Document:

Exhibit 10.28

 

OWENS-ILLINOIS, INC.

2005 INCENTIVE AWARD PLAN

 

ARTICLE 1

 

PURPOSE

 

The purpose of the
Owens-Illinois, Inc. 2005 Incentive Award Plan (the “Plan”) is to promote the success and enhance the value of,
as well as aid Owens-Illinois, Inc. (the “Company”)
by linking the personal interests of current and future Employees
and Consultants to those of Company stockholders. The Plan is intended to
incentivise these individuals to continue providing the Company with
outstanding performance, to generate superior returns to Company stockholders,
and to provide flexibility to the Company in its ability to motivate, attract,
and retain the services of Employees and Consultants upon whose judgment,
interest, and special effort the successful conduct of the Company’s operation
is largely dependent.

 

ARTICLE 2

 

DEFINITIONS AND CONSTRUCTION

 

Wherever the following terms
are used in the Plan they shall have the meanings specified below, unless the
context clearly indicates otherwise. The singular pronoun shall include the
plural where the context so indicates.

 

2.1 “Award” means an Option, a Restricted
Stock award, a Stock Appreciation Right award, a Performance Share award, a
Performance Stock Unit award, a Dividend Equivalents award, a Stock Payment
award, a Deferred Stock award, a Restricted Stock Unit award, an Other
Stock-Based Award, a Performance Bonus Award, or a Performance-Based Award
granted to a Participant pursuant to the Plan.

 

2.2 “Award Agreement” means any written
agreement, contract, or other instrument or document evidencing an Award,
including through any electronic medium.

 

2.3 “Board” means the Board of Directors of
the Company.

 

2.4 “Change in Control” means and includes
each of the following:

 

(a)
A transaction or series of transactions (other than an offering of 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” 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

 

(b)
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 Section 2.4(a) or Section
2.4(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

 

(c)
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:

 

(i)            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

 

(ii)           After which no person or group beneficially
owns voting 

 

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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 Section 2.4(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

 

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

 

The Committee shall have full and final
authority, which shall be exercised in its discretion, to determine
conclusively whether a Change in Control of the Company has occurred pursuant
to the above definition, and the date of the occurrence of such Change in
Control and any incidental matters relating thereto.

 

2.5 “Code” means the Internal Revenue Code of
1986, as amended.

 

2.6 “Committee” means the committee of the
Board described in Article 12.

 

2.7 “Consultant” means any consultant or
adviser if:

 

(a)               The consultant or adviser renders bona fide
services to the Company;

 

(b)              The services rendered by the consultant or
adviser are not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or
maintain a market for the Company’s securities; and

 

(c)               The consultant or adviser is a
natural person who has contracted directly with the Company to render such
services.

 

2.8 “Covered Employee” means an Employee who is, or could be, a “covered
employee” within the meaning of Section 162(m) of the Code.

 

2.9 “CSAR” shall have the meaning set forth in
Section 7.2(a).

 

2.10 “Deferred Stock” means a right to receive
a specified number of shares of Stock during specified time periods pursuant to
Article 8.

 

2.11 “Disability” means that the Participant
qualifies to receive long-term disability payments under the Company’s
long-term disability insurance program, as it may be 

 

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amended from time to time.

 

2.12 “Dividend Equivalents” means a right
granted to a Participant pursuant to Article 8 to receive the equivalent value
(in cash or Stock) of dividends paid on Stock.

 

2.13 “Effective Date” shall have the meaning
set forth in Section 13.1.

 

2.14 “Eligible Individual” means any person who
is an Employee or a Consultant, as determined by the Committee.

 

2.15 “Employee” means any officer or other
employee (as defined in accordance with Section 3401(c) of the Code) of the
Company or any Subsidiary.

 

2.16 “Exchange Act” means the Securities
Exchange Act of 1934, as amended.

 

2.17 “Fair Market Value” means, with respect to
a share of Stock as of a given date: (i) the closing price of a Stock on the
principal exchange on which shares of Stock are then trading, if any, on the
day previous to such date, or, if shares were not traded on the day previous to
such date, then on the next preceding trading day during which a sale occurred;
or (ii) if Stock is not traded on an exchange but is quoted on NASDAQ or a
successor quotation system, (1) the last sales price (if the stock is then
listed as a National Market Issue under the NASD National Market System) or (2)
the mean between the closing representative bid and asked prices (in all other
cases) for the Stock on the day previous to such date as reported by NASDAQ or
such successor quotation system; or (iii) if the Stock is not publicly traded
on an exchange and not quoted on NASDAQ or a successor quotation system, the
mean between the closing bid and asked prices for the Stock, on the day
previous to such date, as determined in good faith by the Committee; or (iv) if
the Stock is not publicly traded, the fair market value established by the
Committee acting in good faith.

 

2.18 “Full Value Award” means any Award other
than an Option, SAR or other Award for which the Participant pays the intrinsic
value (whether directly or by forgoing a right to receive a cash payment from
the Company).

 

2.19 “Incentive Stock Option” means an Option
that is intended to meet the requirements of Section 422 of the Code or any
successor provision thereto.

 

2.20 “ISAR” shall have the meaning set forth in
Section 7.3(a).

 

2.21 “Non-Employee Director” means a member of
the Board who qualifies as a “Non-Employee Director” as defined in Rule
16b-3(b)(3) of the Exchange Act, or 

 

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any successor definition
adopted by the Board.

 

2.22 “Non-Qualified Stock Option” means an Option that is not intended to be an
Incentive Stock Option.

 

2.23 “Option” means a right granted to a Participant pursuant to Article 5 of the
Plan to purchase a specified number of shares of Stock at a specified price
during specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.

 

2.24 “Other Stock-Based Award” means an Award
granted or denominated in Stock or units of Stock pursuant to Section 8.7 of
the Plan.

 

2.25 “Participant” means any Eligible
Individual who, as a member of the Board, Consultant or Employee, has been
granted an Award pursuant to the Plan.

 

2.26 “Performance-Based Award” means an Award
granted to selected Covered Employees pursuant to Articles 6 and 8, but which
is subject to the terms and conditions set forth in Article 9. All
Performance-Based Awards are intended to qualify as Qualified Performance-Based
Compensation.

 

2.27 “Performance Bonus Award” has the meaning
set forth in Section 8.8.

 

2.28 “Performance Criteria” means the criteria
that the Committee selects for purposes of establishing the Performance Goal or
Performance Goals for a Participant for a Performance Period. The Performance
Criteria that will be used to establish Performance Goals are limited to the
following: (i) earnings before or after taxes (including earnings before
interest, taxes, depreciation and amortization); (ii) net income; (iii)
operating income; (iv) earnings per share of Stock; (v) book value per share of
Stock; (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 of its Subsidiaries or one or more of its divisions
or 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

 

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combination thereof, all as the Committee
shall determine. In addition, to the degree consistent with Section 162(m) of
the Code (or any successor section thereto), the Committee may adjust, modify
or amend the above business criteria, either in establishing any performance
goal or in determining the extent to which any performance goal has been
achieved. Without limiting the generality of the foregoing, the Committee shall
have the authority, at the time it establishes the performance goals 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 its operating units, in response to changes in applicable laws or
regulations, 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 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 objectives of this Plan. The Committee
shall, within the time prescribed by Section 162(m) of the Code, define in an
objective fashion the manner of calculating the Performance Criteria it selects
to use for such Performance Period for such Participant.

 

2.29 “Performance Goals” means, for a
Performance Period, the goals established in writing by the Committee for the
Performance Period based upon the Performance Criteria. Depending on the
Performance Criteria used to establish such Performance Goals, the Performance
Goals may be expressed in terms of overall Company performance or the
performance of a division, business unit, or an individual. The Committee, in
its discretion, may, within the time prescribed by Section 162(m) of the Code,
adjust or modify the calculation of Performance Goals for such Performance
Period in order to prevent the dilution or enlargement of the rights of
Participants (a) in the event of, or in anticipation of, any unusual or
extraordinary corporate item, transaction, event, or development, or (b) in
recognition of, or in anticipation of, any other unusual or nonrecurring events
affecting the Company, or the financial statements of the Company, or in
response to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions.

 

2.30 “Performance Period” means the one or more
periods of time, which may be of varying and overlapping durations, as the
Committee may select, over which the attainment of one or more Performance

 

Goals will be measured for the purpose of
determining a Participant’s right to, and the payment of, a Performance-Based
Award.

 

2.31 “Performance Share” means a right granted
to a Participant pursuant to Article 8, to receive Stock, the payment of which
is contingent upon achieving certain Performance Goals or other performance-based
targets established by the Committee.

 

2.32 “Performance Stock Unit” means a right
granted to a Participant pursuant to 

 

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Article 8, to receive Stock, the payment of
which is contingent upon achieving certain Performance Goals or other
performance-based targets established by the Committee.

 

2.33 “Plan” means this Owens-Illinois, Inc.
2005 Incentive Award Plan, as it may be amended from time to time.

 

2.34 “Qualified Performance-Based Compensation” means
any compensation that is intended to qualify as “qualified performance-based
compensation” as described in Section 162(m)(4)(C) of the Code.

 

2.35 “Restricted Stock” means Stock awarded to
a Participant pursuant to Article 6 that is subject to certain restrictions and
may be subject to risk of forfeiture.

 

2.36 “Restricted Stock Unit” means an Award
granted pursuant to Section 8.6.

 

2.37 “Securities Act” shall mean the Securities
Act of 1933, as amended.

 

2.38 “Stock” means the common stock of the
Company, par value $0.01 per share, and such other securities of the Company
that may be substituted for Stock pursuant to Article 11.

 

2.39 “Stock Appreciation Right” or “SAR” means a right granted pursuant to
Article 7 to receive a payment equal to the excess of the Fair Market Value of
a specified number of shares of Stock on the date the SAR is exercised over the
Fair Market Value on the date the SAR was granted as set forth in the
applicable Award Agreement.

 

2.40 “Stock Payment” means (a) a payment in the
form of shares of Stock, or (b) an option or other right to purchase shares of
Stock, as part of any bonus, deferred compensation or other arrangement, made
in lieu of all or any portion of the compensation, granted pursuant to Article
8.

 

2.41 “Subsidiary” means any “subsidiary corporation” as defined
in Section 424(f) of the Code and any applicable regulations promulgated
thereunder or any other entity of which a majority of the outstanding voting
stock or voting power is beneficially owned directly or indirectly by the
Company.

 

2.42 “Successor Entity” shall have the meaning set forth in Section
2.4(c)(i).

 

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ARTICLE 3

 

SHARES SUBJECT TO THE PLAN

 

3.1 Number of Shares.

 

(a)               Subject to Article 11 and Section 3.1(b), the
aggregate number of shares of Stock which may be issued or transferred pursuant
to Awards under the Plan shall be 7,000,000 shares, provided, however, that such aggregate number of shares of
Stock available for issuance under the Plan shall be reduced by 1.75 shares for
each share of Stock delivered in settlement of any Full Value Award.

 

(b)              To the extent that an Award terminates,
expires, or lapses for any reason, any shares of Stock subject to the Award
shall again be available for the grant of an Award pursuant to the Plan. To the
extent permitted by applicable law or any exchange rule, shares of Stock issued
in assumption of, or in substitution for, any outstanding awards of any entity
acquired in any form of combination by the Company or any Subsidiary shall not
be counted against shares of Stock available for grant pursuant to this Plan.
The payment of Dividend Equivalents in conjunction with any outstanding Awards
shall not be counted against the shares available for issuance under the Plan.

 

3.2 Stock Distributed. Any Stock distributed
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Stock, treasury Stock or Stock purchased on the open market.

 

3.3 Limitation on Number of Shares Subject to Awards. Notwithstanding
any provision in the Plan to the contrary, and subject to Article 11, the
maximum number of shares of Stock with respect to one or more Awards that may
be granted to any one Participant during a calendar year (measured from the
date of any grant) shall be 700,000.

 

ARTICLE 4

 

ELIGIBILITY AND PARTICIPATION

 

4.1 Eligibility. Each Eligible Individual
shall be eligible to be granted one or more Awards pursuant to the Plan.

 

4.2 Participation. Subject to the provisions
of the Plan, the Committee may, from time to time, select from among all
Eligible Individuals, those to whom Awards shall be granted and shall determine
the nature and amount of each Award. No Eligible Individual shall have any
right to be granted an Award pursuant to this Plan.

 

4.3 Foreign Participants. In order to assure
the viability of Awards granted to 

 

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Participants employed in foreign countries,
the Committee may provide for such special terms as it may consider necessary
or appropriate to accommodate differences in local law, tax policy, or custom.
Moreover, the Committee may approve such supplements to, or amendments,
restatements, or alternative versions of, the Plan as it may consider necessary
or appropriate for such purposes without thereby affecting the terms of the
Plan as in effect for any other purpose; provided, however, that no such supplements, amendments, restatements or alternative
versions shall increase the share limitations contained in Sections 3.1 and 3.3
of the Plan.

 

ARTICLE 5

 

STOCK OPTIONS

 

5.1 General. The Committee is authorized to
grant Options to Participants on the following terms and conditions:

 

(a)               Exercise Price. The exercise price per share of Stock subject
to an Option shall be determined by the Committee and set forth in the Award
Agreement; provided that the
exercise price for any Option shall not be less than 100% of the Fair Market
Value of a share of Stock on the date of grant.

 

(b)              Time and Conditions of
Exercise. The Committee
shall determine the time or times at which an Option may be exercised in whole
or in part; provided that the
term of any Option granted under the Plan shall not exceed ten years and one
day. The Committee shall also determine the performance or other conditions, if
any, that must be satisfied before all or part of an Option may be exercised.

 

(c)               Payment. The Committee shall determine the methods by
which the exercise price of an Option may be paid, the form of payment,
including, without limitation: (i) cash, (ii) promissory note bearing interest
at no less than such rate as shall then preclude the imputation of interest
under the Code, (iii) shares of Stock held for such period of time as may be
required by the Committee in order to avoid adverse accounting consequences and
having a Fair Market Value on the date of delivery equal to the aggregate
exercise price of the Option or exercised portion thereof, or (iv) other
property acceptable to the Committee (including through the delivery of a
notice that the Participant has placed a market sell order with a broker with
respect to shares of Stock then issuable upon exercise of the Option, and that
the broker has been directed to pay a sufficient portion of the net proceeds of
the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is
then made to the Company upon settlement of such sale), and the methods by
which shares of Stock shall be delivered or deemed to be delivered to
Participants. Notwithstanding any other 

 

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provision of the Plan to the
contrary, no Participant who is a member of the Board or an “executive officer”
of the Company within the meaning of Section 13(k) of the Exchange Act shall be
permitted to pay the exercise price of an Option in any method which would
violate Section 13(k) of the Exchange Act

 

(d)              Evidence of Grant. All Options shall be evidenced by a written
Award Agreement between the Company and the Participant. The Award Agreement
shall include such additional provisions as may be specified by the Committee.

 

5.2 Incentive Stock Options. The terms of any
Incentive Stock Options granted pursuant to the Plan must comply with the
conditions and limitations contained in Section 13.2 and this Section 5.2.

 

(a)               Eligibility.
Incentive Stock Options may be granted only to employees of the
Company or any “subsidiary corporation” thereof (within the meaning of Section
424(f) of the Code and the applicable regulations promulgated thereunder).

 

(b)                Exercise Price. The exercise price per share of Stock shall
be set by the Committee; provided
that subject to Section 5.2(d)
the exercise price for any Incentive Stock Option shall not be less than 100%
of the Fair Market Value on the date of grant.

 

(c)                Individual Dollar
Limitation. The aggregate
Fair Market Value (determined as of the time the Option is granted) of all
shares of Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed $100,000 or
such other limitation as imposed by Section 422(d) of the Code, or any
successor provision. To the extent that Incentive Stock Options are first
exercisable by a Participant in excess of such limitation, the excess shall be
considered Non-Qualified Stock Options.

 

(d)              Ten Percent Owners. An Incentive Stock Option shall be granted to
any individual who, at the date of grant, owns stock possessing more than ten
percent of the total combined voting power of all classes of Stock of the
Company only if such Option is granted at a price that is not less than 110% of
Fair Market Value on the date of grant and the Option is exercisable for no
more than five years from the date of grant.

 

(e)               Notice of Disposition. The Participant shall give the Company prompt
notice of any disposition of shares of Stock acquired by exercise of an
Incentive Stock Option within (i) two years from the date of grant of such
Incentive Stock 

 

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Option or (ii) one year
after the transfer of such shares of Stock to the Participant.

 

(f)               Right to Exercise. During a Participant’s lifetime, an Incentive
Stock Option may be exercised only by the Participant.

 

5.3 Substitution of Stock Appreciation Rights. The
Committee may provide in the Award Agreement evidencing the grant of an Option
that the Committee, in its sole discretion, shall have the right to substitute
a Stock Appreciation Right for such Option at any time prior to or upon
exercise of such Option, subject to the provisions of Section 7.2 hereof;
provided that such Stock Appreciation Right shall be exercisable with respect
to the same number of shares of Stock for which such substituted Option would
have been exercisable.

 

5.4 Paperless Exercise. In the event that the
Company establishes, for itself or using the services of a third party, an
automated system for the exercise of Options, such as a system using an
internet website or interactive voice response, then the paperless exercise of
options by a Participant may be permitted through the use of such an automated
system.

 

ARTICLE 6

 

RESTRICTED STOCK AWARDS

 

6.1 Grant of Restricted Stock. The Committee
is authorized to make Awards of Restricted Stock to any Participant selected by
the Committee in such amounts and subject to such terms and conditions as
determined by the Committee. All Awards of Restricted Stock shall be evidenced
by a written Restricted Stock Award Agreement.

 

6.2 Issuance and Restrictions. Subject to
Section 10.6, Restricted Stock shall be subject to such restrictions on
transferability and other restrictions as the Committee may impose (including,
without limitation, limitations on the right to vote Restricted Stock or the
right to receive dividends on the Restricted Stock). These restrictions may
lapse separately or in combination at such times, pursuant to such
circumstances, in such installments, or otherwise, as the Committee determines
at the time of the grant of the Award or thereafter.

 

6.3 Forfeiture. Except as otherwise determined by the Committee at the time of the
grant of the Award or thereafter, upon termination of employment or service
during the applicable restriction period, Restricted Stock that is at that time
subject to restrictions shall be forfeited; provided, however, that,
except as otherwise provided by 

 

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Section 10.6, the Committee may (a) provide
in any Restricted Stock Award Agreement that restrictions or forfeiture
conditions relating to Restricted Stock will be waived in whole or in part in
the event of terminations resulting from specified causes, and (b) in other
cases waive in whole or in part restrictions or forfeiture conditions relating
to Restricted Stock.

 

6.4 Certificates for Restricted Stock. Restricted
Stock granted pursuant to the Plan may be evidenced in such manner as the
Committee shall determine. If certificates representing shares of Restricted
Stock are registered in the name of the Participant, certificates must bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Restricted Stock, and the Company may, at its discretion,
retain physical possession of the certificate until such time as all applicable
restrictions lapse.

 

ARTICLE 7

 

STOCK APPRECIATION RIGHTS

 

7.1 Grant of Stock Appreciation Rights. A
Stock Appreciation Right may be granted to any Participant selected by the
Committee. A Stock Appreciation Right may be granted (a) in connection and
simultaneously with the grant of an Option, (b) with respect to a previously
granted Option, or (c) independent of an Option. A Stock Appreciation Right
shall be subject to such terms and conditions not inconsistent with the Plan as
the Committee shall impose and shall be evidenced by an Award Agreement.

 

7.2 Coupled Stock Appreciation Rights.

 

(a)               A Coupled Stock Appreciation Right (“CSAR”) shall be related to a particular
Option and shall be exercisable only when and to the extent the related Option
is exercisable.

 

(b)              A CSAR may be granted to a Participant for no
more than the number of shares subject to the simultaneously or previously
granted Option to which it is coupled.

 

(c)               A CSAR shall entitle the Participant (or
other person entitled to exercise the Option pursuant to the Plan) to surrender
to the Company the unexercised portion of the Option to which the CSAR relates
(to the extent then exercisable pursuant to its terms) and to receive from the
Company in exchange 

 

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therefor an amount
determined by multiplying the difference obtained by subtracting the Option
exercise price from the Fair Market Value of a share of Stock on the date of
exercise of the CSAR by the number of shares of Stock with respect to which the
CSAR shall have been exercised, subject to any limitations the Committee may
impose.

 

7.3 Independent Stock Appreciation Rights.

 

(a)               An Independent Stock Appreciation
Right (“ISAR”) shall be unrelated
to any Option and shall have a term set by the Committee. An ISAR shall be
exercisable in such installments as the Committee may determine. An ISAR shall
cover such number of shares of Stock as the Committee may determine. The
exercise price per share of Stock subject to each ISAR shall be set by the
Committee; provided, however, that the exercise price for any ISAR shall
not be less than 100% of the Fair Market Value on the date of grant; and provided, further, that, the Committee in its sole and absolute discretion may provide
that the ISAR may be exercised subsequent to a termination of employment or
service, as applicable, or following a Change in Control of the Company, or
because of the Participant’s retirement, death or Disability, or otherwise.

 

(b)              An ISAR shall entitle the
Participant (or other person entitled to exercise the ISAR pursuant to the
Plan) to exercise all or a specified portion of the ISAR (to the extent then
exercisable pursuant to its terms) and to receive from the Company an amount
determined by multiplying the difference obtained by subtracting the exercise
price per share of the ISAR from the Fair Market Value of a share of Stock on
the date of exercise of the ISAR by the number of shares of Stock with respect
to which the ISAR shall have been exercised, subject to any limitations the
Committee may impose.

 

7.4 Payment and Limitations on Exercise.

 

(a)               Payment in respect of a Stock Appreciation
Right shall be in cash, in Stock (based on its Fair Market Value as of the date
the Stock Appreciation Right is exercised) or a combination of both, as
determined by the Committee in the Award Agreement.

 

(b)              To the extent payment for a Stock
Appreciation Right is to be made in cash, the Award Agreement shall, to the
extent necessary to comply with the requirements to Section 409A of the Code,
specify the date of payment which may be different than the date of exercise of
the Stock Appreciation Right. If the date of payment for a Stock Appreciation
Right is later than the date of exercise, 

 

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the Award Agreement may
specify that the Participant be entitled to earnings on such amount until paid.

 

(c)               To the extent any payment in respect of a
Stock Appreciation Right is effected in Stock, it shall be made subject to
satisfaction of all provisions of Article 5 above pertaining to Options.

 

ARTICLE 8

 

OTHER TYPES OF AWARDS

 

8.1 Performance Share Awards. Any Participant
selected by the Committee may be granted one or more Performance Share awards
which shall be denominated in a number of shares of Stock and which may be
linked to any one or more of the Performance Criteria or other specific
performance criteria determined appropriate by the Committee, in each case on a
specified date or dates or over any period or periods determined by the
Committee. In making such determinations, the Committee shall consider (among such
other factors as it deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the particular
Participant.

 

8.2 Performance Stock Units. Any Participant
selected by the Committee may be granted one or more Performance Stock Unit
awards which shall be denominated in units of value including dollar value of
shares of Stock and which may be linked to any one or more of the Performance
Criteria or other specific performance criteria determined appropriate by the
Committee, in each case on a specified date or dates or over any period or
periods determined by the Committee. In making such determinations, the
Committee shall consider (among such other factors as it deems relevant in
light of the specific type of award) the contributions, responsibilities and
other compensation of the particular Participant.

 

8.3 Dividend Equivalents.

 

(a)
Any Participant selected by the Committee may be granted Dividend Equivalents
based on the dividends declared on the shares of Stock that are subject to any
Award, to be credited as of dividend payment dates, during the period between
the date the Award is granted and the date the Award is exercised, vests or
expires, as determined by the Committee. Such Dividend Equivalents shall be
converted to cash or additional shares of Stock by such formula and at such
time and subject to such limitations as may be determined by the Committee.

 

14

 

(b)
Dividend Equivalents granted with respect to Options or SARs that are intended
to be Qualified Performance-Based Compensation shall be payable, with respect
to pre-exercise periods, regardless of whether such Option or SAR is
subsequently exercised.

 

8.4 Stock Payments. Any Participant selected
by the Committee may receive Stock Payments in the manner determined from time
to time by the Committee; provided, that
unless otherwise determined by the Committee such Stock Payments shall be made
in lieu of base salary, bonus, or other cash compensation otherwise payable to
such Participant. The number of shares shall be determined by the Committee and
may be based upon the Performance Criteria or other specific performance
criteria determined appropriate by the Committee, determined on the date such
Stock Payment is made or on any date thereafter.

 

8.5 Deferred Stock. Any Participant selected
by the Committee may be granted an award of Deferred Stock in the manner
determined from time to time by the Committee. The number of shares of Deferred
Stock shall be determined by the Committee and may be linked to the Performance
Criteria or other specific performance criteria determined to be appropriate by
the Committee, in each case on a specified date or dates or over any period or
periods determined by the Committee subject to Section 10.6. Stock underlying a
Deferred Stock award will not be issued until the Deferred Stock award has
vested, pursuant to a vesting schedule or performance criteria set by the
Committee. Unless otherwise provided by the Committee, a Participant awarded
Deferred Stock shall have no rights as a Company stockholder with respect to
such Deferred Stock until such time as the Deferred Stock Award has vested and
the Stock underlying the Deferred Stock Award has been issued.

 

8.6 Restricted Stock Units. The Committee is
authorized to make Awards of Restricted Stock Units to any Participant selected
by the Committee in such amounts and subject to such terms and conditions as
determined by the Committee. At the time of grant, the Committee shall specify
the date or dates on which the Restricted Stock Units shall become fully vested
and nonforfeitable, and may specify such conditions to vesting as it deems
appropriate subject to Section 10.6. At the time of grant, the Committee shall
specify the maturity date applicable to each grant of Restricted Stock Units
which shall be no earlier than the vesting date or dates of the Award and may
be determined at the election of the grantee. On the maturity date, the Company
shall, subject to Section 10.5(b), transfer to the Participant one
unrestricted, fully transferable share of Stock for each Restricted Stock Unit
scheduled to be paid out on such date and not previously forfeited. The
Committee shall specify the purchase price, if any, to be paid by the grantee
to the Company for such shares of Stock.

 

8.7 Other Stock-Based Awards. Any Participant
selected by the Committee may be 

 

15

 

granted one or more Awards that provide
Participants with shares of Stock or the right to purchase shares of Stock or
that have a value derived from the value of, or an exercise or conversion
privilege at a price related to, or that are otherwise payable in shares of
Stock and which may be linked to any one or more of the Performance Criteria or
other specific performance criteria determined appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined
by the Committee subject to Section 10.6. In making such determinations, the
Committee shall consider (among such other factors as it deems relevant in
light of the specific type of Award) the contributions, responsibilities and
other compensation of the particular Participant.

 

8.8 Performance Bonus Awards. Any Participant
selected by the Committee may be granted one or more Performance-Based Awards
in the form of a cash bonus (a “Performance
Bonus Award”) payable upon the attainment of Performance Goals that
are established by the Committee and relate to one or more of the Performance
Criteria, in each case on a specified date or dates or over any period or
periods determined by the Committee subject to Section 10.6. Any such
Performance Bonus Award paid to a Covered Employee shall be based upon
objectively determinable bonus formulas established in accordance with Article
9. The maximum amount of any Performance Bonus Award payable to a Covered
Employee with respect to any fiscal year of the Company shall not exceed
$5,000,000.

 

8.9 Term. Except as otherwise provided herein,
the term of any Award of Performance Shares, Performance Stock Units, Dividend
Equivalents, Stock Payments, Deferred Stock, Restricted Stock Units or Other
Stock-Based Award shall be set by the Committee in its discretion.

 

8.10 Exercise or Purchase Price. The Committee
may establish the exercise or purchase price, if any, of any Award of
Performance Shares, Performance Stock Units, Deferred Stock, Stock Payments,
Restricted Stock Units or Other Stock-Based Award; provided, however, that such price shall not be less than
the par value of a share of Stock on the date of grant, unless otherwise
permitted by applicable state law.

 

8.11 Exercise Upon Termination of Employment or Service. An
Award of Performance Shares, Performance Stock Units, Dividend Equivalents,
Deferred Stock, Stock Payments, Restricted Stock Units and Other Stock-Based
Award shall only be exercisable or payable while the Participant is an Employee
or Consultant, as applicable; provided,
however, that the Committee in its sole and absolute discretion may
provide that an Award of Performance Shares, Performance Stock Units, Dividend
Equivalents, Stock Payments, Deferred Stock, Restricted Stock Units or Other
Stock-Based Award may be exercised or paid subsequent to a termination of
employment or service, as applicable, or following a Change in Control of the
Company, or because of the Participant’s retirement, death or Disability, or
otherwise; provided, however, that
any 

 

16

 

such provision with respect to Performance
Shares or Performance Stock Units shall be subject to the requirements of
Section 162(m) of the Code that apply to Qualified Performance-Based
Compensation.

 

8.12 Form of Payment. Payments with respect to
any Awards granted under this Article 8 shall be made in cash, in Stock or a
combination of both, as determined by the Committee.

 

8.13 Award Agreement. All Awards under this
Article 8 shall be subject to such additional terms and conditions as
determined by the Committee and shall be evidenced by a written Award
Agreement.

 

ARTICLE 9

 

PERFORMANCE-BASED AWARDS

 

9.1 Purpose. The purpose of this Article 9 is
to provide the Committee the ability to qualify Awards other than Options and
SARs and that are granted pursuant to Articles 6 and 8 as Qualified
Performance-Based Compensation. If the Committee, in its discretion, decides to
grant a Performance-Based Award to a Covered Employee, the provisions of this
Article 9 shall control over any contrary provision contained in Articles 6 or
8; provided, however, that the Committee may in its discretion
grant Awards to Covered Employees that are based on Performance Criteria or
Performance Goals but that do not satisfy the requirements of this Article 9.

 

9.2 Applicability. This Article 9 shall apply
only to those Covered Employees selected by the Committee to receive
Performance-Based Awards. The designation of a Covered Employee as a
Participant for a Performance Period shall not in any manner entitle the
Participant to receive an Award for the period. Moreover, designation of a
Covered Employee as a Participant for a particular Performance Period shall not
require designation of such Covered Employee as a Participant in any subsequent
Performance Period and designation of one Covered Employee as a Participant
shall not require designation of any other Covered Employees as a Participant
in such period or in any other period.

 

9.3 Procedures with Respect to Performance-Based Awards. To
the extent necessary to comply with the Qualified Performance-Based
Compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
any Award granted under Articles 6 and 8 which may be granted to one or more
Covered Employees, no later than ninety (90) days 

 

17

 

following the commencement of any fiscal year
in question or any other designated fiscal period or period of service (or such
other time as may be required or permitted by Section 162(m) of the Code), the
Committee shall, in writing, (a) designate one or more Covered Employees, (b)
select the Performance Criteria applicable to the Performance Period, (c)
establish the Performance Goals, and amounts of such Awards, as applicable,
which may be earned for such Performance Period, and (d) specify the relationship
between Performance Criteria and the Performance Goals and the amounts of such
Awards, as applicable, to be earned by each Covered Employee for such
Performance Period. Following the completion of each Performance Period, the
Committee shall certify in writing whether the applicable Performance Goals
have been achieved for such Performance Period. In determining the amount
earned by a Covered Employee, the Committee shall have the right to reduce or
eliminate (but not to increase) the amount payable at a given level of
performance to take into account additional factors that the Committee may deem
relevant to the assessment of individual or corporate performance for the
Performance Period.

 

9.4 Payment of Performance-Based Awards. Unless
otherwise provided in the applicable Award Agreement, a Participant must be
employed by the Company or a Subsidiary on the day a Performance-Based Award
for such Performance Period is paid to the Participant. Furthermore, a
Participant shall be eligible to receive payment pursuant to a
Performance-Based Award for a Performance Period only if the Performance Goals
for such period are achieved.

 

9.5 Additional Limitations. Notwithstanding
any other provision of the Plan, any Award which is granted to a Covered
Employee and is intended to constitute Qualified Performance-Based Compensation
shall be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for
qualification as qualified performance-based compensation as described in
Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the
extent necessary to conform to such requirements.

 

ARTICLE 10

 

PROVISIONS APPLICABLE TO AWARDS

 

10.1 Stand-Alone and Tandem Awards. Awards
granted pursuant to the Plan may, in the discretion of the Committee, be
granted either alone, in addition to, or in tandem with, any other Award
granted pursuant to the Plan. Awards granted in addition to or in tandem with
other Awards may be granted either at the same time as or at a different time
from the grant of such other Awards.

 

18

 

10.2 Award Agreement. Awards under the Plan
shall be evidenced by Award Agreements that set forth the terms, conditions and
limitations for each Award which may include the term of an Award, the
provisions applicable in the event the Participant’s employment or service
terminates, and the Company’s authority to unilaterally or bilaterally amend,
modify, suspend, cancel or rescind an Award.

 

10.3 Limits on Transfer. No right or interest
of a Participant in any Award may be pledged, encumbered, or hypothecated to or
in favor of any party other than the Company or a Subsidiary, or shall be
subject to any lien, obligation, or liability of such Participant to any other
party other than the Company or a Subsidiary. Except as otherwise provided by
the Committee, no Award shall be assigned, transferred, or otherwise disposed
of by a Participant other than by will or the laws of descent and distribution.
The Committee by express provision in the Award or an amendment thereto may
permit an Award (other than an Incentive Stock Option) to be transferred to,
exercised by and paid to certain persons or entities related to the
Participant, including but not limited to members of the Participant’s family,
charitable institutions, or trusts or other entities whose beneficiaries or
beneficial owners are members of the Participant’s family and/or charitable
institutions, or to such other persons or entities as may be expressly approved
by the Committee, pursuant to such conditions and procedures as the Committee
may establish. Any permitted transfer shall be subject to the condition that
the Committee receive evidence satisfactory to it that the transfer is being
made for estate and/or tax planning purposes (or to a “blind trust” in
connection with the Participant’s termination of employment or service with the
Company or a Subsidiary to assume a position with a governmental, charitable,
educational or similar non-profit institution) and on a basis consistent with
the Company’s lawful issue of securities.

 

10.4 Beneficiaries. Notwithstanding Section
10.3, a Participant may, in the manner determined by the Committee, designate a
beneficiary to exercise the rights of the Participant and to receive any
distribution with respect to any Award upon the Participant’s death. A
beneficiary, legal guardian, legal representative, or other person claiming any
rights pursuant to the Plan is subject to all terms and conditions of the Plan
and any Award Agreement applicable to the Participant, except to the extent the
Plan and Award Agreement otherwise provide, and to any additional restrictions
deemed necessary or appropriate by the Committee. If the Participant is married
and resides in a community property state, a designation of a person other than
the Participant’s spouse as his or her beneficiary with respect to more than
50% of the Participant’s interest in the Award shall not be effective without
the prior written consent of the Participant’s spouse. If no beneficiary has
been designated or survives the Participant, payment shall be made to the
person entitled thereto pursuant to the Participant’s will or the laws of
descent and distribution. Subject to the foregoing, a beneficiary designation
may be changed or revoked by a Participant at any time provided the change or
revocation is filed with the Committee.

 

19

 

10.5 Stock Certificates; Book Entry Procedures.

 

(a) Notwithstanding anything
herein to the contrary, the Company shall not be required to issue or deliver
any certificates evidencing shares of Stock pursuant to the exercise of any
Award, unless and until the Board has determined, with advice of counsel, that
the issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authorities and, if applicable,
the requirements of any exchange on which the shares of Stock are listed or
traded. All Stock certificates delivered pursuant to the Plan are subject to
any stop-transfer orders and other restrictions as the Committee deems
necessary or advisable to comply with federal, state, or foreign jurisdiction,
securities or other laws, rules and regulations and the rules of any national
securities exchange or automated quotation system on which the Stock is listed,
quoted, or traded. The Committee may place legends on any Stock certificate to
reference restrictions applicable to the Stock. In addition to the terms
and conditions provided herein,
the Board may require that a Participant make such reasonable covenants,
agreements, and representations as the Board, in its discretion, deems
advisable in order to comply with any such laws, regulations, or requirements.
The Committee shall have the right to require any Participant to comply with
any timing or other restrictions with respect to the settlement or exercise of
any Award, including a window-period limitation, as may be imposed in the
discretion of the Committee.

 

(b) Notwithstanding any
other provision of the Plan, unless otherwise determined by the Committee or
required by any applicable law, rule or regulation, the Company shall not
deliver to any Participant certificates evidencing shares of Stock issued in
connection with any Award and instead such shares of Stock shall be recorded in
the books of the Company (or, as applicable, its transfer agent or stock plan
administrator).

 

10.6 Full Value Award Vesting Limitations. Notwithstanding
any other provision of this Plan to the contrary, Full Value Awards made to
Employees or Consultants shall become vested over a period of not less than
three years (or, in the case of vesting based upon the attainment of
Performance Goals or other performance based objectives, over a period of not
less than one year) following the date the Award is made; provided, however, that, notwithstanding
the foregoing, Full Value Awards that result in the issuance of an aggregate of
up to 5% of the shares of Stock available pursuant to Section 3.1(a) may be
granted to any one or more Participants without respect to such minimum vesting
provisions.

 

20

 

ARTICLE 11

 

CHANGES IN CAPITAL STRUCTURE

 

11.1 Adjustments.

 

(a)                In the event of any stock dividend, stock
split, combination or exchange of shares, merger, consolidation, spin-off,
recapitalization, distribution of Company assets to stockholders (other than
normal cash dividends), or any other corporate event affecting the Stock or the
share price of the Stock, the Committee may make such proportionate
adjustments, if any, as the Committee in its discretion may deem appropriate to
reflect such changes with respect to (i) the aggregate number and type of
shares that may be issued under the Plan (including, but not limited to,
adjustments of the limitations in Sections 3.1 and 3.3); (ii) the terms and
conditions of any outstanding Awards (including, without limitation, any
applicable performance targets or criteria with respect thereto); and/or (iii)
the grant or exercise price per share for any outstanding Awards under the
Plan. Any adjustment affecting an Award intended as Qualified Performance-Based
Compensation shall be made consistent with the requirements of Section 162(m)
of the Code.

 

(b)                In the event of any transaction or event
described in Section 11.1(a) or any unusual or nonrecurring transactions or
events affecting the Company, any affiliate of the Company, or the financial
statements of the Company or any affiliate (including without limitation any
Change in Control), or of changes in applicable laws, regulations or accounting
principles, and whenever the Committee determines that action is appropriate in
order to prevent the dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan or with respect to any
Award under the Plan, to facilitate such transactions or events or to give
effect to such changes in laws, regulations or principles, the Committee, in
its sole discretion and on such terms and conditions as it deems appropriate,
either by amendment of the terms of any outstanding Awards or by action taken
prior to the occurrence of such transaction or event and either automatically
or upon the Participant’s request, is hereby authorized to take any one or more
of the following actions:

 

(i)                To provide for either (A) termination of any
such Award in exchange for an amount of cash and/ or other property, if any,
equal to the amount that would have been attained upon the exercise of such
Award or realization of the Participant’s rights (and, for the avoidance of
doubt, if as of the date of the occurrence of the transaction or event
described in this Section 11.1(b) the Committee determines in good faith that
no amount would have been attained upon the exercise of such Award or
realization of the Participant’s rights, then such Award may be terminated by
the Company without payment) or (B) the replacement of such Award with other rights
or property selected by the Committee in its sole discretion;

 

(ii)               To provide that such Award be assumed by the
successor or survivor 

 

21

 

corporation, or a parent or
subsidiary thereof, or shall be substituted for by similar options, rights or
awards covering the stock of the successor or survivor corporation, or a parent
or subsidiary thereof, with appropriate adjustments as to the number and kind
of shares and prices; and

 

(iii)              To make adjustments in the number and type of
shares of Stock (or other securities or property) subject to outstanding
Awards, and in the number and kind of outstanding Restricted Stock or Deferred
Stock and/or in the terms and conditions of (including the grant or exercise price),
and the criteria included in, outstanding options, rights and awards and
options, rights and awards which may be granted in the future;

 

(iv)             To provide that such Award shall be
exercisable or payable or fully vested with respect to all shares covered
thereby, notwithstanding anything to the contrary in the Plan or the applicable
Award Agreement; and

 

(v)              To provide that the Award cannot vest, be
exercised or become payable after such event.

 

11.2 Impact of a Change in Control. Subject to
any applicable requirements of Section 409A of the Code, upon or in
anticipation of, a Change in Control, the Committee, in its sole and absolute
discretion, may (a) cause any and all Awards outstanding hereunder to become
fully exercisable, (b) cause all forfeiture conditions to lapse and to
terminate at a specific time in the future, including but not limited to the
date of such Change in Control, (c) give each Participant the right to exercise
such Awards during a period of time as the Committee, in its sole and absolute
discretion, shall determine, and/or (d) cause any and all Awards outstanding
hereunder to terminate at a specific time in the future, including but not
limited to the date of such Change in Control. In the event that the terms of
any agreement between the Company or any Company Subsidiary or affiliate and a
Participant contains provisions that conflict with and are more restrictive
than the provisions of this Section 11.2, this Section 11.2 shall prevail and
control and the more restrictive terms of such agreement (and only such terms)
shall be of no force or effect.

 

11.3 Outstanding Awards—Certain Mergers. Subject
to any required action by the stockholders of the Company, in the event that
the Company shall be the surviving corporation in any merger or consolidation
(except a merger or consolidation as a result of which the holders of shares of
Stock receive securities of another corporation), each Award outstanding on the
date of such merger or consolidation shall pertain to and apply to the securities
that a holder of the number of shares of Stock subject to such Award would have
received in such merger or consolidation.

 

22

 

11.4 Outstanding Awards—Other Changes. In the event of any other change in the
capitalization of the Company or corporate change other than those specifically
referred to in this Article 11, the Committee may, in its sole and absolute
discretion, make such adjustments in the number and kind of shares or other
securities subject to Awards outstanding on the date on which such change
occurs and in the per share grant or exercise price of each Award as the
Committee may consider appropriate to prevent dilution or enlargement of rights
hereunder.

 

11.5 No Other Rights. Except as expressly
provided in the Plan, no Participant shall have any rights by reason of any
subdivision or consolidation of shares of stock of any class, the payment of
any dividend, any increase or decrease in the number of shares of stock of any
class or any dissolution, liquidation, merger, or consolidation of the Company
or any other corporation. Except as expressly provided in the Plan or pursuant
to action of the Committee under the Plan, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Stock subject to an Award or the grant or
exercise price of any Award.

 

ARTICLE 12

 

ADMINISTRATION

 

12.1 Committee. Unless and until the Board
delegates administration of the Plan to a Committee as set forth below, the
Plan shall be administered by the full Board, and for such purposes the term “Committee”
as used in this Plan shall be deemed to refer to the Board. The Board, at its
discretion or as otherwise necessary to comply with the requirements of Section
162(m) of the Code, Rule 16b-3 promulgated under the Exchange Act or to the
extent required by any other applicable law, rule or regulation, shall delegate
administration of the Plan to a Committee. The Committee shall consist solely
of two or more members of the Board each of whom is both an “outside director,”
within the meaning of Section 162(m) of the Code, and a Non-Employee Director.
Notwithstanding the foregoing, the Committee may delegate its authority
hereunder to the extent permitted by Section 12.5. Appointment of Committee
members shall be effective upon acceptance of appointment. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan. Committee members may resign at any time by delivering written notice
to the Board. Vacancies in the Committee may only be filled by the Board.

 

12.2 Action by the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved in
writing by a majority of the Committee in lieu of a 

 

23

 

meeting, shall be deemed the acts of the
Committee. Each member of the Committee is entitled to, in good faith, rely or
act upon any report or other information furnished to that member by any
officer or other employee of the Company or any Subsidiary, the Company’s
independent certified public accountants, or any executive compensation
consultant or other professional retained by the Company to assist in the
administration of the Plan.

 

12.3 Authority of Committee. Subject to any
specific designation in the Plan, the Committee has the exclusive power,
authority and discretion to:

 

(a)  Designate Participants to receive Awards;

 

(b) Determine the type or types of Awards to be
granted to each Participant;

 

(c)  Determine the number of Awards to be granted
and the number of shares of Stock to which an Award will relate;

 

(d) Determine the terms and conditions of any
Award granted pursuant to the Plan, including, but not limited to, the exercise
price, grant price, or purchase price, any reload provision, any restrictions
or limitations on the Award, any schedule for lapse of forfeiture restrictions
or restrictions on the exercisability of an Award, and accelerations or waivers
thereof, any provisions related to noncompetition and recapture of gain on an
Award, based in each case on such considerations as the Committee in its sole
discretion determines; provided, however, that
the Committee shall not have the authority to accelerate the vesting or waive
the forfeiture of any Performance-Based Awards;

 

(e)  Determine whether, to what extent, and
pursuant to what circumstances an Award may be settled in, or the exercise
price of an Award may be paid in, cash, Stock, other Awards, or other property,
or an Award may be canceled, forfeited, or surrendered;

 

(f)  Prescribe the form of each Award Agreement,
which need not be identical for each Participant;

 

(g) Decide all other matters that must be
determined in connection with an Award;

 

(h) Establish, adopt, or revise any rules and
regulations as it may deem necessary or advisable to administer the Plan;

 

24

 

(i)   Interpret the terms of, and any matter
arising pursuant to, the Plan or any Award Agreement; and

 

(j)   Make all other decisions and determinations
that may be required pursuant to the Plan or as the Committee deems necessary
or advisable to administer the Plan.

 

12.4 Decisions Binding. The Committee’s
interpretation of the Plan, any Awards granted pursuant to the Plan, any Award
Agreement and all decisions and determinations by the Committee with respect to
the Plan are final, binding, and conclusive on all parties.

 

12.5 Delegation of Authority. To the extent
permitted by applicable law, the Committee may from time to time delegate to a
committee of one or more members of the Board or one or more officers of the
Company the authority to grant or amend Awards to Participants other than (a)
senior executives of the Company who are subject to Section 16 of the Exchange
Act, (b) Covered Employees, or (c) officers of the Company (or members of the Board)
to whom authority to grant or amend Awards has been delegated hereunder. Any
delegation hereunder shall be subject to the restrictions and limits that the
Committee specifies at the time of such delegation, and the Committee may at
any time rescind the authority so delegated or appoint a new delegatee. At all
times, the delegatee appointed under this Section 12.5 shall serve in such
capacity at the pleasure of the Committee.

 

ARTICLE 13

 

EFFECTIVE AND EXPIRATION DATE

 

13.1 Effective Date. The Plan is effective as of the date the Plan
is approved by the Company’s stockholders (the “Effective Date”). The Plan will be deemed to be approved by the stockholders if it
receives the affirmative vote of the holders of a majority of the shares of
stock of the Company present or represented and entitled to vote at a meeting
duly held in accordance with the applicable provisions of the Company’s Bylaws.

 

13.2 Expiration Date. The Plan will expire on,
and no Incentive Stock Option or other Award may be granted pursuant to the
Plan after, the earlier of the tenth anniversary of (i) the Effective Date or
(ii) the date this Plan is approved by the Board. Any Awards that are
outstanding on the tenth anniversary of the Effective Date shall remain in
force according to the terms of the Plan and the applicable Award Agreement.

 

25

 

ARTICLE 14

 

AMENDMENT, MODIFICATION, AND TERMINATION

 

14.1 Amendment, Modification And Termination. With
the approval of the Board, at any time and from time to time, the Committee may
terminate, amend or modify the Plan; provided,
however, that (a) to the extent necessary and desirable to comply
with any applicable law, regulation, or stock exchange rule, the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such
a degree as required, and (b) stockholder approval is required for any
amendment to the Plan that (i) increases the number of shares available under
the Plan (other than any adjustment as provided by Article 11), (ii) permits
the Committee to grant Options with an exercise price that is below Fair Market
Value on the date of grant, (iii) permits the Committee to extend the exercise
period for an Option beyond ten years from the date of grant, or (iv) results
in a material increase in benefits or a change in eligibility requirements.
Notwithstanding any provision in this Plan to the contrary, absent approval of
the stockholders of the Company, no Option may be amended to reduce the per
share exercise price of the shares subject to such Option below the per share
exercise price as of the date the Option is granted and, except as permitted by
Article 11, no Option may be granted in exchange for, or in connection with,
the cancellation or surrender of an Option having a higher per share exercise
price.

 

14.2 Awards Previously Granted. No termination,
amendment, or modification of the Plan shall adversely affect in any material
way any Award previously granted pursuant to the Plan without the prior written
consent of the Participant.

 

ARTICLE 15

 

GENERAL PROVISIONS

 

15.1 No Rights to Awards. No Eligible
Individual or other person shall have any claim to be granted any Award
pursuant to the Plan, and neither the Company nor the Committee is obligated to
treat Eligible Individuals, Participants or any other persons uniformly.

 

15.2 No Stockholders Rights. Except as
otherwise provided herein, a Participant shall have none of the rights of a
stockholder with respect to shares of Stock covered by any Award until the
Participant becomes the record owner of such shares of Stock.

 

26

 

15.3 Withholding. The Company or any Subsidiary
shall have the authority and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy federal,
state, local and foreign taxes (including the Participant’s FICA obligation)
required by law to be withheld with respect to any taxable event concerning a
Participant arising as a result of this Plan. The Committee may in its
discretion and in satisfaction of the foregoing requirement allow a Participant
to elect to have the Company withhold shares of Stock otherwise issuable under
an Award (or allow the return of shares of Stock) having a Fair Market Value
equal to the sums required to be withheld. Notwithstanding any other provision
of the Plan, the number of shares of Stock which may be withheld with respect
to the issuance, vesting, exercise or payment of any Award (or which may be
repurchased from the Participant of such Award within six months (or such other
period as may be determined by the Committee) after such shares of Stock were
acquired by the Participant from the Company) in order to satisfy the
Participant’s federal, state, local and foreign income and payroll tax
liabilities with respect to the issuance, vesting, exercise or payment of the
Award shall be limited to the number of shares which have a Fair Market Value
on the date of withholding or repurchase equal to the aggregate amount of such
liabilities based on the minimum statutory withholding rates for federal,
state, local and foreign income tax and payroll tax purposes that are
applicable to such supplemental taxable income.

 

15.4 No Right to Employment or Services. Nothing
in the Plan or any Award Agreement shall interfere with or limit in any way the
right of the Company or any Subsidiary to terminate any Participant’s
employment or services at any time, nor confer upon any Participant any right
to continue in the employ or service of the Company or any Subsidiary.

 

15.5 Unfunded Status of Awards. The Plan is
intended to be an “unfunded” plan for incentive compensation. With respect to
any payments not yet made to a Participant pursuant to an Award, nothing
contained in the Plan or any Award Agreement shall give the Participant any
rights that are greater than those of a general creditor of the Company or any
Subsidiary.

 

15.6 Indemnification. To the extent allowable
pursuant to applicable law, each member of the Committee or of the Board shall
be indemnified and held harmless by the Company from any loss, cost, liability,
or expense that may be imposed upon or reasonably incurred by such member in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action or failure to act pursuant to the Plan and against and from any
and all amounts paid by him or her in satisfaction of judgment in such action,
suit, or proceeding against him or her; provided
he or she gives the Company an opportunity, at its own expense, to
handle and defend the same before he or she undertakes to handle and defend it
on his or her own behalf. The foregoing right of 

 

27

 

indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled pursuant
to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.

 

15.7 Relationship to other Benefits. No payment
pursuant to the Plan shall be taken into account in determining any benefits
pursuant to any pension, retirement, savings, profit sharing, group insurance,
welfare or other benefit plan of the Company or any Subsidiary except to the
extent otherwise expressly provided in writing in such other plan or an
agreement thereunder.

 

15.8 Expenses. The expenses of administering
the Plan shall be borne by the Company and its Subsidiaries.

 

15.9 Titles and Headings. The titles and
headings of the Sections in the Plan are for convenience of reference only and,
in the event of any conflict, the text of the Plan, rather than such titles or
headings, shall control.

 

15.10 Fractional Shares. No fractional shares of
Stock shall be issued and the Committee shall determine, in its discretion,
whether cash shall be given in lieu of fractional shares or whether such
fractional shares shall be eliminated by rounding up or down as appropriate.

 

15.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the
Plan, the Plan, and any Award granted or awarded to any Participant who is then
subject to Section 16 of the Exchange Act, shall be subject to any additional
limitations set forth in any applicable exemptive rule under Section 16 of the
Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that
are requirements for the application of such exemptive rule. To the extent
permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such applicable
exemptive rule.

 

15.12 Government and Other Regulations. The
obligation of the Company to make payment of awards in Stock or otherwise shall
be subject to all applicable laws, rules, and regulations, and to such
approvals by government agencies as may be required. The Company shall be under
no obligation to register pursuant to the Securities Act of 1933, as amended, any
of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant
to the Plan may in certain circumstances be exempt from registration pursuant
to the Securities Act of 1933, as amended, the Company may restrict the
transfer of such shares in such manner as it deems advisable to ensure the
availability of any such exemption.

 

28

 

15.13 Section 409A. To the extent that the
Committee determines that any Award granted under the Plan is subject to Section
409A of the Code, the Award Agreement evidencing such Award shall incorporate
the terms and conditions required by Section 409A of the Code. To the extent
applicable, the Plan and Award Agreements shall be interpreted in accordance
with Section 409A of the Code and Department of Treasury regulations and other
interpretive guidance issued thereunder, including without limitation any such
regulations or other guidance that may be issued after the Effective Date.
Notwithstanding any provision of the Plan to the contrary, in the event that
following the Effective Date the Committee determines that any Award may be
subject to Section 409A of the Code and related Department of Treasury guidance
(including such Department of Treasury guidance as may be issued after the
Effective Date), the Committee may adopt such amendments to the Plan and the
applicable Award Agreement or adopt other policies and procedures (including
amendments, policies and procedures with retroactive effect), or take any other
actions, that the Committee determines are necessary or appropriate to (a)
exempt the Award from Section 409A of the Code and/or preserve the intended tax
treatment of the benefits provided with respect to the Award, or (b) comply
with the requirements of Section 409A of the Code and related Department of
Treasury guidance.

 

15.14 Governing Law. The Plan and all Award
Agreements shall be construed in accordance with and governed by the laws of
the State of Delaware.

 

*
* * * *

 

I hereby certify that the
foregoing Plan was duly adopted by the Board of Directors of Owens-Illinois,
Inc. on March 24, 2005.

 

*
* * * *

 

I hereby certify that the
foregoing Plan was approved by the stockholders of Owens-Illinois, Inc. on May
11, 2005.

 

Executed on this 12th
day of May, 2005.

 

	
   

  	
    /s/
  James W. Baehren

  	
   

  
	
   

  	
  Corporate
  Secretary

  

 

29Exhibit 10.29

 

2005
INCENTIVE AWARD PLAN

 

OF

 

OWENS-ILLINOIS, INC.

 

NON-QUALIFIED STOCK OPTION AGREEMENT

 

THIS AGREEMENT, dated                                       ,
20            , is
made by and between Owens-Illinois, Inc., a Delaware corporation hereinafter
referred to as “Company,” and                              ,
an employee of the Company or a Subsidiary of the Company, hereinafter referred
to as “Optionee”:

 

WHEREAS, the Company wishes
to afford Optionee the opportunity to purchase shares of its $.01 par value
Common Stock (as defined hereunder); and

 

WHEREAS, the Company wishes
to carry out the 2005 Incentive Award Plan of Owens-Illinois, Inc. (the terms
of which are hereby incorporated by reference and made a part of this
Agreement); and

 

WHEREAS, the Compensation
Committee of the Company’s Board of Directors (hereinafter referred to as the “Committee”),
appointed to administer said Plan, has determined that it would be to the
advantage and best interest of the Company and its stockholders to grant the
Non-Qualified Option provided for herein to Optionee as an inducement to remain
in the service of the Company, its Parent Corporations or its Subsidiaries
(each as defined hereunder) and as an incentive for increased efforts during
such service, and has advised the Company thereof and instructed the
undersigned Officers (as defined hereunder) to issue said Option.

 

NOW, THEREFORE, in
consideration of the mutual covenants herein contained and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto do hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Whenever the following terms
are used in this Agreement, they shall have the meaning specified below unless
the context clearly indicates to the contrary. The masculine pronoun shall
include the feminine and neuter, and the singular the plural, where the context
so indicates.

 

Section 1.1 - Board

 

“Board” shall mean
the Board of Directors of the Company.

 

1

 

Section 1.2 - Cause

 

“Cause” shall mean
dishonesty, disloyalty, misconduct, insubordination, failure to reasonably
devote working time to assigned duties, failure or refusal to comply with any
reasonable rule, regulation, standard or policy which from time to time may be
established by the Company, including, without limitation, those policies set
forth in the Owens-Illinois Policy Manual in effect from time to time, or
failure to fully cooperate with any investigation of an alleged violation of
any such rule, regulation, standard or policy.

 

Section 1.3 - Code

 

“Code” shall mean the
Internal Revenue Code of 1986, as amended.

 

Section 1.4 - Common Stock

 

“Common Stock” shall
mean the Company’s common stock, $.01 par value.

 

Section 1.5 - Company

 

“Company” shall mean
Owens-Illinois, Inc. In addition, “Company” shall mean any corporation
assuming, or issuing new employee stock options in substitution for, the Option
and Incentive Stock Options (as defined in Section 1.14 of the Plan),
outstanding under the Plan, in a transaction to which Section 424(a) of the
Code applies.

 

Section 1.6 – Disability

 

“Disability” means the total disability of
the Optionee, as determined in the sole discretion of the Committee.

 

Section 1.7 – Exchange Act

 

“Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended.

 

Section 1.8 - Fair Market Value

 

“Fair Market Value”
of a share of the Company’s stock as of a given date shall be:  (i) the closing price of a share of the
Company’s stock on the principal exchange on which shares of the Company’s
stock are then trading, if any, on the day previous to such date, or, if shares
were not traded on the day previous to such date, then on the next preceding
trading day during which a sale occurred; or (ii) if such stock is not traded on
an exchange but is quoted on NASDAQ or a successor quotation system, (1) the
last sales price (if the stock is then listed as a National Market Issue under
the NASD National Market System) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the stock on the
day previous to such date as reported by NASDAQ or such successor quotation
system; or (iii) if such stock is not publicly traded on an exchange and not
quoted on NASDAQ or a successor quotation system, the mean between the closing
bid and asked prices for the stock, on the day previous to such date, as
determined in good faith by the Committee; or (iv) if 

 

2

 

the Company’s stock is not publicly traded,
the fair market value established by the Committee acting in good faith.

 

Section 1.9 - Officer

 

“Officer” shall mean
an officer of the Company, as defined in Rule 16a-1(f) under the Exchange Act,
as such Rule may be amended in the future.

 

Section 1.10 - Option

 

“Option” shall mean
the Non-Qualified Option (as defined in Section 1.15 of the Plan) to purchase
Common Stock of the Company under this Agreement. This Option is a Transferable
Option (as defined in Section 1.31 of the Plan).

 

Section 1.11 - Parent Corporation

 

“Parent Corporation”
shall mean any corporation in an unbroken chain of corporations ending with the
Company if each of the corporations other than the Company then owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

 

Section 1.12 - Plan

 

“Plan” shall mean the
2005 Incentive Award Plan of Owens-Illinois, Inc.

 

Section 1.13 - Retirement

 

“Retirement” shall
mean Optionee’s retirement and “separation from service” (within the meaning of
Section 409A of the Code) from the Company, a Parent Corporation or a
Subsidiary after reaching the Company’s normal retirement age or Optionee’s
early retirement from the Company, a Parent Corporation or a Subsidiary after
reaching the age of 60.

 

Section 1.14 - Rule 16b-3

 

“Rule 16b-3” shall
mean that certain Rule 16b-3 under the Exchange Act, as such rule may be
amended in the future.

 

Section 1.15 - Secretary

 

“Secretary” shall
mean the Secretary of the Company.

 

Section 1.16 - Securities Act

 

“Securities Act”
shall mean the Securities Act of 1933, as amended.

 

3

 

Section 1.17 - Subsidiary

 

“Subsidiary” shall
mean any corporation in an unbroken chain of corporations beginning with the
Company if each of the corporations other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain. “Subsidiary” shall also mean any partnership in which the Company and/or
any Subsidiary owns more than 50% of the capital of profits interests.

 

Section 1.18 - 
Termination of Employment

 

“Termination of
Employment” shall mean the time when the employee-employer relationship
between Optionee and the Company, a Parent Corporation or a Subsidiary is
terminated for any reason, with or without Cause, including, but not by way of
limitation, a termination by resignation, discharge, or retirement (including a
Retirement), but excluding (i) any termination where there is a simultaneous
reemployment by the Company, a Parent Corporation or a Subsidiary, (ii) any
termination where Optionee continues a relationship (e.g., as a director or as
a consultant) with the Company, a Parent Corporation or a Subsidiary or (iii)
any termination resulting from the death or Disability of Optionee. The
Committee, in its absolute discretion, shall determine the effect of all other
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for Cause, and all questions of whether a particular leave
of absence constitutes a Termination of Employment. Notwithstanding any other
provision of this Agreement, the Company, any Parent Corporation or any
Subsidiary has an absolute and unrestricted right to terminate Optionee’s
employment at any time for any reason whatsoever, with or without Cause.

 

Section 1.19 - Transferee

 

“Transferee” shall mean
any person or entity to whom or to which Optionee has transferred all or any
part of the Option in accordance with Section 5.2.

 

ARTICLE II

 

GRANT OF OPTION

 

Section 2.1 - Grant of Option

 

In consideration of Optionee’s
agreement to remain in the employ of the Company, its Parent Corporations or
its Subsidiaries and for other good and valuable consideration, on the date
hereof the Company irrevocably grants to Optionee the option to purchase any
part or all of an aggregate of                             
shares of its $.01 par value Common Stock upon the terms and conditions set
forth in this Agreement.

 

Section 2.2 - Purchase Price

 

The purchase price of the
shares of stock covered by the Option shall be $                       
per share without commission or other charge.

 

4

 

Section 2.3 - Consideration to Company

 

In consideration of the
granting of this Option by the Company, Optionee agrees to render faithful and
efficient services to the Company, a Parent Corporation or a Subsidiary, with
such duties and responsibilities as the Company shall from time to time
prescribe, for a period of at least one year from the date this Option is
granted. Nothing in this Agreement or in the Plan shall confer upon Optionee
any right to continue in the employ of the Company, any Parent Corporation or
any Subsidiary or shall interfere with or restrict in any way the rights of the
Company, any Parent Corporation and any Subsidiary, which are hereby expressly
reserved, to discharge Optionee at any time for any reason whatsoever, with or
without cause.

 

Section 2.4 - Adjustments in Option

 

In the event that the
outstanding shares of Common Stock subject to the Option are changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company by reason of merger, consolidation, recapitalization,
reclassification, or the number of shares is increased or decreased by reason
of a stock split up, stock dividend, combination of shares or any other
increase or decrease in the number of such shares of Common Stock effected
without receipt of consideration by the Company (provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been “effected without receipt of consideration”) the Committee shall make
appropriate adjustments in the number and kind of shares as to which the
Option, or portions thereof then unexercised, shall be exercisable, to the end
that after such event Optionee’s proportionate interest shall be maintained as
before the occurrence of such event. Such adjustment in the Option shall be
made without change in the total price applicable to the unexercised portion of
the Option (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in the Option price per share. Any such adjustment
made by the Committee shall be final and binding upon Optionee, the Company and
all other interested persons.

 

ARTICLE III

 

PERIOD OF EXERCISABILITY

 

Section 3.1 - Commencement of Exercisability

 

(a)  Except as provided in Section 3.4, no Option
may be exercised in whole or in part during the first year after such Option is
granted.

 

(b)  Except to the extent that such Option becomes
exercisable sooner pursuant to Section 3.4, the Option shall become exercisable
as to 25% of the shares covered by the Option on each of the first four
anniversaries of the date of grant of such Option. Such installments shall be cumulative.

 

(c) 
Except as provided in Section 3.4, no portion of the Option which is
unexercisable at Termination of Employment, other than a Termination of
Employment due to Retirement, shall thereafter become exercisable. 

 

5

 

Following a
Termination of Employment due to Retirement, Options shall continue to vest and
become exercisable as provided in Section 3.1(b).

 

Section 3.2 - Duration of Exercisability

 

The installments provided
for in Section 3.1 are cumulative. Each such installment which becomes
exercisable pursuant to Section 3.1 shall remain exercisable until it becomes
unexercisable under Section 3.3.

 

Section 3.3 - Expiration of Option

 

The Option may not be
exercised to any extent by anyone after the first to occur of the following
events:

 

(a)  The expiration of seven years from the date
the Option was granted; or

 

(b)  Except as provided in clauses (c) through (h)
below, the date of Optionee’s Termination of Employment, other than due to
Retirement; or

 

(c)  If Optionee is discharged not for Cause or
retires (other than a Retirement), the expiration of the earlier of (i) one (1)
year from Optionee’s Termination of Employment  or (ii) seven years from the date the Option
was granted, unless Optionee dies within said period; or

 

(d)  If Optionee’s right to exercise his Option is
extended by the Committee, which extension shall not exceed the earlier of (i) three
years from the date of Optionee’s Termination of Employment or (ii) seven years
from the date the Option was granted, the date upon which such extension
expires; or

 

(e)  If Optionee is determined by the Committee to
have a Disability, the expiration of the earlier of (i) one year from the date Optionee
is determined by the Committee to have a Disability, or (ii) seven years from
the date the Option was granted, unless Optionee dies within said period; or

 

(f)  In the case of Optionee’s death, including
during an extended exercise period provided in subsection (c) or (e) of this
Section 3.3,  the expiration of the
earlier of (i) one year from the date of Optionee’s death, or  (ii) seven years from the date the Option was
granted; or

 

(g)  In the case of the Optionee’s Retirement, the
expiration of seven years from the date the Option was granted; or

 

(h)  The effective date of either the merger or
consolidation of the Company with or into another corporation, or the
acquisition by another corporation or person (excluding any employee benefit
plan of the Company or any trustee or other fiduciary holding securities under
an employee benefit plan of the Company) of all or substantially all of the
Company’s assets or 51% or more of the Company’s then outstanding voting stock,
or the liquidation or dissolution of the Company, unless the Committee waives
this provision in connection with such transaction. At least ten days prior to
the effective date of 

 

6

 

such merger, consolidation,
acquisition, liquidation or dissolution, the Committee shall give Optionee
notice of such event if the Option has then neither been fully exercised nor
become unexercisable under this Section 3.3.

 

Section 3.4 - Acceleration of Exercisability

 

(a)           In the event the Optionee dies, or
experiences a Disability, in either case, prior to the Optionee’s Termination
of Employment, the Option shall become immediately exercisable as to all shares
covered hereby, notwithstanding that this Option may not have become fully
exercisable under Section 3.1; or

 

(b)           In the event of the merger or
consolidation of the Company with or into another corporation, or the
acquisition by another corporation or person (excluding any employee benefit
plan of the Company or any trustee or other fiduciary holding securities under
an employee benefit plan of the Company) of all or substantially all of the
Company’s assets or 51% or more of the Company’s then outstanding voting stock,
or the liquidation or dissolution of the Company, the Committee shall then
provide by resolution, adopted prior to such event and incorporated in the
notice referred to in Section 3.3(g), that at some time prior to the effective
date of such event this Option shall be exercisable as to all the shares
covered hereby, notwithstanding that this Option may not yet have become fully
exercisable under Section 3.1; provided, however, that this acceleration of
exercisability shall not take place if:

 

(i)            This Option becomes unexercisable
under Section 3.3 prior to said effective date; or

 

(ii)           In connection with such an event,
provision is made for an assumption of this Option or a substitution therefor
of a new option by an employer corporation or a parent or subsidiary of such
corporation.

 

The Committee
may make such determinations and adopt such rules and conditions as it, in its
absolute discretion, deems appropriate in connection with such acceleration of
exercisability, including, but not by way of limitation, provisions to ensure
that any such acceleration and resulting exercise shall be conditioned upon the
consummation of the contemplated corporate transaction.

 

7

 

ARTICLE IV

 

EXERCISE OF OPTION

 

Section 4.1 - Person Eligible to Exercise

 

During the lifetime of Optionee,
only he or his Transferee, if any, may exercise the Option or any portion
thereof. After the death of Optionee, any exercisable portion of the Option
may, prior to the time when such portion becomes unexercisable under Section
3.3, be exercised by his Transferee, if any, or by his personal representative
or any other person empowered to do so under Optionee’s will or under the then
applicable laws of descent and distribution. All of the terms and conditions of
this Option in the hands of Optionee during his lifetime shall be and remain
fully applicable and binding on his Transferee, if any, and on any other person
who may become eligible to exercise this Option.

 

Section 4.2 - Partial Exercise

 

Any exercisable portion of
the Option or the entire Option, if then wholly exercisable, may be exercised
in whole or in part at any time prior to the time when the Option or portion
thereof becomes unexercisable under Section 3.3; provided, however, that each
partial exercise shall be for not less than one hundred (100) shares (or the
minimum installment set forth in Section 3.1, if a smaller number of shares)
and shall be for whole shares only.

 

Section 4.3 - Manner of Exercise

 

The Option, or any
exercisable portion thereof, may be exercised solely by delivery to the
Secretary or his office of all of the following prior to the time when the
Option or such portion becomes unexercisable under Section 3.3:

 

(a)  Notice in electronic form approved by the
Committee or, if no such form has been approved by the Committee, in writing
signed by Optionee or the other person then entitled to exercise the Option or
portion, stating that the Option or portion is thereby exercised, such electronic
form or notice complying with all applicable rules established by the
Committee; and

 

(b)           (i) 
Full payment (in cash or by check) for the shares with respect to which
such Option or portion is exercised; or

 

(ii)  With the consent of the Committee, (A) shares
of the Company’s Common Stock owned by Optionee duly endorsed for transfer to
the Company, or (B) shares of the Company’s Common Stock issuable to Optionee
upon exercise of the Option, with a Fair Market Value on the date of option
exercise equal to the aggregate purchase price of the shares with respect to
which such Option or portion is exercised; or

 

(iii)  With the consent of the Committee, a full
recourse promissory note bearing interest (at least such rate as shall then
preclude the imputation of interest under the Code or successor provision) and
payable upon such terms as may be prescribed by the Committee. The 

 

8

 

Committee may also prescribe
the form of such note and the security to be given for such note. The Option
may not be exercised, however, by delivery of a promissory note or by a loan
from the Company when or where such loan or other extension of credit is
prohibited by law; or;

 

(iv)  With the consent of the Committee, any
combination of the consideration provided in the foregoing subparagraphs (i),
(ii) and (iii); and

 

(c)  A bona fide written or electronic representation
and agreement, in a form satisfactory to the Committee, signed by Optionee or
other person then entitled to exercise such Option or portion, stating that the
shares of stock are being acquired for his own account, for investment and
without any present intention of distributing or reselling said shares or any
of them except as may be permitted under the Securities Act and then applicable
rules and regulations thereunder, and that Optionee or other person then
entitled to exercise such Option or portion will indemnify the Company against
and hold it free and harmless from any loss, damage, expense or liability
resulting to the Company if any sale or distribution of the shares by such
person is contrary to the representation and agreement referred to above. The
Committee may, in its absolute discretion, take whatever additional actions it
deems appropriate to insure the observance and performance of such
representation and agreement and to effect compliance with the Securities Act
and any other federal or state securities laws or regulations. Without limiting
the generality of the foregoing, the Committee may require an opinion of
counsel acceptable to it to the effect that any subsequent transfer of shares
acquired on an Option exercise does not violate the Securities Act, and may
issue stop-transfer orders covering such shares. Share certificates evidencing
stock issued on exercise of this Option shall bear an appropriate legend
referring to the provisions of this subsection (c) and the agreements herein. The
written or electronic representation and agreement referred to in the first
sentence of this subsection (c) shall, however, not be required if the shares
to be issued pursuant to such exercise have been registered under the
Securities Act, and such registration is then effective in respect of such
shares; and

 

(d)  Full payment to the Company (or other
employer corporation) of all amounts which, under federal, state or local tax
law, it is required to withhold upon exercise of the Option; with the consent
of the Committee, (i) shares of the Company’s Common Stock owned by Optionee
duly endorsed for transfer, or, (ii) shares of the Company’s Common Stock
issuable to Optionee upon exercise of the Option, valued at Fair Market Value
as of the date of Option exercise, may be used to make all or part of such
payment; provided, that
notwithstanding anything herein to the contrary, the number of shares which may
be withheld with respect to the satisfaction of any such taxes shall be limited
to the number of shares which have a Fair Market Value on the date of
withholding equal to the aggregate amount of such withholding obligations based
on the minimum applicable statutory withholding rates for federal, state and/or
local income and payroll tax purposes; and

 

9

 

(e)  In the event the Option or portion shall be
exercised pursuant to Section 4.1 by any person or persons other than Optionee,
appropriate proof of the right of such person or persons to exercise the
Option.

 

Section 4.4 - Conditions to Issuance of Stock Certificates

 

 The shares of stock deliverable upon the
exercise of the Option, or any portion thereof, may be either previously
authorized but unissued shares or issued shares which have been reacquired by
the Company. Such shares shall be fully paid and nonassessable. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of the Option or portion thereof
prior to fulfillment of all of the following conditions:

 

(a)  The admission of such shares to listing on
all stock exchanges on which such class of stock is then listed; and

 

(b)  The completion of any registration or other
qualification of such shares under any state or federal law or under rulings or
regulations of the Securities and Exchange Commission or of any other
governmental regulatory body, which the Committee shall, in its absolute
discretion, deem necessary or advisable; and

 

(c)  The obtaining of any approval or other
clearance from any state or federal governmental agency which the Committee
shall, in its absolute discretion, determine to be necessary or advisable; and

 

(d)  The payment to the Company (or other employer
corporation) of all amounts, if any, which, under federal, state or local tax
law, it is required to withhold upon exercise of the Option; and

 

(e)  The lapse of such reasonable period of time
following the exercise of the Option as the Committee may from time to time
establish for reasons of administrative convenience.

 

Section 4.5 - Rights as Stockholder

 

The holder of the Option
shall not be, nor have any of the rights or privileges of, a stockholder of the
Company in respect to any shares purchasable upon the exercise of any part of
the Option unless and until certificates representing such shares shall have
been issued by the Company to such holder.

 

10

 

ARTICLE V

 

OTHER PROVISIONS

 

Section 5.1 - Administration

 

The Committee shall have the
power to interpret the Plan, this Agreement and all other documents relating to
the Option and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Committee in good faith shall be final and binding upon Optionee,
the Company and all other interested persons. No member of the Committee shall
be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or the Option and all members of the
Committee shall be fully protected by the Company in respect to any such
action, determination or interpretation. In its absolute discretion, the Board
may at any time and from time to time exercise any and all rights and duties of
the Committee under the Plan and this Agreement except with respect to matters
which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or
rules issued thereunder, are required to be determined in the sole discretion
of the Committee.

 

Section 5.2 - Option Not Transferable

 

Neither the Option nor any
interest or right therein or part thereof shall be liable for the debts,
contracts or engagements of Optionee or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect;
provided, however, that this Section 5.2 shall not prevent:

 

(a)
any transfer by gift, without the receipt of any consideration, of the Option
or any part thereof by Optionee, in writing and with written notice thereof to
the Committee, (i) to Optionee’s spouse; (ii) to any child or more remote
lineal descendant of Optionee or to the spouse of any such child or more remote
lineal descendant; or (iii) to any trust, custodianship, or other similar
fiduciary relationship maintained for the benefit of any one or more of such
persons; or

 

(b)
any transfer by will or by the applicable laws of descent and distribution.

 

Section 5.3 - Shares to Be Reserved

 

The Company
shall at all times during the term of the Option reserve and keep available
such number of shares of stock as will be sufficient to satisfy the
requirements of this Agreement.

 

11

 

Section 5.4 - Notices

 

Any notice to be given under
the terms of this Agreement to the Company shall be addressed to the Company in
care of its Secretary, and any notice to be given to Optionee shall be
addressed to him at the address given beneath his signature hereto. By a notice
given pursuant to this Section 5.4, either party may hereafter designate a
different address for notices to be given to it or him. Any notice which is
required to be given to Optionee shall, if Optionee is then deceased, be given
to Optionee’s personal representative if such representative has previously
informed the Company of his status and address by written notice under this
Section 5.4. Any notice shall be deemed duly given when enclosed in a properly
sealed envelope or wrapper addressed as aforesaid, deposited (with postage
prepaid) in a post office or branch post office regularly maintained by the
United States Postal Service.

 

Section 5.5 - Titles

 

Titles are provided herein
for convenience only and are not to serve as a basis for interpretation or
construction of this Agreement.

 

Section 5.6 - Rule 16b-3

 

The Company shall take such
actions with respect to the Plan as may be necessary to satisfy the
requirements of Rule 16b-3.

 

Section 5.7 - Conformity to Securities Laws

 

This Agreement is intended
to conform to the extent necessary with all provisions of the Securities Act
and the Exchange Act and any and all regulations and rules promulgated by the
Securities and Exchange Commission thereunder, including without limitation
Rule 16b-3. Notwithstanding anything herein to the contrary, this Agreement
shall be administered, and the Option shall be granted and may be exercised,
only in such a manner as to conform to such laws, rules and regulations. To the
extent permitted by applicable law, this Agreement and the Option granted
hereunder shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

 

Section 5.8 - Amendment

 

This Agreement may be
amended only by a writing executed by the parties hereto which specifically
states that it is amending this Agreement.

 

Section 5.9 - Governing Law

 

The laws of the
State of Delaware shall govern the interpretation, validity, administration,
enforcement and performance of the terms of this Agreement regardless of the
law that might be applied under principles of conflicts of laws.

 

12

 

IN WITNESS HEREOF, this Agreement has
been executed and delivered by the parties hereto.

 

	
   

  	
  OWENS-ILLINOIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Its Sr. VP Chief Human
  Resources Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Employee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Employee’s Taxpayer

  	
   

  
	
  Identification Number:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

13

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