Exhibit  10.1

 

Adobe Systems [ex101image002.gif]

 

WORLD OPERATIONS

 

 

March 31, 2004

 

 

Mr. Steve McCracken

296 Old Kennett Road

Kennett Square, PA 19348

 

 

Dear Steve:

 

We are delighted to confirm that you will join us as Chairman and Chief
Executive Officer on the terms set forth below.

 

1.                                       POSITION.  PRESIDENT AND CHIEF
EXECUTIVE OFFICER AND A MEMBER OF THE BOARD OF DIRECTORS OF OWENS-ILLINOIS, INC.
(THE “BOARD” AND THE “COMPANY,” RESPECTIVELY), EFFECTIVE APRIL 1, 2004. 
CHAIRMAN OF THE BOARD FOLLOWING THE COMPANY’S 2004 ANNUAL MEETING OF
SHAREHOLDERS.

 

2.                                       BASE SALARY.  $700,000 PER YEAR, PLUS
SUCH INCREASES, IF ANY, AS MAY BE DETERMINED FROM TIME TO TIME BY THE BOARD
(“BASE SALARY”).

 

3.                                       ANNUAL BONUS.  YOU WILL PARTICIPATE IN
THE COMPANY’S SENIOR MANAGEMENT INCENTIVE PLAN, AS AMENDED FROM TIME TO TIME (OR
ANY SUCCESSOR PLAN).  YOUR TARGET BONUS WILL BE 150% OF BASE SALARY (THE “TARGET
BONUS”).  YOUR ANNUAL BONUS CAN REACH 300% OF BASE SALARY IF YOU EXCEED TARGET
ANNUAL INCENTIVES BY UP TO 20%.  YOUR ANNUAL BONUS FOR 2004 WILL BE NOT LESS
THAN $350,000.

 

4.                                       EQUITY ARRANGEMENTS.

 

A.                                       PURCHASED EQUITY.  AS SOON AS
PRACTICABLE FOLLOWING THE DATE HEREOF, BUT IN NO EVENT LATER THAN APRIL 9, 2004,
YOU WILL PURCHASE FROM THE COMPANY A NUMBER OF SHARES OF THE COMPANY’S COMMON
STOCK, PAR VALUE $0.01 PER SHARE (THE “COMMON STOCK”), FOR AN AGGREGATE PURCHASE
PRICE OF $750,000, WITH THE NUMBER OF SHARES CALCULATED BY DIVIDING (X) THAT
AGGREGATE PURCHASE PRICE, BY (Y) THE PER-SHARE CLOSING PRICE OF THE COMMON STOCK
ON THE NEW YORK STOCK EXCHANGE (THE “FAIR MARKET VALUE”) ON THE TRADING DAY
IMMEDIATELY PRECEDING THE DATE OF PURCHASE.

 

B.                                      INITIAL RESTRICTED SHARE AWARD.  ON
APRIL 1, 2004, YOU WILL BE GRANTED AN AWARD OF RESTRICTED SHARES IN RESPECT OF
155,000 SHARES (“RESTRICTED SHARES”) OF COMMON STOCK UNDER THE COMPANY’S AMENDED
AND RESTATED 1997 EQUITY PARTICIPATION PLAN (THE

 

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“EQUITY PARTICIPATION PLAN”).  SUBJECT TO YOUR CONTINUED EMPLOYMENT WITH THE
COMPANY, 50% OF THE RESTRICTED SHARES WILL VEST ON THE SECOND ANNIVERSARY OF THE
DATE OF GRANT, 25% ON THE THIRD ANNIVERSARY OF THE DATE OF GRANT, AND THE
REMAINING 25% ON THE FOURTH ANNIVERSARY OF THE DATE OF GRANT.

 

C.                                       INITIAL STOCK OPTION.  ON APRIL 1,
2004, YOU WILL BE GRANTED A NON-QUALIFIED STOCK OPTION TO PURCHASE 335,000
SHARES OF COMMON STOCK (THE “STOCK OPTION”) UNDER THE EQUITY PARTICIPATION
PLAN.  THE STOCK OPTION WILL HAVE A PER-SHARE EXERCISE PRICE EQUAL TO THE FAIR
MARKET VALUE ON THE TRADING DAY IMMEDIATELY PRECEDING THE DATE OF GRANT, AND
WILL EXPIRE TEN YEARS AND ONE DAY FOLLOWING THE DATE OF GRANT SUBJECT TO EARLIER
EXPIRATION IN ACCORDANCE WITH THE TERMS OF THE STANDARD NON-QUALIFIED STOCK
OPTION AGREEMENT UNDER THE EQUITY PARTICIPATION PLAN.  SUBJECT TO YOUR CONTINUED
EMPLOYMENT WITH THE COMPANY, 50% OF THE STOCK OPTION WILL BECOME EXERCISABLE ON
THE 5TH ANNIVERSARY OF THE DATE OF GRANT, AND THE REMAINING 50% WILL BECOME
EXERCISABLE ON THE 6TH ANNIVERSARY OF THE DATE OF GRANT.  THE STOCK OPTION WILL,
HOWEVER, BECOME EXERCISABLE ON AN ACCELERATED BASIS, AS INDICATED BELOW, AFTER
THE FIRST ANNIVERSARY OF THE DATE OF GRANT IF THE AVERAGE FAIR MARKET VALUE PER
SHARE 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.”

 

Stock Price Multiple

 

Exercisable Percentage

112.0%

 

25

%

134.5%

 

50

%

160.5%

 

75

%

192.5%

 

100

%

 

D.                                      FUTURE EQUITY-INCENTIVE AWARDS.  YOU
WILL BE ELIGIBLE FOR FUTURE EQUITY-INCENTIVE AWARDS IN THE SOLE DISCRETION OF
THE BOARD.

 

5.                                       EMPLOYEE BENEFITS AND PERQUISITES.  YOU
WILL PARTICIPATE IN THE COMPANY’S EMPLOYEE BENEFIT PLANS (EXCEPT FOR SEVERANCE
OR INCENTIVE PLANS) AS IN EFFECT FROM TIME TO TIME, INCLUDING ITS HEALTH PLAN
AND LIFE INSURANCE PLAN (COLLECTIVELY, THE “EMPLOYEE BENEFITS”), ON THE SAME
BASIS AS THOSE BENEFITS ARE GENERALLY MADE AVAILABLE TO OTHER SENIOR EXECUTIVES
OF THE COMPANY.  YOU WILL BE PROVIDED WITH FOUR WEEKS (20 DAYS) PER YEAR OF PAID
VACATION.  YOU WILL HAVE USE OF A COMPANY CAR AND WILL BE REIMBURSED FOR
REASONABLE FEES PAID FOR FINANCIAL CONSULTING.  YOU WILL PARTICIPATE IN THE
COMPANY’S SUPPLEMENTAL RETIREMENT PLAN, WITH ACCELERATED VESTING IN ORDER TO
MEET THE SERVICE REQUIREMENTS AFTER FIVE YEARS OF SERVICE, AND WE INTEND TO WORK
WITH YOU TO COORDINATE YOUR PENSION BENEFITS WITH THOSE YOU EARNED FROM YOUR
FORMER EMPLOYER.

 

6.                                       RELOCATION.  THE COMPANY WILL REIMBURSE
YOU FOR REASONABLE AND CUSTOMARY RELOCATION EXPENSES (INCLUDING TEMPORARY LIVING
EXPENSES AND THE 5% BROKERAGE COMMISSION ON THE SALE OF YOUR HOME IN KENNETT
SQUARE, PENNSYLVANIA) UNDER ITS POLICIES INCURRED BY YOU IN CONNECTION WITH THE
RELOCATION OF YOUR PRIMARY RESIDENCE (AND PERSONAL BELONGINGS).  THE

 

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COMPANY ALSO WILL PAY YOU AN AMOUNT UP TO $300,000 IN THE EVENT THE SALE OF YOUR
HOME IN KENNETT SQUARE, PENNSYLVANIA RESULTS IN A LOSS TO YOU (I.E., THE AMOUNT
RECEIVED BY YOU, NET OF ANY UNREIMBURSED BROKERAGE COMMISSIONS, IS LESS THAN
$1,500,000).

 

7.                                       MISCELLANEOUS.

 

A.                                       GOVERNING LAW.  THIS LETTER AGREEMENT
(“LETTER AGREEMENT”) WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF OHIO, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
THEREOF.

 

B.                                      ENTIRE AGREEMENT/AMENDMENTS.  THIS
LETTER AGREEMENT AND THE PROVISIONS OF APPENDIX A CONTAIN THE ENTIRE
UNDERSTANDING OF THE PARTIES WITH RESPECT TO YOUR EMPLOYMENT BY THE COMPANY. 
APPENDIX A IS MADE A PART OF THIS LETTER AGREEMENT AND IS INCORPORATED BY
REFERENCE.  THIS LETTER AGREEMENT (INCLUDING APPENDIX A) MAY NOT BE AMENDED
EXCEPT BY WRITTEN INSTRUMENT SIGNED BY THE PARTIES HERETO.  THIS LETTER
AGREEMENT REPLACES AND SUPERCEDES ANY PRIOR AGREEMENTS BETWEEN THE PARTIES,
WHETHER WRITTEN OR ORAL.

 

C.                                       NO WAIVER.  THE FAILURE OF THE COMPANY
OR YOU TO INSIST UPON STRICT ADHERENCE TO ANY TERM OF THIS LETTER AGREEMENT WILL
NOT BE CONSIDERED A WAIVER OF SUCH PARTY’S RIGHTS OR DEPRIVE SUCH PARTY OF THE
RIGHT THEREAFTER TO INSIST UPON STRICT ADHERENCE TO THAT TERM OR ANY OTHER TERM
OF THIS LETTER AGREEMENT.

 

D.                                      EXECUTIVE REPRESENTATION.  YOU REPRESENT
TO THE COMPANY THAT THE EXECUTION OF THIS LETTER AGREEMENT BY YOU AND THE
PERFORMANCE BY YOU OF YOUR DUTIES TO THE COMPANY WILL NOT CONSTITUTE A BREACH
OF, OR OTHERWISE CONTRAVENE, THE TERMS OF ANY EMPLOYMENT AGREEMENT OR OTHER
AGREEMENT OR POLICY TO WHICH YOU ARE A PARTY OR OTHERWISE BOUND.

 

E.                                       WITHHOLDING TAXES.  THE COMPANY MAY
WITHHOLD FROM THE AMOUNTS PAYABLE UNDER THIS LETTER AGREEMENT ANY AMOUNTS
REQUIRED BY LAW.

 

F.                                         COUNTERPARTS.  THIS LETTER AGREEMENT
MAY BE SIGNED IN COUNTERPARTS, EACH OF WHICH WILL BE AN ORIGINAL.

 

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STEVE, WE LOOK FORWARD WITH GREAT PLEASURE TO WORKING WITH YOU.  PLEASE
COUNTER-SIGN THIS LETTER AGREEMENT IN THE SPACE INDICATED BELOW, AND RETURN AN
ORIGINAL TO MY ATTENTION.

 

 

Sincerely,

 

 

 

 

 

/s/James W. Baehren

 

 

By: James W. Baehren

 

Its:  Senior Vice President

 

 

Acknowledged and Agreed:

 

 

 

STEVE MCCRACKEN

 

 

 

 

 

/s/Steven R. McCracken

 

 

 

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— Appendix A —

 

Provisions Relating to Termination of Employment and Restrictive Covenants

 

This Appendix A forms a part of the Letter Agreement between Owens-Illinois,
Inc. and Steve McCracken, dated March 31, 2004, to which this Appendix A is
attached.  Capitalized terms used herein will have the meaning set forth in the
Letter Agreement, unless otherwise defined below.

 

Paragraph 1.                              Termination of Employment.

 

A.                                       BY THE COMPANY WITHOUT CAUSE.  YOUR
EMPLOYMENT MAY BE TERMINATED BY THE COMPANY AT ANY TIME WITHOUT CAUSE (AS
DEFINED BELOW, BUT WHICH DOES NOT INCLUDE TERMINATION DUE TO YOUR DISABILITY),
IN WHICH CASE YOU WILL RECEIVE:

 

(I)                                     THE ACCRUED RIGHTS (AS DEFINED BELOW);

 

(II)                                  SUBJECT TO YOUR CONTINUED COMPLIANCE WITH
THE PROVISIONS OF PARAGRAPHS 2 AND 3 OF THIS APPENDIX A, AN AMOUNT EQUAL TO TWO
TIMES THE SUM OF (X) YOUR BASE SALARY, AND (Y) YOUR TARGET BONUS, PAYABLE IN
EQUAL MONTHLY INSTALLMENTS OVER A PERIOD OF 24 MONTHS AFTER TERMINATION OF
EMPLOYMENT; AND

 

(III)                               CONTINUED COVERAGE UNDER THE COMPANY’S
HEALTH PLAN IN WHICH YOU PARTICIPATED AT THE TIME OF YOUR TERMINATION OF
EMPLOYMENT FOR A PERIOD OF UP TO 24 MONTHS, SUBJECT TO YOUR PAYMENT OF THE SAME
PREMIUMS YOU WOULD HAVE PAID AS AN ACTIVE EMPLOYEE; PROVIDED THAT THIS CONTINUED
COVERAGE WILL TERMINATE IF YOU BECOME COVERED UNDER A SUBSEQUENT EMPLOYER’S
HEALTH PLAN.

 

FOLLOWING SUCH TERMINATION OF EMPLOYMENT, EXCEPT AS SET FORTH IN THIS PARAGRAPH
1(A), YOU WILL HAVE NO FURTHER RIGHTS TO ANY OTHER COMPENSATION OR BENEFITS
UNDER THE LETTER AGREEMENT AND THIS APPENDIX A.

 

B.                                      BY THE COMPANY FOR CAUSE OR BY YOUR
RESIGNATION FOR ANY REASON.  YOUR EMPLOYMENT MAY BE TERMINATED BY THE COMPANY AT
ANY TIME FOR CAUSE AND WILL TERMINATE AUTOMATICALLY UPON YOUR RESIGNATION FOR
ANY REASON.  IF YOUR EMPLOYMENT IS TERMINATED BY THE COMPANY FOR CAUSE, OR IF
YOU RESIGN, YOU WILL RECEIVE THE ACCRUED RIGHTS. FOLLOWING SUCH TERMINATION OF
EMPLOYMENT, EXCEPT AS SET FORTH IN THIS PARAGRAPH 1(B), YOU WILL HAVE NO FURTHER
RIGHTS TO ANY OTHER COMPENSATION OR BENEFITS UNDER THE LETTER AGREEMENT AND THIS
APPENDIX A.

 

C.                                       CERTAIN DEFINITIONS.

 

(I)                                     “CAUSE” MEANS (A) YOUR CONTINUED FAILURE
SUBSTANTIALLY TO PERFORM YOUR DUTIES TO THE COMPANY OR ANY OF ITS SUBSIDIARIES
OR AFFILIATES (OTHER THAN AS A RESULT OF TOTAL OR PARTIAL INCAPACITY DUE TO
PHYSICAL OR MENTAL ILLNESS) FOR A PERIOD OF 10 DAYS FOLLOWING WRITTEN NOTICE BY
THE COMPANY TO YOU OF SUCH FAILURE, (B) YOUR COMMISSION OF A FELONY UNDER THE
LAWS OF THE UNITED STATES OR ANY STATE THEREOF OR A MISDEMEANOR INVOLVING MORAL
TURPITUDE, (C) YOUR WILLFUL MALFEASANCE OR WILLFUL MISCONDUCT IN CONNECTION WITH
YOUR DUTIES TO THE COMPANY, ITS SUBSIDIARIES OR AFFILIATES, OR ANY ACT OR
OMISSION WHICH IS

 

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INJURIOUS TO THE FINANCIAL CONDITION OR BUSINESS REPUTATION OF THE COMPANY OR
ANY OF ITS SUBSIDIARIES OR AFFILIATES, OR (D) YOUR BREACH OF THE PROVISIONS OF
PARAGRAPHS 2 OR 3 OF THIS APPENDIX A.

 

(II)                                  “ACCRUED RIGHTS” MEANS: (A) THE BASE
SALARY THROUGH THE DATE OF TERMINATION; (B) ANY ANNUAL BONUS EARNED BUT UNPAID
FOR ANY PREVIOUSLY COMPLETED FISCAL YEAR; (C) SUCH EMPLOYEE BENEFITS AS TO WHICH
YOU MAY BE ENTITLED; AND (D) ANY SUPPLEMENTAL RETIREMENT PLAN VESTING AS TO
WHICH YOU MAY BE ENTITLED UNDER SECTION 5 OF THE LETTER AGREEMENT.

 

d.                                      Release.  Your receipt of any amounts
under this Paragraph 1 (other than the Accrued Rights) will be subject to and
conditioned on your execution and non-revocation of a general release on terms
reasonably satisfactory to the Company.

 

PARAGRAPH 2.                              NON-COMPETITION.

 

A.                                       YOU ACKNOWLEDGE AND RECOGNIZE THE
HIGHLY COMPETITIVE NATURE OF THE BUSINESSES OF THE COMPANY AND ITS AFFILIATES
AND ACCORDINGLY AGREE AS FOLLOWS:

 

(I)                                     WHILE EMPLOYED AND FOR A PERIOD OF ONE
YEAR THEREAFTER, YOU WILL NOT, DIRECTLY OR INDIRECTLY: (A) ENGAGE IN, INVEST IN,
OR ENTER INTO THE EMPLOY OF OR OTHERWISE RENDER ANY SERVICES TO, ANY BUSINESS
THAT COMPETES WITH THE BUSINESS OF THE COMPANY OR ITS AFFILIATES (INCLUDING,
WITHOUT LIMITATION, BUSINESSES WHICH THE COMPANY OR ITS AFFILIATES HAVE SPECIFIC
PLANS TO CONDUCT IN THE FUTURE AND AS TO WHICH YOU ARE AWARE OF SUCH PLANNING)
IN ANY GEOGRAPHICAL AREA WHERE THE COMPANY OR ITS AFFILIATES MANUFACTURES,
PRODUCES, SELLS, LEASES, RENTS, LICENSES OR OTHERWISE PROVIDES ITS PRODUCTS OR
SERVICES (A “COMPETITIVE BUSINESS”); OR (B) INTERFERE WITH, OR ATTEMPT TO
INTERFERE WITH, BUSINESS RELATIONSHIPS (WHETHER FORMED BEFORE, ON OR AFTER THE
DATE OF THE LETTER AGREEMENT) BETWEEN THE COMPANY OR ANY OF ITS AFFILIATES AND
CUSTOMERS, CLIENTS, SUPPLIERS, OR INVESTORS OF THE COMPANY OR ITS AFFILIATES. 
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS LETTER AGREEMENT, YOU MAY OWN
UP TO 2% OF THE SECURITIES OF ANY PERSON ENGAGED IN THE BUSINESS OF THE COMPANY
OR ITS AFFILIATES THAT ARE PUBLICLY TRADED.

 

(II)                                  WHILE EMPLOYED BY THE COMPANY AND FOR A
PERIOD OF TWO YEARS THEREAFTER, YOU WILL NOT, DIRECTLY OR INDIRECTLY: (A)
SOLICIT OR ENCOURAGE ANY EMPLOYEE OF THE COMPANY OR ITS AFFILIATES TO LEAVE THE
EMPLOYMENT OF THE COMPANY OR ITS AFFILIATES; OR (B) HIRE ANY EMPLOYEE WHO WAS
EMPLOYED BY THE COMPANY OR ITS AFFILIATES WITHIN ONE YEAR PRIOR TO TERMINATION
OF YOUR EMPLOYMENT.

 

B.                                      IT IS EXPRESSLY UNDERSTOOD AND AGREED
THAT, ALTHOUGH YOU AND THE COMPANY CONSIDER THE RESTRICTIONS CONTAINED IN THIS
PARAGRAPH 2 TO BE REASONABLE, IF A FINAL JUDICIAL DETERMINATION IS MADE BY A
COURT OF COMPETENT JURISDICTION THAT THE TIME OR TERRITORY OR ANY OTHER
RESTRICTION CONTAINED IN THIS APPENDIX A IS AN UNENFORCEABLE RESTRICTION AGAINST
YOU, THE PROVISIONS OF THIS APPENDIX A WILL NOT BE RENDERED VOID BUT WILL BE
DEEMED AMENDED TO APPLY AS

 

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TO SUCH MAXIMUM TIME AND TERRITORY AND TO SUCH MAXIMUM EXTENT AS SUCH COURT MAY
JUDICIALLY DETERMINE OR INDICATE TO BE ENFORCEABLE.  ALTERNATIVELY, IF ANY COURT
OF COMPETENT JURISDICTION FINDS THAT ANY RESTRICTION CONTAINED IN THIS APPENDIX
A IS UNENFORCEABLE, AND SUCH RESTRICTION CANNOT BE AMENDED SO AS TO MAKE IT
ENFORCEABLE, SUCH FINDING WILL NOT AFFECT THE ENFORCEABILITY OF ANY OF THE OTHER
RESTRICTIONS CONTAINED HEREIN.

 

PARAGRAPH 3.                              CONFIDENTIALITY.  YOU MAY NOT DISCLOSE
TO ANY PERSON OUTSIDE THE COMPANY ANY NON-PUBLIC, PROPRIETARY OR CONFIDENTIAL
INFORMATION CONCERNING THE BUSINESS OF THE COMPANY, AND ITS SUBSIDIARIES AND
AFFILIATES, UNLESS SUCH INFORMATION IS REQUIRED BY LAW TO BE DISCLOSED.

 

Paragraph 4.                              Specific Performance.  You acknowledge
and agree that the Company’s remedies at law for a breach or threatened breach
of any of the provisions of Paragraph 2 or Paragraph 3 would be inadequate and
the Company would suffer irreparable damages as a result of such breach or
threatened breach.  Accordingly, you agree that, in the event of such a breach
or threatened breach, in addition to any remedies at law, the Company, without
posting any bond, will be entitled to cease making any payments or providing any
benefit otherwise required by the Letter Agreement and/or Appendix A and obtain
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available.

 

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