Exhibit 10.34


 


SECOND AMENDED AND RESTATED OWENS-ILLINOIS,
INC.


SENIOR MANAGEMENT INCENTIVE PLAN


 


Effective January 1, 2004


 


1.                                      History
and purpose.


 


1.1                               The Owens-Illinois, Inc.
Senior Management Incentive Plan, initially adopted by the Board of Directors
of Owens-Illinois, Inc. effective on January 1, 1991 was amended in the
form of the Amended and Restated Owens-Illinois, Inc. Senior Management
Incentive Plan and further amended by a First, Second and Third Amendment
thereto (the “Original Plan”) effective on or as of January 1, 1993.  Pursuant to paragraph 8 of the Original Plan,
said Board has duly authorized the further amendment and restatement of the
Original Plan, effective on or as of January 1, 2004, in the form of this
Second Amended and Restated Owens-Illinois, Inc. Senior Management Incentive
Plan.  The provisions of the Original
Plan shall continue to govern with respect to Award Periods (as defined in the
Original Plan) commencing before January 1, 2004 and with respect to all
matters related thereto.


 


1.2                               The purposes of this
Second Amended and Restated Owens-Illinois, Inc. Senior Management Incentive
Plan are to reward officers and other management employees who contribute to
the success of the Company, by making the amount of their compensation
significantly contingent upon the Company’s financial performance, and to
attract and retain officers and other management employees of exceptional
ability.


 


2.                                      Definitions.  The following capitalized terms used in the
Plan have the respective meanings set forth in this Section:


 


“Award” means the periodic bonus award granted to a Participant under
this Plan.


 


“Board” means the Board of Directors of OI.


 


“Bonus Pool” means, for each year, the sum of all Target Bonuses for
such year, as described in paragraph 5.1 hereof.


 


“CEO” means the Chief Executive Officer of OI.


 


“Committee” means the Compensation Committee of the Board or any other
committee of the Board to which administrative authority with respect to the
Plan may be delegated by the Board.


 


“Company” means OI together with any corporation (or unincorporated
business entity) 50 percent or more of the voting shares (or other ownership
interests) of which are owned, directly or indirectly, by OI.


 


“Deferred Compensation Plan” means any plan or arrangement adopted by
the Company whereby a Participant may be permitted, at his option, to defer the
actual receipt of an Award otherwise payable to him under this Plan.


 





















 


“Equity Participation Plan” means the 1997 Equity Participation Plan of
Owens-Illinois, Inc. executed May 15, 1997, as amended from time to time.


 


“Fair Market Value” shall have the meaning set forth in the Equity
Participation Plan.


 


“OI” means Owens-Illinois, Inc., a Delaware corporation.


 


“Operating Results” means the Company’s or a Unit’s annual results from
operations for any Performance Period, determined in accordance with paragraph
7 hereof and expressed as a percentage of the Performance Period’s Performance
Objective.


 


“Participant” means an officer or other management employee of the
Company who is eligible to participate in this Plan in accordance with
paragraph 4 hereof.


 


“Performance Objective” means the annual objective established in
accordance with paragraph 6 hereof for the operating performance of the Company
or a Unit.


 


“Performance Period” means the calendar year or any other period that
the CEO or the Committee may determine.


 


“Plan” means this Second Amended and Restated Owens-Illinois, Inc.
Senior Management Incentive Plan as set forth herein or as from time to time amended.


 


“Restricted Stock” shall have the meaning set forth in the Equity
Participation Plan.


 


“Share” means a share of common stock, par value $0.01 per share, of
the Company.


 


“Target Bonus” means an amount established each year in accordance with
paragraph 5 hereof equal to a stated percentage of a Participant’s annual base
salary.


 


“Unit” means an operating unit or subsidiary of the Company.


 


Words of the masculine gender include correlative words of the feminine
and neuter genders and vice versa, and words denoting the singular include the
plural and vice versa.


 





















 


3.                                      Administration.


 


3.1                               The Plan will be
administered by the CEO, whose administrative powers hereunder shall include
the powers to interpret the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan, and to make any other determinations that he
deems necessary or desirable for the administration of the Plan.  The CEO may correct any defect or omission or
reconcile any inconsistency in the Plan in the manner and to the extent the CEO
deems necessary or desirable.  Any
decision of the CEO in the interpretation and administration of the Plan, as
described herein, shall lie within his sole and absolute discretion and shall
be final, conclusive, and binding on all parties concerned.  Determinations made by the CEO under the Plan
need not be uniform and may be made selectively among Participants, whether or
not such Participants are similarly situated.


 


3.2                               The Board, in its
discretion on recommendation of the CEO, shall be authorized at any time and
from time to time to modify any Performance Objective, and the Committee, in
its discretion on recommendation of the CEO, shall be authorized at any time
and from time to time to adjust the amount of any Target Bonus and/or the size
of the Bonus Pool; and to accelerate or defer the payment of Awards.


 


4.                                      Eligibility
and participation.


 


4.1                               Each person who, at the
beginning of 200_ or any subsequent calendar year, is an elected corporate
officer of OI shall be eligible to participate in the Plan for such year.  Each person who first becomes an elected
corporate officer of OI during 200_ or any subsequent calendar year shall be
eligible to participate in the Plan for at least the balance of such year or,
if approved by the Committee on recommendation of the CEO, for the entire year.


 


4.2                               The CEO shall designate
those persons who shall be Participants for each Performance Period.  The CEO may prospectively or retroactively
suspend or withdraw such approval with respect to any such Participant for all
or any part of any year.


 


5.                                      Target
Bonuses.


 


5.1                               A Target Bonus shall be
established each year for each Participant, equal in amount to a stated
percentage, not to exceed 100 percent, of his base salary for such year.


 


5.2                               The Committee shall
establish the Target Bonus of the CEO, and the CEO shall establish the Target
Bonuses of all other Participants under this Plan.  Target Bonuses shall be based on an
evaluation of the responsibilities of each Participant and of each Participant’s
potential to contribute to the attainment of the Performance Objective of the
Company or the Participant’s Unit for such year.  Target Bonuses shall be established before or
as soon as practicable after the beginning of each year, and each Participant
shall thereupon be notified of his Target Bonus.


 





















 


5.3                               If the rate of a
Participant’s base salary is changed during a year after his Target Bonus has
been established, the amount of his Target Bonus shall be adjusted to equal the
stated percentage of his actual base salary before and after the change.


 


6.                                      Performance
Objectives.  The Board, on
recommendation of the CEO, shall establish one or more Performance Objectives
for each Performance Period, each of which shall be expressed as the
attainment, at the end of such Period, of a specified measurable operating,
financial, or other objective, such as (but not limited to) one or more of the
following criteria:  (i) earnings before
or after taxes (including earnings before interest, taxes depreciation and
amortization); (ii) net income; (iii) operating income; (iv) earnings per
Share; (v) book value per Share; (vi) return on equity; (vii) expense
management; (viii) return on investment before or after the cost of capital;
(ix) improvements in capital structure; (x) profitability of an identifiable
business unit or product; (xi) maintenance or improvement of profit margins;
(xii) stock price; (xiii) market share; (xiv) revenues or sales; (xv) costs;
(xvi) cash flow; (xvii) working capital; (xviii) return on assets; (xix) cost
reduction goals; (xx) return on sales; (xxi) gross margin; (xxii) debt
reduction; (xxiii) new product launches; (xxiv) completion of joint ventures,
divestitures, acquisitions or other corporate transactions; (xxv) new business
or expansion of customers or clients; or (xxvi) productivity improvement. The
foregoing criteria may relate to the Company, one or more its subsidiaries or
one or more of its Units or any combination of the foregoing, and may be
applied on an absolute basis and/or be relative to one or more peer group
companies or indices, or any combination thereof, all as the Board
determines.  In addition, the CEO or the
Committee may adjust, modify or amend the above business criteria, either in
establishing any Performance Objective or in determining the extent to which
any Performance Objective has been achieved. 
Without limiting the generality of the foregoing, the CEO or the
Committee shall have the authority, at any time it establishes a Performance
Objective for the applicable Performance Period, to make equitable adjustments
in the business criteria in recognition of unusual or non-recurring events
affecting the Company or any Unit, in response to changes in applicable laws or
regulation, or to account for items of gain, loss or expense determined to be
extraordinary or unusual in nature or infrequent in occurrence or related to
the disposal of a segment of a business or related to a change in accounting
principles, or as the CEO or Committee determines to be appropriate to reflect
a true measurement of the profitability of the Company or its operating units,
as applicable and to otherwise satisfy the purposes of this Plan.  Each Performance Period’s Performance
Objective(s) shall be established before or as soon as practicable after the
beginning of such Period, and each Participant shall thereupon be notified
thereof.


 


7.                                      Operating
Results.  As soon as practicable
after the end of each Performance Period, the specific objective or objectives
used as the Performance Objective(s) for such Period for the Company and each
Unit shall be determined and reported to the Board and the CEO.  The Operating Results for each Performance
Period, for purposes of the Plan, shall be the 


 





















 


percentage which the specific objective or objectives used as the
Performance Objective(s) for such Period, as so reported, is of the Performance
Objective(s) for such Period.


 


8.                                      Determination
of Awards.


 


8.1                               The Operating Results of
the Company or a Participant’s Unit shall determine the extent to which a Participant’s
Award shall be paid to such Participant. 
However, and notwithstanding paragraph 8.2 hereof to the contrary, the
CEO, in his discretion, may reduce or eliminate the Award of any Participant
for any Performance Period to the extent the CEO determines that such
Participant’s performance for such Period did not materially contribute to the
Operating Results for such year or that any act or omission by such Participant
has adversely affected (or can be reasonably expected to adversely affect) the
Company or the Participant’s Unit.


 


8.2                               If the Company’s
Operating Results are less than 90 percent, none of the Participant’s Award
will be paid.  If the Company’s Operating
Results are exactly 90 percent, 50 percent of the Participant’s Target Bonus
will be paid as an Award.  For each
percentage point by which the Company’s Operating Results exceed 90 percent but
not 120 percent, an additional 5% percent of the Participant’s Target Bonus
will be paid as an Award.  No more than
200 percent of the Participant’s Target Bonus shall be paid as an Award
regardless of the level of the Company’s Operating Results.


 


9.                                      Payment
of Awards.


 


9.1                               Except to the extent
deferred at the option of a Participant in accordance with a Deferred
Compensation Plan, and/or except to the extent distributable in the form of
Restricted Stock at the option of a Participant in accordance with paragraph
9.4 hereof, each Participant’s Award for each year, determined in accordance
with paragraph 8 hereof, shall be paid to him in cash no later than March 15
of the following year.


 


9.2                               In the event of a
Participant’s death after the end of a Performance Period but before his Award,
if any, for such Period has been paid to him, it shall be paid to the
beneficiary or beneficiaries designated by him in writing filed with the
Company or, in the absence of any such designation or if no such designated
beneficiary survives the Participant, to the beneficiary or beneficiaries of
his life insurance under the Company’s Life Insurance Plan.  If there is no such designated beneficiary or
life insurance beneficiary, such Participant’s Award shall be paid to his
estate.


 


9.3                               If a Participant’s
employment with the Company is terminated for any reason during the course of a
year, or if he is transferred to a position with the Company which the CEO
determines no longer qualifies him to be a Participant eligible to participate
in this Plan, the extent, if any, to which his Award for such year will be paid
to him will be determined by the CEO, in his discretion.


 





















 


9.4                               From time to time the
Committee may grant to any Participant eligible for an Award under the Plan the
option to receive all or any specified part of such Award in Restricted
Stock.  On or before June 30 of any
year for which the Committee has granted such an option, any Participant to
whom such an option has been granted may elect, by written notice to the
Committee, to receive distribution of all or any specified part of his Award
for such year in the form of Restricted Stock with a Fair Market Value at the
date of distribution equal to 100 percent (or such higher percent as determined
by the Committee) of the dollar amount of such Award or part thereof if payable
in cash.  If so elected, such
distribution shall be made no later than March 15 of the following year,
in accordance with applicable provisions of the Equity Participation Plan.  The terms of the Restricted Stock shall be
set forth in a Restricted Stock Agreement, the form and content of which shall
be approved by the Committee.


 


10.                               Amendment
or termination of the Plan.  The
Board or the Committee, in its sole discretion, may amend, alter, or terminate
the Plan at any time, except that no such action shall adversely affect the
rights of any person with respect to an Award that has become payable in
accordance with paragraph 8 hereof without such person’s consent.


 


11.                               Miscellaneous.


 


11.1                        Neither the Plan nor any action
taken hereunder shall be construed as giving any Participant or other person
any right to continue to be employed by or perform services for the Company,
and the right to terminate the employment of or performance of services of any
Participant at any time and for any reason is specifically reserved to the
Company.


 


11.2                        No rights under this Plan shall
be assignable or transferable, or subject to encumbrance of any nature, except
to the extent that a Participant may designate a beneficiary to receive any
payment to be made following his death. 
If any Participant or beneficiary shall attempt to assign, transfer,
encumber or charge any such right, or should such right be subjected to
attachment, execution, garnishment, sequestration or other legal, equitable or
other process, it shall thereupon pass to such one or more persons as may be
designated by the Committee from among the Participant, any beneficiary
theretofore designated by the Participant, and any spouse, parent, or child of
such Participant or beneficiary.


 


11.3                        With respect to the rights of
Participants under the Plan, the obligations of the Company under the Plan
shall be wholly unsecured.  The Company
shall be under no obligation to reserve, segregate or earmark any cash or other
property for the payment of any amounts under the Plan.


 





















 


11.4                        Notwithstanding
anything to the contrary herein, the Committee, in its sole discretion (but
subject to applicable law) may reduce any amounts payable to a Participant
hereunder in order to satisfy any liabilities owed to the Company by the
Participant.


 


11.5                        The
Company shall withhold therefrom such amounts as may be required by federal,
state or local law, and the amount payable under the Plan to the person
entitled thereto shall be reduced by the amount so withheld.


 


11.6                        The
Plan shall be governed by and construed in accordance with the laws of the
State of Ohio applicable to contracts made and to be performed in the State of
Ohio.


 


12.                               Effective
Date.  This Plan, when duly executed,
shall become effective on or as of January 1, 2004.


 


IN WITNESS WHEREOF,
the Board of Directors of Owens-Illinois, Inc., has caused this Second Amended
and Restated Owens-Illinois, Inc. Senior Management Incentive Plan to be
executed by a duly authorized officer of the corporation, this 26th day of January,
2005.


 


	
   

  	
  OWENS-ILLINOIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
      /s/ James W. Baehren

  	
   

  
	
   

  	
   

  	
   Senior Vice President