UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No.   )

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o Preliminary Proxy Statement

o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ Definitive Proxy Statement

o Definitive Additional Materials

o Soliciting Material Pursuant to Section 240.14a-12

 

LIBBEY INC.

(Name of Registrant as Specified In Its Charter)

 

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

 

Payment of Filing Fee (Check the appropriate box):

 

þ No fee required.

 

o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

 

 

 

 

 

 

 

 

o Fee paid previously with preliminary materials.

 

 

 

 

 

 

 

 

 

 

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

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

ON MAY 7, 2009

 

 

 

Dear Fellow Libbey Stockholder:

 

We will hold our 2009 Annual Meeting of Libbey stockholders on Thursday, May 7, 2009, at 2 p.m., Eastern Time, at the Libbey Corporate Showroom located at 335 North St. Clair Street, Toledo, Ohio.

 

At the meeting, stockholders 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 April 3, 2009. 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.

 

We hope you will vote by marking, signing and returning your proxy or voting instruction card as soon as possible, whether or not you plan to attend the meeting.

 

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

 

April 8, 2009

Toledo, Ohio

TABLE OF CONTENTS

 

LIBBEY INC.

 

 

PROXY STATEMENT

 

 

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 stockholders. The members of the proxy committee are John F. Meier, Richard I. Reynolds 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 7, 2009, at 2 p.m., Eastern 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 stockholders of this proxy statement and the enclosed proxy on or about April 8, 2009.

 

You may vote if you were a holder of Libbey Inc. (“Libbey”) common stock at the close of business on April 3, 2009.

 

You may vote on the following proposals:

 

 

The Board recommends that you vote:

 

 

You may vote by marking, signing and dating the enclosed proxy card or voting instruction card and returning it in the prepaid envelope. The proxy committee will vote your shares in accordance with your directions. If you return a proxy card but do not mark the boxes showing how you wish to vote, the proxy committee will vote your shares FOR each of the proposals, but only if you have signed and dated the card. Unsigned proxy cards will not be voted at all. If you are a stockholder of record (that is, if you are registered on our books), you also may vote in person by attending the meeting.

 

If you are a stockholder of record, you may, at any time before your shares are voted at the 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 13, 2009, there were 14,755,997 shares of our common stock outstanding. Each share of common stock is entitled to one vote.

 

As long as a quorum is present either in person or by proxy at the Annual Meeting, each proposal must receive the votes of the holders of a majority of the shares of common stock present in person or represented by proxy at the Annual Meeting.

 

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 the presence of a quorum, but as unvoted for purposes of determining the matter to which the abstention applies. Broker non-votes will not be considered as present and entitled to vote with respect to that matter. The common stock outstanding on the record date held by the trustee under Libbey’s Retirement Savings 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 unless you give your broker or nominee specific instructions as to how to vote. For example, unless brokers have received voting instructions from their customers, brokers may not vote their customers’ shares with respect to the approval of equity

compensation plans or other non-routine matters. 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.

 

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 stockholder desiring to submit a proposal for inclusion in our Proxy Statement for our Annual Meeting to be held in 2010 must deliver the proposal so that we receive it no later than December 5, 2009. Any proposal submitted outside the processes of Rule 14a-8 under the Exchange Act will be considered untimely if submitted after February 19, 2010. 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.

 

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, 2008.

 

 

 

 

 

Stock Ownership Guidelines

 

Since July 2004, we have required each of our outside directors, prior to the expiration of his or her second full term, to own at least 4,000 shares of Libbey common stock. Compliance with this guideline may be achieved through direct ownership of shares of our common stock, through deferral of director compensation into an account, the value of which is based upon the value of our common stock plus dividends (as described under “Compensation-Related Matters — Compensation Discussion and Analysis — How are Libbey’s directors compensated?” below), or through a combination of these means.

 

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 are 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 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 has determined that the average closing price of Libbey common stock over 2007, $16.84, will be used to determine the number of shares that they are required to own as of December 31, 2012.

 

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 13, 2009, the number of Qualifying Shares held by the executive officers whom we refer to as the “Named Executives” (as set forth under “Compensation-Related Matters — Summary Compensation Table” below) was as follows:

 

 

 

 

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 13, 2009, 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, the Named Executives and our directors and executive officers as a group. Our address 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. An asterisk indicates ownership of less than one percent of the outstanding stock.

 

 

 

 

 

 

 

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

 

 

 

In addition to outstanding shares of common stock that our Named Executives beneficially owned as of March 13, 2009, the Named Executives have received the following grants of RSUs that have not yet vested:

 

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Based solely on our review of filings with the Securities and Exchange Commission 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, 2008, 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.

 

Libbey’s Certificate of Incorporation and By-Laws provide that the Board of Directors is divided into three classes. The following table shows information with respect to the members of the Board of Directors on the date of this proxy statement:

 

 

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: an Audit Committee, a Compensation Committee and a Nominating and Governance Committee.

 

Audit Committee.  The Board of Directors adopted an Audit Committee Charter in 2000 and periodically reviews and, when indicated in light of current best practices, updates the Audit Committee Charter. Most recently, the Board of Directors adopted a new Audit Committee Charter at the Board’s meeting held on February 5, 2008. The current Audit Committee Charter is available on Libbey’s website (www.libbey.com).

 

The functions of the Audit Committee are described under “Audit-Related Matters; Report of the Audit Committee” below. The Audit Committee met ten times during 2008. On February 10, 2009, the Board selected the members of the Audit Committee for the coming year, as shown above. The Board has determined that all members of the Audit Committee are independent, within the meaning of SEC regulations and the listing standards of the New York Stock Exchange. The Board has further determined that each of Messrs. Duno and Howell and Ms. Moerdyk is qualified as an audit committee financial expert, as defined in SEC regulations, and that each of Messrs. Duno, Gougelet and Howell and Ms. Moerdyk is financially literate and has accounting and related financial management expertise, as those qualifications are interpreted by the Board in its business judgment.

 

Compensation Committee.  The Compensation Committee is responsible for (a) discharging the Board’s responsibilities relating to executive compensation, (b) producing an annual report on executive compensation for inclusion in the proxy statement or annual report on Form 10-K as required by the SEC, (c) approving grants of stock options and other awards under the company’s equity participation plans and providing oversight and administration of these plans in accordance with the provisions of the plans, and (d) providing oversight and administration for the company’s employee stock purchase plan in accordance with the provisions of the plan. In particular, the Compensation Committee has been charged with the following responsibilities:

 

 

 

The Compensation Committee met eight times during 2008. On February 10, 2009, the Board selected the members of the Compensation Committee for the coming year, as shown above. The Board has determined that all members of the Compensation Committee are independent, within the meaning of the listing standards of the New York Stock Exchange, and that all members of the Compensation Committee are “outside directors,” within the meaning of 26 CFR § 1.162-27.

 

Nominating and Governance Committee.  Pursuant to the charter of the Nominating and Governance Committee, the Committee is responsible for developing and implementing policies and practices relating to corporate governance, including reviewing and monitoring implementation of our Corporate Governance Guidelines. In addition, the Committee is responsible for establishing a selection process for new directors to meet the needs of the Board, for evaluating and recommending candidates for Board membership, for assessing the performance of the Board and reviewing that assessment with the Board and for establishing objective criteria to evaluate the performance of the Chief Executive Officer. The Committee also is responsible for reporting to the Board trends in director compensation practices and the competitiveness of the Company’s director compensation practices.

 

The Nominating and Governance Committee met five times in 2008. On February 10, 2009, the Board selected the members of the Nominating and Governance Committee for the coming year, as shown above. The Board has determined that all of the members of the Committee are independent, within the meaning of the listing standards of the New York Stock Exchange.

 

At each regularly scheduled meeting of the Board, the Board (excluding management directors) meets in executive session outside the presence of management. In order to provide continuity, the Board has designated Deborah G. Miller to chair and coordinate these executive sessions.

 

New directors are selected 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 stockholder who 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 stockholder deems appropriate. Candidates for director nominated by stockholders 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 seeks 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. 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.

 

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 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 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.

 

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 three 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 2008, see “Corporate Governance — Certain Relationships and Related Transactions — What transactions involved directors or other related parties?” below.

 

The Board of Directors met seven times during 2008. Five of these meetings were regularly scheduled meetings and two of them were special meetings. During 2008, Mr. Orr attended 75% or more of the aggregate number of meetings of the Board that he was eligible to attend after being appointed to the Board of Directors; he did not serve as a member of any Board committees in 2008. Each other incumbent 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. 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 2008 Stewart and Stewart received fees of approximately $5,994 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.

 

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 stockholders.

 

Stockholders 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 stockholders, 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 stockholders. As a result, we anticipate that a substantial majority of our directors will be present at the annual meeting of stockholders to be held on May 7, 2009. In 2008, all members of the Board of Directors attended our annual meeting of stockholders.

 

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, 2009. Although ratification by the stockholders 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 2 — 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, 2008 and 2007 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.

 

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, 2008, for filing with the Securities and Exchange Commission.

 

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

 

Financial and Operational Highlights for 2008.  During the first half of 2008, Libbey’s net sales increased by 6.6 percent compared to net sales for the first six months of 2007. In addition, Libbey’s stock price rose to $17.84 in April and, as of the quarter ended June 30, 2008, Libbey’s financial results met or exceeded, for the tenth consecutive quarter, the guidance that Libbey had provided to its stockholders and analysts.

 

In the second half of 2008, Libbey’s sales were severely impacted by a significant decline in consumer spending in the U.S., rapid deterioration in worldwide economic conditions, and an unexpected and precipitous devaluation of the Mexican peso. As a result of these developments, Libbey’s net sales for 2008 were essentially flat with 2007 net sales.

 

Although we began 2008 expecting to refinance a portion of our debt, the U.S. financial markets dried up as a result of several crises, preventing us from addressing our capital structure.

 

Our stock price finished the year at $1.25 per share, representing a substantial reduction in total shareholder return from the prior year.

 

Libbey did achieve a number of positive outcomes during 2008. For example:

 

 

In the face of the tumultuous economy and the frozen capital markets, in October and December 2008 we announced steps to enhance cash flow in 2009 by $24 million to $28 million, including by:

 

 

In February 2009, we announced additional initiatives, including salary cuts (7.5% for our executive officers and 5% for most other U.S. salaried employees), suspension of matching contributions to our U.S. salaried employees’ 401(k) accounts and suspension of our dividend. We also announced that capital expenditures for 2009 will be reduced by an additional $10 million, with the result that 2009 capital expenditures are expected to be approximately $20 million, or less than 50% of the amount expended in 2008. As a result of these additional initiatives, anticipated cash flow enhancements for 2009 range from $46 million to $50 million. For further information regarding these initiatives, see “— Have there been subsequent changes to the executive compensation program for 2009?” below.

 

2008 Executive Compensation Highlights.  Based upon Libbey’s financial performance in 2007, the Compensation Committee, after consulting with Hewitt Associates, its independent compensation consultant, awarded merit increases to each of the executive officers in 2008. Effective January 1, 2008, the base salaries of four of the ten executive officers, including Messrs. Meier, Geswein and Reynolds, were increased, and effective April 1, 2008, the base salaries of the other six executive officers, including Messrs. Sellick and Wilkes, were increased. For further information regarding these salary increases, see “— What compensation did Libbey’s executives receive for 2008?” below.

 

In February 2008 the Compensation Committee also made awards under the Company’s 2008 long-term incentive program (which we refer to as the “2008 LTIP”), granting RSUs and NQSOs to our executive officers. The RSUs and NQSOs vest over four years, with one-quarter the number of RSUs and NQSOs awarded vesting on each of the first, second, third and fourth anniversaries of the grant date. In addition, the Compensation Committee established a three-year performance cycle beginning January 1, 2008, and ending December 31, 2010, and awarded performance shares that may be earned if Libbey achieves the designated performance metric over that performance cycle. For further information regarding these grants, see “— What compensation did Libbey’s executives receive for 2008?” below.

 

In late 2008, the Compensation Committee commissioned a review by Hewitt of the executive officers’ compensation program. Hewitt concluded that the 2008 base salaries of the executives studied generally were competitive, although the salaries of some executives were below market while the salaries of others were above market. Hewitt also concluded that most executives’ long-term incentive compensation target opportunities were below market. As a result, while salaries for all of our executive officers were frozen in October 2008 and subsequently reduced by 7.5% in February 2009, the Committee determined in February 2009 that the long-term incentive target opportunities of certain executive officers should be adjusted effective January 1, 2009. See “— Have there been subsequent changes to the executive compensation program for 2009?” below for further information regarding these adjustments.

 

With respect to 2008 performance, the Compensation Committee, in February 2009, determined that Libbey did not achieve the threshold level of performance with respect to one of the two performance measures under the corporate component of our 2008 annual senior management incentive plan (which we refer to as our “SMIP”). Specifically, the Compensation Committee determined that the ratio of our actual income from operations (which we refer to as “IFO”) to our budgeted IFO for the year did not reach the threshold required to generate a payout with respect to that measure. Although our working capital productivity performance measure scored slightly above the threshold level of performance necessary to generate a payout with respect to that measure, and although some executive officers achieved some or all of their respective goals under the individual component of the 2008 SMIP, the CEO, with the concurrence of

the other executive officers, recommended to the Committee, and the Committee agreed, that no annual incentive or discretionary awards should made to any of the executive officers for 2008 performance in light of the significant decline in total shareholder return during 2008 and the fact that the Company did not achieve the threshold level of performance under the IFO performance measure of the corporate component of the 2008 SMIP. For additional information regarding the 2008 SMIP, see “ — In what forms did Libbey deliver compensation to its executives in 2008, and what purposes do the various forms of compensation serve?” and “— What compensation did Libbey’s executives receive for 2008?” below.

 

While Libbey’s performance in 2008 did not meet expectations, Libbey’s performance over the 30-month performance cycle beginning July 1, 2006, and ending December 31, 2008, did generate a payout of performance shares under the Company’s July 1, 2006 long-term incentive plan (which we refer to as the “July 2006 LTIP”). Accordingly, in February 2009 the Compensation Committee determined that Libbey had achieved 86.8% of its cumulative, budgeted EBITDA of approximately $278.1 million for that performance cycle, and that our executive officers had earned 55.3% of the performance shares awarded to them for that performance cycle. For additional information regarding these awards, see ‘‘— What compensation did Libbey’s executives receive for 2008?” below.

 

Our current executive compensation program is structured to achieve the following objectives:

 

 

In 2008 we delivered compensation to our executives in the form of annual cash compensation; long-term, equity-based incentives; fringe benefits and limited perquisites; and income protection under certain limited circumstances. Although our most senior executives have the highest compensation opportunities, they also have a higher percentage of their compensation opportunities “at risk” than our more junior executives.

The following table sets forth the respective forms of compensation for which our executive officers were eligible for 2008, the characteristics of those forms of compensation, and the purposes or objectives that each form of compensation is designed to fulfill:

 

 

 

 

 

 

In October 2008, in order to conserve cash and reduce costs in response to the global economic recession, we froze the salaries of virtually all management, professional, sales and administrative positions at Libbey. As a result, the salaries of our Named Executives were frozen until further notice. We also announced that the Employee Stock Purchase Plan would be terminated effective May 31, 2009. In December 2008, the Compensation Committee recommended to the Board of Directors, and the Board approved, the freezing of the ESP and the adoption of a new executive deferred compensation plan (which we refer to as the “Executive DCP”) for compensation earned beginning January 1, 2009. For more information with respect to the ESP, see “— Nonqualified Deferred Compensation” below.

 

In December 2008 the Compensation Committee also recommended to the Board, and the Board approved, amended and restated employment agreements and change in control agreements for our executives. Those agreements, which reflect, among other changes, modifications necessary to comply with Section 409A of the Internal Revenue Code, became effective January 1, 2009. For more information with respect to these amended and restated employment and change in control agreements, see “— Potential Payments Upon Termination or Change in Control” below.

 

In February 2009, we announced that, until further notice, the salaries of our executive officers, including our Named Executives, will be reduced by 7.5% and the Company’s matching contribution to the 401(k) accounts of all U.S. salaried employees, including our executive officers, will be suspended.

 

In addition, in February 2009 the Compensation Committee modified the long-term incentive plan for the period beginning January 1, 2009. (We refer to this plan as the “2009 LTIP.”) Pursuant to the 2009 LTIP, on February 12, 2009, the Committee granted to our executive officers RSUs and NQSOs, one-quarter of which vest on each of the first through fourth anniversaries of the grant date. However, the Committee, desiring to exercise control over the “burn rate” (defined as the number of shares awarded divided by the number of shares outstanding) associated with its equity grants and to reduce the cost to the Company of the awards granted in February 2009, modified the long-term incentive program for 2009 in the following respects:

 

 

As a result of these changes, the number of shares of Libbey stock underlying equity awards made by the Committee in 2009 is significantly lower than would have been required if the Committee had maintained the methodology utilized in 2007 and 2008 for determining the number of RSUs and NQSOs. In addition, the cost to Libbey of the equity component of the executive compensation program was reduced significantly. However, the real economic value to the executives of the equity component of the executive compensation program was reduced substantially, potentially undermining the Company’s talent attraction and retention

objective and its motivational objective. In light of the significant decline in total shareholder return in 2008, however, the Committee believes that the modified 2009 LTIP strikes the appropriate balance.

 

Development and Implementation of the Executive Compensation Program.  The Compensation Committee of our Board of Directors is responsible for overseeing the design, development and implementation of our executive compensation program. In discharging that responsibility, the Compensation Committee has engaged Hewitt Associates as its independent executive compensation consultant. All amounts incurred by Libbey in 2008 for services provided by Hewitt Associates were attributable to services provided by Hewitt Associates to the Compensation Committee in connection with its executive compensation decisions.

 

The Compensation Committee consults with Hewitt when the Compensation Committee determines it to be appropriate, and a representative of Hewitt frequently attends meetings of the Compensation Committee. Our CEO, Vice President — Administration and Vice President, General Counsel attend meetings of, and provide information to, the Compensation Committee and its consultant to assist them in their compensation 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 compensation 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 compensation decisions.

 

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 Vice President, General Counsel provide information to the Compensation Committee with respect to compensation programs affecting all executive officers, our non-CEO executives play no direct role in determining their own compensation.

 

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 Hewitt. 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.

 

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 compensation is consistent with the Committee’s intent in adopting the program and for reviewing internal pay equity within the executive officer group.

 

Process for Setting 2008 Executive Compensation.  We have not conducted any benchmarking of our executive compensation program since the Compensation Committee commissioned Hewitt to benchmark our executive compensation against a peer group of approximately 25 companies in 2005. The Compensation Committee has utilized general survey information obtained from Hewitt Associates and other executive compensation consulting firms to obtain insight as to the average annual merit increases provided by industrial companies to their employees. In late 2007, using those average annual merit increases as a framework, our CEO made recommendations to the Compensation Committee with respect to salary

increases for our chief operating officer, chief financial officer and vice president, global supply chain. The CEO’s recommendations were based upon his assessment of each executive officer’s experience, individual performance in 2007, including contributions to Libbey’s success, and, to a limited extent, competitive factors. Based upon the CEO’s input, the Compensation Committee assessed the performance and determined the compensation of those executive officers, approving merit increases for them effective January 1, 2008. The Compensation Committee observed a similar process in approving merit increases for the other executive officers effective April 1, 2008.

 

With respect to the CEO’s merit increase effective January 1, 2008, our Board of Directors evaluated the performance of our CEO, and the Nominating and Governance Committee of our Board coordinated the evaluation process. The Compensation Committee then reviewed that evaluation and, after obtaining input from our Board and Hewitt Associates, set his compensation for 2008. The chairperson of the Compensation Committee then reviewed the CEO’s evaluation with him in early 2008.

 

Process for Setting 2009 Executive Compensation.  In late 2008, the Compensation Committee determined that a more in-depth review of the Committee’s executive compensation program should be completed. Accordingly, the Committee engaged Hewitt to review the compensation of several of the Company’s executives. After performing a regression analysis utilizing manufacturing companies with revenues less than $5 billion in Hewitt’s Regression Analysis System, Hewitt concluded that the 2008 base salaries of the executives studied generally were competitive, although some were below market and others were above market. The names of the companies in the Regression Analysis System were not disclosed to the Committee or the Company and were not material to the Committee’s decisions. Hewitt also concluded that most executives’ long-term incentive compensation target opportunities were below market. As a result, while salaries for all of our executive officers were frozen in October 2008 and subsequently reduced by 7.5% in February 2009, the Committee determined in February 2009 that the long-term incentive target opportunities of certain executive officers should be increased. The Committee’s determination was based upon the Hewitt analysis and recommendations by the CEO as to internal pay equity. The adjusted target opportunities are effective with awards made under the 2009 LTIP. The target percentages for the Named Executives under the 2009 LTIP are as follows:

 

 

Our Equity Grant Practices.  Since 2006, grants of equity awards have been made under the following circumstances:

 

 

 

 

Potential Impact of Misconduct on Compensation.  Our SMIP and long-term incentive plans are authorized under the 2006 Omnibus Incentive Plan of Libbey Inc. (which we refer to as our “Omnibus Plan”). Our stockholders approved the Omnibus Plan at our annual meeting of stockholders on May 4, 2006. Under the Omnibus Plan, if:

 

 

then the executive is required to reimburse us the amount of any payment in settlement of an award made under the Omnibus Plan and 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 2004 we implemented share ownership guidelines for 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. 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 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.

 

Base Salaries.  Effective January 1, 2008, the base salaries for four executive officers, including Messrs. Meier, Geswein and Reynolds, were increased. The increases for Messrs. Meier, Geswein and Reynolds are set forth in the following table:

 

 

Effective April 1, 2008, the base salaries of the other six executive officers, including Messrs. Sellick and Wilkes, were increased. The increases for Messrs. Sellick and Wilkes are set forth in the following table:

 

 

These increases reflected the Compensation Committee’s assessment that our executives led Libbey to an outstanding performance in 2007, as detailed in our proxy statement for 2007, and the Committee’s desire to ensure these executives’ salaries were competitive in 2008.

 

As discussed earlier, the salaries of the executive officers, including the Named Executives, were reduced by 7.5% effective February 16, 2009, resulting in the following current base salaries for the Named Executives:

 

 

Annual Incentive Compensation.  As indicated under “— In what forms did Libbey deliver compensation to its executives for 2008, and what purposes do the various forms of compensation serve?” above, the SMIP, which is our annual incentive plan for senior management, included two components in 2008: a corporate component, representing 70% of each executive’s target opportunity; and an individual component, representing 30% of each executive’s target opportunity. The corporate component in turn is divided into two corporate-wide financial performance measures: (1) actual to budgeted IFO and (2) actual to budgeted working capital productivity. We selected IFO as a corporate-wide performance measure for 2008 because it is a key measure of company profitability. We selected working capital productivity — defined as the ratio of our working capital (inventory-net plus accounts receivable-net minus accounts payable) to our net sales — as a corporate-wide performance measure for 2008 because it is an important measure of cash flow generation. Improving our corporate-wide IFO and generating cash flow are important business objectives.

 

On February 9, 2009, the Compensation Committee reviewed our actual IFO results for 2008, compared them to our budgeted IFO and determined that we had not achieved the threshold level of performance as to that performance measure. We did achieve a score slightly higher than the threshold level of performance under the working capital productivity performance measure, but our CEO, with the concurrence of the other executive officers, recommended to the Committee, and the Committee agreed, that no payout be made with respect to that measure because of the significant reduction in total shareholder return during the year and because we failed to achieve the threshold level of performance with respect to the IFO performance

measure. For further information with respect to the scales utilized in determining the amount of potential payouts of these components, see the Grants of Plan-Based Awards Table below.

 

The remaining 30% of our executives’ annual incentive opportunity for 2008 was based upon achievement of a series of other goals developed early in the year and tailored specifically for the respective executive officers. Because it was apparent in late 2008 that the Company would not achieve the threshold level of performance necessary to generate a payout under the IFO performance measure of the corporate component, and because our stockholders were negatively impacted by the significant reduction in total shareholder return during 2008, our CEO, with the concurrence of the other executive officers, recommended to the Compensation Committee, and the Committee agreed, that no payouts be made under the individual component of the 2008 SMIP.

 

Discretionary Cash Awards.  Similarly, because of the substantial decline in total shareholder return during 2008, the Compensation Committee declined to make any discretionary cash awards to our executive officers.

 

Long-Term Performance-Based Compensation.  The long-term performance-based compensation opportunity provided to our executive officers for performance during 2008 consists of the following components:

 

 

As discussed in detail in our proxy statement for our 2006 annual meeting of stockholders, the Compensation Committee elected to phase in the performance share component of our executives’

equity-based compensation opportunity. The phase-in of the performance share component was completed in the 2008 LTIP, with shares having a grant date value equal to 40% of the respective participants’ target long-term incentive opportunities being awarded on February 15, 2008. In each case, the number of performance shares awarded was determined by dividing the dollar value that the Compensation Committee sought to transfer by the average closing price of our common stock over a period of 60 consecutive trading days ending on the grant date. In February 2008, the grant date was February 15, 2008.

 

On February 9, 2009, the Compensation Committee determined that we had achieved 86.8% of cumulative, budgeted EBITDA for the period July 1, 2006 through December 31, 2008, and that, as a result, participants under the July 2006 LTIP had earned 55.3% of the target number of performance shares awarded to them for the period July 1, 2006 through December 31, 2008. As a result, in February 2009, we settled the earned performance shares by issuing the following number of common shares to the Named Executives:

 

 

 

 

Stock Options and RSUs.  The Compensation Committee contemplated that, for each three-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. Accordingly, at its meeting on February 4, 2008, the Compensation Committee authorized a grant of NQSOs and RSUs that vests ratably over four years, with the NQSOs having an exercise price equal to the closing price of our common stock on February 15, 2008, the first business day after we released our financial results for our 2007 fiscal year.

 

The number of RSUs awarded was determined by dividing the dollar value that the Compensation Committee sought to transfer (40% of each executive’s target long-term incentive opportunity) by the average closing price of our common stock over a period of 60 consecutive trading days ending on February 15, 2008. The number of NQSOs awarded was determined by dividing the dollar value that the Compensation Committee sought to transfer (20% of each executive’s target long-term incentive opportunity) by the Black Scholes value of the options on February 15, 2008.

 

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 million, unless the compensation is “performance-based.” It is the Compensation Committee’s policy that compensation paid to our Named Executives should, to the extent it exceeds $1 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 compensation objectives, as set forth in “— What are the objectives of Libbey’s executive compensation program?”

 

Our management directors do not receive additional compensation for service on the Board of Directors. We pay the following forms and amounts of compensation to our non-management directors:

 

 

 

 

Because we recognize that our non-employee directors are required to devote a significant amount of time to their duties as directors, and because we believe that our non-employee directors bring significant value to our stockholders, we seek to provide our non-employee directors with market-competitive compensation. We also seek to align the interests of our non-employee directors with those of our stockholders by providing equity-based compensation in the form of RSUs or outright grants of common stock and by requiring that our non-employee directors achieve and maintain a meaningful amount of equity in Libbey. 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.

 

In late 2008, we compared the compensation payable to our non-employee directors to the 2007-2008 Report on Director Compensation published by the National Association of Corporate Directors (the “NACD”) and the Center for Board Leadership. Specifically, we compared the pay provided to our non-employee directors to directors of companies in three different categories: (1) small companies with revenues between $500 million and $1 billion; (2) small companies in the consumer products/ diversified manufacturing industries; and (3) small companies located in the North Central region, as defined by the NACD. Although we did not benchmark our director compensation against these categories, we did note that the cash retainers and meeting fees that we pay to our non-employee directors are generally below the median in each of these categories. However, in light of our performance in 2008 and the decline in total shareholder return during the year, our Board of Directors declined to consider any increase in the compensation of our non-employee directors. The Board did, however, decide to adjust the methodology for determining the number of shares of common stock to be awarded to non-employee directors. The Board determined that, beginning with the grant to be made on the date of the annual meeting of stockholders in 2009, the number of shares issued to non-employee directors will be determined by dividing $40,000 by the closing price of our common stock on the date of grant. Our Omnibus Incentive Plan, however, limits the number of shares that we may issue in any year to any non-employee director to 7,500 shares. As of March 13, 2009, the value of 7,500 shares was only $6,900. To the extent that the value of the maximum number of shares that we may issue to a non-employee director on May 7, 2009 (the date of our annual meeting of shareholders) is less than $40,000, we will pay the difference to the non-employee director in cash.

Directors may elect, pursuant to the 2006 Deferred Compensation Plan for Outside Directors adopted effective January 1, 2006, and the Amended and Restated 2006 Deferred Compensation Plan for Outside Directors adopted effective October 17, 2006 (which we refer to as the “Amended 2006 Plan”), to defer all or any part of the retainer and fees payable to them into either a subaccount that is deemed invested in our common stock or a subaccount that has a fixed rate of return equal to the average yield on 10-year treasuries (determined as of the last day of the calendar quarter in which interest is being computed). In addition, directors may elect, pursuant to the Amended 2006 Plan, to defer receipt of the equity award referred to above. Effective with compensation earned on or after January 1, 2009, our non-employee directors may elect, pursuant to our 2009 Director Deferred Compensation Plan (which we refer to as the “Director DCP”), to defer cash and/or equity compensation into any of 13 measurement funds. The various deferred compensation plans under which non-employee directors are 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 Amended 2006 Plan and the Director DCP 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.

 

In addition to the retainers, fees and equity awards listed above, the Company reimburses the 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 compensation to its executives in 2008, and what purposes do the various forms of compensation 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 first implemented employment agreements for our executive officers in 1993, when Libbey separated from its former parent, Owens-Illinois, Inc. and became a public company, and we first implemented our change in control agreements in 1998, when hostile takeovers were not uncommon. In late 2007, the Compensation Committee, assisted by Hewitt Associates, began a thorough review of those agreements. Although the Compensation Committee recognized that the Company did not have the unilateral ability to amend the employment and change in control agreements, the Compensation Committee undertook its review with two goals in mind:

 

 

As a result of its review, the Compensation Committee recommended to the Board, and on December 2, 2008, the Board approved, amended and restated employment and change in control agreements that were executed prior to December 31, 2008, and became effective January 1, 2009. These agreements incorporate a number of changes, including the following:

 

 

 

The amended employment and change in control agreements reflect the continued belief of our Compensation Committee and Board that it is in the best interests of our stockholders to provide our executive officers with income replacement upon the occurrence of any of the “triggers” described in the amended employment and change in control agreements. That belief is based upon the following:

 

 

 

Following are tables containing summaries of the material terms of the amended employment and change in control agreements to which our Named Executives 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 Form 10-K filed with the Securities and Exchange Commission on March 16, 2009, for a complete description of their terms.

 

 

 

 

 

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 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’s legal counsel, to be heard before the Board. We also must provide the executive with reasonable opportunity to correct the conduct that he or she is alleged to have committed.

 

 

 

 

 

 

In order to terminate his employment for “good reason,” the Named Executive 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’s employment with cause, or if the Named Executive resigns or retires other than at our request or for good reason, we nevertheless are obligated to pay or provide to the Named Executive 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 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 that are required by law at the time the payments are due.

 

 

 

 

 

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.

 

 

 

 

 

 

 

William A. Foley, Deborah G. Miller and Carol B. Moerdyk served on our Compensation Committee during 2008. None of Mr. Foley, Ms. Miller or Ms. Moerdyk 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.

 

Carol B. Moerdyk, Chair
William A. Foley
Deborah G. Miller
John C. Orr

 

The following narrative, tables and footnotes describe the “total compensation” earned during 2008, 2007 and 2006 by Messrs. Meier, Geswein, Reynolds, Sellick and Wilkes. Information for 2006 was not provided for Mr. Geswein, since he did not join Libbey until May 2007. We refer to Messrs. Meier, Geswein, Sellick, Reynolds and Wilkes as our “Named Executives.”

 

The total compensation presented below does not reflect the actual compensation received by, or the target compensation of, the Named Executives in 2008, 2007 or 2006. The actual value realized by our Named Executives in 2008 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 2008 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 2008, 2007 and 2006.

 

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 Executives for 2008 or 2006 performance.

 

Stock Awards.  The awards disclosed under the heading “Stock Awards” consist of common stock issued in settlement of performance shares earned during each of 2008, 2007 and 2006, respectively, and RSUs granted in each of February 2008 and February 2007. The dollar amounts for the awards represent the grant-date fair value-based compensation expense recognized in 2008, 2007 and 2006, respectively, under FAS 123R for each Named Executive, as reported in our audited financial statements contained in our Annual Report on Form 10-K. Details with respect to the awards granted in 2008 are included in the Grants of Plan-Based Awards Table below. The recognized compensation expense of the stock-based awards may vary from the actual value the respective Named Executives receive, because the actual value will depend upon the number of shares earned 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. Geswein, the amounts reflected for 2007 reflect a single award of 50,000 NQSOs made in order to induce Mr. Geswein to join Libbey as our Vice President and Chief Financial Officer in May 2007. The dollar amounts for the awards represent the grant-date fair value-based compensation expense recognized in each of 2008 and 2007 for each Named Executive, as reported in our audited financial statements contained in our Annual Report on Form 10-K. (No awards of NQSOs were made to the Named Executives in 2006.) The recognized compensation expense of the NQSOs may vary from the actual value the respective Named Executives receive, because the actual value will depend upon 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 amounts earned by the Named Executives in 2008, 2007 and 2006 under our SMIP. There were no awards paid for 2008 performance. The awards for 2007 and 2006 performance were paid in February of 2008 and 2007, respectively.

 

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 2008, 2007 and 2006 in the pension value provided under our Libbey Inc. Salaried Cash Balance Pension Plan (which we refer to as our “Salary Plan”). Because we do not guarantee any particular rate of return on deferred compensation under our Executive Savings Plan (which we refer to as our “ESP”), 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) the matching contributions that we make, on behalf of the Named Executives, to their respective accounts in our 401(k) savings plan for U.S. salaried employees; (b) the matching contributions that we make, on behalf of the Named Executives, pursuant to our ESP; (c) the cost that we paid for tax return preparation and financial planning for the respective Named Executives, together with tax “gross-ups” on that cost; (d) our incremental cost for ground transportation for trips from the Toledo, Ohio area to the Detroit/Wayne County Metropolitan airport for our executives while traveling on business and for our executives and their spouses while traveling together; (e) the annual premiums that we pay to provide executive long-term disability coverage for each of the Named Executives; and (f) our cost of annual executive physical examinations and related services for the Named Executives. The amounts disclosed for 2007 for Mr. Geswein include our cost to relocate Mr. Geswein, his family and their belongings to Toledo, Ohio from Dayton, Ohio, together with related tax “gross-ups” on that cost.

 

SUMMARY COMPENSATION TABLE

 

 

 

 

 

 

 

Grants of Plan-Based Awards Table

 

During 2008, the Compensation Committee granted to our Named Executives the following plan-based awards under our 2006 Omnibus Incentive Plan:

 

 

Recipients of performance shares and RSUs are not entitled to dividends or voting rights with respect to the common shares underlying the performance shares or RSUs unless and until they are earned or vested. We do not engage in repricing of NQSOs.

 

None of our executive officers, including our Named Executives, earned an award under our SMIP for 2008 performance.

 

Information with respect to each of these awards, including information with respect to the performance measures applicable to the cash awards under our SMIP and our performance shares, and vesting schedules with respect to RSUs and NQSOs, is set forth, on a grant-by-grant basis, in the table and footnotes below.