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

x

Filed by a Party other than the Registrant

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Preliminary Proxy Statement

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

x

Definitive Proxy Statement

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Definitive Additional Materials

o

Soliciting Material Pursuant to §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):

x

No fee required.

o

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

(1)

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(2)

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(3)

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(1)

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(3)

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Date Filed:

 

 

LIBBEY INC.

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

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
ON MAY 14, 2013

  

Dear Fellow Libbey Shareholder:

We will hold our 2013 Annual Meeting of Libbey shareholders on Tuesday, May 14, 2013, 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:

•

elect three directors, each for a term of three years;

•

vote, on an advisory and non-binding basis, to approve the pay of our named executives;

•

vote to ratify the appointment of Ernst & Young LLP as Libbey's independent auditors for our fiscal year ending December 31, 2013; and

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transact such other business as properly may come before the meeting.

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 15, 2013. 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.

By Order of the Board of Directors,

Susan A. Kovach
Vice President, General Counsel and Secretary

April 2, 2013
Toledo, Ohio

 

 

 

TABLE OF CONTENTS

(i)

 

 

 

 

(ii)

 

 

 

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 shareholders. The members of the proxy committee are Stephanie A. Streeter and Susan A. 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 14, 2013, 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 April 2, 2013.

QUESTIONS AND ANSWERS

Who may vote?

You may vote if you were a holder of Libbey Inc. (which we refer to as we, our, Libbey or the Company) common stock at the close of business on March 15, 2013.

What may I vote on, what are my voting options and how does the Board recommend that I vote?

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How do I vote?

Registered Shareholders

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

•

Vote by telephone:  Call on a touch-tone telephone, toll-free 1-800-690-6903, 24 hours a day, seven days a week, until 11:59 p.m., eastern daylight savings time, on May 13, 2013. Make sure you have your proxy card available, and follow the simple instructions provided.

•

Vote over the internet:  Go to www.proxyvote.com, 24 hours a day, seven days a week, until 11:59 p.m., eastern daylight savings time, on May 13, 2013. Make sure you have your proxy card available and follow the simple instructions provided.

•

Vote by mail:  Mark, date and sign the enclosed proxy card and return it in the enclosed, postage-paid envelope. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity.

•

Vote in person at the annual meeting:  Bring the enclosed proxy card or other proof of identification and request a ballot at the meeting.

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 and 2.

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 e-mail address provided by Libbey for business purposes, you will receive an e-mail message at your Libbey-provided e-mail address containing instructions that you must follow in order for shares in 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 e-mail 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 in your account to be voted.

May I change my vote?

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:

•

sending us a proxy card dated later than your last vote;

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notifying the Secretary of Libbey in writing; or

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voting at the meeting.

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.

How many outstanding shares of Libbey common stock are there?

At the close of business on March 15, 2013, there were 20,918,730 shares of Libbey common stock outstanding. Each share of common stock is entitled to one vote.

How big a vote do the proposals need in order to be adopted?

Provided that a quorum is present either in person or by proxy at the Annual Meeting, Proposals 1 through 3 must receive the required votes set forth below:

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What constitutes a quorum?

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.

How will votes be counted?

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 – 3. Additionally, broker non-votes will not be considered as present and entitled to vote with respect to either of Proposal 1 or Proposal 2. 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.

What are broker non-votes?

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 and 2, 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.

How will voting be conducted on other matters raised at the meeting?

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.

When must shareholder proposals be submitted for the 2014 Annual Meeting?

A shareholder desiring to submit a proposal for inclusion in our Proxy Statement for our Annual Meeting to be held in 2014 must deliver the proposal so that we receive it no later than December 6, 2013. Any proposal submitted outside the processes of Rule 14a-8 under the Exchange Act will be considered untimely if submitted after February 19, 2014. We request that all such proposals be addressed to Susan A. Kovach, Vice President, General Counsel and Secretary, Libbey Inc., 300 Madison Avenue, P.O. Box 10060, Toledo, Ohio 43699-0060.

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PROPOSAL 1 — ELECTION OF DIRECTORS

Our Board of Directors, which currently has nine directors, is divided into three classes, each of which includes three directors. The term of office for members of Class II of the Board of Directors will expire on the date of the Annual Meeting in 2013. The Board has nominated Messrs. Duno, Howell and Reynolds for election to Class II. Those persons who are elected directors at the 2013 Annual Meeting will hold office until their terms expire on the date of the 2016 Annual Meeting or until the election and qualification of their successors. The terms of office of the members of Class I and Class III of the Board of Directors will expire on the date of the Annual Meeting in 2015 and 2014, respectively. Information regarding Messrs. Duno, Howell and Reynolds is set forth below under “Libbey Corporate Governance — Who are the members of our Board of Directors?”

Only Messrs. Duno, Howell and Reynolds will be nominated for election as directors at the Annual Meeting. Each has consented to being named in this proxy statement and to serve if elected, and we expect each to be available to serve. If any of them becomes unavailable to serve prior to the Annual Meeting, the proxy will be voted for a substitute nominee or nominees designated by the Board, or the number of directors may be reduced.

Shares represented by proxies in the accompanying form will be voted for the election of these three nominees unless authority to vote for any or all of these nominees is withheld. 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 Messrs. Duno, Howell and Reynolds.

PROPOSAL 2 — ADVISORY SAY-ON-PAY VOTE

We are providing 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 executives, as disclosed in this proxy statement, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, pursuant to Item 402 of Regulation S-K.

Our 2012 executive pay program, which is discussed below under “Compensation-Related Matters — Compensation Discussion and Analysis” and related tables and narrative, contemplates the delivery of executive pay that is performance-based and market-driven, as demonstrated in the table below:

1

Adjusted EBITDA and adjusted free cash flow are non-GAAP measures. For reconciliations of adjusted EBITDA and adjusted free cash flow to net income, see Attachment A.

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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.

PROPOSAL 3 — RATIFICATION OF AUDITORS

The Audit Committee has appointed Ernst & Young LLP to serve as our independent auditors for our 2013 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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STOCK OWNERSHIP

Who are the largest owners of Libbey stock?

The following table shows information with respect to the persons we know to be the beneficial owners of more than 5% of our common stock as of December 31, 2012.

(1)

Amendment No. 9 to Schedule 13G filed with the SEC on behalf of Zesiger Capital Group LLC (“Zesiger”), an investment advisor, indicates that, as of December 31, 2012, Zesiger was the beneficial owner of 1,647,995 common shares, with sole dispositive power as to all such common shares and sole voting power as to 1,250,500 common shares. The schedule further states that all securities reported in the schedule are held in discretionary accounts that Zesiger manages, and that no single client of Zesiger owns more than 5% of the class.

(2)

Amendment No. 1 to Schedule 13G filed with the SEC on behalf of Robeco Investment Management, Inc. (“RIM”), an investment advisor, indicates that, as of December 31, 2012, RIM was the beneficial owner of 1,410,979 common shares, with sole dispositive power as to all such shares and sole voting power with respect to 915,305 common shares. The schedule further states that all securities are held for the discretionary account of certain clients, and that, to the best knowledge of RIM, no person has the right to receive or the power to direct the receipt of dividends from or the proceeds from the sale of shares representing more than 5% of the class.

How much Libbey stock do our directors and officers own?

Stock Ownership Guidelines

Non-Management Director Stock Ownership Guidelines.  We have stock ownership guidelines that are applicable to non-management directors. For individuals who were non-management directors as of May 6, 2010, when we revised the guidelines, the deadline for compliance is May 6, 2015. For individuals subsequently becoming non-management directors, the deadline will be the fifth anniversary of the date on which they become non-management directors. We refer to the deadline as the Compliance Deadline.

Under the guidelines, a non-management 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 four 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.

In determining whether a non-management director has achieved his or her Ownership Threshold, we include:

•

Shares of Libbey common stock held by the non-management director; and

•

“Phantom stock” into which deferred compensation is deemed invested under any deferred compensation plan for non-management directors.

If a non-management 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 shares subsequently declines as a result of a decline in the closing price of Libbey common stock. A non-management director who has achieved the Ownership Threshold subsequently may sell or dispose of shares as long as the non-management director retains at least the minimum number of shares that s/he was required to hold when s/he first achieved the Ownership Threshold. If the non-management director’s share ownership drops below that Ownership Threshold, his or her holdings will be re-valued based on the then-current market price of Libbey common stock, and s/he will be required to achieve the Ownership Threshold based on his or her re-valued holdings.

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As of March 15, 2013, all of our non-management 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. In late 2012, we modified the guidelines as described below. We refer to the guidelines, as originally established, as the Original Guidelines.

Under the Original Guidelines, each executive officer was 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 became subject to the guidelines.

The applicable multiples for the executive officers under the Original Guidelines were as follows:

(1)

Mr. Reynolds currently is our only Executive Vice President.

Under the Original Guidelines, an executive may achieve the required ownership by a variety of forms of unpledged equity ownership (which we refer to as Qualifying Shares), including outright ownership, by the officer and/or his or her spouse and minor children, of shares of Libbey stock; shares held in 401(k) savings accounts, individual retirement accounts or trust or other estate planning vehicles; shares underlying vested RSUs (even if deferred); and vested, “in-the-money” stock options to the extent of 50% of the required guideline.

The following table shows, for each named executive who was employed by us at December, 31, 2012, the applicable guideline and number of Qualifying Shares, excluding vested, “in-the-money” stock options, held as of March 15, 2013:

  

In late 2012 we elected to transition our executive stock ownership guidelines to stock retention guidelines. This decision was made in order to provide greater parity between long-time executive officers and our newer executive officers and to further align our executives’ interests with those of shareholders. Under the retention guidelines, which we refer to as the Retention Guidelines, each executive generally will be required to retain, until his or her separation from service:

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50% of the net after-tax shares underlying each grant of RSUs made after January 1, 2013 that subsequently vests; and

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50% of the net after-tax shares underlying NQSOs that are granted after January 1, 2013 and that the executive subsequently exercises.

Executives who satisfied the Original Guidelines prior to December 31, 2012 are exempt from the Retention Guidelines until January 2018. During the period between January 2, 2013 and January 1, 2018, those executives are permitted to sell or otherwise dispose of our stock, but only to the extent of any shares in excess of their respective ownership guidelines under the Original Guidelines.

Executives nearing retirement are released from our guidelines on the later to occur of the date that is one year prior to the contemplated retirement date or the date on which the Board is notified of the planned retirement.

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Beneficial Ownership Table

The following table shows, as of March 15, 2013, the number of shares of our common stock and percentage of all issued and outstanding shares of our common stock that are beneficially owned by our directors, the named executives (including those who were no longer employed by us at that date) 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 named executive set forth below. The shares owned by the named executives set forth below include the shares held in their accounts in our 401(k) plan. An asterisk indicates ownership of less than one percent of the outstanding stock.

(1)

Does not include shares of our common stock that have vested but are deferred under our Executive Deferred Compensation Plan, which we refer to as our EDCP. As of March 15, 2013, each of Messrs. Ibele, Paige and Reynolds, and Ms. Kovach, Streeter and Buck, and all executive officers as a group, had the following number of shares of our common stock that are vested but deferred under our EDCP:

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(2)

Includes the following number of shares of our common stock that are deferred under our 2009 Director Deferred Compensation Plan, which we refer to as our Director DCP, and that are payable as shares of our common stock:

Does not include the following number of shares of phantom stock that are held by non-management directors pursuant to our deferred compensation plans for outside directors and that are payable in cash:

For more information regarding our deferred compensation plans for non-management directors, see “Compensation-Related Matters — Non-Management Directors' Compensation in 2012” below.

  

(3)

Includes the following number of NQSOs that have been granted to our named executives and all executive officers as a group and that currently are exercisable or will be exercisable on or before May 14, 2013:

  

(4)

Includes 750 shares held by family members of Mr. Howell. Mr. Howell disclaims any beneficial interest in these shares.

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(5)

Based on last known information as of date of separation from service. For Mr. Rubio, that date was July 6, 2012; for Mr. Sellick, that date was February 29, 2012.

In addition to outstanding shares of common stock that our named executives beneficially owned as of March 15, 2013, the named executives and all executive officers as a group have received the following grants of RSUs that have not yet vested:

(1)

Of these amounts, a total of 17,412 RSUs with four-year vesting were awarded on February 8, 2010 (but were not granted until May 6, 2010, after our shareholders approved our Amended and Restated 2006 Omnibus Incentive Plan, which we refer to as our Omnibus Plan); a total of 21,275 RSUs with four-year vesting were awarded on February 10, 2011; a total of 17,070 RSUs with four-year vesting were awarded to Ms. Streeter on July 29, 2011; a total of 65,924 RSUs with four-year vesting were awarded on February 17, 2012; a total of 20,444 RSUs with four-year vesting were awarded to Ms. Buck on August 1, 2012; a total of 36,000 RSUs were granted to Mr. Reynolds on August 1, 2012, with 50% vesting on January 2, 2014 and 50% vesting on January 2, 2015, provided that Mr. Reynolds remains employed by us until the first to occur of December 31, 2013 or the date on which we otherwise request that he retire; and a total of 90,110 RSUs with four-year vesting were awarded on February 11, 2013. One share of our common stock will be issued for each vested RSU. Dividends do not accrue on RSUs until they vest. For further information, see “Compensation-Related Matters — Compensation Discussion and Analysis — In what forms does Libbey deliver pay to its executives, and what purposes do the various forms of pay serve?” and the Outstanding Equity Awards at Fiscal Year-End table below.

(2)

Pursuant to the respective employment agreements covering Mr. Rubio and Mr. Sellick, upon termination of employment, vesting was accelerated with respect to RSUs that had not vested prior to termination of employment and that otherwise would have vested on or before the first anniversary of their respective dates of termination.

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, 2012, all officers, directors and greater-than-10% beneficial owners complied, on a timely basis, with the filing requirements applicable to them pursuant to Section 16 of the Exchange Act.

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LIBBEY CORPORATE GOVERNANCE

Who are the members of Libbey's Board of Directors?

Our Board of Directors is divided into three classes of directors. Each year, one 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, for each director, the individual attributes that enhance the Board's collective knowledge and experience.

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How is our Board leadership structured?

Our Board currently includes seven non-management directors and two employee directors. All seven of the non-management directors have been determined to be independent. For more information with respect to how the Board determines which directors are considered to be independent, see “How does the Board determine which directors are considered independent?” below.

When Ms. Streeter joined the Company and was named our chief executive officer on August 1, 2011, the Board elected to separate the roles of the chairman and chief executive officer in order to enable Ms. Streeter to devote herself to becoming familiar with our business, industry and customers. As a result of the Board’s most recent assessment of its leadership structure, the Board has concluded that continued separation of the roles of chairman and chief executive officer is appropriate at this time and will enable Ms. Streeter to focus on implementation of the new strategy adopted by the Company in 2012.

Does Libbey have Corporate Governance Guidelines?

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).

What is the role of the Board's committees?

Our Board of Directors currently has the following standing committees:

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(1)

Determined by the Board to be qualified as an audit committee financial expert, as defined in SEC regulations.

(2)

Determined by the Board to be financially sophisticated and literate and to have accounting and related financial management expertise, as those qualifications are interpreted by the Board in its business judgment.

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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 NYSE MKT Company Guide. The Board also has determined that all members of the Compensation Committee are “outside directors,” within the meaning of 26 CFR § 1.162-27.

How does our Board oversee risk?

Our management is responsible for day-to-day risk management and our Board, through the Audit Committee and the Board's other committees, is responsible for oversight of management's risk management processes. We have implemented an enterprise-wide risk management program. Our Vice President, Treasurer has primary responsibility for this program and reports to our 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 Vice President, Treasurer routinely reports to the Audit Committee with respect to the status of our program and particular risk strategies and reports to our Board regarding particular risk management matters in connection with its general oversight of our business.

How does our Board select nominees for the Board?

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 proposes and reviews 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 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

•

the highest professional and personal ethics and values, consistent with longstanding Libbey values and standards

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broad experience at the policy-making level in business, government, education, technology or public interest

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commitment to enhancing shareholder value

•

devotion of sufficient time to carry out the duties of Board membership and to provide insight and practical wisdom based upon experience

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expertise in areas that add strategic value to the Board and/or knowledge of business in foreign locations strategic to our then-current or potential future operations. For example, current or recent experience as a chief executive officer of a public company; expertise in logistics and advanced supply chain management; experience as an executive with a large multinational company or as an expatriate executive in the Far East, Europe or Latin America; management experience in the foodservice industry; or management or board experience in a highly leveraged environment.

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, two of our non-management directors are women and one non-management director is Hispanic. In addition, one non-management 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 or other subject-matter expertise and the Board's evaluations of other prospective nominees.

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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.

How does our Board determine which directors are considered independent?

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 “Corporate Governance — 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 NYSE MKT Company Guide, since our common stock currently is listed on the NYSE MKT exchange.

As a result of this review, the Board has affirmatively determined that Carlos V. Duno, William A. Foley, 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. In addition, the Board has affirmatively determined that, notwithstanding that Stewart & Stewart provides Libbey with legal services relating to international trade matters, Terence P. Stewart is independent of Libbey and its management, as the fees paid to Stewart & Stewart in each of the last three (3) years were less than 5% of the consolidated gross revenues of Stewart & Stewart. Ms. Streeter and Mr. Reynolds are considered inside directors because of their employment as senior executives of Libbey. For more information with respect to the compensation paid to Mr. Stewart's law firm for services provided to Libbey in 2012, see “Corporate Governance — Certain Relationships and Related Transactions — What transactions involved directors or other related parties?” below.

How often did our Board meet during fiscal 2012?

During 2012, the Board of Directors held ten meetings, five of which were regularly scheduled meetings and five of which were special meetings. During 2012, 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.

Certain Relationships and Related Transactions — What transactions involved directors or other related parties?

A substantial majority of our directors is independent, as defined in the NYSE MKT Company Guide and our Corporate Governance Guidelines. Our Code of Business Ethics and Conduct, which we refer to as our Code of Ethics, generally prohibits related-party transactions involving directors. However, our Board permits 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 2012, Stewart and Stewart received fees of approximately $228,000 from us for legal services in connection with various international trade matters. Our Board believes that Libbey's General Counsel is best suited to select legal counsel for Libbey, so 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. Mr. Stewart and our General Counsel are responsible for monitoring whether the fees paid to Stewart & Stewart would render Mr. Stewart not independent, within the meaning of the NYSE MKT Company Guide and our Corporate Governance Guidelines, and for informing the Chairman of the Board and the Nominating and Governance Committee of any issues in that regard.

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 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.

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How do shareholders and other interested parties communicate with the Board?

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.

Are Libbey's Corporate Governance Guidelines, Code of Business Ethics and Conduct and Committee Charters available to shareholders?

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.

Are Libbey's directors required to attend Libbey's Annual Meeting of shareholders?

Our directors are not required to attend our Annual Meeting of shareholders, but we typically hold a meeting of the Board at the same location and on the same day as the Annual Meeting. 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 14, 2013. In 2012, all members of the Board of Directors attended our Annual Meeting.

AUDIT-RELATED MATTERS

Who are Libbey's auditors?

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, 2013. 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 3 — Ratification of Auditors” above.

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.

What fees did Libbey pay to its auditors for Fiscal 2012 and 2011?

Fees for services rendered by Ernst & Young LLP for the years ended December 31, 2012 and 2011 are as follows:

(1)

Audit Fees include fees associated with the annual audit of our internal controls, the annual audit of financial statements, the reviews of our quarterly reports on Form 10-Q and annual report on Form 10-K and statutory audit procedures.

(2)

Audit-related fees include fees for audits of our employee benefit plans.

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,

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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.

Report of the Audit Committee

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:

•

confirming the independence of our independent auditors;

•

appointing, compensating and retaining our independent auditors;

•

reviewing the scope of the audit services to be provided by our independent auditors, including the adequacy of staffing and compensation;

•

approving non-audit services;

•

overseeing management's relationship with our independent auditors;

•

overseeing management's implementation and maintenance of effective systems of internal and disclosure controls;

•

reviewing our internal audit program; and

•

together with the Board's other standing committees, overseeing our enterprise risk management program.

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.

With respect to the audited financial statements for the year ended December 31, 2012, 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 auditors' 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, 2012, for filing with the Securities and Exchange Commission.

Carlos V. Duno, Chair
Peter C. McC. Howell
Carol B. Moerdyk
John C. Orr¹

1

Not a member of the Audit Committee during 2012.

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COMPENSATION-RELATED MATTERS

Compensation Discussion and Analysis

This Compensation Discussion and Analysis provides information regarding our 2012 executive pay program, particularly as it relates to the following individuals, who are our “named executives” for 2012:

Executive Summary

Financial and Operational Highlights for 2012.

•

Our 2012 net sales were $825.3 million, up slightly from $817.1 million in 2011, with strong sales increases in our U.S. and Canada and China sales regions.

•

By focusing on reducing our cost structure, we achieved:

Ø

income from operations of $81.3 million, up 28.1% compared to $63.5 million in 2011; and

Ø

adjusted EBITDA of $132.4 million, an all-time record for us and a 17.1% increase compared to our adjusted EBITDA of $113.1 million in 2011.

•

During 2012, we stabilized our balance sheet, positioning us to prepay $45.0 million of our 6.875% senior secured notes on or before May 15, 2013:

Ø

In May 2012, we refinanced a majority of our debt, including our senior secured notes due 2015, reducing the annual interest rate on our senior secured notes from 10.0% to 6.875% and extending their maturity to 2020;

Ø

Although our indebtedness increased as a result of our May 2012 refinancing, we used a portion of the proceeds of the refinancing to contribute $79.7 million to our U.S. pension plans, fully funding our Pension Protection Act target obligations under those plans and enabling us to further de-risk our U.S. pension obligations;

Ø

As a result of our significant cash generation during the fourth quarter of 2012, at December 31, 2012 our ratio of debt net of cash to adjusted EBITDA2 was 3.0 times; and

Ø

At December 31, 2012, we had $67.2 million of cash on hand and no loans outstanding under our asset-based loan (ABL) facility.

•

Our shareholders benefited substantially, as we achieved total shareholder return for the one-year period ended December 31, 2012 of approximately 52% and an average annualized shareholder return of 36.2% over the three-year period ended December 31, 2012.

2012 Executive Compensation Highlights.  At our 2012 Annual Meeting of shareholders, our say-on-pay proposal garnered the support of over 96% of the shares voted. Our Compensation Committee interpreted the results of the vote as an affirmation of our executive pay program and, as a result, the Committee retained generally the same structure for our 2012 executive pay program.

2

A reconciliation of net income to EBITDA and adjusted EBITDA and debt net of cash to adjusted EBITDA ratio is set forth on Attachment A.

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Notable actions taken by the Committee in 2012 regarding the pay of our named executives include the following:

For more information with respect to these awards, see “What pay did Libbey's executives receive for 2012?” below.

What are the objectives of Libbey's executive pay program?

Our 2012 executive pay program was structured to achieve the following objectives:

•

Talent Attraction and Retention Objective. In light of Mr. Reynolds’s long tenure, it was critical that our executive pay program for 2012 be geared to attracting a new chief financial officer and retaining Mr. Reynolds and other executives who are critical to Libbey 2015, which is described below.

•

Motivational Objective.  Beginning in the fall of 2011, we undertook a comprehensive review of our company, performance and strategy. That review, which was completed during the first quarter of 2012, resulted in Libbey 2015 – our comprehensive strategy that we announced in July 2012 and that focuses on the following areas:

Ø

Maximizing our leadership position in key lines of business, including U.S. foodservice and Mexican foodservice and retail;

Ø

Increasing our profitability and improving our cash generation in Europe;

Ø

Accelerating our growth within China;

Ø

Better leveraging our manufacturing and distribution footprint; and

Ø

Continuing to drive margin expansion and cash flow generation.

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We structured our 2012 executive pay program to provide adequate financial incentives to motivate our executives to execute Libbey 2015.

•

Alignment Objective.  We structured the pay program to align the interests of our executives with those of our shareholders generally, ensuring that, if our shareholders profited, our executives also would profit.

•

Reasonableness Objective.  We designed our pay program to balance the need to provide sufficient financial incentives to achieve the three objectives described above with the need to ensure that executive pay is reasonable and appropriate.

In what forms did Libbey deliver pay to its executives in 2012, and what purposes do the various forms of pay serve?

Balanced Program with Significant Pay At Risk.  For 2012, the pay opportunities of our CEO and our other named executives 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 aligns our executives' interests with those of shareholders generally and also serves as a retention tool; and annual and long-term incentive awards that are designed to motivate our executives to execute our strategy, thereby driving our financial and operational performance. The charts below show the mix of these pay elements and reflect the substantial portions of our named executives' target pay opportunities that are at risk:

  

*

Excludes NEOs who were not employed by us at December 31, 2012; also excludes special “sign-on” awards for Ms. Buck and special retention award for Mr. Reynolds.

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The following table sets forth the forms of pay for which our executive officers were eligible in 2012, 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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How does Libbey determine the forms and amounts of executive pay?

Compensation Committee Independence.  After taking into account all factors specifically relevant to a determination as to whether any of the members of our Compensation Committee has a relationship to us that is material to his or her ability to be independent from management in connection with his or her duties as a Compensation Committee member, including, but not limited to, the source of compensation of the member and whether the member is affiliated with us or one of our subsidiaries or affiliates, our Board has determined that all of the members of our Compensation Committee are independent within the meaning established by the NYSE MKT Company Guide.

Role of Compensation Consultants.  The Compensation Committee engaged Compensation Advisory Partners LLC, which we refer to as CAP, as its independent executive compensation consultant until October 2012. In October 2012, the Committee replaced CAP with Exequity in order to develop another perspective on our executive pay program and ensure it is geared to achieving our Libbey 2015 strategy. Exequity’s retention was not due to a disagreement with CAP over its advice or services. All amounts that we incurred in 2012 for services provided by CAP and Exequity were attributable to services provided by them to the Compensation Committee in connection with its executive pay decisions.

In compliance with pending disclosure requirements set forth in the NYSE MKT Company Guide regarding the independence of compensation consultants, Exequity provided the Compensation Committee with a letter addressing each of the six independence factors. Their responses affirm the independence of Exequity and the partners, consultants, and employees who service the Compensation Committee on executive compensation matters.

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. The Compensation Committee consults with its independent executive compensation consultant when determined to be appropriate by the Compensation Committee. A representative of CAP attended the February 2012 meeting at which the Compensation Committee made decisions regarding our executive pay program for 2012 and also advised the Committee in connection with other pay decisions made during the first nine months of 2012. A representative of Exequity attended the October and December 2012 meetings of the Committee as well as the February 2013 meeting at which the Compensation Committee made decisions regarding incentive pay for 2012. Our CEO, our Vice President, Human Resources and our Vice President, General Counsel and 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, Human Resources and the Vice President, General Counsel and Secretary provide information to the Compensation Committee with respect to pay programs affecting all members of the senior leadership team.

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 senior leadership team, 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 senior leadership team.

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Process for Setting 2012 Executive Pay.  Generally the structure of our 2012 executive pay program remained the same as our 2011 executive pay program in that the components of pay, and the weight accorded each component, remained the same.

With respect to base salary increases that were implemented in April 2012, the decisions were made by the Compensation Committee at its February 2012 meeting after receiving input from Ms. Streeter and CAP. Ms. Streeter and a representative of CAP also provided input into the decisions made by the Compensation Committee in July and August 2012, including the decisions relating to Ms. Buck’s pay package, Mr. Ibele’s base salary increase and Mr. Reynolds’s special award of RSUs.

After the Committee engaged Exequity in October 2012, Exequity worked with the Committee and senior management to develop the peer group referred to under “Did Libbey use a peer group in setting 2012 executive pay?” below.

In February 2013, the Compensation Committee, with input from Ms. Streeter and Exequity, or, in the case of Ms. Streeter’s pay, Exequity and the other independent directors, reviewed our 2012 performance and made the awards under our 2012 SMIP described above under “Executive Summary — 2012 Executive Compensation Highlights.”

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

•

In February of each year, the Compensation Committee typically makes awards of RSUs and NQSOs to our senior leadership team under our long-term incentive compensation program. In February 2012, the Compensation Committee authorized these awards at its meeting, before we announced financial results for the recently concluded fiscal year. The number of RSUs awarded was a function of the average closing price of our common stock over a period of 60 consecutive trading days ending on the grant date, and the number of NQSOs granted was a function of the Black-Scholes value of the NQSOs on the grant date. In each case, the grant date was the first business day after we released our fiscal 2011 financial results.

•

In 2012, the Compensation Committee delegated authority to the Chairman of the Board to make limited grants of NQSOs, restricted stock and RSUs to senior managers and other employees who are not executive officers. The Chairman's authority to make these grants was subject to the following limitations and conditions:

•

The total number of shares that may be granted as NQSOs, restricted stock or RSUs, as the case may be, was limited;

•

The exercise price of any NQSOs that the Chairman was permitted to award could not be less than the closing price of our common stock on the date of grant;

•

Grants of NQSOs were not permitted to be made during “quiet periods”; and

•

The Chairman was required to report periodically to the Compensation Committee with respect to the awards made pursuant to this delegation of authority.

Potential Impact of Misconduct on Compensation.  Our SMIP and long-term incentive plans are authorized under our Omnibus Plan. The Omnibus Plan contains a “clawback” provision that obligates an individual receiving an award to reimburse us under certain circumstances. Specifically, reimbursement is required if:

•

we are required, as a result of misconduct, to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under the securities laws; and

•

the individual knowingly engaged, or was grossly negligent in engaging, in the misconduct, or knowingly failed, or was grossly negligent in failing, to prevent the misconduct or is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002.

The amount to be reimbursed is 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.  We obligate our non-management directors and our executive officers to achieve ownership of meaningful amounts of equity in Libbey. For further information regarding our stock ownership guidelines for non-management directors and executive officers, see “Stock Ownership — How much Libbey stock do our directors and officers own? — Stock Ownership Guidelines” above.

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Did Libbey use a peer group in setting 2012 executive pay?

We did not use a peer group as a reference point in setting executive pay between 2008 and 2012 because no other U.S. glass tableware manufacturer had multi-national operations and stock trading on a public stock exchange during that period.

However, after the Compensation Committee engaged Exequity as its advisor in October 2012, the Committee engaged Exequity to work with management to develop a peer group to use as a reference point in setting 2013 executive pay. In developing the peer group, Exequity utilized a database assembled by Equilar in connection with its survey regarding the 25 most highly compensated executive positions at participating companies. Initially, we reviewed for inclusion in the peer group public companies having revenues in the range of .5 to 2.0 times our 2011 revenues and having businesses that are engaged in manufacturing or that otherwise are asset-intensive. Because we are a multi-national manufacturer with asset-intensive operations, we eliminated from the peer group companies that do not have operations outside the U.S., companies that do not have manufacturing operations (i.e., that source substantially all of the products that they sell) and companies that merely have light assembly-type operations. As a result, we identified, and the Compensation Committee approved for use in 2013, the following group of 18 companies:

What pay did Libbey's executives receive for 2012?

Base Salaries.  In February 2012, the Compensation Committee increased annualized salaries for the named executives, as shown below, effective April 1, 2012:

  

In connection with our hiring of Ms. Buck as Vice President, Chief Financial Officer, effective August 1, 2012, the Compensation Committee approved an initial annual base salary of $350,000.

We also implemented a regional realignment as of August 1, 2012 to enable us to better serve our customers and execute our Libbey 2015 strategy. In connection with that realignment, which is further described below, Mr. Ibele became responsible for all operations and commercial activities in our U.S. and Canada sales region, including the operation of our glass manufacturing plants and distribution centers in the U.S. In order to reflect Mr. Ibele’s broadened responsibilities, the Compensation Committee approved an additional 4.1% base salary increase for Mr. Ibele, taking his annual base salary to $354,000 as of August 1, 2012.

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Annual Incentive Compensation.  Our 2012 SMIP provided each of our named executives with a target annual incentive opportunity equal to a percentage of his or her actual base salary in accordance with the following table:

  

The SMIP consisted of two components: a financial performance component and an individual performance component. Prior to August 2012, all of our named executives had global responsibilities and, as a result, payouts under the financial performance component were based on two performance measures that were to be calculated based on company-wide financial performance: (1) the ratio of actual adjusted EBITDA to budgeted EBITDA; and (2) the ratio of adjusted free cash flow to adjusted budgeted free cash flow. We selected adjusted EBITDA and adjusted free cash flow as our company-wide financial performance measures for 2012 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 value to shareholders and potential shareholders and ensure that, when we refinance our debt, we are able to do so on as favorable terms as possible.

As noted above, in August 2012, we implemented a regional realignment to enable us to better serve our customers and execute our Libbey 2015 strategy. The realignment included the appointment of general managers for three geographic regions:

•

China and Asia Pacific;

•

Europe, Middle East and Africa; and

•

The Americas, including the Mexico and Latin America region and the U.S. and Canada region.3

In order to reflect the general managers’ increased focus on their respective regions, the financial component of their respective annual incentive opportunities were modified so that, beginning August 1, 2012, the performance measures under the financial component would be allocated 50% to company-wide performance and 50% to regional performance to ensure line of sight. At that time, we did not track adjusted free cash flow on a regional basis, but we did track cash earnings (defined as adjusted EBITDA plus or minus changes in working capital⁴) on a regional basis. As a result, for the period August 1, 2012 through December 31, 2012, we substituted the ratio of actual, regional cash earnings to regional budgeted cash earnings for purposes of the financial performance component of the general managers’ respective annual incentive opportunities.

As a result, the named executives’ 2012 annual incentive opportunities comprised the following:

3

Ms. Streeter is interim general manager of the Americas region; Mr. Ibele and the general manager of the Mexico and Latin America region report to Ms. Streeter in that capacity.

4

We define working capital as inventories and accounts receivable less accounts payable.

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On February 10, 2013, the Committee met and reviewed our performance and the performance of our senior leadership team during 2012. The Committee reviewed both company-wide and regional adjusted EBITDA for 2012 and regional cash earnings for 2012, and compared them to our company-wide budgeted EBITDA (adjusted for special items) and our budgeted regional cash earnings, respectively, for the year. The Committee also considered the impact on free cash flow and EBITDA (and, as a result, cash earnings) of a number of items that we do not believe are indicative of our core operating performance. After receipt of input from Exequity and discussion, the Committee opted to adjust free cash flow and adjusted EBITDA (and, as a result, cash earnings) as follows:

Adjustments to Company-wide Free Cash Flow

Adjustments to Company-wide and U.S. and Canada Regional EBITDA (and Cash Earnings)

Add $31.1 million (all of which is attributable to company-wide performance), representing expense incurred in connection with the refinancing

Add $4.3 million (of which less than one-half is attributable to the U.S. and Canada region), representing pension settlement and curtailment charges

Add $5.2 million (of which less than one-third is attributable to the U.S. and Canada region), representing severance in connection with reductions in force

Although the 2012 SMIP initially contemplated that the Committee would apply the guidelines described in footnote 2 to the Grants of Plan-Based Awards Table and, using discretion, determine the payout amounts for each of the performance measures, management recommended to the Committee, and the Committee concurred, that the scales contemplated under the annual management incentive plan, which applied to managers below the officer level, also should be applied to participants in the 2012 SMIP. The Committee elected to apply those scales⁵ because they permitted linear interpolation between threshold, target and maximum payout levels, providing a more objective basis on which to determine payouts and ensuring that payouts under the 2012 SMIP were consistent with payouts to managers covered by the management incentive plan.

⁵ The scales actually applied by the Committee, with respect to each performance measure, were as follows:

Payout percentages between these three points are linear.

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Applying the relevant scales to the corporate and regional financial performance measures, the Committee determined that the achieved performance should drive payouts as follows:

Company-wide Financial Performance

  

U.S. and Canada Region Financial Performance

With respect to the individual performance component applicable to our named executives in 2012, the Compensation Committee approved individual objectives for each of them early in the year or, in the case of Ms. Buck, shortly after she joined Libbey. The individual objectives of Mr. Ibele were modified effective August 1, 2012 to reflect his broadened responsibilities as general manager of the U.S. and Canada region during the last five months of 2012. The individual objectives were closely tied to leadership of a variety of initiatives contemplated by our Libbey 2015 strategy.

The Committee received input from Ms. Streeter regarding the other named executives' performance with respect to their individual objectives and reviewed the performance evaluation completed by our non-management directors with respect to Ms. Streeter's performance in 2012, including her performance relative to her individual objectives.

Funding of the individual performance component of the 2012 SMIP was dependent on the extent to which we achieved budgeted, company-wide EBITDA. Having achieved adjusted, company-wide EBITDA equal to 110% of budgeted, company-wide EBITDA, funding of the individual performance components of all of our incentive plans worldwide was established at 125% of the aggregate of the target awards payable with respect to the individual performance components of those plans, and payouts under the individual performance component of our 2012 SMIP (other than payouts to Messrs. Rubio and Sellick) were adjusted accordingly.

After meeting in executive session with Exequity, the Committee determined that the respective named executives had achieved the scores and payouts shown in the table below:

(1)

Under their respective employment agreements, Messrs. Rubio and Sellick were entitled to a prorated target award under the individual performance component of the 2012 SMIP.

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As a result, the named executives earned the following total annual incentive compensation for 2012:

The amount of the annual incentive actually earned by Ms. Buck exceeded the minimum amount that we committed to pay her when she was hired.

Discretionary bonus.  In May 2012, Ms. Streeter recommended to the Committee that the Company recognize the contributions of a limited number of members of the Company’s finance and legal departments in connection with Libbey’s extremely successful refinancing. After receiving the input of CAP, the Committee authorized the payment of discretionary bonuses to these individuals in amounts up to $25,000, including to Ms. Kovach in recognition of her leadership in completing the refinancing.

Long-Term Performance-Based Compensation.  In 2012, each named executive's long-term incentive opportunity included a cash-based performance component and an award of NQSOs and RSUs. The long-term incentive opportunity is intended to have an aggregate economic value equal to a target percentage of the executive's base salary. The following table sets forth the target percentage for each of the named executives in 2012:

During 2012, the cash-based performance opportunity provided to our named executives for performance during 2012 consisted of the following components:

•

A performance component under our 2010 LTIP that provides for cash awards if and to the extent we achieve, over a three-year performance cycle beginning January 1, 2010 and ending December 31, 2012, cumulative EBITDA (adjusted as described below) equal to the sum of EBITDA budgeted for each of the three years during the performance cycle.

•

A performance component under our 2011 LTIP that provides for cash awards if and to the extent we achieve, over a three-year performance cycle beginning January 1, 2011 and ending December 31, 2013, cumulative EBITDA (adjusted as described below) equal to the sum of EBITDA budgeted for each of the three years during the performance cycle.

•

A performance component under our 2012 LTIP that provides for cash awards if and to the extent we achieve, over a three-year performance cycle beginning January 1, 2012 and ending December 31, 2014, cumulative EBITDA (adjusted as described below) equal to the sum of EBITDA budgeted for each of the three years during the performance cycle.

For purposes of determining the extent to which the cash award is earned, EBITDA is calculated and adjusted as described under the heading “ — Annual Incentive Compensation” above and may be further adjusted to take into account the impact of any

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acquisition or disposition with respect to which EBITDA for the business that is acquired or sold, as the case may be, exceeds $5.0 million. For the 2012 fiscal year included in the 2010 – 2012, 2011 – 2013 and 2012 – 2014 performance cycles, EBITDA will be adjusted by the items identified under the Adjustments to EBITDA (and Cash Earnings) table on page 31 above.

In February 2013, the Compensation Committee reviewed our performance for the three-year performance cycle ended December 31, 2012 and determined that we had achieved 103.5% of budgeted adjusted EBITDA for that period.⁶ Accordingly, the Compensation Committee authorized payments to the participants in the 2010 LTIP in an amount equal to 117.5% of their respective target awards. As a result, the named executives received payouts in the following amounts:

  

Stock Options and RSUs.  In February 2012, the Compensation Committee awarded to participants in our 2012 LTIP (other than Ms. Buck) NQSOs and RSUs (each subject to four-year vesting) having an economic value at the time of award equal to 20% and 40%, respectively, of their target long-term incentive opportunities. In August 2012, when Ms. Buck joined Libbey, the Committee awarded to her NQSOs and RSUs subject to four-year vesting and having an economic value at the time of award equal to 20% and 40%, respectively, of her long-term incentive opportunity. In addition, the Committee awarded Ms. Buck 10,000 RSUs subject to four-year vesting and 15,750 NQSOs subject to cliff vesting on August 1, 2016. The additional RSU and NQSO awards were intended to replace compensation that Ms. Buck forfeited when she left Whirlpool Corporation to join us. Finally, on August 1, 2012, the Committee awarded Mr. Reynolds 36,000 RSUs with two-year vesting to reward him for postponing his retirement, assisting in Ms. Buck’s transition into her new role and establishing the Strategy Program Management Office.

What is the Compensation Committee's policy regarding deductibility of compensation?

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 executives 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?”

Potential Payments Upon Termination or Change in Control

We have employment agreements with each of our named executives other than Ms. Buck and Mr. Reynolds. Ms. Buck is a party to a change in control agreement that provides for payments under the circumstances described below in the event of termination of employment in connection with a change in control. In addition, under our Executive Severance Policy, Ms. Buck is entitled to certain separation benefits in the event of termination of employment in the absence of a change in control, and Mr.

6

The scale applied to determine this payout is as follows:

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Reynolds is entitled to certain separation benefits in the event of termination regardless of whether a change in control has occurred. Finally, the terms of award agreements pursuant to which awards of some RSUs and NQSOs were made provide for acceleration of unvested equity in the event of termination of employment in connection with a change in control.

The following tables summarize the trigger events under which payments may be made and/or other benefits provided under these agreements or plans, the material payments or benefits to be provided, the conditions to our obligations to make the payments and/or provide the benefits, and the reasons why we believe that the provision of these payments and/or benefits is appropriate under the circumstances described.

Employment Agreements (applicable to named executives other than Ms. Buck and Mr. Reynolds) — 

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(1)

The benefits set forth in this column are payable upon the occurrence of the corresponding “triggers” identified in the “Triggers” column.

(2)

Includes base salary through date of termination, earned but unpaid vacation pay as of the date of termination, any amounts to which the executive is entitled under any retirement savings plan, equity participation plan, medical benefit plan or employment policy and any incentive compensation earned but not yet paid for a performance period ended prior to the date of termination.

(3)

Cause means (a) willful and continuous failure to substantially perform duties; (b) willful and continuous failure to substantially follow and comply with directives of the Board; (c) commission of an act of fraud or dishonesty that results in a material adverse effect on us or commission of an act in material violation of our Code of Business Ethics and Conduct; or (d) willful, illegal conduct or gross misconduct that is materially and demonstrably injurious to us.

(4)

Good reason means (a) we materially diminish the executive's authority, duties or responsibilities, including, in the case of Ms. Streeter, we remove her from the CEO position and/or we cause her to cease reporting directly to the Board, and in the case of the Company's general counsel, we cause her to cease reporting directly to the CEO; (b) we reduce the executive's base salary and, in the case of all executives other than Ms. Streeter, we do not apply the reduction in the same or similar manner to specified other executive officers; (c) we reduce the executive's incentive compensation opportunity by a percentage greater than that applicable to the other executive officers; (d) we reduce or eliminate an executive benefit or an employee benefit and we do not apply the reduction to all other officers in the same or similar manner; (e) in the case of Ms. Streeter, she fails to be elected as a member of the Board; (f) we materially breach the agreement and fail to remedy the breach within 60 days (30 days in the case of Ms. Streeter) after our receipt from the executive of written notice of breach; and (g) in the case of all executive officers other than Ms. Streeter, we exercise our right not to renew the agreement unless we concurrently exercise our right not to renew the agreements of specified other executive officers.

(5)

To the extent Internal Revenue Code Section 409A imposes a six-month delay on issuance of the shares underlying RSUs with respect to which vesting is accelerated, the shares are delivered to the executive on the first day of the seventh month after the executive’s employment is terminated.

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(6)

If we terminate the executive’s employment without cause or the executive terminates his or her employment for good reason and the termination is not in connection with a change in control, then, generally speaking, the cash payments will be made in the form of salary continuation in accordance with our normal payroll practices. To the extent Internal Revenue Code Section 409A imposes a six-month delay on payment, the first installment will be made on the first day of the seventh month after termination and will represent payment for the first six months of severance, and the remaining payments will begin on the first payroll date in the seventh month.

(7)

Amounts paid under the cash component of the LTIP will be paid between January 1 and March 15 of the year following the end of the relevant performance cycle.

(8)

Change in control generally means any of the following events:

•

A person (other than Libbey, any trustee or other fiduciary holding securities under one of our employee benefit plans, or any corporation owned, directly or indirectly, by our shareholders in substantially the same proportions as their ownership of our common stock) becomes the “beneficial owner,” directly or indirectly, of our securities representing 30% or more of the combined voting power of our then-outstanding securities;

•

The consummation of a merger or consolidation pursuant to which we are merged or consolidated with any other corporation (or other entity), unless our voting securities outstanding immediately prior to the merger or consolidation continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 66 2/3% of the combined voting power of securities of the surviving entity outstanding immediately after the merger or consolidation;

•

A plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of our assets is consummated; or

•

During any period of two consecutive years (not including any period prior to the execution of the agreement), Continuing Directors (as defined below) cease for any reason to constitute at least a majority of our Board. Continuing Directors means (i) individuals who were members of the Board at the beginning of the two-year period referred to above and (ii) any individuals elected to the Board, after the beginning of the two-year period referred to above, by a vote of at least  2/3 of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously approved in accordance with this provision. However, an individual who is elected to the Board after the beginning of the two-year period referred to above will not be considered to be a Continuing Director if the individual was designated by a person who has entered into an agreement with us to effect a transaction that otherwise meets the definition of a change in control.

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.

(9)

If we terminate the executive’s employment without cause or the executive terminates his or her employment for good reason in connection with a change in control, then, generally speaking, the cash payments will be made in a lump sum on the first day of the seventh month after termination.

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Executive Severance Policy (applicable to Ms. Buck and Mr. Reynolds) — 

(1)

Salary continuation will be paid in accordance with our normal payroll practices. To the extent that Internal Revenue Code Section 409A imposes a six-month delay on payment, the first installment will be made on the first day of the seventh month after termination and will represent payment for the first six months of severance, and the remaining payments will begin on the first payroll date in the seventh month.

(2)

Cause means (a) willful and continuous failure to substantially perform duties; (b) willful and continuous failure to substantially follow and comply with directives of the Board; (c) commission of an act of fraud or dishonesty that causes harm to the Company; (d) failure to comply with a material policy of the Company or with our Code of Ethics; (e) breach of any material obligation under any written agreement between the executive and the Company; (f) willful, illegal conduct or gross misconduct that causes harm to the Company; or (g) conviction of a misdemeanor or felony that is directly related to the executive’s position with the Company or indicates that the executive is unsuitable for his or her position.

(3)

Includes base salary through date of termination, earned but unpaid vacation pay as of the date of termination, any amounts to which the executive is entitled under any retirement savings plan, equity participation plan, medical benefit plan or employment policy and any incentive compensation earned but not yet paid for a performance period ended prior to the date of termination.

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Change in Control Agreement (applicable to Ms. Buck) — 

(1)

To the extent Internal Revenue Code Section 409A imposes a six-month delay on payment, the lump-sum payment will be made on the first day of the seventh month after termination.

(2)

Cause means (a) willful and continuous failure to substantially perform duties; (b) willful and continuous failure to substantially follow and comply with directives of the Board; (c) commission of an act of fraud or dishonesty that causes

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harm to the Company; (d) material failure to comply with our Code of Ethics or other Company policy; (e) material breach of a material obligation under a written agreement between the executive and the Company; and (f) willful, illegal conduct or gross misconduct that causes harm to the Company.

(3)

Change in control generally means any of the following events:

•

A person (other than Libbey, any trustee or other fiduciary holding securities under one of our employee benefit plans, or any corporation owned, directly or indirectly, by our shareholders in substantially the same proportions as their ownership of our common stock) becomes the “beneficial owner,” directly or indirectly, of our securities representing 30% or more of the combined voting power of our then-outstanding securities;

•

The consummation of a merger or consolidation pursuant to which we are merged or consolidated with any other corporation (or other entity), unless our voting securities outstanding immediately prior to the merger or consolidation continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 66 2/3% of the combined voting power of securities of the surviving entity outstanding immediately after the merger or consolidation;

•

A plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of our assets is consummated; or

•

During any period of two consecutive years (not including any period prior to the execution of the agreement), Continuing Directors (as defined below) cease for any reason to constitute at least a majority of our Board. Continuing Directors means (i) individuals who were members of the Board at the beginning of the two-year period referred to above and (ii) any individuals elected to the Board, after the beginning of the two-year period referred to above, by a vote of at least  2/3 of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously approved in accordance with this provision. However, an individual who is elected to the Board after the beginning of the two-year period referred to above will not be considered to be a Continuing Director if the individual was designated by a person who has entered into an agreement with us to effect a transaction that otherwise meets the definition of a change in control.

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.

(4)

Includes base salary through date of termination, earned but unpaid vacation pay as of the date of termination, any amounts to which the executive is entitled under any retirement savings plan, equity participation plan, medical benefit plan or employment policy and any incentive compensation earned but not yet paid for a performance period ended prior to the date of termination.

(5)

Shares underlying RSUs with respect to which vesting is accelerated are delivered to the executive on the first day of the seventh month after the executive’s employment is terminated.

Compensation Committee Interlocks and Insider Participation

Carlos V. Duno, Deborah G. Miller, Carol B. Moerdyk and John C. Orr served on our Compensation Committee during 2012. None of Mr. Duno, Ms. Miller, Ms. Moerdyk or Mr. Orr has been an officer or employee of Libbey or its subsidiaries.

Compensation Committee Report

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 approved the inclusion of the Compensation Discussion and Analysis in this proxy statement and has approved the incorporation by reference of the Compensation Discussion and Analysis in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

1

Not a member of the Compensation Committee for 2013.

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Summary Compensation Table

The following narrative and tables describe the “total compensation” earned during 2012 and 2011 by Ms. Streeter; during 2012, 2011 and 2010 by Messrs. Ibele, Reynolds, Rubio and Sellick; and during 2012 by Ms. Buck, Ms. Kovach and Mr. Paige.

The total compensation presented below does not reflect the actual pay received by, or the target pay of, the named executives in 2012, 2011 or 2010. The actual value realized by our named executives in 2012 from NQSOs and RSUs is presented in the Option Exercises and Stock Vested Table below. Target annual and long-term incentive awards for 2012 are presented in the Grants of Plan-Based Awards Table below.

SUMMARY COMPENSATION TABLE

(1)

As to Ms. Buck for 2012, represents her minimum guaranteed award under our 2012 SMIP; the balance of Ms. Buck's award under our 2012 SMIP is included under the “Nonequity Incentive Plan Compensation” column. As to Ms. Kovach in 2012, represents a special award made in May 2012 in recognition of leadership relating to our 2012 refinancing. As to Ms. Streeter for 2011, represents the sum of (a) her minimum guaranteed incentive in the amount of $315,000 and (b) a discretionary award in the amount of $25,000.

(2)

Represents the grant date fair value, in accordance with FASB ASC Topic 718, with respect to RSUs granted in 2012, 2011 and 2010, respectively. With respect to the awards made in 2010 and 2011, as well as the awards made in February 2012 and the award made to Ms. Buck in August 2012, these awards vest ratably over a four-year period from the date of grant. With respect to the award made to Mr. Reynolds in August 2012, 50% of the shares are scheduled to vest on each of January 2, 2014 and January 2, 2015, subject in each case to the satisfaction of certain retention requirements. Upon termination of employment, Messrs. Rubio and Sellick forfeited their awards to the extent of the portion scheduled to vest after the first anniversary of their respective dates of termination. For more information, see Footnote 12, “Employee Stock Benefit Plans,” to the consolidated financial statements included in our Annual Report on Form 10-K filed with the