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.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(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:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(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):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / 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:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
- - --------------------------------------------------------------------------------
[LOGO]
OWENS-ILLINOIS, INC.
NOTICE AND PROXY STATEMENT
FOR
THE ANNUAL MEETING OF SHARE OWNERS
TO BE HELD
WEDNESDAY, MAY 14, 1997
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 14, 1997, 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 three directors for a term of three years.
2. The approval of an amendment to the Second Amended and Restated Stock
Option Plan for Key Employees of Owens-Illinois, Inc.
3. The approval of the 1997 Equity Participation Plan of Owens-Illinois,
Inc.
4. 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, the Board of Directors' nominees for election as directors and the
other matters to be considered at the Annual Meeting. Also enclosed is a copy of
the Company's Annual Report which describes the results of our operations during
1996 and provides other information about the Company which will be of interest.
The Board of Directors fixed the close of business on March 17, 1997, 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 and in favor of each of the other matters to be considered at the
meeting, you need not mark your votes on the proxy card but need only sign and
date it and return it in the enclosed envelope.
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
Thomas L. Young
Secretary
March 31, 1997
Toledo, Ohio
OWENS-ILLINOIS, INC.
ONE SEAGATE
TOLEDO, OHIO 43666
-------------------
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHARE OWNERS
TO BE HELD MAY 14, 1997
------------------------
The Annual Meeting of the share owners of Owens-Illinois, Inc. (herein
called the "Company") will be held on Wednesday, May 14, 1997, 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 three directors for
a term of three years, and consider the approval of the amendment to the Second
Amended and Restated Stock Option Plan for Key Employees and the approval of the
1997 Equity Participation Plan 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 the other matters to be voted on, 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, 1997.
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 17, 1997 (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.
Each share owner of record is requested to complete, date and sign the
accompanying proxy card and return it promptly in the enclosed envelope. 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 Joseph H. Lemieux, Henry R. Kravis and
Michael W. Michelson as directors of the Company for a term of three years, (b)
for the approval of the amendment to the Second Amended and Restated Stock
Option Plan for Key Employees, (c) for the approval of the 1997 Equity
Participation Plan and (d) 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 eleven members,
three of whom are Class III directors whose terms expire at this year's Annual
Meeting, four of whom are Class I directors whose terms expire at the 1998
Annual Meeting, and four of whom are Class II directors whose terms expire at
the 1999 Annual Meeting. All of the eleven directors listed herein, including
the nominees, have served as directors since the last Annual Meeting.
The Board has nominated three persons for election as Class III directors to
serve for a three-year term expiring in 2000 and until their successors have
been elected and qualified. The three nominees of the
1
Board are Joseph H. Lemieux, Henry R. Kravis and Michael W. Michelson, 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 THREE NOMINEES IDENTIFIED BELOW.
CLASS III: NOMINEES FOR 3-YEAR TERM
Joseph H. Lemieux Director since
Chairman of the Board and 1987
Chief Executive Officer Age 66
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 Health Care and Retirement Corporation, National City
Corporation, National City Bank, Northwest, and Owens-Illinois Group, Inc. He is
chairman of the Executive Committee.
Henry R. Kravis Director since
Managing Member of KKR & Co. L.L.C., 1987
the general partner of Age 53
Kohlberg Kravis Roberts & Co., L.P.
Mr. Kravis 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.
Kravis also is a general partner of KKR Associates, L.P. Mr. Kravis is a
director of AutoZone, Inc., Borden, Inc., Bruno's, Inc., Evenflo & Spalding
Holdings Corporation, Flagstar Companies, Inc., Flagstar Corporation, The
Gillette Company, IDEX Corporation, K-III Communications Corp., Merit Behavioral
Care Corporation, Newsquest Capital plc, Safeway Inc., Southeby's Holdings,
Inc., Union Texas Petroleum Holdings, Inc., World Color Press, Inc. and Owens-
Illinois Group, Inc.
Michael W. Michelson Director since
Member of KKR & Co. L.L.C., 1987
the general partner of Age 45
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 AutoZone, Inc., Doubletree Corporation, Union Texas Petroleum
Holdings, Inc. and Owens-Illinois Group, Inc. He is chairman of the Compensation
Committee and a member of the Executive Committee.
2
CLASS I: TERM EXPIRES IN 1998
Lee A. Wesselmann Director since
Senior Vice President and 1988
Chief Financial Officer Age 61
Owens-Illinois, Inc.
Mr. Wesselmann has been Senior Vice President and Chief Financial Officer and a
director of the Company since 1988. He previously served with the Company as
Secretary (1988-1990), and Vice President and Comptroller (1984-1988). Mr.
Wesselmann is a director of Owens-Illinois Group, Inc. He is a member of the
Executive Committee.
James H. Greene, Jr. Director since
Member of KKR & Co. L.L.C., 1987
the general partner of Age 46
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
Bruno's Inc., Safeway Inc., Union Texas Petroleum Holdings, Inc., The Vons
Companies, Inc. and Owens-Illinois Group, Inc. He is a member of the Executive
and Compensation Committees.
George R. Roberts Director since
Managing Member of KKR & Co. L.L.C., 1987
the general partner of Age 53
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 AutoZone, Inc., Borden, Inc., Bruno's, Inc., Evenflo & Spalding
Holdings Corporation, Flagstar Companies, Inc., Flagstar Corporation, IDEX
Corporation, K-III Communications Corp., Merit Behavioral Care Corporation,
Newsquest Capital, plc, Safeway Inc., Union Texas Petroleum Holdings, Inc.,
World Color Press, Inc. and Owens-Illinois Group, Inc.
Messrs. Kravis and Roberts are first cousins.
Robert J. Dineen Director since
Chairman of the Board of Directors 1994
Layne Christensen Company Age 67
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, Kansas City Power & Light Company and
Owens-Illinois Group, Inc. He is a member of the Audit Committee.
3
CLASS II: TERM EXPIRES IN 1999
Edward A. Gilhuly Director since
Member of KKR & Co. L.L.C., 1987
the general partner of Age 37
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 Doubletree Corporation, Layne Christensen Company, Merit Behavioral
Care Corporation, Union Texas Petroleum Holdings, Inc., and Owens-Illinois
Group, Inc. He is a member of the Executive, Compensation and Audit Committees.
Robert J. Lanigan Director since
Chairman Emeritus 1987
Age 69
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 director of Chrysler Corporation, Cognizant Corporation, The
Coleman Company, Inc., The Dun and Bradstreet Corporation, Sonat, Inc.,
Transocean Offshore Drilling, Inc. and Owens-Illinois Group, Inc.
Robert I. MacDonnell Director since
Member of KKR & Co. L.L.C., 1987
the general partner of Age 59
Kohlberg Kravis Roberts & Co., L.P.
Mr. MacDonnell 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. MacDonnell also is a general partner of KKR Associates, L.P. Mr. MacDonnell
is a director of AutoZone, Inc., Safeway Inc., The Vons Companies, Inc. and
Owens-Illinois Group, Inc.
John J. McMackin, Jr. Director since
Member 1994
Williams & Jensen, P.C. Age 45
Mr. McMackin has been a member of Williams & Jensen for more than five years.
Mr. McMackin is a director of Owens-Illinois Group, Inc. He is a member of the
Audit 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
4
each committee each year at its first meeting following the Annual Meeting. 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.
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 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 1996, the Board held three formal meetings and the Audit Committee
held one formal meeting. The Executive Committee and the Compensation Committee
held no meetings in 1996. During 1996, 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 Henry R. Kravis, Robert J. Lanigan and
Robert I. MacDonnell. 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
$35,000 annually plus expenses associated with meetings of the Company's Board.
SUMMARY COMPENSATION TABLE
The following table shows, for the years ended December 31, 1994, 1995 and
1996, the cash compensation paid by the Company and its subsidiaries, as well as
certain other compensation paid or accrued for those years, to the Company's
Chief Executive Officer and the four most highly compensated executive officers
of the Company (the "named executive officers") in all capacities in which they
served.
LONG TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ------------------------- ---------
OTHER RESTRICTED SECURITIES LONG-TERM
ANNUAL STOCK UNDERLYING INCENTIVE ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) ($) (#)(4) ($)(5) ($)(6)
- - -------------------------- ---- -------- -------- ------------ ---------- ------------ --------- ------------
Joseph H. Lemieux......... 1996 $558,333 $750,000 $105,588(7) $0 20,000 $453,600 $ 10,000
Chairman and Chief 1995 540,000 620,000 126,105 0 20,000 417,555 8,500
Executive Officer 1994 540,000 700,000 283,255 0 20,000 387,472 179,302
Lee A Wesselmann.......... 1996 254,000 235,000 21,291 0 12,000 138,186 9,500
Senior V.P. & Chief 1995 244,000 190,000 21,048 0 12,000 125,782 8,093
Financial Officer 1994 244,000 215,000 16,473 0 10,000 116,546 7,364
Terry L. Wilkison......... 1996 240,000 220,000 24,957 0 15,000 104,198 9,500
Executive V.P. 1995 230,000 190,000 15,396 0 15,000 94,852 7,700
1994 230,000 215,000 15,934 0 15,000 83,147 6,594
R. Scott Trumbull......... 1996 237,000 220,000 24,278 0 15,000 101,952 9,000
Executive V.P., 1995 225,000 200,000 28,682 0 15,000 92,790 7,500
International Operations 1994 225,000 215,000 21,109 0 15,000 80,230 5,938
Thomas L. Young........... 1996 217,000 220,000 16,584 0 15,000 92,880 6,000
Exec. 1995 205,000 190,000 16,966 0 15,000 84,542 4,500
V.P.-Administration, 1994 205,000 215,000 14,608 0 15,000 74,395 6,450
Secretary & Gen. Counsel
- - ------------------------------
(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) The amounts disclosed in this column represent awards under the
Owens-Illinois, Inc. Senior Management Incentive Plan for the year
indicated. Amounts, if any, deferred at the election of an 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 1996.
(5) The amounts disclosed in this column represent awards under the
Owens-Illinois, Inc. Performance Award Plan for the year indicated. Amounts,
if any, deferred at the election of an executive officer are included in the
year earned.
(6) The amounts disclosed in this column for 1996 represent matching cash
contributions by the Company to the Stock Purchase and Savings Program and
the Executive Savings Plan, both defined contribution plans.
(7) The amount shown reflects $52,795 reimbursed to Mr. Lemieux in 1996 for the
payment of taxes. The amount shown also reflects the value of certain
perquisites provided by the Company to Mr. Lemieux totalling $52,793, of
which $29,410 is attributable to his personal use of Company aircraft and
$16,383 is attributable to his use of a leased automobile.
6
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
The following table provides information on option grants in 1996 to the
named executive officers.
% OF
INDIVIDUAL GRANTS
- - ----------------------------------------------------------------------------------------------------
TOTAL
OPTIONS/ SARS POTENTIAL REALIZABLE
NUMBER OF GRANTED TO VALUE AT ASSUMED
SECURITIES EMPLOYEES IN ANNUAL RATES
UNDERLYING FISCAL YEAR OF STOCK PRICE
OPTIONS/ ------------- APPRECIATION FOR
SARS EXERCISE OR OPTION TERM(3)
GRANTED BASE PRICE EXPIRATION ---------------------------
NAME (#)(2) ($/SH) DATE 5% 10%
- - ---------------------------------------- ------------ ------------ ------------ ------------ ------------
Joseph H. Lemieux....................... 20,000 3.7% $ 16.50 06/26/06 $ 207,535 $ 525,935
Lee A. Wesselmann....................... 12,000 2.2% 16.50 06/26/06 124,521 315,561
Terry L. Wilkison....................... 15,000 2.8% 16.50 06/26/06 155,651 394,451
R. Scott Trumbull....................... 15,000 2.8% 16.50 06/26/06 155,651 394,451
Thomas L. Young......................... 15,000 2.8% 16.50 06/26/06 155,651 394,451
- - ------------------------
(1) No SAR's were granted to any of the named executive officers during 1996.
(2) Exercises of one-half of the options are permitted after each of the fifth
and sixth anniversaries of the dates 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% $ 19.80 25%
144% 23.76 50%
172% 28.38 75%
206% 33.99 100%
(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 $26.877 and $42.797, respectively.
7
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 1996 and prior years to the named
executive officers and held by them at December 31, 1996. None of the named
executive officers exercised any stock options during 1996.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
DECEMBER 31, 1996 AT DECEMBER 31, 1996(1)
-------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------------------------------------------- ----------- ------------- ------------- -------------
Joseph H. Lemieux....................................... 790,306 138,750 $ 13,032,307 $ 1,345,938
Lee A. Wesselmann....................................... 171,887 34,750 2,828,619 309,188
Terry L. Wilkison....................................... 174,381 48,750 2,767,138 442,188
R. Scott Trumbull....................................... 173,250 43,750 2,784,563 390,938
Thomas L. Young......................................... 110,812 43,750 1,676,288 390,938
- - ------------------------
(1) Based on the closing price of the Company's Common Stock on the New York
Stock Exchange on that date of $22.75.
8
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 1996-1998
award period, performance will be evaluated in comparison to the Company's
attained levels of return on assets and earnings per share on an equally
weighted basis 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
PERIOD ESTIMATED FUTURE PAYOUTS UNDER
UNTIL NON-STOCK PRICE-BASED PLANS
MATURATION ----------------------------------
NAME OR PAYOUT THRESHOLD TARGET MAXIMUM
- - ---------------------------------------------------------------- ----------- ----------- ---------- ---------
Joseph H. Lemieux............................................... 1996-1998 $ 87,000 $435,000 (1)
Lee A. Wesselmann............................................... 1996-1998 26,590 132,950 (1)
Terry L. Wilkison............................................... 1996-1998 20,096 100,480 (1)
R. Scott Trumbull............................................... 1996-1998 19,840 99,200 (1)
Thomas L. Young................................................. 1996-1998 18,160 90,800 (1)
- - ------------------------
(1) The maximum dollar amount that may be earned under PAP is not capped.
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 CONSECUTIVE THREE-YEAR
AVERAGE ANNUAL EARNINGS 20 25 30 35 40
- - ----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
$ 200,000............................................ $ 53,218 $ 66,522 $ 79,827 $ 93,131 $ 105,251
400,000............................................ 109,739 137,174 164,609 192,044 214,531
600,000............................................ 166,882 208,603 250,323 292,044 323,811
800,000............................................ 224,025 280,031 336,038 392,044 433,091
1,000,000........................................... 281,168 351,460 421,752 492,044 542,371
1,200,000........................................... 338,311 422,889 507,466 592,044 651,651
1,400,000........................................... 395,454 494,317 593,181 692,044 760,931
1,600,000........................................... 452,597 565,746 678,895 792,044 870,211
9
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 and Senior
Management Incentive 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, 1997,
Mr. Lemieux had 39 years of credited service, Mr. Wesselmann had 36 years of
credited service, Mr. Wilkison had 33 years of credited service, Mr. Trumbull
had 25 years of credited service and Mr. Young had 20 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.
EMPLOYMENT AGREEMENTS. The Company has 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. Such employment agreements permit executive officers to take part in
the Senior Executive Life Insurance Plan, whereby the Company purchases life
insurance policies which are transferred to the participants subject, in part,
to the executive agreeing not to compete with the Company.
CERTAIN TRANSACTIONS
During 1996, 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 1996 the payment for the management fee and expenses was
$1,142,700. 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.
10
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 Stock Option 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
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 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.
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 periodically
provides salary adjustments based on competitive considerations. In 1996, Mr.
Lemieux was granted a $20,000 increase in base salary, representing a 3.2%
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 the Company's attainment of an annual rate of return on net
assets ("RONA") established by the Board as the performance objective 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
attainment of the corporate RONA objective for the year.
The SMIP establishes precise quantitative relationships between performance
and payout percentages within defined minimum/maximum ranges. For any covered
executive including the Chief Executive Officer, the maximum SMIP payment
percentage under the Plan is 150% of his or her target incentive percentage.
11
Based on the Company's RONA performance relative to its 1996 RONA objective,
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 $750,000 in 1996.
LONG-TERM INCENTIVES. There are two forms of long-term incentives utilized
for key executives: PAP, which provides cash awards, and stock options granted
pursuant to the Company's Stock Option Plan.
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
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
1995-97 and 1996-98 award periods, performance will be evaluated in comparison
to the Company's attained levels of RONA and earnings per share on an equally
weighted basis 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.
The Committee previously approved a PAP allotment to Mr. Lemieux for the
1994-96 award period of $420,000, and the Committee determined, in the manner
described in the immediately preceding paragraph, that performance in 1994-96
award period relative to the RONA and earnings per share objectives established
for this period warranted a 108% payout of Mr. Lemieux's 1994-96 PAP allotment.
In 1996, the Committee approved a PAP allotment to Mr. Lemieux for the
1996-1998 award period of $435,000.
The Company Stock Option 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 1996
a pool approximately equal to .47% 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 shareholder 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
1996, Mr. Lemieux was granted options on 20,000 shares.
BENEFITS. 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 plans is potentially subject to the provisions of Section
162(m). Mr. Lemieux has elected, pursuant to a deferred compensation plan
previously approved by the Committee, to defer until his retirement an amount of
his potential incentive compensation for 1997 such that his total compensation
will not in any event exceed the $1 million deductibility limit in 1997.
Michael W. Michelson, Chairman
Edward A. Gilhuly
James H. Greene, Jr.
13
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG OWENS-ILLINOIS, S&P 500 AND PACKAGING GROUP
210- .........................................
200-
190-
180-
170-
160- [LINE GRAPH OF THE VALUES
150- CONTAINED IN THE TABLE BELOW,
140- AT THE VARIOUS DATES INDICATED]
130-
120-
110-
100-
90-
80- .........................................
'91 '92 '93 '94 '95 '96
- - ---------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- -------
Owens-Illinois. $100.00 $ 83.33 $103.13 $ 91.67 $120.83 $189.58
------- ------- ------- ------- ------- -------
S&P 500........ $100.00 $107.62 $118.46 $120.03 $165.13 $203.05
------- ------- ------- ------- ------- -------
Packaging
Group......... $100.00 $110.37 $115.14 $123.86 $145.87 $179.89
------- ------- ------- ------- ------- -------
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 packaging group consists of: Aluminum Co. of America, Aptargroup Inc.,
Avery Dennison Corp., Ball Corp., Bemis Co., Chesapeake Corp., Continental Can,
Crown Cork & Seal Co., Johnson Controls Inc., Kerr Group Inc., Liqui-Box Corp.,
The Mead Corp., Multi-Color Corp., Owens-Illinois Inc., Reynolds Metals Co.,
Sealed Air Corp., Sealright Co., Sonoco Products Co., Tredegar Industries, U.S.
Can Co., Vitro Sociedad Anomina (ADSs), and through the dates market quotations
ceased to be available due to acquisition, Engraph Inc., Heekin Can Inc., Lawson
Mardon Group Ltd Class A, and Van Dorn Co.
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 17, 1997 (except as otherwise noted in
the footnotes below) by each beneficial owner of more than five percent of the
Company's outstanding Common Stock, 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.
14
NUMBER OF
SHARES
NAME AND ADDRESS BENEFICIALLY
OF BENEFICIAL OWNER OWNED(1) PERCENTAGE
- - ------------------------------ ---------------- ------------
KKR Associates, L.P.(2)....... 36,000,000 29.4%
9 West 57th Street
New York, New York 10019
FMR Corp.(3).................. 16,147,530 13.4
82 Devonshire Street
Boston, Massachusetts 02109
Trust for Owens-Illinois
Hourly Retirement Plan...... 8,880,785 7.2
200 Newport Avenue--7N
North Quincy, Massachusetts
02171
Trust for Owens-Illinois
Salary Retirement Plan...... 8,303,839 6.8
515 Flower Street, Suite
2800
Los Angeles, California
90071
Neuberger & Berman(4)......... 8,586,244 7.0
605 Third Avenue
New York, New York 10158
Joseph H. Lemieux(1).......... 676,190(5) 0.5
Lee A. Wesselmann(1).......... 147,938(5) 0.1
Robert J. Dineen(1)........... 22,736 --
Edward A. Gilhuly............. 5,000 --
James H. Greene, Jr.(2)....... -- --
Henry R. Kravis(2)............ -- --
Robert J. Lanigan(1).......... 353,278 0.3
Robert I. MacDonnell(2)....... -- --
John J. McMackin, Jr.(1)...... 23,421 --
Michael W. Michelson(2)(6).... 20,000 --
George R. Roberts(2).......... -- --
Terry L. Wilkison(1).......... 115,133(5) 0.1
R. Scott Trumbull(1).......... 106,343(5) 0.1
Thomas L. Young(1)............ 97,649(5) 0.1
All directors and executive
officers as a group (other
than as set forth in
relation to KKR Associates,
L.P.) (23 persons).......... 2,169,816(5) 1.8
(FOOTNOTES ON FOLLOWING PAGE)
15
(FOOTNOTES FOR PRECEDING PAGE)
- - ------------------------
(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 which such person
has the right to acquire 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 outstanding for the purpose of
computing the percentage ownership of any other person. The information
includes: all currently exercisable options granted to Messrs. Lemieux,
Wesselmann, Dineen, Lanigan, McMackin, Wilkison, Trumbull and Young. The
number of shares beneficially owned includes 304,056 shares subject to
options granted to Mr. Lemieux; 76,750 shares subject to options granted to
Mr. Wesselmann; 13,636 shares subject to options granted to Mr. Dineen;
75,000 shares subject to options granted to Mr. Lanigan; 13,793 shares
subject to options granted to Mr. McMackin; 66,250 shares subject to options
granted to Mr. Wilkison; 2,500 shares subject to options granted to Mr.
Trumbull; 58,750 shares subject to options granted to Mr. Young; and 945,579
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.).
(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 Henry R. Kravis, George R.
Roberts, Robert I. MacDonnell, Michael W. Michelson, James H. Greene, Jr.,
Edward A. Gilhuly (all directors of the Company), Paul E. Raether, Michael
T. Tokarz, Perry Golkin, Clifton S. Robbins, 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 Company has received a Schedule 13G filed by FMR Corp., Edward C.
Johnson 3d, Abigail P. Johnson and Fidelity Management & Research Company
with respect to the shares of Common Stock identified as owned as of
December 31, 1996 and in which such reporting persons assert dispositive
and/or voting power with respect to portions or all of such shares as a
result of their direct or indirect investment advisory relationship to, or
ownership interest in, various investment companies, institutional accounts
or investment advisers which own such shares. The Company has not attempted
to independently verify any of the foregoing information which is based
solely on the information contained in the Schedule 13G.
(4) The Company has received a Schedule 13G filed by Neuberger & Berman with
respect to the shares of Common Stock identified as owned as of December 31,
1996 and in which such entity asserts that it shares dispositive power or,
in some cases, has sole or shared voting power with respect to such shares,
but that the economic ownership interest belongs to many unrelated clients
of such entity. The Company has not attempted to independently verify any of
the foregoing information, which is based solely on the information
contained in the Schedule 13G.
(5) The table includes the number of shares of Common Stock that Joseph H.
Lemieux, Lee A. Wesselmann, Terry L. Wilkison, R. Scott Trumbull, Thomas L.
Young 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, 1997.
(6) 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.
16
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO
THE SECOND AMENDED AND RESTATED STOCK OPTION PLAN
FOR KEY EMPLOYEES OF OWENS-ILLINOIS, INC.
PROPOSED AMENDMENT
Upon the recommendation of the Compensation Committee, the Board of
Directors has adopted, subject to share owner approval, an amendment to the
Second Amended and Restated Stock Option Plan for Key Employees of
Owens-Illinois, Inc. (the "Restated Plan"). The amendment provides for changes
in the Restated Plan which (1) allow the Compensation Committee to grant
additional options if an optionee elects to pay the exercise price of an
outstanding option or to satisfy tax withholding obligations upon option
exercise by tendering or relinquishing shares to the Company, (2) will add back
shares tendered or relinquished to pay the exercise price of an option or to
satisfy tax withholding for purposes of the limit on the number of shares
available to be issued under the Restated Plan, and (3) conform certain
provisions of the Restated Plan to the recent amendments to Rule 16b-3 under the
Securities Exchange Act of 1934.
The complete text of the amendment to the Restated Plan appears as Appendix
A to this Proxy Statement. While the amendment is summarized herein, such
summary is in all respects subject to the complete text of the amendment
contained in Appendix A.
SUMMARY OF CURRENT PLAN
SHARES SUBJECT TO PLAN. The Restated Plan provides for the granting of
incentive stock options ("ISOs") and non-qualified stock options ("NQSOs")
covering an aggregate of 7,488,762 shares of Common Stock. If any option expires
or is cancelled without exercise, the shares covered thereby may be subject to
the grant of future options.
ELIGIBILITY. Any key employee of the Company or of any parent or subsidiary
is eligible to be granted options under the Restated Plan. As of the date
hereof, approximately 450 employees are eligible to participate in the Restated
Plan.
EXERCISE PRICE. Each option shall have an exercise price of not less than
100% or, in the case of an ISO granted to an individual owning more than 10% of
the combined voting power of the Company, 110% of the Fair Market Value (as
defined in the Restated Plan) of such shares on the date the option is granted.
As long as the Common Stock is listed on the New York Stock Exchange, the Fair
Market Value of the Common Stock generally will be the closing price on such
exchange of the Common Stock at the end of the business day preceding the date
of grant.
ADMINISTRATION. The Restated Plan is administered by the Compensation
Committee, which is responsible for determining the persons to whom options
shall be granted, the number of shares to be subject to such options (subject to
an award limit of 250,000 options that may be granted in any given year to a
single optionee) and the other terms and conditions of the options, including
the terms on which such options shall become exercisable, subject to certain
limitations set forth in the Restated Plan.
TERMS OF OPTIONS. Each option granted pursuant to the Restated Plan will
expire no later than ten years, or in the case of NQSOs, ten years and one day,
or, in the case of an ISO granted to an individual owning more than 10% of the
combined voting power of the Company, five years from the date the option
17
was granted. The Compensation Committee may grant options that are (a) not
transferable except by will or pursuant to the applicable laws of descent and
distribution upon death of the optionee or (b) transferable only by gift to (i)
such optionee's spouse, children or certain other relatives of the optionee, or
(ii) a trust for the benefit of such persons. The terms of the options granted
under the Restated Plan will be provided in separate stock option agreements.
PAYMENT FOR SHARES. Upon the exercise of any option, the purchase price of
Common Stock must be paid in full in cash or, in certain circumstances, with
shares of Common Stock owned by the optionee or issuable to the optionee upon
exercise of the option, or a promissory note of the optionee, or a combination
of such forms of consideration as provided in the Restated Plan. Each share
received by the Company in payment of the purchase price will be valued at its
Fair Market Value on the date of exercise. When the per share value of the
Common Stock received is higher than the per share exercise price of an option,
it is possible that a participant may exercise the full amount of his option
without any cash payment of the exercise price.
CHANGE IN COMMON STOCK. In the event that the outstanding shares of Common
Stock are changed into or exchanged for a different number or kind of shares of
capital stock or other securities of the Company by reason of a reorganization,
merger, consolidation, recapitalization, reclassification, stock split, stock
dividend, combination of shares, or otherwise, the number and kind of shares
covered by the Restated Plan and by each outstanding option, and the exercise
price per share, shall be adjusted (such adjustments with respect to outstanding
shares shall be made proportionately).
AMENDMENT AND TERMINATION. The Restated Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Compensation Committee. However, certain provisions of the
Restated Plan may not be amended or modified without share owner approval. These
provisions include the provisions respecting the maximum number of shares which
may be issued on exercise of options, the award limit, eligibility requirements
for receipt of grants, minimum option price requirements for receipt of grants,
minimum option price requirements and extending the period during which the
Restated Plan is in effect.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material federal income
tax consequences to the Company and to participants in the Restated Plan. The
Restated Plan is not a qualified pension, profit-sharing or stock bonus plan
under Section 401(a) of the Internal Revenue Code of 1986 (the "Code") or an
"employee benefit plan" subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended. This discussion is based on the Code,
regulations thereunder, rulings and decisions now in effect, all of which are
subject to change.
NON-QUALIFIED STOCK OPTIONS. Participants who are granted a NQSO (including
an Additional Option which is a NQSO) do not recognize income as a result of the
grant of a NQSO but normally recognize compensation taxable at ordinary income
rates upon the NQSO's exercise to the extent that the Fair Market Value of the
shares on the date of the exercise of the NQSO exceeds the option exercise price
paid. Subject to Section 162(m) of the Code, the Company will be entitled to a
deduction in an amount equal to the amount that the participant is required to
include in ordinary income at the time of such inclusion. The Company generally
will also be required to withhold taxes on ordinary income realized by the
participant at the time of such inclusion.
18
INCENTIVE STOCK OPTIONS. Participants who are granted an ISO (including an
Additional Option which is an ISO) will not be considered to have received
taxable income upon the grant of an ISO or its exercise; however, generally the
amount by which the Fair Market Value of the shares at the time of exercise
exceeds the option price will be included in the participant's alternative
minimum taxable income upon exercise unless the stock acquired is not
transferable or is subject to a substantial risk of forfeiture, in which case no
amount is included in alternative minimum taxable income until the stock is
transferable or there is no longer a substantial risk of forfeiture. If an ISO
is disposed of in the same year it is exercised, and the amount realized is less
than the stock's Fair Market Value at the time of exercise, the amount
includible in alternative minimum taxable income does not exceed the amount
realized on the sale or exchange of the stock, less the taxpayer's basis in such
stock.
Upon the sale or other taxable disposition of shares of Common Stock
acquired upon the exercise of an ISO, long-term capital gain will normally be
recognized in the full amount of the difference between the amount realized and
the option exercise price if no disposition of shares has taken place within
either (a) two years from the date of grant of the ISO or (b) one year from the
date of transfer of such shares of Common Stock to the participant upon
exercise. If shares of Common Stock acquired upon the exercise of an ISO are
sold or otherwise disposed of before the end of the one-year or two-year periods
referenced above, the difference between the ISO exercise price and the Fair
Market Value of the shares of Common Stock on the date of the ISO's exercise
will be taxed as ordinary income; the balance of the gain, if any, will be taxed
as capital gain. If shares of Common Stock acquired upon the exercise of an ISO
are disposed of before the expiration of the one-year or two-year periods
referenced above and the amount realized is less than the Fair Market Value of
the shares at the date of exercise, the participant's ordinary income is limited
to the excess (if any) of the amount realized less the option exercise price
paid. Subject to Section 162(m) of the Code, the Company will be entitled to a
tax deduction in regards to an ISO only to the extent that the participant has
ordinary income upon sale or other disposition of the shares.
EFFECT OF 1993 OMNIBUS BUDGET RECONCILIATION ACT ON THE RESTATED
PLAN. Under OBRA, which became law in August 1993, income tax deductions of
publicly-traded companies may be limited to the extent total compensation
(including base salary, annual bonus, stock option exercises and non-qualified
benefits paid in 1994 and thereafter) for certain executive officers exceeds $1
million (less the amount of any "excess parachute payments" as defined in
Section 280G of the Code) in any one year. However, under OBRA, the deduction
limit does not apply to certain "performance-based" compensation established by
an independent compensation committee which is adequately disclosed to, and
approved by, share owners. In particular, stock options will satisfy the
performance-based exception if the awards are made by a qualifying compensation
committee, the plan sets the maximum number of shares that can be granted to any
particular employee within a specified period and the compensation is based
solely on an increase in the stock price after the grant date (i.e. the option
exercise price is equal to or greater than the Fair Market Value of the stock
subject to the award on the grant date).
It is the Company's policy generally to design the Company's compensation
programs to conform with the OBRA legislation and related regulations to qualify
the compensation paid thereunder for deductibility to the extent the limitations
necessary to obtain such deductibility are not inconsistent with the Company's
overall compensation policies and goals.
19
REASONS FOR AMENDMENT
The amendment provides that the Company may grant additional options
("Additional Options") to eligible employees, in a form commonly referred to as
"reload options." The purpose of the Additional Options is to encourage
ownership and retention of the Company's Common Stock by key employees by
providing for the grant of a new option with respect to shares tendered or
relinquished in payment of the exercise price of an outstanding option. Also,
Additional Options may be granted with respect to shares tendered or
relinquished in payment of the amount to be withheld under federal, state and
local income tax laws in connection with the exercise of an option to which such
Additional Option relates.
The proposed amendment to the Restated Plan provides that the Compensation
Committee may, at or after the date of grant with respect to any outstanding
option, grant Additional Options and may establish the terms and conditions of
such Additional Options. Pursuant to an Additional Option, the optionee would be
granted a new option at the then prevailing market price when shares of the
Company's Common Stock are tendered or relinquished in payment of the exercise
price of the option to which such Additional Option relates and/or when shares
of the Company's Common Stock are tendered or relinquished in payment of the
amount to be withheld under federal, state and local income tax laws in
connection with the exercise of the option to which such Additional Option
relates. The new option granted upon such exercise would be an option to
purchase the number of shares not exceeding the sum of (i) the number of shares
of the Company's Common Stock tendered or relinquished in payment of the
exercise price of an option to which such Additional Option relates and (ii) the
number of shares of the Company's Common Stock tendered or relinquished in
payment of the amount to be withheld under income tax laws in connection with
the exercise of the option to which such Additional Option relates. The
amendment provides that the Compensation Committee has the discretion as to
setting terms and conditions of the Additional Options subject to the following
provisions: (1) the Additional Option exercise price shall be the Fair Market
Value, per share, of the shares of the Company's Common Stock, on the date the
employee tenders or relinquishes shares of the Company's Common Stock to
exercise the Option that has the Additional Option feature and/or tenders or
relinquishes shares of the Company's Common Stock in payment of income tax
withholding on the exercise of an Option that has the Additional Option feature
and (2) the Additional Option shall have the same termination provisions as the
underlying option to which such Additional Option relates.
In addition, the proposed amendment provides that the number of shares of
the Company's Common Stock that may be issued under the Restated Plan will be
increased by the number of shares of the Company's Common Stock that are
tendered or relinquished to the Company in payment of the exercise price of a
stock option or in payment of federal, state and local tax withholding
liabilities due upon the exercise.
Finally, the proposed amendment makes certain other changes to the Plan
designed to conform to recent amendments to Rule 16b-3 under the Securities
Exchange Act of 1934, including deleting the "window-period" requirement for
cashless exercises of options.
No executive or non-executive officer of the Company effected any option
exercise during 1996 by tendering or relinquishing shares in payment of the
exercise price or tax withholding liabilities. Accordingly, even if the Restated
Plan had the Additional Option feature available and all the options which were
exercised during the fiscal year 1996 had contained such feature, no Additional
Options would have been granted to officers of the Company during 1996.
20
REQUIRED VOTE FOR APPROVAL AND RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the shares present or represented and
entitled to vote at the Annual Meeting is required to approve the amendment to
the Restated Plan. Your Board of Directors recommends a vote FOR approval of the
amendment to the Restated Plan.
PROPOSAL 3
APPROVAL OF 1997 EQUITY PARTICIPATION PLAN
OF OWENS-ILLINOIS, INC.
PROPOSED PLAN
Upon the recommendation of the Compensation Committee, the Board of
Directors has adopted, subject to share owner approval, the 1997 Equity
Participation Plan of Owens-Illinois, Inc. (the "1997 Plan"). The 1997 Plan
succeeds the Company's Second Amended and Restated Stock Option Plan for Key
Employees of Owens-Illinois, Inc. (the "Restated Plan") which covered 7,488,762
shares of Common Stock and was adopted in its restated form by the Board of
Directors and then approved by the share owners in 1994.
The principal purposes of the 1997 Plan are to provide incentives for key
employees of the Company or of any parent or subsidiary through granting of
options and restricted stock, thereby stimulating their personal and active
interest in the Company's development and financial success, and inducing them
to remain in the Company's employ. Under the 1997 Plan, not more than 10,000,000
shares of Common Stock (or their equivalent in other equity securities) are
authorized for issuance upon the exercise of options or upon vesting of
restricted stock awards. As of March 17, 1997, under the Restated Plan, a total
of 3,117,781 shares were subject to outstanding stock options held by
approximately 405 key employees and only 1,132,138 shares remained available for
the grant of new stock options under the Restated Plan. On March 17, 1997, the
closing price of a share of the Company's Common Stock on the New York Stock
Exchange was $25.875.
If any portion of an option terminates or lapses unexercised, or is
cancelled upon a grant of a new option (which may be at a higher or lower
exercise price than the option so cancelled), the shares which were subject to
the unexercised portion of such option will continue to be available for
issuance under the 1997 Plan. In addition, the 1997 Plan provides that the
number of shares of the Company's Common Stock that may be issued under the 1997
Plan will be increased by the number of shares of the Company's Common Stock
that are tendered or relinquished in payment of the exercise price of a stock
option or in payment of federal, state and local tax withholding liabilities due
upon exercise.
The complete text of the 1997 Plan appears as Appendix B to this Proxy
Statement. While the 1997 Plan is summarized herein, such summary is in all
respects subject to the complete text of the 1997 Plan contained in Appendix B.
DESCRIPTION OF THE 1997 PLAN
SHARES SUBJECT TO PLAN. The 1997 Plan provides for the granting of
Incentive Stock Options ("ISOs"), non-qualified stock options ("NQSOs") and
restricted stock covering an aggregate of 10,000,000 shares of the Common Stock.
If any option expires or is cancelled without exercise, or if restricted stock
is forfeited
21
prior to vesting, the shares covered thereby may be subject to the grant of
future options or restricted stock.
ELIGIBILITY. Any key employee of the Company or of any parent or subsidiary
is eligible to be granted options or restricted stock under the 1997 Plan. As of
the date hereof, approximately 450 employees are eligible to participate in the
1997 Plan.
EXERCISE PRICE. Each option shall have an exercise price of not less than
100% or, in the case of an ISO granted to an individual owning more than 10% of
the combined voting power of the Company, 110% of the Fair Market Value of such
shares on the date the option is granted. As long as the Common Stock is listed
on the New York Stock Exchange, the Fair Market Value of the Common Stock
generally will be the closing price on such exchange of the Common Stock at the
end of the business day preceding the date of grant.
ADMINISTRATION. The 1997 Plan is administered by the Compensation
Committee, which is responsible for determining the persons to whom options and
restricted stock shall be granted, the number of shares to be subject thereto
(subject to an award limit of 500,000 options and shares of restricted stock
that may be granted in any given year to a single participant) and the other
terms and conditions thereof, including the terms on which options shall become
exercisable, subject to certain limitations set forth in the 1997 Plan.
TERMS OF OPTIONS. Each option granted pursuant to the 1997 Plan will expire
no later than ten years, or in the case of NQSOs, ten years and one day, or, in
the case of an ISO granted to an individual owning more than 10% of the combined
voting power of the Company, five years from the date the option was granted.
The Compensation Committee may grant options that are (a) not transferable
except by will or pursuant to the applicable laws of descent and distribution
upon death of the optionee or (b) transferable only by gift to (i) such
optionee's spouse, children or certain other relatives of the optionee, or (ii)
a trust for the benefit of such persons. The terms of the options granted under
the 1997 Plan will be provided in separate stock option agreements.
TERMS OF RESTRICTED STOCK. Restricted stock may be sold to participants at
various prices (but not below par value) and made subject to such restrictions
as may be determined by the Compensation Committee. Restricted stock, typically,
may be repurchased by the Company at the original purchase price if the
participant has terminated employment prior to the lapse of the restrictions. In
general, restricted stock may not be sold, or otherwise transferred or
hypothecated, until restrictions are removed or expire. Purchasers of restricted
stock, unlike recipients of options, generally will have voting rights and will
receive dividends prior to the time when the restrictions lapse.
PAYMENT FOR SHARES. The exercise or purchase price of all options and
restricted stock must be paid in full in cash or, in certain circumstances, with
shares of Common Stock owned by the optionee or issuable to the optionee upon
exercise of the option, or a promissory note of the optionee, or a combination
of such forms of consideration as provided in the 1997 Plan. Each share received
by the Company in payment of the purchase price will be valued at its Fair
Market Value on the date of exercise. When the per share value of the Common
Stock received is higher than the per share exercise price of an option, it is
possible that a participant may exercise the full amount of his option without
any cash payment of the exercise price.
22
ADDITIONAL OPTIONS. The Company may also grant additional options
("Additional Options") to eligible employees. The purpose of the Additional
Options is to encourage ownership and retention of the Company's Common Stock by
key employees by providing for the grant of a new option with respect to shares
tendered or relinquished in payment of the exercise price of an outstanding
option. Also, Additional Options may be granted with respect to shares tendered
or relinquished in payment of the amount to be withheld under federal, state and
local income tax laws in connection with the exercise of an option to which such
Additional Option relates.
CHANGE IN COMMON STOCK. In the event that the outstanding shares of Common
Stock are changed into or exchanged for a different number or kind of shares of
capital stock or other securities of the Company by reason of a reorganization,
merger, consolidation, recapitalization, reclassification, stock split, stock
dividend, combination of shares, or otherwise, the number and kind of shares
covered by the 1997 Plan and by each outstanding option or restricted stock
award, and the exercise price per share, shall be adjusted (such adjustments
with respect to outstanding shares shall be made proportionately).
AMENDMENT AND TERMINATION. The 1997 Plan may be wholly or partially amended
or otherwise modified, suspended or terminated at any time or from time to time
by the Compensation Committee. However, certain provisions of the 1997 Plan may
not be amended or modified without share owner approval. These provisions
include the provisions respecting the maximum number of shares which may be
issued on the exercise of options or awarded as restricted stock, the award
limit, eligibility requirements for receipt of grants, minimum option price
requirements for receipt of grants, minimum option price requirements and
extending the period during which the 1997 Plan is in effect.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material federal income
tax consequences to the Company and to participants in the 1997 Plan. The 1997
Plan is not a qualified pension, profit-sharing or stock bonus plan under
Section 401(a) of the Code or an "employee benefit plan" subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
This discussion is based on the Code, regulations thereunder, rulings and
decisions now in effect, all of which are subject to change.
NON-QUALIFIED STOCK OPTIONS. Participants who are granted a NQSO (including
an Additional Option which is a NQSO) do not recognize income as a result of the
grant of a NQSO but normally recognize compensation taxable at ordinary income
rates upon the NQSO's exercise to the extent that the Fair Market Value of the
shares on the date of the exercise of the NQSO exceeds the option exercise price
paid. Subject to Section 162(m) of the Code, the Company will be entitled to a
deduction in an amount equal to the amount that the participant is required to
include in ordinary income at the time of such inclusion. The Company generally
will also be required to withhold taxes on ordinary income realized by the
participant at the time of such inclusion.
INCENTIVE STOCK OPTIONS. Participants who are granted an ISO (including an
Additional Option which is an ISO) will not be considered to have received
taxable income upon the grant of an ISO or its exercise; however, generally the
amount by which the Fair Market Value of the shares at the time of exercise
exceeds the option price will be included in the participant's alternative
minimum taxable income upon exercise unless the stock acquired is not
transferable or is subject to a substantial risk of forfeiture, in which case no
amount is included in alternative minimum taxable income until the stock is
transferable or there is no longer a substantial risk of forfeiture. If an ISO
is disposed of in the same year it is exercised,
23
and the amount realized is less than the stock's Fair Market Value at the time
of exercise, the amount includible in alternative minimum taxable income does
not exceed the amount realized on the sale or exchange of the stock, less the
taxpayer's basis in such stock.
Upon the sale or other taxable disposition of shares of Common Stock
acquired upon the exercise of an ISO, long-term capital gain will normally be
recognized in the full amount of the difference between the amount realized and
the option exercise price if no disposition of shares has taken place within
either (a) two years from the date of grant of the ISO or (b) one year from the
date of transfer of such shares of Common Stock to the participant upon
exercise. If shares of Common Stock acquired upon the exercise of an ISO are
sold or otherwise disposed of before the end of the one-year or two-year periods
referenced above, the difference between the ISO exercise price and the Fair
Market Value of the shares of Common Stock on the date of the ISO's exercise
will be taxed as ordinary income; the balance of the gain, if any, will be taxed
as capital gain. If shares of Common Stock acquired upon the exercise of an ISO
are disposed of before the expiration of the one-year or two-year periods
referenced above and the amount realized is less than the Fair Market Value of
the shares at the date of exercise, the participant's ordinary income is limited
to the excess (if any) of the amount realized less the option exercise price
paid. Subject to Section 162(m) of the Code, the Company will be entitled to a
tax deduction in regards to an ISO only to the extent that the participant has
ordinary income upon sale or other disposition of the shares.
RESTRICTED STOCK. An employee to whom restricted stock is issued will not
have taxable income upon issuance and the Company will not then be entitled to a
deduction, unless an election is made under Section 83(b) of the Code. However,
when restrictions on shares of restricted stock lapse, such that the shares are
no longer subject to repurchase by the Company, the employee will realize
ordinary income and the Company will be entitled to a deduction in an amount
equal to the Fair Market Value of the shares at the date such restrictions
lapse, less the purchase price therefor. If an election is made under Section
83(b) with respect to restricted stock, the employee will realize ordinary
income at the date of issuance equal to the difference between the Fair Market
Value of the shares at that date less the purchase price therefor and the
Company will be entitled to a deduction in the same amount.
EFFECT OF 1993 OMNIBUS BUDGET RECONCILIATION ACT ON THE 1997 PLAN. Under
OBRA, which became law in August 1993, income tax deductions of publicly-traded
companies may be limited to the extent total compensation (including base
salary, annual bonus, stock option exercises and non-qualified benefits paid in
1994 and thereafter) for certain executive officers exceeds $1 million (less the
amount of any "excess parachute payments" as defined in Section 280G of the
Code) in any one year. However, under OBRA, the deduction limit does not apply
to certain "performance-based" compensation established by an independent
compensation committee which is adequately disclosed to, and approved by, share
owners. In particular, stock options will satisfy the performance-based
exception if the awards are made by a qualifying compensation committee, the
plan sets the maximum number of shares that can be granted to any particular
employee within a specified period and the compensation is based solely on an
increase in the stock price after the grant date (i.e. the option exercise price
is equal to or greater than the Fair Market Value of the stock subject to the
award on the grant date).
It is the Company's policy generally to design the Company's compensation
programs to conform with the OBRA legislation and related regulations to qualify
the compensation paid thereunder for deductibility to the extent the limitations
necessary to obtain such deductibility are not inconsistent with the Company's
overall compensation policies and goals. Accordingly, the Board is asking share
owners to
24
approve the 1997 Plan in compliance with OBRA requirements. No option grants
will become exercisable under the 1997 Plan unless such holders vote to approve
the 1997 Plan.
REASONS FOR PROPOSAL
The Restated Plan currently provides that 7,488,762 shares of Common Stock
are authorized for issuance. As of March 17, 1997, approximately 1,132,138
shares remained available for future awards under the Restated Plan. Also on
that date, options held by approximately 405 key employees and covering
approximately 3,117,781 shares were outstanding under the Restated Plan, of
which approximately 2,263,145 were exercisable. The Board has determined that it
is advisable to continue to provide stock-based incentive compensation to the
Company's key employees, thereby continuing to align the interests of such
employees with those of the share owners, and that awards under the 1997 Plan
are an effective means of providing such compensation. In addition, among other
intended uses for restricted stock, the Compensation Committee may provide
employees of the Company who participate in the SMIP or PAP with the opportunity
to elect to defer all or a portion of their bonus awards thereunder and to
receive restricted stock in lieu thereof. The Board recommends that the 1997
Plan be adopted, and that 10,000,000 shares of Common Stock be reserved for
issuance on exercise of options and awards or vesting of restricted stock
thereunder.
REQUIRED VOTE FOR APPROVAL AND RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the shares present or represented and
entitled to vote at the Annual Meeting is required to approve the 1997 Plan.
Your Board of Directors recommends a vote FOR approval of the 1997 Plan.
25
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 1997.
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 122,664,143 shares of the Company's Common Stock was
outstanding at the close of business on March 17, 1997. 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.
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 1997 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
26
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 the approval of the
benefit plans described herein.
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.
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 1997 Annual Meeting other than the election of directors and
approval of the other proposals as presented herein. 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, except that
Robert A. Smith, an executive officer of the Company, filed a Form 5 to report
gifts to family members of a total of 1,000 shares of the Company's Common Stock
13 days after the date by which it should have been filed.
27
SHARE OWNER PROPOSALS AND NOMINATIONS FOR 1998 ANNUAL MEETING
A share owner desiring to submit a proposal for inclusion in the Company's
Proxy Statement for the 1998 Annual Meeting must deliver the proposal so that it
is received by the Company no later than December 1, 1997. The Company requests
that all such proposals be addressed to Thomas L. Young, Executive Vice
President, General Counsel and 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 1996 Annual
Report to each share owner entitled to vote at the Annual Meeting. Included in
the 1996 Annual Report are the Company's consolidated financial statements for
the year ended December 31, 1996.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996, 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, 1997
28
APPENDIX A
SECOND AMENDMENT
TO
SECOND AMENDED AND RESTATED STOCK OPTION PLAN
FOR KEY EMPLOYEES OF OWENS-ILLINOIS, INC.
Pursuant to the authority reserved to the Compensation Committee (the
"Committee") of the Board of Directors of Owens-Illinois, Inc. (the "Company")
under Section 7.2 of the Second Amended and Restated Stock Option Plan for Key
Employees of Owens-Illinois, Inc. (the "Plan"), the Committee hereby amends the
Plan as follows:
1. Article I of the Plan is amended by the addition thereto of a new Section
1.1, to read, in its entirety, as follows:
SECTION 1.1--ADDITIONAL OPTION
"Additional Option" means an Option granted to an Optionee to
purchase a number of shares of Common Stock equal to the number of shares
of Common Stock tendered or relinquished by the Optionee in payment of
the exercise price upon exercise of an Option and/or the number of shares
of Common Stock tendered or relinquished in payment of the amount to be
withheld under applicable federal, state and local income tax laws in
connection with the exercise of an option as described in Article VIII.
2. Article I of the Plan is amended by the addition thereto of a new Section
1.2, to read, in its entirety, as follows:
SECTION 1.2--ADDITIONAL OPTION FEATURE
"Additional Option Feature" means a feature of an Option that
provides for the automatic grant of an Additional Option in accordance
with the provisions described in Article VIII.
3. Existing Sections 1.1 through 1.24, inclusive, of the Plan are amended by
redesignating such Sections as Sections 1.3 through 1.26.
4. Section 2.1 of the Plan is amended by the addition at the end of the
second sentence the following:
For purposes of determining the number of shares that may be sold under
the Plan, such number shall increase by the number of shares of Common Stock
tendered or relinquished to the Corporation (a) in connection with the
exercise of an Option or (b) in payment of federal, state and local income
tax withholding liabilities upon exercise of an Option.
5. Section 5.3(b)(ii) of the Plan is amended to read, in its entirety, as
follows:
(ii) With the consent of the Committee, (A) shares of the Company's
Common Stock owned by the Optionee duly endorsed for transfer to the
Company, or, (B) shares of the Company's Common Stock issuable to the
Optionee upon exercise of the Option, with a Fair Market Value on the date
of Option exercise equal to the aggregate Option price of the shares with
respect to which such Option or portion is thereby exercised; or
6. Section 5.3(c) of the Plan is amended to read, in its entirety, as
follows:
(c) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law
in connection with the exercise of the Option; with the consent of the
Committee, (i) shares of the Company's Common Stock owned by the Optionee
duly endorsed for transfer, or, (ii) shares of the Company's Common Stock
issuable to the Optionee upon exercise of the Option, valued at Fair Market
Value as of the date of Option exercise, may be used to make all or part of
such payment;
7. Section 5.4 of the Plan is amended by deleting it in its entirety.
8. Sections 5.5 through 5.7, inclusive, of the Plan are amended by
redesignating such Sections as Sections 5.4 through 5.6.
9. The first sentence of Section 5.6, as redesignated, of the Plan is
amended by deleting it in its entirety.
10. The first sentence of Section 6.1 of the Plan is amended to read, in its
entirety, as follows:
The Compensation Committee shall consist of two or more Directors,
appointed by and holding office at the pleasure of the Board.
11.The last sentence of Section 6.2 of the Plan is amended to read, in its
entirety, as follows:
In its absolute discretion, the Board may at any time and from time to
time exercise any and all rights and duties of the Committee under this Plan
except with respect to matters which under Rule 16b-3 or Section 162(m) of
the Code, or any regulations or rules issued thereunder, are required to be
determined in the sole discretion of the Committee.
12. The Plan is amended by the addition thereto after the end of Article VII
of the following:
ARTICLE VIII
ADDITIONAL OPTIONS
SECTION 8.1--ADDITIONAL OPTIONS
(a) The Committee may, at or after the date of grant of an Option, grant
Additional Options. Additional Options may be granted with respect to any
outstanding Option.
(b) If, with the consent of the Committee pursuant to Section 5.3(b)(ii), an
Optionee exercises an Option that has an Additional Option Feature by tendering
or relinquishing shares of Common Stock and/ or when shares of Common Stock are
tendered or relinquished in payment for the amount to be withheld under
applicable federal, state and local income tax laws (at withholding rates not to
exceed the Optionee's applicable marginal tax rates) in connection with the
exercise of an option, the Optionee shall automatically be granted an Additional
Option. The Additional Option shall be subject to the following provisions:
(i) The Additional Option shall cover the number of shares of Common
Stock equal to the sum of (A) the number of shares of Common Stock tendered
or relinquished as consideration upon the exercise of the Option to which
such Additional Option Feature relates and (B) the number of shares of
Common Stock tendered or relinquished in payment of the amount to be
withheld under applicable
A-2
federal, state and local income tax laws in connection with the exercise of
the option to which such Additional Option Feature relates;
(ii) The Additional Option will not have an Additional Option Feature
unless the Committee directs otherwise;
(iii) The Additional Option exercise price shall be 100% of the Fair
Market Value per share on the date the employee tenders or relinquishes
shares of Common Stock to exercise the Option that has the Additional Option
Feature and/or tenders or relinquishes shares of Common Stock in payment of
income tax withholding on the exercise of an Option that has the Additional
Option Feature; and
(iv) The Additional Option shall have the same termination date and
other termination provisions as the underlying Option that had the
Additional Option Feature.
13. This Second Amendment shall be effective on or as of the date of its
approval by the stockholders of the Company. In all other respects the Plan
shall remain in full force and effect as originally adopted.
A-3
APPENDIX B
1997 EQUITY PARTICIPATION PLAN
OF
OWENS-ILLINOIS, INC.
OWENS-ILLINOIS, INC., a Delaware corporation, has adopted the 1997 Equity
Participation Plan of Owens Illinois, Inc. (the "Plan"), effective ,
1997, for the benefit of its eligible employees. The purposes of this Plan are
as follows:
(1) To further the growth, development and financial success of the Company
by providing additional incentives to certain of its key Employees (as defined
hereunder) who have been or will be given responsibility for the management or
administration of the Company's business affairs, by assisting them to become
owners of capital stock of the Company and thus to benefit directly from its
growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the type of
professional, technical and managerial employees considered essential to the
long-range success of the Company by providing and offering them an opportunity
to become owners of capital stock of the Company under options, including
options that are intended to qualify as "incentive stock options" under Section
422 of the Code (as defined hereunder).
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
The masculine pronoun shall include the feminine and neuter and the singular
shall include the plural, where the context so indicates.
SECTION 1.1--ADDITIONAL OPTION
"Additional Option" means an Option granted to an Optionee to purchase a
number of shares of Common Stock equal to the number of shares of Common Stock
tendered or relinquished by the Optionee in payment of the exercise price upon
exercise of an Option and/or the number of shares of Common Stock tendered or
relinquished in payment of the amount to be withheld under applicable federal,
state and local income tax laws in connection with the exercise of an option as
described in Article VI.
SECTION 1.2--ADDITIONAL OPTION FEATURE
"Additional Option Feature" means a feature of an Option that provides for
the automatic grant of an Additional Option in accordance with the provisions
described in Article VI.
SECTION 1.3--AWARD
"Award" shall mean an Option or Restricted Stock granted under this Plan.
SECTION 1.4--AWARD LIMIT
"Award Limit" shall mean 500,000 shares of Common Stock or, as the context
may require, Options to acquire 500,000 shares of Common Stock.
SECTION 1.5--BOARD
"Board" shall mean the Board of Directors of the Company.
SECTION 1.6--CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.7--COMMITTEE
"Committee" shall mean the Compensation Committee of the Board, appointed as
provided in Section 8.1
SECTION 1.8--COMMON STOCK
"Common Stock" shall mean the Company's common stock, $.01 par value.
SECTION 1.9--COMPANY
"Company" shall mean Owens-Illinois, Inc. In addition, "Company" shall mean
any corporation assuming, or issuing new employee stock options in substitution
for, Incentive Stock Options, outstanding under the Plan, in a transaction to
which Section 424(a) of the Code applies.
SECTION 1.10--DIRECTOR
"Director" shall mean a member of the Board.
SECTION 1.11--EMPLOYEE
"Employee" shall mean any employee (as defined in accordance with the
regulations and revenue rulings then applicable under Section 3401(c) of the
Code) of the Company, or of any corporation which is then a Parent Corporation
or a Subsidiary, whether such employee is so employed at the time this Plan is
adopted or becomes so employed subsequent to the adoption of this Plan.
SECTION 1.12--EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
SECTION 1.13--FAIR MARKET VALUE
"Fair Market Value" of a share of the Company's stock as of a given date
shall be: (i) the closing price of a share of the Company's stock on the
principal exchange on which shares of the Company's stock are then trading, if
any, on the day previous to such date, or, if shares were not traded on the day
previous to such date, then on the next preceding trading day during which a
sale occurred; or (ii) if such stock is not traded on an exchange but is quoted
on NASDAQ or a successor quotation system, (1) the last sales price (if the
stock is then listed as a National Market Issue under the NASD National Market
System) or (2) the mean between the closing representative bid and asked prices
(in all other cases) for the stock on the day previous to such date as reported
by NASDAQ or such successor quotation system; or (iii) if such stock is not
publicly traded on an exchange and not quoted on NASDAQ or a successor quotation
system, the
B-2
mean between the closing bid and asked prices for the stock, on the day previous
to such date, as determined in good faith by the Committee; or (iv) if the
Company's stock is not publicly traded, the fair market value established by the
Committee acting in good faith.
SECTION 1.14--INCENTIVE STOCK OPTION
"Incentive Stock Option" shall mean an Option which qualifies under Section
422 of the Code and which is designated as an Incentive Stock Option by the
Committee.
SECTION 1.15--NON-QUALIFIED OPTION
"Non-Qualified Option" shall mean an Option which is not an Incentive Stock
Option and which is designated as a Non-Qualified Option by the Committee.
SECTION 1.16--OFFICER
"Officer" shall mean an officer of the Company, as defined in Rule 16a-1(f)
under the Securities Exchange Act of 1934, as such Rule may be amended in the
future.
SECTION 1.17--OPTION
"Option" shall mean an option to purchase capital stock of the Company,
granted under the Plan. "Options" includes both Incentive Stock Options and
Non-Qualified Options.
SECTION 1.18--OPTIONEE
"Optionee" shall mean an Employee to whom an Option is granted under the
Plan.
SECTION 1.19--PARENT CORPORATION
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
SECTION 1.20--PLAN
"Plan" shall mean this 1997 Equity Participation Plan of Owens-Illinois,
Inc.
SECTION 1.21--RESTRICTED STOCK
"Restricted Stock" shall mean Common Stock awarded under Article VII of this
Plan.
SECTION 1.22--RESTRICTED STOCK AGREEMENT
"Restricted Stock Agreement" shall mean Restricted Stock Agreement as
provided in Section 7.2.
SECTION 1.23--RULE 16B-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as
such Rule may be amended in the future.
B-3
SECTION 1.24--SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.25--SECTION 162(M) PARTICIPANT
"Section 162(m) Participant" shall mean any key Employee designated by the
Committee as a key Employee whose compensation for the fiscal year in which the
key Employee is so designated or a future fiscal year may be subject to the
limit on deductible compensation imposed by Section 162(m) of the Code.
SECTION 1.26--SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
SECTION 1.27--SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. "Subsidiary" shall also mean any partnership in
which the Company and/or any Subsidiary owns more than 50% of the capital or
profits interests.
SECTION 1.28--TERMINATION OF EMPLOYMENT
"Termination of Employment" shall mean the time when the employee-employer
relationship between the Optionee or holder of Restricted Stock and the Company,
a Parent Corporation or a Subsidiary is terminated for any reason, with or
without cause, including, but not by way of limitation, a termination by
resignation, discharge, death, total disability or retirement, but excluding (i)
terminations where there is a simultaneous reemployment by the Company, a Parent
Corporation or a Subsidiary or (ii) except with respect to an Incentive Stock
Option, terminations where the Optionee or holder of Restricted Stock continues
a relationship (e.g., as a director or as a consultant) with the Company, a
Parent Corporation or a Subsidiary. The Committee, in its absolute discretion,
shall determine the effect of all other matters and questions relating to
Termination of Employment, including, but not by way of limitation, the question
of whether a Termination of Employment resulted from a discharge for good cause,
and all questions of whether particular leaves of absence constitute
Terminations of Employment; provided, however, that, with respect to Incentive
Stock Options, a leave of absence shall constitute a Termination of Employment
if, and to the extent that, such leave of absence interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section. Notwithstanding any other provision of
this Plan, the Company or any of its subsidiaries has an absolute and
unrestricted right to terminate the Optionee's or holder of Restricted Stock's
employment at any time for any reason whatsoever, with or without cause.
SECTION 1.29--TRANSFERABLE OPTION
"Transferable Option" means a Non-Qualified Option which by its terms, as
determined by the Committee and set forth in the applicable Option Agreement (or
an amendment thereto), may be transferred by the Optionee, in writing and with
written notice thereof to the Committee, by gift, without the receipt of any
consideration, (i) to such Optionee's spouse; (ii) to any child or more remote
lineal
B-4
descendant of such Optionee or to the spouse of any such child or more remote
lineal descendant; or (iii) to any trust, custodianship, or other similar
fiduciary relationship maintained for the benefit of any one or more of such
persons, but is otherwise nontransferable except by will or the applicable laws
of descent and distribution.
SECTION 1.30--TRANSFEREE
"Transferee" shall mean any person or entity to whom or to which an Optionee
has transferred a Transferable Option.
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1--SHARES SUBJECT TO PLAN
(a) The shares of stock subject to Options and awards of Restricted Stock
shall be shares of the Company's $.01 par value Common Stock. The aggregate
number of such shares which may be issued upon exercise of such Options or upon
any such awards of Restricted Stock shall not exceed 10,000,000. For purposes of
determining the number of shares of Common Stock that may be sold under the
Plan, such number shall increase by the number of shares tendered or
relinquished to the Corporation (a) in connection with the exercise of an Option
or (b) in payment of federal, state and local income tax withholding liabilities
upon exercise of an Option or award or vesting of Restricted Stock.
(b) The maximum number of shares which may be subject to Awards granted
under the Plan to any Employee in any calendar year shall not exceed the Award
Limit.
SECTION 2.2--UNEXERCISED OPTIONS
If any Option expires or is cancelled without having been fully exercised,
the number of shares subject to such Option but as to which such Option was not
exercised prior to its expiration or cancellation may again be granted
hereunder, subject to the limitations of Section 2.1. If any Restricted Stock is
repurchased by the Company or forfeited in connection with a Termination of
Employment or otherwise, the number of shares repurchased or forfeited may again
be granted hereunder, subject to the limitations of Section 2.1.
SECTION 2.3--CHANGES IN COMPANY'S SHARES
In the event that the outstanding shares of Common Stock of the Company are
hereafter changed into or exchanged for a different number or kind of shares or
other securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, or
the number of shares is increased or decreased by reason of a stock split-up,
stock dividend, combination of shares or any other increase or decrease in the
number of such shares of Common Stock effected without receipt of consideration
by the Company (provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of
consideration"), the Committee shall make appropriate adjustments in the number
and kind of shares for the purchase of which Options may be granted or which may
be granted as Restricted Stock, including adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued on
exercise of Options and for the grants of Restricted Stock, and of the Award
Limit set forth in Section 1.4.
B-5
ARTICLE III
GRANTING OF OPTIONS
SECTION 3.1--ELIGIBILITY
Any key Employee of the Company or of any corporation which is then a Parent
Corporation or a Subsidiary shall be eligible to be granted Options, except as
provided in Section 3.2.
SECTION 3.2--QUALIFICATION OF INCENTIVE STOCK OPTIONS
No Incentive Stock Option shall be granted unless such Option, when granted,
qualifies as an "incentive stock option" under Section 422 of the Code.
SECTION 3.3--GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its absolute discretion:
(i) Determine which Employees are key Employees and select from among
the key Employees (including those to whom Options have been previously
granted under the Plan) such of them as in its opinion should be granted
Options; and
(ii) Determine the number of shares to be subject to such Options
granted to such selected key Employees, and determine whether such Options
are to be Incentive Stock Options or Non-Qualified Options; and
(iii) Determine the terms and conditions of such Options, consistent with
the Plan, including, but not limited to:
(A) such terms and conditions as may be required in order for such
Options to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code if the Committee determines that such Options
should so qualify; and/or
(B) such terms and conditions as may be required in order to make a
Non-Qualified Option a Transferable Option.
(b) Upon the selection of a key Employee to be granted an Option, the
Committee shall instruct the Secretary to issue such Option and may impose such
conditions on the grant of such Option as it deems appropriate. Without limiting
the generality of the preceding sentence, the Committee may, in its discretion
and on such terms as it deems appropriate, require as a condition on the grant
of an Option to an Employee that the Employee surrender for cancellation some or
all of the unexercised Options which have been previously granted to him. An
Option the grant of which is conditioned upon such surrender may have an Option
price lower (or higher) than the Option price of the surrendered Option, may
cover the same (or a lesser or greater) number of shares as the surrendered
Option, may contain such other terms as the Committee deems appropriate and
shall be exercisable in accordance with its terms, without regard to the number
of shares, price, Option period or any other term or condition of the
surrendered Option.
B-6
ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1--OPTION AGREEMENT
Each Option shall be evidenced by a written Stock Option Agreement, which
shall be executed by the Optionee and an authorized Officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with the Plan, including, but not limited to such terms and
conditions as may be required in order for such Option to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
if the Committee determines that such Option should so qualify. Stock Option
Agreements evidencing Incentive Stock Options shall contain such terms and
conditions as may be necessary to qualify such Options as "incentive stock
options" under Section 422 of the Code. Stock Option Agreements evidencing
Transferable Options shall contain (or may be amended to contain) such terms and
conditions as may be necessary to meet the definition of a Transferable Option
under Section 1.29 hereof.
SECTION 4.2--OPTION PRICE
The price of the shares subject to each Option shall be set by the
Committee; provided, however, that the price per share shall be not less than
100% of the Fair Market Value of such shares on the date such Option is granted;
provided, further, that, in the case of an Incentive Stock Option, the price per
share shall not be less than 110% of the Fair Market Value of such shares on the
date such Option is granted in the case of an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company, any Subsidiary or any
Parent Corporation.
SECTION 4.3--COMMENCEMENT OF EXERCISABILITY
(a) No Option may be exercised in whole or in part during the first year
after such Option is granted, except as may be provided in Sections 4.3(c) and
4.6.
(b) Subject to the provisions of Sections 4.3(a), 4.3(c), 4.3(d), 4.6 and
9.4, Options shall become exercisable at such times and in such installments
(which may be cumulative) as the Committee shall provide in the terms of each
individual Option; provided, however, that by a resolution adopted after an
Option is granted the Committee may, on such terms and conditions as it may
determine to be appropriate and subject to Sections 4.3(a), 4.3(c), 4.3(d), 4.6
and 9.4, accelerate the time at which such Option or any portion thereof may be
exercised.
(c) No portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable; provided, however, that
provision may be made that such Option shall become exercisable in the event of
a Termination of Employment because of the Optionee's retirement or total
disability (each as determined by the Committee in accordance with Company
policies) or death; and provided further, that in the event the Committee
extends the right of an Optionee to exercise his or her Option pursuant to
Section 4.4(a)(vii) below, the Committee may also provide that such Option shall
become exercisable immediately, or in accordance with the schedule of
exercisability which would be applicable to such Option but for the Optionee's
Termination of Employment, or in accordance with any other schedule determined
in the Committee's discretion.
B-7
(d) To the extent that the aggregate Fair Market Value of stock with respect
to which "incentive stock options" (within the meaning of Section 422 of the
Code, but without regard to Section 422(d) of the Code) are exercisable for the
first time by an Optionee during any calendar year (under the Plan and all other
incentive stock option plans of the Company, any Subsidiary and any Parent
Corporation) exceeds $100,000, such options shall be taxed as Non-Qualified
Options. The rule set forth in the preceding sentence shall be applied by taking
options into account in the order in which they were granted. For purposes of
this Section 4.3(d), the Fair Market Value of stock shall be determined as of
the time the option with respect to such stock is granted.
SECTION 4.4--EXPIRATION OF OPTIONS
(a) No Option may be exercised to any extent by anyone after the first to
occur of the following events:
(i) In the case of an Incentive Stock Option, (A) the expiration of ten
years from the date the Option was granted, or (B) in the case of an
Optionee owning (within the meaning of Section 424(d) of the Code), at the
time the Option was granted, more than 10% of the total combined voting
power of all classes of stock of the Company, any Subsidiary or any Parent
Corporation, the expiration of five years from the date the Option was
granted; or
(ii) In the case of a Non-Qualified Option, the expiration of ten years
and one day from the date the Option was granted; or
(iii) Except as provided in clauses (iv) through (viii) below, the date
of the Optionee's Termination of Employment; or
(iv) In the case of an Optionee who is totally disabled (within the
meaning of Section 22(e)(3) of the Code for purposes of an Incentive Stock
Option, or otherwise as determined by the Committee in accordance with
Company policies), the expiration of one year from the date of the
Optionee's Termination of Employment by reason of his or her disability
unless the Optionee dies within said one-year period; or
(v) In the case of an Optionee who retires after reaching the Company's
normal retirement age or who takes early retirement, the expiration of three
months from the date of Optionee's Termination of Employment by reason of
such retirement, or in the case of any such retiring Optionee whose right to
exercise his or her Option is extended by the Committee, which extension
shall not exceed three years from the date of Optionee's Termination of
Employment, the date upon which such extension expires; or
B-8
(vi) The expiration of one year from the date of the Optionee's death;
or
(vii) In the case of an Optionee who is discharged not for good cause,
the expiration of three months from the Optionee's Termination of Employment
unless the Optionee dies within said three-month period; or
(viii) In the case of any Optionee whose right to exercise his or her
Option is extended by the Committee, which extension shall not exceed three
years from the date of Optionee's Termination of Employment, the date upon
which such extension expires.
(b) Subject to the provisions of Section 4.4(a), the Committee shall
provide, in the terms of each individual Option, when such Option expires and
becomes unexercisable; and (without limiting the generality of the foregoing)
the Committee may provide in the terms of individual Options that said Options
expire immediately upon a Termination of Employment; provided, however, that
provision may be made that such Option shall become exercisable in the event of
a Termination of Employment because of the Optionee's retirement (as determined
by the Committee in accordance with Company policies), total disability (within
the meaning of Section 22(e)(3) of the Code for purposes of an Incentive Stock
Option, or otherwise as determined by the Committee in accordance with Company
policies) or death; and provided further, that in the event the Committee
extends the right of an Optionee to exercise his or her Option pursuant to
Section 4.4(a)(vii) above, the Committee may also provide that such Option shall
become exercisable immediately, or in accordance with the schedule of
exercisability which would be applicable to such Option but for the Optionee's
Termination of Employment, or in accordance with any other schedule determined
in the Committee's discretion.
SECTION 4.5--CONSIDERATION
In consideration of the granting of an Option, the Optionee shall agree, in
the written Stock Option Agreement, to remain in the employ of the Company, a
Parent Corporation or a Subsidiary for a period of at least one year after the
Option is granted. Nothing in this Plan or in any Stock Option Agreement
hereunder shall confer upon any Optionee any right to continue in the employ of
the Company, any Parent Corporation or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company, its Parent Corporations and its
Subsidiaries, which are hereby expressly reserved, to discharge any Optionee at
any time for any reason whatsoever, with or without cause.
SECTION 4.6--MERGER, CONSOLIDATION, ACQUISITION, LIQUIDATION OR DISSOLUTION
Notwithstanding the provisions of Section 9.3, in its absolute discretion,
and on such terms and conditions as it deems appropriate, the Committee may
provide by the terms of any Option that such Option cannot be exercised after
the merger or consolidation of the Company with or into another corporation, the
acquisition by another corporation or person (excluding any employee benefit
plan of the Company or any trustee or other fiduciary holding securities under
an employee benefit plan of the Company) of all or substantially all of the
Company's assets or 51% or more of the Company's then outstanding voting stock,
or the liquidation or dissolution of the Company; and if the Committee so
provides, it may, in its absolute discretion and on such terms and conditions as
it deems appropriate, also provide, either by the terms of such Option or by a
resolution adopted prior to the occurrence of such merger, consolidation,
acquisition, liquidation or dissolution, that, for some period of time prior to
such
B-9
event, such Option shall be exercisable as to all shares covered thereby,
notwithstanding anything to the contrary in Section 4.3(a), Section 4.3(b)
and/or any installment provisions of such Option.
SECTION 4.7--NO RIGHT TO CONTINUED EMPLOYMENT
Nothing in this Plan or in any Non-Qualified Stock Option Agreement
hereunder shall confer upon any Optionee any right to continue in the employ of
the Company, any Parent Corporation or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company, its Parent Corporations and its
Subsidiaries, which are hereby expressly reserved, to terminate or discharge any
Optionee at any time for any reason whatsoever, with or without cause.
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1--PERSONS ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he or his Transferee, if any, may
exercise an Option (or any portion thereof) granted to him. After the death of
the Optionee, any exercisable portion of an Option may, prior to the time when
such portion becomes unexercisable under the Plan or the applicable Stock Option
Agreement, be exercised by his Transferee, if any, or by his personal
representative or any other person empowered to do so under the deceased
Optionee's will or under the then applicable laws of descent and distribution.
All of the terms and conditions of any Option in the hands of the Optionee
during his lifetime shall be and remain fully applicable and binding on his
Transferee, if any, and on any other person who may become eligible to exercise
such Option.
SECTION 5.2--PARTIAL EXERCISE
At any time and from time to time prior to the time when any exercisable
Option or exercisable portion thereof becomes unexercisable under the Plan or
the applicable Stock Option Agreement, such Option or portion thereof may be
exercised in whole or in part; provided, however, that the Company shall not be
required to issue fractional shares and the Committee may, by the terms of the
Option, require any partial exercise to be with respect to a specified minimum
number of shares.
SECTION 5.3--MANNER OF EXERCISE
An exercisable Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary or his office of all of the following prior
to the time when such Option or such portion becomes unexercisable under the
Plan or the applicable Stock Option Agreement:
(a) Notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or
portion is exercised, such notice complying with all applicable rules
established by the Committee; and
(b) (i) Full payment (in cash or by check) for the shares with respect
to which such Option or portion is thereby exercised; or
(ii) With the consent of the Committee, (A) shares of the Company's
Common Stock owned by the Optionee duly endorsed for transfer to the
Company, or, (B) shares of the
B-10
Company's Common Stock issuable to the Optionee upon exercise of the
Option, with a Fair Market Value on the date of Option exercise equal to
the aggregate Option price of the shares with respect to which such
Option or portion is thereby exercised; or
(iii) With the consent of the Committee, a full recourse promissory
note bearing interest (at least such rate as shall then preclude the
imputation of interest under the Code or any successor provision) and
payable upon such terms as may be prescribed by the Committee. The
Committee may also prescribe the form of such note and the security to be
given for such note. No Option may, however, be exercised by delivery of
a promissory note or by a loan from the Company when or where such loan
or other extension of credit is prohibited by law; or
(iv) With the consent of the Committee, any combination of the
consideration provided in the foregoing subsections (i), (ii) and (iii);
and
(c) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law
in connection with the exercise of the Option; with the consent of the
Committee, (i) shares of the Company's Common Stock owned by the Optionee
duly endorsed for transfer, or, (ii) shares of the Company's Common Stock
issuable to the Optionee upon exercise of the Option, valued at Fair Market
Value as of the date of Option exercise, may be used to make all or part of
such payment;
(d) Such representations and documents as the Committee, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to
effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer orders to transfer agents and
registrars; and
(e) In the event that the Option or portion thereof shall be exercised
pursuant to Section 5.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
Option or portion thereof.
SECTION 5.4--CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock issuable and deliverable upon the exercise of an Option,
or any portion thereof, may be either previously authorized but unissued shares
or issued shares which have then been reacquired by the Company. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory
body, which the Committee shall, in its absolute discretion, deem necessary
or advisable; and
B-11
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts which it is required to withhold under federal, state or local law
in connection with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may establish from time to time for reasons
of administrative convenience.
SECTION 5.5--RIGHTS AS STOCKHOLDERS
The holders of Options shall not be, nor have any of the rights or
privileges of, stockholders of the Company in respect to any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
SECTION 5.6--TRANSFER RESTRICTIONS
The Committee, in its absolute discretion, may impose such restrictions on
the transferability of the shares purchasable upon the exercise of an Option as
it deems appropriate. Any such other restriction shall be set forth in the
respective Stock Option Agreement and may be referred to on the certificates
evidencing such shares. The Committee may require the Employee to give the
Company prompt notice of any disposition of shares of stock, acquired by
exercise of an Incentive Stock Option, within two years from the date of
granting such Option or one year after the transfer of such shares to such
Employee. The Committee may direct that the certificates evidencing shares
acquired by exercise of an Option refer to such requirement to give prompt
notice of disposition.
ARTICLE VI
ADDITIONAL OPTIONS
SECTION 6.1--ADDITIONAL OPTIONS
(a) The Committee may, at or after the date of grant of an Option, grant
Additional Options. Additional Options may be granted with respect to any
outstanding Option.
(b) If, with consent of the Committee pursuant to Section 5.3(b)(ii), an
Optionee exercises an Option that has an Additional Option Feature by tendering
or relinquishing shares of Common Stock and/or when shares of Common Stock are
tendered or relinquished in payment for the amount to be withheld under
applicable federal, state and local income tax laws in connection with the
exercise of an option, the Optionee shall automatically be granted an Additional
Option. The Additional Option shall be subject to the following provisions:
(i) The Additional Option shall cover the number of shares of Common
Stock equal to the sum of (A) the number of shares of Common Stock tendered
or relinquished as consideration upon the exercise of the Option to which
such Additional Option Feature relates and (B) the number of shares of
Common Stock tendered or relinquished in payment of the amount to be
withheld under applicable
B-12
federal, state and local income tax laws in connection with the exercise of
the option to which such Additional Option Feature relates;
(ii) The Additional Option will not have an Additional Option Feature
unless the Committee directs otherwise;
(iii) The Additional Option exercise price shall be 100% of the Fair
Market Value per share on the date the employee tenders or relinquishes
shares of Common Stock to exercise the Option that has the Additional Option
Feature and/or tenders or relinquishes shares of Common Stock in payment of
income tax withholding on the exercise of an Option that has the Additional
Option Feature; and
(iv) The Additional Option shall have the same termination date and
other termination provisions as the underlying Option that had the
Additional Option Feature.
ARTICLE VII
AWARDS OF RESTRICTED STOCK
SECTION 7.1--AWARD OF RESTRICTED STOCK
(a) The Committee may from time to time, in its absolute discretion:
(i) Select from among the key Employees (including Employees who have
previously received Options under this Plan) such of them as in its opinion
should be awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent with this Plan.
(b) The Committee shall establish the purchase price, if any, and form of
payment for Restricted Stock; provided, however, that such purchase price shall
be no less than the par value of the Common Stock to be purchased, unless
otherwise permitted by applicable state law. In all cases, legal consideration
shall be required for each issuance of Restricted Stock.
(c) Upon the selection of a key Employee to be awarded Restricted Stock, the
Committee shall instruct the Secretary of the Company to issue such Restricted
Stock and may impose such conditions on the issuance of such Restricted Stock as
it deems appropriate.
SECTION 7.2--RESTRICTED STOCK AGREEMENT
Restricted Stock shall be issued only pursuant to a written Restricted Stock
Agreement, which shall be executed by the selected key Employee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.
SECTION 7.3--RIGHTS AS STOCKHOLDERS
Upon delivery of the shares of Restricted Stock to the escrow holder
pursuant to Section 7.8, the holder of Restricted Stock shall have, unless
otherwise provided by the Committee, all the rights of a stockholder with
respect to said shares, subject to the restrictions in his Restricted Stock
Agreement, including voting rights and the right to receive all dividends and
other distributions paid or made with
B-13
respect to the shares; provided, however, that in the discretion of the
Committee, any extraordinary distributions with respect to the Common Stock
shall be subject to the restrictions set forth in Section 7.4.
SECTION 7.4--RESTRICTIONS
All shares of Restricted Stock issued under this Plan (including any shares
received by holders thereof with respect to shares of Restricted Stock as a
result of stock dividends, stock splits or any other form of recapitalization)
shall, in the terms of each individual Restricted Stock Agreement, be subject to
such restrictions as the Committee shall provide, which restrictions may
include, without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment with the
Company, Company performance and individual performance; provided, however, that
by action taken after the Restricted Stock is issued, the Committee may, on such
terms and conditions as it may determine to be appropriate, remove any or all of
the restrictions imposed by the terms of the Restricted Stock Agreement.
Restricted Stock may not be sold or encumbered until all restrictions are
terminated or expire. Unless provided otherwise by the Committee, if no
consideration was paid by the holder of Restricted Stock upon issuance, a holder
of Restricted Stock's rights in unvested Restricted Stock shall lapse upon
Termination of Employment.
SECTION 7.5--PROVISIONS APPLICABLE TO SECTION 162(M) PARTICIPANTS
(a) Notwithstanding anything in the Plan to the contrary, the Committee may
grant any performance or incentive awards of Restricted Stock described in this
Article VII to a Section 162(m) Participant that vest or become exercisable upon
the attainment of performance targets for the Company which are related to one
or more of the following performance goals: (i) pre-tax income, (ii) operating
income, (iii) cash flow, (iv) earnings per share, (v) earnings before any one or
more of the following items: interest, taxes, depreciation or amortization, (vi)
return on equity, (vii) return on invested capital or assets and (viii) cost
reductions or savings.
(b) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
performance or incentive awards described in this Article VII which may be
granted to one or more Section 162(m) Participants, no later than ninety (90)
days following the commencement of any fiscal year in question or any other
designated fiscal period (or such other time as may be required or permitted by
Section 162(m) of the Code), the Committee shall, in writing, (i) designate one
or more Section 162(m) Participants, (ii) select the performance goal or goals
applicable to the fiscal year or other designated fiscal period, (iii) establish
the various targets and bonus amounts which may be earned for such fiscal year
or other designated fiscal period and (iv) specify the relationship between
performance goals and targets and the amounts to be earned by each Section
162(m) Participant for such fiscal year or other designated fiscal period.
Following the completion of each fiscal year or other designated fiscal period,
the Committee shall certify in writing whether the applicable performance
targets have been achieved for such fiscal year or other designated fiscal
period. In determining the amount earned by a Section 162(m) Participant, the
Committee shall have the right to reduce (but not to increase) the amount
payable at a given level of performance to take into account additional factors
that the Committee may deem relevant to the assessment of individual or
corporate performance for the fiscal year or other designated fiscal period.
B-14
SECTION 7.6--REPURCHASE OF RESTRICTED STOCK
The Committee may provide in the terms of each individual Restricted Stock
Agreement that the Company shall have the right to repurchase from the holder of
Restricted Stock the Restricted Stock then subject to restrictions under the
Restricted Stock Agreement immediately upon a Termination of Employment between
the holder of Restricted Stock and the Company, at a cash price per share equal
to the price paid by the holder of Restricted Stock for such Restricted Stock;
provided, however, that provision may be made that no such right of repurchase
shall exist in the event of a Termination of Employment without cause, or
following a change in control of the Company or because of the holder of the
Restricted Stock's retirement, death or disability, or otherwise.
SECTION 7.7--TAX WITHHOLDING
The Company shall be entitled to require payment in cash or deduction from
other compensation payable to each holder of Restricted Stock of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting or exercise of any Restricted Stock. The Committee may in its
discretion and in satisfaction of the foregoing requirement allow such holder of
Restricted Stock to elect to have the Company withhold shares of Common Stock
otherwise issuable under such award (or allow the return of shares of Common
Stock) having a Fair Market Value equal to the sums required to be withheld.
SECTION 7.8--ESCROW
The Secretary of the Company or such other escrow holder as the Committee
may appoint shall retain physical custody of each certificate representing
Restricted Stock until all of the restrictions imposed under the Restricted
Stock Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.
SECTION 7.9--LEGEND
In order to enforce the restrictions imposed upon shares of Restricted Stock
hereunder, the Committee shall cause a legend or legends to be placed on
certificates representing all shares of Restricted Stock that are still subject
to restrictions under Restricted Stock Agreements, which legend or legends shall
make appropriate reference to the conditions imposed thereby.
ARTICLE VIII
ADMINISTRATION
SECTION 8.1--COMPENSATION COMMITTEE
The Compensation Committee shall consist of two or more Directors, appointed
by and holding office at the pleasure of the Board. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee shall be filled by the Board.
B-15
SECTION 8.2--DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general administration
of the Plan in accordance with its provisions. The Committee shall have the
power to interpret the Plan and the Options and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret, amend or revoke any such rules. Any such
interpretations and rules in regard to Incentive Stock Options shall be
consistent with the basic purpose of the Plan to grant "incentive stock options"
within the meaning of Section 422 of the Code. In its absolute discretion, the
Board may at any time and from time to time exercise any and all rights and
duties of the Committee under this Plan except with respect to matters which
under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules
issued thereunder, are required to be determined in the sole discretion of the
Committee.
SECTION 8.3--MAJORITY RULE
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
SECTION 8.4--COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
Members of the Committee shall receive such compensation for their services
as members as may be determined by the Board. All expenses and liabilities
incurred by members of the Committee in connection with the administration of
the Plan shall be borne by the Company. The Committee may employ attorneys,
consultants, accountants, appraisers, brokers or other persons. The Committee,
the Company and its Officers and Directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all Optionees, the Company and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
the Options, and all members of the Committee shall be fully protected by the
Company in respect to any such action, determination or interpretation.
ARTICLE IX
OTHER PROVISIONS
SECTION 9.1--OPTIONS NOT TRANSFERABLE
No Award or interest or right therein or part thereof shall be liable for
the debts, contracts or engagements of the Optionee or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section 9.1 shall
prevent any transfer of a Transferable Option in accordance with its terms or
any transfer by will or by the applicable laws of descent and distribution.
B-16
SECTION 9.2--AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified, suspended
or terminated at any time or from time to time by the Committee. However,
without approval of the Company's stockholders given within twelve months before
or after the action by the Committee, no action of the Committee may, except as
provided in Section 2.3, increase any limit imposed in Section 2.1 on the
maximum number of shares which may be issued on exercise of Options or awarded
as Restricted Stock, modify the Award Limit, materially modify the eligibility
requirements of Section 3.1, reduce the minimum Option price requirements of
Section 4.2, extend the limit imposed in this Section 9.2 on the period during
which Awards may be granted or amend or modify the Plan in a manner requiring
stockholder approval under Rule 16b-3 or Section 162(m) of the Code. Neither the
amendment, suspension nor termination of the Plan shall, without the consent of
the holder of an Award alter or impair any rights or obligations under any Award
theretofore granted. No Award may be granted during any period of suspension nor
after termination of the Plan, and in no event may any Award be granted under
this Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by the
Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's stockholders under Section 9.3.
SECTION 9.3--ADJUSTMENTS IN OUTSTANDING AWARDS
In the event that the outstanding shares of Common Stock subject to Awards
are changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, or the number of shares is increased or
decreased by reason of a stock split-up, stock dividend, combination of shares
or any other increase or decrease in the number of such shares of Common Stock
effected without receipt of consideration by the Company (provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration"), the Committee shall
make appropriate adjustments in the number and kind of shares as to which all
outstanding Awards, or portions thereof then unexercised or unvested, shall be
exercisable or granted upon any Awards, to the end that after such event the
Award holder's proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in an outstanding Award shall be made
without change in the total price applicable to the Award or the unexercised
portion of an Option (except for any change in the aggregate price resulting
from rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in Award price per share; provided, however, that, in
the case of Incentive Stock Options, each such adjustment shall be made in such
manner as not to constitute a "modification" within the meaning of Section
424(h)(3) of the Code. Any such adjustment made by the Committee shall be final
and binding upon all holders of Awards, the Company and all other interested
persons.
SECTION 9.4--APPROVAL OF PLAN BY STOCKHOLDERS
This Plan will be submitted for the approval of the Company's stockholders
within twelve months after the date of the Board's initial adoption of the Plan.
Awards may be granted prior to such stockholder approval; provided, however,
that such Awards shall not be exercisable prior to the time when the Plan is
approved by the stockholders; provided, further, that if such approval has not
been obtained at the end of
B-17
said twelve-month period, all Awards previously granted under the Plan shall
thereupon be cancelled and become null and void, provided that the Company will
return to the holder of the cancelled Award any purchase price previously paid
therefor. The Company shall take such actions with respect to the Plan as may be
necessary to satisfy the requirements of Rule 16b-3(b).
SECTION 9.5--EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary. Nothing in this Plan shall be construed to limit the right of the
Company, any Parent Corporation or any Subsidiary (a) to establish any other
forms of incentives or compensation for employees of the Company, any Parent
Corporation or any Subsidiary or (b) to grant or assume options or restricted
stock otherwise than under this Plan in connection with any proper corporate
purpose, including, but not by way of limitation, the grant or assumption of
options or restricted stock in connection with the acquisition by purchase,
lease, merger, consolidation or otherwise, of the business, stock or assets of
any corporation, firm or association.
SECTION 9.6--TITLES
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan.
SECTION 9.7--CONFORMITY TO SECURITIES LAWS
The Plan is intended to conform to the extent necessary with all provisions
of the Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, including
without limitation Rule 16b-3. Notwithstanding anything herein to the contrary,
the Plan shall be administered, and Awards shall be granted and may be
exercised, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, the Plan and Awards
granted hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
B-18
[LOGO]
APPENDIX C
FORM OF PROXY
OWENS-ILLINOIS, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints David G. Van Hooser, Lee A. Wesselmann and Thomas L.
P Young and each of them, or if more than one is present and acting then a majority
R thereof, as Proxies with full power of substitution, and hereby authorize(s) them to
O represent and to vote, as designated below, all shares of common stock of
X Owens-Illinois, Inc. held of record by the undersigned on March 17, 1997, at the Annual
Y Meeting of Share Owners to be held on May 14, 1997, or at any adjournment thereof.
Election of Directors, Nominees:
Class III: Joseph H. Lemieux, Henry R. Kravis and Michael W. Michelson
(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 and FOR proposal numbers 2
and 3.
- - -------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote "FOR" the Proposals.
- - -------------------------------------------------------------------------------------------------------
FOR WITHHELD
1. Election of Directors FOR / / / / WITHHOLD AUTHORITY to
nominees listed on the reverse vote for all nominees listed on
side (except as marked to the reverse side
contrary).
(To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- - --------------------------------------------------------------------------------
2. Approval of an Amendment to the Second Amended FOR AGAINST ABSTAIN
and Restated Stock Option Plan for Key Employees / / / / / /
of Owens-Illinois, Inc.
3. Approval of 1997 Equity Participation Plan of FOR AGAINST ABSTAIN
Owens-Illinois, Inc. / / / / / /
4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
Please sign exactly as name appears hereon. When shares
are held by joint owners, both should sign. When signing
as attorney, executor, administrator, trust 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