Exhibit
10.37





January
3, 2007


Mr. Albert P. L. Stroucken


12 Apple Orchard Court


Dellwood,
Minnesota  55110


Dear Al:


We are delighted to confirm the terms of your
employment as set forth below in this letter (the “Letter”).


1.                                       Position
and Term.  You will be retained as
both Chief Executive Officer and Chairman of the Board of Directors of
Owens-Illinois, Inc. (the “Board” and the “Company,”
respectively).  You have already been
appointed as chairman of the Board.  This
Letter with Appendix A attached (together the “Letter Agreement”) sets
forth the compensation and benefits that will be provided to you as Chief
Executive Officer of the Company.


2.                                       Term.  Your employment commenced December 4, 2006
and shall continue until December 31, 2011 (the “Initial Term”).  The date your employment commenced shall be
referred to as the “Commencement Date.” 
The Letter Agreement will twice renew automatically for a period of one
year (the “Automatic Renewals”) unless either you or the Company
provides 9 months advance written notice of non-renewal (subject to waiver of
the notice period by the party entitled to notice).  The entire period the Letter Agreement is in
effect is referred to as the “Term.”


If,
after the Initial Term, the Company does not renew the Letter Agreement for
either of the two one-year Automatic Renewal periods, such non-renewal by the
Company will be treated as termination without Cause.  However, after the two Automatic Renewals,
any non-renewal of the contract by you or the Company will not result in a
termination without Cause but will be deemed to be your voluntary termination
of employment due to retirement.


3.                                       Base
Salary.  You will be entitled to an
annual base salary of $950,000, plus such increases, if any, as may be
determined from time to time by the Compensation Committee of the Board (“Base
Salary”).  The Base Salary will be
paid, subject to income tax and benefit plan withholdings, in accordance with
the Company’s normal payroll practices for executives.


4.                                       Annual
Bonus.  You will participate in the
Company’s Incentive Bonus Plan, as amended from time to time (or any successor
plan).  Subject to the terms of that
plan, you will be eligible for a bonus. 
Your target bonus will be 150% of your Base Salary (the “Target Bonus”),
which is achieved if you meet 100% of the target objectives, and your maximum
bonus will be 300% of your Base Salary, which you will earn if you exceed your
target objectives by 20% or more. 
Notwithstanding the above, your annual bonus for the 2007 calendar year
will be at least the Target Bonus of $1,425,000, and can be more based on
performance.













5.                                       Equity
Arrangements.


a.                                       Purchased
Equity.  On the Commencement Date you
were required to and did purchase from the Company 51,073 shares of the Company’s
common stock, par value $0.01 per share (the “Common Stock”), for an
aggregate purchase price of approximately $1,000,000 based on a purchase price
of $19.58 (the “Closing Price”) which was the closing price of the
Common Stock on the New York Stock Exchange on the Commencement Date.


b.                                      Fully
Vested Awards.  As compensation for
benefits and compensation you forfeited by leaving your prior employer prior to
March 31, 2007, the Company made the following grants:


i.                                          Fully
Vested Shares.  On the Commencement Date, you were awarded 95,761
shares of Common Stock (“Fully Vested Shares”) with a fair value as
determined by the Company for financial reporting purposes (“Fair Value”)
on the Commencement Date of approximately $1,875,000 based on the Closing
Price.


ii.                                       Fully
Vested Stock Option.  On the Commencement Date, you were awarded
pursuant to the terms of the Company’s 2005 Incentive Award Plan (the “2005
Plan”) a nonqualified stock option to purchase 317,796 shares of Common
Stock (the “Fully Vested Stock Option”) which has a Fair Value on the
Commencement Date of approximately $1,875,000 based on a Black-Scholes value of
$5.90 per share, as determined by the Company for financial reporting
purposes.  The Fully Vested Stock Option
is immediately and fully vested and exercisable.  The exercise price for each share of Common
Stock is the Closing Price and is the Fair Market Value of a share of Common
Stock as defined in the 2005 Plan. 
Except for immediate vesting, the Fully Vested Stock Option shall be
subject to the terms and conditions set forth in the Non-qualified Stock Option
Agreement executed by you and the Company on the Commencement Date.


c.                                       Initial
Awards.  In recognition of your
commencing employment with the Company and in lieu of other option and
restricted stock grants in 2007, the Company has made the following restricted
stock and option grants:


i.                                          Initial
Restricted Shares.  On the
Commencement Date, you were awarded pursuant to the 2005 Plan 107,253
restricted shares of Common Stock (“Initial Restricted Shares”) which
have a Fair Value on the Commencement Date of approximately $2,100,000 based on
the Closing Price.  Of those Initial
Restricted Shares, 76,609 shares with a Fair Value on the Commencement Date of
$1,500,000 represented an initial sign-on grant, and 30,644 shares with a Fair
Value on the Commencement Date of approximately $600,000 represented a grant in
lieu of a 2007 grant.  The Initial
Restricted Shares will be subject to terms and conditions set forth in the
Restricted Stock Agreement executed by you and the Company on the Commencement
Date.


ii.                                       Initial
Stock Option.  On the Commencement
Date, you were granted a nonqualified stock option to purchase 340,051 number
shares of Common Stock (the “Initial Stock Option”) with a Fair Value on
the



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Commencement Date of approximately $2,700,000 based on
a Black-Scholes value of $7.94 per share, as determined by the Company for
financial reporting purposes.  Of those
Initial Stock Options 188,917 shares with a Fair Value on the Commencement Date
of approximately $1,500,000 (as determined by the Company for financial
reporting purposes) represented an initial sign-on grant, and 151,134 shares
with a Fair Value on the Commencement Date of approximately $1,200,000 (as
determined by the Company for financial reporting purposes) represented a grant
in lieu of a 2007 grant.  The exercise
price for each share of Common Stock subject to the Initial Stock Option is the
Closing Price, which is the Fair Market Value of a share of Common Stock as
defined in the 2005 Plan.  The Initial
Stock Options will be subject to the terms and conditions set forth in the
Non-Qualified Stock Option Agreement executed by you and the Company on the
Commencement Date.


d.                                      2007
Performance Awards.  


i.                                          Grant.  In 2007, at the same time as the
Compensation Committee makes equity grants to other employees under the 2005
Plan, you will be granted a number of performance-based restricted stock units
(the “Performance Shares”) with a Fair Value on the Commencement Date of
approximately $1,200,000 as determined by the Company for financial reporting
purposes.


ii.                                       Vesting.  The Performance Shares will vest in
accordance with the performance targets set for other executives with respect
to their 2007 performance awards.  The
Performance Shares will be subject to the terms and conditions set forth in the
Company’s form Restricted Stock Unit Agreement which was filed as Exhibit 10.32
to the Company’s Annual Report on Form 10-K for year ended December 31, 2005 or
as subsequently amended.


e.                                       Future
Equity Awards.  You will participate
in the Company’s equity plans in effect from time to time in accordance with
the terms of such plans.  You will be
eligible for future equity awards in the sole discretion of the Board.  


6.                                       Nonqualified
Retirement Benefits.


a.                                       Defined
Contribution.  You will be eligible
to participate in the Company’s Executive Deferred Savings Plan during the
Term.


b.                                      Defined
Benefit SERP.  Unless before the end
of the Initial Term (December 31, 2011), you voluntarily resign or are
terminated by the Company for Cause you (or, in the event of your death your
surviving spouse or, if no surviving spouse, your estate) will receive
following your termination of employment a non-qualified pension benefit (the “SERP
Benefit”) based on (i) your actual years of service as an employee with the
Company plus 1.5 years, and (ii) your final average earnings, as calculated
under the Owens-Illinois Salary Retirement Plan and the Owens-Illinois
Supplemental Retirement Benefit Plan as in effect on the Commencement Date (the
“Plans”).  The SERP Benefit will
be converted to a single lump-sum determined by calculating the actuarial
equivalent of the 100% single life annuity amount on the date of your
retirement using (x) the applicable interest rate then in effect under the
Plans and (y) a remaining life expectancy at the time of retirement using
the then applicable mortality table under the



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Plans.  Payment
of the lump sum SERP Benefit will be made within 30 business days after
retirement or, if required by Code Section 409A, the first business day on or
after the date which is 6 months after your retirement.


7.                                       Employee
Benefits and Perquisites.


a.                                       You
will participate in the Company’s employee benefit plans (except for the
severance plan, as in effect from time to time), including without limitation
the Company’s 401(k) plan, group health plans (medical, dental, vision and
prescription drug benefits), short term disability, long term disability, and
life insurance or benefit plans (collectively, the “Employee Benefits”),
on the same basis as those benefits are generally made available to other
senior executives of the Company, except that with respect to the 2005 Plan,
the 2007 award of Performance Shares shall be not less than as provided in
Section 5(d) above.


b.                                      Vacation.  You will be provided with five weeks (25
days) of paid vacation per calendar year beginning in calendar year 2007.


c.                                       Physical
Exam.  You will be reimbursed for the cost of an annual physical
exam plus the cost of any tax gross-up in accordance with the Company policies
and programs in effect from time to time for senior executives.


d.                                      Car
Allowance.  You will be provided with an annual car allowance of
not less than $24,000 per calendar year payable in no less frequent than
monthly installments in accordance with the Company policies and programs in
effect from time to time for senior executives.


e.                                       Life
Insurance.  You will be reimbursed
for the premiums and the cost of any tax gross-up on a term life insurance
policy on your life with a coverage amount equal to three times your Base
Salary.


f.                                         Aircraft.  You will be permitted to use Company aircraft
for business purposes and up to 50 hours per calendar year for personal travel
in accordance with the Company policies and programs in effect from time to time
for senior executives.


g.                                      Drivers.
You will be provided with access to Company drivers in accordance with the
Company policies and programs in effect from time to time for senior
executives.


h.                                      Tax
and Financial Services.  You will be
reimbursed for personal tax and financial services up to $15,000 per calendar
year plus the cost of any tax gross-up in accordance with the Company policies
and programs in effect from time to time for senior executives.


i.                                          Security
System.  The Company will install and
monitor your home with a security system in accordance with the Company
policies and programs in effect from time to time for senior executives.


j.                                          Relocation
Expenses.  The Company will reimburse
you for reasonable and customary relocation expenses (including temporary
living expenses and



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the 5% brokerage commission on the sale of your home
in Minnesota) you incur in connection with the relocation of your primary
residence (and personal belongings) to the Toledo, Ohio area, in accordance
with Company policies and programs in effect from time to time for senior
executives but only to the extent not reimbursable under your prior agreement
with H. B. Fuller Company.


8.                                       Reimbursement
for Loss on Sale of Ohio Residence. 
If you terminate employment with the Company at, or at anytime after,
the Initial Term (other than for Cause) and you sell your primary residence in
the Toledo, Ohio area, the Company will reimburse you for any loss on such
sale, subject to a maximum reimbursement equal to 20% of the then appraised
value of the residence.  For example, if
your residence has an appraised value of $1.2 million, your reimbursement for a
loss will not exceed $240,000 (20% of the appraised value.)  For this purpose, your loss on the sale is
difference between (i) the appraised value of the residence at the time of your
termination of employment and (ii) the actual sale price, after deducting
brokerage commissions.


9.                                       Payment
of Legal Fees.   The Company will
reimburse you for reasonable legal and consultant costs you incur in connection
with the negotiation of this Letter Agreement, up to a maximum of $75,000.


10.                                 Miscellaneous.


a.                                       Governing
Law.  This 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.                                      Arbitration.  Any dispute, claim or controversy based on,
arising out of or relating to your employment or this Agreement shall be
settled by final and binding arbitration in Toledo, Ohio, before a single
neutral arbitrator in accordance with the National Rules for the Resolution of
Employment Disputes (the “Rules”) of the American Arbitration
Association (“AAA”), and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction.  If the parties are unable to agree upon an
arbitrator, the Company shall obtain a list from AAA of the names of 10
arbitrators who are members of the national Academy of Arbitrators to ensure
their neutrality.  From that list, with
you to strike first, you and the Company will alternately strike names, until
one name remains and that person will be the arbitrator.  Each party shall pay the fees of its own
attorneys, the expenses of its witnesses and all other expenses connected with
presenting its case; however, you and the Company agree that, to the
extent permitted by law, the arbitrator may, in his discretion, award
reasonable attorneys’ fees to the prevailing party.  Other costs of the arbitration, including the
cost of any record or transcripts of the arbitration, AAA’s administrative
fees, the fee of the arbitrator, and all other fees and costs, shall be borne
by the Company.  Arbitration is intended
to be the exclusive method for resolving any and all claims by the parties
against each other for payment of damages under this Letter Agreement or
relating to your employment; provided, however, that neither this Letter
Agreement nor the submission to arbitration shall limit the parties’ right to
seek provisional relief, including without limitation injunctive relief, in any
Ohio court of competent jurisdiction. 
Seeking any such relief shall not be deemed to be a waiver of such party’s
right to compel arbitration.  Both
parties expressly waive their right to a jury trial.



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c.                                       Entire
Agreement; Amendments. This Letter Agreement contains the entire
understanding of the parties with respect to your employment by the
Company.  Appendix A is 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 you and the Company.


d.                                      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.


e.                                       Severability.  Whenever possible, each provision of this
Letter Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Letter Agreement is
held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other jurisdiction,
and such invalid, void or otherwise unenforceable provision will be null and
void.  It is the intent of the parties,
however, that any invalid, void or otherwise unenforceable provisions be
automatically replaced by other provisions which are as similar as possible in
terms to such invalid, void or otherwise unenforceable provisions but are valid
and enforceable to the fullest extent permitted by law.


f.                                         Withholding
Taxes.  The Company may withhold from
the amounts payable under this Letter Agreement any amounts required by law.


g.                                      Headings
and Interpretations.  The headings of the sections contained in this Letter
Agreement are for convenience only and will not be deemed to control or affect the
meaning or construction of any provision of this Agreement.  Neither this Letter Agreement nor any
uncertainty or ambiguity herein will be construed or resolved against a party
as the draftsperson.


h.                                      Counterparts.  This Letter Agreement may be signed in
counterparts, each of which will be an original.


i.                                          No
Mitigation; No Offset.  You will be
under no obligation to seek other employment following a termination of
employment and there will be no offset against amounts due you under the Letter
Agreement.


j.                                          Assignability;
Binding Nature.  This Letter
Agreement will be binding upon and inure to the benefit of (i) the Company and
its respective successors and permitted assigns and (ii) you and your heirs,
executors, beneficiaries and administrators. 
No obligations of the Company under this Letter Agreement may be
assigned without your consent; provided that the Company may assign this Letter
Agreement without your consent to any of its direct or indirect subsidiaries or
in a Change in Control without your consent. 
You may not assign your rights or obligations under this Letter
Agreement without the consent of the Company.


k.                                       Survival.  The respective rights and
obligations of the Parties hereunder will survive any termination of the
Executive’s employment to the extent necessary to the intended preservation of
such rights and obligations.



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l.                                          Notices.  Any notice or other
communication to be given hereunder will be in writing and will be deemed
sufficient if (i) mailed by United States certified mail, return receipt
requested, (ii) sent by nationally recognized overnight courier, (iii) if sent
to a Company, sent by facsimile (with confirmation), or (iv) delivered in
person, in each case, at the address set forth below, or such other address as
a party may provide to the other in accordance with the procedure for notices
set forth in this Letter Agreement.  Any
notice or other communication so delivered will constitute valid notice under
this Agreement and will be deemed to have been received (A) on the fifth
business day after the date of deposit in the United States mail, (B) on the
next business day after the date when sent in the case of delivery by
nationally recognized overnight courier, (C) upon receipt by the sender of
confirmation of delivery if sent by facsimile prior to 5 p.m. local time on a
business day and otherwise on the next business day, and (D) on the day of
actual delivery in the case of personal delivery if delivered on a business day
and otherwise on the next business day.


If
to the Company:                                     Owens-Illinois,
Inc.

James W. Baehren

Senior Vice President, Chief Administrative Officer and General Counsel

Attention:  Board of Directors

Telephone: (567) 336-1032


If to you:                                                                                       Mr.
Albert P.L. Stroucken 

current address and phone no. on file with the Company for purposes of W-2


With a copy to:                                                     Reed
Smith LLP 

435 Sixth Avenue

Pittsburgh, PA  15219

Attention:  Dodi Walker Gross, Esquire 

Telephone:  (412) 288-4132


Al, we look forward with great pleasure to working with you.  Please countersign this Letter and Appendix A
in the space indicated below, and return an original to my attention.


	
  

  	
  Owens-Illinois, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  James W. Baehren

  
	
   

  	
  Its:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
  Acknowledged
  and Agreed:

  	
   

  	
   

  
	
  ALBERT
  P. L. STROUCKEN

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
						



 



 7















Appendix A to Letter Agreement — Albert P. L. Stroucken


Provisions Relating to Termination of Employment and Restrictive
Covenants


This Appendix A,
dated January 3, 2006, is an integral part of the Letter, which is incorporated
herein and constitutes part of the Letter Agreement.  Capitalized terms used herein will have the
meaning set forth in the Letter, unless otherwise defined below.


Paragraph 1.          Termination of Employment.  Your
employment may be terminated by the Company at any time with Cause, without
Cause or due to your Disability.  You may
terminate your employment for any reason, including for Good Reason.  Termination by you or the Company is subject
to the advance notice requirements set forth in Paragraph 2 of the Letter.  Termination will occur automatically on your
death.


a.             Termination Without Cause.  If your employment is terminated by the
Company without Cause, you will receive the following:


(i)            the Accrued Rights.


(ii)           Severance Pay payable over a period of 24 months commencing immediately
following your termination, except as otherwise provided in Paragraph 1(c)
below, and subject to your continued compliance with the provisions of
Paragraphs 2 and 3 of this Appendix A, and execution and non-revocation
of a general release on terms reasonably satisfactory to the Company.


(iii)          Health Benefits for a period of up to 24 months, provided that this
continued coverage will terminate if you become covered under a subsequent
employer’s group health plan, such coverage is concurrent with and not in addition
to any COBRA continuation rights you may have under Section 4980A of the
Internal Revenue Code of 1986, as amended (“Code”) or any similar state law, or
if you fail to make timely payment of the same premiums for the coverage you
would have paid as an active employee;


The
payments and benefits under clauses (i), (ii), and (iii) above constitute the “Basic
Termination Benefits.


b.             Disability.  If your employment terminates due to
your Disability you will be entitled to the Basic Termination Benefits (and
subject to the same terms).


c.             Death.  If your employment terminates due to
your death, you will be entitled to the Accrued Rights and the Target Bonus for
the year of death.  Payments under this
Paragraph 1(c) will be made to your surviving spouse or, if no surviving
spouse, to your estate within 30 business days of your death.


d.             Change of Control.  If within 1 year after a Change of Control
you are terminated without Cause or within 2 years after a Change of Control
you voluntarily terminate because your responsibilities are significantly
reduced or altered, in addition to receiving the Basic Termination Benefits
(and subject to the same terms):


(i)            In the event it shall be determined
that any payment or distribution by the Company to or for your benefit, whether
paid or payable or













distributed or
distributable pursuant to the terms of this Letter Agreement or otherwise, but
determined without regard to any additional payments required under this
Paragraph 1(d), (a “Payment”) would be subject to the tax imposed by
Section 4999 of the Code (such excise tax, together with any such interest and
penalties, are collectively referred to as the “Excise Tax”), and if the
amount of the your total “Parachute Payments” (as defined in Section
280G(b)(2) of the Code) with respect to the same Change in Control does not
exceed 330% of your “Base Amount” (as defined in Section 280G(b)(3) of
the Code), then the Payment shall be adjusted until the amount of your
Parachute Payments equals 299% of the Base Amount.  The adjustments shall be made in such manner,
and to such payments or other benefits, as you and the Company shall mutually
agree, that would not result in a violation of Code Section 409A.


(ii)           In the event it shall be determined
that a Payment would be subject to the Excise Tax and the amount of your total
Parachute Payments with respect to the same Change in Control exceeds 330% of
the Base Amount, or in the event an Excise Tax is actually assessed with
respect to a Payment, then you shall be entitled to receive an additional
payment (a “Gross-Up Payment”) in an amount such that after payment by
you of all taxes and any benefits that result from the deductibility by you of
such taxes (including, in each case, any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and
any interest and penalties imposed on them) and Excise Tax imposed upon the
Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.


All determinations
required to be made under this Paragraph 1(d), including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
the a nationally recognized public accounting firm as may be designated by the
Company (the “Accounting Firm”) based on reasonable assumptions,
interpretations and approximations concerning applicable taxes and relying on
reasonable good faith interpretations concerning the applications or Code
Sections 280G and 4999; provided such determinations are made with substantial
authority (within the meaning of Code Section 6662).  The Accounting Firm shall provide detailed
supporting calculations both to the Company and you within 15 business days of
the receipt of notice from you that there has been a Payment, or such earlier
time as is requested by the Company.  All
fees and expenses of the Accounting Firm shall be borne solely by the
Company.  Any Gross Up Payment, as
determined pursuant to this Paragraph 1(d), shall be paid by the Company to or
for your benefit within five days of the receipt of the Accounting Firm’s
determination.  Any determination by the
Accounting Firm shall be binding upon the Company and you.  Notwithstanding any other provision of this
Paragraph 1(d), the Company may withhold and pay over to the Internal Revenue
Service, for your benefit, all or any portion of the Gross-Up Payment that it
determines in good faith it is required to withhold.  You consent to such withholding.  As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (“Underpayment”),
consistent with the calculations required to be made.  In the event that you are required to make a
payment of any Excise Tax, the Accounting Firm shall



 2
 









determine the amount of
the Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for your benefit. 
The Company will take whatever steps are necessary to ensure that any
Gross-Up Payment meets the requirements of a short-term deferral, if considered
to be deferred compensation under Code Section 409A.


e.             By
the Company For Cause or by Your Resignation For Any Reason.  If
your employment is terminated by the Company for Cause or if you voluntarily
terminate for any reason not covered by (d) above, you will receive the Accrued
Rights.


f.              409A Delay. 
If required to comply with Section 409A of the Internal Revenue Code of
1986, as amended (“Section 409A”), no amount of Severance or other
payment under this Appendix A or the Letter shall be paid, and you shall be required
to pay the full cost of the Health Benefits. during the six-month period
following your termination of employment (the “Delay Period”).  Upon expiration of the Delay Period, the
Company shall pay you in a lump sum an amount equal to (x) six months of the
monthly installments of Severance or other payment which otherwise would have
been paid if not for the requirements of Section 409A plus (y) the difference
in the full cost of the Health Benefits paid by you during the Delay Period and
the amount you would have paid as an active employee during such period.


Paragraph 2.          Non-Competition/Non-Solicitation.


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



 3
 









(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 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 of Appendix A 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.


Paragraph 5.          Certain Definitions.


a.             “Accrued Rights” mean:


(i)            your accrued but unpaid Base Salary through
the date of termination payable in accordance with applicable law;


(ii)           unless you are terminated for Cause, any annual bonus earned but unpaid
under the Company’s Incentive Bonus Plan for any previously completed fiscal
year payable in accordance with applicable law; and


(iii)          benefits under any Company benefit plan or program in which you are a
participant on the date of termination, specifically including the SERP
Benefit, payable in accordance with the terms of the applicable benefit plan or
program.



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b.             “Cause” means:


(i)            the commission of an act of fraud against the
Company or any affiliate thereof or embezzlement;


(ii)           breach of one or more of the following duties to the Company:


(A)          the duty of loyalty;


(B)           the duty not to take
willful actions which would reasonably be viewed by the Company as placing your
interest in a position adverse to the interest of the Company;


(C)           the duty not to
engage in self-dealing with respect to the Company’s assets, properties or
business opportunities;


(D)          the duty of honesty;
or


(E)           any other fiduciary
duty which you owe to the Company;


(iii)          your conviction (or a plea of nolo
contendere in lieu thereof) for


(A)          a felony; or


(B)           a crime involving
fraud, dishonesty or moral turpitude;


(iv)          intentional misconduct as an executive of the Company, including, but
not limited to, knowing and intentional violation by you of material written
policies of the Company or specific directions of the Board, which policies or
directives are neither illegal (or do not involve illegal conduct) nor do they
require you to violate reasonable business ethical standards; or


(v)           your failure to substantially perform your duties for the Company
(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
of such failure.


However, “Cause”
does not include termination of your employment due Disability or death, and
does not include the Company’s termination of your employment by non-renewal
after the Initial Term for either of the two one-year periods after the Initial
Term.


c.             “Change of Control” means:


(i)            A transaction or series of transactions
(other than an offering of Common Stock to the general public through a
registration statement filed with the Securities and Exchange Commission) whereby
any “person” or related “group” of “persons” (as such terms are used in
Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any
of its subsidiaries, an employee benefit plan maintained by the Company or any
of its subsidiaries or a “person”



 5
 









that, prior to such transaction, directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of securities of the Company possessing more than 50%
of the total combined voting power of the Company’s securities outstanding
immediately after such acquisition; or


(ii)           During any period of two consecutive years, individuals who, at the
beginning of such period, constitute the Board together with any new
director(s) (other than a director designated by a person who shall have
entered into an agreement with the Company to effect a transaction described in
paragraphs (a) or (c)) whose election by the Board or nomination for election
by the Company’s stockholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the beginning
of the two-year period or whose election or nomination for election was previously
so approved, cease for any reason to constitute a majority thereof; or


(iii)          The consummation by the Company (whether directly involving the Company
or indirectly involving the Company through one or more intermediaries) of (x)
a merger, consolidation, reorganization, or business combination or (y) a sale
or other disposition of all or substantially all of the Company’s assets in any
single transaction or series of related transactions or (z) the acquisition of
assets or stock of another entity, in each case other than a transaction:


(A)          Which results in the
Company’s voting securities outstanding immediately before the transaction
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the Company or the person that, as a result of the
transaction, controls, directly or indirectly, the Company or owns, directly or
indirectly, all or substantially all of the Company’s assets or otherwise
succeeds to the business of the Company (the Company or such person, the “Successor
Entity”)) directly or indirectly, at least a majority of the combined
voting power of the Successor Entity’s outstanding voting securities
immediately after the transaction; and


(B)           After which no
person or group beneficially owns voting securities representing 50%  or more of the combined voting power of the
Successor Entity; provided, however, that no person or group shall be treated
for purposes of this subparagraph (c)(ii) as beneficially owning 50% or more of
combined voting power of the Successor Entity solely as a result of the voting
power held in the Company prior to the consummation of the transaction; or


(iv)          The Company’s stockholders approve a liquidation or dissolution of the
Company.


d.             “Disability” shall mean your
permanent and total disability as determined in the discretion of the Board
based on the advice of a licensed physician that you will be unable to perform
the essential duties of your employment for an unknown period of time.



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e.             “Health Benefits” mean
coverage under the Company’s group health plan in which you participated at the
time of your termination of employment.


f.              “Severance Pay” means an
amount equal to two times the sum of:


(i)                                     your Base Salary in effect when your
employment terminates; and


(ii)           your Target Bonus.


	
  

  	
   

  	
  OWENS-ILLINOIS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ James W. Baehren

  	
   

  
	
   

  	
   

  	
  By:

  	
  James W. Baehren

  
	
   

  	
   

  	
  Its:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Acknowledged
  and Agreed:

  	
   

  	
   

  
	
  ALBERT
  P. L. STROUCKEN

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Albert P.L.
  Stroucken

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date Signed:

  	
  January 3, 2007

  	
   

  	
   

  
								



 



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