UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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LIBBEY INC.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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LIBBEY INC.
P.O. BOX 10060
300 MADISON AVENUE
TOLEDO, OHIO 43699-0060

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
ON MAY 19, 2011

 

 

 

Dear Fellow Libbey Shareholder:

 

We will hold our 2011 Annual Meeting of Libbey shareholders on Thursday, May 19, 2011, at 2 p.m., Eastern Daylight Savings Time, at the Libbey Corporate Showroom located at 335 North St. Clair Street, Toledo, Ohio.

 

At the meeting, shareholders will:

 

 

You are entitled to vote at the meeting if you were an owner of record of Libbey Inc. common stock at the close of business on March 21, 2011. If your ownership is through a broker or other intermediary, you will need to have proof of your stockholdings in order to be admitted to the meeting. A recent account statement, letter or proxy from your broker or other intermediary will suffice.

 

Whether or not you plan to attend the meeting, we hope you will vote as soon as possible in accordance with the instructions contained under “Questions and Answers — How do I vote?” in the enclosed proxy statement.

 

Management sincerely appreciates your support.

 

Sincerely,

 

John F. Meier

Chairman of the Board of Directors and

Chief Executive Officer

 

By Order of the Board of Directors,

 

Susan Allene Kovach

Secretary

 

March 31, 2011

Toledo, Ohio

 

TABLE OF CONTENTS

 

 

 

 

 

LIBBEY INC.

 

 

PROXY STATEMENT

 

Important Notice Regarding the Availability of Proxy Materials

 

We have sent you this proxy statement because our Board of Directors is asking you to give your proxy (that is, the authority to vote your shares) to our proxy committee so that they may vote your shares on your behalf at our annual meeting of shareholders. The members of the proxy committee are John F. Meier and Susan Allene Kovach. They will vote your shares as you instruct.

 

We will hold the meeting in the Libbey Corporate Showroom located at 335 North St. Clair Street, Toledo, Ohio. The meeting will be held on May 19, 2011, at 2 p.m., Eastern Daylight Savings Time. This proxy statement contains information about the matters being voted on and other information that may be helpful to you.

 

We began the mailing to shareholders of this proxy statement and the enclosed proxy on or about March 31, 2011.

 

You may vote if you were a holder of Libbey Inc. (which we refer to as Libbey or the Company) common stock at the close of business on March 21, 2011.

 

You may vote on the following proposals:

 

 

You may vote FOR these nominees, you may WITHHOLD your vote with respect to any or all of these nominees, or you may abstain.

 

1

 

 

The following non-binding, advisory resolution regarding the pay of our named executive officers, as disclosed in this proxy statement:

 

RESOLVED, that the shareholders of the Company approve, on an advisory and non-binding basis, the compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K in this proxy statement, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.

 

You may vote FOR this resolution, you may vote AGAINST this resolution, or you may abstain.

 

 

Recommend, on an advisory and non-binding basis, the frequency — every 3 years, 2 years or 1 year — with respect to which shareholders should have future non-binding say-on-pay votes. You may vote FOR 3 years, 2 years or 1 year, or you may abstain.

 

 

You may vote FOR ratification of the appointment or AGAINST ratification of the appointment, or you may abstain.

 

The Board recommends that you vote:

 

 

Registered Shareholders

 

If you are a registered shareholder, you may vote in any of the following ways:

 

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Shares held jointly by two or more registered shareholders may be voted by any joint owner unless we receive written notice from another joint owner denying the authority of the first joint owner to vote those shares.

 

Shares Held in Street Name

 

If you hold your shares in street name — in other words, you hold your shares through a broker or other nominee, you will receive from your broker a notice regarding availability of proxy materials that will tell you how to access our proxy materials and provide voting instructions to your broker over the internet. It also will tell you how to request a paper or e-mail copy of our proxy materials. If you hold your shares in street name and do not provide voting instructions to your broker, your shares will not be voted on any proposals on which your broker does not have discretionary authority to vote, including Proposals 1 through 3.

 

Shares Held Through 401(k) Plan

 

If you participate in the Libbey Retirement Savings Plan, which we refer to as our 401(k) plan, and if you have investments in the Libbey Inc. stock fund and have an email address provided by Libbey for business purposes, you will receive an email message at your Libbey-provided email address containing instructions that you must follow in order for shares attributable to your account to be voted. If you participate in our 401(k) plan, have investments in the Libbey Inc. stock fund and do not have an email address provided by Libbey for business purposes, you will receive instructions from the trustee of the 401(k) plan that you must follow in order for shares attributable to your account to be voted.

 

If you are a shareholder of record, you may, at any time before your shares are voted at the annual meeting, change your vote or revoke your proxy by:

 

 

If you hold your shares in street name through a broker or other nominee, you should contact your broker or nominee to determine how to change your vote or revoke your proxy.

 

At the close of business on March 21, 2011, there were 19,831,144 shares of Libbey common stock outstanding. Each share of common stock is entitled to one vote.

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Provided that a quorum is present either in person or by proxy at the Annual Meeting, each of Proposals 1 through 4 must receive the required votes set forth below:

 

 

Under our By-laws, the holders of a majority of the total shares issued and outstanding, whether present in person or represented by proxy, will constitute a quorum, permitting business to be transacted at the meeting.

 

Votes cast in person or by proxy will be tabulated by the inspector of elections appointed for the meeting and will determine whether a quorum is present. Abstentions will be counted as shares that are present and entitled to vote for purposes of determining whether a quorum is present. For purposes of determining whether the shareholders have approved a matter, abstentions are not treated as votes cast “for,” “against” or “withheld,” and therefore will have no effect on the outcome of any of Proposals 1-4. Additionally, broker non-votes will not be considered as present and entitled to vote with respect to any of Proposals 1-4. The common stock outstanding on the record date held by the trustee under Libbey’s 401(k) plan will be voted by the trustee in accordance with written instructions from participants in that 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 of the plan for which instructions were received.

 

If you hold your shares in “street name” through a broker or other nominee, your broker or nominee may not be permitted to vote your shares with respect to certain matters, including Proposals 1-3, unless you give your broker or nominee specific instructions as to how to vote. Non-voted shares on non-routine matters are called broker non-votes. They will not be counted in determining the number of shares necessary for approval but will be counted in determining whether there is a quorum.

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The proxy committee will vote on other matters that properly come before the meeting in accordance with the Board’s recommendation or, if no recommendation is given, in the discretion of the proxy committee.

 

A shareholder desiring to submit a proposal for inclusion in our Proxy Statement for our Annual Meeting to be held in 2012 must deliver the proposal so that we receive it no later than November 30, 2011. Any proposal submitted outside the processes of Rule 14a-8 under the Exchange Act will be considered untimely if submitted after February 14, 2012. We request that all such proposals be addressed to Susan Allene Kovach, Vice President, General Counsel and Secretary, Libbey Inc., 300 Madison Avenue, P.O. Box 10060, Toledo, Ohio 43699-0060.

 

Each year our shareholders are asked to elect the members of a class for a term of three years. Currently, the term of office for members of Class III of the Board of Directors will expire on the date of the Annual Meeting in 2011. The members of Class III are William A. Foley, Deborah G. Miller and Terence P. Stewart. The Board of Directors has fixed the number of directors to be elected at the 2011 Annual Meeting at 3 and has nominated Messrs. Foley and Stewart and Ms. Miller for election to Class III. Those persons who are elected directors at the 2011 Annual Meeting will hold office until their terms expire on the date of the 2014 Annual Meeting or until the election and qualification of their successors. The terms of office of the members of Class I and Class II of the Board of Directors will expire on the date of the Annual Meeting in 2012 and 2013, respectively. Information regarding Messrs. Foley and Stewart and Ms. Miller is set forth below under “Libbey Corporate Governance — Who are the current members of Libbey’s Board of Directors?”

 

So far as the Board has been advised, only the 3 persons named above as nominees will be nominated for election as directors at the Annual Meeting. Shares represented by proxies in the accompanying form will be voted for the election of these 3 nominees unless authority to vote for any or all of these nominees is withheld. The nominees have consented to being named in this proxy statement and to serve if elected. If any of them should become unavailable prior to the Annual Meeting, the proxy will be voted for a substitute nominee or nominees designated by the Board of Directors or the number of directors may be reduced accordingly. The Board, however, expects each of the nominees to be available. As long as a quorum is present, directors shall be elected by a majority of the votes of the shares present in person or represented by proxy at the meeting. A shareholder entitled to vote for the election of directors may withhold authority to vote for any or all of the nominees.

 

The Board of Directors recommends a vote FOR each of Mr. Foley, Ms. Miller and Mr. Stewart.

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We are providing shareholders the opportunity to vote on a non-binding, advisory resolution to approve the pay of our named executive officers, as disclosed below under “Compensation-Related Matters — Compensation Discussion and Analysis” and the related tables and narrative disclosures. For convenience, this vote is referred to in this proxy statement as the “say-on-pay vote.”

 

Specifically, our say-on-pay vote gives shareholders the opportunity to cast a non-binding, advisory vote with respect to the following resolution:

 

RESOLVED, that the shareholders of the Company approve, on an advisory and non-binding basis, the compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K in this proxy statement, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.

 

Our executive pay program, which is discussed in detail below under “Compensation-Related Matters — Compensation Discussion and Analysis” and related tables and narrative, embodies a pay-for-performance philosophy that is designed to:

 

 

The 2010 program, which we believe provides an appropriate balance among base salary and short- and long-term compensation target opportunities, incorporated the following features:

 

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In addition, our executive pay program incorporates stock ownership guidelines for executive officers, and our incentive compensation awards are subject to a clawback under certain circumstances.

 

Because your vote is advisory, it will not be binding on Libbey, our Compensation Committee or our Board of Directors. However, we value the opinions of our shareholders, and our Compensation Committee and Board will carefully consider the outcome of this vote.

 

The Board of Directors recommends a vote FOR the approval, on an advisory basis, of the resolution.

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We are providing shareholders the opportunity to vote, on a non-binding, advisory basis, as to the frequency with which shareholders will be provided future say-on-pay votes. Shareholders may choose “3 years,” “2 years,” “1 year” or “abstain.”

 

We believe a “3 years” frequency is most consistent with our compensation philosophy because:

 

 

This advisory vote on the frequency of future say-on-pay votes does not bind our Board of Directors. Regardless of the Board’s recommendation and the outcome of the shareholder vote on this proposal, our Board may in the future decide to conduct advisory say-on-pay votes on a more or less frequent basis and may vary its practice based on factors such as discussions with shareholders and the adoption of material changes to our executive pay program. The Board will disclose its position on the frequency of future say-on-pay votes in our Form 10-Q report to be filed with the SEC for the quarter ending June 30, 2011.

 

The Board of Directors recommends a vote FOR holding future say-on-pay votes every “3 years.”

 

 

The Audit Committee has appointed Ernst & Young LLP to serve as our independent auditors for our 2011 fiscal year. Although ratification by the shareholders is not required by law, the Board of Directors believes that you should be given the opportunity to express your views on the subject. Unless otherwise directed, proxies in the accompanying form will be voted for ratification.

 

The Board of Directors recommends a vote FOR this proposal.

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The following table shows information with respect to the persons we know to be the beneficial owners of more than five percent of our common stock as of December 31, 2010.

 

 

 

 

Stock Ownership Guidelines

 

Non-Employee Director Stock Ownership Guidelines.  Effective May 6, 2010, our Board of Directors adopted new stock ownership guidelines applicable to non-employee directors. For individuals who were non-employee directors as of May 6, 2010, the deadline for compliance is May 6, 2015. For an individual who subsequently becomes a non-employee director, the deadline will be the fifth anniversary of the date on which he or she becomes a non-employee director. We refer to the deadline as the Compliance Deadline.

 

Under the new guidelines, a non-employee director must, on or before the applicable Compliance Deadline, own Libbey common stock and/or its equivalents, as described below, in an amount at least equal to 4 times the amount of the annual cash retainer payable to the director for service on the Board of Directors (excluding the cash retainer or fees payable for service on any committee of the Board). We refer to this amount as the Ownership Threshold.

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The following forms of equity, which we refer to as Libbey Shares, will be counted in determining whether a non-employee director has achieved the Ownership Threshold applicable to him or her:

 

 

If a non-employee director achieves the Ownership Threshold on any date prior to his or her Compliance Deadline, that director generally will be deemed to continue to comply with the Ownership Threshold even if the value of his or her Libbey Shares subsequently declines as a result of a decline in the closing price of Libbey common stock. If, after achieving the Ownership Threshold, the non-employee director sells or otherwise disposes of Libbey Shares and after the sale or disposition fails to hold at least the minimum number of Libbey Shares that he or she was required to hold when he or she first achieved the Ownership Threshold, then the director’s holdings of Libbey Shares will be re-valued based on the then-current market price of Libbey common stock, and the director will be required to achieve the Ownership Threshold based on his or her re-valued holdings.

 

As of March 21, 2011, all of our non-employee directors comply with these stock ownership guidelines.

 

Executive Stock Ownership Guidelines.  In October 2007, we established guidelines pursuant to which our executive officers also are required to achieve ownership of meaningful amounts of equity in Libbey. Specifically, each executive officer is required to achieve ownership of a specified number of shares of Libbey common stock equal to a multiple of his or her base salary in effect on January 1, 2008 or, if later, the date on which the executive officer becomes subject to the guidelines. For individuals who were executive officers as of January 1, 2008, the applicable deadline for compliance with the guidelines is December 31, 2012. For individuals who become executive officers after January 1, 2008, the applicable deadline is the fifth anniversary of the date on which they become executive officers.

 

The applicable multiples for the executive officers are as follows:

 

 

 

 

We generally determine the number of shares of stock that each executive officer is required to own by the applicable deadline as follows. First, we multiply the applicable executive officer’s annual base salary on January 1, 2008 (or the date on which he or she becomes subject to the guidelines, if later) by the appropriate multiple from the above table. We then divide the product by the average closing price of Libbey common stock over a period of time to be determined by the Nominating and Governance Committee of Libbey’s Board of Directors. For those individuals who were executive officers as of January 1, 2008, the Nominating and Governance Committee determined that the average closing price of Libbey common stock over 2007, $16.84, would be used to determine the number of shares that they are required to own as of December 31, 2012.

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In light of the significant volatility in our stock price during the 1-year period prior to July 1, 2009, when Mr. Roberto Rubio joined us as Vice President, Managing Director, Libbey Mexico, the Nominating and Governance Committee considered a number of different methodologies for determining the number of shares that Mr. Rubio should be required to own by the fifth anniversary of his date of hire. Ultimately, the Nominating and Governance Committee based its decision as to Mr. Rubio’s equity ownership guideline on internal equity factors, comparing his annualized base salary to the annualized base salary of the other executive officers and positioning his guideline so that it exceeds that of the other Vice Presidents, whose guidelines were determined using a 2X multiple of base salary but have annualized base salaries that are lower than Mr. Rubio’s. Mr. Rubio’s guideline is lower than the guidelines of our CEO and Executive Vice President, whose respective guidelines were determined based upon higher multiples of base salary.

 

The following forms of equity, which we refer to as Qualifying Shares, will be counted in determining whether an executive officer has achieved the guideline applicable to him or her:

 

 

 

 

As of March 21, 2011, the number of Qualifying Shares held by the executive officers whom we refer to as the named executive officers was as follows:

 

 

 

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The Nominating and Governance Committee, which is responsible for monitoring compliance with the guidelines, has authority to address extenuating circumstances that prevent an executive officer from complying with the guidelines by the deadline applicable to him or her. In addition, the Nominating and Governance Committee has authority to work out transition plans for executive officers nearing retirement.

 

Beneficial Ownership Table

 

The following table shows, as of March 21, 2011, the number of shares of our common stock and percentage of all issued and outstanding shares of our common stock that are beneficially owned (unless otherwise indicated) by our directors, our named executive officers (who are identified on page 11) and our directors and executive officers as a group. Our address, as set forth on the Notice of Annual Meeting of Shareholders, is the address of each director and executive officer set forth below. The shares owned by the executive officers set forth below include the shares held in their accounts in the Libbey Inc. Retirement Savings Plan, which we refer to as our 401(k) plan. An asterisk indicates ownership of less than one percent of the outstanding stock.

 

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		Number of
		Deferred or
Name of Director		Phantom Shares
C. Duno			14,748
W. Foley			11,778
J.R. Gougelet			5,428
P. Howell			14,568
D. Miller			2,192
C. Moerdyk			18,453
J. Orr			0
T. Stewart			67,307
All non-employee directors as a group			134,475

 

For more information regarding our deferred compensation plans for non-management directors, see “Compensation-Related Matters —  Compensation Discussion and Analysis — How are Libbey’s directors compensated?” below.

 

 

		Number of
		Shares of
Named Executive Officer		Deferred Stock
G. Geswein			17,187
D. Ibele			0
J. Meier			105,650
R. Reynolds			0
R. Rubio			0
All executive officers as a group			165,304

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		Number of
		Outstanding Stock
		Options Exercisable
Named Executive Officer		Within 60 Days
G. Geswein			69,828
D. Ibele			80,340
J. Meier			238,978
R. Reynolds			154,815
R. Rubio			6,721
All executive officers as a group			744,643

 

 

In addition to outstanding shares of common stock that our named executive officers beneficially owned as of March 21, 2011, the named executive officers have received the following grants of RSUs that have not yet vested:

 

		No. of
Named Executive Officer		Unvested RSUs(1)
G. Geswein			33,536
D. Ibele			24,483
J. Meier			117,409
R. Reynolds			58,848
R. Rubio			40,023
All executive officers as a group			368,202

 

 

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Section 16(a) Beneficial Ownership Reporting Compliance

 

Based solely on our review of filings with the SEC and written representations that no other reports were required to be filed by the relevant persons, we believe that, during the fiscal year ended December 31, 2010, all officers, directors and greater-than-ten-percent beneficial owners complied with the filing requirements applicable to them pursuant to Section 16 of the Exchange Act on a timely basis.

 

Our Board of Directors is divided into 3 classes of directors. Each year, 1 class of directors stands for election at our annual meeting of shareholders. It is important to us that our directors and candidates for our Board not only meet the “Requisite Qualifications for Board Candidates” described under “How does our Board select nominees for the Board?” below, but also possess experience, qualifications or skills in the substantive areas that impact our business. The biographies below highlight the individual attributes of each director that enhance the Board’s collective knowledge and experience.

 

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As noted above, our Board currently includes 8 non-employee directors and 2 employee directors. Of our 8 non-employee directors, 7 have been determined to be independent. For more information with respect to how the Board determines which directors are considered independent, see “How does the Board determine which directors are considered independent?” below. Mr. Meier, our CEO, has served as Chairman of the Board since 1993, when we became a publicly-held company.

 

We currently are well-served by the Board leadership structure described above. Given Mr. Meier’s long history with the Company and his close working relationships with key customers and other stakeholders, we believe that unifying the Chairman and CEO roles in Mr. Meier demonstrates to our employees, suppliers, customers and other stakeholders that we are under strong leadership, with a single person who has extensive institutional and industry knowledge setting the tone and having primary responsibility for managing our operations.

 

Although Mr. Meier serves as both Chairman and CEO, a number of factors about our directors and the way our Board operates promote independent oversight of management, including our Chairman and CEO:

 

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Finally, our Board periodically evaluates the appropriateness of combining the Chairman and CEO roles and will do so again in connection with Mr. Meier’s planned retirement.

 

Our Board of Directors has adopted Corporate Governance Guidelines that govern the Board of Directors. Our Corporate Governance Guidelines, as well as the charters for each of the Audit, Compensation and Nominating and Governance committees, are available on our website (www.libbey.com).

 

Our Board of Directors currently has the following standing committees:

 

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The Board has determined that all members of each of its standing committees are independent, within the meaning of SEC regulations and the listing standards of the NYSE Amex exchange. The Board also has determined that all members of the Compensation Committee are “outside directors,” within the meaning of 26 CFR § 1.162-27.

 

In addition to our Board’s standing committees, the Board, in connection with the announcement in February 2011 that Mr. Meier, our Chairman and CEO, intends to retire by the end of this year, has appointed an ad hoc succession committee to evaluate, and make recommendations to the Board regarding, candidates to succeed Mr. Meier and to address related succession issues. Members of the ad hoc succession planning committee are William A. Foley (Chair), Carlos V. Duno, Peter C. McC. Howell, Deborah G. Miller, Carol B. Moerdyk and John C. Orr, each of whom has been determined by the Board to be independent.

 

Our management is responsible for day-to-day risk management and our Board, through the Audit Committee, is responsible for oversight of management’s risk management processes. We have implemented an enterprise-wide risk management program. Our Director, Enterprise Risk Management, has primary responsibility for this program and reports to our Executive Vice President, Chief Financial Officer. We also have an Enterprise Risk Management Steering Committee consisting of members of senior management from across our operations.

 

Through our enterprise risk management program, we identify, evaluate and address actual and potential risks that may impact our business and our financial results. Our Director, Enterprise Risk Management reports routinely to the Audit Committee with respect to the status of our program and particular risk strategies, and we apprise our Board of particular risk management matters in connection with its general oversight of our business.

 

Our Board selects new directors following review and evaluation by the Nominating and Governance Committee, which also proposes and reviews the criteria for membership at least biannually and the selection process. The Nominating and Governance Committee solicits input from all Board members and makes its recommendation to the Board. An invitation to join the board is extended by the Chairman of the Board on behalf of the Board. A shareholder who

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wishes to recommend a prospective nominee for the Board may notify our Corporate Secretary or any member of the Nominating and Governance Committee in writing, including such supporting material as the shareholder deems appropriate. Candidates for director nominated by shareholders will be given the same consideration as candidates nominated by other sources.

 

The Board in its Corporate Governance Guidelines has determined that Board members must satisfy the following standards and qualifications:

 

Requisite Characteristics for Board Candidates

 

 

In addition, the Board’s Corporate Governance Guidelines set forth the Board’s intention to seek directors who are strategic thinkers, understand complex capital structures and the operational constraints that they create, are members of the boards of directors of other public companies and have experience and expertise in corporate governance, marketing expertise and/or experience in the consumer products industry. Consistent with the Board’s Corporate Governance Guidelines, the Board also seeks directors who, as compared to then-existing members of the Board, are diverse with respect to geography, employment, age, race or gender. Reflecting this desire to foster a diverse Board, 2 of our directors are women and 1 director is Hispanic. In addition, 1 director is French and brings us his deep knowledge of the European glass tableware industry, and another director is British and, through his wide travels around the world, brings us his perspective as to the international business environment, particularly in China.

 

Finally, the Board considers such other relevant factors as it deems appropriate, including the current composition of the Board, the balance of management and independent directors, the need for Audit Committee expertise and the Board’s evaluations of other prospective nominees.

 

The Nominating and Governance Committee employed the services of a third-party search firm to identify and recruit Ms. Moerdyk to the Board in 1998 and Mr. Orr to the Board in 2008, and, under its charter, the Nominating and Governance Committee continues to have the authority to employ the services of a third-party search firm in fulfilling its duties to select nominees to the Board.

 

Pursuant to the Corporate Governance Guidelines approved by the Board, the Board has made a determination as to the independence of each of the members of the Board. In making this determination, the Board has considered the existence or absence of any transactions or relationships between each

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director or any member of his or her immediate family and Libbey and its subsidiaries and affiliates, including those reported under “Certain Relationships and Related Transactions — What transactions involved directors or other related parties?” below. The Board also examined the existence or absence of any transactions or relationships between directors or their affiliates and members of Libbey’s senior management or their affiliates.

 

As provided in the Guidelines, the purpose of this review was to determine whether there is any relationship that is inconsistent with a determination that a director is independent of Libbey or its management. Specifically, the Guidelines preclude a determination by the Board that a director is independent if the director does not meet the independence requirements set forth in the listing standards of the New York Stock Exchange, which are substantially the same as the independence requirements set forth in the listing standards of the NYSE Amex exchange, on which our common stock currently is listed.

 

As a result of this review, the Board has affirmatively determined that Carlos V. Duno, William A. Foley, Jean-René Gougelet, Peter C. McC. Howell, Deborah G. Miller, Carol B. Moerdyk and John C. Orr are independent of Libbey and its management under the standards set forth in the Corporate Governance Guidelines. Messrs. Meier and Reynolds are considered inside directors because of their employment as senior executives of Libbey. Mr. Stewart is considered a non-independent director because in the past 3 years Stewart and Stewart, the law firm of which Mr. Stewart is managing partner, has provided legal services to Libbey in connection with international trade matters and is expected to continue to do so. For more information with respect to the compensation paid to Mr. Stewart’s law firm for services provided to Libbey in 2010, see “Corporate Governance — Certain Relationships and Related Transactions — What transactions involved directors or other related parties?” below.

 

The Board of Directors met 12 times during 2010.  Five of these meetings were regularly scheduled meetings and 7 of them were special meetings. During 2010, each member of the Board of Directors attended 75% or more of the aggregate number of meetings of the Board and at least 75% of the aggregate number of meetings of the committees of the Board that he or she was eligible to attend.

 

We desire to maintain a Board of Directors in which a substantial majority of our directors are independent, as defined in our Corporate Governance Guidelines. Those Guidelines preclude a determination by the Board that a director is independent if the director does not meet the independence requirements set forth in the listing standards of the New York Stock Exchange, which are substantially the same as the independence requirements set forth in the listing standards of the NYSE Amex exchange, on which our common stock currently is listed. We generally prohibit related-party transactions involving directors. Our Board makes a single exception to that policy in order to enable us to obtain legal services with respect to international trade matters from the law firm of Stewart and Stewart, of which Mr. Stewart is managing partner. During 2010 Stewart and Stewart received fees of approximately $31,100 from us for legal services in connection with various international trade matters. We anticipate that we will continue to utilize the legal services of Stewart and Stewart in the future in connection with international trade matters. In that connection, because our Board believes that Libbey’s General Counsel is best suited to select legal counsel for Libbey, the Board does not require that we seek the approval of the Board, or of any committee of the Board, in connection with our engagement of Stewart and Stewart. However, the Board has determined that, as a result of our engagement of Stewart and Stewart with respect to international trade matters, Mr. Stewart is not independent of Libbey.

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In addition, our Code of Business Ethics and Conduct, which we refer to as our Code of Ethics, requires that all of Libbey’s directors, officers and other employees avoid conflicts of interest. Related-party transactions that are of the nature and magnitude that they must be disclosed pursuant to Item 404(b) of Regulation S-K would be considered transactions that could give rise to a conflict of interest, and therefore are covered by our Code of Ethics. Our Code of Ethics requires that any conflicts of interest be reported to our Legal Department, and that the written concurrence of our General Counsel is required to waive any conflict of interest. In addition, our Code of Ethics requires that waivers of our Code of Ethics with respect to executive officers or directors may be granted only by the Board of Directors and only if the noncompliance with our Code of Ethics is or would be immaterial or if the Board of Directors otherwise determines that extraordinary circumstances exist and that the waiver is in the best interests of our shareholders.

 

Shareholders and other parties interested in communicating directly with the non-management directors as a group may do so by writing to Non-Management Directors, c/o Corporate Secretary, Libbey Inc., 300 Madison Avenue, P.O. Box 10060, Toledo, Ohio 43699-0060. The Nominating and Governance Committee has approved a process for handling letters that we receive and that are addressed to the non-management members of the Board. Under that process, the Corporate Secretary is responsible for reviewing all such correspondence and regularly forwarding to the non-management members of the Board a summary of all correspondence and copies of all correspondence that, in the opinion of the Corporate Secretary, deals with the function of the Board or committees thereof or that the Corporate Secretary otherwise determines requires the attention of the Board. Directors may, at any time, review a log of all correspondence that we receive and that are addressed to the Non-Management Directors or other members of the Board and request copies of any such correspondence. Concerns relating to accounting, internal controls or auditing matters are brought immediately to the attention of our internal auditors and Audit Committee and are handled in accordance with procedures established by the Audit Committee with respect to such matters.

 

Our Corporate Governance Guidelines and Code of Business Ethics and Conduct (which applies to all of our employees, officers and directors), as well as the Charters for each of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee, are available on our website (www.libbey.com). They also are available in print, upon request, to any holder of our common stock. Requests should be directed to Corporate Secretary, Libbey Inc., 300 Madison Avenue, P.O. Box 10060, Toledo, Ohio 43699-0060.

 

While our directors are not required to attend our annual meeting of shareholders, we typically schedule a meeting of the Board of Directors to take place at the same location and on the same day as the annual meeting of shareholders. As a result, we anticipate that a substantial majority of our directors will be present at the annual meeting of shareholders to be held on May 19, 2011. In 2010, all members of the Board of Directors attended our annual meeting of shareholders.

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Upon the recommendation of the Audit Committee, the Board of Directors has appointed Ernst & Young LLP as Libbey’s independent auditors for the fiscal year ending December 31, 2011. Although ratification by the shareholders is not required by law, the Board of Directors believes that you should be given the opportunity to express your views on the subject. See “Proposal 4 — Ratification of Auditors” below.

 

A representative of Ernst & Young LLP is expected to attend the Annual Meeting and will have an opportunity to make a statement if the representative so desires. The representative will be available to respond to appropriate questions.

 

Fees for services rendered by Ernst & Young LLP for the years ended December 31, 2010 and 2009 are as follows:

 

 

 

 

All audit-related, tax and other services were pre-approved by the Audit Committee, which concluded that the provision of these services by Ernst & Young LLP was compatible with the maintenance of that firm’s independence in the conduct of its audit functions. The Audit Committee’s policy regarding auditor independence requires pre-approval by the Audit Committee of audit, audit-related and tax services on an annual basis. The policy requires that engagements that the auditors or management anticipates will exceed pre-established thresholds must be separately approved. The policy also provides that the Committee will authorize one of its members to pre-approve certain services. The Committee has appointed Carlos V. Duno, Chair of the Committee, to pre-approve these services.

 

The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing by Libbey under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent Libbey specifically incorporates this Report by reference therein.

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The Audit Committee oversees the integrity of our financial statements on behalf of the Board of Directors; the adequacy of our systems of internal controls; our compliance with legal and regulatory requirements; the qualifications and independence of our independent auditors; and the performance of our independent auditors and of our internal audit function.

 

In fulfilling its oversight responsibilities, the Audit Committee has direct responsibility for, among other things:

 

 

The Audit Committee reviews and discusses with management and the independent auditors all annual and quarterly financial statements prior to their issuance. The Audit Committee’s discussions with management and the independent auditors include a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

 

The Audit Committee met both with management and with the independent auditors who are responsible for auditing the financial statements prepared by management and expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States. The Audit Committee also met with each of the independent auditors and the internal auditors without management being present. The Audit Committee discussed with the independent auditors and management the results of the independent auditors’ examinations; their judgments as to the quality, not just the acceptability, of our accounting principles; the adequacy and effectiveness of our accounting and financial internal controls; the reasonableness of significant judgments; the clarity of disclosures in the financial statements; and such other matters as are required to be communicated to the Audit Committee under generally accepted auditing standards, including Accounting Standards Board Statement on Auditing Standards No. 61, Communication with Audit Committees. In addition, the Audit Committee discussed with the independent auditors the auditor’s independence from management and Libbey, including the matters in the written disclosures required by the Independence Standards Board, Standard No. 1, Independence Discussions with Audit Committees.

 

Taking all of these reviews and discussions into account, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2010, for filing with the SEC.

 

Carlos V. Duno, Chair
Jean-René Gougelet
Peter C. McC. Howell
Carol B. Moerdyk

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Financial and Operational Highlights for 2010.  For Libbey, 2010 got off to a fast start. After our stock was delisted by the New York Stock Exchange in April 2009 and we restructured our 16% payment-in-kind notes, which we refer to as the PIK Notes, in October 2009, on January 4, 2010 our stock reclaimed the “LBY” ticker symbol and began trading on the NYSE Amex exchange. Shortly after that, on February 8, 2010 we completed a successful offering of $400 million of senior secured notes, while also amending our asset-based loan facility to replace it with a smaller facility. Using the proceeds of the new senior secured notes, which have a 5-year term and bear interest at a fixed annual rate of 10%, together with cash on hand, we paid off our $306 million of floating rate senior secured notes as well as the remaining PIK Notes.

 

During the balance of 2010, we continued to focus on generating cash and strengthening our balance sheet, while at the same time improving our sales and operating performance. As a result, we paid down approximately $10 million of debt in Portugal and China in late 2010, and on March 25, 2011, we further strengthened our balance sheet by redeeming $40 million of our 10% senior secured notes due 2015.

 

Additionally:

 

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The following graphs demonstrate the significant progress that we have made since 2008 with respect to 4 key performance measures — Adjusted EBITDA, Long-Term Debt (Net of Cash), Net Income (Loss) Per Diluted Share, and, perhaps most importantly, our closing stock price:

 

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In fact, as the performance graph below shows, our 1-year total shareholder return for 2009 of 512% and our 1-year total shareholder return for 2010 of 102.2% significantly exceeded both the Russell 2000 Index (27.17% in 2009 and 26.85% in 2010) and S&P 600 Housewares & Specialties Index (52.97% in 2009 and – 6.53% in 2010) during the same period:

 

 

 

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Named Executive Officers.  For purposes of this proxy statement, our named executive officers for 2010 were:

 

 

2010 Executive Compensation Highlights.  The structure of our executive pay program remained largely unchanged in 2010 compared to 2009. However, our strong performance in 2009, coupled with the rebound in our stock price and our receipt of shareholder approval of our Omnibus Plan, enabled the Compensation Committee to:

 

 

In addition, on February 7, 2011, after reviewing our performance for 2010, the Compensation Committee:

 

 

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For more information with respect to these awards, see “What pay did Libbey’s executives receive for 2010?” below.

 

In addition, in connection with strategic changes to management roles that we announced in June 2010, our Compensation Committee increased Mr. Ibele’s base salary to $312,000, effective July 1, 2010, in recognition of his expanded responsibilities as Vice President, Global Sales & Marketing and increased the target annual and long-term incentive opportunities for Mr. Ibele and Mr. Rubio in recognition of their new responsibilities. The increase in the target annual incentive opportunities applied to pay earned during the second half of the year, and the increase in the target long-term incentive opportunities applies to awards made beginning in 2011. The Committee also increased the 2011 target long-term incentive opportunity of another executive officer (who is not a named executive officer) in recognition of his work restructuring the Company’s capital structure and to ensure internal equity among executive officers.

 

Finally, for 2011 we elected to discontinue the practice of providing tax gross-ups on the financial and tax planning and executive physical examination perquisites that we provide to executive officers.

 

Our executive pay program for 2010 was structured to achieve the following objectives:

 

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Messrs. Meier and Reynolds, were (and continue to be) approaching retirement. Accordingly, retention of our other highly qualified and experienced executives was critical during 2010 and will continue to be critical during 2011.

 

 

 

Balanced Program with Significant Pay At Risk.  For 2010, the pay opportunities of our CEO and our other named executive officers were designed to provide a balance of stable and competitive pay in the form of base salary, fringe benefits and perquisites; equity compensation (NQSOs and RSUs) that align our executives’ interests with those of shareholders generally and also serve as retention tools; and annual and long-term incentive awards that are designed to motivate our executives to drive our financial and operational performance. The charts set forth below show the balance of these pay elements and reflect the significant portion of the pay of our named executive officers that is performance-based pay.

 

Components of Total Target Compensation Opportunity⁽¹⁾ for 2010

 

 

(1) Includes Base Salary earned in 2010; Performance-Based Pay payable at a target (100%) payout; and Time-Vested Pay. Performance-Based Pay includes the opportunity to earn annual incentive compensation under our 2010 SMIP and the opportunity to earn performance-based cash awards, payable in 2013, under the performance component of our 2010 LTIP. Time-Vested Pay includes the intended grant-date value of NQSOs and RSUs awarded in 2010. Vesting of NQSOs and RSUs is subject to continued service over a 4-year period.

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Components of Total Maximum Compensation Opportunity⁽¹⁾ for 2010

 

 

(1) Includes Base Salary earned in 2010; Performance-Based Pay payable at a maximum (200%) payout; and Time-Vested Pay. Performance-Based Pay includes the opportunity to earn annual incentive compensation under our 2010 SMIP and the opportunity to earn performance-based cash awards, payable in 2013, under the performance component of our 2010 LTIP. Time-Vested Pay includes the intended grant-date value of NQSOs and RSUs awarded in 2010. Vesting of NQSOs and RSUs is subject to continued service over a 4-year period.

 

The following table sets forth the respective forms of pay for which our executive officers were eligible for 2010, the characteristics of those forms of pay, and the purposes or objectives that each form of pay is designed to fulfill:

 

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34

 

35

 

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		Target SMIP Opportunity as a
		Percentage of Actual Base Salary
Named Executive Officer		(%)
G. Geswein			60	%
D. Ibele (for period January 1 — June 30)			50	%
D. Ibele (for period July 1 — December 31)			60	%
J. Meier			90	%
R. Reynolds			75	%
R. Rubio (for period January 1 — June 30)			55	%
R. Rubio (for period July 1 — December 31)			60	%

 

 

		Target LTIP Opportunity as a
		Percentage of Base Salary
Named Executive Officer		(%)
G. Geswein			100	%
D. Ibele			85	%
J. Meier			180	%
R. Reynolds			140	%
R. Rubio			100	%

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Development and Implementation of the Executive Pay Program.  The Compensation Committee of our Board of Directors is responsible for overseeing the design, development and implementation of our executive pay program. In discharging that responsibility, the Compensation Committee engaged Hewitt Associates as its independent executive compensation consultant from 2005 through February 8, 2010. As a result of personnel changes at Hewitt, the Compensation Committee conducted a search for a new independent executive compensation consultant and, in May 2010, engaged Compensation Advisory Partners, LLC, which we refer to as CAP, as its independent executive compensation consultant. All amounts that we incurred in 2010 for services provided by both Hewitt and CAP were attributable to services provided by them to the Compensation Committee in connection with its executive pay decisions.

 

The Compensation Committee consults with its independent executive compensation consultant when determined to be appropriate by the Compensation Committee. A representative of Hewitt attended the February 2010 meeting at which the Compensation Committee made decisions regarding our executive pay, and a representative of CAP attended each of the other meetings in 2010 at which the Compensation Committee made decisions regarding our executive pay. Our CEO, our Vice President — Administration and our Vice President, General Counsel & Secretary attend meetings of, and provide information to, the Compensation Committee and its consultant to assist them in their pay determinations. In addition, management may request that the Compensation Committee convene a meeting, and management may communicate with the Compensation Committee’s consultant in order to provide the consultant with information or understand the views of, or request input from, the consultant as to pay proposals being submitted by management to the Committee. However, the Compensation Committee meets in executive session, without any member of management being present, to discuss and make its final pay decisions.

 

Our non-CEO executives play no direct role in determining their own pay, except to the extent they provide the CEO with an assessment of their own performance against their individual performance objectives and to the extent that the Vice President — Administration and the Vice President, General Counsel & Secretary provide information to the Compensation Committee with respect to pay programs affecting all executive officers.

 

With respect to our SMIP and our long-term incentive plans, the Compensation Committee sets the performance goals based upon input from our CEO with respect to those goals, including suggested individual performance objectives and metrics under the SMIP. In setting our corporate performance objectives and measures, the Committee seeks input from its independent consultant. The Committee also seeks input from our Board in setting our CEO’s individual performance objectives and metrics.

 

In determining awards to be made for current and future performance periods, the Compensation Committee considers internal pay equity within the executive officer group, but does not consider the impact of, or wealth accumulated as a result of, equity awards made during prior years, since those awards represent pay for services rendered during prior year periods.

 

In connection with the preparation of our proxy statement each year, the Committee reviews “tally sheets” that summarize, for each of our executive officers, the compensation paid and equity grants awarded during the prior year, as well as the amounts that would have been payable to each executive officer if the executive officer’s employment had been terminated under a variety of scenarios as of December 31 of the prior year. The Committee uses these “tally sheets,” which provide substantially the same information as is provided in the tables included in this proxy statement, primarily for purposes of ensuring that our executives’ estimated pay is consistent with the Committee’s intent in adopting the program and for reviewing internal pay equity within the executive officer group.

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Process for Setting 2010 Executive Pay.  As noted above under “Executive Summary — 2010 Executive Compensation Highlights,” the structure of our 2010 executive pay program remained substantially the same as the structure of our 2009 executive pay program. Decisions as to the base salary increases that were implemented in February and May 2010 were made by the Compensation Committee at its February 2010 meeting after receiving input from our CEO and the Committee’s independent consultant. As noted in our proxy statement for our 2010 annual meeting of shareholders, the Compensation Committee determined in late 2009 that Mr. Rubio’s target long-term incentive opportunity for 2010 should be increased to 100% of his annual base salary in effect on January 1, 2010, when Mr. Rubio was transferred from the payroll of our Mexican subsidiary to our U.S. payroll. This increase in Mr. Rubio’s target long-term incentive opportunity for 2010 was designed to reflect Mr. Rubio’s promotion from Vice President, General Manager, Libbey Mexico to Vice President, General Manager, International Operations.

 

In June 2010, when we announced strategic management changes, our CEO recommended, and the Compensation Committee and its independent consultant concurred, that the 2010 annual incentive targets for Mr. Ibele and Mr. Rubio should be adjusted to reflect the change in their scope of duties. Because Mr. Ibele’s duties for the second half of 2010 were expanded significantly to comprise global sales and marketing, Mr. Ibele’s target annual incentive opportunity for the second half of 2010 was increased from 50% of base salary to 60% of base salary actually earned. Similarly, since Mr. Rubio’s responsibilities were modified to encompass manufacturing and engineering for our operations worldwide, his target annual incentive opportunity for the second half of 2010 was increased from 55% to 60% of base salary actually earned. At the same time, the Committee increased the target long-term incentive opportunities applicable to Mr. Ibele and Mr. Rubio in 2011 to 110% of annual base salary in effect on January 1, 2011.

 

In February 2011, the Compensation Committee, with input from our CEO and the Committee’s independent consultant, reviewed our 2010 performance and made the awards described above under “Executive Summary — 2010 Executive Compensation Highlights.”

 

Our Equity Grant Practices.  Grants of equity awards have been made under the following circumstances:

 

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Potential Impact of Misconduct on Compensation.  Our SMIP and long-term incentive plans are authorized under our Omnibus Plan. Under the Omnibus Plan, if:

 

 

 

then the executive is required to reimburse us the amount of any payment that was made in settlement of an award made under the Omnibus Plan and that was earned or accrued during the 12-month period following the first public issuance or filing with the SEC of the financial document embodying the financial reporting requirement in question.

 

Share Ownership Guidelines.  In 2010 we significantly modified the share ownership guidelines applicable to our non-employee directors. In October 2007, we established guidelines pursuant to which our executive officers also are required to achieve ownership of meaningful amounts of equity in Libbey. For further information regarding our stock ownership guidelines for non-employee directors and executive officers, see “Stock Ownership — How much Libbey stock do our directors and officers own? — Stock Ownership Guidelines” above.

 

 

¹ The grants of RSUs awarded in February 2010 were contingent on our receipt of shareholder approval of our Omnibus Plan. Upon our receipt of shareholder approval at our annual meeting of shareholders on May 6, 2010, the RSUs were granted subject to a 4-year vesting schedule, with the first 25% vesting on February 11, 2011.

 

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Base Salaries.  In February 2010, the Compensation Committee approved salary increases for each of the executive officers. These salary increases were the first salary increases in 25 months and followed a 91/2 month period in 2009 during which our executive officers’ monthly pay was cut by 7.5%. Salary increases for the named executive officers were:

 

 

In addition, Mr. Ibele’s annualized base salary was increased to $312,000 effective July 1, 2010, when he assumed responsibility for our global sales and marketing.

 

Annual Incentive Compensation.  As indicated under “Executive Summary — 2010 Executive Compensation Highlights” above, our 2010 SMIP included two components in 2010: a corporate component and an individual component. We employed 2 performance metrics in connection with the corporate component of the plan: (1) the ratio of actual adjusted EBITDA to budgeted EBITDA and (2) the ratio of actual free cash flow to budgeted free cash flow.² As a result, each executive officer’s annual incentive opportunity for 2010 was divided as follows:

 

 

² The 2010 budget that we submitted to our Board for approval in late 2009 assumed that during 2010 we would make 2 interest payments on our senior secured notes. As a result of the refinancing of those notes completed in February 2010, we were required to make only 1 interest payment during 2010. Accordingly, we submitted an adjusted budget to the Board that increased budgeted free cash flow for 2010, and the portion of our executive officers’ actual 2010 SMIP awards attributable to performance against the free cash flow metric is based on a comparison of actual free cash flow to the increased budgeted free cash flow.

 

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2010 SMIP Opportunity

 

 

Reconciliations of adjusted EBITDA and EBITDA to net income (loss) and of free cash flow to adjusted EBITDA are set forth on Attachment 1. We selected adjusted EBITDA and free cash flow as our corporate-wide performance measures for 2010 because we wanted to achieve a balance between our continuing need to generate cash to fund our operations and reduce our debt and our need to generate EBITDA to increase our stock price and ensure that, when we refinance our debt in the coming years, we are able to do so on as favorable terms as possible.

 

On February 7, 2011, the Compensation Committee met and reviewed our performance and the performance of our executive officers during 2010. The Committee reviewed our actual free cash flow and adjusted EBITDA for 2010, and compared them to our budgeted free cash flow and budgeted EBITDA (adjusted for special items) for the year. Applying the scale described in footnote 2 to the Grants of Plan-Based Awards Table, the Committee determined that we had achieved 102% of budgeted free cash flow and 106% of budgeted EBITDA for 2010, resulting in a combined payout under the corporate component of approximately 121% of target.

 

With respect to the individual component applicable to our named executive officers in 2010, the Compensation Committee approved individual objectives for each of them early in the year. In June 2010, the responsibilities of 4 of our named executive officers changed. Specifically, Mr. Reynolds moved from the Chief Operating Officer position to the Chief Financial Officer position, which Mr. Geswein vacated to become Vice President, Strategic Planning and Business Development; Mr. Ibele assumed responsibility for global sales and marketing, in contrast to his previous responsibility only for North American

 

 

² The 2010 budget that we submitted to our Board for approval in late 2009 assumed that during 2010 we would make 2 interest payments on our senior secured notes. As a result of the refinancing of those notes completed in February 2010, we were required to make only 1 interest payment during 2010. Accordingly, we submitted an adjusted budget to the Board that increased budgeted free cash flow for 2010, and the portion of our executive officers’ actual 2010 SMIP awards attributable to performance against the free cash flow metric is based on a comparison of actual free cash flow to the increased budgeted free cash flow.

 

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sales; and Mr. Rubio assumed responsibility for global manufacturing and engineering, in contrast to his previous responsibility only for international operations. As a result, the Compensation Committee determined that, for each of these named executive officers, an additional individual objective should be added to reflect his new responsibilities. The Compensation Committee then determined to weight the individual objectives attributable to the first 6 months of the year at 50% of the individual component, with the individual objectives attributable to the latter 6 months of the year making up the other 50% of the individual component.

 

Although disclosure of certain of the individual objectives of our executives may result in competitive harm, the following table provides examples of the individual objectives, and corresponding scores, of our named executive officers for 2010:

 

 

The Committee received input from our CEO as to the performance by our other executive officers relative to their individual objectives. In addition, prior to the meeting, the Committee reviewed the performance evaluation completed by our non-employee directors with respect to our CEO’s performance in 2010, including his performance with respect to his individual objectives. After meeting in executive session with the Committee’s independent compensation consultant, the Committee determined that the respective named executive officers had achieved the scores earned in the table above.

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As a result, each of the named executive officers earned the following annual incentive compensation for 2010:

 

 

Discretionary Cash Awards.  For some of our executives, including Messrs. Geswein and Ibele, the Compensation Committee determined that discretionary cash awards were warranted. Specifically, the Committee determined that Messrs. Geswein and Ibele merited small discretionary awards of $7,421 and $7,891 for the following reasons:

 

 

Long-Term Performance-Based Compensation. The long-term performance-based compensation opportunity provided to our executive officers for performance during 2010 consisted of the following components:

 

 

On February 7, 2011, the Compensation Committee determined that our cumulative adjusted EBITDA for the period January 1, 2008 through December 31, 2010 was $290.4 million, or 91.5% of the sum of adjusted EBITDA budgeted for each year during that 3-year period. The Committee then used

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the following scale and determined that participants under the 2008 LTIP had earned 71.8% of the target number of performance shares awarded to them for the period January 1, 2008 through December 31, 2010:

 

 

As a result, in February 2011, we settled the earned performance shares by issuing the following number of common shares to the named executive officers:

 

 

 

 

Stock Options and RSUs.  When the Compensation Committee adopted our equity-based 2006 LTIP, it contemplated that, for each 3-year period covered by an LTIP, executives would be entitled to grants of NQSOs and RSUs equal to a total of 60% of their respective target LTIP opportunities. As described in our proxy statement for our 2010 annual meeting of shareholders, the Compensation Committee changed the methodology for determining the number of NQSOs and RSUs awarded in 2009 in reaction to our low stock price and the limited number of shares available for awards under our 2006 Omnibus Incentive Plan, with the result that the economic value of the NQSOs and RSUs granted to our executives in 2009 was reduced by 88% and 83%, respectively. After noting the significant increase in our stock price since that time, as well as the submission to our shareholders (and subsequent receipt of shareholder approval at our 2010 annual meeting of shareholders) of the Omnibus Plan, the Compensation Committee determined that it was appropriate to revert to the previous methodology for purposes of determining the number of NQSOs and RSUs to be awarded in 2010. Accordingly, in February 2010 the Compensation Committee awarded to our executive officers NQSOs and RSUs (each subject to 4-year vesting) having an economic value at the time of award equal to 20% and 40%, respectively, of our executive officers’ respective target long-term incentive opportunity.

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Pursuant to Section 162(m) of the Internal Revenue Code, publicly-held corporations are prohibited from deducting compensation paid to certain executive officers, as of the end of the fiscal year, in excess of $1.0 million, unless the compensation is “performance-based.” It is the Compensation Committee’s policy that compensation paid to our named executive officers should, to the extent it exceeds $1.0 million in any year, qualify under Section 162(m) as “performance-based,” provided that compliance with Section 162(m) is consistent with our overall corporate tax planning strategies and our executive pay objectives, as set forth in “What are the objectives of Libbey’s executive pay program?”

 

Our management directors do not receive additional pay for service on the Board of Directors. Through April 2010, we paid the following forms and amounts of compensation to our non-management directors:

 

 

On May 6, 2010, our Board adopted a new pay program for our non-management directors. Under the new program, which went into effect on May 1, 2010, the following changes were made to the director pay program:

 

 

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We continue to pay $500 per half-day for special board or committee service, such as the service provided by certain directors in connection with our strategic planning during 2010 and service to be provided by members of the ad hoc succession planning committee recently appointed by the Board.

 

Concurrently, in a further attempt to align the interests of our non-employee directors with those of our shareholders, we significantly modified (and increased) the stock ownership guidelines for non-employee directors. For more information with respect to our stock ownership guidelines for non-employee directors, see “Stock Ownership — How much Libbey stock do our directors and officers own? — Stock Ownership Guidelines” above.

 

Directors may elect, pursuant to the Director DCP, to defer cash and/or equity compensation into any of 13 measurement funds. The Director DCP, as well as the predecessor deferred compensation plans under which non-employee directors were eligible to participate, are unfunded plans, and the Company does not guarantee an above-market return on amounts deferred under any of these plans. Amounts deferred under the Director DCP, as well as under a predecessor plan, are, at the election of the applicable director, payable either in a lump sum or in installments over a period of time selected by the director. Amounts deferred under our first deferred compensation plan for outside directors are payable in a lump sum upon retirement from our Board or, if earlier, upon death of the director.

 

In addition to paying the compensation listed above, we reimburse our non-management directors for their travel expenses incurred in attending meetings of the Board or its committees, as well as for fees and expenses incurred in attending director education seminars and conferences. The directors do not receive any other personal benefits.

 

As discussed under “In what forms did Libbey deliver pay its executives in 2010, and what purposes do the various forms of pay serve?” above, we have employment agreements with our executive officers and change in control agreements with our executive officers and certain other key members of senior management. We have made no changes to the employment and change in control agreements that were in effect on the date of our 2010 annual meeting of shareholders, and we have not entered into any additional employment or change in control agreements since the date of that meeting.

 

Our employment and change in control agreements, each of which renews automatically each calendar year unless we give notice of non-renewal by September 30 of the year before the next automatic extension would be effective¹, reflect the continued belief of our Compensation Committee and Board that it is in the best interests of our shareholders to provide our executive officers with income replacement upon the occurrence of any of the “triggers” described in the employment and change in control agreements. That belief is based upon the following:

 

 

 

¹ Under the circumstances described in the “Employment Agreements” table that follows, non-renewal of an employment agreement may constitute a “trigger” under which benefits are payable to the executive whose agreement is not renewed.

 

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Following are tables containing summaries of the material terms of the employment and change in control agreements to which our named executive officers are party and the rationale for the respective benefits provided under those agreements. You should refer to the entire agreements, the forms of which are attached as exhibits to our Forms 10-K filed with the Securities and Exchange Commission on March 16, 2009 (as to our named executive officers other than Mr. Rubio) and March 15, 2010 (as to Mr. Rubio), for a complete description of their terms.

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We cannot terminate an executive officer for cause unless and until we deliver to the executive officer a copy of a resolution, duly adopted by the affirmative vote of not less than 3/4 of the entire membership of our Board at a meeting of our Board, finding that, in the Board’s good faith opinion, the executive officer committed any of the conduct described in the definition of “cause” and specifying, in reasonable detail, the particulars of that conduct. We must provide the executive officer with reasonable notice of the meeting of the Board and the opportunity, together with the executive officer’s legal counsel, to be heard before the Board. We also must provide the executive officer with reasonable opportunity to correct the conduct that he or she is alleged to have committed.

 

 

 

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In order to terminate his employment for “good reason,” the named executive officer must assert the basis for terminating his employment for “good reason” by providing written notice to the Board within 90 days of the date the named executive knew or should have known of the event that is the basis for terminating for good reason.

 

Other obligations.  If we terminate the named executive officer’s employment with cause, or if the named executive officer resigns or retires other than at our request or for good reason, we nevertheless are obligated to pay or provide to the named executive officer base salary, when due, through the date of termination at the then current rate, plus all other amounts and benefits to which the named executive officer is entitled under any pension plan, retirement savings plan, equity participation plan, stock purchase plan, medical benefits and other benefits that we customarily provide or are required by law to provide at the time the payments are due.

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A person typically is considered to be the “beneficial owner” of securities if the person has or shares the voting power associated with those securities.

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William A. Foley, Deborah G. Miller, Carol B. Moerdyk and John C. Orr served on our Compensation Committee during 2010, and Mr. Duno has been added to the Compensation Committee for 2011. None of Mr. Duno, Mr. Foley, Ms. Miller, Ms. Moerdyk or Mr. Orr has been an officer or employee of Libbey or its subsidiaries.

 

The Compensation Committee has reviewed and discussed with Libbey’s management the Compensation Discussion and Analysis set forth in this proxy statement. Taking all of these reviews and discussions into account, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

 

Carol B. Moerdyk, Chair

Carlos V. Duno

William A. Foley

Deborah G. Miller

John C. Orr

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The following narrative, tables and footnotes describe the “total compensation” earned during 2010, 2009 and 2008 by Messrs. Geswein, Ibele, Meier, Reynolds and Rubio. Information for 2008 was not provided for Mr. Rubio, since he did not join Libbey until July 2009.

 

The total compensation presented below does not reflect the actual pay received by, or the target pay of, the named executive officers in 2010, 2009 or 2008. The actual value realized by our named executive officers in 2010 from long-term incentives (NQSOs, RSUs and performance shares) is presented in the Option Exercises and Stock Vested Table below. Target annual and long-term incentive awards for 2010 are presented in the Grants of Plan-Based Awards Table below.

 

The individual components of the total compensation calculation reflected in the Summary Compensation Table are as follows:

 

Salary.  Base salary earned during 2010, 2009 and 2008.

 

Bonus.  Cash awards made, at the discretion of the Compensation Committee, in recognition of achievements that were not contemplated by the individual component of the SMIP but nevertheless played important roles in Libbey’s ability to achieve its results for the year in question. No bonuses were paid to our named executive officers for 2009 or 2008 performance.

 

Stock Awards.  The awards disclosed under the heading “Stock Awards” consist of performance shares and RSUs awarded during each of 2010, 2009 and 2008, respectively. Details with respect to the awards are included in the Grants of Plan-Based Awards Table below. The dollar amounts for the awards represent the respective grant date fair values of these awards under FASB ASC Topic 718 for each named executive. The actual values received by the respective named executive officers will depend upon the number of shares earned, the number of RSUs that actually vest and the price of our common stock when shares of our common stock are issued in settlement of the performance shares or RSUs, as applicable.

 

Option Awards.  The awards disclosed under the heading “Option Awards” generally represent annual grants of NQSOs. As to Mr. Rubio, the amounts disclosed for 2009 include an award of 25,000 NQSOs made in order to induce Mr. Rubio to join Libbey as our Vice President, General Manager, Libbey Mexico, in July 2009. The dollar amounts for the awards represent the grant date fair values of these awards under FASB ASC Topic 718 for each named executive. The actual values received by the respective named executive officers will depend upon the number of NQSOs that actually vest, the number of shares with respect to which NQSOs are exercised and the price of our common stock on the date on which the NQSOs are exercised.

 

Non-Equity Incentive Compensation.  The awards disclosed under the heading “Non-Equity Incentive Compensation” consist of (a) amounts earned by the named executive officers in 2010, 2009 and 2008 under our SMIP and (b) for 2009, amounts earned by the named executive officers under the cash component of our 2009 LTIP. There were no awards paid for 2008 performance under our SMIP. The awards under our SMIP for 2010 and 2009 performance were paid in February of 2011 and 2010, respectively. The awards under the cash component of our 2009 LTIP will not be paid until early 2012. In order to collect the awards earned under the cash component of our 2009 LTIP, named executive officers must remain continuously employed by us through December 31, 2011. However, we are obligated to pay the awards earned under the cash component of our 2009 LTIP to Messrs. Meier and Reynolds on the first day of the seventh month after their respective retirements, even if they retire before January 1, 2012. In that connection, Mr. Meier has announced his intention to retire by the end of 2011.

 

Change in Pension Value and Nonqualified Deferred Compensation Earnings.  The amounts disclosed under the heading “Change in Pension Value and Nonqualified Deferred Compensation Earnings” represent the actuarial increase, if any, during each of 2010, 2009 and 2008 in the pension value provided

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under our Libbey Inc. Salaried Cash Balance Pension Plan, which we refer to as our Salary Plan, and our Supplemental Retirement Benefit Plan, which we refer to as our SERP. With respect to Messrs. Meier and Reynolds, the amounts do not reflect the decline in actuarial value of their pension benefits under our Salary Plan and SERP during 2009. Because we do not guarantee any particular rate of return on deferred compensation under our Executive Savings Plan or Executive Deferred Compensation Plan, which we refer to as our ESP and EDCP, respectively, there are no earnings on nonqualified deferred compensation included in the amounts disclosed.

 

All Other Compensation.  The amounts disclosed under the heading “All Other Compensation” include: (a) annual company matching contributions under our 401(k) savings plan (a broad-based plan open to all U.S. salaried employees); (b) annual company matching contributions under our ESP or EDCP, as the case may be; (c) the cost that we paid for tax return preparation and financial planning for the respective named executive officers, together with tax “gross-ups” on that cost; (d) for our U.S.-based named executive officers, our incremental cost for ground transportation for personal and business trips from the Toledo, Ohio area to the Detroit/Wayne County Metropolitan airport, and, for Mr. Rubio, who currently is based in Monterrey, Mexico, the cost incurred for a driver to provide secure ground transportation to Mr. Rubio while traveling in the Monterrey, Mexico vicinity, which has an elevated risk of kidnap for ransom; (e) the annual premiums that we pay to provide executive long-term disability coverage for each of the named executive officers; (f) in 2010, the cost of airline club memberships; and (g) as to Mr. Geswein only, our cost of an annual executive physical examination in 2008. In addition, because Mr. Rubio was employed by our Mexican subsidiary during 2009, the amounts under this heading for Mr. Rubio in 2009 include (a) contributions made on Mr. Rubio’s behalf to Instituto Mexicano Del Seguro Social (Mexico’s equivalent to the U.S. Social Security Administration); (b) amounts paid on Mr. Rubio’s behalf for supplemental medical insurance provided by our Mexican subsidiary; and (c) the amount payable by the our Mexican subsidiary to Mr. Rubio’s previous employer as partial reimbursement for severance payable to Mr. Rubio in connection with his resignation and decision to accept our offer of employment.

 

SUMMARY COMPENSATION TABLE