Form of Employee Performance Stock Unit Agreement for use under the Owens-Illinois, Inc. Amended and Restated 2017 Incentive Award Plan
PERFORMANCE STOCK UNIT AGREEMENT
Section 1.5 Performance Period
“Retirement” solely for purposes of this Agreement shall mean “separation from service” (within the meaning of Section 409A of the Code) of an Employee from the Company, a Parent Corporation or a Subsidiary after reaching the age of 60 and having 10 years of employment, or after reaching the age of 65.
In consideration of the services rendered or to be rendered to the Company, a Parent Corporation or a Subsidiary and for other good and valuable consideration which the Committee has determined to be equal to the par value of the Shares, on the date hereof the Company awards to the Participant the number of PSUs specified for this grant in the Solium Shareworks Account accessible by the Participant.
Section 3.1 ‑ Vesting of PSUs
Section 3.2 ‑ Effect of a Change in Control
Section 3.3 ‑ Termination of PSUs
Until vested pursuant to Section 3.1 or 3.2, all PSUs issued to the Participant pursuant to this Agreement shall terminate immediately upon the Participant’s Termination of Service. For the avoidance of doubt, if the Participant experiences a Termination of Service prior to a Vesting Date for any reason not described in Section 3.1 or 3.2(b), all PSUs issued to the Participant pursuant to this Agreement shall immediately terminate.
Section 3.4 ‑ Payment of PSUs
Except as provided under Section 3.2(a) vested PSUs shall become payable, to the extent any amount becomes payable in respect of a vested PSU, as soon as practicable after [ ]; provided, however, if the Participant has not satisfied the requirements for Retirement or has not died or incurred a Disability, such payment shall be made by the March 15 immediately following the end of the Performance Period, and if the Participant has a Termination of Service due to death, Retirement or Disability prior to [ ], such vested PSUs shall become payable as soon as practicable after the Company determines the extent, if any, to which the performance criteria below have been satisfied, but in any event during [ ]. Each vested PSU shall entitle the Participant to receive a number of Shares, if any, determined by the addition of: (a) the Company’s cumulative EPS (as defined below) performance at a weight of [ ]% and (b) the Company’s average ROIC (as defined below) performance at a weight of [ ]%, with the total of that summation multiplied by (c) the Company’s relative Total Shareholder Return (“r-TSR”) (as defined below) results.
EPS. The Company’s target cumulative EPS for the Performance Period shall equal $[ ] to achieve a target level award, and $[ ] to achieve a maximum level award, with the entry point to achieve a payout set at $[ ]. For purposes hereof, “EPS” shall mean, for each fiscal year ending during the Performance Period, “diluted earnings per share” from continuing operations before items that management considers not representative of ongoing operations, as reported by the Company in its earnings release for each of the Company’s fiscal years ending during the Performance
Period and adjusted for the impact of acquisitions and divestitures and to exclude the effect of non-service pension costs. The cumulative EPS shall be the sum of the EPS for each fiscal year ending during the Performance Period. Results between the minimum and target cumulative EPS; and results between the target and maximum cumulative EPS shall be interpolated per the attached charts, as determined by the Committee.
ROIC. The Company’s target average of the annual ROIC for each of the Company’s three fiscal years ending during the Performance Period shall equal [ ]%, with a minimum of [ ]% and a maximum of [ ]%. For purposes hereof, “Return on Invested Capital” shall mean the number calculated by multiplying (a) the Company’s earnings before interest, taxes and items that management considers not representative of ongoing operations for each of the Company’s fiscal years during the Performance Period times (b) one minus the Company’s tax rate for the respective full year, [ ], [ ], and [ ] (as reflected in the EPS numerator), and dividing the product thereof by the sum of the (x) Company’s total debt and (y) total share owners’ equity, all as reflected on the Company’s consolidated balance sheet for each fiscal year of the Company ending during the Performance Period and adjusted for the impact of acquisitions and divestitures. The ROIC performance for each of the three years of the Performance Period will be averaged for purposes of determining the ROIC payout. For purposes of computing total share owners’ equity for the denominator of this calculation, the accumulated other comprehensive income related to pension and retiree medical shall be held constant for each year of the Performance Period at the amount reflected on the Company’s consolidated balance sheet as of December 31, [ ]. Results between the minimum and target average ROIC; and, results between the target and maximum average ROIC shall be interpolated per the attached charts, as determined by the Committee.
r-TSR. If the Company’s r-TSR for the Performance Period is (a) less than or equal to the 25th percentile the multiplier is 0.8; or (b) equal to or above the 75th percentile, then the multiplier is 1.2. Results above the 25th percentile, but less than the 75th percentile performance shall be interpolated as per the attached charts, as determined by the Committee. For purposes hereof, “r-TSR” means, the relative rate of return reflecting stock price appreciation, plus the reinvestment of dividends in additional shares of stock, from the beginning of the Performance Period through the end of the Performance Period of the Common Stock as compared to that of the shares of common stock of each member of the Peer Group (as defined below). For purposes of calculating r-TSR for the Company and the members of the Peer Group, the beginning stock price will be based on the closing price on the trading day immediately prior to the first day of the Performance Period on the principal stock exchange on which the stock is then traded and the ending stock price will be based on the closing price on the last day of the Performance Period on the principal stock exchange on which the stock then trades (and also adjusted for any stock splits). The “Peer Group” means the S&P 1500 – Materials (GICS# 1510) as of the Grant Date. The Peer Group r-TSR will be adjusted by the Committee, in its discretion, to reflect acquisitions or dispositions of Peer Group members, the pro ration of r-TSR due to stock splits and a zero r-TSR for the bankruptcy or delisting of a member of the Peer Group.
If the Company’s performance falls below either EPS or ROIC minimum amount, no Shares shall become payable with respect to such component of the PSU, provided that failure to meet or exceed the minimum amount with respect to EPS or ROIC shall not affect any payment due with respect to the other measure of performance. PSUs shall have a zero value if the Company fails to meet or exceed both the minimum EPS and the minimum ROIC during the Performance Period. Conversely, to the extent the Company’s performance exceeds either performance measure, no amounts in excess of such maximum performance measures shall be taken into account in determining the amount payable with respect to such PSU. Charts illustrating the [ ] through [ ] performance measures are shown in Attachment A.
Section 3.5 – Dividend Equivalents
A bookkeeping account will be established by the Company to which Dividend Equivalents equal to the product of (a) the number of PSUs subject to this Agreement, and (b) the dividend declared on a single share of Common Stock will be credited. To the extent the Participant becomes vested in the PSUs issued pursuant to this Agreement, such Dividend Equivalents will be converted to cash or additional Shares (as may be determined by the Administrator in its sole discretion) and will be paid to the Participant at the same time as the Shares of Common Stock are issued with respect to the vested PSUs. The Dividend Equivalents will cease and be forfeited upon the earlier of (i) the settlement of the PSUs into shares of Common Stock, and (ii) the forfeiture and termination of the PSUs under this Agreement.
Section 4.1 ‑ Covenant Not to Compete
Participant covenants and agrees that prior to Participant’s Termination of Service and for a period of three (3) years following the Participant’s Termination of Service, including without limitation termination for Cause or without Cause, Participant shall not, in any country in which the Company, any Parent Corporation or any Subsidiary manufactures or sells its products, engage, directly or indirectly, whether as principal or as agent, officer, director, employee, consultant, shareholder or otherwise, alone or in association with any other person, corporation or other entity, in any Competing Business.
Section 4.2 ‑ Non-Solicitation of Employees
Section 4.3 ‑ Equitable Relief
Participant agrees that it is impossible to measure in money the damages that will accrue to the Company in the event that Participant breaches any of the restrictive covenants provided in Sections 4.1 or 4.2 hereof. Accordingly, in the event that Participant breaches any such restrictive covenant, the Company shall be entitled to an injunction restraining Participant from further violating such restrictive covenant. If the Company shall institute any action or proceeding to enforce any such restrictive covenant, Participant hereby waives the claim or defense that the Company has an adequate remedy at law and agrees not to assert such claim or defense. The foregoing shall not prejudice the Company’s right to require Participant to account for and pay over to the Company, and Participant hereby agrees to account for and pay over, any compensation, profits, monies, accruals or other benefits derived or received by Participant as a result of any transaction constituting a breach of any of the restrictive covenants provided in Sections 4.1 or 4.2 hereof.
Section 5.1 ‑ PSUs Not Transferable
Section 5.3 ‑ Conditions to Issuance of Stock Certificates
Section 5.4 ‑ Notices
Any notice to be delivered to the Company under this Agreement shall be delivered to such individual and in such form as the Committee shall specify from time to time and communicate to the Participant. Any notice to be delivered to the Participant shall be addressed to the Participant at the Participant’s last address reflected in the Company’s records. Notices may, as approved by the Committee be given electronically (or by facsimile), and if so approved will be deemed given when sent. Otherwise, notices shall be sent by reputable overnight courier or by certified mail (return receipt requested) through the United States Postal Service.
Section 5.5 ‑ Rights as Stockholder
Participant shall not, by virtue of the PSUs, be entitled to vote in any Company election, receive any dividend in respect of Shares subject to the PSUs (except as provided under Section 3.5 above) or exercise any other rights of a stockholder of the Company. The PSUs shall not confer upon the Participant any rights of a stockholder of the Company unless and until the PSUs have vested and certificates representing the Shares subject to the PSUs shall have been issued by the Company pursuant to the terms of this Agreement.
Section 5.6 ‑ Titles
Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
Section 5.7 ‑ Conformity to Laws
Agreement shall be administered, and the PSUs shall be granted, 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 PSUs granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
Section 5.8 ‑ Section 409A
Section 409A of the Internal Revenue Code provides that “nonqualified deferred compensation” that does not meet the requirements specified in Section 409A may become subject to penalty taxes. Currently, the Company does not believe that PSUs constitute nonqualified deferred compensation within the meaning of Section 409A; however, if, in the future, the PSUs are or may become subject to Section 409A, the Committee may make such modifications to the Plan and this Agreement as may become necessary or advisable, in the Committee’s sole discretion, to either comply with Section 409A or to avoid its application to the PSUs.
Section 5.9 ‑ Amendment
This Agreement and the Plan may be amended without the consent of the Participant provided that such amendment would not impair any rights of the Participant under this Agreement. No amendment of this Agreement shall, without the written consent of the Participant, impair any rights of the Participant under this Agreement.
Section 5.10 ‑ Tax Withholding
Section 5.11 ‑ Clawback
Notwithstanding anything contained in the Agreement to the contrary, all PSUs and Dividend Equivalents awarded under this Agreement, and any Shares issued upon settlement hereunder shall be subject to forfeiture, or repayment pursuant to the terms of any policy that the Company may implement in compliance with the requirements of applicable law, including without limitation the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder.
Section 5.12 ‑ 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.
IN WITNESS HEREOF, this Agreement has been executed and delivered by the parties hereto.