Exhibit 
10.1


 





 


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


 

















 


“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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