- --------------------------------------------------------------------------------
 
                                     [LOGO]
                              OWENS-ILLINOIS, INC.
 
                           NOTICE AND PROXY STATEMENT
 
                                      FOR
 
                       THE ANNUAL MEETING OF SHARE OWNERS
 
                                   TO BE HELD
 
                            WEDNESDAY, MAY 11, 1994
 
                             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 11, 1994, 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. The approval of the Second Amended and Restated Stock Option Plan for
        Key Employees of Owens-Illinois, Inc.
 
     3. The approval of the Stock Option Plan for Directors of Owens-Illinois,
        Inc.
 
     4. 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, the Board of Directors' nominees for election as directors and the
other matters to be considered at the Annual Meeting. Also enclosed is a copy of
the Company's Annual Report which describes the results of our operations during
1993 and provides other information about the Company which will be of interest.
 
     The Board of Directors fixed the close of business on March 16, 1994, 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 and in favor of each of the other matters to be considered at the
meeting, 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
 
                                          THOMAS L. YOUNG
                                          Secretary
M
arch 31, 1994
Toledo, Ohio

<PAGE>
                              OWENS-ILLINOIS, INC.
                                  ONE SEAGATE
                               TOLEDO, OHIO 43666
                            ------------------------
             PROXY STATEMENT FOR THE ANNUAL MEETING OF SHARE OWNERS
                            TO BE HELD MAY 11, 1994
                            ------------------------
 
     The Annual Meeting of the share owners of Owens-Illinois, Inc. (herein
called the "Company") will be held on Wednesday, May 11, 1994, 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 and consider the approval of an amended Employee Benefit
Plan and a Stock Option Plan for outside directors, all 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 the other matters to be voted on, 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, 1994.
 
     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 16, 1994 (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 Joseph H. Lemieux, Henry R. Kravis and
Michael W. Michelson as directors of the Company for a term of three years, (b)
for the approval of the benefit plans described below and (c) 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 I directors whose terms expire at the 1995 Annual
Meeting, four of whom are Class II directors whose terms expire at the 1996
Annual Meeting, and three of whom are Class III directors whose terms expire at
this year's Annual Meeting. Nine of the eleven directors listed herein,
including the nominees, have served as directors since the last annual meeting.
Two of the directors, Mr. Dineen and Mr. McMackin, were
                                       1

<PAGE>
appointed by the Board effective March 31, 1994 to fill vacancies created by the
expansion of the Board as of that date to eleven members.
 
     The Board has nominated three persons for election as Class III directors
to serve for a three-year term expiring in 1997 and until their successors have
been elected and qualified. The three nominees of the Board are Joseph H.
Lemieux, Henry R. Kravis and Michael W. Michelson, 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 III: NOMINEES FOR 3-YEAR TERM
 


Joseph H. Lemieux                                            Director since 1987
Chairman of the Board and                                                 Age 63
Chief Executive Officer
Owens-Illinois, Inc.

 
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 Health Care and Retirement Corporation, National City
Corporation, National City Bank, Northwest, Libbey Inc. and Owens-Illinois
Group, Inc. He is chairman of the Executive Committee.
 


Henry R. Kravis                                              Director since 1987
General Partner                                                           Age 50
Kohlberg Kravis Roberts & Co., L.P.

 
Mr. Kravis has been a general partner of each of Kohlberg Kravis Roberts & Co.,
L.P. and KKR Associates, L.P. for more than five years. Mr. Kravis is a director
of American Re Corporation, AutoZone, Inc., Duracell International, Inc.,
Flagstar Companies, Inc., Flagstar Corporation, IDEX Corporation, K-III
Communications Corp., RJR Nabisco Holdings Corp., RJR Nabisco, Inc., Safeway
Inc., The Stop & Shop Companies, Inc., Union Texas Petroleum Holdings, Inc.,
Walter Industries, Inc., World Color Press, Inc. and Owens-Illinois Group, Inc.
 


Michael W. Michelson                                         Director since 1987
General Partner                                                           Age 42
Kohlberg Kravis Roberts & Co., L.P.

 
Mr. Michelson has been a general partner of each of Kohlberg Kravis Roberts &
Co., L.P. and KKR Associates, L.P. for more than five years. Mr. Michelson is a
director of AutoZone, Inc., Fred Meyer, Inc., Red Lion Properties, Inc., Union
Texas Petroleum Holdings, Inc. and Owens-Illinois Group, Inc. He is chairman of
the Compensation Committee and a member of the Executive Committee.
 
                                       2

<PAGE>
                         CLASS I: TERM EXPIRES IN 1995
 


Lee A. Wesselmann                                            Director since 1988
Senior Vice President and                                                 Age 58
Chief Financial Officer
Owens-Illinois, Inc.

 
Mr. Wesselmann has been Senior Vice President and Chief Financial Officer and a
director of the Company since 1988. He previously served with the Company as
Secretary (1988-1990), and Vice President and Comptroller (1984-1988). Mr.
Wesselmann is a director of Owens-Illinois Group, Inc. He is a member of the
Executive Committee.
 


James H. Greene, Jr.                                         Director since 1987
General Partner                                                           Age 43
Kohlberg Kravis Roberts & Co., L.P.

 
Mr. Greene has been a General Partner of each of Kohlberg Kravis Roberts & Co.,
L.P. and KKR Associates, L.P. since 1993; prior thereto he was an executive of
Kohlberg Kravis Roberts & Co., L.P. and a limited partner of KKR Associates,
L.P. for more than five years. Mr. Greene is a director of RJR Nabisco Holdings
Corp., RJR Nabisco, Inc., Safeway Inc., The Stop & Shop Companies, Inc., Union
Texas Petroleum Holdings, Inc., The Vons Companies, Inc. and Owens-Illinois
Group, Inc. He is a member of the Executive and Compensation Committees.
 


George R. Roberts                                            Director since 1987
General Partner                                                           Age 50
Kohlberg Kravis Roberts & Co., L.P.

 
Mr. Roberts has been a general partner of each of Kohlberg Kravis Roberts & Co.,
L.P. and KKR Associates, L.P. for more than five years. Mr. Roberts is a
director of American Re Corporation, AutoZone, Inc., Duracell International,
Inc., Flagstar Companies, Inc., Flagstar Corporation, IDEX Corporation, K-III
Communications Corp., Red Lion Properties, Inc., RJR Nabisco Holdings Corp., RJR
Nabisco, Inc., Safeway Inc., The Stop & Shop Companies, Inc., Union Texas
Petroleum Holdings, Inc., Walter Industries, Inc., World Color Press, Inc. and
Owens-Illinois Group, Inc.
 
     Messrs. Kravis and Roberts are first cousins.


Robert J. Dineen                                             Director since 1994
Chairman of the Board of Directors                                        Age 64
Layne, Inc.

 
Mr. Dineen has been Chairman of the Board of Directors of Layne, Inc. 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, Inc.
and Kansas City Power & Light Company. He is a member of the Audit Committee.
 
                                       3

<PAGE>
                         CLASS II: TERM EXPIRES IN 1996
 


Edward A. Gilhuly                                            Director since 1987
Executive                                                                 Age 34
Kohlberg Kravis Roberts & Co., L.P.

 
Mr. Gilhuly has been an executive of Kohlberg Kravis Roberts & Co., L.P. and a
limited partner of KKR Associates, L.P. for more than five years. Mr. Gilhuly is
a director of Layne, Inc., Union Texas Petroleum Holdings, Inc., Red Lion
Properties, Inc. and Owens-Illinois Group, Inc. He is a member of the Executive,
Compensation and Audit Committees.
 

Robert J. Lanigan                                            Director since 1987
Chairman Emeritus                                                         Age 65

 
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 Chrysler Corporation, The Dun and Bradstreet
Corporation, Sonat, Inc. and Owens-Illinois Group, Inc.
 


Robert I. MacDonnell                                         Director since 1987
General Partner                                                           Age 56
Kohlberg Kravis Roberts & Co., L.P.

 
Mr. MacDonnell has been a general partner of each of Kohlberg Kravis Roberts &
Co., L.P. and KKR Associates, L.P. for more than five years. Mr. MacDonnell is a
director of AutoZone, Inc., Safeway Inc., The Vons Companies, Inc. and
Owens-Illinois Group, Inc.
 


John J. McMackin, Jr.                                        Director since 1994
Partner                                                                   Age 42
Williams & Jensen

 
Mr. MacMackin has been a partner of Williams & Jensen for more than five years.
He is a member of the Audit 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.
 
     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.
 
                                       4

<PAGE>
     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 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 1993, the Board held two formal meetings and the Audit Committee and
the Compensation Committee each held one formal meeting. The Executive Committee
held no meetings in 1993. During 1993, 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
 
     With the exception of Mr. Lanigan, 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. In 1990, the Company entered into an
agreement with Mr. Lanigan pursuant to which Mr. Lanigan agreed to provide
consulting services to the Company, as and to the extent requested by Mr.
Lemieux, for the five-year period commencing on January 1, 1991. Under this
agreement, Mr. Lanigan receives an annual fee of $250,000 and certain other
non-monetary consideration as well as reimbursement for travel and other
expenses incurred in connection with his performance of consulting services
requested by Mr. Lemieux. The agreement further provides that the annual fee
payable to Mr. Lanigan also constitutes his fee for continuing to serve on the
Board.
 
SUMMARY COMPENSATION TABLE
 
     The following table shows, for the years ended December 31, 1991, 1992 and
1993, 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................   1993  $ 515,000  $ 656,000    $  31,497   $       0          15,000     $ 349,125   $   7,013
  Chairman and Chief Executive      1992    498,333    450,000       35,765           0         200,000       277,313       6,866
  Officer                           1991    475,000    475,000        *               0               0       228,000       *
Robert S. Coakley................   1993    246,100    175,000       21,362           0           5,000       101,430      26,732(7)
  Senior V.P. & G.M., Mkting.,      1992    243,417    140,000       17,247           0          20,000        83,385       6,866
  Public Affairs & Spec. Glass      1991    230,000    150,000        *               0               0        80,000       *
Lee A Wesselmann.................   1993    238,208    212,000        7,916           0           7,000       105,350       6,958
  Senior V.P. & Chief               1992    227,583    140,000       17,873           0          25,000        82,875       6,828
  Financial Officer                 1991    215,000    150,000        *               0               0        83,125       *
Terry L. Wilkison................   1993    219,667    215,000        6,934           0          10,000        74,480       6,184
  Executive V.P., Domestic          1992    202,667    140,000        7,682           0          40,000        58,820       6,080
  Packaging Operations              1991    190,000    150,000        *               0               0        60,800       *
R. Scott Trumbull................   1993    213,750    209,000       10,977           0          10,000        72,520      26,044(8)
  Executive V.P.,                   1992    195,833    100,000       11,128           0          30,000        58,820       5,875
  International Operations          1991    185,000    110,000        *               0               0        60,800       *
</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. Amounts, if any, deferred at the election of an executive 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 1993.
(5) The amounts disclosed in this column represent awards under the
    Owens-Illinois, Inc. Performance Award Plan for the year indicated.
(6) The amounts disclosed in this column represent matching cash contributions
    by the Company to the Stock Purchase and Savings Program, a defined
    contribution plan.
(7) Also includes $19,877 paid to Mr. Coakley for accumulated vacation.
(8) Also includes the $20,194 cash value of a whole life insurance policy
    purchased by the Company and transferred to Mr. Trumbull pursuant to the
    Company's Senior Executive Life Insurance Plan.
 
                                       6

<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
 
     The following table provides information on option grants in 1993 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                          (#)(2)         FISCAL YEAR       ($/SH)        DATE          5%           10%
- -----------------------------  --------------  -----------------  -----------  -----------  -----------  -----------
<S>                            <C>             <C>                <C>          <C>          <C>          <C>
Joseph H. Lemieux............        15,000              3.4%      $   11.50      04/02/03  $   108,675  $   274,275
Robert S. Coakley............         5,000              1.1           11.50      04/02/03       36,225       91,425
Lee A. Wesselmann............         7,000              1.6           11.50      04/02/03       50,715      127,995
Terry L. Wilkison............        10,000              2.3           11.50      04/02/03       72,450      182,850
R. Scott Trumbull............        10,000              2.3           11.50      04/02/03       72,450      182,850
</TABLE>

 
- ---------------
 
(1) No SAR's were granted to any of the named executive officers during 1993.
 
(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."
 

  STOCK PRICE     RESULTING
   MULTIPLE      STOCK PRICE    EXERCISE PERCENTAGE
       120%        $13.80              25%
       144%         16.56              50%
       172%         19.78              75%
       206%         23.69             100%

 
(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 $18.745 and $29.785, 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 1993 and prior years to the named
executive officers and held by them at December 31, 1993. None of the named
executive officers exercised any stock options during 1993.
 

<TABLE><CAPTION>

                                                            NUMBER OF SECURITIES
                                                           UNDERLYING UNEXERCISED        VALUE OF UNEXERCISED
                                                              OPTIONS/SARS AT         IN-THE-MONEY OPTIONS/SARS
                                                             DECEMBER 31, 1993         AT DECEMBER 31, 1993(1)
                                                         --------------------------  ----------------------------
     NAME                                                EXERCISABLE  UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
- -------------------------------------------------------  -----------  -------------  -------------  -------------
<S>                                                      <C>          <C>            <C>            <C>
Joseph H. Lemieux......................................     654,056        215,000   $   4,823,663   $    13,125
Robert S. Coakley......................................      40,000         25,000         295,000         4,375
Lee A. Wesselmann......................................     140,637         32,000       1,037,198         6,125
Terry L. Wilkison......................................     128,131         50,000         944,966         8,750
R. Scott Trumbull......................................     132,000         40,000         973,500         8,750
</TABLE>

 
- ---------------
 
(1) Based on the closing price of the Company's Common Stock on the New York
    Stock Exchange on that date of $12.375.
 
                                       8

<PAGE>
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 1991-1993,
1992-1994 and 1993-1995 award periods, performance was or 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 those periods. 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        ESTIMATED FUTURE PAYOUTS UNDER
                                                                PERIOD UNTIL        NON-STOCK PRICE-BASED PLANS
                                                                 MATURATION   ---------------------------------------
     NAME                                                        OR PAYOUT     THRESHOLD     TARGET        MAXIMUM
- --------------------------------------------------------------  ------------  -----------  -----------  -------------
<S>                                                             <C>           <C>          <C>          <C>
Joseph H. Lemieux.............................................     1991-1993     $71,250      $356,250          (1)
                                                                   1992-1994     $76,500      $382,500          (1)
                                                                   1993-1995     $81,000      $405,000          (1)
Robert S. Coakley.............................................     1991-1993     $20,700      $103,500          (1)
                                                                   1992-1994     $22,149      $110,745          (1)
                                                                   1993-1995     $22,149      $110,745          (1)
Lee A. Wesselmann.............................................     1991-1993     $21,500      $107,500          (1)
                                                                   1992-1994     $23,010      $115,050          (1)
                                                                   1993-1995     $24,400      $122,000          (1)
Terry L. Wilkison.............................................     1991-1993     $15,200       $76,000          (1)
                                                                   1992-1994     $16,416       $82,080          (1)
                                                                   1993-1995     $18,400       $92,000          (1)
R. Scott Trumbull.............................................     1991-1993     $14,800       $74,000          (1)
                                                                   1992-1994     $15,840       $79,200          (1)
                                                                   1993-1995     $18,000       $90,000          (1)
</TABLE>

 
- ---------------
 
(1) The maximum dollar amount that may be earned under PAP is not capped.
 
                                       9

<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>

                                                                     YEARS OF CREDITED SERVICE
                                                  ---------------------------------------------------------------
         HIGHEST CONSECUTIVE THREE-YEAR
            AVERAGE ANNUAL EARNINGS                   20           25           30           35           40
- ------------------------------------------------  -----------  -----------  -----------  -----------  -----------
<S>                                               <C>          <C>          <C>          <C>          <C>
$  200,000......................................  $    53,387  $    66,734  $    80,080  $    93,427  $    98,427
   400,000......................................      110,353      137,941      165,530      193,118      203,118
   600,000......................................      167,496      209,370      251,244      293,118      308,118
   800,000......................................      224,639      280,799      336,958      393,118      413,118
 1,000,000......................................      281,782      352,227      422,673      493,118      518,118
 1,200,000......................................      338,925      423,656      508,387      593,118      623,118
 1,400,000......................................      396,067      495,084      594,101      693,118      728,118
 1,600,000......................................      453,210      566,513      679,815      793,118      833,118
</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 and Senior
Management Incentive 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, 1994,
Mr. Lemieux had 36 years of credited service, Mr. Coakley had 11 years of
credited service, Mr. Wesselmann had 33 years of credited service, Mr. Wilkison
had 30 years of credited service and Mr. Trumbull 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 are transferred to the participants subject, in part,
to the executive agreeing not to compete with the Company.
 
                                       10

<PAGE>

CERTAIN TRANSACTIONS
 
     During 1993, the law firm of Williams & Jensen, of which Mr. McMackin is a
partner, 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 on various Company matters.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
D
ECISIONS
 
     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 and Michelson are general partners and
Mr. Gilhuly is an executive of Kohlberg Kravis Roberts & Co., L.P., which
provides management, consulting and financial services to the Company for an
annual fee. In 1993 the payment for the management fee and expenses was
$858,500. 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.
 
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 Stock Option 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 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
 
                                       11

<PAGE>
     BASE SALARY. Base salaries are set at levels intended to be competitive
with companies of comparable size, particularly those in competitive industries.
The Committee reviews base salaries annually and periodically provides salary
adjustments based on competitive considerations. Mr. Lemieux received an
adjustment in base salary in November, 1993, which was 17 months after his
previous increase.
 
     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 in the case of the Chief Executive Officer). The SMIP provides
for annual incentive awards consisting of a corporate performance component, an
operating unit 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 an annual rate of return on net assets ("RONA") established by the
Board as the performance objective for the year.
 
     The SMIP establishes precise quantitative relationships between performance
and payout percentages within defined minimum/maximum ranges. For any covered
executive including the Chief Executive Officer, the maximum SMIP payment
percentage under the Plan is 150% of his or her target incentive percentage.
 
     Based on the Company's RONA performance in 1993 in excess of its 1993 RONA
objective, and further based on the Committee's evaluation of certain other
performance factors relating to the Chief Executive Officer, including his
leadership in undertaking and sustaining a comprehensive reengineering program
for most of the Company's domestic operations and related corporate staff
functions and, further, the Company's successful completion of a number of
difficult and complex restructuring transactions during the year, Mr. Lemieux
was granted an SMIP award of $656,000 in 1993.
 
     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 Stock Option 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
1992-94 and 1993-95 award periods, performance will be evaluated in comparison
to the Company's attained levels of RONA and earnings per share on an equally
weighted basis 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.
 
     Due to the pendency of the evaluation and review of SMIP and PAP in 1992,
no PAP allotments for the 1991-93 or 1992-94 award periods were made to Mr.
Lemieux or other executive officers in 1992. However, in 1993, the Committee
approved allotments to Mr. Lemieux for the 1991-93, 1992-94, and 1993-95 award
periods. Mr. Lemieux's 1991-93 allotment was $356,250, and the Committee
determined the performance in the 1991-93 award period relative to the RONA and
earnings per share objectives for this period warranted a 98% payout of Mr.
Lemieux's 1991-93 PAP allotment.
 
     The Company Stock Option 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
                                       12

<PAGE>
available until the fifth year after the grant date unless exercisability has
been accelerated by virtue of increase(s) in the Company stock price. In 1993,
Mr. Lemieux received options on 15,000 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 proposed regulations
purporting to interpret and implement the provisions of Section 162(m).
 
     In order to qualify the Company's Stock Option Plan as performance-based
compensation under this legislation and the proposed regulations, the Committee
has approved, subject to share owner approval at this meeting, certain
amendments to this Plan.
 
     Mr. Lemieux is the only executive who earned more than $1 million in 1993
under the Company's cash compensation plans. 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 1994
such that his total compensation will not in any event exceed the $1 million
deductibility limit in 1994.
 
                                          Michael W. Michelson, Chairman
 
                                          Edward A. Gilhuly
 
                                          James H. Greene, Jr.
 
                                       13

<PAGE>
PERFORMANCE GRAPH
 



[Graph entitled "Comparison of Cumulative Total Return among Owens-Illinois,
S&P 500 and Packaging Groups"]

See Exhibit (1) filed on Form SE dated 3/31/94 which Exhibit is hereby 
incorporated by reference.



 
     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.
 
     During 1993, the Company sold its Libbey glass tableware business, its
remaining 50% interest in the television glass business, and a 51% interest in
its Kimble pharmaceutical and laboratory glassware business. As a result, the
Company has changed the packaging group from the prior year performance graph to
eliminate companies in those lines of business. In addition, several companies
have been added to the group principally as a result of the formation of new
public companies. The revised group is presented above as the "revised"
packaging group and, for reference, the performance of the group as constituted
in the prior year is also shown above as the "previous" packaging group.
 
     The "revised" packaging group consists of: Aluminum Co. of America,
Aptargroup Inc., Avery Dennison Corp., Ball Corp., Bemis Co., Chesapeake Corp.,
Continental Can, Crown Cork & Seal Co., Johnson Controls Inc., Kerr Group Inc.,
Lawson Mardon Group Ltd Class A, Liqui-Box Corp., The Mead Corp., Multi-Color
Corp., Owens-Illinois Inc., Reynolds Metals Co., Sealed Air Corp., Sealright
Co., Sonoco Products Co., Tredegar Industries, U.S. Can Co., Vitro Sociedad
Anomina (ADSs), and
                                       14

<PAGE>
through the dates market quotations ceased to be available due to acquisition,
Engraph Inc., Heekin Can Inc., and Van Dorn Co.
 
     The "previous" packaging group included the following companies which are
not in the "revised" packaging group: Corning Inc., Lancaster Colony Corp.,
Newell Co., Oneida Ltd., and West Co. Conversely, companies which are included
in the "revised" packaging group, but were not in the "previous" packaging group
are: Aptargroup Inc., Multi-Color Corp., Tredegar Industries, and U.S. Can Co.
 
     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.
 
     The performance shown above for the Company's Common Stock assumes $100 was
invested at the initial public offering price of $11 per share on December 11,
1991. For comparative purposes, the five-year cumulative total returns for the
S&P 500 and the packaging groups have been adjusted to equal $100 on that date.
 
                                       15

<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 16, 1994 (except as otherwise noted in
the footnotes below) by each beneficial owner of more than five percent of the
Company's outstanding Common Stock, 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           30.3%
  9 West 57th Street
  New York, New York 10019
Trust for Owens-Illinois Hourly Retirement Plan..................................         8,880,975            7.5
  280 Park Avenue
  New York, New York 10017
Trust for Owens-Illinois Salary Retirement Plan..................................         8,303,839            7.0
  280 Park Avenue
  New York, New York 10017
Neuberger & Berman(3)............................................................         8,429,666            7.1%
  605 Third Avenue
  New York, New York 10158
FMR Corp.(4).....................................................................         6,801,800            5.7%
  82 Devonshire Street
  Boston, Massachusetts 02109
Joseph H. Lemieux(1).............................................................           839,702(5)         0.7
Lee A. Wesselmann(1).............................................................           190,488(5)         0.2
Robert J. Dineen.................................................................          --               --
Edward A. Gilhuly................................................................             5,000         --
James H. Greene, Jr(2)...........................................................          --               --
Henry R. Kravis(2)...............................................................          --               --
Robert J. Lanigan(1).............................................................         1,075,000            0.9
Robert I. MacDonnell(2)..........................................................          --               --
John J. McMackin, Jr.............................................................          --               --
Michael W. Michelson(2)(6).......................................................            20,000         --
George R. Roberts(2).............................................................          --               --
Robert S. Coakley(1).............................................................            51,291(5)      --
Terry L. Wilkison(1).............................................................           174,884(5)         0.1
R. Scott Trumbull(1).............................................................           171,373(5)         0.1
All directors and executive officers as a group (other than as set forth in
relation to KKR Associates, L.P.) (27 persons)...................................         3,536,754(5)         2.9%
</TABLE>

 
                                                   (Footnotes on following page)
 
                                       16

<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 which such person
    has the right to acquire 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,
    Wesselmann, Lanigan, Coakley, Wilkison and Trumbull. The number of shares
    beneficially owned includes 654,056 shares subject to options granted to Mr.
    Lemieux; 140,637 shares subject to options to Mr. Wesselmann; 772,722 shares
    subject to options granted to Mr. Lanigan; 40,000 shares subject to options
    granted to Mr. Coakley; 128,131 shares subject to options granted to Mr.
    Wilkison; 132,000 shares subject to options granted to Mr. Trumbull; and
    2,628,691 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.
    (all directors of the Company), Paul E. Raether, Saul A. Fox and, Michael T.
    Tokarz are the general partners. Such persons may be deemed to share
    beneficial ownership of the shares shown as owned by KKR Associates, L.P.
    Mr. Gilhuly is a limited partner of KKR Associates, L.P. The foregoing
    persons disclaim beneficial ownership of such shares of the Company.
 
(3) The Company has received a Schedule 13G filed by Neuberger & Berman with
    respect to the shares of Common Stock identified as owned as of December 31,
    1993 and in which such entity asserts that it shares dispositive power or,
    in some cases, has sole or shared voting power with respect to such shares,
    but that the economic ownership interest belongs to many unrelated clients
    of such entity. The Company has not attempted to independently verify any of
    the foregoing information, which is based solely on the information
    contained in the Schedule 13G.
 
(4) The Company has received a Schedule 13G filed by FMR Corp., Edward C.
    Johnson 3d and Fidelity Management & Research Company with respect to the
    shares of Common Stock identified as owned as of December 31, 1993 and in
    which such reporting persons assert dispositive and/or voting power with
    respect to portions or all of such shares as a result of their direct or
    indirect investment advisory relationship to, or ownership interest in,
    various investment companies, institutional accounts or investment advisers
    which own such shares. The Company has not attempted to independently verify
    any of the foregoing information which is based solely on the information
    contained in the Schedule 13G.
 
(5) The table includes the number of shares of Common Stock that Joseph H.
    Lemieux, Lee A. Wesselmann, Robert S. Coakley, Terry L. Wilkison, R. Scott
    Trumbull 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 December 31, 1993.
 
(6) 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.
 
                                       17

<PAGE>

                                   PROPOSAL 2
            APPROVAL OF THE SECOND AMENDED AND RESTATED STOCK OPTION
                 PLAN FOR KEY EMPLOYEES OF OWENS-ILLINOIS, INC.
 
PROPOSED AMENDMENT
 
     The Committee has adopted, subject to share owner approval, the Second
Amended and Restated Stock Option Plan for Key Employees of Owens-Illinois, Inc.
(the "Restated Plan") which was originally adopted on July 20, 1987 and which
was first amended and restated on October 14, 1991 (prior to the second
amendment and restatement, the "Stock Option Plan"). The Restated Plan contains
amendments to the Stock Option Plan which (a) limit to 250,000 shares of Common
Stock the number of shares subject to options which may be granted under the
Restated Plan in any given year to any single optionee (the "Award Limit"), (b)
provide that the stock option agreements evidencing an option shall include
terms and conditions as may be required in order for such options to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Internal Revenue Code of 1986, as amended (the "Code"), (c) provide that with
respect to the options of any optionee who retires after reaching the Company's
normal retirement age or who takes early retirement, the Committee may extend
the exercisability of options for up to three years from the date of the
optionee's termination of employment, and (d) provide that with respect to the
options of any optionee, the Committee may extend the exercisability of options
for up to three years from the date of the optionee's termination of employment
and may provide that such options shall become exercisable immediately, or in
accordance with the schedule of exercisability which would be applicable for
such option but for the optionee's termination of employment, or in accordance
with any other schedule determined in the Committee's discretion.
 
DESCRIPTION OF RESTATED PLAN
 
     Shares Subject to Plan. The Restated Plan provides for the granting of
Incentive Stock Options ("ISOs") and non-qualified stock options ("NQSOs")
covering an aggregate of 7,488,762 shares of the Common Stock. If any option
expires or is cancelled without exercise, the shares covered thereby may be
subject to the grant of future options.
 
     Eligibility. Any key employee of the Company or of any parent or subsidiary
is eligible to be granted options under the Restated Plan. Eligibility to
participate in the Restated Plan is determined by the Committee. As of the date
hereof, approximately 450 employees are eligible to participate in the Restated
Plan.
 
     Exercise Price. Each Option shall have an exercise price of not less than
100% or, in the case of an ISO granted to an individual owning more than 10% of
the combined voting power of the Company, 110% of the fair market value of such
shares on the date the option is granted for as long as the Common Stock is
listed on the New York Stock Exchange, the fair market value of the Common Stock
generally will be the closing price on such exchange of the Common Stock at the
end of the business day preceding the date of grant.
 
     Administration. The Restated Plan is administered by the Committee, which
is responsible for determining the persons to whom options shall be granted, the
number of shares to be subject to such options (subject to the Award Limit) and
the other terms and conditions of the options, including the terms on which such
options shall become exercisable, subject to certain limitations set forth in
the Restated Plan.
 
                                       18

<PAGE>
     Terms of Options. All options granted pursuant to the Restated Plan will
expire no later than ten years or, in the case of NQSOs, ten years and one day
from the date the option was granted. Options are not transferable except by
will or pursuant to the applicable laws of descent and distribution upon death
of the optionee. The terms of the options granted under the Restated Plan are
provided in separate stock option agreements.
 
     Payment for Shares. Upon exercise of any Option, the purchase price of
Common Stock must be paid in full in cash or, in certain circumstances, with
shares of Common Stock owned by the optionee or issuable to the optionee upon
exercise of the option, or a promissory note of the optionee, or a combination
of such forms of consideration as provided in the Restated Plan. Each share
received by the Company in payment of the purchase price will be valued at its
fair market value on the date of exercise. When the per share value of the
Common Stock received is higher than the per share exercise price of an Option,
it is possible that a participant may exercise the full amount of his Option
without any cash payment of the exercise price.
 
     Change in Common Stock. In the event that the outstanding shares of Common
Stock are changed into or exchanged for a different number or kind of shares of
capital stock or other securities of the Company by reason of a reorganization,
merger, consolidation, recapitalization, reclassification, stock split, stock
dividend, combination of shares, or otherwise, the number and kind of shares
covered by the Restated Plan and by each outstanding option, and the exercise
price per share, shall be adjusted (such adjustments with respect to outstanding
shares shall be made proportionately).
 
     Amendment and Termination. The Restated Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Committee. However, certain provisions of the plan may not be
amended or modified without share owner approval. These provisions include the
provisions respecting the maximum number of shares which may be issued on
exercise of options, the Award Limit, eligibility requirements for receipt of
grants, minimum option price requirements for receipt of grants, minimum option
price requirements and extending the period during which the Restated Plan is in
effect.
 
     Past and Future Grants. Certain information with respect to options
previously granted to the named executive officers is set forth under "Director
and Executive Compensation and Other Information," above. On March 16, 1994, the
closing price of the Common Stock on the New York Stock Exchange was $12.
 
     The following table sets forth, as of March 16, 1994, the aggregate number
of shares of the Common Stock subject to stock options granted to the named
executive officers as well as all current executive officers as a group, all
current directors who are not executive officers as a group and all employees as
a group.
 

<TABLE><CAPTION>

                                                                                NUMBER OF SHARES       AVERAGE
                                                                                OF COMMON STOCK       PER SHARE
                                                                               SUBJECT TO OPTIONS  EXERCISE PRICE
                                                                               ------------------  ---------------
<S>                                                                            <C>                 <C>
Joseph H. Lemieux............................................................          869,056        $    6.84
Robert S. Coakley............................................................           65,000             7.81
Lee A. Wesselmann............................................................          172,637             6.35
Terry L. Wilkison............................................................          178,131             7.05
R. Scott Trumbull............................................................          172,000             6.69
All current executive officers as a group (18 persons).......................        2,470,101             6.71
All current directors who are not executive officers as a group (9
persons).....................................................................          772,722             5.24
All employees, including all current officers who are not executive officers
as a group (253 persons).....................................................          826,277            10.57
</TABLE>

 
                                       19

<PAGE>
     Further options with respect to the remaining shares under the Restated
Plan will be granted to other members of management or employees, as either ISOs
or NQSOs, in the discretion of the Committee, in accordance with the Restated
Plan. If any option expires or is cancelled without exercise, the shares covered
thereby may be subject to the grant of future options. The terms of future
options will be provided in separate stock option agreements. All stock options
presently outstanding were granted prior to amendment and restatement of the
terms of the Restated Plan.
 
FEDERAL INCOME TAX CONSEQUENCES
 
     The following discussion is a general summary of the material federal
income tax consequences to the Company and to participants in the Restated Plan.
The Restated Plan is not a qualified pension, profit-sharing or stock bonus plan
under Section 401(a) of the Code or an "employee benefit plan" subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
This discussion is based on the Code, regulations thereunder, rulings and
decisions now in effect, all of which are subject to change.
 
     Non-Qualified Stock Options. Participants who are granted a NQSO do not
recognize income as a result of the grant of a NQSO but normally recognize
compensation taxable at ordinary income rates upon the NQSO's exercise to the
extent that the fair market value of the shares on the date of the exercise of
the NQSO exceeds the option exercise price paid. However, in the case of a
participant subject to Section 16(b) of the Exchange Act, who has held a NQSO
for less than six months and exercises such option, the ordinary income portion
generally would be calculated using the fair market value of the shares upon the
lapse of the six-month period from the date of grant of such option rather than
the fair market value on the date of exercise, unless the participant elects to
recognize income immediately upon exercise in accordance with Section 83(b) of
the Code. Subject to Section 162(m) of the Code, the Company will be entitled to
a deduction in an amount equal to the amount that the participant is required to
include in ordinary income at the time of such inclusion. The Company generally
will also be required to withhold taxes on ordinary income realized by the
participant at the time of such inclusion.
 
     Incentive Stock Options. Participants who are granted an ISO will not be
considered to have received taxable income upon either the grant of an ISO or
its exercise; however, generally the amount by which the fair market value of
the shares at the time of exercise exceeds the option price will be included in
the participant's alternative minimum taxable income upon exercise unless the
stock acquired is not transferable or is subject to a substantial risk of
forfeiture, in which case no amount is included in alternative minimum taxable
income until the stock is transferable or there is no longer a substantial risk
of forfeiture. If an ISO is disposed of in the same year it is exercised, and
the amount realized is less than the stock's fair market value at the time of
exercise, the amount includible in alternative minimum taxable income does not
exceed the amount realized on the sale or exchange of the stock, less the
taxpayer's basis in such stock.
 
     Upon the sale or other taxable disposition of shares of Common Stock
acquired upon the exercise of an ISO, long-term capital gain will normally be
recognized in the full amount of the difference between the amount realized and
the option exercise price if no disposition of shares has taken place within
either (a) two years from the date of grant of the ISO or (b) one year from the
date of transfer of such shares of Common Stock to the participant upon exercise
(whether or not such participant is subject to Section 16(b) of the Exchange
Act). If shares of Common Stock acquired upon the exercise of an ISO are sold or
otherwise disposed of before the end of the one-year or two-year periods
referenced above, the
                                       20

<PAGE>
difference between the ISO exercise price and the fair market value of the
shares of Common Stock on the date of the ISO's exercise will be taxed as
capital gain. If shares of Common Stock acquired upon the exercise of an ISO are
disposed of before the expiration of the one-year or two-year periods referenced
above and the amount realized is less than the fair market value of the shares
at the date of exercise, the participant's ordinary income is limited to the
excess (if any) of the amount realized less the option exercise price paid.
Subject to Section 162(m) of the Code, the Company will be entitled to a tax
deduction in regards to an ISO only to the extent that the participant has
ordinary income upon sale or other disposition of the shares.
 
REASONS FOR AMENDMENT
 
     Under the Omnibus Budget Reconciliation Act of 1993 ("OBRA"), which became
law in August 1993, income tax deductions of publicly-traded companies may be
limited to the extent total compensation (including base salary, annual bonus,
stock option exercises and non-qualified benefits paid in 1994 and thereafter)
for certain executive officers exceeds $1 million (less the amount of any
"excess parachute payments" as defined in Section 280G of the Code) in any one
year. However, under OBRA, the deduction limit does not apply to qualified
"performance-based" compensation established by an independent compensation
committee provided the material terms of the performance goals under which such
performance-based compensation is to be paid are adequately disclosed to, and
approved by, share owners. In particular, stock options and stock appreciation
rights will satisfy the performance-based exception if the awards are made by a
qualifying compensation committee, the plan sets the maximum number of shares
that can be granted to any particular employee within a specified period and the
compensation is based solely on an increase in the stock price after the grant
date (i.e., the option exercise price is equal to or greater than the fair
market value of the stock subject to the award on the grant date).
 
     It is the Company's policy generally to design the Company's compensation
programs to conform with the OBRA legislation and related regulations to qualify
the compensation paid thereunder for deductibility to the extent the limitations
necessary to obtain such deductibility are not inconsistent with the Company's
overall compensation policies and goals.
 
     The proposed amendments will not affect the Federal income tax consequences
associated with the Restated Plan except as noted above.
 
REQUIRED VOTE FOR APPROVAL AND RECOMMENDATION OF THE BOARD OF DIRECTORS
 
     The affirmative vote of a majority of the shares present or represented and
entitled to vote at the Annual Meeting is required to approve the Restated Plan.
Y
our Board of Directors recommends a vote FOR approval of the Restated Plan.
 
                                       21

<PAGE>

                                   PROPOSAL 3
                          APPROVAL OF THE STOCK OPTION
                   PLAN FOR DIRECTORS OF OWENS-ILLINOIS, INC.
 
PROPOSED PLAN
 
     Upon the recommendation of the Committee, the Board of Directors has
adopted, subject to share owner approval, the Stock Option Plan for Directors of
Owens-Illinois, Inc. (the "Director Plan").
 
DESCRIPTION OF THE DIRECTOR PLAN
 
     Shares Subject to Plan. The Director Plan provides for the granting of
non-qualified stock options covering an aggregate of 200,000 shares of the
Common Stock. If any option expires or is cancelled without exercise, the shares
covered thereby may be subject to the grant of future options. The Director Plan
limits to 50,000 shares of Common Stock the number of shares subject to options
which may be granted under the Director Plan in any given year to any single
optionee (the "Award Limit").
 
     Eligibility. Any director of the Company or of any parent or subsidiary who
is not an employee of the Company or of any parent or subsidiary is eligible to
be granted options under the Director Plan.
 
     Exercise Price. Each option shall have an exercise price of not less than
100% of the fair market value of such share on the date the option is granted.
For as long as the Common Stock is listed on the New York Stock Exchange, the
fair market value of the Common Stock generally will be the closing price on
such exchange of the Common Stock at the end of the business day preceding the
date of grant.
 
     Administration. The Director Plan is administered by the Committee, which
is responsible for determining the persons to whom options shall be granted, the
number of shares to be subject to such options (subject to the Award Limit) and
the other terms and conditions of the options, including the terms on which such
options shall become exercisable, subject to certain limitations set forth in
the Director Plan.
 
     Terms of Options. All options granted pursuant to the Director Plan will be
non-qualified stock options and will expire no later than ten years and one day
from the date the option was granted. Options are not transferable except by
will or pursuant to the applicable laws of descent and distribution upon death
of the optionee. The terms of the options granted under the Director Plan will
be provided in separate stock option agreements. The Director Plan provides that
the stock option agreements evidencing an option shall include terms and
conditions as may be required in order for such options to qualify as
performance-based compensation as described in Section 162(m)(4)(c) of the Code.
 
     Provisions with respect to payment for shares upon exercise of options,
changes in the Common Stock and amendment and termination of the Director Plan
are the same as those set forth with respect to the Restated Plan for key
employees of the Company, as described with respect to Proposal 2, above.
 
FEDERAL INCOME TAX CONSEQUENCES
 
     See introduction and discussion regarding Non-Qualified Stock Options under
P
roposal 2, subheading "Federal Income Tax Consequences."
 
                                       22

<PAGE>
REASONS FOR PROPOSAL
 
     The purpose of the Director Plan is to further the growth, development and
financial success of the Company by providing additional incentives to certain
members of the Board of Directors who are not employees of the Company and to
enable the Company to obtain and retain the services of the type of outside
directors considered essential to the long-range success of the Company, by
providing them the opportunity to become owners of the capital stock of the
Company. The Company has not yet granted any options under the Director Plan,
but expects to grant options to Messrs. Dineen and McMackin at its first meeting
following the Annual Meeting.
 
REQUIRED VOTE FOR APPROVAL AND RECOMMENDATION OF THE BOARD OF DIRECTORS
 
     The affirmative vote of a majority of the shares present or represented and
entitled to vote at the Annual Meeting is required to approve the Director Plan.
Y
our Board of Directors recommends a vote FOR approval of the Director Plan.
 
                              GENERAL INFORMATION
 
AUDITORS
 
     The Board, upon the recommendation of the Audit Committee, has approved the
selection of Ernst & Young as the Company's independent auditors for 1994.
Representatives of Ernst & Young 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 118,978,327 shares of the Company's Common Stock was
outstanding at the close of business on March 16, 1994. 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 1994 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
                                       23

<PAGE>
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 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 1994 Annual Meeting other than the election of
directors and approval of the benefit plans as presented herein. 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.
 
                                       24

<PAGE>

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 
     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.
 
     Based solely on the Company's review of the copies of Forms 3 and 4 and
amendments thereto received by it during 1993, Forms 5 and amendments thereto
received by it with respect to fiscal 1993, or written representations from
certain reporting persons that no Forms 5 were required to be filed by those
persons, the Company believes that during the fiscal year ending December 31,
1993 all filing requirements applicable to its officers, directors and
greater-than-ten-percent beneficial owners were complied with.
 
SHARE OWNER PROPOSALS AND NOMINATIONS FOR 1994 ANNUAL MEETING
 
     A share owner desiring to submit a proposal for inclusion in the Company's
Proxy Statement for the 1995 Annual Meeting must deliver the proposal so that it
is received by the Company no later than December 2, 1994. The Company requests
that all such proposals be addressed to Thomas L. Young, Executive Vice
President, General Counsel and Secretary, Owens-Illinois, Inc., One SeaGate,
Toledo, Ohio 43666, and mailed by certified mail, return receipt requested.
 
R
EPORTS TO SHARE OWNERS
 
     The Company has mailed this Proxy Statement and a copy of its 1993 Annual
Report to each share owner entitled to vote at the Annual Meeting. Included in
the 1993 Annual Report are the Company's consolidated financial statements for
the year ended December 31, 1993.
 
     A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1993, 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, 1994
 
                                       25



<PAGE>












                                   [LOGO]



<PAGE>
                       OWENS-ILLINOIS, INC.

  This Proxy is Solicited on Behalf of the Board of Directors

     The undersigned hereby appoints Lee A. Wesselmann, David
  P  G. Van Hooser and Thomas L. Young and each of them, or if
  R  more than one is present and acting then a majority there-
  O  of, as Proxies with full power of substitution, and hereby
  X  authorize(s) them to represent and to vote, as designated
  Y  below, all shares of common stock of Owens-Illinois, Inc.
     held of record by the undersigned on March 16, 1994, at
     the Annual Meeting of Share Owners to be held on May 11,
     1994, or at any adjournment thereof.

         Election of Directors, Nominees:
         Class III: Joseph H. Lemieux, Henry R. Kravis and
                      Michael W. Michelson


     (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 and FOR proposal numbers 2 and 3.

 The Board of Directors recommends a vote "FOR" the Proposals.

                             FOR  WITHHELD
 1.Election of Directors FOR              WITHHOLD AUTHORITY to
   nominees listed on the    / /    / /   vote for all nominees
   reverse side (except as                listed on reverse side
   marked to the contrary).
   (To withhold authority to vote for any individual nominee,
    write that nominee's name in the space provided below.)



                                          FOR  AGAINST ABSTAIN
 2. Approval of the Second Amended and
    Restated Stock Option Plan for Key    / /    / /     / /
    Employees of Owens-Illinois, Inc.

                                          FOR  AGAINST ABSTAIN
 3. Approval of the Stock Option Plan
    for Directors of Owens-Illinois,      / /    / /     / /
    Inc.

 4. In their discretion, the Proxies are authorized to vote
    upon such other business as may properly come before the
    meeting.

        Please sign exactly as name appears hereon. When shares
        are held by joint owners, both should sign.  When
        signing as attorney, executor, administrator, trust or
        guardian, please give full title as such.  If a corpora-
        tion, 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


<PAGE>

                                                        APPENDIX A



                              SECOND AMENDED AND RESTATED

                          STOCK OPTION PLAN FOR KEY EMPLOYEES

                                          OF

                                 OWENS-ILLINOIS, INC.



           OWENS-ILLINOIS, INC., a corporation organized under the laws of the
State of Delaware (the "Company"), hereby amends and restates in its entirety
the Stock Option Plan for Key Employees of Owens-Illinois, Inc. which was
adopted by the Company on July 20, 1987, amended in September 1990 and
amended in December 1993.  The purposes of this Stock Option Plan are as
follows:

           (1)  To further the growth, development and financial success of
the Company by providing additional incentives to certain of its key
Employees (as defined hereunder) who have been or will be given
responsibility for the management or administration of the Company's business
affairs, by assisting them to become owners of capital stock of the Company
and thus to benefit directly from its growth, development and financial
success.

           (2)  To enable the Company to obtain and retain the services of the
type of professional, technical and managerial employees considered essential
to the long-range success of the Company by providing and offering them an
opportunity to become owners of capital stock of the Company under options,
including options that are intended to qualify as "incentive stock options"
under Section 422 of the Code (as defined hereunder).


<PAGE>

                                       ARTICLE I

                                      DEFINITIONS

           Whenever the following terms are used in this Plan, 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 shall include the plural, where the context so indicates.

Section 1.1 - Award Limit

           "Award Limit" shall mean 250,000 shares of Common Stock or, as the
context may require, Options to acquire more than 250,000 shares of Common
Stock.

Section 1.2 - Board

           "Board" shall mean the Board of Directors of the Company.


Section 1.3 - Code

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

Section 1.4 - Committee

           "Committee" shall mean the Compensation Committee of the Board,
appointed as provided in Section 6.1.

Section 1.5 - Common Stock

           "Common Stock" shall mean the Company's common stock, $.01 par
value.

Section 1.6 - Company

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

Section 1.7 - Director

           "Director" shall mean a member of the Board.

Section 1.8 - Employee

           "Employee" shall mean any employee (as defined in accordance with
the regulations and revenue rulings then applicable under Section 3401(c) of
the Code) of the Company, or of any corporation which is then a Parent
Corporation or a Subsidiary, whether such employee is so employed at the time
this Plan is adopted or becomes so employed subsequent to the adoption of
this Plan.


<PAGE>

Section 1.9 - Exchange Act

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

Section 1.10 - 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 the Company's stock is not
publicly traded, the fair market value established by the Committee acting in
good faith.

Section 1.11 - Incentive Stock Option

           "Incentive Stock Option" shall mean an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive Stock Option
by the Committee.

Section 1.12 - Non-Qualified Option

           "Non-Qualified Option" shall mean an Option which is not an
Incentive Stock Option and which is designated as a Non-Qualified Option by
the Committee.

Section 1.13 - Officer

           "Officer" shall mean an officer of the Company, as defined in Rule 
16a-1(f) under the Securities Exchange Act of 1934, as such Rule may be
amended in the future.

Section 1.14 - Option

           "Option" shall mean an option to purchase capital stock of the
Company, granted under the Plan. "Options" includes both Incentive Stock
Options and Non-Qualified Options.

Section 1.15 - Optionee

           "Optionee" shall mean an Employee to whom an Option is granted
under the Plan.



<PAGE>

Section 1.16 - 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 1.17 - Plan

           "Plan" shall mean this Second Amended and Restated Stock Option
Plan for Key Employees of Owens-Illinois, Inc.

Section 1.18 - 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 1.19 - Secretary

           "Secretary" shall mean the Secretary of the Company.

Section 1.20 - Securities Act

           "Securities Act" shall mean the Securities Act of 1933, as amended.

Section 1.21 - 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 or profits interests.

Section 1.22 - Termination of Employment

           "Termination of Employment" shall mean the time when the
employee-employer relationship between the 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, death, total disability or retirement, but excluding (i)
terminations where there is a simultaneous reemployment by the Company, a
Parent Corporation or a Subsidiary or (ii) with respect to any Non-Qualified
Option, terminations where the Optionee continues a relationship (e.g., as a
director or as a consultant) with the Company, a Parent Corporation or a
Subsidiary.  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 good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Employment; provided, however, that, with respect to Incentive Stock Options,
a leave of absence shall constitute a Termination of Employment if, and to
the extent that, such leave of absence interrupts employment for the purposes
of Section 422(a)(2) of the Code and the then applicable regulations and
revenue rulings under said Section.  Notwithstanding any other provision of
this Plan, the Company or any of its subsidiaries has an absolute and
unrestricted right to terminate the Optionee's employment at any time for any
reason whatsoever, with or without cause.


<PAGE>

                                      ARTICLE II

                                SHARES SUBJECT TO PLAN

Section 2.1 - Shares Subject to Plan

           The shares of stock subject to Options shall be shares of the
Company's $.01 par value Common Stock.  The aggregate number of such shares
which may be issued upon exercise of Options shall not exceed 7,488,762.

Section 2.2 - Unexercised Options

           If any Option expires or is cancelled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
granted hereunder, subject to the limitations of Section 2.1.

Section 2.3 - Changes in Company's Shares

           In the event that the outstanding shares of Common Stock of the
Company are hereafter changed into or exchanged for a different number or
kind of shares or other securities of the Company, or of another corporation,
by reason of reorganization, 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 for the
purchase of which Options may be granted, including adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares which may
be issued on exercise of Options and of the Award Limit set forth in Section
1.1.


<PAGE>

                                      ARTICLE III

                                  GRANTING OF OPTIONS

Section 3.1 - Eligibility

           Any key Employee of the Company or of any corporation which is then
a Parent Corporation or a Subsidiary shall be eligible to be granted Options,
except as provided in Section 3.2.

Section 3.2 - Qualification of Incentive Stock Options

           No Incentive Stock Option shall be granted unless such Option, when
granted, qualifies as an "incentive stock option" under Section 422 of the
Code.

Section 3.3 - Granting of Options

           (a)  The Committee shall from time to time, in its absolute
discretion:

                 (i)  Determine which Employees are key Employees and select
      from among the key Employees (including those to whom Options have been
      previously granted under the Plan) such of them as in its opinion should
      be granted Options; and

                 (ii)  Determine the number of shares to be subject to such
      Options granted to such selected key Employees, and determine whether
      such Options are to be Incentive Stock Options or Non-Qualified Options;
      and

                 (iii)  Determine the terms and conditions of such Options,
      consistent with the Plan, including, but not limited to such terms and
      conditions as may be required in order for any such Options to qualify
      as performance-based compensation as described in Section 162(m)(4)(C)
      of the Code if the Committee determines that such Options should so
      qualify.

           (b)  Upon the selection of a key Employee to be granted an Option,
the Committee shall instruct the Secretary to issue such Option and may
impose such conditions on the grant of such Option as it deems appropriate. 
Without limiting the generality of the preceding sentence, the Committee may,
in its discretion and on such terms as it deems appropriate, require as a
condition on the grant of an Option to an Employee that the Employee
surrender for cancellation some or all of the unexercised Options which have
been previously granted to him.  An Option the grant of which is conditioned
upon such surrender may have an Option price lower (or higher) than the
Option price of the surrendered Option, may cover the same (or a lesser or
greater) number of shares as the surrendered Option, may contain such other
terms as the Committee deems appropriate and shall be exercisable in
accordance with its terms, without regard to the number of shares, price,
Option period or any other term or condition of the surrendered Option.

           (c)  Notwithstanding anything contained herein to the contrary,
including, without limitation, Section 3.3(a)(ii) above, no Employee shall be
granted during any calendar year an Option or Options for more than The Award
Limit.


<PAGE>
                                       ARTICLE IV

                                   TERMS OF OPTIONS

Section 4.1 - Option Agreement

           Each Option shall be evidenced by a written Stock Option Agreement,
which shall be executed by the Optionee and an authorized Officer of the
Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with the Plan, including, but not limited to such
terms and conditions as may be required in order for such Option to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code if the Committee determines that such Option should so qualify.  Stock
Option Agreements evidencing Incentive Stock Options shall contain such terms
and conditions as may be necessary to qualify such Options as "incentive
stock options" under Section 422 of the Code.

Section 4.2 - Option Price

           The price of the shares subject to each Option shall be set by the
Committee; provided, however, that the price per share shall be not less than
100% of the Fair Market Value of such shares on the date such Option is
granted; provided, further, that, in the case of an Incentive Stock Option,
the price per share shall not be less than 110% of the Fair Market Value of
such shares on the date such Option is granted in the case of an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10%
of the total combined voting power of all classes of stock of the Company,
any Subsidiary or any Parent Corporation.  

Section 4.3 - Commencement of Exercisability

           (a)  No Option may be exercised in whole or in part during the
first year after such Option is granted, except as may be provided in
Sections 4.7 and 4.3(c).

           (b)  Subject to the provisions of Sections 4.3(a), 4.3(c), 4.3(d),
4.7 and 7.3, Options shall become exercisable at such times and in such
installments (which may be cumulative) as the Committee shall provide in the
terms of each individual Option; provided, however, that by a resolution
adopted after an Option is granted the Committee may, on such terms and
conditions as it may determine to be appropriate and subject to Sections
4.3(a), 4.3(c), 4.3(d), 4.7 and 7.3, accelerate the time at which such Option
or any portion thereof may be exercised.

           (c)  No portion of an Option which is unexercisable at Termination
of Employment shall thereafter become exercisable; provided, however, that
provision may be made that such Option shall become exercisable in the event
of a Termination of Employment because of the Optionee's retirement or total
disability (each as determined by the Committee in accordance with Company
policies) or death; and provided further, that in the event the Committee
extends the right of an Optionee to exercise his or her Option pursuant to
Section 4.4(a)(vii) below, the Committee may also provide that such Option
shall become exercisable immediately, or in accordance with the schedule of
exercisability which would be applicable to such Option but for the
Optionee's Termination of Employment, or in accordance with any other
schedule determined in the Committee's discretion.


<PAGE>

           (d)  To the extent that the aggregate Fair Market Value of stock
with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the Code)
are exercisable for the first time by an Optionee during any calendar year
(under the Plan and all other incentive stock option plans of the Company,
any Subsidiary and any Parent Corporation) exceeds $100,000, such options
shall be taxed as Non-Qualified Options.  The rule set forth in the preceding
sentence shall be applied by taking options into account in the order in
which they were granted.  For purposes of this Section 4.3(d), the Fair
Market Value of stock shall be determined as of the time the option with
respect to such stock is granted.

Section 4.4 - Expiration of Options

           (a)  No Option may be exercised to any extent by anyone after the
first to occur of the following events:

                 (i)  In the case of an Incentive Stock Option, (A) the
      expiration of ten years from the date the Option was granted, or (B) in
      the case of an Optionee owning (within the meaning of Section 424(d) of
      the Code), at the time the Option was granted, more than 10% of the
      total combined voting power of all classes of stock of the Company, any
      Subsidiary or any Parent Corporation, the expiration of five years from
      the date the Option was granted; or

                 (ii)  In the case of a Non-Qualified Option, the expiration of
      ten years and one day from the date the Option was granted; or

                 (iii)  Except in the case of (A) any Optionee who is totally
      disabled (within the meaning of Section 22(e)(3) of the Code for
      purposes of an Incentive Stock Option, or otherwise as determined by the
      Committee in accordance with Company policies), (B) any Optionee who
      retires within the meaning of clause (v) below, (C) any Optionee who
      dies or (D) any Optionee whose right to exercise his or her Option is
      extended by the Committee pursuant to clause (vii) below, the expiration
      of three months from the date of the Optionee's Termination of
      Employment for any reason unless the Optionee dies within said
      three-month period; or

                 (iv) In the case of an Optionee who is totally disabled
      (within the meaning of Section 22(e)(3) of the Code for purposes of an
      Incentive Stock Option, or otherwise as determined by the Committee in
      accordance with Company policies), the expiration of one year from the
      date of the Optionee's Termination of Employment by reason of his or her
      disability unless the Optionee dies within said one-year period; or

                 (v)  In the case of an Optionee who retires after reaching the
      Company's normal retirement age or who takes early retirement, the
      expiration of three months from the date of Optionee's Termination of
      Employment by reason of such retirement, or in the case of any such
      retiring Optionee whose right to exercise his or her Option is extended
      by the Committee, which extension shall not exceed three years from the
      date of Optionee's Termination of Employment, the date upon which such
      extension expires; or

                 (vi)  The expiration of one year from the date of the
      Optionee's death; or


<PAGE>
                 (vii)  In the case of any Optionee whose right to exercise his
      or her Option is extended by the Committee, which extension shall not
      exceed three years from the date of Optionee's Termination of
      Employment, the date upon which such extension expires.

           (b)  Subject to the provisions of Section 4.4(a), the Committee
shall provide, in the terms of each individual Option, when such Option
expires and becomes unexercisable; and (without limiting the generality of
the foregoing) the Committee may provide in the terms of individual Options
that said Options expire immediately upon a Termination of Employment;
provided, however, that provision may be made that such Option shall become
exercisable in the event of a Termination of Employment because of the
Optionee's retirement (as determined by the Committee in accordance with
Company policies), total disability (within the meaning of Section 22(e)(3)
of the Code for purposes of an Incentive Stock Option, or otherwise as
determined by the Committee in accordance with Company policies) or death;
and provided further, that in the event the Committee extends the right of an
Optionee to exercise his or her Option pursuant to Section 4.4(a)(vii) above,
the Committee may also provide that such Option shall become exercisable
immediately, or in accordance with the schedule of exercisability which would
be applicable to such Option but for the Optionee's Termination of
Employment, or in accordance with any other schedule determined in the
Committee's discretion.

Section 4.5 - Consideration

           In consideration of the granting of an Option, the Optionee shall
agree, in the written Stock Option Agreement, to remain in the employ of the
Company, a Parent Corporation or a Subsidiary for a period of at least one
year after the Option is granted.  Nothing in this Plan or in any Stock
Option Agreement hereunder shall confer upon any 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, its Parent Corporations and its Subsidiaries, which are hereby
expressly reserved, to discharge any Optionee at any time for any reason
whatsoever, with or without cause.

Section 4.6 - Adjustments in Outstanding Options

           In the event that the outstanding shares of Common Stock subject to
Options 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 all outstanding Options, or portions
thereof then unexercised, shall be exercisable, to the end that after such
event the Optionee's proportionate interest shall be maintained as before the
occurrence of such event.  Such adjustment in an outstanding Option shall be
made without change in the total price applicable to the Option or 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 Option price per share; provided,
however, that, in the case of Incentive Stock Options, each such adjustment
shall be made in such manner as not to constitute a "modification" within the
meaning of Section 424(h)(3) of the Code.  Any such adjustment made by the
Committee shall be final and binding upon all Optionees, the Company and all
other interested persons.


<PAGE>

Section 4.7 -    Merger, Consolidation, Acquisition, 
           Liquidation or Dissolution        

           Notwithstanding the provisions of Section 4.6, in its absolute
discretion, and on such terms and conditions as it deems appropriate, the
Committee may provide by the terms of any Option that such Option cannot be
exercised after the merger or consolidation of the Company with or into
another corporation, 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; and if the Committee so provides, it may, in its absolute
discretion and on such terms and conditions as it deems appropriate, also
provide, either by the terms of such Option or by a resolution adopted prior
to the occurrence of such merger, consolidation, acquisition, liquidation or
dissolution, that, for some period of time prior to such event, such Option
shall be exercisable as to all shares covered thereby, notwithstanding
anything to the contrary in Section 4.3(a), Section 4.3(b) and/or any
installment provisions of such Option.

Section 4.8 - No Right to Continued Employment

           Nothing in this Plan or in any Non-Qualified Stock Option Agreement
hereunder shall confer upon any 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, its Parent
Corporations and its Subsidiaries, which are hereby expressly reserved, to
terminate or discharge any Optionee at any time for any reason whatsoever,
with or without cause.


<PAGE>
                                       ARTICLE V

                                  EXERCISE OF OPTIONS

Section 5.1 - Person Eligible to Exercise

           During the lifetime of the Optionee, only he may exercise an Option
(or any portion thereof) granted to him.  After the death of the Optionee,
any exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock Option
Agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.

Section 5.2 - Partial Exercise

           At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Stock Option Agreement, such Option or portion
thereof may be exercised in whole or in part; provided, however, that the
Company shall not be required to issue fractional shares and the Committee
may, by the terms of the Option, require any partial exercise to be with
respect to a specified minimum number of shares.

Section 5.3 - Manner of Exercise

           An exercisable 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 such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:

                 (a)  Notice in writing signed by the Optionee or other person
      then entitled to exercise such Option or portion, stating that such
      Option or portion is exercised, such 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 thereby exercised; or

                      (ii)  With the consent of the Committee, (A) shares of
      the Company's Common Stock owned by the Optionee duly endorsed for
      transfer to the Company, or, (B) subject to the timing requirements of
      Section 5.4, shares of the Company's Common Stock issuable to the
      Optionee upon exercise of the Option, with a Fair Market Value on the
      date of Option exercise equal to the aggregate Option price of the
      shares with respect to which such Option or portion is thereby
      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 any successor
      provision) and payable upon such terms as may be prescribed by the
      Committee.  The Committee may also prescribe the form of such note and
      the security to be given for such note.  No Option may, however, be
      exercised 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


<PAGE>

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

                 (c)  The payment to the Company (or other employer
      corporation) of all amounts which it is required to withhold under
      federal, state or local law in connection with the exercise of the
      Option; with the consent of the Committee, (i) shares of the Company's
      Common Stock owned by the Optionee duly endorsed for transfer, or, (ii)
      subject to the timing requirements of Section 5.4, shares of the
      Company's Common Stock issuable to the 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;

                 (d)  Such representations and documents as the Committee, in
      its absolute discretion, deems necessary or advisable to effect
      compliance with all applicable provisions of the Securities Act and any
      other federal or state securities laws or regulations.  The Committee
      may, in its absolute discretion, also take whatever additional actions
      it deems appropriate to effect such compliance including, without
      limitation, placing legends on share certificates and issuing
      stop-transfer orders to transfer agents and registrars; and

                 (e)  In the event that the Option or portion thereof shall be
      exercised pursuant to Section 5.1 by any person or persons other than
      the Optionee, appropriate proof of the right of such person or persons
      to exercise the Option or portion thereof.

Section 5.4 - Certain Timing Requirements

           Shares of the Company's Common Stock issuable to the Optionee upon
exercise of the Option may be used to satisfy the Option price or the tax
withholding consequences of such exercise only (i) during the period
beginning on the third business day following the date of release of the
quarterly or annual summary statement of sales and earnings of the Company
and ending on the twelfth business day following such date or (ii) pursuant
to an irrevocable written election by the Optionee to use shares of the
Company's Common Stock issuable to the Optionee upon exercise of the Option
to pay all or part of the Option price or the withholding taxes (subject to
the approval of the Committee) made at least six months prior to the payment
of such Option price or withholding taxes.

Section 5.5 - Conditions to Issuance of Stock Certificates

           The shares of stock issuable and deliverable upon the exercise of
an Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the
Company.  The Company shall not be required to issue or deliver any
certificate or certificates for shares of stock purchased upon the exercise
of any 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 the rulings or
      regulations of the Securities and Exchange Commission or any other
      governmental regulatory body, which the Committee shall, in its absolute
      discretion, deem necessary or advisable; and


<PAGE>

                 (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 which it is required to withhold under
      federal, state or local law in connection with the exercise of the
      Option; and

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

Section 5.6 - Rights as Stockholders

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

Section 5.7 - Transfer Restrictions

           Unless otherwise approved in writing by the Committee, no shares
acquired upon exercise of any Option by any Officer may be sold, assigned,
pledged, encumbered or otherwise transferred until at least six months have
elapsed from (but excluding) the date that such Option was granted.  The
Committee, in its absolute discretion, may impose such other restrictions on
the transferability of the shares purchasable upon the exercise of an Option
as it deems appropriate.  Any such other restriction shall be set forth in
the respective Stock Option Agreement and may be referred to on the
certificates evidencing such shares.  The Committee may require the Employee
to give the Company prompt notice of any disposition of shares of stock,
acquired by exercise of an Incentive Stock Option, within two years from the
date of granting such Option or one year after the transfer of such shares to
such Employee.  The Committee may direct that the certificates evidencing
shares acquired by exercise of an Option refer to such requirement to give
prompt notice of disposition.


<PAGE>

                                      ARTICLE VI

                                    ADMINISTRATION

Section 6.1 - Compensation Committee

           The Compensation Committee shall consist of two or more Directors,
appointed by and holding office at the pleasure of the Board, each of whom is
a "disinterested person" as defined by Rule 16b-3.  Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members
may resign at any time by delivering written notice to the Board.  Vacancies
in the Committee shall be filled by the Board.

Section 6.2 - Duties and Powers of Committee

           It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions.  The Committee
shall have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as
are consistent therewith and to interpret, amend or revoke any such rules. 
Any such interpretations and rules in regard to Incentive Stock Options shall
be consistent with the basic purpose of the Plan to grant "incentive stock
options" within the meaning of Section 422 of the Code.  The Board shall have
no right to exercise any of the rights or duties of the Committee under the
Plan.

Section 6.3 - Majority Rule

           The Committee shall act by a majority of its members in office. 
The Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.

Section 6.4 - Compensation; Professional Assistance;
           Good Faith Actions                    

           Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board.  All expenses and
liabilities incurred by members of the Committee in connection with the
administration of the Plan shall be borne by the Company.  The Committee may
employ attorneys, consultants, accountants, appraisers, brokers or other
persons.  The Committee, the Company and its Officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons. 
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Optionees, 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 Options, and all members of the
Committee shall be fully protected by the Company in respect to any such
action, determination or interpretation.


<PAGE>

                                      ARTICLE VII

                                   OTHER PROVISIONS

Section 7.1 - Options Not Transferable

           No Option or interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the 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 nothing in
this Section 7.1 shall prevent transfers by will or by the applicable laws of
descent and distribution.


Section 7.2 -    Amendment, Suspension or
           Termination of the Plan   

           The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee. 
However, without approval of the Company's stockholders given within twelve
months before or after the action by the Committee, no action of the
Committee may, except as provided in Section 2.3, increase any limit imposed
in Section 2.1 on the maximum number of shares which may be issued on
exercise of Options, modify the Award Limit, materially modify the
eligibility requirements of Section 3.1, reduce the minimum Option price
requirements of Section 4.2, extend the limit imposed in this Section 7.2 on
the period during which Options may be granted or amend or modify the Plan in
a manner requiring stockholder approval under Rule 16b-3 or Section 162(m) of
the Code.  Neither the amendment, suspension nor termination of the Plan
shall, without the consent of the holder of the Option alter or impair any
rights or obligations under any Option theretofore granted.  No Option may be
granted during any period of suspension nor after termination of the Plan,
and in no event may any Option be granted under this Plan after the first to
occur of the following events:

                 (a)  The expiration of ten years from the date the Plan is
      adopted by the Board; or

                 (b)  The expiration of ten years from the date the Plan is
      approved by the Company's stockholders under Section 7.3.

Section 7.3 - Approval of Plan by Stockholders

           This Plan will be submitted for the approval of the Company's
stockholders within twelve months after the date of the Board's initial
adoption of the Plan.  Options may be granted prior to such stockholder
approval; provided, however, that such Options shall not be exercisable prior
to the time when the Plan is approved by the stockholders; provided, further,
that if such approval has not been obtained at the end of said twelve-month
period, all Options previously granted under the Plan shall thereupon be
cancelled and become null and void.  The Company shall take such actions with
respect to the Plan as may be necessary to satisfy the requirements of Rule
16b-3(b).



<PAGE>

Section 7.4 -    Effect of Plan Upon Other Option
           and Compensation Plans          

           The adoption of this Plan shall not affect any other compensation
or incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary.  Nothing in this Plan shall be construed to limit the right of
the Company, any Parent Corporation or any Subsidiary (a) to establish any
other forms of incentives or compensation for employees of the Company, any
Parent Corporation or any Subsidiary or (b) to grant or assume options
otherwise than under this Plan in connection with any proper corporate
purpose, including, but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.

Section 7.5 - Titles

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

Section 7.6 - Conformity to Securities Laws

           The Plan 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, the Plan shall be administered, and Options
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,
the Plan and Options granted hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.

                                      *  *  *  *


<PAGE>


           I hereby certify that the foregoing Second Amended and Restated
Plan was duly adopted by the Compensation Committee of the Board of Directors
of Owens-Illinois, Inc. on December 31, 1993.

           Executed on this 23rd day of March, 1994.


                                           /s/ THOMAS L. YOUNG
                                       -----------------------------
                                                  Secretary


Corporate Seal


                                      *  *  *  *



<PAGE>

           I hereby certify that the foregoing Plan was duly approved by the
stockholders of Owens-Illinois, Inc. on May 11, 1994.

           Executed on this ____ day of May, 1994.



                                       _____________________________
                                                  Secretary


<PAGE>

                                                       APPENDIX B


                          STOCK OPTION PLAN FOR DIRECTORS OF
                                 OWENS-ILLINOIS, INC.


           OWENS-ILLINOIS, INC., a corporation organized under the laws of the
State of Delaware (the "Company"), hereby adopts this Stock Option Plan for
Directors of Owens-Illinois, Inc.  The purposes of this Stock Option Plan are
as follows:

           (1)  To further the growth, development and financial success of
the Company by providing additional incentives to certain members of its
Board of Directors who are not employees of the Company, by assisting them to
become owners of capital stock of the Company and thus to benefit directly
from its growth, development and financial success.

           (2)  To enable the Company to obtain and retain the services of the
type of outside directors considered essential to the long-range success of
the Company by providing and offering them an opportunity to become owners of
capital stock of the Company under options.


<PAGE>
                                       ARTICLE I
                                      DEFINITIONS

           Whenever the following terms are used in this Plan, 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 shall include the plural, where the context so indicates.

Section 1.1 - Award Limit

           "Award Limit" shall mean 50,000 shares of Common Stock or, as the
context may require, Options to acquire more than 50,000 shares of Common
Stock.

Section 1.2 - Board

           "Board" shall mean the Board of Directors of the Company.

Section 1.3 - Committee

           "Committee" shall mean a committee of the Board appointed to
administer the Plan, as provided in Section 6.1.

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, Options, outstanding under the Plan, in a transaction to
which Section 424(a) of the Internal Revenue Code would apply if such Options
were "incentive stock options" within the meaning of Section 422 of said
Code.

Section 1.6 - Director

           "Director" shall mean a member of the Board, whether he is such a
member at the time this Plan is adopted or becomes such a member subsequent
to the adoption of this Plan, who is not an employee of the Company or of any
corporation which is a Parent Corporation or a Subsidiary.

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


<PAGE>

Section 1.9 - Option

           "Option" shall mean an option to purchase capital stock of the
Company, granted under the Plan.

Section 1.10 - Optionee

           "Optionee" shall mean a Director to whom an Option is granted under
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 this Stock Option Plan for Directors of Owens-
Illinois, Inc.

Section 1.13 - 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 1.14 - Securities Act

           "Securities Act" shall mean the Securities Act of 1933, as amended.

Section 1.15 - 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 or profits interests.

Section 1.16 - Termination of Membership

           "Termination of Membership" shall mean the time when an Optionee's
membership on the Board of the Company or of 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, death,
total disability or retirement, but excluding (i) terminations where there is
a simultaneous reelection to or other reestablishment of membership on the
Board of the Company or of a Parent Corporation or a Subsidiary or (ii)
terminations where the Optionee continues a relationship (e.g., as an
employee or as a consultant) with the Company, a Parent Corporation or a
Subsidiary.  The Committee, in its absolute discretion, shall determine the
effect of all other matters and questions relating to Termination of
Membership, including, but not by way of limitation, the question of whether
a Termination of Membership resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Membership.


<PAGE>
                                      ARTICLE II
                                SHARES SUBJECT TO PLAN

Section 2.1 - Shares Subject to Plan

           The shares of stock subject to Options shall be shares of the
Company's $.01 par value Common Stock.  The aggregate number of such shares
which may be issued upon exercise of Options shall not exceed 200,000.

Section 2.2 - Unexercised Options

           If any Option expires or is cancelled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
granted hereunder, subject to the limitations of Section 2.1.

Section 2.3 - Changes in Company's Shares

           In the event that the outstanding shares of Common Stock of the
Company are hereafter changed into or exchanged for a different number or
kind of shares or other securities of the Company, or of another corporation,
by reason of reorganization, 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 for the
purchase of which Options may be granted, including adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares which may
be issued on exercise of Options and of the Award Limit set forth in Section
1.1.


<PAGE>
                                      ARTICLE III
                                  GRANTING OF OPTIONS

Section 3.1 - Eligibility

           Any Director of the Company or of any corporation which is then a
Parent Corporation or a Subsidiary shall be eligible to be granted Options.

Section 3.2 - Granting of Options

           (a)  The Committee shall from time to time, in its absolute
discretion:

                 (i)  Determine the Directors (including those to whom Options
      have been previously granted under the Plan) as in its opinion should be
      granted Options; and

                 (ii)  Determine the number of shares to be subject to such
      Options granted to such Directors; and

                 (iii)  Determine the terms and conditions of such Options,
      consistent with the Plan.

           (b)  Upon the selection of a Director to be granted an Option, the
Committee shall instruct the appropriate officer or officers of the Company
to issue such Option and may impose such conditions on the grant of such
Option as it deems appropriate.  Without limiting the generality of the
preceding sentence, the Committee may, in its discretion and on such terms as
it deems appropriate, require as a condition on the grant of an Option to a
Director that the Director surrender for cancellation some or all of the
unexercised Options which have been previously granted to him.  An Option the
grant of which is conditioned upon such surrender may have an Option price
lower (or higher) than the Option price of the surrendered Option, may cover
the same (or a lesser or greater) number of shares as the surrendered Option,
may contain such other terms as the Committee deems appropriate and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, Option period or any other term or condition of the
surrendered Option.

           (c)  Notwithstanding anything contained herein to the contrary,
including, without limitation, Section 3.2(a)(ii) above, no Director shall be
granted during any calendar year an Option or Options for more than the Award
Limit.


<PAGE>
                                       ARTICLE IV
                                   TERMS OF OPTIONS

Section 4.1 - Option Agreement

           Each Option shall be evidenced by a written Stock Option Agreement,
which shall be executed by the Optionee and an authorized officer of the
Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with the Plan.

Section 4.2 - Option Price

           The price of the shares subject to each Option shall be set by the
Committee; provided, however, that the price per share shall be not less than
100% of the Fair Market Value of such shares on the date such Option is
granted.  

Section 4.3 - Commencement of Exercisability

           (a)  No Option may be exercised in whole or in part during the
first year after such Option is granted, except as may be provided in
Sections 4.7 and 4.3(c).

           (b)  Subject to the provisions of Sections 4.3(a), 4.3(c), 4.7 and
7.3, Options shall become exercisable at such times and in such installments
(which may be cumulative) as the Committee shall provide in the terms of each
individual Option; provided, however, that by a resolution adopted after an
Option is granted the Committee may, on such terms and conditions as it may
determine to be appropriate and subject to Sections 4.3(a), 4.3(c), 4.7 and
7.3, accelerate the time at which such Option or any portion thereof may be
exercised.

           (c)  No portion of an Option which is unexercisable at Termination
of Membership shall thereafter become exercisable; provided, however, that
provision may be made that such Option shall become exercisable in the event
of a Termination of Membership because of the Optionee's retirement or total
disability (each as determined by the Committee in accordance with Company
policies) or death.

Section 4.4 - Expiration of Options

           (a)  No Option may be exercised to any extent by anyone after the
first to occur of the following events:

                 (i)  The expiration of ten years and one day from the date the
      Option was granted; or

                 (ii)  Except in the case of (A) any Optionee who is totally
      disabled (as determined by the Committee in accordance with Company
      policies), (B) any Optionee who retires within the meaning of clause
      (iv) below, (C) any Optionee who dies or (D) any Optionee whose right to
      exercise his Option is extended by the Committee pursuant to clause (vi)
      below, the expiration of three months from the date of the Optionee's
      Termination of Membership for any reason unless the Optionee dies within
      said three-month period; or

                 (iii) In the case of an Optionee who is totally disabled (as
      determined by the Committee in accordance with Company policies), the
      expiration of one year from the date of the Optionee's Termination of
      Membership by reason of his disability unless the Optionee dies within
      said one-year period; or


<PAGE>
                 (iv)  In the case of an Optionee who retires (as determined by
      the Committee in accordance with Company policies),  the expiration of
      three years from the date of Optionee's Termination of Membership by
      reason of such retirement; or

                 (v)  The expiration of one year from the date of the
      Optionee's death; or

                 (vi)  In the case of any Optionee whose right to exercise his
      Option is extended by the Committee, which extension shall not exceed
      three years from the date of Optionee's Termination of Membership, the
      date upon which such extension expires.

           (b)  Subject to the provisions of Section 4.4(a), the Committee
shall provide, in the terms of each individual Option, when such Option
expires and becomes unexercisable; and (without limiting the generality of
the foregoing) the Committee may provide in the terms of individual Options
that said Options expire immediately upon a Termination of Membership;
provided, however, that provision may be made that such Option shall become
exercisable in the event of a Termination of Membership because of the
Optionee's retirement or total disability (as determined by the Committee in
accordance with Company policies) or death.

Section 4.5 - Consideration

           In consideration of the granting of an Option, the Optionee shall
agree, in the written Stock Option Agreement, to remain a member of the Board
of the Company or of a Parent Corporation or a Subsidiary for a period of at
least one year after the Option is granted.  Nothing in this Plan or in any
Stock Option Agreement hereunder shall confer upon any Optionee any right to
continue as a member of the Board of the Company or of any Parent Corporation
or any Subsidiary or shall interfere with or restrict in any way the rights
of the Board or the stockholders of the Company, its Parent Corporations and
its Subsidiaries, which are hereby expressly reserved, to terminate any
Optionee's Board membership at any time for any reason whatsoever, with or
without cause.

Section 4.6 - Adjustments in Outstanding Options

           In the event that the outstanding shares of Common Stock subject to
Options 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 all outstanding Options, or portions
thereof then unexercised, shall be exercisable, to the end that after such
event the Optionee's proportionate interest shall be maintained as before the
occurrence of such event.  Such adjustment in an outstanding Option shall be
made without change in the total price applicable to the Option or 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 Option price per share.  Any such
adjustment made by the Committee shall be final and binding upon all
Optionees, the Company and all other interested persons.


<PAGE>

Section 4.7 -    Merger, Consolidation, Acquisition, Liquidation or Dissolution

           Notwithstanding the provisions of Section 4.6, in its absolute
discretion, and on such terms and conditions as it deems appropriate, the
Committee may provide by the terms of any Option that such Option cannot be
exercised after the merger or consolidation of the Company with or into
another corporation, 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; and if the Committee so provides, it may, in its absolute
discretion and on such terms and conditions as it deems appropriate, also
provide, either by the terms of such Option or by a resolution adopted prior
to the occurrence of such merger, consolidation, acquisition, liquidation or
dissolution, that, for some period of time prior to such event, such Option
shall be exercisable as to all shares covered thereby, notwithstanding
anything to the contrary in Section 4.3(a), Section 4.3(b) and/or any
installment provisions of such Option.

Section 4.8 - No Right to Continued Board Membership

           Nothing in this Plan or in any Stock Option Agreement hereunder
shall confer upon any Optionee any right to continue as a member of the Board
of the Company or of any Parent Corporation or any Subsidiary or shall
interfere with or restrict in any way the rights otherwise conferred on or
reserved to the Board and the stockholders of the Company, its Parent
Corporations and Subsidiaries, and/or the stockholders of any of them, to
terminate any Optionee's Board membership.


<PAGE>
                                       ARTICLE V
                                  EXERCISE OF OPTIONS

Section 5.1 - Person Eligible to Exercise

           During the lifetime of the Optionee, only he may exercise an Option
(or any portion thereof) granted to him.  After the death of the Optionee,
any exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock Option
Agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.

Section 5.2 - Partial Exercise

           At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Stock Option Agreement, such Option or portion
thereof may be exercised in whole or in part; provided, however, that the
Company shall not be required to issue fractional shares and the Committee
may, by the terms of the Option, require any partial exercise to be with
respect to a specified minimum number of shares.

Section 5.3 - Manner of Exercise

           An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the secretary of the Company or his office of
all of the following prior to the time when such Option or such portion
becomes unexercisable under the Plan or the applicable Stock Option
Agreement:

                 (a)  Notice in writing signed by the Optionee or other person
      then entitled to exercise such Option or portion, stating that such
      Option or portion is exercised, such 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 thereby exercised; or

                      (ii)  With the consent of the Committee, (A) shares of
      the Company's Common Stock owned by the Optionee duly endorsed for
      transfer to the Company, or, (B) subject to the timing requirements of
      Section 5.4, shares of the Company's Common Stock issuable to the
      Optionee upon exercise of the Option, with a Fair Market Value on the
      date of Option exercise equal to the aggregate Option price of the
      shares with respect to which such Option or portion is thereby
      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 Internal Revenue Code) and
      payable upon such terms as may be prescribed by the Committee.  The
      Committee may also prescribe the form of such note and the security to
      be given for such note.  No Option may, however, be exercised 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 subsections (i),
           (ii) and (iii); and

<PAGE>

                 (c)  The payment to the Company (or other applicable
      corporation) of all amounts, if any, which it is required to withhold
      under federal, state or local law in connection with the exercise of the
      Option; with the consent of the Committee, (i) shares of the Company's
      Common Stock owned by the Optionee duly endorsed for transfer, or, (ii)
      subject to the timing requirements of Section 5.4, shares of the
      Company's Common Stock issuable to the 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;

                 (d)  Such representations and documents as the Committee, in
      its absolute discretion, deems necessary or advisable to effect
      compliance with all applicable provisions of the Securities Act and any
      other federal or state securities laws or regulations.  The Committee
      may, in its absolute discretion, also take whatever additional actions
      it deems appropriate to effect such compliance including, without
      limitation, placing legends on share certificates and issuing
      stop-transfer orders to transfer agents and registrars; and

                 (e)  In the event that the Option or portion thereof shall be
      exercised pursuant to Section 5.1 by any person or persons other than
      the Optionee, appropriate proof of the right of such person or persons
      to exercise the Option or portion thereof.

Section 5.4 - Certain Timing Requirements

           Shares of the Company's Common Stock issuable to the Optionee upon
exercise of the Option may be used to satisfy the Option price or the tax
withholding consequences of such exercise only (i) during the period
beginning on the third business day following the date of release of the
quarterly or annual summary statement of sales and earnings of the Company
and ending on the twelfth business day following such date or (ii) pursuant
to an irrevocable written election by the Optionee to use shares of the
Company's Common Stock issuable to the Optionee upon exercise of the Option
to pay all or part of the Option price or any withholding taxes (subject to
the approval of the Committee) made at least six months prior to the payment
of such Option price or withholding taxes.

Section 5.5 - Conditions to Issuance of Stock Certificates

           The shares of stock issuable and deliverable upon the exercise of
an Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the
Company.  The Company shall not be required to issue or deliver any
certificate or certificates for shares of stock purchased upon the exercise
of any 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 the rulings or
      regulations of the Securities and Exchange Commission or 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


<PAGE>

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

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

Section 5.6 - Rights as Stockholders

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

Section 5.7 - Transfer Restrictions

           Unless otherwise approved in writing by the Committee, no shares
acquired upon exercise of any Option by any Director may be sold, assigned,
pledged, encumbered or otherwise transferred until at least six months have
elapsed from (but excluding) the date that such Option was granted.  The
Committee, in its absolute discretion, may impose such other restrictions on
the transferability of the shares purchasable upon the exercise of an Option
as it deems appropriate.  Any such other restriction shall be set forth in
the respective Stock Option Agreement and may be referred to on the
certificates evidencing such shares.


<PAGE>
                                      ARTICLE VI
                                    ADMINISTRATION

Section 6.1 - Committee

           The Committee shall consist of two or more members of the Board,
appointed by and holding office at the pleasure of the Board, each of whom is
a "disinterested person" as defined by Rule 16b-3.  Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members
may resign at any time by delivering written notice to the Board.  Vacancies
in the Committee shall be filled by the Board.

Section 6.2 - Duties and Powers of Committee

           It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions.  The Committee
shall have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as
are consistent therewith and to interpret, amend or revoke any such rules. 
The Board shall have no right to exercise any of the rights or duties of the
Committee under the Plan.

Section 6.3 - Majority Rule

           The Committee shall act by a majority of its members in office. 
The Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.

Section 6.4 -    Compensation; Professional Assistance; Good Faith Actions

           Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board.  All expenses and
liabilities incurred by members of the Committee in connection with the
administration of the Plan shall be borne by the Company.  The Committee may
employ attorneys, consultants, accountants, appraisers, brokers or other
persons.  The Committee, the Company and its officers and directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons. 
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Optionees, 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 Options, and all members of the
Committee shall be fully protected by the Company in respect to any such
action, determination or interpretation.


<PAGE>

                                      ARTICLE VII
                                   OTHER PROVISIONS

Section 7.1 - Options Not Transferable

           No Option or interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the 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 nothing in
this Section 7.1 shall prevent transfers by will or by the applicable laws of
descent and distribution.

Section 7.2 -    Amendment, Suspension or Termination of the Plan

           The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Committee. 
However, without approval of the Company's stockholders given within twelve
months before or after the action by the Committee, no action of the
Committee may, except as provided in Section 2.3, increase any limit imposed
in Section 2.1 on the maximum number of shares which may be issued on
exercise of Options, modify the Award Limit, materially modify the
eligibility requirements of Section 3.1, reduce the minimum Option price
requirements of Section 4.2, extend the limit imposed in this Section 7.2 on
the period during which Options may be granted or amend or modify the Plan in
a manner requiring stockholder approval under Rule 16b-3.  Neither the
amendment, suspension nor termination of the Plan shall, without the consent
of the holder of the Option, alter or impair any rights or obligations under
any Option theretofore granted.  No Option may be granted during any period
of suspension nor after termination of the Plan, and in no event may any
Option be granted under this Plan after the first to occur of the following
events:

                 (a)  The expiration of ten years from the date the Plan is
      adopted by the Board; or

                 (b)  The expiration of ten years from the date the Plan is
      approved by the Company's stockholders under Section 7.3.

Section 7.3 - Approval of Plan by Stockholders

           This Plan will be submitted for the approval of the Company's
stockholders within twelve months after the date of the Board's initial
adoption of the Plan.  Options may be granted prior to such stockholder
approval; provided, however, that such Options shall not be exercisable prior
to the time when the Plan is approved by the stockholders; provided, further,
that if such approval has not been obtained at the end of said twelve-month
period, all Options previously granted under the Plan shall thereupon be
cancelled and become null and void.  The Company shall take such actions with
respect to the Plan as may be necessary to satisfy the requirements of Rule
16b-3(b).


<PAGE>

Section 7.4 -    Effect of Plan Upon Other Option and Compensation Plans

           The adoption of this Plan shall not affect any other compensation
or incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary.  Nothing in this Plan shall be construed to limit the right of
the Company, any Parent Corporation or any Subsidiary (a) to establish any
other forms of incentives or compensation for members of the Board of the
Company, any Parent Corporation or any Subsidiary or (b) to grant or assume
options otherwise than under this Plan in connection with any proper
corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.

Section 7.5 - Titles

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

Section 7.6 - Conformity to Securities Laws

           The Plan 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, the Plan shall be administered, and Options
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,
the Plan and Options granted hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.

                                      *  *  *  *

<PAGE>

           I hereby certify that the foregoing Plan was duly adopted by the
Compensation Committee of the Board of Directors of Owens-Illinois, Inc. on
March 15, 1994.

           Executed on this 23rd day of March, 1994.


                                            /s/ THOMAS L. YOUNG
                                       ------------------------------------
                                                  Secretary
Corporate Seal
                                      *  *  *  *

<PAGE>

           I hereby certify that the foregoing Plan was duly approved by the
stockholders of Owens-Illinois, Inc. on May 11, 1994.

           Executed on this _____ day of May, 1994.



                                       ____________________________________
                                                  Secretary