<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
OWENS-ILLINOIS, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
- - --------------------------------------------------------------------------------
[LOGO]
OWENS-ILLINOIS, INC.
NOTICE AND PROXY STATEMENT
FOR
THE ANNUAL MEETING OF SHARE OWNERS
TO BE HELD
WEDNESDAY, MAY 12, 1999
YOUR VOTE IS IMPORTANT
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN
THE ENCLOSED ENVELOPE.
<PAGE>
OWENS-ILLINOIS, INC.
ONE SEAGATE
TOLEDO, OHIO 43666
-------------------
NOTICE OF ANNUAL MEETING OF SHARE OWNERS
-------------------
Dear Share Owner:
You are cordially invited to attend the Annual Meeting of Owens-Illinois'
share owners which will be held on Wednesday, May 12, 1999, at 2:00 p.m. in the
auditorium of the Owens-Illinois World Headquarters Building, One SeaGate,
Toledo, Ohio for the purpose of considering and voting upon the following
matters:
1. The election of three directors for a term of three years.
2. Such other business as may properly be presented for action at the
meeting or any adjournment thereof.
Enclosed is a Proxy Statement which provides information concerning the
Company and the Board of Directors' nominees for election as directors. Also
enclosed is a copy of the Company's Annual Report which describes the results of
our operations during 1998 and provides other information about the Company
which will be of interest.
The Board of Directors fixed the close of business on March 15, 1999, as the
record date for the determination of share owners owning the Company's Common
Stock, par value $.01 per share, entitled to notice of and to vote at the Annual
Meeting.
Enclosed is a proxy card which provides you with a convenient means of
voting on the matters to be considered at the meeting whether or not you attend
the meeting in person. All you need do is mark the proxy card to indicate your
vote, sign and date the card, then return it in the enclosed envelope as soon as
conveniently possible. If the shares are held in more than one name, all holders
of record should sign. If you desire to vote for all of the Board of Directors'
nominees, you need not mark your votes on the proxy card but need only sign and
date it and return it in the enclosed envelope.
Management sincerely appreciates your support. We hope to see you at the
Annual Meeting.
By order of the Board of Directors,
Joseph H. Lemieux
Chairman of the Board
James W. Baehren
Secretary
March 31, 1999
Toledo, Ohio
<PAGE>
OWENS-ILLINOIS, INC.
ONE SEAGATE
TOLEDO, OHIO 43666
-------------------
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHARE OWNERS
TO BE HELD MAY 12, 1999
------------------------
The Annual Meeting of the share owners of Owens-Illinois, Inc. (herein
called the "Company") will be held on Wednesday, May 12, 1999, at 2:00 p.m. in
the auditorium of the Owens-Illinois World Headquarters Building, One SeaGate,
Toledo, Ohio. At the Annual Meeting, share owners will elect three directors for
a term of three years, as more fully described below.
This Proxy Statement has been prepared in connection with the solicitation
by the Company's Board of Directors of proxies for the Annual Meeting and
provides information concerning the persons nominated by the Board of Directors
for election as directors, and other information relevant to the Annual Meeting.
The Company intends to commence distribution of this Proxy Statement and the
materials which accompany it on or about March 31, 1999.
The record of share owners entitled to notice of and to vote at the Annual
Meeting was taken as of the close of business on March 15, 1999 (the "record
date"), and each share owner will be entitled to vote at the meeting any shares
of the Company's Common Stock, par value $.01 per share ("Common Stock"), held
of record at the record date.
Each share owner of record is requested to complete, date and sign the
accompanying proxy card and return it promptly in the enclosed envelope. The
proxy card lists each person nominated by the Board of Directors for election as
director. Proxies duly executed and received in time for the meeting will be
voted in accordance with share owners' instructions. If no instructions are
given, proxies will be voted (a) to elect Edward A. Gilhuly, Robert J. Lanigan
and John J. McMackin, Jr. as directors of the Company for a term of three years,
and (b) in the discretion of the proxy holders as to any other business which
may properly come before the meeting.
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for a
classified Board of Directors consisting of three classes as nearly equal in
size as practicable. Each class holds office until the third Annual Meeting for
selection of directors following the election of such class. The Board of
Directors of the Company (the "Board") currently consists of eleven members,
four of whom are Class II directors whose terms expire at this year's Annual
Meeting, three of whom are Class III directors whose terms expire at the 2000
Annual Meeting, and four of whom are Class I directors whose terms expire at the
2001 Annual Meeting. All of the directors listed herein, including the nominees,
have served as directors since the last Annual Meeting.
As a result of the recent decision of Mr. Robert I. MacDonnell not to seek
election to another term, the Board has elected to reduce the size of the Board
of Directors from eleven to ten. The Board intends to search for a qualified
candidate to serve as a director. Once a suitable candidate is identified, the
Board
1
<PAGE>
will then expand the size of the Board to eleven directors and appoint such
qualified candidate to fill the resulting vacancy.
The Board has nominated three persons for election as Class II directors to
serve for a three-year term expiring at the Annual Meeting of share owners to be
held in 2002 and until their successors have been elected and qualified. The
three nominees of the Board are Edward A. Gilhuly, Robert J. Lanigan and John J.
McMackin, Jr., each of whom is currently serving as a director of the Company.
If for any reason any of them should be unavailable to serve, proxies solicited
hereby may be voted for a substitute as well as for the other nominees. The
Board, however, expects all nominees to be available.
The nominees and the directors whose terms of office continue after this
year's Annual Meeting are listed below with brief statements setting forth their
present principal occupations and other information, including directorships in
other public companies.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT THE SHARE OWNERS
VOTE FOR THE THREE NOMINEES IDENTIFIED BELOW.
CLASS II: NOMINEES FOR 3-YEAR TERM
<TABLE>
<S> <C>
Edward A. Gilhuly Director since
Member of KKR & Co. L.L.C., 1987
the general partner of Age 39
Kohlberg Kravis Roberts & Co., L.P.
</TABLE>
Mr. Gilhuly was a general partner of Kohlberg Kravis Roberts & Co., L.P. from
January 1, 1995 until January 1, 1996, when he became a member of the limited
liability company which is the general partner of Kohlberg Kravis Roberts & Co.,
L.P. Mr. Gilhuly has been a general partner of KKR Associates, L.P. since
January 1, 1995, and prior thereto was a limited partner of KKR Associates, L.P.
and an executive of Kohlberg Kravis Roberts & Co., L.P. Mr. Gilhuly is a
director of Layne Christensen Company. He is Chairman of the Audit Committee and
a member of the Executive and Compensation Committees.
<TABLE>
<S> <C>
Robert J. Lanigan Director since
Chairman Emeritus 1987
Age 71
</TABLE>
Mr. Lanigan was the Chairman of the Board of Directors of the Company from 1984
to 1991 and the Chief Executive Officer of the Company from 1984 to 1990. Mr.
Lanigan is a director of DaimlerChrysler AG, IMS Health Incorporated, Sonat,
Inc. and Transocean Offshore Inc..
<TABLE>
<S> <C>
John J. McMackin, Jr. Director since
Member 1994
Williams & Jensen, P.C. Age 47
</TABLE>
Mr. McMackin has been a member of Williams & Jensen for more than five years. He
is a member of the Audit Committee.
2
<PAGE>
CLASS I: TERM EXPIRES IN 2001
<TABLE>
<S> <C>
James H. Greene, Jr. Director since
Member of KKR & Co. L.L.C., 1987
the general partner of Age 48
Kohlberg Kravis Roberts & Co., L.P.
</TABLE>
Mr. Greene was a general partner of Kohlberg Kravis Roberts & Co., L.P. from
January 1, 1993 until January 1, 1996, when he became a member of the limited
liability company which is the general partner of Kohlberg Kravis Roberts & Co.,
L.P. Mr. Greene has been a general partner of KKR Associates, L.P. since January
1, 1993, and prior thereto was a limited partner of KKR Associates, L.P. and an
executive of Kohlberg Kravis Roberts & Co., L.P. Mr. Greene is a director of
Accuride Corporation, Randall's Food Markets, Inc., RELTEC Corporation and
Safeway Inc. He is a member of the Compensation Committee.
<TABLE>
<S> <C>
George R. Roberts Director since
Managing Member of KKR & Co. L.L.C., 1987
the general partner of Age 55
Kohlberg Kravis Roberts & Co., L.P.
</TABLE>
Mr. Roberts is a Founding Partner of Kohlberg Kravis Roberts & Co., L.P. and,
effective January 1, 1996, he became a managing member of the limited liability
company which is the general partner of Kohlberg Kravis Roberts & Co., L.P. Mr.
Roberts also is a general partner of KKR Associates, L.P. Mr. Roberts is a
director of Accuride Corporation, Amphenol Corporation, Borden, Inc., The Boyds
Collection, Ltd., Bruno's, Inc., Evenflo Company Inc., IDEX Corporation,
KinderCare Learning Center, Inc., KSL Recreation Group, Inc., PRIMEDIA, Inc.,
Randall's Food Markets, Inc., Regal Cinemas, Inc., RELTEC Corporation, Safeway
Inc. and Spalding Holdings Corporation. He is a member of the Executive
Committee.
Mr. Roberts and Mr. Kravis are first cousins.
<TABLE>
<S> <C>
Robert J. Dineen Director since
Chairman of the Board of Directors 1994
Layne Christensen Company Age 69
</TABLE>
Mr. Dineen has been Chairman of the Board of Directors of Layne Christensen
Company since 1992. Prior to 1993, Mr. Dineen was President and Chief Executive
Officer of The Marley Company for more than five years. Mr. Dineen is a director
of Layne Christensen Company and Kansas City Power & Light Company. He is a
member of the Audit Committee.
<TABLE>
<S> <C>
Thomas L. Young Director since
Executive Vice President 1998
Owens-Illinois, Inc. Age 55
</TABLE>
Mr. Young has been Executive Vice President, Administration and General Counsel
since 1998. He previously served the Company as Executive Vice President,
Administration, General Counsel, and Secretary (1993-1998). Mr. Young is a
director of HCR Manor Care, Inc.
3
<PAGE>
CLASS III: TERM EXPIRES IN 2000
<TABLE>
<S> <C>
Joseph H. Lemieux Director since
Chairman of the Board and 1987
Chief Executive Officer Age 68
Owens-Illinois, Inc.
</TABLE>
Mr. Lemieux has been Chairman of the Board of the Company since 1991 and Chief
Executive Officer of the Company since 1990. Mr. Lemieux was President and Chief
Operating Officer of the Company and its predecessor from 1986 to 1990. Mr.
Lemieux is a director of HCR Manor Care, Inc. He is chairman of the Executive
Committee.
<TABLE>
<S> <C>
Henry R. Kravis Director since
Managing Member of KKR & Co. L.L.C., 1987
the general partner of Age 55
Kohlberg Kravis Roberts & Co., L.P.
</TABLE>
Mr. Kravis is a Founding Partner of Kohlberg Kravis Roberts & Co., L.P. and,
effective January 1, 1996, he became a managing member of the limited liability
company which is the general partner of Kohlberg Kravis Roberts & Co., L.P. Mr.
Kravis also is a general partner of KKR Associates, L.P. Mr. Kravis is a
director of Accuride Corporation, Amphenol Corporation, Borden, Inc., The Boyds
Collection, Ltd., Bruno's, Inc., Evenflo Company, Inc., The Gillette Company,
IDEX Corporation, KinderCare Learning Centers, Inc., KSL Recreation Group, Inc.,
Newsquest Capital plc, PRIMEDIA, Inc., Randall's Food Markets, Inc., Regal
Cinemas, Inc., RELTEC Corporation, Safeway Inc., Sotheby's Holdings, Inc. and
Spalding Holdings Corporation.
<TABLE>
<S> <C>
Michael W. Michelson Director since
Member of KKR & Co. L.L.C., 1987
the general partner of Age 47
Kohlberg Kravis Roberts & Co., L.P.
</TABLE>
Mr. Michelson has been a member of the limited liability company which is the
general partner of Kohlberg Kravis Roberts & Co., L.P. since January 1, 1996.
Prior thereto, he was a general partner of Kohlberg Kravis Roberts & Co., L.P.
Mr. Michelson also is a general partner of KKR Associates, L.P. Mr. Michelson is
a director of Amphenol Corporation, AutoZone, Inc. and Promus Corporation. He is
chairman of the Compensation Committee and a member of the Executive Committee.
FUNCTIONS OF THE BOARD AND ITS COMMITTEES
The Board has the ultimate authority for the management of the Company's
business. The Board selects the Company's executive officers, delegates
responsibilities for the conduct of the Company's operations to those officers,
and monitors their performance.
Important functions of the Board are performed by committees comprised of
members of the Board. Subject to applicable provisions of the Company's By-Laws,
the Board as a whole appoints the members of each committee each year at its
first meeting following the Annual Meeting. The Board may, at any time, change
the authority or responsibility delegated to any committee. There are three
regularly constituted committees of the Board: the Executive Committee, the
Audit Committee and the Compensation Committee. The Company does not have a
nominating committee or any regularly constituted committee performing the
functions of such a committee.
4
<PAGE>
The Executive Committee is empowered to exercise the authority of the Board
in the management of the Company between meetings of the Board, except that the
Executive Committee may not fill vacancies on the Board, appoint or remove
officers, amend the Company's By-Laws or exercise certain other powers reserved
to the Board or delegated to other Board committees.
The Audit Committee recommends to the Board the firm of independent auditors
to audit the Company's financial statements for each fiscal year; reviews with
the independent auditors the general scope of this service; reviews the nature
and extent of the non-audit services performed by the independent auditors; and
consults with management on the activities of the Company's independent auditors
and the Company's internal control structure.
The Compensation Committee administers the Amended and Restated Stock Option
Plan, the 1997 Equity Participation Plan and certain other benefit plans of the
Company and makes recommendations to the Board with respect to the compensation
to be paid and benefits to be provided to directors, officers and employees of
the Company.
During 1998, the Board held four formal meetings and the Audit Committee
held one formal meeting. The Compensation Committee and the Executive Committee
held no meetings in 1998. During 1998, each member of the Board attended 75% or
more of the aggregate number of meetings of the Board and of committees of the
Board of which he was a member, except Henry R. Kravis, Robert J. Lanigan and
Robert I. MacDonnell. In addition to the formal meetings indicated above, the
Board and the committees of the Board consulted frequently and often acted by
written consent taken without a meeting.
5
<PAGE>
DIRECTOR AND EXECUTIVE COMPENSATION AND OTHER INFORMATION
DIRECTOR COMPENSATION
Directors of the Company who are not Company officers are paid a fee of
$35,000 annually plus expenses associated with meetings of the Company's Board.
SUMMARY COMPENSATION TABLE
The following table shows, for the years ended December 31, 1996, 1997 and
1998, the cash compensation paid by the Company and its subsidiaries, as well as
certain other compensation paid or accrued for those years, to the Company's
Chief Executive Officer and the four most highly compensated executive officers
of the Company (the "named executive officers") in all capacities in which they
served.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ------------------------- ---------
OTHER RESTRICTED SECURITIES LONG-TERM
ANNUAL STOCK UNDERLYING INCENTIVE ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) ($) (#)(4) ($)(5) ($)(6)
- - ------------------------------ ---- -------- -------- ------------ ---------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph H. Lemieux............. 1998 $601,400 $387,500 $ 76,028 $746,825(7) 160,000 $119,951 $ 57,056(8)
Chairman and Chief 1997 578,333 537,500 113,066 593,208 200,000 231,840 23,113
Executive Officer 1996 558,333 750,000 105,588 0 20,000 453,600 10,000
John L. Hodges (9)............ 1998 228,333 150,000 22,726 0 15,000 97,461 9,133
Vice President and 1997 218,500 175,000 21,869 0 15,000 94,017 8,740
Technical Director 1996 211,000 160,000 22,767 0 8,000 91,973 8,177
R. Scott Trumbull............. 1998 262,500 200,000 28,869 0 75,000 109,418 10,500
Executive V.P., 1997 247,833 240,000 18,610 0 75,000 104,218 9,913
International Operations 1996 237,000 220,000 24,278 0 15,000 101,952 9,000
David G. Van Hooser........... 1998 217,250 170,000 15,142 0 75,000 85,902 35,225(10)
Senior Vice President and 1997 196,000 160,000 14,070 0 50,000 72,141 7,840
Chief Financial Officer 1996 186,000 130,000 18,095 0 12,000 70,573 19,440
Thomas L. Young............... 1998 255,000 200,000 15,320 0 75,000 100,152 10,200
Exec. V.P.--Administration 1997 236,167 240,000 21,876 0 101,567 94,944 9,447
and General Counsel 1996 217,000 220,000 16,584 0 15,000 92,880 6,000
</TABLE>
- - ----------------------------------
(1) Includes amounts deferred at the election of the named executive officer
pursuant to the salary reduction provisions of the Stock Purchase and
Savings Program.
(2) The amounts disclosed in this column represent awards under the
Owens-Illinois, Inc. Senior Management Incentive Plan for the year
indicated. Except as otherwise provided in footnote 7 below, amounts, if
any, deferred at the election of a named executive officer are included in
the year earned.
(3) The amounts disclosed in this column represent amounts reimbursed during
the year for the payment of taxes.
(4) No SAR's were granted to any of the named executive officers during 1998.
(5) The amounts disclosed in this column represent awards under the
Owens-Illinois, Inc. Performance Award Plan for the year indicated. Except
as otherwise provided in footnote 7 below, amounts, if any, deferred at the
election of an executive officer are included in the year earned.
(6) The amounts disclosed in this column for 1998 represent matching cash
contributions by the Company to the Stock Purchase and Savings Program
("SPASP") and the Executive Savings Plan, both defined contribution plans.
The SPASP is a tax-qualified defined contribution plan intended to satisfy
the requirements of Section 401(k) of the Internal Revenue Code of 1986. The
Company contributes to each participant's account maintained under the SPASP
an amount of Company stock equal to 50% of the participant's contributions
to the SPASP but not more than 4% of (a) the participant's earnings or (b)
$160,000 for 1998, whichever is lower.
The Executive Savings Plan provides a benefit to any eligible individual for
whom the 4% matching contribution would otherwise be in excess of the
maximum permitted under the SPASP. The difference between the theoretical
Company matching contribution under the SPASP for each participant, without
regard to the legally imposed maximum, and the maximum contribution
permitted under law is used to determine the number of theoretical shares of
Company Common Stock which would have been purchased for the participant's
account in the absence of the IRS limitation on participant's earnings of
$160,000 for 1998. Such amount, including interest, is paid in cash to the
individual at termination of employment.
(7) Represents aggregate value of 29,651 shares of restricted stock received by
Mr. Lemieux in 1999 in lieu of cash payments in the amounts of $262,500 and
$359,854 pursuant to elections under the Company's Senior Management
Incentive Plan and Performance Award Plan, respectively. See " Board
Compensation Committee Report on Executive Compensation--Annual Incentive"
and "--Long-Term Incentives" below. As of December 31, 1998, Mr. Lemieux
held 15,211 shares of restricted stock of the Company with a value of
$465,837 (determined by the closing price of the Common Stock on the New
York Stock Exchange on December 31, 1998).
(8) Also includes the $33,000 cash value of a whole life insurance policy
purchased by the Company under the Senior Executive Life Insurance Plan and
owned by Mr. Lemieux.
(9) Mr. Hodges retired as Vice President and Technical Director of the Company
as of January 31, 1999.
(10) Also includes the $26,580 cash value of a whole life insurance policy
purchased by the Company under the Senior Executive Life Insurance Plan and
owned by Mr. Van Hooser.
6
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
The following table provides information on option grants in 1998 to the
named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- - ---------------------------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES
SECURITIES % OF TOTAL OF STOCK PRICE
UNDERLYING OPTIONS/SARS APPRECIATION FOR
OPTIONS/SARS GRANTED TO EXERCISE OR OPTION TERM(3)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% 10%
- - -------------------------------------- ------------- ------------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph H. Lemieux..................... 160,000(2) 8.9% $ 39.9375 05/06/08 $ 4,018,637 $ 10,184,014
John L. Hodges........................ 15,000(2) .8% 39.9375 05/06/08 376,747 954,751
R. Scott Trumbull..................... 75,000(2) 4.2% 39.9375 05/06/08 1,883,736 4,773,757
David G. Van Hooser................... 75,000(2) 4.2% 39.9375 05/06/08 1,883,736 4,773,757
Thomas L. Young....................... 75,000(2) 4.2% 39.9375 05/06/08 1,883,736 4,773,757
</TABLE>
- - ------------------------------
(1) No SAR's were granted to any of the named executive officers during 1998.
(2) Exercises of one-half of the options are permitted after each of the fifth
and sixth anniversaries of the dates of the grant; provided, options shall
become exercisable after the first anniversary of the date of the grant
thereof at the time when the average fair market value per share (as
evidenced by the closing price of the underlying stock on the principal
exchange on which it is traded) for any period of 20 consecutive trading
days (commencing after such first anniversary) is at least equal to the
product of the fair market value per share on the date of grant times the
amount shown below under "Stock Price Multiple" as to the percentage of the
shares of stock initially subject to the option shown below under "Exercise
Percentage."
<TABLE>
<CAPTION>
STOCK PRICE RESULTING
MULTIPLE STOCK PRICE EXERCISE PERCENTAGE
<S> <C> <C>
120% $ 47.93 25%
144% 57.51 50%
172% 68.69 75%
206% 82.27 100%
</TABLE>
Under the Second Amended and Restated Stock Option Plan for Key Employees of
Owens-Illinois, Inc., for all options granted between January 1, 1992 and
December 31, 1996, rights to receive Additional Options, as defined in the
Second Amended and Restated Stock Option Plan for Key Employees of
Owens-Illinois, Inc., are attached to each option and Additional Options
will be granted upon exercise, subject to certain conditions, if the
exercise price is paid using shares of Owens-Illinois Common Stock owned by
the optionee or the related tax obligation is paid using shares of
Owens-Illinois Common Stock owned by the optionee or by relinquising
Owens-Illinois Common Stock which the optionee is entitled to receive upon
the exercise of the options. Under the 1997 Equity Participation Plan of
Owens-Illinois, Inc., for all options granted under the plan, rights to
receive Additional Options, as defined in the 1997 Equity Participation Plan
of Owens-Illinois, Inc., are attached to each option and Additional Options
will be granted upon exercise, subject to certain conditions, if the
exercise price is paid using shares of Owens-Illinois Common Stock owned by
the optionee or the related tax obligation is paid using shares of
Owens-Illinois Common Stock owned by the optionee or by relinquishing
Owens-Illinois Common Stock which the optionee is entitled to receive upon
the exercise of the options.
(3) Based on actual option term and annual compounding. The assumed annual rates
of appreciation of 5 and 10 percent would result in the price of the
Company's Common Stock increasing to $65.054 and $103.588, respectively.
7
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
Shown below is information with respect to the unexercised options to
purchase the Company's Common Stock granted in 1998 and prior years to the named
executive officers and held by them at December 31, 1998. No options were
exercised by named executive officers in 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
DECEMBER 31, 1998 AT DECEMBER 31, 1998(1)
-------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------------------------------------------------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Joseph H. Lemieux......................................... 325,000 310,000 $4,934,375 $ 0
John L. Hodges............................................ 82,750 26,250 1,656,625 0
R. Scott Trumbull......................................... 47,500 131,250 460,781 0
David G. Van Hooser....................................... 64,500 112,500 907,000 0
Thomas L. Young........................................... 83,491 131,250 632,915 0
</TABLE>
- - ------------------------------
(1) Based on the closing price of the Company's Common Stock on the New York
Stock Exchange on that date of $30.625.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
The named executive officers are covered by the Company's Performance Award
Plan ("PAP") under which eligible employees receive annual cash awards payable
at the end of the three-year period covered by the grant of the award. Award
payouts under PAP are based on the average annual attainment of the performance
objectives set by the Compensation Committee of the Board. For the 1998-2000
award period, performance will be evaluated in comparison to the Company's
attained levels of return on assets and earnings per share on an equally
weighted basis relative to objectives for that period. The target amounts shown
below are earned by Company performance at the level of 100% of the established
objectives, with such payment percentage increasing or decreasing four
percentage points for each single percentage point increase or decrease,
respectively, in performance.
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER
PERIOD ESTIMATED FUTURE PAYOUTS UNDER
UNTIL NON-STOCK PRICE-BASED PLANS
MATURATION ---------------------------------
NAME OR PAYOUT THRESHOLD TARGET MAXIMUM
- - ------------------------------------------------------------------ ----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Joseph H. Lemieux................................................. 1998-2000 $ 93,792 $468,960 (1)
John L. Hodges.................................................... 1998-2000 19,192 95,960 (1)
R. Scott Trumbull................................................. 1998-2000 22,080 110,400 (1)
David G. Van Hooser............................................... 1998-2000 17,736 88,680 (1)
Thomas L. Young................................................... 1998-2000 21,440 107,200 (1)
</TABLE>
- - ------------------------------
(1) The maximum dollar amount that may be earned under PAP is not capped.
8
<PAGE>
PENSION PLANS
The following table illustrates the estimated annual benefits payable under
the Owens-Illinois Salary Retirement Plan (the "Retirement Plan") and
nonqualified retirement plans in various average earnings classifications upon
normal retirement at age 65:
<TABLE>
<CAPTION>
HIGHEST CONSECUTIVE YEARS OF CREDITED SERVICE
THREE-YEAR ----------------------------------------------------------------------------
AVERAGE ANNUAL EARNINGS 20 25 30 35 40 45
- - ---------------------------- ---------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 52,964 $ 66,206 $ 79,447 $ 92,688 $ 104,808 $ 116,928
400,000 109,578 136,973 164,367 191,762 214,088 238,328
600,000 166,721 208,401 250,082 291,762 323,368 359,728
800,000 223,864 279,830 335,796 391,762 432,648 481,128
1,000,000 281,007 351,259 421,510 491,762 541,928 602,528
1,200,000 338,150 422,687 507,225 591,762 651,208 723,928
1,400,000 395,293 494,116 592,939 691,762 760,488 845,328
1,600,000 452,435 565,544 678,653 791,762 869,768 966,728
1,800,000 509,578 636,973 764,367 891,762 979,048 1,088,128
2,000,000 566,721 708,401 850,082 991,762 1,088,328 1,209,528
2,200,000 623,864 779,830 935,796 1,091,762 1,197,608 1,330,928
</TABLE>
The above pension table illustrates benefits calculated on a straight-life
annuity basis, and reflects the greater of the regular benefit or the
"grandfathered" benefit available under the formula in effect prior to January
1, 1989. The regular benefit does not contain an offset for social security or
other amounts, whereas the "grandfathered" benefit does provide for a partial
offset for social security benefits.
The compensation covered by the plans under which the benefits are
summarized in the table above equals the sum of base salary, Senior Management
Incentive Plan and Performance Award Plan payments, as reported in the Summary
Compensation Table for the named executive officers for the last three fiscal
years, and is equal to the highest three-year average of such amounts. At
January 31, 1999, Mr. Lemieux had 41 years of credited service, Mr. Hodges had
37 years of credited service, Mr. Trumbull had 27 years of credited service, Mr.
Van Hooser had 26 years of credited service and Mr. Young had 22 years of
credited service under the Retirement Plan. To the extent that benefits in the
preceding table cannot, under the limitations of the Code, be provided under the
Retirement Plan, such benefits will be provided under the Company's Supplemental
Retirement Benefit Plan.
EMPLOYMENT AGREEMENTS. The Company has entered into employment agreements
with certain officers, including the named executive officers listed above, that
entitle the participants to receive their base salaries and to participate in
designated benefit plans of the Company. The agreements provide for termination
of employment at any time, with or without cause, and the benefit plans
designated therein and each employee's rights to receive salary and bonuses
pursuant thereto are subject to modification by the Company in its sole
discretion. Such employment agreements permit executive officers to take part in
the Senior Executive Life Insurance Plan, whereby the Company purchases life
insurance policies which
9
<PAGE>
are transferred to the participants subject, in part, to the executive agreeing
not to compete with the Company.
CERTAIN TRANSACTIONS
During 1998, the law firm of Williams & Jensen, P.C., of which Mr. McMackin
is a member, received fees for legal services in connection with various
matters. It is anticipated that the Company will continue to utilize the
services of Williams & Jensen, P.C. on various Company matters.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The following non-employee directors serve on the Compensation Committee of
the Company's Board of Directors: Edward A. Gilhuly, James H. Greene, Jr. and
Michael W. Michelson (chair). Until June, 1987, Mr. Gilhuly and Mr. Greene were
officers of the Company. Messrs. Greene, Michelson and Gilhuly are members of
KKR & Co. L.L.C., the general partner of Kohlberg Kravis Roberts & Co., L.P.,
which provides management, consulting and financial services to the Company for
an annual fee. In 1998 the payment for the management fee and expenses was
$1,382,600. Such services include, but are not necessarily limited to, advice
and assistance concerning any and all aspects of the operation, planning and
financing of the Company and its subsidiaries, as needed from time to time. In
addition, in 1998, the Company paid an investment banking fee of $7,500,000 to
KKR & Co., L.L.C. in connection with the Company's acquisition of the glass and
plastics packaging businesses of BTR plc.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Company's Board of
Directors establishes the Company's policies regarding the compensation of its
executive officers and other key managers, and oversees the compensation
practices employed pursuant to those policies. The Committee also administers
the Company's Equity Participation Plan, the Performance Award Plan ("PAP"),
and, with the Chief Executive Officer, the Senior Management Incentive Plan
("SMIP"). The Committee has direct responsibility for the compensation of the
Chief Executive Officer.
The Company's principal objective is to increase share owner value over
time. The Committee's executive compensation policies are intended and
structured to achieve this objective by emphasis on and adherence to the
following principles: (1) focus on a significant equity orientation among
executives to align their interests with those of all other share owners, (2)
linkage of compensation with achievement of certain specific financial,
strategic and operating goals which underlie long-term share owner value, (3)
maintenance of plans which are intended to be competitive with those of other
successful companies of comparable size, particularly those in the industries in
which the Company competes, and (4) effective communication and straightforward
administration of plans that are well understood and not unduly complex.
The components of the Company's executive officer compensation are:
- Base Salary
- Annual Incentive
- Long-Term Incentives
- Benefits
BASE SALARY. Base salaries are set at levels intended to be competitive
with industrial companies of comparable size in a broad range of American
industries, which the Committee believes are the Company's competitors for
executive talent. The Committee reviews salaries annually and provides salary
10
<PAGE>
adjustments based on periodic reviews of competitive considerations. In 1998,
Mr. Lemieux was granted a $23,280 increase in base salary, representing a 4.0%
adjustment on an annualized basis.
ANNUAL INCENTIVE. The Company's SMIP establishes target annual incentives
for key executives in the form of a percentage of base salary (up to a maximum
target incentive of 100% in the case of the Chief Executive Officer). The SMIP
provides for annual incentive awards consisting of a corporate performance
component based on the Company's attainment of an annual rate of return on net
assets ("RONA") and an earnings per share ("EPS") target, on an equally weighted
basis, established by the Board as the performance objectives for the year, an
operating unit RONA performance component (for executive positions at the unit
level), and a discretionary component. Each performance component and, in the
aggregate, the discretionary components are contingent on the Company's
attainment of the corporate RONA and EPS objectives for the year.
The SMIP establishes precise quantitative relationships between performance
and payout percentages within defined minimum/maximum ranges. The total bonus
pool available for distribution to all covered executives, including the Chief
Executive Officer, cannot exceed 150% of the total of all target bonuses for the
covered executives.
A recipient of an SMIP payment may elect to receive restricted stock in lieu
of cash for all or a portion of such payment. Such restricted stock is issued
under the terms of the 1997 Equity Participation Plan of Owens-Illinois, Inc.,
which plan was approved by the share owners at the 1997 Annual Meeting. A
recipient who so elects receives a number of shares of restricted stock equal to
120% of the amount of cash forgone divided by the closing price of the Common
Stock on the last trading day prior to the date on which the cash amount would
have been paid. Except as otherwise provided in the 1997 Equity Participation
Plan of Owens-Illinois, Inc., such restricted stock vests on the third
anniversary of the date on which the cash amount would have been paid.
Based on the Company's RONA and EPS performance relative to its 1998 RONA
and EPS objectives, and further based on the Committee's evaluation of certain
other performance factors relating to the Chief Executive Officer, Mr. Lemieux
was granted an SMIP award of $650,000 for 1998.
LONG-TERM INCENTIVES. There are two forms of long-term incentives utilized
for key executives: PAP, which provides cash awards, and stock options granted
pursuant to the Company's Equity Participation Plan.
The PAP establishes target cash awards for key executives based on a
percentage of base salary at the time of the award (up to a maximum target award
of 75% in the case of the Chief Executive Officer). The PAP is based on a
three-year performance cycle. Award payouts are based on the average annual
attainment of the performance objectives set by the Board for each year of each
award period. The Board establishes the performance criteria under this Plan and
sets the relative weighting where multiple criteria are applicable. For the
1997-1999 and 1998-2000 award periods, performance will be evaluated in
comparison to the Company's attained level of EPS relative to objectives for
these periods. Under the Plan, performance at the level of 100% of these
established objectives results in a 100% payment of the PAP award, with such
payment percentage increasing or decreasing four percentage points for each
single percentage point increase or decrease, respectively, in performance.
A recipient of a PAP payment may elect to receive restricted stock in lieu
of cash for all or a portion of such payment on the same terms described above
with respect to SMIP payments.
The Committee previously approved a PAP allotment to Mr. Lemieux for the
1996-1998 award period of $435,000, and the Committee determined, in the manner
described in the immediately preceding
11
<PAGE>
paragraph, that performance in 1996-1998 award period relative to the RONA and
earnings per share objectives established for this period warranted a 110.3%
payout of Mr. Lemieux's 1996-1998 PAP allotment.
In 1998, the Committee approved a PAP allotment to Mr. Lemieux for the
1998-2000 award period of $468,960.
The Company Equity Participation Plan provides executives with the
opportunity to acquire an equity interest in the Company and to share in the
appreciation of the value of the stock. Stock options only have value if the
stock price appreciates from the date the options are granted. Furthermore,
under the form of Stock Option Agreement currently approved by the Committee,
exercisability of options is not available until the fifth year after the grant
date unless exercisability has been accelerated by virtue of increase(s) in the
Company stock price.
Each year the Committee determines the total number of options to be awarded
to all eligible key employees as a group. The Committee determined that in 1998
a pool approximately equal to 1.2% of the total number of outstanding shares of
common stock of the Company was sufficient to achieve the overall goals of the
plan. The number of options awarded to each eligible key employee, including the
Chief Executive Officer and each executive officer, is based on the opportunity
for such individual to enhance shareholder value through the effective
performance of such individual's job responsibilities. Consideration is also
given to the total number of options previously granted to such individual. In
1998, Mr. Lemieux was granted options on 160,000 shares.
BENEFITS. Benefits offered to executive officers are essentially the same
as those offered to all salaried employees of the Company. The level and nature
of such benefits are reviewed from time to time to ensure that they are
competitive, tax efficient, and otherwise appropriate in the judgment of the
Committee.
The Committee believes that the executive compensation policies and programs
described above serve the interest of all share owners and the Company and
substantially link the compensation of the Company's executives with the
Company's performance.
TAX DEDUCTIBILITY COMPENSATION. During 1993, the Internal Revenue Code of
1986 was amended by adding a new Section 162(m), which denies a tax deduction to
a publicly held corporation for compensation paid to its Chief Executive Officer
and its other four most highly compensated officers to the extent any such
compensation exceeds $1 million in a taxable year after 1993. Such denial of tax
deductibility is subject, however, to an exception for "performance-based
compensation." The Internal Revenue Service has issued regulations purporting to
interpret and implement the provisions of Section 162(m).
Mr. Lemieux is the only executive whose compensation under the Company's
cash compensation plans is potentially subject to the provisions of Section
162(m). Mr. Lemieux has elected, pursuant to a deferred compensation plan
previously approved by the Committee, to defer until his retirement an amount of
his potential incentive compensation for 1999 such that his total compensation
will not in any event exceed the $1 million deductibility limit in 1999. Of the
amount deferred by Mr. Lemieux for 1998, $622,354 was taken in the form of
restricted stock under the 1997 Equity Participation Plan.
Michael W. Michelson, Chairman
Edward A. Gilhuly
James H. Greene, Jr.
12
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG OWENS-ILLINOIS, S&P 500 AND PACKAGING GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OWENS-ILLINOIS S&P 500 PACKAGING GROUP
<S> <C> <C> <C>
1993 $100.00 $100.00 $100.00
1994 $88.89 $101.32 $107.49
1995 $117.17 $139.40 $127.04
1996 $183.84 $171.40 $157.22
1997 $306.56 $228.59 $188.78
1998 $247.47 $293.91 $178.23
</TABLE>
The above graph compares the performance of the Company's Common Stock with
that of a broad market index (the S&P 500 Composite Index) and a packaging group
consisting of companies with lines of business or product end uses comparable to
those of the Company for which market quotations are available.
The packaging group consists of: Aluminum Co. of America, Aptargroup Inc.,
Avery Dennison Corp., Ball Corp., Bemis Co., BWAY Corporation, Chesapeake Corp.,
Crown Cork & Seal Co., Johnson Controls Inc., Liqui-Box Corp., The Mead Corp.,
Multi-Color Corp., Owens-Illinois Inc., Reynolds Metals Co., Sealed Air Corp.,
Silgan Holdings, Inc., Sonoco Products Co., Tredegar Industries, U.S. Can Co.,
and Vitro Sociedad Anonima (ADSs). Market quotations ceased to be available for
Continental Can and Sealright Co. following acquisitions of these companies in
1998. Their elimination from the packaging group in 1998 did not have a
significant effect on total returns for prior periods. BWAY Corporation and
Silgan Holdings Inc. were added to the packaging group in 1998 using market
quotations from the dates they were first available in June 1995 and February
1997, respectively. Their addition to the packaging group did not have a
significant effect on total returns for periods following the first availability
of market quotations.
The comparison of total return on investment for each period is based on the
change in market value of the stock, including additional shares assumed
purchased through reinvestment of dividends, if any.
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 15, 1999 (except as otherwise noted in
the footnotes below) by each beneficial owner of more than five percent of the
Company's outstanding Common Stock known to the Company, each of the Company's
directors and nominees for director, each of the named executive officers and
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NAME AND ADDRESS BENEFICIALLY
OF BENEFICIAL OWNER OWNED(1) PERCENTAGE
- - ------------------------------ ---------------- ------------
<S> <C> <C>
KKR Associates, L.P.(2)....... 36,000,000 23.1%
9 West 57th Street
New York, New York 10019
FMR Corp.(3).................. 17,509,515 11.3
82 Devonshire Street
Boston, Massachusetts 02109
Neuberger Berman, LLC(4)...... 7,924,108 5.1
605 Third Avenue
New York, New York
10158-3698
Putnam Investments, Inc.(5)... 8,421,938 5.4
One Post Office Square
Boston, MA 02109
Joseph H. Lemieux(1).......... 786,581(6) 0.5
Thomas L. Young(1)............ 134,550(6) 0.1
Robert J. Dineen(1)........... 27,282 --
Edward A. Gilhuly(2).......... 10,000 --
James H. Greene, Jr.(2)....... -- --
Henry R. Kravis(2)............ -- --
Robert J. Lanigan(1).......... 353,278 0.2
Robert I. MacDonnell(2)....... -- --
John J. McMackin, Jr.(1)...... 28,019 --
Michael W. Michelson(2)(7).... 20,000 --
George R. Roberts(2).......... -- --
John L. Hodges(1)............. 100,082(6) 0.1
R. Scott Trumbull(1).......... 151,813(6) 0.1
David G. Van Hooser(1)........ 101,569(6) 0.1
All directors and executive
officers as a group (other
than as set forth in
relation to KKR Associates,
L.P.) (30 persons).......... 2,324,245(6) 1.5
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
14
<PAGE>
(FOOTNOTES FOR PRECEDING PAGE)
- - ------------------------
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of a given date if such person has
the right to acquire such shares within 60 days after such date. For
purposes of computing the percentage of outstanding shares held by each
person or group of persons named above on a given date, any security which
such person or persons has the right to acquire within 60 days after such
date is deemed to be outstanding, but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person. The
information includes: all currently exercisable options granted to Messrs.
Lemieux, Young, Dineen, Lanigan, McMackin, Hodges, Trumbull and Van Hooser.
The number of shares beneficially owned includes 325,000 shares subject to
options granted to Mr. Lemieux; 83,491 shares subject to options granted to
Mr. Young; 18,182 shares subject to options granted to Mr. Dineen; 75,000
shares subject to options granted to Mr. Lanigan; 18,391 shares subject to
options granted to Mr. McMackin; 82,750 shares subject to options granted to
Mr. Hodges; 47,500 shares subject to options granted to Mr. Trumbull; 64,500
shares subject to options granted to Mr. Van Hooser; and 1,022,339 shares
subject to options granted to all directors and officers as a group (other
than as set forth in relation to KKR Associates, L.P.).
(2) Shares shown as owned by KKR Associates, L.P. are owned of record by three
limited partnerships of which KKR Associates, L.P. is the sole general
partner and as to which it possesses sole voting and investment power. KKR
Associates is a limited partnership of which Henry R. Kravis, George R.
Roberts, Robert I. MacDonnell, Michael W. Michelson, James H. Greene, Jr.,
Edward A. Gilhuly (all directors of the Company), Paul E. Raether, Michael
T. Tokarz, Perry Golkin, Clifton S. Robbins, and Scott Stuart are the
general partners. Such persons may be deemed to share beneficial ownership
of the shares shown as owned by KKR Associates, L.P. The foregoing persons
disclaim beneficial ownership of such shares of the Company.
(3) The Schedule 13G received by the Company from FMR Corp. ("FMR"), Edward C.
Johnson 3d, Abigail P. Johnson and Fidelity Management & Research Company
("Fidelity"), indicated that Fidelity, a wholly-owned subsidiary of FMR and
an investment advisor under the Investment Advisors Act of 1940, is the
beneficial owner of 15,958,452 shares of the Common Stock as a result of
acting as investment advisor to various investment companies. The number of
shares of Common Stock owned by the investment companies at December 31,
1998 included 703,472 shares of Common Stock resulting from the assumed
conversion of 741,200 shares of the $2.375 Convertible Preferred Stock
(0.949 shares of Common Stock for each share of the $2.375 Convertible
Preferred Stock). Edward C. Johnson 3d, FMR, through its control of
Fidelity, and the funds each has sole power to dispose of the 15,958,452
shares owned by the funds. Fidelity Management Trust Company, a wholly-owned
subsidiary of FMR, is the beneficial owner of 1,551,062 shares of Common
Stock outstanding of the Company as a result of its serving as investment
manager of the institutional account(s). The number of shares of Common
Stock owned by the institutional account(s) at December 31, 1998 included
84,280 shares of Common Stock resulting from the assumed conversion of
88,800 shares of the $2.375 Convertible Preferred Stock described above.
Edward C. Johnson 3d and FMR, through its control of Fidelity Management
Trust Company, each has sole dispositive power over 1,551,062 shares of
Common Stock and sole power to vote or to direct the voting of 1,063,062
shares of Common Stock, and no power to vote or to direct the voting of
488,000 shares of Common Stock owned by the institutional account(s) as
reported above.
15
<PAGE>
(4) The Schedule 13G received by the Company from Neuberger Berman, LLC and
Neuberger Berman Management Inc. indicated it is beneficial owner of
7,924,108 shares of Common Stock with shared dispositive power with respect
to 7,924,108 shares of Common Stock, with sole voting power with respect to
4,950,083 shares of Common Stock and shared voting power with respect to
2,163,600 shares of Common Stock. Neuberger Berman, LLC disclaims any
economic interest in these securities of its clients. The foregoing Schedule
13G indicated that in addition to the above shares, principal(s) of
Neuberger Berman, LLC own 55,650 shares of Common Stock. Principal(s) own
these shares in their own personal securities accounts. Neuberger Berman,
LLC disclaims beneficial ownership of these shares since these shares were
purchased with each principal(s) personal funds and each principal has
exclusive dispositive and voting power over the shares held in their
respective accounts.
(5) The Schedule 13G received by the Company from Putnam Investments, Inc.
("PI") indicated that the filing was made on behalf of PI, its parent
company, Marsh & McLennan Companies, Inc. ("MMC"), two subsidiaries of PI
which are registered investment advisors, Putnam Investment Management, Inc.
("PIM") and the Putnam Advisory Company, Inc. ("PAC"). The Schedule 13G
filing further stated that neither MMC nor PI have any power to vote or
dispose of, or direct the voting or disposition of, any of the securities
covered by the Schedule 13G. The Schedule 13G indicated that PIM had shared
dispositive power over 7,895,234 shares of Common Stock; and that PAC had
shared voting power over 539,857 shares of Common Stock and shared
dispositive power over 526,704 shares of Common Stock.
(6) The table includes the number of shares of Common Stock that Joseph H.
Lemieux, Thomas L. Young, John L. Hodges, R. Scott Trumbull, David G. Van
Hooser and all directors and officers as a group (other than as set forth in
relation to KKR Associates, L.P.) held in the Stock Purchase and Savings
Program as of February 28, 1999.
(7) Does not include 3,000 shares of Common Stock held in an irrevocable trust
created by Mr. Michelson for the benefit of his children with respect to
which Mr. Michelson disclaims any beneficial ownership.
The limited partnership agreements pursuant to which two of the limited
partnerships noted in footnote 2 above (the "KKR Partnerships") were organized
will, by their terms, expire on December 31, 1999, unless amended by all of the
limited partners to extend the term beyond such date. There can be no assurance
that KKR Associates, L.P., as general partner of the KKR Partnerships, will seek
an amendment or, if sought, that an amendment will be approved by the limited
partners. If the partnership agreements expire, the limited partnerships will
dissolve. In the event of the dissolution and winding up of the limited
partnerships, KKR Associates, L.P. will have sole discretion regarding the
timing (which may be one or more years after the expiration of the partnership
agreements) and manner of the disposition of any Common Stock held by such
limited partnerships, including public or private sales of such Common Stock,
the distribution of such Common Stock to the limited partners of the limited
partnerships or a combination of the foregoing.
16
<PAGE>
GENERAL INFORMATION
AUDITORS
The Board, upon the recommendation of the Audit Committee, has approved the
selection of Ernst & Young LLP as the Company's independent auditors for 1999.
Representatives of Ernst & Young LLP will attend the Annual Meeting, will have
the opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions.
OUTSTANDING STOCK
An aggregate of 155,810,489 shares of the Company's Common Stock was
outstanding at the close of business on March 15, 1999. Each share entitles its
holder of record to one vote on each matter upon which votes are taken at the
Annual Meeting. Shares of Common Stock held by the trustee under the Company's
401(k) plans must be voted by the trustee in accordance with written
instructions from participants in such plan or, as to those shares for which no
instructions are received, in a uniform manner as a single block in accordance
with the instructions received with respect to the majority of shares for which
instructions were received from participants. No other securities are entitled
to be voted at the Annual Meeting.
REVOCABILITY OF PROXIES
Any proxy solicited hereby may be revoked by the person or persons giving it
at any time before it has been exercised at the Annual Meeting by giving notice
of revocation to the Company in writing or at the 1999 Annual Meeting.
SOLICITATION COSTS
The Company will pay the cost of preparing and mailing this Proxy Statement
and other costs of the proxy solicitation made by the Board. Certain of the
Company's officers and employees may solicit the submission of proxies
authorizing the voting of shares in accordance with the Board's recommendations,
but no additional remuneration will be paid by the Company for the solicitation
of those proxies. Such solicitations may be made by personal interview,
telephone and telegram. Arrangements have also been made with brokerage firms
and others for the forwarding of proxy solicitation materials to the beneficial
owners of Common Stock, and the Company will reimburse them for reasonable
out-of-pocket expenses incurred in connection therewith.
VOTING PROCEDURES
The By-laws of the Company (the "By-laws") provide that a majority of the
Common Stock issued and outstanding and entitled to vote at the Annual Meeting,
the holders of which are present in person or represented by proxy, shall
constitute a quorum at any Annual Meeting.
Votes cast at the Annual Meeting will be tabulated by the persons appointed
by the Company to act as inspectors of election for the Annual Meeting. The
inspectors of election will treat shares of voting stock represented by a
properly signed and returned proxy as present at the Annual Meeting for purposes
of determining a quorum, without regard to whether the proxy is marked as
casting a vote or abstaining. Likewise, the inspectors of election will treat
shares of voting stock represented by "broker non-votes" (i.e., shares of voting
stock held in record name by brokers or nominees as to which (i) instructions
have not been received from the beneficial owners or persons entitled to vote,
(ii) the broker or nominee does
17
<PAGE>
not have discretionary voting power under applicable New York Stock Exchange
rules or the instrument under which it serves in such capacity, and (iii) the
recordholder has indicated on the proxy card or otherwise notified the Company
that it does not have authority to vote such shares on that matter) as present
for purposes of determining a quorum.
The By-Laws provide that all matters to come before the Annual Meeting
require the approval of the vote of the holders of a majority of the stock
present in person or represented by proxy, unless the question is one upon which
by express provision of law, or the Certificate of Incorporation, or the
By-Laws, a different vote is required, in which case such express provision
shall govern and control the decision of such question. On any such matters,
abstentions as to particular proposals will have the same effect as votes
against such proposals. Broker non-votes as to particular proposals, however,
will be deemed shares not having voting power on such proposals. Accordingly,
broker non-votes will not be counted for purposes of determining whether the
requisite majority vote has been received in favor of the approval of the
benefit plans described herein.
The By-Laws further provide that all elections shall be had and all
questions decided by a plurality vote. Therefore, directors will be elected by a
favorable vote of a plurality of the shares of Common Stock present and entitled
to vote, in person or by proxy, at the Annual Meeting. Accordingly abstentions
or broker non-votes as to the election of directors will not affect the election
of the candidates receiving the plurality of votes.
If a properly signed proxy form is returned to the Company and is not
marked, it will be voted in accordance with management's recommendations on all
proposals.
OTHER MATTERS
Management of the Company does not know of any matter that will be presented
for action at the 1999 Annual Meeting other than the election of directors.
However, if any other matter should be brought to a vote at the meeting, all
shares covered by proxies solicited hereby will be voted with respect to such
matter in accordance with the proxy holders' discretion.
SECTION 16 BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership (Forms 3, 4 and 5) with the Securities and
Exchange Commission and the New York Stock Exchange. Officers, directors and
greater-than-ten-percent holders are required by SEC regulation to furnish the
Company with copies of all such forms which they file. To the Company's
knowledge, based solely on review of the copies of such reports furnished to the
Company and written representations that no reports were required, all of its
directors and executive officers made all required filings on time during 1998.
SHARE OWNER PROPOSALS AND NOMINATIONS FOR 2000 ANNUAL MEETING
A share owner desiring to submit a proposal for inclusion in the Company's
Proxy Statement for the 2000 Annual Meeting must deliver the proposal so that it
is received by the Company no later than December 1, 1999. The Company requests
that all such proposals be addressed to James W. Baehren, Secretary,
Owens-Illinois, Inc., One SeaGate, Toledo, Ohio 43666, and mailed by certified
mail, return receipt requested.
18
<PAGE>
REPORTS TO SHARE OWNERS
The Company has mailed this Proxy Statement and a copy of its 1998 Annual
Report to each share owner entitled to vote at the Annual Meeting. Included in
the 1998 Annual Report are the Company's consolidated financial statements for
the year ended December 31, 1998.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1998, INCLUDING THE FINANCIAL STATEMENT SCHEDULES, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, MAY BE OBTAINED WITHOUT CHARGE BY
SENDING A WRITTEN REQUEST THEREFOR TO OWENS-ILLINOIS, INC., INVESTOR RELATIONS,
ONE SEAGATE, TOLEDO, OHIO 43666.
Toledo, Ohio
March 31, 1999
19
<PAGE>
[LOGO]
<PAGE>
OWENS-ILLINOIS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P The undersigned hereby appoints David G. Van Hooser, Jeffrey A. Denker and
James W. Baehren and each of them, or if more than one is present and acting
R then a majority thereof, as Proxies with full power of substitution, and
hereby authorize(s) them to represent and to vote, as designated below, all
O shares of common stock of Owens-Illinois, Inc. held of record by the
undersigned on March 15, 1999, at the Annual Meeting of Share Owners to be
X held on May 12, 1999, or at any adjournment thereof.
Y Election of Directors, Nominees:
Class II: Edward A. Gilhuly, Robert J. Lanigan and John J. McMackin, Jr.
(PLEASE MARK THIS PROXY AND SIGN AND DATE IT ON THE REVERSE SIDE HEREOF AND
RETURN IT IN THE ENCLOSED ENVELOPE)
SEE REVERSE
SIDE
<PAGE>
PLEASE MARK YOUR
X VOTES AS IN THIS
EXAMPLE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHARE OWNER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
<TABLE>
<S> <C> <C> <C> <C>
FOR WITHHELD
1. Election of Directors / / / / WITHHOLD AUTHORITY to vote for all 2. In their discretion, the Proxies are
FOR nominees listed nominees listed on reverse side authorized to vote upon such other
on the reverse side business as may properly come before
(except as marked to the meeting.
the contrary).
</TABLE>
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
___________________________________________________
Please sign exactly as name appears
hereon. When shares are held by joint
owners, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by
President or other authorized officer.
If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
______________________________________
Signature
______________________________________
Signature, if held jointly DATE
