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Stock Options and Other Stock Based Compensation
 12 Months Ended
Dec. 31, 2011
Stock Options and Other Stock Based Compensation  
Stock Options and Other Stock Based Compensation

12. Stock Options and Other Stock Based Compensation

        The Company has five nonqualified plans under which it has granted stock options, restricted shares and performance vested restricted share units: (1) the Stock Option Plan for Key Employees of Owens-Illinois, Inc.; (2) the Stock Option Plan for Directors of Owens-Illinois, Inc.; (3) the 1997 Equity Participation Plan of Owens-Illinois, Inc.; (4) the 2004 Equity Incentive Plan for Directors of Owens-Illinois, Inc.; and (5) the 2005 Equity Incentive Plan of Owens-Illinois, Inc. At December 31, 2011, there were 6,922,000 shares authorized and available for grants under these plans. Total compensation cost for all grants of shares and units under all of these plans was $1 million, $11 million and $20 million for the years ended December 31, 2011, 2010 and 2009, respectively. The expense in 2011 and 2010 was decreased as a result of adjustments made to performance vested restricted share units due to actual and expected attainment of performance goals.

Stock Options

        For options granted prior to March 22, 2005, no options may be exercised in whole or in part during the first year after the date granted. In general, subject to accelerated exercisability provisions related to the performance of the Company's common stock or change of control, 50% of the options became exercisable on the fifth anniversary of the date of the option grant, with the remaining 50% becoming exercisable on the sixth anniversary date of the option grant. In general, options expire following termination of employment or the day after the tenth anniversary date of the option grant.

        For options granted after March 21, 2005, no options may be exercised in whole or in part during the first year after the date granted. In general, subject to change in control, these options become exercisable 25% per year beginning on the first anniversary. In general, options expire following termination of employment or the seventh anniversary of the option grant.

        The fair value of options granted before March 22, 2005, was amortized ratably over five years or a shorter period if the grant became subject to accelerated exercisability provisions related to the performance of the Company's common stock. The fair value of options granted after March 21, 2005, is amortized over the vesting periods which range from one to four years.

        Stock option information at December 31, 2011 and for the year then ended is as follows:

 
   Number of
Shares
(thousands) 		  Weighted
Average
Exercise
Price
(per share) 		  Weighted
Average
Remaining
Contractual
Term
(years) 		  Aggregate
Intrinsic
Value 		 

Options outstanding at January 1, 2011

     4,048   $ 20.60              

Granted

     548     29.68              

Exercised

     (340 )   15.32              

Forfeited or expired

     (212 )   21.98              
                         

Options outstanding at December 31, 2011

     4,044     22.20     3.6   $ 13  
                   

Options vested or expected to vest at December 31, 2011

     3,991   $ 22.20     3.6   $ 13  
                   

Options exercisable at December 31, 2011

     2,450   $ 21.78     2.8   $ 7  
                   

        Certain additional information related to stock options is as follows for the periods indicated:

 
   2011   2010   2009  

Weighted average grant-date fair value of options granted (per share)

   $ 13.70   $ 14.60   $ 4.23  
               

Aggregate intrinsic value of options exercised

   $ 4   $ 5   $ 3  
               

Aggregate cash received from options exercised

   $ 5   $ 5   $ 7  
               

Restricted Shares and Restricted Share Units

        Shares granted to employees prior to March 22, 2005, generally vest after three years or upon retirement, whichever is later. Shares granted after March 21, 2005 and prior to 2011, vest 25% per year beginning on the first anniversary and unvested shares are forfeited upon termination of employment. Restricted share units granted to employees after 2010 vest 25% per year beginning on the first anniversary. Holders of vested restricted share units receive one share of the Company's common stock for each unit. Granted but unvested restricted share units are forfeited upon termination, unless certain retirement criteria are met. Shares granted to directors prior to 2008 were immediately vested but may not be sold until the third anniversary of the share grant or the end of the director's then current term on the board, whichever is later. Shares granted to directors after 2007 vest after one year.

        The fair value of the restricted shares and restricted share units is equal to the market price of the Company's common stock on the date of the grant. The fair value of restricted shares granted before March 22, 2005, is amortized ratably over the vesting period. The fair value of restricted shares and restricted share units granted after March 21, 2005, is amortized over the vesting periods which range from one to four years.

        The activity of restricted shares and restricted share units is as follows:

 
   Number of
Restricted
Shares
(thousands) 		  Weighted
Average
Grant-Date
Fair Value
(per share) 		 

Nonvested at January 1, 2011

     536   $ 20.11  

Granted

     156     29.99  

Vested

     (152 )   23.50  

Forfeited

     (29 )   23.49  
             

Nonvested at December 31, 2011

     511     21.94  
           

Awards granted during 2010

         $ 31.30  

Awards granted during 2009

         $ 11.85  

 

 
   2011   2010   2009  

Total fair value of shares vested

   $ 4   $ 5   $ 4  
               

Performance Vested Restricted Share Units

        Performance vested restricted share units vest on January 1 of the third year following the year in which they are granted. Holders of vested units receive 0.5 to 2.0 shares of the Company's common stock for each unit, depending upon the attainment of consolidated performance goals established by the Compensation Committee of the Company's Board of Directors. If minimum goals are not met, no shares will be issued. Granted but unvested restricted share units are forfeited upon termination of employment, unless certain retirement criteria are met.

        The fair value of each performance vested restricted share unit is equal to the product of the fair value of the Company's common stock on the date of grant and the estimated number of shares into which the performance vested restricted share unit will be converted. The fair value of performance vested restricted share units is amortized ratably over the vesting period. Should the estimated number of shares into which the performance vested restricted share unit will be converted change, an adjustment will be recorded to recognize the accumulated difference in amortization between the revised and previous estimates.

        Performance vested restricted share unit activity is as follows:

 
   Number of
Performance Vested
Restricted Shares
Units (thousands) 		  Weighted Average
Grant-Date
Fair Value
(per unit) 		 

Nonvested at January 1, 2011

     1,220   $ 19.99  

Granted

     253     29.70  

Forfeited/Cancelled

     (194 )   45.37  
             

Nonvested at December 31, 2011

     1,279     18.06  
           

Awards granted during 2010

         $ 31.10  

Awards granted during 2009

         $ 10.30  

        No shares were issued in 2011 related to performance vested restricted share units as the minimum goals were not met.

        As of December 31, 2011, there was $16 million of total unrecognized compensation cost related to all unvested stock options, restricted shares and performance vested restricted share units. That cost is expected to be recognized over a weighted average period of approximately three years.