10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-12084

Libbey Inc.

(Exact name of registrant as specified in its charter)

Delaware	34-1559357
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

300 Madison Avenue, Toledo, Ohio 43604
(Address of principal executive offices) (Zip Code)

419-325-2100
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o      Accelerated Filer þ       Non-Accelerated Filer o

Indicate by check mark whether the registrant is a shell company. Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value — 14,532,666 shares at July 31, 2007.

TABLE OF CONTENTS

Certification

Certification

Certification

Certification

 EX-10.6

 EX-10.7

 EX-10.8

 EX-10.9

 EX-31.1

 EX-31.2

 EX-32.1

 EX-32.2

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying unaudited condensed consolidated financial statements of Libbey Inc. and all majority-owned subsidiaries (collectively, Libbey or the Company) have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Item 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. Generally Accepted Accounting Principles (U.S. GAAP) for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month and six-month periods ended June 30, 2007, are not necessarily indicative of the results that may be expected for the year ended December 31, 2007.

The balance sheet at December 31, 2006, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

3

LIBBEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per-share amounts)

(unaudited)

	Three months ended June 30,
	2007		2006
Net sales	$	207,123	$	157,998
Freight billed to customers		549		926
Total revenues		207,672		158,924
Cost of sales		163,483		130,752
Gross profit		44,189		28,172
Selling, general and administrative expenses		23,667		19,696
Special charges		—		12,587
Income (loss) from operations		20,522		(4,111	)
Equity earnings — pretax		—		921
Other income (expense)		639		(907	)
Earnings (loss) before interest, income taxes and minority interest		21,161		(4,097	)
Interest expense		16,429		10,200
Income (loss) before income taxes and minority interest		4,732		(14,297	)
Provision (benefit) for income taxes		776		(4,720	)
Income (loss) before minority interest		3,956		(9,577	)
Minority interest		—		8
Net income (loss)	$	3,956	$	(9,569	)
Net income (loss) per share:
Basic	$	0.27	$	(0.68	)
Diluted	$	0.27	$	(0.68	)
Dividends per share	$	0.025	$	0.025

See accompanying notes

4

LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per-share amounts)
(unaudited)

	Six months ended June 30,
	2007			2006
Net sales	$	386,619		$	292,864
Freight billed to customers		1,024			1,383
Total revenues		387,643			294,247
Cost of sales		311,039			243,929
Gross profit		76,604			50,318
Selling, general and administrative expenses		45,701			38,782
Special charges		—			12,587
Income (loss) from operations		30,903			(1,051	)
Equity earnings — pretax		—			1,986
Other income (expense)		2,484			(511	)
Earnings before interest, income taxes and minority interest		33,387			424
Interest expense		31,993			13,809
Income (loss) before income taxes and minority interest		1,394			(13,385	)
Benefit for income taxes		(808	)		(4,419	)
Income (loss) before minority interest		2,202			(8,966	)
Minority interest		—			(88	)
Net income (loss)	$	2,202		$	(9,054	)
Net income (loss) per share:
Basic	$	0.15		$	(0.64	)
Diluted	$	0.15		$	(0.64	)
Dividends per share	$	0.05		$	0.05

See accompanying notes

5

LIBBEY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share amounts)

	June 30, 2007			December 31, 2006
	(unaudited)
ASSETS
Current assets:
Cash and equivalents	$	15,576		$	41,766
Accounts receivable — net		109,822			100,230
Inventories — net		175,169			159,123
Deferred taxes		4,120			4,120
Prepaid and other current assets		6,730			15,605
Total current assets		311,417			320,844
Other assets:
Repair parts inventories		13,467			9,279
Software — net		4,869			4,704
Deferred taxes		13,096			6,974
Other assets		14,002			17,717
Purchased intangible assets — net		30,842			31,492
Goodwill — net		175,782			174,880
Total other assets		252,058			245,046
Property, plant and equipment — net		317,979			312,241
Total assets	$	881,454		$	878,131
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Notes payable	$	1,381		$	226
Accounts payable		65,359			67,493
Salaries and wages		21,856			28,679
Accrued liabilities		52,570			47,622
Pension liability (current portion)		1,389			1,389
Nonpension postretirement benefits (current portion)		3,252			3,252
Derivative liability		2,038			4,132
Payable to Vitro		19,704			—
Long-term debt due within one year		794			794
Total current liabilities		168,343			153,587
Long-term debt		491,142			490,212
Pension liability		80,105			77,174
Nonpension postretirement benefits		37,839			38,495
Payable to Vitro		—			19,673
Other long-term liabilities		8,952			11,140
Total liabilities		786,381			790,281
Shareholders’ equity:
Common stock, par value $.01 per share, 50,000,000 shares authorized, 18,692,630 shares issued (18,689,710 in 2006)		187			187
Capital in excess of par value (includes warrants of $1,034, based on 485,309 shares as of June 30, 2007 and as of December 31, 2006)		291,965			303,381
Treasury stock, at cost, 4,164,681 shares (4,358,175 shares in 2006)		(114,893	)		(129,427	)
Retained deficit		(38,799	)		(40,282	)
Accumulated other comprehensive loss		(43,387	)		(46,009	)
Total shareholders’ equity		95,073			87,850
Total liabilities and shareholders’ equity	$	881,454		$	878,131

See accompanying notes

6

LIBBEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

	Three months ended June 30,
	2007			2006
Net income (loss)	$	3,956		$	(9,569	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		10,710			8,206
Equity earnings — net of tax		—			(546	)
Gain on asset sales		(6	)		—
Change in accounts receivable		(10,064	)		(2,722	)
Change in inventories		(7,475	)		1,134
Change in accounts payable		1,514			(7,977	)
Special charges		18			19,788
Pension & nonpension postretirement benefits		(350	)		4,564
Income taxes		1,032			2,802
Other operating activities		5,027			(103	)
Net cash provided by operating activities		4,362			15,577
Investing activities:
Additions to property, plant and equipment		(12,833	)		(12,817	)
Proceeds from asset sales and other		(116	)		—
Business acquisition and related costs, less cash acquired		—			(77,571	)
Net cash used in investing activities		(12,949	)		(90,388	)
Financing activities:
Net revolving credit facility activity		—			(160,505	)
Net ABL credit facility activity		(5,170	)		43,038
Other net borrowings (repayments)		1,187			(72,995	)
Note payments		—			(100,000	)
Note proceeds		—			399,840
Debt financing fees		—			(14,356	)
Dividends		(360	)		(352	)
Other		—			195
Net cash (used in) provided by financing activities		(4,343	)		94,865
Effect of exchange rate fluctuations on cash		109			105
(Decrease) increase in cash		(12,821	)		20,159
Cash at beginning of period		28,397			6,502
Cash at end of period	$	15,576		$	26,661
Supplemental disclosure of cash flows information:
Cash paid during the period for interest	$	20,145		$	7,364
Cash paid (net of refunds received) during the period for income taxes	$	239		$	(417	)

See accompanying notes

7

LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)

	Six months ended June 30,
	2007			2006
Net income (loss)	$	2,202		$	(9,054	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		19,926			16,541
Equity earnings — net of tax		—			(1,378	)
Gain on asset sales		(1,575	)		—
Change in accounts receivable		(7,660	)		4,516
Change in inventories		(15,378	)		2,922
Change in accounts payable		(2,755	)		(15,312	)
Special charges		(781	)		18,924
Pension & nonpension postretirement benefits		2,237			6,203
Income taxes		(3,513	)		(5,244	)
Other operating activities		11,622			2,257
Net cash provided by operating activities		4,325			20,375
Investing activities:
Additions to property, plant and equipment		(22,626	)		(34,256	)
Proceeds from asset sales and other		1,953			—
Business acquisition and related costs, less cash acquired		—			(77,571	)
Net cash used in investing activities		(20,673	)		(111,827	)
Financing activities:
Net revolving credit facility activity		—			(147,142	)
Net ABL credit facility activity		(30,578	)		43,038
Other net borrowings (repayments)		21,280			(66,106	)
Note payments		—			(100,000	)
Note proceeds		—			399,840
Debt financing fees		—			(14,356	)
Dividends		(719	)		(703	)
Other		—			195
Net cash (used in) provided by financing activities		(10,017	)		114,766
Effect of exchange rate fluctuations on cash		175			105
(Decrease) increase in cash		(26,190	)		23,419
Cash at beginning of period		41,766			3,242
Cash at end of period	$	15,576		$	26,661
Supplemental disclosure of cash flows information:
Cash paid during the period for interest	$	21,031		$	9,345
Cash paid (net of refunds received) during the period for income taxes	$	1,774		$	5,852

See accompanying notes

8

LIBBEY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except per share data

(unaudited)

1. Description of the Business

Libbey is the leading producer of glass tableware products in the Western Hemisphere, in addition to supplying to key markets throughout the world. With Libbey’s roots dating back to 1818, we have the largest manufacturing, distribution and service network among North American glass tableware manufacturers. We design and market an extensive line of high-quality glass tableware, ceramic dinnerware, metal flatware, hollowware and serveware, and plastic items to a broad group of customers in the foodservice, retail, business-to-business and industrial markets. We own and operate two glass tableware manufacturing plants in the United States as well as glass tableware manufacturing plants in the Netherlands, Portugal, China and Mexico. We also own and operate a ceramic dinnerware plant in New York and a plastics plant in Wisconsin. In addition, we import products from overseas in order to complement our line of manufactured items. The combination of manufacturing and procurement allows us to compete in the global tableware market by offering an extensive product line at competitive prices.

Our website can be found at www.libbey.com. We make available, free of charge, at this website all of our reports filed or furnished pursuant to Section 13(a) or 15(d) of Securities Exchange Act of 1934, including our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, as well as amendments to those reports. These reports are made available on the website as soon as reasonably practicable after their filing with, or furnishing to, the Securities and Exchange Commission.

2. Significant Accounting Policies

See our Form 10-K for the year ended December 31, 2006 for a description of significant accounting policies not listed below.

Basis of Presentation

The Condensed Consolidated Financial Statements include Libbey Inc. and its majority-owned subsidiaries (collectively, Libbey or the Company). Our fiscal year end is December 31st. Prior to June 16, 2006, we recorded our 49 percent interest in Crisa using the equity method. On June 16, 2006, we acquired the remaining 51 percent of Crisa; as a result, effective that date Crisa’s results are included in the Condensed Consolidated Financial Statements. Prior to October 13, 2006, we owned 95 percent of Crisal-Cristalaria Automatica S.A. (Crisal). The 5 percent equity interest of Crisal that we did not own prior to October 13, 2006 is shown as minority interest in the Condensed Consolidated Financial Statements. On October 13, 2006, we acquired the remaining 5 percent of Crisal. All material intercompany accounts and transactions have been eliminated. The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ materially from management’s estimates.

Condensed Consolidated Statements of Operations

Net sales in our Condensed Consolidated Statements of Operations include revenue earned when products are shipped and title and risk of loss have passed to the customer. Revenue is recorded net of returns, discounts and incentives offered to customers. Cost of sales includes cost to manufacture and/or purchase products, warehouse, shipping and delivery costs, royalty expense and other costs.

Foreign Currency Translation

Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive loss. Income and expense accounts are translated at average exchange rates during the year. Translation adjustments are recorded in other income (expense), where the U.S. dollar is the functional currency.

9

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax attribute carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. FAS No. 109, “Accounting for Income Taxes,” requires that a valuation allowance be recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Deferred tax assets and liabilities are determined separately for each tax jurisdiction in which we conduct our operations or otherwise incur taxable income or losses. In the United States, we have recorded a net deferred tax asset. Losses before income taxes have been incurred in recent years and, though the risk of not realizing the net deferred tax asset exists, we believe it is more likely than not that the net deferred tax asset will be realized through loss carry backs and the effects of tax planning.

Stock-Based Compensation Expense

We account for stock-based compensation in accordance with SFAS No. 123-R, “Accounting for Stock-Based Compensation,” (“SFAS No. 123-R”). Share-based compensation cost is measured based on the fair value of the equity instruments issued. SFAS No. 123-R applies to all of our outstanding unvested share-based payment awards as of January 1, 2006, and all prospective awards using the modified prospective transition method without restatement of prior periods. Stock-based compensation expense charged to the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2007 was $1.0 million and $1.6 million, respectively. The stock-based compensation expense charged to the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2006 was $0.1 million and $0.3 million, respectively.

New Accounting Standards

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109,” (“FIN 48”). FIN 48 is effective for the first interim or annual reporting period for the first fiscal year beginning on or after December 15, 2006. On January 1, 2007, we adopted FIN 48. FIN 48 clarified the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 applies to all tax positions for income taxes accounted for in accordance with SFAS No. 109, “Accounting for Income Taxes.” See Note 7 for the impact of applying the provisions of FIN 48.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure about fair value measurements. This statement clarifies how to measure fair value as permitted under other accounting pronouncements but does not require any new fair value measurements. However, for some companies, the application of this statement will change current practice. We will be required to adopt SFAS No. 157 as of January 1, 2008. We are currently evaluating the impact that SFAS No. 157 will have on our consolidated results of operations and financial condition.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of SFAS No. 115, which is effective for fiscal years beginning after November 15, 2007. This statement permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. We are currently evaluating the potential impact of this statement on our consolidated results of operations and financial condition.

Reclassifications

Certain amounts in the prior year’s financial statements have been reclassified to conform to the presentation used in the current year financial statements.

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3. Balance Sheet Details

The following table provides detail of selected balance sheet items:

	June 30, 2007		December 31, 2006
Accounts receivable:
Trade receivables	$	101,526	$	94,490
Other receivables		8,296		5,740
Total accounts receivable, less allowances of $11,857 and $11,507	$	109,822	$	100,230
Inventories:
Finished goods	$	164,279	$	147,423
Work in process		4,384		3,881
Raw materials		5,273		4,922
Operating supplies		1,233		2,897
Total inventories	$	175,169	$	159,123
Prepaid and other current assets:
Prepaid expenses	$	3,368	$	7,088
Prepaid income taxes		3,362		8,517
Total prepaid and other current assets	$	6,730	$	15,605
Other assets:
Deposits	$	813	$	1,069
Finance fees — net of amortization		12,800		14,275
Other		389		2,373
Total other assets	$	14,002	$	17,717
Accrued liabilities:
Accrued incentives	$	22,770	$	15,341
Workers compensation		9,298		10,008
Medical liabilities		2,395		2,539
Interest		3,631		5,519
Commissions payable		1,421		1,539
Accrued liabilities		13,055		12,676
Total accrued liabilities	$	52,570	$	47,622
Other long-term liabilities:
Deferred liability	$	1,232	$	754
Other		7,720		10,386
Total other long-term liabilities	$	8,952	$	11,140

4. Acquisitions

On June 16, 2006, we purchased from Vitro, S.A. de C.V. the remaining 51 percent of the shares of Vitrocrisa Holding, S. de R.L. de C.V. and related companies (Crisa), located in Monterrey, Mexico, that we did not previously own. The purchase price was $80.0 million in addition to $4.9 million of acquisition costs. In addition, we refinanced approximately $71.9 million of Crisa’s existing indebtedness, $23.0 million of which we guaranteed prior to our purchase of the remaining 51 percent of the shares of Crisa. In connection with the acquisition, Crisa transferred to Vitro the pension liability for Crisa employees who had retired as of the closing date. Vitro also agreed to forgive $0.4 million of net intercompany payables owed to it and to defer receipt of approximately $9.4 million of net intercompany payables until August 15, 2006, and approximately $19.7 million of net intercompany payables until January 15, 2008. In addition, Vitro waived its right to receive profit sharing payments of approximately $1.3 million from Libbey under the now-terminated distribution agreement. Crisa transferred to Vitro real estate (land and buildings) on which one of Crisa’s two manufacturing facilities is located, but Crisa retained the right to occupy the facility transferred to Vitro for up to three years. Concurrently, Vitro transferred to Crisa ownership of the land on which a leased, state-of-the-art distribution center is located, along

11

with racks and conveyors that Crisa leased from an affiliate of Vitro. Also, Vitro agreed not to compete with Crisa anywhere in the world (with limited exceptions) for five years.

Crisa is one of the largest glass tableware manufacturers in Latin America and has a significant percentage of the glass tableware market in Mexico. This acquisition is consistent with our strategy to expand our manufacturing platform into low-cost countries in order to become a more cost-competitive source of high-quality glass tableware.

In establishing the opening balance sheet under step acquisition accounting, we recorded 49 percent of the historical book value of the assets acquired and liabilities assumed of Crisa due to our existing 49 percent ownership of Crisa, and 51 percent of the fair values of the assets acquired and liabilities assumed as of the date of acquisition. The following is a summary of 51 percent of the assigned fair values of the assets acquired and liabilities assumed as of the date of acquisition.

Current assets and other assets	$	40,639
Property, plant and equipment		37,190
Intangible assets		21,675
Goodwill		56,115
Total assets acquired		155,619
Less liabilities assumed:
Current liabilities		42,181
Long-term liabilities		28,547
Total liabilities assumed		70,728
Cash purchase price, including acquisition costs		84,891
Less: Cash acquired		6,429
Cash purchase price, net of cash acquired	$	78,462

The purchase price allocation for the Crisa acquisition has been finalized during the second quarter 2007. The primary changes relate to the initial restructuring cost estimates and estimated tax receivables. The impact of these items did not materially change the initial purchase price allocation from December 31, 2006.

The following table is a summary of the goodwill associated with the excess of the purchase price over the fair value of assets acquired and liabilities assumed as a result of the purchase price allocation. This table provides the details for 100 percent of the goodwill created by the purchase of the remaining 51 percent interest in Crisa, which is included in the North American Glass reporting segment:

Inferred Enterprise purchase price ($80.0 million divided by 51%)	$	156,863
Less: assets received/liabilities forgiven		(4,457	)
Add: acquisition costs		4,891
Add: adjustment to reflect 49% of inferred purchase price to actual		1,855
Aggregate enterprise purchase price		159,152
Add: fair value liabilities assumed		156,256
Less: fair value assets acquired		(189,946	)
Total enterprise goodwill	$	125,462

Intangible assets acquired of approximately $21.7 million consist of trademarks and trade names, patented technologies, customer lists and non-compete covenants. The patented technologies, customer lists and non-compete covenants are being amortized over an average life of 7.7 years. Amortization of these intangible assets was $0.3 million and $0.5 million for the three and six months ended June 30, 2007, respectively. Amortization of these intangible assets was not material for the period ended June 30, 2006. Trademarks and trade names are valued at approximately $8.9 million and are not subject to amortization.

Crisa’s results of operations are included in our Condensed Consolidated Financial Statements starting June 16, 2006. Prior to June 16, 2006, 49 percent of Crisa’s earnings were accounted for under the equity method.

In connection with the acquisition, we announced plans in June 2006 to consolidate Crisa’s two principal manufacturing facilities into a single facility in order to reduce fixed costs. As a result, we recognized charges of approximately $18.9 million in 2006, representing our existing 49 percent indirect ownership interest in the fixed assets related to the facility closed and the inventory related to product lines discontinued. For the additional 51 percent ownership interest acquired, the write down of the fixed assets and inventory was included in the purchase price allocation. In addition, a $3.2 million reserve for statutory severance for approximately 650 hourly employees of Crisa was recognized as additional acquisition cost in accordance with Emerging Issues Task Force No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination”.

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The pro forma unaudited results of operations for the three month and six month periods ended June 30, 2006, assuming we consummated the acquisition of Crisa as of January 1, 2006, are as follows:

	Three months ended			Six months ended
	June 30, 2006			June 30, 2006
Net sales	$	191,291		$	366,936
Earnings before interest and taxes	$	1,263		$	12,125
Net income	$	(7,508	)	$	(4,331	)
Net income per share:
Basic	$	(0.53	)	$	(0.30	)
Diluted	$	(0.53	)	$	(0.30	)
Depreciation and amortization	$	10,849		$	22,238

5. Borrowings

Our borrowings, prior to the refinancing consummated on June 16, 2006, consisted of a revolving credit and swing line facility permitting borrowings up to an aggregate total of $195.0 million, $100.0 million of privately placed senior notes, a $2.7 million promissory note in connection with the purchase of our Laredo, Texas warehouse, a euro-based working capital line for a maximum of €10.0 million, and other borrowings including the RMB Loan Contract described below and other debt related to Crisal.

On June 16, 2006, Libbey Glass Inc. issued, pursuant to private offerings, $306.0 million aggregate principal amount of floating rate senior secured notes (Senior Notes) and $102.0 million aggregate principal amount of senior subordinated secured pay-in-kind notes (PIK Notes), both due 2011. Concurrently, Libbey Glass Inc. entered into a new $150 million Asset Based Loan facility (ABL Facility) expiring in 2010.

Proceeds from these transactions were used immediately to repay existing bank and private placement indebtedness. In addition, proceeds were used for the acquisition of the remaining 51 percent equity interest in Crisa, for $80.0 million, bringing our ownership of Crisa to 100 percent; for repayment of existing Crisa indebtedness of approximately $71.9 million; and for related fees, expenses and redemption premiums of Libbey and Crisa.

Borrowings consist of the following:

					June 30,		December 31,
	Interest Rate			Maturity Date	2007		2006
Borrowings under ABL facility	floating			December 16, 2010	$	16,170	$	46,210
Senior notes	floating (1)			June 1, 2011		306,000		306,000
PIK notes (2)		16.00	%	December 1, 2011		118,238		109,480
Promissory note		6.00	%	July 2007 to September 2016		1,909		1,985
Notes payable	floating			July 2007		1,381		226
RMB loan contract	floating			July 2012 to January 2014		32,875		32,050
RMB working capital loan	floating			March 2010		6,575		—
Obligations under capital leases	floating			July 2007 to May 2009		1,238		1,548
BES Euro line	floating			January 2010 to January 2014		14,603		—
Other debt	floating			September 2009		1,650		1,954
Total borrowings						500,639		499,453
Less — unamortized discounts and warrants						7,322		8,221
Total borrowings — net						493,317		491,232
Less — current portion of borrowings						2,175		1,020
Total long-term portion of borrowings — net					$	491,142	$	490,212

(1)	See Interest Rate Protection Agreements below
(2)	Additional PIK notes were issued on June 1, 2007 in exchange for payment of the semi-annual interest. During the first three years, interest is payable by the issuance of additional PIK notes.

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ABL Facility

The ABL Facility is with a group of six banks and provides for a revolving credit and swing line facility permitting borrowings for Libbey Glass and Libbey Europe up to an aggregate of $150.0 million, with Libbey Europe’s borrowings being limited to $75.0 million. Borrowings under the ABL Facility mature December 16, 2010. Swing line borrowings are limited to $15.0 million, with swing line borrowings for Libbey Europe being limited to €7.5 million. Swing line U.S. dollar borrowings bear interest calculated at the prime rate plus the Applicable Rate for ABR (Alternate Base Rate) Loans, and euro-denominated swing line borrowings (Eurocurrency Loans) bear interest calculated at the Netherlands swing line rate, as defined in the ABL Facility. The Applicable Rates for ABR Loans and Eurocurrency Loans vary depending on our aggregate remaining availability. The Applicable Rates for ABR Loans and Eurocurrency Loans were 0 percent and 1.75 percent, respectively, at June 30, 2007. There were no Libbey Glass borrowings under the facility at June 30, 2007, while Libbey Europe had outstanding borrowings of $16.2 million at June 30, 2007, at an interest rate of 6.13 percent.

All borrowings under the ABL Facility are secured by a first priority security interest in (i) substantially all assets of (a) Libbey Glass and (b) substantially all of Libbey Glass’s present and future direct and indirect domestic subsidiaries, (ii) (a) 100 percent of the stock of Libbey Glass, (b) 100 percent of the stock of substantially all of Libbey Glass’s present and future direct and indirect domestic subsidiaries, (c) 100 percent of the non-voting stock of substantially all of Libbey Glass’s first-tier present and future foreign subsidiaries and (d) 65 percent of the voting stock of substantially all of Libbey Glass’s first-tier present and future foreign subsidiaries, and (iii) substantially all proceeds and products of the property and assets described in clauses (i) and (ii) of this sentence. Additionally, borrowings by Libbey Europe under the ABL Facility are secured by a first priority security interest in (i) substantially all of the assets of Libbey Europe, the parent of Libbey Europe and certain of its subsidiaries, (ii) 100 percent of the stock of Libbey Europe and certain subsidiaries of Libbey Europe, and (iii) substantially all proceeds and products of the property and assets described in clauses (i) and (ii) of this sentence.

We pay a Commitment Fee, as defined by the ABL Facility, on the total credit provided under the Facility. The Commitment Fee varies depending on our aggregate availability. The Commitment Fee was 0.25 percent at June 30, 2007. No compensating balances are required by the Agreement. The Agreement does not require compliance with restrictive financial covenants, unless aggregate unused availability falls below $25.0 million.

The borrowing base under the ABL Facility is determined by a monthly analysis of the eligible accounts receivable, inventory and fixed assets. The borrowing base is the sum of (a) 85 percent of eligible accounts receivable, (b) the lesser of (i) 85 percent of the net orderly liquidation value (NOLV) of eligible inventory, (ii) 65 percent of eligible inventory, or (iii) $75.0 million and (c) the lesser of $25.0 million and the aggregate of (i) 75 percent of the NOLV of eligible equipment and (ii) 50 percent of the fair market value of eligible real property.

The available total borrowing base is offset by real estate and ERISA reserves totaling $8.0 million and mark-to-market reserves for natural gas and interest rate swaps of $2.1 million. The ABL Facility also provides for the issuance of $30.0 million of letters of credit, which are applied against the $150.0 million limit. At June 30, 2007, we had $8.4 million in letters of credit outstanding under the ABL Facility. Remaining unused availability on the ABL Facility was $84.0 million at June 30, 2007.

Senior Notes

Libbey Glass and Libbey Inc. entered into a purchase agreement pursuant to which Libbey Glass agreed to sell $306.0 million aggregate principal amount of floating rate senior secured notes due 2011 to the initial purchasers named in a private placement. The net proceeds, after deducting a discount and the estimated expenses and fees, were approximately $289.8 million. On February 15, 2007, we exchanged $306.0 million aggregate principal amount of our floating rate senior secured notes due 2011, which have been registered under the Securities Act of 1933, as amended (Senior Notes), for the notes sold in the private placement. The Senior Notes bear interest at a rate equal to six-month LIBOR plus 7.0 percent and were offered at a discount of 2 percent of face value. Interest with respect to the Senior Notes is payable semiannually on June 1 and December 1. The interest rate was 12.38 percent at June 30, 2007.

We have Interest Rate Protection Agreements (Rate Agreements) with respect to $200.0 million of debt as a means to manage our exposure to fluctuating interest rates. The Rate Agreements effectively convert this portion of our long-term borrowings from variable rate debt to fixed-rate debt, thus reducing the impact of interest rate changes on future income. The fixed interest rate for our borrowings related to the Rate Agreements at June 30, 2007, excluding applicable fees, is 5.24 percent per year and the total interest

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rate, including applicable fees, is 12.24 percent per year. The average maturity of these Rate Agreements is 2.4 years at June 30, 2007. Total remaining Senior Notes not covered by the Rate Agreements have fluctuating interest rates with a weighted average rate of 12.38 percent per year at June 30, 2007. If the counterparties to these Rate Agreements were to fail to perform, these Rate Agreements would no longer protect us from interest rate fluctuations. However, we do not anticipate nonperformance by the counterparties. All counterparties’ credit ratings are rated A+ or better.

The fair market value for the Rate Agreements at June 30, 2007, was $.3 million. The fair value of the Rate Agreements is based on the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves. We do not expect to cancel these agreements and expect them to expire as originally contracted.

The Senior Notes are guaranteed by Libbey Inc. and all of Libbey Glass’s existing and future domestic subsidiaries that guarantee any of Libbey Glass’s debt or debt of any subsidiary guarantor (see Note 12). The Senior Notes and related guarantees have the benefit of a second-priority lien, subject to permitted liens, on collateral consisting of substantially all the tangible and intangible assets of Libbey Glass and its domestic subsidiary guarantors that secure all of the indebtedness under Libbey Glass’s ABL Facility. The Collateral does not include the assets of non-guarantor subsidiaries that secure the ABL Facility.

PIK Notes

Concurrently with the execution of the purchase agreement with respect to the Senior Notes, Libbey Glass and Libbey Inc. entered into a purchase agreement (Unit Purchase Agreement) pursuant to which Libbey Glass agreed to sell, to a purchaser named in the private placement, units consisting of $102.0 million aggregate principal amount 16 percent senior subordinated secured pay-in-kind notes due 2011 (PIK Notes) and detachable warrants to purchase 485,309 shares of Libbey Inc. common stock (Warrants) exercisable on or after June 16, 2006 and expiring on December 1, 2011. The warrant holder does not have voting rights. The net proceeds, after deducting a discount and estimated expenses and fees, were approximately $97.0 million. The proceeds were allocated between the Warrants and the underlying debt based on their respective fair values at the time of issuance. The amount allocated to the Warrants has been recorded in equity, with the offset recorded as a discount on the underlying debt. Each Warrant is exercisable at $11.25. The PIK Notes were offered at a discount of 2 percent of face value. Interest is payable semiannually on June 1 and December 1, but during the first three years interest is payable by issuance of additional PIK Notes.

The obligations of Libbey Glass under the PIK Notes are guaranteed by Libbey Inc. and all of Libbey Glass’s existing and future domestic subsidiaries that guarantee any of Libbey Glass’s debt or debt of any subsidiary guarantor (see Note 12). The PIK Notes and related guarantees are senior subordinated obligations of Libbey Glass and the guarantors of the PIK Notes and are entitled to the benefit of a third-priority lien, subject to permitted liens, on the collateral that secures the Senior Notes.

Promissory Note

In September 2001, we issued a $2.7 million promissory note in connection with the purchase of our Laredo, Texas warehouse facility. At June 30, 2007, and December 31, 2006, we had $1.9 million and $2.0 million, respectively, outstanding on the promissory note. Interest with respect to the promissory note is paid monthly.

Notes Payable

We have an overdraft line of credit for a maximum of €1.8 million. The $1.4 million outstanding at June 30, 2007, was the U.S. dollar equivalent under the euro-based overdraft line and the interest rate was 3.14 percent. Interest with respect to the note payable is paid monthly.

RMB Loan Contract

On January 23, 2006, Libbey Glassware (China) Co., Ltd. (Libbey China), an indirect wholly owned subsidiary of Libbey Inc., entered into an RMB Loan Contract (RMB Loan Contract) with China Construction Bank Corporation Langfang Economic Development Area Sub-Branch (CCB). Pursuant to the RMB Loan Contract, CCB agreed to lend to Libbey China RMB 250.0 million, or the equivalent of approximately $32.9 million, for the construction of our production facility in China and the purchase of related equipment, materials and services. The loan has a term of eight years and bears interest at a variable rate as announced by the People’s Bank of China. As of the date of the initial advance under the Loan Contract, the annual interest rate was 5.51 percent, and as of June 30, 2007, the annual interest rate was 6.10 percent. As of June 30, 2007, the outstanding balance was RMB 250.0 million

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(approximately $32.9 million). Interest is payable quarterly. Payments of principal in the amount of RMB 30.0 million (approximately $3.9 million) and RMB 40.0 million (approximately $5.3 million) must be made on July 20, 2012, and December 20, 2012, respectively, and three payments of principal in the amount of RMB 60.0 million (approximately $7.9 million) each must be made on July 20, 2013, December 20, 2013, and January 20, 2014, respectively. The obligations of Libbey China are secured by a guarantee executed by Libbey Inc. for the benefit of CCB.

RMB Working Capital Loan

In March 2007, Libbey China entered into a 50.0 million RMB working capital loan with China Construction Bank. The 3-year term loan has a principal payment at maturity on March 14, 2010, has a current interest rate of 6.30 percent, and is secured by a Libbey Inc. guarantee. At June 30, 2007, the U.S. dollar equivalent on the line was $6.6 million.

Obligations Under Capital Leases

We lease certain machinery and equipment under agreements that are classified as capital leases. These leases were assumed in the Crisal acquisition. The cost of the equipment under capital leases is included in the Condensed Consolidated Balance Sheet as property, plant and equipment, and the related depreciation expense is included in the Condensed Consolidated Statements of Operations.

The future minimum lease payments required under the capital leases as of June 30, 2007, are $630 for year one and $608 for years two and three.

BES Euro Line

In January 2007, Crisal entered into a seven year, €11.0 million line of credit (approximately $14.8 million) with BANCO ESPÍRITO SANTO, S.A. (BES). The $14.6 million outstanding at June 30, 2007, was the U.S. dollar equivalent under the line at an interest rate of 5.22 percent. Payment of principal in the amount of €1.1 million (approximately $1.5 million) is due in January 2010, payment of €1.6 million (approximately $2.2 million) is due in January 2011, payment of €2.2 million (approximately $3.0 million) is due in January 2012, payment of €2.8 million (approximately $3.8 million) is due in January 2013 and payment of €3.3 million (approximately $4.4 million) is due in January 2014. Interest with respect to the line is paid every six months.

Other Debt

The other debt of $1.7 million primarily consists of government-subsidized loans for equipment purchases at Crisal.

6. Special Charges

Crisa Restructuring

In June 2006, we announced plans to consolidate Crisa’s two principal manufacturing facilities into one facility and to discontinue certain product lines in order to reduce fixed costs. See Form 10-K for the year ended December 31, 2006, for further discussion.

As a result, we recorded the following non-recurring special charges within the North American Glass reporting segment:

	Three months ended June 30,				Six months ended June 30,
	2007		2006		2007		2006
Fixed asset related (included in Special charges)	$	—	$	12,587	$	—	$	12,587
Inventory write-down (included in Cost of sales)		—		2,543		—		2,543
Crisa restructuring	$	—	$	15,130	$	—	$	15,130

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The following reflects the balance sheet activity related to the Crisa restructuring (see Note 4) for the six months ended June 30, 2007:

	Balance at		Cash			Non-cash			Balance at		Cash		Non-cash		Balance at
	December 31, 2006		payments			utilization			March 31, 2007		payments		utilization		June 30, 2007
Employee termination costs & other	$	1,163	$	(614	)	$	(68	)	$	481	$	—	$	73	$	554
Total	$	1,163	$	(614	)	$	(68	)	$	481	$	—	$	73	$	554

The employee termination costs and other of $0.6 million are included in the accrued liabilities on the Condensed Consolidated Balance Sheets.

Write-off of Finance Fees

In June 2006, we wrote off unamortized finance fees related to debt of Libbey and Crisa that was refinanced. See Form 10-K for the year ended December 31, 2006, for further discussion.

As a result, we recorded the following non-recurring special charges within the North American Glass reporting segment:

	Three months ended June 30,				Six months ended June 30,
	2007		2006		2007		2006
Write-off of finance fees	$	—	$	4,906	$	—	$	4,906
Included in interest expense	$	—	$	4,906	$	—	$	4,906

Summary of Special Charges

The following table summarizes the charges related to the Crisa restructuring and write-off of finance fees and their classifications on the Condensed Consolidated Statements of Operations:

	Three months ended June 30,				Six months ended June 30,
	2007		2006		2007		2006
Cost of sales	$	—	$	2,543	$	—	$	2,543
Special charges		—		12,587		—		12,587
Interest expense		—		4,906		—		4,906
Total Special charges	$	—	$	20,036	$	—	$	20,036

7. Income Taxes

In July 2006, the FASB issued FIN 48. FIN 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on derecognition, classification, interest and penalties on income taxes and accounting in interim periods and requires increased disclosures.

We adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, we recorded a $6.7 million decrease in the net tax asset for unrecognized tax benefits, offset by an increase in net deferred tax asset of $6.7 million, with no cumulative effect on retained earnings. The amount of unrecognized tax benefits at January 1, 2007 was $11.1 million, of which $4.4 million would impact our effective tax rate, if recognized. The amount of unrecognized tax benefits at June 30, 2007 is $11.3 million, of which $4.6 million would impact our effective tax rate, if recognized.

It is expected that the amount of the unrecognized tax benefits will change within the next twelve months; however, we do not expect the change to have a significant impact on our results of operations or our financial position.

We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision. As of January 1, 2007, we had $3.0 million of accrued interest and penalties. The liability for the payment of interest and penalties did not materially change as of June 30, 2007.

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We are not currently under audit by the Internal Revenue Service for any years. The statutes of limitation for our income tax returns after 2002 remain open for examination by the IRS. We have not been contacted by the IRS for examination for any of these years.

Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to five years. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. We have various foreign and state income tax returns in the process of examination, administrative appeals or litigation.

Years still open to examination by foreign tax authorities in major jurisdictions include Netherlands (2001 onward), Portugal (2002 onward), Mexico (2001 onward), and Canada (2004 onward).

8. Pension and Nonpension Postretirement Benefits

We have pension plans covering the majority of our employees. Benefits generally are based on compensation and length of service for salaried employees and job grade and length of service for hourly employees. In addition, we have a supplemental employee retirement plan (SERP) covering certain employees. The U.S. pension plans, including the SERP, which is an unfunded liability, cover the hourly and salaried U.S.-based employees of Libbey, hired before January 1, 2006. The non-U.S. pension plans cover the employees of our wholly owned subsidiaries, Royal Leerdam, Leerdam Crystal and Crisa. The Crisa plan is not funded.

The components of our net pension expense (credit), including the SERP, are as follows:

	U.S. Plans						Non-U.S. Plans						Total
Three months ended June 30,	2007			2006			2007			2006			2007			2006
Service cost	$	1,436		$	1,633		$	482		$	209		$	1,918		$	1,842
Interest cost		3,609			3,515			957			415			4,566			3,930
Expected return on plan assets		(3,990	)		(3,881	)		(688	)		(565	)		(4,678	)		(4,446	)
Amortization of unrecognized:
Prior service cost		521			521			(11	)		(31	)		510			490
(Gain)/loss		515			809			75			10			590			819
Settlement		1,000			1,000			—			—			1,000			1,000
Pension expense (credit)	$	3,091		$	3,597		$	815		$	38		$	3,906		$	3,635

	U.S. Plans						Non-U.S. Plans						Total
Six months ended June 30,	2007			2006			2007			2006			2007			2006
Service cost	$	2,961		$	3,266		$	961		$	377		$	3,922		$	3,643
Interest cost		7,304			7,030			1,913			785			9,217			7,815
Expected return on plan assets		(8,020	)		(7,762	)		(1,375	)		(1,130	)		(9,395	)		(8,892	)
Amortization of unrecognized:
Prior service cost		1,043			1,042			(23	)		(117	)		1,020			925
(Gain)/loss		1,070			1,618			149			20			1,219			1,638
Settlement		1,000			1,000			—			—			1,000			1,000
Pension expense (credit)	$	5,358		$	6,194		$	1,625		$	(65	)	$	6,983		$	6,129

We provide certain retiree health care and life insurance benefits covering a majority of our salaried and non-union hourly (hired before January 1, 2004) and union hourly employees. Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. The U.S. nonpension postretirement plans cover the hourly and salaried U.S.-based employees of Libbey. The non-U.S. nonpension postretirement plans cover the retirees and active employees of Libbey who are located in Canada.

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The provision for our nonpension postretirement benefit expense consists of the following:

	U.S. Plans						Non-U.S. Plans					Total
Three months ended June 30,	2007			2006			2007			2006		2007			2006
Service cost	$	190		$	208		$	—		$	—	$	190		$	208
Interest cost		558			494			24			34		582			528
Amortization of unrecognized:
Prior service cost		(222	)		(220	)		—			—		(222	)		(220	)
(Gain)/loss		21			(8	)		(12	)		—		9			(8	)
Nonpension postretirement benefit expense	$	547		$	474		$	12		$	34	$	559		$	508

	U.S. Plans						Non-U.S. Plans					Total
Six months ended June 30,	2007			2006			2007			2006		2007			2006
Service cost	$	398		$	416		$	—		$	—	$	398		$	416
Interest cost		1,122			988			47			68		1,169			1,056
Amortization of unrecognized:
Prior service cost		(442	)		(440	)		—			—		(442	)		(440	)
(Gain)/loss		39			(16	)		(25	)		—		14			(16	)
Nonpension postretirement benefit expense	$	1,117		$	948		$	22		$	68	$	1,139		$	1,016

We expect to utilize $20.5 million to fund our pension plans and nonpension postretirement benefits in 2007 of which $4.8 million and $5.9 million was incurred for the three months and six months ended June 30, 2007, respectively.

9. Net Income per Share of Common Stock

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended June 30,					Six Months Ended June 30,
	2007		2006			2007		2006
Numerator for earnings per share — net income (loss) that is available to common shareholders	$	3,956	$	(9,569	)	$	2,202	$	(9,054	)
Denominator for basic earnings per share — weighted-average shares outstanding		14,435,975		14,123,647			14,398,997		14,080,796
Effect of dilutive securities – employee stock options, employee stock purchase plan (ESPP), warrants and restricted share units (1)		236,108		—			217,645		—
Denominator for diluted earnings per share – adjusted weighted-average shares and assumed conversions		14,672,083		14,123,647			14,616,642		14,080,796
Basic earnings (loss) per share	$	0.27	$	(0.68	)	$	0.15	$	(0.64	)
Diluted earnings (loss) per share	$	0.27	$	(0.68	)	$	0.15	$	(0.64	)

(1) The effect of employee stock options, warrants and the employee stock purchase plan (ESPP), 388 shares for the three months ended June 30, 2006, and 193 shares for the six months ended June 30, 2006, were anti-dilutive and thus not included in the earnings per share calculation. These amounts are anti-dilutive due to the net loss.

Diluted shares outstanding include the dilutive impact of in-the-money employee stock options, the employee stock purchase plan (ESPP), warrants and restricted stock units, which are calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the tax-effected proceeds that hypothetically would be received from the exercise of all in-the-money options are assumed to be used to repurchase shares.

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10. Derivatives

As of June 30, 2007, we had Interest Rate Protection Agreements for $200.0 million of our variable rate debt, commodity contracts for 2,865,000 million British Thermal Units (BTUs) of natural gas and a foreign currency contract for 212.0 million pesos for a contractual payment due to Vitro, related to the Crisa acquisition, in January 2008, with a fair value of $ (2.0) million, accounted for under Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (Statement 133). At December 31, 2006, we had Interest Rate Protection Agreements for $200.0 million of variable rate debt and commodity contracts for 3,450,000 million BTUs of natural gas with a fair value of $(4.1) million. The fair value of these derivatives is included in derivative liability on the Condensed Consolidated Balance Sheets.

We do not believe we are exposed to more than a nominal amount of credit risk in our interest rate, natural gas and foreign currency hedges, as the counterparties are established financial institutions. All counterparties’ credit ratings are rated A+ or better.

All of our derivatives (except for the foreign currency contract) qualify and are designated as cash flow hedges at June 30, 2007. Hedge accounting is applied only when the derivative is deemed to be highly effective at offsetting changes in anticipated cash flows of the hedged item or transaction. The ineffective portion of the change in the fair value of a derivative designated as a cash flow hedge is recognized in current earnings. We recognized an immaterial loss in the three months and a gain of $ 0.7 million in the six months ended June 30, 2007, in other income on the Condensed Consolidated Statement of Operations. We recognized a loss of $ 0.9 million in the six months ended June 30, 2006.

11. Comprehensive Income (Loss)

Components of comprehensive income (loss) (net of tax) are as follows:

	Three months ended June 30,						Six months ended June 30,
	2007			2006			2007		2006
Net income (loss)	$	3,956		$	(9,569	)	$	2,202	$	(9,054	)
Pension and other postretirement benefit adjustments		(181	)		(118	)		24		(118	)
Change in fair value of derivative instruments (see detail below)		57			(968	)		816		(4,724	)
Effect of exchange rate fluctuation		2,851			(95	)		1,782		15
Comprehensive income (loss)	$	6,683		$	(10,750	)	$	4,824	$	(13,881	)

Accumulated other comprehensive loss (net of tax) includes:

	June 30, 2007			December 31, 2006
Pension and other postretirement benefit adjustments	$	(41,820	)	$	(41,844	)
Derivatives		(2,270	)		(3,086	)
Exchange rate fluctuation		703			(1,079	)
Total	$	(43,387	)	$	(46,009	)

The change in other comprehensive income (loss) for derivative instruments for the Company is as follows:

	Three months ended June 30,						Six months ended June 30,
	2007			2006			2007		2006
Change in fair value of derivative instruments	$	46		$	(1,484	)	$	1,159	$	(7,441	)
Less:
Income tax effect		(11	)		(516	)		343		(2,717	)
Other comprehensive income (loss) related to derivatives	$	57		$	(968	)	$	816	$	(4,724	)

We adopted the provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB statements No. 87, 88, 106 and 132 (R)” in December 2006. As a result of the adoption of this statement, accumulated other comprehensive income (loss) decreased by $21.8 million. The decrease was incorrectly recorded as a component of comprehensive loss in the 2006 Consolidated Statement of Shareholders’ Equity. Total comprehensive loss was incorrectly reported as $35.8 million and should have been reported as $14.0 million for the year ended December 31, 2006. The decrease due to the adoption of this statement should have been recorded as a direct adjustment to accumulated other comprehensive income (loss).

12. Condensed Consolidated Guarantor Financial Statements

Libbey Glass is a direct, 100 percent owned subsidiary of Libbey Inc. and the issuer of the Senior Notes and the PIK Notes. The obligations of Libbey Glass under the Senior Notes and the PIK Notes are fully and unconditionally and jointly and severally guaranteed by Libbey Inc. and by certain indirect, 100 percent owned domestic subsidiaries of Libbey Inc, as described below. All are related parties that are included in the Condensed Consolidated Financial Statements for the three month and six month periods ended June 30, 2007.

20

At June 30, 2007 and December 31, 2006, Libbey Inc.’s indirect, 100 percent owned domestic subsidiaries were Syracuse China Company, World Tableware Inc., LGA4 Corp., LGA3 Corp., The Drummond Glass Company, LGC Corp., Traex Company, Libbey.com LLC, LGFS Inc. and LGAC LLC (together with Crisa Industrial LLC, which became an indirect, 100 percent owned subsidiary of Libbey Inc. on June 16, 2006, the “Subsidiary Guarantors”). The following tables contain condensed consolidating financial statements of (a) the parent, Libbey Inc., (b) the issuer, Libbey Glass, (c) the Subsidiary Guarantors, (d) the indirect subsidiaries of Libbey Inc. that are not Subsidiary Guarantors (collectively, “Non-Guarantor Subsidiaries”), (e) the consolidating elimination entries, and (f) the consolidated totals.

Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands) (unaudited)

Three months ended June 30, 2007
	Libbey		Libbey						Non-
	Inc.		Glass			Subsidiary			Guarantor
	(Parent)		(Issuer)			Guarantors			Subsidiaries			Eliminations			Consolidated
Net sales	$	—	$	106,371		$	30,492		$	82,587		$	(12,327	)	$	207,123
Freight billed to customers		—		118			367			64			—			549
Total revenues		—		106,489			30,859			82,651			(12,327	)		207,672
Cost of sales		—		81,928			24,012			69,870			(12,327	)		163,483
Gross profit		—		24,561			6,847			12,781			—			44,189
Selling, general and administrative expenses		—		12,195			1,948			9,524			—			23,667
Income from operations		—		12,366			4,899			3,257			—			20,522
Other income (expense)		—		406			66			167			—			639
Earnings (loss) before interest, income taxes and minority interest		—		12,772			4,965			3,424			—			21,161
Interest expense		—		14,800			1			1,628			—			16,429
Earnings (loss) before income taxes and minority interest		—		(2,028	)		4,964			1,796			—			4,732
Provision (benefit) for income taxes		—		10,843			(7,320	)		(2,747	)		—			776
Net income (loss) before minority interest		—		(12,871	)		12,284			4,543			—			3,956
Minority interest and equity in net income (loss) of subsidiaries		3,956		16,827			—			—			(20,783	)		—
Net income (loss)	$	3,956	$	3,956		$	12,284		$	4,543		$	(20,783	)	$	3,956

21

Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands) (unaudited)

Three months ended June 30, 2006
	Libbey			Libbey					Non-
	Inc.			Glass			Subsidiary		Guarantor
	(Parent)			(Issuer)			Guarantors		Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	97,795		$	28,735	$	34,538		$	(3,070	)	$	157,998
Freight billed to customers		—			159			391		376			—			926
Total revenues		—			97,954			29,126		34,914			(3,070	)		158,924
Cost of sales		—			77,219			24,053		32,550			(3,070	)		130,752
Gross profit		—			20,735			5,073		2,364			—			28,172
Selling, general and administrative expenses		—			14,294			2,003		3,399			—			19,696
Special charges		—			—			—		12,587			—			12,587
Income (loss) from operations		—			6,441			3,070		(13,622	)		—			(4,111	)
Equity earnings (loss) — pretax		—			—			328		593			—			921
Other income (expense)		—			(331	)		185		(761	)		—			(907	)
Earnings (loss) before interest, income taxes and minority interest		—			6,110			3,583		(13,790	)		—			(4,097	)
Interest expense		—			7,984			1		2,215			—			10,200
Earnings (loss) before income taxes and minority interest		—			(1,874	)		3,582		(16,005	)		—			(14,297	)
Provision (benefit) for income taxes		—			(620	)		1,182		(5,282	)		—			(4,720	)
Net income (loss) before minority interest		—			(1,254	)		2,400		(10,723	)		—			(9,577	)
Minority interest and equity in net income (loss) of subsidiaries		(9,569	)		(8,315	)		—		8			17,884			8
Net income (loss)	$	(9,569	)	$	(9,569	)	$	2,400	$	(10,715	)	$	17,884		$	(9,569	)
The following represents the total special charges included in the above Statement of Operations (see Note 6 for further details):
Special charges included in:
Cost of sales	$	—		$	—		$	—	$	2,543		$	—		$	2,543
Special charges		—			—			—		12,587			—			12,587
Interest expense		—			3,490			—		1,416			—			4,906
Total pretax special charges	$	—		$	3,490		$	—	$	16,546		$	—		$	20,036

22

Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands) (unaudited)

Six months ended June 30, 2007
	Libbey		Libbey						Non-
	Inc.		Glass			Subsidiary			Guarantor
	(Parent)		(Issuer)			Guarantors			Subsidiaries			Eliminations			Consolidated
Net sales	$	—	$	197,079		$	57,926		$	154,092		$	(22,478	)	$	386,619
Freight billed to customers		—		266			668			90			—			1,024
Total revenues		—		197,345			58,594			154,182			(22,478	)		387,643
Cost of sales		—		156,195			46,410			130,912			(22,478	)		311,039
Gross profit		—		41,150			12,184			23,270			—			76,604
Selling, general and administrative expenses		—		24,153			4,198			17,350			—			45,701
Income from operations		—		16,997			7,986			5,920			—			30,903
Other income (expense)		—		1,271			1,194			19			—			2,484
Earnings (loss) before interest, income taxes and minority interest		—		18,268			9,180			5,939			—			33,387
Interest expense		—		29,468			1			2,524			—			31,993
Earnings (loss) before income taxes and minority interest		—		(11,200	)		9,179			3,415			—			1,394
Provision (benefit) for income taxes		—		6,491			(5,320	)		(1,979	)		—			(808	)
Net income (loss) before minority interest		—		(17,691	)		14,499			5,394			—			2,202
Minority interest and equity in net income (loss) of subsidiaries		2,202		19,893			—			—			(22,095	)		—
Net income (loss)	$	2,202	$	2,202		$	14,499		$	5,394		$	(22,095	)	$	2,202

23

Libbey Inc.

Condensed Consolidating Statement of Operations

(dollars in thousands) (unaudited)

	Six months ended June 30, 2006
	Libbey			Libbey					Non-
	Inc.			Glass			Subsidiary		Guarantor
	(Parent)			(Issuer)			Guarantors		Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	182,430		$	55,559	$	58,134		$	(3,259	)	$	292,864
Freight billed to customers		—			308			691		384			—			1,383
Total revenues		—			182,738			56,250		58,518			(3,259	)		294,247
Cost of sales		—			147,992			48,576		50,620			(3,259	)		243,929
Gross profit		—			34,746			7,674		7,898			—			50,318
Selling, general and administrative expenses		—			29,007			3,442		6,333			—			38,782
Special charges		—			—			—		12,587			—			12,587
Income (loss) from operations		—			5,739			4,232		(11,022	)		—			(1,051	)
Equity earnings (loss) – pretax		—			—			612		1,374			—			1,986
Other income (expense)		—			247			58		(816	)		—			(511	)
Earnings (loss) before interest, income taxes and minority interest		—			5,986			4,902		(10,464	)		—			424
Interest expense		—			10,343			2		3,464			—			13,809
Earnings (loss) before income taxes and minority interest		—			(4,357	)		4,900		(13,928	)		—			(13,385	)
Provision (benefit) for income taxes		—			(1,440	)		1,617		(4,596	)		—			(4,419	)
Net income (loss) before minority interest		—			(2,917	)		3,283		(9,332	)		—			(8,966	)
Minority interest and equity in net income (loss) of subsidiaries		(9,054	)		(6,137	)		—		(88	)		15,191			(88	)
Net income (loss)	$	(9,054	)	$	(9,054	)	$	3,283	$	(9,420	)	$	15,191		$	(9,054	)
The following represents the total special charges included in the above Statement of Operations (see Note 6 for further details):
Special charges included in:
Cost of sales	$	—		$	—		$	—	$	2,543		$	—		$	2,543
Special charges		—			—			—		12,587			—			12,587
Interest expense		—			3,490			—		1,416			—			4,906
Total pretax special charges	$	—		$	3,490		$	—	$	16,546		$	—		$	20,036

24

Libbey Inc.
Condensed Consolidating Balance Sheet
(dollars in thousands)

	June 30, 2007 (unaudited)
	Libbey		Libbey				Non-
	Inc.		Glass		Subsidiary		Guarantor
	(Parent)		(Issuer)		Guarantors		Subsidiaries		Eliminations			Consolidated
Cash and equivalents	$	—	$	5,523	$	613	$	9,440	$	—		$	15,576
Accounts receivable — net		—		50,917		9,897		49,008		—			109,822
Inventories — net		—		66,762		32,205		76,202		—			175,169
Other current assets		—		4,269		173		6,408		—			10,850
Total current assets		—		127,471		42,888		141,058		—			311,417
Other non-current assets		—		36,696		1,050		7,688		—			45,434
Investments in and advances to subsidiaries		95,073		347,779		275,579		123,264		(841,695	)		—
Goodwill and purchased intangible assets — net		—		26,833		16,112		163,679		—			206,624
Total other assets		95,073		411,308		292,741		294,631		(841,695	)		252,058
Property, plant and equipment — net		—		98,554		19,792		199,633		—			317,979
Total assets	$	95,073	$	637,333	$	355,421	$	635,322	$	(841,695	)	$	881,454
Accounts payable		—	$	17,451	$	2,688	$	45,220	$	—		$	65,359
Accrued and other current liabilities		—		51,642		10,805		38,362		—			100,809
Notes payable and long-term debt due within one year		—		115		—		2,060		—			2,175
Total current liabilities		—		69,208		13,493		85,642		—			168,343
Long-term debt		—		418,710		—		72,432		—			491,142
Other long-term liabilities and minority interest		—		88,432		7,812		30,652		—			126,896
Total liabilities		—		576,350		21,305		188,726		—			786,381
Total shareholders’ equity		95,073		60,983		334,116		446,596		(841,695	)		95,073
Total liabilities and shareholders’ equity	$	95,073	$	637,333	$	355,421	$	635,322	$	(841,695	)	$	881,454

	December 31, 2006
	Libbey		Libbey				Non-
	Inc.		Glass		Subsidiary		Guarantor
	(Parent)		(Issuer)		Guarantors		Subsidiaries		Eliminations			Consolidated
Cash and equivalents	$	—	$	22,849	$	509	$	18,408	$	—		$	41,766
Accounts receivable — net		—		47,772		10,063		42,395		—			100,230
Inventories — net		—		55,620		32,521		70,982		—			159,123
Other current assets		—		14,221		347		5,157		—			19,725
Total current assets		—		140,462		43,440		136,942		—			320,844
Other non-current assets		—		30,247		1,296		7,131		—			38,674
Investments in and advances to subsidiaries		87,850		326,705		284,384		153,011		(851,950	)		—
Goodwill and purchased intangible assets — net		—		26,834		16,140		163,398		—			206,372
Total other assets		87,850		383,786		301,820		323,540		(851,950	)		245,046
Property, plant and equipment — net		—		100,804		21,039		190,398		—			312,241
Total assets	$	87,850	$	625,052	$	366,299	$	650,880	$	(851,950	)	$	878,131
Accounts payable	$	—	$	21,513	$	4,577	$	41,403		—		$	67,493
Accrued and other current liabilities		—		53,263		8,561		23,250		—			85,074
Notes payable and long-term debt due within one year		—		155		—		865		—			1,020
Total current liabilities		—		74,931		13,138		65,518		—			153,587
Long-term debt		—		409,089		—		81,123		—			490,212
Other long-term liabilities and minority interest		—		86,354		7,924		52,204		—			146,482
Total liabilities		—		570,374		21,062		198,845		—			790,281
Total shareholders’ equity		87,850		54,678		345,237		452,035		(851,950	)		87,850
Total liabilities and shareholders’ equity	$	87,850	$	625,052	$	366,299	$	650,880	$	(851,950	)	$	878,131

25

Libbey Inc.
Condensed Consolidating Statement of Cash Flows
(dollars in thousands)(unaudited)

	Three months ended June 30, 2007
	Libbey			Libbey						Non-
	Inc.			Glass			Subsidiary			Guarantor
	(Parent)			(Issuer)			Guarantors			Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	3,956		$	3,956		$	12,284		$	4,543		$	(20,783	)	$	3,956
Depreciation and amortization		—			4,095			881			5,734			—			10,710
Other operating activities		(3,956	)		(12,520	)		(12,710	)		(1,901	)		20,783			(10,304	)
Net cash provided by (used in) operating activities		—			(4,469	)		455			8,376			—			4,362
Additions to property, plant & equipment		—			(1,856	)		(401	)		(10,576	)		—			(12,833	)
Other investing activities		—			—			—			(116	)		—			(116	)
Net cash provided by (used in) investing activities		—			(1,856	)		(401	)		(10,692	)		—			(12,949	)
Net borrowings		—			(487	)		—			(3,496	)		—			(3,983	)
Other financing activities		—			(360	)		—			—			—			(360	)
Net cash provided by (used in) financing activities		—			(847	)		—			(3,496	)		—			(4,343	)
Exchange effect on cash		—			—			—			109			—			109
Increase (decrease) in cash		—			(7,172	)		54			(5,703	)		—			(12,821	)
Cash at beginning of period		—			12,695			559			15,143			—			28,397
Cash at end of period	$	—		$	5,523		$	613		$	9,440		$	—		$	15,576

	Three months ended June 30, 2006
	Libbey			Libbey						Non-
	Inc.			Glass			Subsidiary			Guarantor
	(Parent)			(Issuer)			Guarantors			Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(9,569	)	$	(9,569	)	$	2,400		$	(10,715	)	$	17,884		$	(9,569	)
Depreciation and amortization		—			4,585			828			2,793			—			8,206
Other operating activities		9,569			24,786			(5,553	)		6,022			(17,884	)		16,940
Net cash provided by (used in) operating activities		—			19,802			(2,325	)		(1,900	)		—			15,577
Additions to property, plant & equipment		—			(8,390	)		(202	)		(4,225	)		—			(12,817	)
Other investing activities		—			(221,359	)		(421	)		144,209			—			(77,571	)
Net cash provided by (used in) investing activities		—			(229,749	)		(623	)		139,984			—			(90,388	)
Net borrowings		—			231,998			—			(122,620	)		—			109,378
Other financing activities		—			(17,548	)		2,999			36			—			(14,513	)
Net cash provided by (used in) financing activities		—			214,450			2,999			(122,584	)		—			94,865
Exchange effect on cash		—			—			—			105			—			105
Increase (decrease) in cash		—			4,503			51			15,605			—			20,159
Cash at beginning of period		—			1,766			285			4,451			—			6,502
Cash at end of period	$	—		$	6,269		$	336		$	20,056		$	—		$	26,661

26

Libbey Inc.
Condensed Consolidating Statement of Cash Flows
(dollars in thousands)(unaudited)

	Six months ended June 30, 2007
	Libbey			Libbey						Non-
	Inc.			Glass			Subsidiary			Guarantor
	(Parent)			(Issuer)			Guarantors			Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	2,202		$	2,202		$	14,499		$	5,394		$	(22,095	)	$	2,202
Depreciation and amortization		—			8,365			1,761			9,800			—			19,926
Other operating activities		(2,202	)		(22,775	)		(17,053	)		2,132			22,095			(17,803	)
Net cash provided by (used in) operating activities		—			(12,208	)		(793	)		17,326			—			4,325
Additions to property, plant & equipment		—			(4,324	)		(604	)		(17,698	)		—			(22,626	)
Other investing activities		—						1,501			452			—			1,953
Net cash provided by (used in) investing activities		—			(4,324	)		897			(17,246	)		—			(20,673	)
Net borrowings		—			(75	)		—			(9,223	)		—			(9,298	)
Other financing activities		—			(719	)		—						—			(719	)
Net cash provided by (used in) financing activities		—			(794	)		—			(9,223	)		—			(10,017	)
Exchange effect on cash		—			—			—			175			—			175
Increase (decrease) in cash		—			(17,326	)		104			(8,968	)		—			(26,190	)
Cash at beginning of period		—			22,849			509			18,408			—			41,766
Cash at end of period	$	—		$	5,523		$	613		$	9,440		$	—		$	15,576

	Six months ended June 30, 2006
	Libbey			Libbey						Non-
	Inc.			Glass			Subsidiary			Guarantor
	(Parent)			(Issuer)			Guarantors			Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(9,054	)	$	(9,054	)	$	3,283		$	(9,420	)	$	15,191		$	(9,054	)
Depreciation and amortization		—			9,334			1,729			5,478			—			16,541
Other operating activities	$	9,054			25,218			(7,568	)		1,375		$	(15,191	)		12,888
Net cash provided by (used in) operating activities		—			25,498			(2,556	)		(2,567	)		—			20,375
Additions to property, plant & equipment		—			(22,859	)		(277	)		(11,120	)		—			(34,256	)
Other investing activities		—			(225,483	)		1,797			146,115			—			(77,571	)
Net cash provided by (used in) investing activities		—			(248,342	)		1,520			134,995			—			(111,827	)
Net borrowings		—			242,268			—			(112,638	)		—			129,630
Other financing activities		—			(15,972	)		1,072			36			—			(14,864	)
Net cash provided by (used in) financing activities		—			226,296			1,072			(112,602	)		—			114,766
Exchange effect on cash		—			—			—			105			—			105
Increase (decrease) in cash		—			3,452			36			19,931			—			23,419
Cash at beginning of period		—			2,817			300			125			—			3,242
Cash at end of period	$	—		$	6,269		$	336		$	20,056		$	—		$	26,661

27

13. Segments

Our segments are described as follows:

• North American Glass—includes sales of glass tableware from subsidiaries throughout the United States, Canada and Mexico.

• North American Other—includes sales of ceramic dinnerware; metal tableware, holloware and serveware; and plastic items for sale primarily in the foodservice, retail and industrial markets from subsidiaries in the United States.

• International—includes worldwide sales of glass tableware from subsidiaries outside the United States, Canada and Mexico.

Some operating segments were aggregated to arrive at the disclosed reportable segments. The accounting policies of the segments are the same as those described in Note 1 of the Notes to Condensed Consolidated Financial Statements. We do not have any customers who represent 10 percent or more of total net sales. We evaluate the performance of our segments based upon net sales and Earnings Before Interest and Taxes (EBIT). Intersegment sales are consummated at arm’s length and are reflected in eliminations in the table below.

	Three months ended June 30,						Six months ended June 30,
	2007			2006			2007			2006
Net Sales
North American Glass	$	146,963		$	105,029		$	271,689		$	189,664
North American Other		30,490			28,736			57,925			55,560
International		32,236			25,585			62,018			49,181
Eliminations		(2,566	)		(1,352	)		(5,013	)		(1,541	)
Consolidated	$	207,123		$	157,998		$	386,619		$	292,864
EBIT
North American Glass	$	16,549		$	(7,128	)	$	27,484		$	(6,494	)
North American Other		4,281			2,679			8,050			3,141
International		331			352			(2,147	)		3,777
Consolidated	$	21,161		$	(4,097	)	$	33,387		$	424
Equity Earnings
North American Glass	$	—		$	—		$	—		$	—
North American Other		—			—			—			—
International		—			921			—			1,986
Consolidated	$	—		$	921		$	—		$	1,986
Depreciation & Amortization
North American Glass	$	6,441		$	4,997		$	12,203		$	9,786
North American Other		880			855			1,761			1,729
International		3,389			2,354			5,962			5,026
Consolidated	$	10,710		$	8,206		$	19,926		$	16,541
Capital Expenditures
North American Glass	$	8,318		$	2,678		$	13,797		$	12,789
North American Other		401			183			604			258
International		4,114			9,956			8,225			21,209
Consolidated	$	12,833		$	12,817		$	22,626		$	34,256
Reconciliation of EBIT to Net Income
Segment EBIT	$	21,161		$	(4,097	)	$	33,387		$	424
Interest Expense		16,429			10,200			31,993			13,809
Provision (Benefit) for Income Taxes		776			(4,720	)		(808	)		(4,419	)
Minority Interest Income (Loss)		—			8			—			(88	)
Net Income (Loss)	$	3,956		$	(9,569	)	$	2,202		$	(9,054	)

28

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes thereto appearing elsewhere in this report and in our Annual Report filed with the Securities and Exchange Commission. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ from those anticipated in these forward-looking statements as a result of many factors. [These factors are discussed in “Other Information” in the section “Qualitative and Quantitative Disclosures About Market Risk.”]

Results of Operations — Second Quarter 2007 Compared with Second Quarter 2006

Dollars in thousands, except percentages and per-share amounts.

							Variance
Three months ended June 30,	2007			2006 (2)			In dollars		In percent
Net sales	$	207,123		$	157,998		$	49,125		31.1	%
Gross profit	$	44,189		$	28,172		$	16,017		56.9	%
Gross profit margin		21.3	%		17.8	%
Income (loss) from operations (IFO)	$	20,522		$	(4,111	)	$	24,633		599.2	%
IFO margin		9.9	%		(2.6	)%
Earnings (loss) before interest and income taxes after minority interest adjustment (EBIT)(1)	$	21,161		$	(4,089	)	$	25,250		617.5	%
EBIT margin		10.2	%		(2.6	)%
Earnings before interest, taxes, depreciation and amortization after minority interest adjustment (EBITDA)(1)	$	31,871		$	4,069		$	27,802		683.3	%
EBITDA margin		15.4	%		2.6	%
Net income (loss)	$	3,956		$	(9,569	)	$	13,525		141.3	%
Net income margin		1.9	%		(6.1	)%
Diluted net income (loss) per share	$	0.27		$	(0.68	)	$	0.95		139.7	%

(1)	We believe that EBIT and EBITDA, non-GAAP financial measures, are useful metrics for evaluating our financial performance, as they are measures that we use internally to assess our performance. See Table 1 for a reconciliation of income (loss) before income taxes to EBIT and EBITDA and a further discussion as to the reasons we believe these non-GAAP financial measures are useful.
(2)	Includes pre-tax special charges of $20.0 million related to Crisa restructuring and write-off of finance fees (see Note 6.)

Net Sales

For the quarter ended June 30, 2007, net sales increased 31.1 percent to $207.1 million from $158.0 million in the year-ago quarter. The increase in net sales was primarily attributable to the consolidation of sales of Crisa, the Company’s former joint venture in Mexico, a more than 16.0 percent increase in shipments to export customers outside of North America, and a more than 7.0 percent increase in shipments to foodservice, retail and industrial glassware customers. In addition, shipments of Syracuse China^® products were up over 9.0 percent, shipments of World Tableware^® products to customers were up approximately 5.0 percent and sales in our International segment increased 26.0 percent.

Gross Profit

For the quarter ended June 30, 2007, gross profit increased by $16.0 million, or 56.9 percent, to $44.2 million, compared to $28.2 million in the year-ago quarter. Gross profit as a percentage of net sales increased to 21.3 percent, compared to 17.8 percent in the year-ago quarter. The increase in gross profit and gross profit margin is attributable to the consolidation of Crisa, higher sales and higher production activity. In addition, the year-ago quarter included a one-time inventory write-down related to the Crisa restructuring of $2.5 million. Partially offsetting these improvements were higher distribution expenses and expenses related to the start-up of our new facility in China.

29

Income From Operations

We reported income from operations of $20.5 million during the quarter, compared to a loss from operations of $4.1 million in the year-ago quarter. Income from operations as a percentage of net sales increased to 9.9 percent in the second quarter 2007, compared to (2.6) percent in the year-ago quarter. Factors contributing to the $24.6 million increase in income from operations and improved income from operations margin include higher gross profit and gross profit margin (discussed above), offset by higher selling, general and administrative expense due to the consolidation of Crisa. The year-ago quarter included a one-time fixed asset charge related to the Crisa restructuring of $12.6 million.

Earnings Before Interest and Income Taxes (EBIT)

Earnings before interest and taxes (EBIT) increased by $25.3 million in the second quarter 2007, compared to the year-ago quarter. EBIT as a percentage of net sales increased to 10.2 percent in the second quarter 2007, compared to (2.6) percent in the year-ago quarter. Key contributors to the increase in EBIT compared to the year-ago quarter are the same as those discussed above under Income From Operations. In addition, we recorded a currency translation gain in the second quarter 2007 as compared to a currency translation loss in the year-ago quarter.

Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)

EBITDA increased by $27.8 million to $31.9 million from $4.1 million in the year-ago quarter. As a percentage of net sales, EBITDA was 15.4 percent for the second quarter 2007, compared to 2.6 percent in the year-ago quarter. The key contributors to the increase in EBITDA were those factors discussed above under EBIT. Depreciation and amortization increased by $2.5 million to $10.7 million primarily due to the consolidation of Crisa and depreciation related to our new facility in China.

Net Income and Diluted Net Income Per Share

We recorded net income of $4.0 million, or $0.27 per diluted share, in the second quarter 2007, compared to a net loss of $9.6 million, or $(0.68) per diluted share, in the year-ago quarter. Net income as a percentage of net sales was 1.9 percent in the second quarter 2007, compared to (6.1) percent in the year-ago quarter. The change from net loss to net income is primarily driven by the items discussed above under EBIT, offset by a $6.2 million increase in interest expense compared with the year-ago quarter resulting from the refinancing consummated on June 16, 2006, which resulted in higher debt from the purchase of Crisa and higher average interest rates. The effective tax rate decreased to 16.4 percent for the quarter ended June 30, 2007, as compared to 33 percent in the year-ago quarter. This decrease was primarily driven by tax incentives and other favorable tax benefits.

30

Results of Operations — First Six Months 2007 Compared with First Six Months 2006

Dollars in thousands, except percentages and per-share amounts.

							Variance
Six months ended June 30,	2007			2006 (2)			In dollars		In percent
Net sales	$	386,619		$	292,864		$	93,755		32.0	%
Gross profit	$	76,604		$	50,318		$	26,286		52.2	%
Gross profit margin		19.8	%		17.2	%
Income (loss) from operations (IFO)	$	30,903		$	(1,051	)	$	31,954		3,040.3	%
IFO margin		8.0	%		(0.4	)%
Earnings before interest and income taxes after minority interest adjustment (EBIT)(1)	$	33,387		$	336		$	33,051		9,836.6	%
EBIT margin		8.6	%		0.1	%
Earnings before interest, taxes, depreciation and amortization, after minority interest adjustment (EBITDA)(1)	$	53,313		$	16,776		$	36,537		217.8	%
EBITDA margin		13.8	%		5.7	%
Net income (loss)	$	2,202		$	(9,054	)	$	11,256		124.3	%
Net income margin		0.6	%		(3.1	)%
Diluted net income (loss) per share	$	0.15		$	(0.64	)	$	0.79		123.4	%

(1)	We believe that EBIT and EBITDA, non-GAAP financial measures, are useful metrics for evaluating our financial performance, as they are measures that we use internally to assess our performance. See Table 1 for a reconciliation of income (loss) before income taxes to EBIT and EBITDA and a further discussion as to the reasons we believe these non-GAAP financial measures are useful.
(2)	Includes pre-tax special charges of $20.0 million related to Crisa restructuring and write-off of finance fees (see Note 6.)

Net Sales

For the six months ended June 30, 2007, sales increased 32.0 percent to $386.6 million from $292.9 million in the year-ago period. This increase in sales was attributable to the consolidation of Crisa’s sales, the Company’s former joint venture in Mexico, a 23.0 percent increase in shipments to export customers outside of North America, and a more than 13.0 percent increase in shipments to retail glassware customers and single digit sales increases to foodservice and industrial glassware customers. In addition, shipments of World Tableware^® products to customers were up approximately 9.3 percent, and sales from our International segment increased 26.1 percent.

Gross Profit

For the six months ended June 30, 2007, gross profit increased by $26.3 million, or 52.2 percent, compared to the year-ago period. For the six months ended June 30, 2007, gross profit as a percentage of net sales increased to 19.8 percent, compared to 17.2 percent in the year-ago period. Contributing to the increase in gross profit and gross profit margin is the consolidation of Crisa, higher sales and higher production activity. In addition, the first six months of 2006 included a inventory write down related to the Crisa restructuring of $2.5 million. Partially offsetting these improvements were higher distribution expenses, higher natural gas expenses and expenses related to the start-up of our new facility in China.

Income From Operations

Income from operations was $30.9 million during the first six months of 2007, as compared to a loss from operations of $1.1 million during the year-ago period. Contributing to the increase in income from operations and income from operations margin is the higher gross profit and gross profit margin (discussed above) offset by higher selling, general and administrative expense due to the consolidation of Crisa. The year-ago period included a fixed asset charge related to the Crisa restructuring of $12.6 million.

31

Earnings Before Interest and Income Taxes (EBIT)

EBIT increased by $33.1 million for the first six months of 2007 to $33.4 million from $0.3 million in the year-ago period. EBIT as a percentage of net sales increased to 8.6 percent in the first six months of 2007, compared to 0.1 percent in the year-ago period. The contributors to the improvement in EBIT compared to the prior period are the same as those discussed above under Income from Operations. In addition, we recognized a $1.1 million gain on the sale of excess land in Syracuse, N.Y. during the first quarter of 2007. We also recognized a decrease of approximately $0.9 million in charges related to ineffectiveness on our natural gas contracts as compared to the year-ago period. In addition, we recorded a currency translation gain for the first six months of 2007 as compared to a currency translation loss in the year-ago period.

Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)

EBITDA increased by $36.5 million, or 217.8 percent, for the six months ended June 30, 2007, compared to the year-ago period. As a percentage of net sales, EBITDA was 13.8 percent in the six months ended June 30, 2007, compared to 5.7 percent in the prior year period. For the first six months of 2007, EBITDA was $53.3 million, a 217.8 percent increase over the first half of 2006. The key contributors to the increase in EBITDA were those factors discussed above under EBIT. Depreciation and amortization increased by $3.4 million to $19.9 million primarily due to the consolidation of Crisa and depreciation related to our new facility in China.

Net Income and Diluted Net Income Per Share

We recorded net income of $2.2 million, or $0.15 per diluted share, for the six months ended June 30, 2007, compared to a net loss of $9.1 million, or $(0.64) per diluted share, for the six months ended June 30, 2006. Net income as a percentage of net sales was 0.6 percent for the six months ended June 30, 2007, compared to (3.1) percent for the year-ago period. The change from net loss to net income is primarily driven by the items discussed above under EBIT. An $18.2 million increase in interest expense compared with the year-ago period is the result of the refinancing consummated on June 16, 2006, which resulted in higher debt from the purchase of Crisa and higher average interest rates. The effective tax rate decreased to a negative 58 percent for the six months ended June 30, 2007, as compared to 33 percent for the six months ended June 30, 2006. This decrease was primarily driven by tax incentives and other favorable tax benefits.

Segment Results of Operations

	Three months ended June 30,						Variance						Six months ended June 30,						Variance
Dollars in thousands	2007			2006			In dollars			In percent			2007			2006			In dollars			In percent
Net Sales:
North American Glass	$	146,963		$	105,029		$	41,934			39.9	%	$	271,689		$	189,664		$	82,025			43.2	%
North American Other		30,490			28,736			1,754			6.1	%		57,925			55,560			2,365			4.3	%
International		32,236			25,585			6,651			26.0	%		62,018			49,181			12,837			26.1	%
Eliminations		(2,566	)		(1,352	)								(5,013	)		(1,541	)
Consolidated	$	207,123		$	157,998		$	49,125			31.1	%	$	386,619		$	292,864		$	93,755			32.0	%
EBIT:
North American Glass	$	16,549		$	(7,128	)	$	23,677			322.2	%	$	27,484		$	(6,494	)	$	33,978			523.2	%
North American Other		4,281			2,679			1,602			59.8	%		8,050			3,141			4,909			156.3	%
International		331			352			(21	)		(6.0	)%		(2,147	)		3,777			(5,924	)		(156.8	)%
Consolidated	$	21,161		$	(4,097	)	$	25,258			616.5	%	$	33,387		$	424		$	32,963			7,774.3	%

32

Segment Results of Operations – Second Quarter 2007 Compared to Second Quarter 2006

North American Glass

For the quarter ended June 30, 2007, net sales increased 39.9 percent to $147.0 million from $105.0 million in the year-ago quarter. Of the total increase in net sales approximately 32.0 percent is attributable to the consolidation of Crisa, 1.0 percent relates to shipments to export customers outside of North America, and 6.5 percent relates to shipments to foodservice, retail and industrial glassware customers.

EBIT increased to $16.5 million for the second quarter 2007, compared to a loss of $7.1 million for the year-ago quarter. EBIT, as a percentage of net sales, increased to 11.3 percent in the second quarter 2007, compared to (6.8) percent in the year-ago quarter. The key contributors to the improvement in EBIT compared to the year-ago quarter were the consolidation of Crisa of approximately $4.5 million, the impact of higher sales in the U.S. operations of $5.4 million and increased operating activity in the U.S. operations of $1.7 million. Partially offsetting these improvements were higher U.S. distribution costs of $2.5 million resulting from the increase in shipments. The year-ago quarter included a fixed asset charge and inventory write-down related to the Crisa restructuring of $15.1 million.

North American Other

For the quarter ended June 30, 2007, net sales increased 6.1 percent to $30.5 million from $28.7 million in the year-ago quarter. Of the total increase in net sales approximately 3.0 percent relates to shipments of Syracuse China^® products and approximately 2.0 percent relates to shipments of World Tableware^® products.

EBIT increased by $1.6 million for the second quarter of 2007, compared to the year-ago quarter. EBIT as a percentage of net sales increased to 14.0 percent in the second quarter 2007 compared to 9.3 percent in the year-ago quarter. The key contributors to the increased EBIT were increased shipments of Syracuse China^® and World Tableware^® products of $0.3 million and significantly higher production activity at Syracuse China of approximately $1.8 million.

International

For the quarter ended June 30, 2007, net sales increased 26.0 percent to $32.2 million from $25.6 million in the year-ago quarter. Of the total increase in net sales approximately 11.0 percent is attributable to shipments to customers of Royal Leerdam and Crisal, approximately 8.0 percent relates to shipments from Libbey China, and 7.0 percent relates to a stronger euro compared to the year-ago quarter.

EBIT decreased by $0.1 million to $0.3 million for the second quarter of 2007, compared to $0.4 million in the year-ago quarter. EBIT as a percentage of net sales decreased to 1.0 percent in the second quarter 2007, compared to 1.4 percent in the year-ago quarter. The decrease in EBIT as a percentage of net sales is due to start-up costs at Libbey China of $0.6 million partially offset by improved results at Royal Leerdam and Crisal driven by higher sales of approximately $1.8 million.

Segment Results of Operations – First Six Months 2007 Compared to First Six Months 2006

North American Glass

For the six months ended June 30, 2007, net sales increased 43.2 percent to $271.7 million from $189.7 million in the year-ago period. Of the total increase in net sales approximately 35.0 percent is attributable to the consolidation of Crisa, approximately 1.0 percent relates to shipments to export customers outside of North America, 3.5 percent relates to shipments to retail glassware customers, and approximately 2.0 percent relates to shipments to foodservice and industrial glassware customers.

EBIT increased to $27.5 million for the first half of 2007, compared to $(6.5) million for the year-ago period. EBIT, as a percentage of net sales, increased to 10.1 percent in the first six months of 2007, compared to (3.4) percent in the year-ago period. The key contributors to the improvement in EBIT were the consolidation of Crisa of approximately $9.1 million, the impact of higher sales in the U.S. operations of $5.7 million, increased operating activity in the U.S. operations of $5.7 million, and lower U.S. selling, general and administrative expenses of approximately $2.3 million. Partially offsetting these improvements were higher U.S. distribution costs of $4.5 million resulting from the increase in shipments. The year-ago period included a fixed asset charge and inventory write-down related to the Crisa restructuring of $15.1 million.

33

North American Other

For the six months ended June 30, 2007, net sales increased 4.3 percent to $57.9 million from $55.6 million in the year-ago period. The increase in net sales was primarily attributable to increased shipments of World Tableware^® products.

EBIT increased by $4.9 million for the first half of 2007, compared to the year-ago period. EBIT as a percentage of net sales increased to 13.9 percent in the first six months of 2007 compared to 5.7 percent in the year-ago period. The key contributors to the increased EBIT were higher sales of World Tableware^® products of approximately $1.2 million, significantly higher production activity levels at Syracuse China of $3.3 million and a $1.1 million gain on the sale of excess land at Syracuse China.

International

For the six months ended June 30, 2007, net sales increased 26.1 percent to $62.0 million from $49.2 million in the year-ago period. Of the total increase in net sales approximately 15.0 percent is attributable to an increase in shipments to customers of Royal Leerdam and Crisal, approximately 4.0 percent relates to shipments from Libbey China, and approximately 8.0 percent relates to a stronger euro compared to the year-ago period.

EBIT decreased by $5.9 million for the first six months of 2007, compared to the year-ago period. EBIT as a percentage of net sales decreased to (3.5) percent in the first half of 2007, compared to 7.7 percent in the year-ago period. The key contributors to the change in EBIT are a result of start-up costs at Libbey China of $2.4 million, lower production activity in Portugal of approximately $2.1 million and higher natural gas costs in Europe of $1.4 million.

Capital Resources and Liquidity

Balance Sheet and Cash Flows

Cash and Equivalents

At June 30, 2007, our cash balance decreased $26.2 million to $15.6 million from $41.8 million on December 31, 2006 and decreased $12.8 million from March 31, 2007. We used a large portion of the cash to repay debt under the ABL Facility.

34

Working Capital

The following table presents working capital components:

(Dollars in thousands,
except percentages
and DSO, DIO, DPO							Variance to June 30, 2007									Variance to June 30, 2007
and DWC)	June 30, 2007			March 31, 2007			In dollars			In percent			December 31, 2006			In dollars			In percent
Accounts receivable - - net	$	109,822		$	101,906		$	7,916			7.8	%	$	100,230		$	9,592			9.6	%
DSO (1)(6)		51.2			48.4									48.7
Inventories — net	$	175,169		$	168,971		$	6,198			3.7	%	$	159,123		$	16,046			10.1	%
DIO (2)(6)		81.6			80.4									77.4
Accounts payable	$	65,359		$	65,817		$	(458	)		(0.7	)%	$	67,493		$	(2,134	)		(3.2	)%
DPO (3)(6)		30.5			31.3									32.8
Working capital (4)	$	219,632		$	205,060		$	14,572			7.1	%	$	191,860		$	27,772			14.5	%
DWC (5)(6)		102.3			97.5									93.3
Percentage of net sales (6)		28.0	%		26.7	%								25.6	%

	DSO, DIO and DWC are all calculated using net sales as the denominator and are based on a 365-day calendar year.
(1)	Days sales outstanding (DSO) measures the number of days it takes to turn receivables into cash.
(2)	Days inventory outstanding (DIO) measures the number of days it takes to turn inventory into cash.
(3)	Days payable outstanding (DPO) measures the number of days it takes to pay our accounts payable.
(4)	Working capital is defined as accounts receivable and inventories less accounts payable. See Table 3 for the calculation of this non-GAAP financial measure and further discussion as to the reasons we believe this non-GAAP financial measure is useful.
(5)	Days working capital (DWC) measures the number of days it takes to turn our working capital into cash.
(6)	The calculations for March 31, 2007 and December 31, 2006 include Crisa proforma net sales.

Working capital (defined as accounts receivable and inventories less accounts payable) was $219.6 million at June 30, 2007. Working capital increased $14.6 million from March 31, 2007 and 27.8 million from December 31, 2006. These increases are the result of normal seasonal increases in working capital and building working capital for our new operations in China. Working capital as a percentage of net sales decreased from 30.3 percent in the year ago quarter to 28.0 percent in the second quarter of 2007, reflecting our continued efforts to reduce our investment in working capital.

Borrowings

The following table presents our total borrowings:

(Dollars in thousands)	Interest Rate			Maturity Date	June 30, 2007		December 31, 2006
Borrowings under ABL facility	floating			December 16, 2010	$	16,170	$	46,210
Senior notes	floating (1)			June 1, 2011		306,000		306,000
PIK notes		16.00	%	December 1, 2011		118,238		109,480
Promissory note		6.00	%	July 2007 to September 2016		1,909		1,985
Notes payable	floating			July 2007		1,381		226
RMB loan contract	floating			July 2012 to January 2014		32,875		32,050
RMB working capital loan	floating			March 2010		6,575		—
Obligations under capital leases	floating			July 2007 to May 2009		1,238		1,548
BES Euro line	floating			January 2010 to January 2014		14,603		—
Other debt	floating			September 2009		1,650		1,954
Total borrowings						500,639		499,453
Less — unamortized discounts and warrants						7,322		8,221
Total borrowings — net						493,317		491,232
Less — current portion of borrowings						2,175		1,020
Total long-term portion of borrowings — net					$	491,142	$	490,212

(1)	See Interest Rate Protection Agreements in Derivatives section below.
(2)	Additional PIK notes were issued on June 1, 2007 in exchange for payment of the semi-annual interest. During the first three years, interest is payable by the issuance of additional PIK notes.

35

We had total borrowings of $500.6 million at June 30, 2007, compared to total borrowings of $499.5 million at December 31, 2006. The $1.1 million increase in borrowings was primarily related to the $16.3 million negative free cash flow discussed below offset by the reduction of cash on our balance sheet of $26.2 million discussed above. In addition, there was $8.8 million additional PIK notes issued on June 1, 2007 in exchange for payment of the semi-annual interest per the PIK note agreement.

During the first quarter of this year, we entered into new credit facilities in China and Portugal to fund our working capital requirements.

Of our total indebtedness, $180.5 million is subject to fluctuating interest rates at June 30, 2007. A change in one percentage point in such rates would result in a change in interest expense of approximately $1.8 million on an annual basis.

Included in Interest Expense is the amortization of discounts and warrants on the Senior Notes and PIK Notes and financing fees of $0.4 million and $0.9 million for the three months and six months ended June 30, 2007, respectively.

Cash Flow

The following table presents key drivers to free cash flow for the second quarter.

(Dollars in thousands, except percentages)							Variance
Three months ended June 30,	2007			2006			In dollars			In percent
Net cash provided by operating activities	$	4,362		$	15,577		$	(11,215	)		(72.0	)%
Capital expenditures		12,833			12,817			16			0.1	%
Acquisitions and related costs		—			77,571			(77,571	)		(100.0	)%
Proceeds from asset sales and other		(116	)		—			(116	)		(100.0	)%
Free cash flow (a)	$	(8,587	)	$	(74,811	)	$	66,224			88.5	%

(a) We believe that Free Cash Flow [net cash (used in) provided by operating activities, less capital expenditures, plus proceeds from assets sales and other] is a useful metric for evaluating our financial performance, as it is a measure we use internally to assess performance. See Table 2 for a reconciliation of net cash (used in) provided by operating activities to free cash flow and a further discussion as to the reasons we believe this non-GAAP financial measure is useful.

Our net cash provided by operating activities was $ 4.4 million in the second quarter of 2007, compared to net cash provided by operating activities of $15.6 million in the year-ago quarter, or a decrease of $11.2 million. The major components impacting cash flow from operations were an increase in EBITDA offset by a $12.8 million increase in cash interest expense, an increase in working capital and non-cash special charges included in the prior year of $15.1 million resulting from the purchase of Crisa.

Our free cash flow was $(8.6) million during the second quarter 2007, compared to $(74.8) million in the year-ago quarter, an improvement of $66.2 million. The primary contributors to this change were the purchase of Crisa in the second quarter of 2006 and the change in net cash provided by operating activities as discussed above.

Net cash used in financing activities was $4.3 million in the second quarter of 2007, compared to net cash provided by financing activities of $94.9 million in the year-ago quarter, or a decrease of $99.2 million. During the second quarter of 2006, we issued additional debt in connection with the acquisition of Crisa. The use of cash by financing activities in the second quarter of 2007, is primarily attributable to the repayment of borrowings on the ABL Facility.

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The following table presents key drivers to free cash flow for the first six months.

(Dollars in thousands, except percentages)	`						Variance
Six months ended June 30,	2007			2006			In dollars			In percent
Net cash provided by operating activities	$	4,325		$	20,375		$	(16,050	)		(78.8	)%
Capital expenditures		22,626			34,256			(11,630	)		(34.0	)%
Acquisitions and related costs		—			77,571			(77,571	)		(100.0	)%
Proceeds from asset sales and other		1,953			—			1,953			100.0	%
Free cash flow (a)	$	(16,348	)	$	(91,452	)	$	75,104			82.1	%

(a) We believe that Free Cash Flow [net cash (used in) provided by operating activities, less capital expenditures, plus proceeds from assets sales and other] is a useful metric for evaluating our financial performance, as it is a measure we use internally to assess performance. See Table 2 for a reconciliation of net cash (used in) provided by operating activities to free cash flow and a further discussion as to the reasons we believe this non-GAAP financial measure is useful.

Our net cash provided by operating activities was $4.3 million in the first six months of 2007, compared to $20.4 million provided by operating activities in the year-ago period, or a decrease of $16.1 million. The major components impacting cash flow from operations were an increase in EBITDA offset by a $11.7 million increase in cash interest expense, an increase in working capital and non-cash special charges included in the prior year of $15.1 million resulting from the purchase of Crisa.

Our free cash flow was $(16.3) million during the first six months of 2007, compared to $(91.5) million in the year-ago period, an improvement of $75.1 million. The primary contributors to this change were the purchase of Crisa in the second quarter of 2006 for $77.6 million, the change in net cash provided by operating activities as discussed above, a $11.6 million decrease in capital expenditures (driven by a reduction in spending resulting from the completion of construction of new facility in China in 2006), and proceeds from asset sales and other items of $2.0 million, primarily attributable to the sale of excess land in Syracuse, N.Y.

Net cash flow from financing activities was a $10.0 million use of cash during the first six months of 2007, compared to $114.8 million net cash provided by financing activities in the year-ago period. The 2006 net cash provided by financing activities resulted from the additional debt issued for the acquisition of Crisa and the construction of our production facility in China. The use of cash by financing activities in the first six months of 2007, is primarily attributable to the repayment of borrowings on the ABL Facility.

Derivatives

We have Interest Rate Protection Agreements (Rate Agreements) with respect to $200.0 million of debt as a means to manage our exposure to fluctuating interest rates. The Rate Agreements effectively convert this portion of our long-term borrowings from variable rate debt to fixed-rate debt, thus reducing the impact of interest rate changes on future income. The fixed interest rate for our borrowings related to the Rate Agreements at June 30, 2007, excluding applicable fees, is 5.24 percent per year and the total interest rate, including applicable fees, is 12.24 percent per year. The average maturity of these Rate Agreements is 2.4 years at June 30, 2007. Total remaining Senior Notes not covered by the Rate Agreements have fluctuating interest rates with a weighted average rate of 12.38 percent per year at June 30, 2007. If the counterparties to these Rate Agreements were to fail to perform, these Rate Agreements would no longer protect us from interest rate fluctuations. However, we do not anticipate nonperformance by the counterparties. All counterparties’ credit ratings are rated A+ or better. The fair market value for the Rate Agreements at June 30, 2007, was $0.3 million. The fair value of the Rate Agreements is based on the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves. We do not expect to cancel these agreements and expect them to expire as originally contracted.

We also use commodity futures contracts related to forecasted future natural gas requirements. The objective of these futures contracts is to limit the fluctuations in prices paid and potential losses in earnings or cash flows from adverse price movements in the underlying commodity. We consider our forecasted natural gas requirements in determining the quantity of natural gas to hedge. We combine the forecasts with historical observations to establish the percentage of forecast eligible to be hedged, typically ranging from 40 percent to 60 percent of our anticipated requirements, generally six or more months in the future. The fair values of these instruments are determined from market quotes. At June 30, 2007, we had commodity futures contracts for 2,865,000 million British Thermal Units (BTUs) of natural gas with a fair market value of $(2.6) million. We have hedged approximately 33.2 percent of our forecasted natural gas usage through January 2009. At December 31, 2006, we had commodity futures contracts for 3,450,000 million BTUs of natural gas with a fair market value of $(5.3) million.

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During the second quarter of 2007, we entered into a foreign currency contract for 212.0 million pesos for a contractual payment due to Vitro, related to the Crisa acquisition, in January 2008. The fair value of this contract at June 30, 2007 was $0.3 million.

Capital Resources and Liquidity

Based on our current level of operations, we believe our cash flow from operations and available borrowings under our ABL Facility and various other facilities will be adequate to meet our liquidity needs for at least the next twelve months. Our ability to fund our working capital needs, debt payments and other obligations, capital expenditures program and other funding requirements, and to comply with debt agreements, depends on our future operating performance and cash flow.

Outlook

In the face of some weakness in select U.S.A. market niches, we expect third quarter sales to continue to be solid and to be in the range of $200 million to $205 million and EBITDA to be between $23 million and $25 million.

As the result of a very strong first and second quarter, finishing above our EBITDA guidance, and given the strong sales performance, improving margins and our continued expectation for savings from our Crisa operations later in 2007, we are increasing our guidance for 2007 EBITDA to a range of $103 million to $109 million on expected sales of slightly over $800 million.

Reconciliation of Non-GAAP Financial Measures

We sometimes refer to data derived from condensed consolidated financial information but not required by GAAP to be presented in financial statements. Certain of these data are considered “non-GAAP financial measures” under Securities and Exchange Commission (SEC) Regulation G. We believe that non-GAAP data provide investors with a more complete understanding of underlying results in our core business and trends. In addition, we use non-GAAP data internally to assess performance. Although we believe that the non-GAAP financial measures presented enhance investors’ understanding of our business and performance, these non-GAAP measures should not be considered an alternative to GAAP.

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Table 1

Reconciliation of income (loss) before income taxes and minority	Three months ended					Six months ended
interest to EBIT and EBITDA	June 30,					June 30,
(Dollars in thousands)	2007		2006			2007		2006
Income (loss) before income taxes, after minority interest adjustment	$	4,732	$	(14,289	)	$	1,394	$	(13,473	)
Add: Interest expense		16,429		10,200			31,993		13,809
Earnings (loss) before interest and income taxes, after minority interest adjustment (EBIT)		21,161		(4,089	)		33,387		336
Add: Depreciation and amortization (adjusted for minority interest)		10,710		8,158			19,926		16,440
Earnings before interest, taxes, deprecation and amortization, after minority interest adjustment (EBITDA)	$	31,871	$	4,069		$	53,313	$	16,776

We define EBIT as net income before interest expense and income taxes, after minority interest adjustment. The most directly comparable U.S. GAAP financial measure is earnings before interest, income taxes and minority interest.

We believe that EBIT is an important supplemental measure for investors in evaluating operating performance in that it provides insight into company profitability. Libbey’s senior management uses this measure internally to measure profitability. EBIT also allows for a measure of comparability to other companies with different capital and legal structures, which accordingly may be subject to different interest rates and effective tax rates.

The non-GAAP measure of EBIT does have certain limitations. It does not include interest expense, which is a necessary and ongoing part of our cost structure resulting from debt incurred to expand operations. Because this is a material and recurring item, any measure that excludes it has a material limitation. EBIT may not be comparable to similarly titled measures reported by other companies.

We define EBITDA as net income before interest expense, income taxes, depreciation and amortization, after minority interest adjustment. The most directly comparable U.S. GAAP financial measure is earnings before interest, income taxes and minority interest.

We believe that EBITDA is an important supplemental measure for investors in evaluating operating performance in that it provides insight into company profitability and cash flow. Libbey’s senior management uses this measure internally to measure profitability and to set performance targets for managers. It also has been used regularly as one of the means of publicly providing guidance on possible future results. EBITDA also allows for a measure of comparability to other companies with different capital and legal structures, which accordingly may be subject to different interest rates and effective tax rates, and to companies that may incur different depreciation and amortization expenses or impairment charges.

The non-GAAP measure of EBITDA does have certain limitations. It does not include interest expense, which is a necessary and ongoing part of our cost structure resulting from debt incurred to expand operations. EBITDA also excludes depreciation and amortization expenses. Because these are material and recurring items, any measure that excludes them has a material limitation. EBITDA may not be comparable to similarly titled measures reported by other companies.

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Table 2

Reconciliation of net cash provided by operating
activities to free cash flow	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2007			2006			2007			2006
Net cash (used in) provided by operating activities	$	4,362		$	15,577		$	4,325		$	20,375
Less:
Capital expenditures		12,833			12,817			22,626			34,256
Acquisitions and related costs		—			77,571			—			77,571
Plus:
Proceeds from asset sales and other		(116	)		—			1,953			—
Free cash flow	$	(8,587	)	$	(74,811	)	$	(16,348	)	$	(91,452	)

We define free cash flow as net cash (used in) provided by operating activities less capital expenditures and acquisition related costs, adjusted for proceeds from asset sales and other. The most directly comparable U.S. GAAP financial measure is net cash (used in) provided by operating activities.

We believe that free cash flow is important supplemental information for investors in evaluating cash flow performance in that it provides insight into the cash flow available to fund such things as discretionary debt service, acquisitions and other strategic investment opportunities. Even though this measure does not exclude certain items within management’s discretion, it is the measure of performance we use to internally evaluate the overall performance of the business.

Free cash flow is used in conjunction with and in addition to results presented in accordance with U.S. GAAP. Free cash flow is neither intended to represent nor be an alternative to the measure of net cash (used in) provided by operating activities recorded under U.S. GAAP. Free cash flow may not be comparable to similarly titled measures reported by other companies.

Table 3

Reconciliation of working capital
(Dollars in thousands)	June 30, 2007		December 31, 2006
Accounts receivable (net)	$	109,822	$	100,230
Plus:
Inventories (net)		175,169		159,123
Less:
Accounts payable		65,359		67,493
Working capital	$	219,632	$	191,860

We define working capital as accounts receivable (net) plus inventories (net) less accounts payable.

We believe that working capital is important supplemental information for investors in evaluating liquidity in that it provides insight into our ability to have net current resources to fund our ongoing operations. Working capital is a measure used by management in internal evaluations of cash availability and operational performance.

Working capital is used in conjunction with and in addition to results presented in accordance with U.S. GAAP. Working capital is neither intended to represent nor be an alternative to any measure of liquidity and operational performance recorded under U.S. GAAP. Working capital may not be comparable to similarly titled measures reported

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Item 3. Qualitative and Quantitative Disclosures about Market Risk

Currency

We are exposed to market risks due to changes in currency values, although the majority of our revenues and expenses are denominated in the U.S. dollar. The currency market risks include devaluations and other major currency fluctuations relative to the U.S. dollar, euro, RMB or Mexican peso that could reduce the cost competitiveness of our products compared to foreign competition.

Interest Rates

We are exposed to market risks associated with changes in interest rates on our floating debt and have entered into Interest Rate Protection Agreements (Rate Agreements) with respect to $200.0 million of debt as a means to manage our exposure to fluctuating interest rates. The Rate Agreements effectively convert this portion of our long-term borrowings from variable rate debt to fixed-rate debt, thus reducing the impact of interest rate changes on future income. We had $180.5 million of debt subject to fluctuating interest rates at June 30, 2007. A change of one percentage point in such rates would result in a change in interest expense of approximately $1.8 million on an annual basis. If the counterparties to these Rate Agreements were to fail to perform, we would no longer be protected from interest rate fluctuations by these Rate Agreements. However, we do not anticipate nonperformance by the counterparties. All counterparties’ credit ratings are rated A+ or better.

Natural Gas

We are also exposed to market risks associated with changes in the price of natural gas. We use commodity futures contracts related to forecasted future natural gas requirements of our manufacturing operations. The objective of these futures contracts is to limit the fluctuations in prices paid and potential losses in earnings or cash flows from adverse price movements in the underlying natural gas commodity. We consider the forecasted natural gas requirements of our manufacturing operations in determining the quantity of natural gas to hedge. We combine the forecasts with historical observations to establish the percentage of forecast eligible to be hedged, typically ranging from 40 percent to 60 percent of our anticipated requirements, generally six or more months in the future. For our natural gas requirements that are not hedged, we are subject to changes in the price of natural gas, which affect our earnings. If the counterparties to these futures contracts were to fail to perform, we would no longer be protected from natural gas fluctuations by the futures contracts. However, we do not anticipate nonperformance by these counterparties. All counterparties’ credit ratings are rated A+ or better.

Retirement Plans

We are exposed to market risks associated with changes in the various capital markets. Changes in long-term interest rates affect the discount rate that is used to measure our benefit obligations and related expense. Changes in the equity and debt securities markets affect the performance of our pension plans asset performance and related pension expense. Sensitivity to these key market risk factors is as follows:

• A change of 1 percent in the discount rate would change our annual expense by approximately $3.9 million.

• A change of 1 percent in the expected long-term rate of return on plan assets would change annual expense by approximately $2.4 million.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 (the “Exchange Act”) reports are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in our controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II — OTHER INFORMATION

This document and supporting schedules contain statements that are not historical facts and constitute projections, forecasts or forward-looking statements. These forward-looking statements reflect only our best assessment at this time, and may be identified by the use of words or phrases such as “anticipate,” “believe,” “expect,” “intend,” “may,” “planned,” “potential,” “should,” “will,” “would” or similar phrases. Such forward-looking statements involve risks and uncertainty; actual results may differ materially from such statements, and undue reliance should not be placed on such statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

Item 1A. Risk Factors

The following factors are the most significant factors that can impact period-to-period comparisons and may affect the future performance of our businesses. New risks may emerge, and management cannot predict those risks or estimate the extent to which they may affect our financial performance.

• Slowdowns in the retail, travel, restaurant and bar, or entertainment industries, such as those caused by general economic downturns, terrorism, health concerns or strikes or bankruptcies within those industries, could reduce our revenues and production activity levels.

• We face intense competition and competitive pressures that could adversely affect our results of operations and financial condition.

• International economic and political factors could affect demand for imports and exports, and our financial condition and results of operations could be adversely impacted as a result.

• We may not be able to effectively integrate Crisa or future businesses we acquire.

• We may not be able to achieve the objectives of our strategic plan.

• Natural gas, the principal fuel we use to manufacture our products, is subject to fluctuating prices; fluctuations in natural gas prices could adversely affect our results of operations and financial condition.

• If we are unable to obtain sourced products or materials at favorable prices, our operating performance may be adversely affected.

• Charges related to our employee pension and postretirement welfare plans resulting from market risk and headcount realignment may adversely affect our results of operations and financial condition.

• Our business requires significant capital investment and maintenance expenditures that we may be unable to fulfill.

• Our business requires us to maintain a large fixed cost base that can affect our profitability.

• Unexpected equipment failures may lead to production curtailments or shutdowns.

• If our investments in new technology and other capital expenditures do not yield expected returns, our results of operations could be reduced.

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• An inability to meet targeted production and profit margin goals in connection with the operation of our new production facility in China could result in significant additional costs or lost sales.

• We may not be able to renegotiate collective bargaining agreements successfully when they expire; organized strikes or work stoppages by unionized employees may have an adverse effect on our operating performance.

• We are subject to risks associated with operating in foreign countries. These risks could adversely affect our results of operations and financial condition.

• High levels of inflation and high interest rates in Mexico could adversely affect the operating results and cash flows of Crisa.

• Fluctuation of the currencies in which we conduct operations could adversely affect our financial condition and results of operations.

• Fluctuations in the value of the foreign currencies in which we operate relative to the U.S. dollar could reduce the cost competitiveness of our products or those of our subsidiaries.

• Devaluation or depreciation of, or governmental conversion controls over, the foreign currencies in which we operate could affect our ability to convert the earnings of our foreign subsidiaries into U.S. dollars.

• If our hedges do not qualify as highly effective or if we do not believe that forecasted transactions would occur, the changes in the fair value of the derivatives used as hedges would be reflected in our earnings.

• We are subject to various environmental legal requirements and may be subject to new legal requirements in the future; these requirements could have a material adverse effect on our operations.

• Our failure to protect our intellectual property or prevail in any intellectual property litigation could materially and adversely affect our competitive position, reduce revenue or otherwise harm our business.

• Our business may suffer if we do not retain our senior management.

• Our high level of debt, as well as incurrence of additional debt, may limit our operating flexibility, which could adversely affect our results of operations and financial condition and prevent us from fulfilling our obligations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuers Purchases of Equity Securities

					Total Number of
					Shares Purchased as		Maximum Number of
					Part of Publicly		Shares that May Yet Be
	Total Number of		Average Price		Announced Plans or		Purchased Under the
Period	Shares Purchased		Paid per Share		Programs		Plans or Programs (1)
April 1 to April 30, 2007		—		—		—		1,000,000
May 1 to May 31, 2007		—		—		—		1,000,000
June 1 to June 30, 2007		—		—		—		1,000,000
Total		—		—		—		1,000,000

(1) We announced on December 10, 2002, that our Board of Directors authorized the purchase of up to 2,500,000 shares of our common stock in the open market and negotiated purchases. There is no expiration date for this plan. In 2003, 1,500,000 shares of our common stock were purchased for $38.9 million. Our ABL Facility and the indentures governing the Senior Secured Notes and the PIK Notes significantly restrict our ability to repurchase additional shares.

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Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of the Shareholders of the Company was held on May 3, 2007. At the meeting, action was taken with respect to the following matters:

(a) Carlos V. Duno, Peter C. McC. Howell and Richard I. Reynolds were reelected as directors of the Company. Each will serve for a term of 3 years or until his successor is elected. The terms of office of William A. Foley, Deborah G. Miller, Terence P. Stewart, John F. Meier, Carol B. Moerdyk and Gary L. Moreau continued after the meeting.

(b) The appointment of Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2007 was ratified.

The following table sets forth the tabulation of votes with respect to each of the matters described above:

	Shares		Shares		Shares		Abstentions /
	Voted For		Voted Against		Withheld		Broker Non-Votes
a. Election of Directors
Carlos V. Duno		13,538,681		—		46,844		—
Peter C. McC. Howell		13,524,775		—		60,750		—
Richard I. Reynolds		13,525,973		—		59,552		—
b. Ratification of auditors		13,560,698		19,530				5,297

Item 5. Other Information

(b) There has been no material change to the procedures by which security holders may recommend nominees to the Company’s board of directors.

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Item 6. Exhibits

Exhibits: The exhibits listed in the accompanying “Exhibit Index” are filed as part of this report.

EXHIBIT INDEX

Exhibit
Number	Description
3.1	Restated Certificate of Incorporation of Libbey Inc. (filed as Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 and incorporated herein by reference).
3.2	Amended and Restated By-Laws of Libbey Inc. (filed as Exhibit 3.01 to Registrant’s Form 8-K filed February 7, 2005 and incorporated herein by reference).
4.1	Credit Agreement, dated June 16, 2006, among Libbey Glass Inc. and Libbey Europe B.V., Libbey Inc., the other loan parties party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., J.P. Morgan Europe Limited, LaSalle Bank Midwest National Association, Wells Fargo Foothill, LLC, Fifth Third Bank, and J.P. Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger. (filed as Exhibit 4.1 to Registrant’s Form 8-K filed June 21, 2006 and incorporated herein by reference).
4.2	Indenture, dated June 16, 2006, among Libbey Glass Inc., Libbey Inc., the Subsidiary Guarantors party thereto and The Bank of New York Trust Company, N.A., as trustee. (filed as Exhibit 4.2 to Registrant’s Form 8-K filed June 21, 2006 and incorporated herein by reference).
4.3	Form of Floating Rate Senior Secured Note due 2011. (filed as Exhibit 4.3 to Registrant’s Form 8-K filed June 21, 2006 and incorporated herein by reference).
4.4	Registration Rights Agreement, dated June 16, 2006, among Libbey Glass Inc., Libbey Inc., the Subsidiary Guarantors party thereto and the Initial Purchasers named therein. (filed as Exhibit 4.4 to Registrant’s Form 8-K filed June 21, 2006 and incorporated herein by reference).
4.5	Indenture, dated June 16, 2006, among Libbey Glass Inc., Libbey Inc., the Subsidiary Guarantors party thereto and Merrill Lynch PCG, Inc. (filed as Exhibit 4.5 to Registrant’s Form 8-K filed June 21, 2006 and incorporated herein by reference).
4.6	Form of 16% Senior Subordinated Secured Pay-in-Kind Note due 2011. (filed as Exhibit 4.6 to Registrant’s Form 8-K filed June 21, 2006 and incorporated herein by reference).
4.7	Warrant, issued June 16, 2006. (filed as Exhibit 4.7 to Registrant’s Form 8-K filed June 21, 2006 and incorporated herein by reference).
4.8	Registration Rights Agreement, dated June 16, 2006, among Libbey Inc. and Merrill Lynch PCG, Inc. (filed as Exhibit 4.8 to Registrant’s Form 8-K filed June 21, 2006 and incorporated herein by reference).
4.9	Intercreditor Agreement, dated June 16, 2006, among Libbey Glass Inc., JPMorgan Chase Bank, N.A., The Bank of New York Trust Company, N.A., Merrill Lynch PCG, Inc. and the Loan Parties party thereto. (filed as Exhibit 4.9 to Registrant’s Form 8-K filed June 21, 2006 and incorporated herein by reference).
10.1	Limited Waiver and Second Amendment to Purchase Agreement, dated June 16, 2006, among Vitro, S.A. de C.V., Crisa Corporation, Crisa Libbey S.A. de C.V., Vitrocrisa Holding, S. de R.L. de C.V., Vitrocrisa S. de R.L. de C.V., Vitrocrisa Commercial, S. de R.L. de C.V., Crisa Industrial, L.L.C., Libbey Mexico, S. de R.L. de C.V. Libbey Europe B.V., and LGA3 Corp. (filed as Exhibit 10.1 to Registrant’s Form 10-Q for the quarter ended June 30, 2006 and incorporated herein by reference)
10.2	Guaranty, dated May 31, 2006, executed by Libbey Inc. in favor of Fondo Stiva S.A. de C.V. (filed as Exhibit 10.2 to Registrant’s Form 10-Q for the quarter ended June 30, 2006 and incorporated herein by reference)
10.3	Guaranty Agreement, dated June 16, 2006, executed by Libbey Inc. in favor of Vitro, S.A. de C.V. (filed as Exhibit 10.3 to Registrant’s Form 10-Q for the quarter ended June 30, 2006 and incorporated herein by reference)
10.4	Transition Services Agreement, dated June 16, 2006, among Crisa Libbey S.A. de C.V., Vitrocrisa Holding, S. de R.L. de C.V., Vitrocrisa S. de R.L. de C.V., Vitrocrisa Commercial, S. de R.L. de C.V., Crisa Industrial, L.L.C. and Vitro S.A. de C.V. (filed as Exhibit 10.1 to Registrant’s Form 8-K filed June 21, 2006 and incorporated herein by reference)
10.5	2006 Omnibus Incentive Plan of Libbey Inc. (filed as Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 and incorporated herein by reference)
10.6	Form of Employment Agreement dated May 7, 2007 between Libbey Inc. and Jonathan S. Freeman.
10.7	Form of Change in Control Agreement dated May 7, 2007 between Libbey Inc. and Jonathan S. Freeman.
10.8	Form of Employment Agreement dated May 23, 2007 between Libbey Inc. and Gregory T. Geswein.
10.9	Form of Change in Control Agreement dated May 23, 2007 between Libbey Inc. and Gregory T. Geswein.
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) (filed herein).
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) (filed herein).
32.1	Chief Executive Officer Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002 (filed herein).
32.2	Chief Financial Officer Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002 (filed herein).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LIBBEY INC.
Date: August 9, 2007	By	/s/ Gregory T. Geswein
	Gregory T. Geswein,
	Vice President, Chief Financial Officer

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EX-10.6

Exhibit 10.6

EMPLOYMENT AGREEMENT

          THIS EMPLOYMENT AGREEMENT (the “Agreement”), dated as of May 7, 2007, between LIBBEY INC., a Delaware corporation (the “Company”), and Jonathan S. Freeman (the “Executive”).

          WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company, to serve as an officer of the Company upon the terms and conditions set forth herein.

          NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

     1. Term of Agreement. The term of this Agreement shall commence on the date of this Agreement (the “Effective Date”) and shall continue through December 31, 2007, provided however, that commencing on January 1, 2008 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless not later than September 30 of the year preceding such extension of the term, the Company shall have given written notice to the Executive that it does not wish to extend this Agreement beyond the expiration of the then current term. Employment hereunder by the Company or its affiliates shall continue indefinitely during the term of this Agreement until terminated as provided in Section 4. Not withstanding the foregoing, the term of this Agreement shall automatically end on the last day of the month in which the Executive reaches age 65.

     2. Position and Duties.

          (a) Position. The Executive hereby agrees to serve as an officer of the Company and shall perform all duties assigned by the Company commensurate with such position and shall devote the Executive’s best efforts to the performance of services to the Company in accordance with the terms hereof and as may reasonably be requested by the Company. For purposes of this Agreement “Officer” of the Company shall mean an executive elected by the Board of Directors of the Company (the “Board”) as an officer and who enters into a written employment agreement authorized by the Board.

          (b) Other Activities. While employed pursuant to this Agreement, the Executive shall not, other than in the performance of duties inherent in, and in furtherance of, the business of the Company, engage in any other business or commercial activity as an employee, consultant, or any other capacity, whether or not any compensation is received therefore, provided, however, that nothing herein shall prevent the Executive from (i) making and managing personal investments, (ii) performing occasional assistance to family members and friends, including but not limited to service as a director of a family owned or private business enterprise, (iii) engaging in community and/or charitable activities, including without limitation service as a director, trustee or officer of an educational, welfare, social, religious or civic organization or charity, (iv) serving as a trustee or director or similar position of a public corporation or public business enterprise, but for only one such public corporation or public business enterprise at any one time, or (v) engaging in such other activities as are approved in writing by the Chief Executive Officer, in each case (i) – (v) which singly or in the aggregate do

not interfere with the proper performance of the Executive’s duties and responsibilities to the Company and are consistent with Section 9 of this Agreement.

     3. Compensation. In consideration of the performance of his duties hereunder, the Executive shall be entitled to receive the salary, bonus and benefits set forth on Schedule A. All amounts payable to the Executive under this Section 3 shall be paid in accordance with the Company’s regular payroll practices (e.g., timing of payments and standard employee deductions, such as income and employment tax withholdings, medical benefit contributions and parking fees among others). No additional compensation shall be payable to the Executive by reason of the number of hours worked or any hours worked on Saturdays, Sundays or holidays, by reason of special responsibilities assumed (whether on behalf of the Company or any of its subsidiaries or affiliates), special projects completed, or otherwise. The Executive’s compensation shall be reviewed by the Chief Executive Officer, the Board or the Compensation Committee of the Board (the “Compensation Committee”) periodically for possible merit increases and other changes as such reviewer deems appropriate.

     4. Termination of Employment. Either party may terminate the Executive’s employment hereunder at any time and for any reason, without advance notice; provided, however, that if the Executive’s employment is terminated for any of the following reasons, the following provisions shall apply:

          (a) Termination for Cause. If the Executive’s employment is terminated for Cause, the Company shall pay to the Executive all base salary, when due, through the Date of Termination at the then current rate in effect at the time the Notice of Termination (as defined in Section 4(f)) is given plus, all other amounts and benefits to which the Executive is entitled under any pension plan, retirement savings plan, equity participation plan, stock purchase plan, medical benefits and other benefits of the Company or provided by law, at the time such payments are due and the Company shall have no further obligations to the Executive under this Agreement. Without waiving any rights the Company may have hereunder or otherwise, the Company hereby expressly reserves its rights to proceed against the Executive for damages in connection with any claim or cause of action that the Company may have arising out of or related to the Executive’s employment hereunder. “Cause” shall mean (a) the Executive’s willful and continued failure to substantially perform the Executive’s duties with the Company (other than any such failure resulting from an incapacity due to physical or mental illness or any such actual or anticipated failure after the Executive’s issuance of a Notice of Termination (as defined in Section 4(d)) for Good Reason), after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties, (b) the Executive’s willful and continued failure to substantially follow and comply with the specific and lawful directives of the Board, as reasonably determined by the Board (other than any such failure resulting from an incapacity due to physical or mental illness or any such actual or anticipated failure after the Executive’s issuance of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially followed or complied with the directives of the Board, (c) the Executive’s willful commission of an act of fraud or dishonesty resulting in material economic or financial injury to the Company, or (d) the Executive’s willful engagement in illegal conduct or gross misconduct, in each case which is materially and demonstrably injurious to the Company.

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For purposes of this Section 4(a), no act, or failure to act, shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith. Notwithstanding the foregoing, the Executive shall not be deemed terminated for Cause pursuant to this section unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (³/₄) of the entire membership of the Board at a meeting of the Board (after reasonable notice to the Executive, an opportunity for the Executive, together with counsel, to be heard before the Board and a reasonable opportunity to cure), finding that in the Board’s good faith opinion, the Executive was guilty any of the conduct set forth above in this section and specifying the particulars thereof in reasonable detail.

          (b) Death. If the Executive’s employment is terminated due to the Executive’s death, within sixty (60) days after the Company receives written notice of appointment of a personal representative (on behalf of the Executive’s estate), the Executive’s estate shall be entitled to compensation, vesting and benefits as described under Section 5(a) below.

          (c) Permanent Disability. If the Executive’s employment is terminated due to Executive’s Permanent Disability, the Executive shall be entitled to such compensation, vesting and benefits as described under Section 5(b) below, which in addition to any payments under the Company’s long-term disability policy, shall constitute full and complete satisfaction of the Company’s obligations hereunder. For purposes of this Agreement, “Permanent Disability” means any incapacity due to physical or mental illness, a result of which is that the Executive shall have been absent from the full-time performance of his duties with the Company for six (6) consecutive months and the Executive shall not have returned to the full-time performance of his duties within thirty (30) days after written notice of termination is given to the Executive.

          (d) Termination Without Cause or For Good Reason. If the Executive’s employment is terminated by the Executive with “Good Reason” or by the Company without cause, the Executive shall be entitled to such compensation, vesting and benefits as described under Section 5(b) below. For purposes of this Agreement, the following circumstances shall constitute “Good Reason” unless such circumstances are fully corrected (provided such circumstances are capable of correction) prior to the Date of Termination (as defined in section 4(g)):

1)	The Executive ceases to be an Officer of the Company reporting to another Officer.
2)	The Executive’s Base Salary is reduced by a greater percentage than the reduction applicable to any other Officer.
3)	There is a reduction in the incentive compensation target established for the position held by the Executive that is not similarly applied in the same or similar manner to all other Officers.
4)	There is a reduction or elimination of an executive benefit or an employee benefit which reduction is not applicable to all other Officers in the same or similar manner provided however the number of awards made pursuant to any stock option or equity participation plan

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is at the discretion of the Chief Executive Officer, the Compensation Committee or the Board at all times and shall in no case be deemed to be Good Reason.

5)

There is a material breach of this Agreement by the Company that is not remedied prior to the expiration of the thirty (30) day period after receipt of written notice thereof given by the Executive to the Company.

6)

The Company exercises its right not to extend the term of this Agreement beyond the then current term, unless such right is exercised with respect to all employment agreements in effect with respect to other Officers. For purposes of this Section 4 (d) 6) the term employment agreements does not include agreements of the type described in Section 11(n) relating to a change in control of the Company.

The Executive’s right to terminate employment for Good Reason pursuant to this Section 4(d) shall not be affected by the Executive’s incapacity due to physical or mental illness or continued employment provided however. Good Reason shall be asserted in writing delivered to the Chief Executive Officer within ninety (90) days of the date the Executive knew or should have known of the event giving rise to the Good Reason and if not so asserted within the ninety (90) day period shall be deemed to be conclusively waived.

     (e) Termination by Resignation or Retirement. If the Executive’s employment is terminated by the Executive’s resignation or retirement, other than at the written request of the Company or for Good Reason, the Company shall pay the Executive all base salary, when due, through the date of termination at the then current rate in effect at the time the Notice of Termination is given plus all other amounts and benefits to which the Executive is entitled under any compensation plan, or practice of the Company, pension plan, retirement savings plan, equity participation plan, stock purchase plan, medical benefits and other benefits of the Company or provided by law, at the time such payments are due and the Company shall have no further obligations to the Executive under this Agreement.

     (f) Notice of Termination. Any purported termination of the Executive’s employment by the Company or by the Executive (other than termination due to death which shall terminate employment automatically, voluntary resignation or retirement not for Good Reason) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 4. “Notice of Termination” shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

     (g) Date of Termination, Etc. “Date of Termination” shall mean (a) if the Executive’s employment is terminated due to death, the date of death; (b) if the Executive’s employment is terminated for Permanent Disability, thirty (30) days after Notice of Termination is given (provided that the Executive has not returned to the full-time performance of the Executive’s duties during such thirty (30) day period), (c) if the Executive’s employment is

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terminated for Cause or for Good Reason, or for any other reason (other than death, Disability, voluntary resignation or retirement not for Good Reason), the date specified in the Notice of Termination (which, in the case of a termination for Cause shall not be less than thirty (30) days from the date such Notice of Termination is given, and in the case of a termination for Good Reason shall not be less than fifteen (15) nor more than sixty (60) days from the date such Notice of Termination is given) or (d) if the Executive’s employment is terminated by the Executive’s resignation or retirement, other than at the written request of the Company or for Good Reason, the Date of Termination shall be the date when the Executive ceases to be an employee of the Company by reason of the resignation or retirement. Notwithstanding anything to the contrary contained in this Section 4(g), if within fifteen (15) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, then the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, or otherwise; provided, however, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence; provided, further, that in the event of the Executive’s death pending a dispute, if the resolution of such dispute is ultimately in the Executive’s favor, then the Date of Termination shall be the date specified in the Notice of Termination.

     5. Compensation upon Termination.

          (a) Death. If the Executive’s employment with the Company is terminated by reason of the Executive’s death, the Executive’s estate shall be entitled to the following:

          (i) payment of the Executive’s base salary accrued through the Date of Termination;

          (ii) payment of the Executive’s incentive compensation under all plans in effect at the Date of Termination paid at target but prorated over the period of each applicable plan through the Date of Termination;

          (iii) one (1) times the sum of the Executive’s annual base salary at the then current rate in effect as of the Date of Termination payable in one (1) lump-sum payment;

          (iv) continuation of the Executive’s medical, prescription drug, dental and vision benefits for the Executive’s covered dependents for a period of twelve (12) months following the Date of Termination without any contribution required of the Executive’s dependents; and

          (v) The Executive’s equity participation awards granted pursuant to any equity participation plan of the Company shall immediately vest as of the Date of Termination and be exercisable for a period of three years following the Date of Termination or for such longer period following the Date of Termination specified by the award granted to the Executive, provided however, nothing in this Agreement shall act to extend the term of any equity participation award and no equity participation award may

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be exercised after the expiration of the term of the award specified in the award granted to the Executive.

          (b) Termination for Permanent Disability, Without Cause or for Good Reason. If the Executive’s employment with the Company is terminated for Permanent Disability, or by the Company without Cause, or by the Executive for Good Reason, the Executive shall be entitled to the following:

     (i) payment of the Executive’s base salary accrued through the Date of Termination;

     (ii) payment of the Executive’s annual incentive compensation paid at the lesser of the Executive’s annual target or the average percentage of the target paid to all other Officers, but prorated over the period of each applicable plan through the Date of Termination;

     (iii) payment of the Executive’s long term incentive compensation under all plans in effect at the Date of Termination paid at the Executive’s target, but prorated over the period of each applicable plan through the Date of Termination;

     (iv) two (2) times the sum of Executive’s annual Base Compensation at the then current rate in effect at the time of the Notice of Termination, payable in equal installments over a period of twenty-four (24) months following the Date of Termination, or at the election of the Company payable in one (1) lump-sum payment;

     (v) payment of the Executive’s annual incentive compensation pursuant to the terms of the annual incentive compensation plan at the lesser of the Executive’s annual target or the average percentage of the target paid to all other Officers, for all annual compensation periods ending twenty four (24) months after the Date of Termination, with the final payment prorated to the end of the twenty four month period;

     (vi) continuation of the Executive’s medical, prescription drug, dental and life insurance benefits for a period of twenty-four (24) months following the Date of Termination without any contribution required of the Executive and the dependents of the Executive; and

     (vii) the Executive’s equity participation awards granted pursuant to any equity participation plan of the Company shall immediately vest as of the Date of Termination and be exercisable for a period of three years following the Date of Termination or for such longer period following the Date of Termination specified by the award granted to the Executive, provided however, nothing in this Agreement shall act to extend the term of any equity participation award and no equity participation award may be exercised after the expiration of the term of the award specified in the award granted to the Executive.

     (c)  Payments. Payment of benefits under Section 5 (a) is subject to reasonable evidence of authority to act for the decedent’s estate. Payment of benefits under

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Sections 5 (b)(ii),(iii),(iv) and (v) are subject to the release provided under Section 5 (d) becoming effective. Except as otherwise provided in this Agreement or accelerated by the Company at its election all payments under this Section 5 shall be made in accordance with the Company’s normal pay practices, and shall be subject to applicable withholdings. Continuation of benefits under Section 5(a)(iv) or 5(b)(vi), shall be in addition to and not concurrent with any continuation rights Executive may have under the Consolidated Omnibus Budget Reconciliation Act of 1985, or similar state law.

     (d) Release. Payment of any amount to, or on behalf of, the Executive pursuant to Sections 5(b)(ii),(iii),(iv) and (v) of this Agreement and Executive’s acceptance of such amounts shall be subject to the execution of a general waiver and release of claims in the form attached hereto as Exhibit A or such other form as the Company may reasonably request to provide a complete release of all claims and causes of action the Executive or the Executive’s estate may have against the Company except claims and causes of action arising out of, or related to, the obligations of the Company pursuant to this Agreement and Claims (as defined in Exhibit A) for vested benefits under any pension plan, retirement plan and savings plan, rights under any equity participation plan and stock purchase plan and rights to continuation of medical care coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 and any similar state law.

     (e) No Offset for Benefits. There shall be no offset to any compensation or other benefits otherwise payable to, or on behalf of, the Executive pursuant to the terms of Section 5 of this Agreement as a result of the receipt by Executive of any pension, retirement or other benefit payments (including, but not limited to, accrued vacation) except that there shall be an offset for severance compensation payable pursuant to the Company’s benefit plans and programs based on the length of service with the Company and except as provided by Section 11(n).

     (f) Excise Tax.

     (i) Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment or distribution to the Executive or for the Executive’s benefit (whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise (the “Payment”) would be subject to the excise tax imposed by section 4999 of the Code or any successor provision (the “Excise Tax”), then the Executive shall be entitled to receive from the Company an additional payment (the “Gross-Up Payment”) in an amount such that the net amount of the Payment and the Gross-Up Payment retained by the Executive after the calculation and deduction of all Excise Taxes (including any interest or penalties imposed with respect to such taxes) on the payment and all federal, state and local income tax, employment tax and Excise Tax (including any interest or penalties imposed with respect to such taxes) on the Gross-Up Payment provided for in this Section 5(g), and taking into account any lost or reduced tax deductions on account of the Gross-Up Payment, shall be equal to the Payment;

     (viii) all determinations required to be made under this Section 5, including whether and when the Gross-Up Payment is required and the amount of such Gross-Up Payment, and the assumptions to be utilized in arriving at such determinations

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shall be made in good faith by the Accountants (as defined below) which shall provide the Executive and the Company with detailed supporting calculations with respect to such Gross-Up Payment within fifteen (15) business days of the receipt of notice from the Executive or the Company that has received or will receive a Payment. For the purposes of this Section 5(f), the “Accountants” shall mean the Company’s independent certified public accountants serving immediately prior to the change in control that with other events results in the imposition of the Excise Tax. In the event that the Accountants are also serving as accountant or auditor for the individual, entity or group effecting a change in control that with other events results in the imposition of the Excise Tax, the Company shall appoint another recognized public accounting firm to make the determinations required hereunder (which accounting firm shall also be referred to herein as the “Accountants”). All fees and expenses of the Accountants shall be borne solely by the Company. For the purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, such Payments will be treated as “parachute payments” within the meaning of section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless and except to the extent that in the opinion of the Accountants such Payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Excise Tax. For purposes of calculating whether the Excise Tax is applicable and determining the amount of the Gross-Up Payment, (A) to the extent not otherwise specified herein, reasonable assumptions and approximations may be made, (B) good faith interpretations of the Code may be relied upon and (C) the Executive shall be deemed to pay Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Gross-Up Payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of your adjusted gross income), and to have otherwise allowable deductions for Federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the Gross-Up Payment in the Executive’s adjusted gross income. To the extent practicable, any Gross-Up Payment with respect to any Payment shall be paid by the Company at the time the Executive is entitled to receive the Payment and in no event will any Gross-Up Payment be paid later than five days after the receipt by the Executive of the Accountant’s determination. Any determination by the Accountants shall be binding upon the Company and the Executive. As a result of uncertainty in the application of section 4999 of the Code at the time of the initial determination by the Accountants hereunder, it is possible that the Gross-Up Payment made will have been an amount less than the Company should have paid pursuant to this Section 5(f) (the “Underpayment”). In the event that the Company exhausts its remedies pursuant to Section 5(f) and the Executive is required to make a payment of any Excise Tax, the Underpayment shall be promptly paid by the Company to or for the Executive’s benefit; and

     (ix) the Executive shall notify the Company in writing of any claim by

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the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes, interest and/or penalties with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

     (A) give the Company any information reasonably requested by the Company relating to such claim;

     (B) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company;

     (C) cooperate with the Company in good faith in order to effectively contest such claim; and

     (D) permit the Company to participate in any proceedings relating to such claims;

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify the Executive for and hold the Executive harmless from, on an after-tax basis, any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of all related costs and expenses. Without limiting the foregoing provisions of this Section 5(f), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify the Executive for and hold the Executive harmless from, on an after-tax basis, any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance (including as a result of any forgiveness by the Company of such advance); provided, further, that any extension of the statute of limitations relating to the payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to

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issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

     6. Termination Obligations.

          (a) The Executive hereby acknowledges and agrees that all personal property and equipment furnished to or prepared by the Executive in the course of or incident to the Executive’s employment by the Company belongs to the Company and shall be promptly returned to the Company upon termination of the employment. “Personal property” includes, without limitation, all books, manuals, records, reports, notes, contracts, lists, blueprints, and other documents, or materials, or copies thereof (including computer files), and all other proprietary information relating to the business of the Company or any affiliate. Following termination of employment, the Executive will not retain any written or other tangible material containing any proprietary information or Confidential Information (as defined below) of the Company or any affiliate of the Company.

          (b) Upon termination of the employment, the Executive shall be deemed to have resigned from all offices and directorships then held with the Company or any affiliate of the Company.

          (c) The representations and warranties contained herein and the Executive’s obligations and/or agreements under Sections 6, 7, 8, 9, 10 and 11 hereof shall survive termination of the employment and the expiration of this Agreement.

          (d) Construction. Any reference to the Company in this Section 6 shall include the Company and any entity which owns, is owned by or under common ownership with the Company (an “Affiliate”).

     7. Records and Confidential Data.

          (a) The Executive acknowledges that in connection with the performance of his duties during the term of this Agreement, the Company will make available to the Executive, or the Executive will have access to, certain Confidential Information (as defined below) of the Company. The Executive acknowledges and agrees that any and all Confidential Information learned or obtained by the Executive during the course of his employment by the Company or otherwise (including, without limitation, information that the Executive obtained through or in connection with the Executive’s stock ownership in and employment by the Company prior to the date hereof) whether developed by the Executive alone or in conjunction with others or otherwise, shall be and is the property of the Company.

          (b) The Executive shall keep all Confidential Information confidential and will not use such Confidential Information other than in connection with the Executive’s discharge of his duties hereunder. The Executive will safeguard the Confidential Information from unauthorized disclosure. This covenant is not intended to, and does not limit in any way, any of the Executive’s duties or obligations to the Company under statutory or common law not to disclose or to make personal use of the Confidential Information or trade secrets.

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          (c) Following the Executive’s termination hereunder, as soon as possible after the Company’s written request, the Executive will return to the Company all written Confidential Information which has been provided to the Executive and the Executive will destroy all copies of any analyses, compilations, studies or other documents prepared by the Executive or for the Executive’s use containing or reflecting any Confidential Information. Within ten (10) business days of the receipt of such request by the Executive, the Executive shall, upon written request of the Company, deliver to the Company a notarized document certifying that such written Confidential Information has been returned or destroyed in accordance with this Section 7(c).

          (d) For the purposes of this Agreement, “Confidential Information” shall mean all confidential and proprietary information of the Company, including, without limitation, the Company’s marketing strategies, pricing policies or characteristics, customers and customer information, product or product specifications, designs, software systems, cost of equipment, customer lists, business or business prospects, plans, proposals, codes, marketing studies, research, reports, investigations, public relations methods, or other information of similar character. For purposes of this Agreement, the Confidential Information shall not include and the Executive’s obligations under this Section 7 shall not extend to (i) information which is available in the public domain, (ii) information obtained by the Executive from third persons (other than employees of the Company or its affiliates) not under agreement to maintain the confidentiality of the same and (iii) information which is required to be disclosed by law or legal process.

          (e) Construction. Any reference to the Company in this Section 7 shall include the Company and its Affiliates.

     8. Assignment of Inventions.

          (a) Definition of Inventions. “Inventions” mean discoveries, developments concepts, ideas, methods, designs, improvements, inventions, formulas, processes, techniques, programs, know-how and data, whether or not patentable or registerable under copyright or similar statutes, except any of the foregoing that (i) is not related to the business of the Company or the Company’s actual or demonstrable research or development, (ii) does not involve the use of any equipment, supplies, facility or Confidential Information of the Company, (iii) was developed entirely on the Executive’s own time, and (iv) does not result from any work performed by the Executive for the Company.

          (b) Assignment. The Executive agrees to and hereby does assign to the Company, without further consideration, all of his right, title and interest in any and all Inventions the Executive may make during the term hereof.

          (c) Duty to Disclose and Assist. The Executive agrees to promptly disclose in writing all Inventions to the Company, and to provide all assistance reasonably requested by the Company in the preservation of the Company’s interests in the Inventions including obtaining patents in any country throughout the world. Such services will be without additional compensation if the Executive is then employed by the Company and for reasonable compensation and subject to his reasonable availability if he is not. If the Company cannot, after reasonable effort, secure the Executive’s signature on any document or documents

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needed to apply for or prosecute any patent, copyright, or other right or protection relating to an Invention, whether because of his physical or mental incapacity or for any other reason whatsoever, the Executive hereby irrevocably designates and appoints the Company and its duly authorized Officers and agents as his agent and attorney-in-fact, to act for and on his behalf and in his name and stead for the purpose of executing and filing any such application or applications and taking all other lawfully permitted actions to further the prosecution and issuance of patents, copyrights, or similar protections thereon, with the same legal force and effect as if executed by the Executive.

          (d) Ownership of Copyrights. The Executive agrees that any work prepared for the Company which is eligible for United States copyright protection or protection under the Universal Copyright Convention or other such laws or protections including, but not limited to, the Berne Copyright Convention and/or the Buenos Aires Copyright Convention shall be a work made for hire and ownership of all copyrights (including all renewals and extensions) therein shall vest in the Company. If any such work is deemed not to be a work made for hire for any reason, the Executive hereby grants, transfers and assigns all right, title and interest in such work and all copyrights in such work and all renewals and extensions thereof to the Company, and agrees to provide all assistance reasonably requested by the Company in the establishment, preservation and enforcement of the Company’s copyright in such work, such assistance to be provided at the Company’s expense but without any additional compensation to the Executive. The Executive hereby agrees to and does hereby waive the enforcement of all moral rights with respect to the work developed or produced hereunder, including without limitation any and all rights of identification of authorship and any and all rights of approval, restriction or limitation on use or subsequent modifications.

          (e) Litigation. The Executive agrees to render assistance and cooperation to the Company at its request regarding any matter, dispute or controversy with which the Company may become involved and of which the Executive has or may have reason to have knowledge, information or expertise. Such services will be without additional compensation if the Executive is then employed by the Company and for reasonable compensation and subject to his reasonable availability if he is not.

          (f) Construction. Any reference to the Company in this Section 7 shall include the Company and its Affiliates.

     9. Additional Covenants.

          (a) Non-Interference with Customer Accounts. Executive covenants and agrees that (i) during employment and (ii) for a period of twenty four (24) months commencing on the Date of Termination, except as may be required by Executive’s employment by the Company, Executive shall not directly or indirectly, personally or on behalf of any other person, business, corporation, or entity, contact or do business with any customer of the Company with respect to any product, business activity or service which is competitive with any product, business, activity or service of the type sold or provided by the Company.

          (b) Non-Competition. In consideration of and in connection with the benefits provided to the Executive under this Agreement and in order to protect the goodwill of the Company, the Executive hereby agrees that if the Executive’s employment is terminated, then,

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unless the Company otherwise agrees in writing, for a period of twenty four (24) months commencing on the Date of Termination, the Executive shall not, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with any entity engaged in a business which sells, in competition with the Company and its affiliates, the same type of products as sold by the Company, including without limitation glass tableware, ceramic dinnerware, metal flatware and plastic supplies to the foodservice industry other than as a shareholder or beneficial owner owning five percent (5%) or less of the outstanding securities of a public company. Without limiting the foregoing, currently the following business operations among others sell, in competition with the Company and its affiliates, the same type of products as sold by the Company and its affiliates: Arc International, Anchor Hocking, currently a unit of Newell Rubbermaid Inc., Cardinal International, Inc., Indiana Glass Company, currently a unit of Lancaster Colony Corporation, Oneida Ltd. and any glass tableware manufacturer, seller or importer for Bormioli Rocco Casa SpA, for the Kedaung group of companies of Indonesia or for the Sisecam group of companies of Turkey including Pasabahce.

          (c) No Diversion. The Executive covenants and agrees that in addition to the other Covenants set forth in this Section 9, (i) during his employment and (ii) for a period of two years following his Date of Termination, Executive shall not divert or attempt to divert or take advantage of or attempt to take advantage of any actual or potential business opportunities of the Company (e.g., joint ventures, other business combinations, investment opportunities, potential investors in the Company, and other similar opportunities) of which the Executive became aware as a result of his employment with the Company.

          (d) Non-Recruitment. The Executive acknowledges that the Company has invested substantial time and effort in assembling its present workforce. Accordingly, the Executive covenants and agrees that during employment and for period of twenty four (24) months commencing on the Date of Termination, the Executive shall not either for the Executive’s own account or jointly with or as a manager, agent, officer, employee, consultant, partner, joint venture owner or shareholder or otherwise on behalf of any other person, firm or corporation directly or indirectly entice, solicit, attempt to solicit, or seek to induce or influence any Officer or employee of the Company to leave his or her employment with the Company or to offer employment to any person who on or during the six (6) month period immediately preceding the date of such solicitation or offer was an employee of the Company; provided, however, that this Section 9(d) shall not be deemed to be breached with respect to an employee or former employee of the Company who responds to a general advertisement seeking employment or who otherwise initiates contact for the purpose of seeking employment.

          (e) Non-Disparagement. Executive covenants and agrees that during the Executive’s employment and for period of twenty four (24) months commencing on the Date of Termination, Executive shall not induce or incite claims of discrimination, wrongful discharge, or any other claims against the Company or any of its directors, Officers, employees or equity holders, by any other persons, executives or entities, and the Executive shall not undertake any harassing or disparaging conduct directed at the Company or any of its directors, Officers, employees or equity holders, other than such statements made as part of testimony compelled by law or legal process.

          (f) Remedies. The Executive acknowledges that should the Executive

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violate any of the covenants contained in Sections 6, 7, 8, or 9 hereof (collectively, the “Covenants”), it would be difficult to determine the resulting damages to the Company and, in addition to any other remedies it may have, the Company shall be entitled to (x) temporary injunctive relief without being required to post a bond, (y) permanent injunctive relief without the necessity of proving actual damage and (z) forfeiture of all benefits otherwise payable to or for the account of the Executive under Sections 5(b)(ii),(iii),(iv) and (v) following the violation. The Executive shall be liable to pay all costs including reasonable attorneys’ fees which the Company may incur in enforcing or defending, to any extent, these Covenants, whether or not litigation is actually commenced and including litigation of any appeal taken or defended by the Company, where the Company succeeds in enforcing any part of these Covenants. The Company may elect to seek one or more of these remedies at its sole discretion on a case by case basis. Failure to seek any or all remedies in one case does not restrict the Company from seeking any remedies in another situation. Such action by the Company shall not constitute a waiver of any of its rights.

          (g) Severability and Modification of any Unenforceable Covenant. It is the parties’ intent that each of the Covenants be read and interpreted with every reasonable inference given to its enforceability. However, it is also the parties’ intent that if any term, provision or condition of the Covenants is held to be invalid, void or unenforceable, the remainder of the provisions thereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Finally, it is also the parties’ intent that if it is determined any of the Covenants are unenforceable because of over breadth, then the covenants shall be modified so as to make it reasonable and enforceable under the prevailing circumstances.

          (h) Tolling. If the Executive breaches any Covenant, the running of the period of restriction shall be automatically tolled and suspended for the amount of time that the breach continues, and shall automatically recommence when the breach is remedied so that the Company shall receive the benefit of the Executive’s compliance with the Covenants. This paragraph shall not apply to any period for which the Company is awarded and receives actual monetary damages for breach by the Executive of a Covenant with respect to which this paragraph applies.

          (i) Construction. Any reference to the Company in this Section 9 shall include the Company and its affiliates.

     10. No Assignment. This Agreement and the rights and duties hereunder are personal to the Executive and shall not be assigned, delegated, transferred, pledged or sold by the Executive without the prior written consent of the Company. The Executive hereby acknowledges and agrees that the Company may assign, delegate, transfer, pledge or sell this Agreement and the rights and duties hereunder (a) to an affiliate of the Company or (b) to any third party in connection with (i) the sale of all or substantially all of the assets of the Company or (ii) a stock purchase, merger, or consolidation involving the Company. This Agreement shall inure to the benefit of and be enforceable by the parties hereto, and their respective heirs, personal representatives, successors and assigns.

     11. Miscellaneous Provisions.

          (a) Payment of Taxes. Except as specifically provided for in this Agreement,

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to the extent that any taxes become payable by the Executive by virtue of any payments made or benefits conferred by the Company, the Company shall not be liable to pay or obligated to reimburse the Executive for any such taxes or to make any adjustment under this Agreement. Any payments otherwise due under this Agreement to the Executive, including, but not limited to, the base salary and any bonus compensation shall be reduced by any required withholding for federal, state and/or local taxes and other appropriate payroll deductions.

          (b) Notices. All notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as properly given or made (i) if delivered personally or (ii) after the expiration of five days from the date upon which such notice was mailed from within the United States by certified mail, return receipt requested, postage prepaid, (iii) upon receipt by prepaid telegram or facsimile transmission (with written confirmation of receipt) or (iv) after the expiration of the second business day following deposit with an overnight delivery service. All notices given or made pursuant hereto shall be so given or made to the parties at the following addresses:

If to the Executive:

Jonathan S. Freeman
806 Majestic
Rochester Hills, MI 48306

If to the Company:

Libbey Inc.
300 Madison Avenue
P.O. Box 10060
Toledo, Ohio 43604
Facsimile: (419) 325-2585
Attention: Secretary

The address of any party hereto may be changed by a notice in writing given in accordance with the provisions hereof.

          (c) Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal or unenforceable, such provision shall be severed and enforced to the extent possible or modified in such a way as to make it enforceable, and the invalidity, illegality or unenforceability thereof shall not affect the validity, legality or enforceability of the remaining provisions of this Agreement.

          

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          (d) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio applicable to contracts executed in and to be performed entirely within that state, except with respect to matters of law concerning the internal corporate affairs of any corporate entity which is a party to or the subject of this Agreement, and as to those matters, the law of the jurisdiction under which the respective entity derives its powers shall govern. The parties irrevocably agree that all actions to enforce an arbitrator’s decision pursuant to Section 11(l) of this Agreement shall be instituted and litigated only in federal, state or local courts sitting in Toledo, Ohio and each of such parties hereby consents to the exclusive jurisdiction and venue of such court and waives any objection based on forum non conveniens.

          (e) WAIVER OF JURY TRIAL. THE PARTIES HEREBY WAIVE, RELEASE AND RELINQUISH ANY AND ALL RIGHTS THEY MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTIONS TO ENFORCE AN ARBITRATOR’S DECISION PURSUANT TO SECTION 11(l) OF THIS AGREEMENT.

          (f) Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument.

          (g) Entire Understanding. This Agreement including all Exhibits and Recitals hereto which are incorporated herein by this reference, together with the other agreements and documents being executed and delivered concurrently herewith by the Executive, the Company and certain of its affiliates, constitute the entire understanding among all of the parties hereto and supersedes any prior understandings and agreements, written or oral, among them respecting the subject matter within.

          (h) Limitation on Liabilities. If the Executive is awarded any damages as compensation for any breach of this Agreement or a breach of any covenant contained in this Agreement (whether express or implied by either law or fact), such damages shall be limited to contractual damages (including reasonable attorneys’ fees) and shall exclude (i) punitive damages and (ii) consequential and/or incidental damages (e.g., lost profits and other indirect or speculative damages). The maximum amount of damages that the Executive may recover for any reason shall be all amounts owed (but not yet paid) to the Executive pursuant to this Agreement.

          (i) Pronouns and Headings. As used herein, all pronouns shall include the masculine, feminine, neuter, singular and plural thereof wherever the context and facts require such construction. The headings, titles and subtitles herein are inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof.

          (j) Amendment. Except as set forth in Sections 9(g) and 11(c) above, this Agreement shall not be changed or amended unless in writing and signed by both the Executive and the Chairman of the Board of Directors or unless amended by the Company in any manner provided that the rights and benefits of the Executive shall not be diminished by any amendment made by the Company without the Executive’s written consent to such amendment.

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          (K) Advice of Counsel. The Executive acknowledges (i) that he has consulted with or has had the opportunity to consult with independent counsel of his own choice concerning this Agreement and has been advised to do so by the Company, and (ii) that he has read and understands this Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment.

          (l) Arbitration. Notwithstanding anything herein to the contrary, in the event that there shall be a dispute among the parties arising out of or relating to this Agreement, or the breach thereof, the parties agree that such dispute shall be resolved by final and binding arbitration in Toledo, Ohio, administered by the American Arbitration Association (the “AAA”), in accordance with AAA’s Employment ADR Rules. The arbitrator’s decision shall be final and binding upon the parties, and may be entered and enforced in any court of competent jurisdiction by either of the parties. The arbitrator shall have the power to grant temporary, preliminary and permanent relief, including without limitation, injunctive relief and specific performance. The arbitrator’s fees and expenses shall be paid by the Company.

          (m) Attorney’s Fees. If any arbitration or other proceeding, including without limitation any hearing before the Board, any arbitration proceeding, any proceeding to enforce an arbitration award, any legal action and any appeal, is brought by one party against the other relating to, or in connection with this Agreement, the Company shall reimburse the Executive reasonable attorneys’ fees and other costs within a reasonable time after the same are incurred in addition to any other relief to which the Executive may be entitled.

          (n) Effect on Other Agreements. It is the intention of the parties hereto and thereto that this Agreement provide benefits which are not otherwise provided by the Letter Agreement dated as of May 7, 2007, between the Executive and the Company (the “Letter Agreement”) that provides to Executive certain benefits if a change of control (as defined in the Letter Agreement) of the Company occurs. Therefore, if during the term of this Agreement the Executive is entitled to payment under both this Agreement and the Letter Agreement, the Executive shall only receive the greater of the benefits provided under this Agreement or under the Letter Agreement, but not both. If Executive receives benefits under this Agreement, all rights to receive any benefits under the Letter Agreement shall be waived, and vice versa.

     IN WITNESS WHEREOF, this Agreement has been executed as of the date and year first above written.

LIBBEY INC.
By:
Name:	Susan A. Kovach
Title:	Vice President, General Counsel & Secretary
Name: Jonathan S. Freeman

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SCHEDULE 1

1.	Base salary of the Executive as of the date of this Agreement and subsequent revisions.
2.	The Executive shall be eligible to participate in the following benefit plans and programs of the Company:

a.	The annual performance incentive compensation plan for corporate Officers (currently the “Senior Management Incentive Plan”). The target percentage for an Executive’s participation shall be the target percentage currently in effect for the position as of the date of this Agreement (namely, 45% of annual base salary) and any subsequent revisions.
b.	The long term incentive compensation plan (currently the Libbey Inc. Long Term Incentive Compensation Plan). The target percentage for an Executive’s participation shall be the target percentage currently in effect for the position as of the date of this Agreement (namely, 60% of annual base salary) and any subsequent revisions.
c.	Stock option and equity participation plan (currently the 2006 Omnibus Incentive Plan of Libbey Inc.)
d.	Libbey Inc. Retirement Savings Plan
e.	Libbey Inc. Executive Savings Plan
f.	Financial Investment Counseling
g.	Executive Physical
h.	Deferred Compensation Plan (if and when adopted)
i.	Such other benefit plans and arrangements as the Company provides, from time to time, to salaried employees generally

[Signature Page to General release and Waiver of Claims]

EXHIBIT A

GENERAL RELEASE AND WAIVER OF CLAIMS

          The undersigned, ___resident of the State of ___(“Releasor”), in accordance with and pursuant to the terms of Section 5(d) of the Employment Agreement (the “Agreement”), dated as of ___, 2007, between Libbey Inc., a Delaware corporation (the “Company”), and Releasor, and the consideration therein provided, except as set forth herein, hereby remises, releases and forever discharges and covenants not to sue, and by these presents does for Releasor and Releasor’s legal representatives, trustees, beneficiaries, heirs and assigns (Releasor and such persons referred to herein, collectively, as the “Releasing Parties”) hereby remise, release and forever discharge and covenant not to sue the Company and its affiliates and the respective Officers, directors, employees, equity holders, agent and representatives of each of them and all of their respective successor and assigns (each a “Released Party” and collectively, the “Released Parties”), of and from any and all manner of actions, proceedings, claims, causes of action, suits, promises, damages, judgments, executions, claims and demands, of any nature whatsoever, and of every kind and description, choate and inchoate, known or unknown, at law or in equity (collectively, “Claims”), which the Releasing Parties, or any of them, now have or ever had, or hereafter can, shall or may have, for, upon or by reason of any matter, cause or thing whatsoever, against the Released Parties, and each of them, from the beginning of time to the date hereof;

     (i) arising from Releasor’s employment, compensation, commissions, deferred compensation plans, insurance, stock ownership, stock options, employee benefits, and other terms and conditions of employment or employment practices of the Company under federal, state or local law or regulation, including, but not limited to the Employee Retirement Income Security Act of 1974, as amended;

     (ii) relating to the termination of Releasor’s employment or the circumstances surrounding thereof based on any contract, tort, whistleblower, personal injury, retaliatory, wrongful discharge or any other theory under any federal, state or local constitution, law, regulation, common law or otherwise;

     (iii) relating to payment of any attorneys’ fees incurred by Releasor; and

     (iv) based on any alleged discrimination on the basis of race, color, religion, sex, age, national origin, handicap, disability or another category protected by any federal, state or local law or regulation, including, but not limited to, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Fair Labor Standards Act, the Older Workers Benefit Protection Act of 1990, or Executive Order 11246 (as any of these laws or orders may have been amended) or any other similar federal, state or local labor, employment or anti-discriminatory laws.

          Notwithstanding any other provision of this General Release and Waiver of Claims, Releasor does not release or waive Releasor’s rights and Claims against the Company arising out of, or related to, the obligations of the Company pursuant to the Agreement, Claims for Releasor’s vested benefits under any pension plan, retirement plan and savings plan, rights under any equity participation plan and stock purchase plan and rights to continuation of

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medical care coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 and any similar state law.

          Releasor represents and warrants on behalf of the Releasing Parties that there has been, and there will be, no assignment or other transfer of any right or interest in any Claims which Releasor has or may have against the Released Parties, and Releasor hereby agrees to indemnify and hold each Released Party harmless from any Claims, costs, expenses and attorney’s fees directly or indirectly incurred by any of the Released Parties as a result of any person asserting any right or interest pursuant to his, her or its assignment or transfer of any such right or interest.

          Releasor agrees that if any Releasing Party hereafter commences, joins in, or in any manner seeks relief through any suit arising out of, based upon, or relating to any of the Claims released hereunder, or in any manner asserts against any Released Party any of the Claims released hereunder, then Releasor will pay to such Released Party, in addition to any and all damages and compensation, direct or indirect, all attorney’s fees incurred in defending or otherwise responding to such suit or Claims.

          Releasor acknowledges that (i) Releasor has received the advice of legal counsel in connection with this General Release and Waiver of Claims, (ii) Releasor has read and understands that this is a General Release and Waiver of Claims, and (iii) Releasor intends to be legally bound by the same.

          Releasor acknowledges that Releasor has been given the opportunity to consider this Release for twenty-one (21) days and has been encouraged and given the opportunity to consult with legal counsel of Releasor’s choosing before signing it. Releasor understands that Releasor shall have seven (7) days from the date on which Releasor executes this General Release and Waiver of Claims (as indicated by the date below his signature) to revoke Releasor’s signature and agreement to be bound hereby by providing written notice of revocation to the Company within such seven (7) day period. Releasor further understands and acknowledges this Release shall become effective, if not sooner revoked, on the eighth day after the execution hereof by Releasor (the “Effective Date”).

          IN WITNESS WHEREOF, Releasor has executed and delivered this General Release and Waiver of Claims on behalf of the Releasing Parties as of the day and year set forth below.

Dated:                     , 20__.

RELEASOR:

Name:

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EX-10.7

Exhibit 10.7

May 7, 2007

Jonathan S. Freeman
806 Majestic
Rochester Hills, MI 48306

Dear Jon:

Libbey Inc. (the “Corporation”) considers it essential to the best interests of its shareholders to foster the continuous employment of key management personnel. In connection with this, the Corporation’s Board of Directors (the “Board”) recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of the Corporation may exist and that the uncertainty and questions that it may raise among management could result in the departure or distraction of management personnel to the detriment of the Corporation and its shareholders.

The Board has decided to reinforce and encourage the continued attention and dedication of members of the Corporation’s management, including yourself, to their assigned duties without the distraction arising from the possibility of a change in control of the Corporation.

In order to induce you to remain in its employ, the Corporation hereby agrees that after this letter agreement (this “Agreement”) has been fully executed, you shall receive the severance benefits set forth in this Agreement in the event your employment with the Corporation is terminated under the circumstances described below subsequent to a Change in Control (as defined in Section 2).

     1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 2007; provided, however, that commencing on January 1, 2008 and on each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Corporation shall have given notice that it does not wish to extend this Agreement; provided, further, that if a Change in Control (as defined in Section 2), occurs during the original or any extended term of this Agreement, the term of this Agreement shall continue in effect for a period of not less than thirty-six (36) months beyond the month in which such Change in Control occurred.

     2. Change in Control. No benefits shall be payable hereunder unless there has been a Change in Control. For purposes of this Agreement, a Change in Control shall be deemed to occur if:

     (a) any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Corporation representing twenty percent (20%) or more of the combined voting power of the Corporation’s then outstanding securities. For purposes of this Agreement, the term “Person” is used as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); provided, however, that the term shall not include the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, and any corporation owned, directly or indirectly, by the shareholders of the Corporation, in substantially the same proportions as their ownership of stock of the Corporation, and provided further that for purposes of this subsection (a) the term person shall not apply to Baron Capital Group, Inc., BAMCO,

2

Inc., Baron Capital Management, Inc., Baron Asset Fund or Ronald Baron (collectively the “Baron Group”), by virtue of their individual or collective beneficial ownership of securities of the Corporation’s outstanding securities as of the date of this letter so long as the Baron Group does not individually or collectively, beneficially own, or increase such beneficial ownership to, twenty-five percent (25%) or more of the combined voting power of the corporation’s then outstanding securities. For purposes of this Agreement, the term “Beneficial Owner” shall have the meaning given to such term in Rule 13d-3 under the Exchange Act;

     (b) during any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in Sections 2(a), (c) or (d)) whose election by the Board or nomination for election by the Corporation’s shareholders was approved by a vote of at least two-thirds (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 so approved (hereinafter referred to as “Continuing Directors”), cease for any reason to constitute at least a majority thereof;

     (c) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation (or other entity), other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing 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 the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation;

     (d) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation’s assets; or

     (e) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation representing ten percent (10%) or more of the combined voting power of the Corporation’s then outstanding securities (a “10% Owner”) and (A) the identity of the Chief Executive Officer of the Corporation is changed during the period beginning sixty (60) days before the attainment of the ten percent (10%) beneficial ownership and ending two (2) years thereafter, or (B) individuals constituting at least one-third (1/3) of the members of the Board at the beginning of such period shall cease for any reason to serve on the Board during the period beginning sixty (60) days before the attainment of the ten percent (10%) beneficial ownership and ending two (2) years thereafter; provided, however, (i) that this subsection (e) shall not apply to (i) any Person who is a 10% Owner as of the date hereof so long as such Person does not increase such beneficial ownership by five percent (5%) or more over the percentage so owned by such Person as of the date hereof; (ii) that this subsection (e) shall not apply to the Baron Group by virtue of their individual or collective beneficial ownership of securities of the Corporation’s outstanding securities as of the date of this letter so long as the Baron Group does not individually or collectively, beneficially own, or increase such beneficial ownership to, twenty-five percent (25%) or more of the combined voting power of the corporation’s then outstanding securities, and (iii) that this subsection (e) shall not apply to Ariel Capital Management (“Ariel”) by virtue of its

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beneficial ownership of the Corporation’s outstanding securities as of the date of this Agreement so long as Ariel does not beneficially own, or increase such beneficial ownership to, twenty percent (20%) or more of the combined voting power of the Corporation’s then outstanding securities.

     3. Termination Following Change in Control. (i) General. During the term of this Agreement, if any of the events described in Section 2 constituting a Change in Control shall have occurred, you shall be entitled to the benefits provided in Section 4(ii) upon the subsequent termination of your employment, provided that such termination occurs during the term of this Agreement and within the two (2) year period immediately following the date of such Change in Control, unless such termination is (a) because of your death or Disability (as defined in Section 3(ii)), (b) by the Corporation for Cause (as defined in Section 3(iii)), or (c) by you other than (1) for Good Reason (as defined in Section 3(iv)), or (2) in a Covered Resignation (as defined in Section 3(v)). In the event that you are entitled to such benefits, such benefits shall be paid notwithstanding the subsequent expiration of the term of this Agreement. In the event your employment with the Corporation is terminated for any reason and subsequently a Change in Control occurs, you shall not be entitled to any benefits hereunder.

     (ii) Disability. If, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Corporation for six (6) consecutive months, and within thirty (30) days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your employment may be terminated for “Disability.”

     (iii) Cause. Termination by the Corporation of your employment for “Cause” shall mean termination (a) upon your willful and continued failure to substantially perform your duties with the Corporation (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after your issuance of a Notice of Termination (as defined in Section 3(vi)) either (x) for Good Reason, or (y) in connection with a Covered Resignation, after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, (b) upon your willful and continued failure to substantially follow and comply with the specific and lawful directives of the Board, as reasonably determined by the Board (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after your issuance of a Notice of Termination for Good Reason or in connection with a Covered Resignation), after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, (c) upon your willful commission of an act of fraud or dishonesty resulting in material economic or financial injury to the Corporation, or (d) upon your willful engagement in illegal conduct or gross misconduct, in each case which is materially and demonstrably injurious to the Corporation. For purposes of this Section 3(iii), no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you not in good faith. Notwithstanding the foregoing, you shall not be deemed terminated for Cause pursuant to Sections 3(iii)(a), (b) or (d) hereof unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board (after reasonable notice to you, an opportunity for you, together with your counsel, to be heard before the Board and a reasonable opportunity to cure), finding that in the Board’s good faith opinion you were guilty of conduct set forth above in this Section 3(iii) and specifying the particulars thereof in reasonable detail.

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     (iv) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, “Good Reason” shall mean, without your express written consent, the occurrence after a Change in Control of any of the following circumstances unless, in the case of Sections 3(iv)(a), (e), (f), (g), (h) or (i), such circumstances are fully corrected (provided such circumstances are capable of correction) prior to the Date of Termination (as defined in Section 3(vii)) specified in the Notice of Termination given in respect thereof:

(a)	the assignment to you of any duties inconsistent with the position in the Corporation that you held immediately prior to the Change in Control, a significant adverse alteration in the nature or status of your responsibilities or the conditions of your employment from those in effect immediately prior to such Change in Control, including by virtue of the Corporation ceasing to be a publicly-held corporation, or any other action by the Corporation that results in a material diminution in your position, authority, duties or responsibilities;
(b)	the Corporation’s reduction of your annual base salary as in effect on the date hereof or as the same may be increased from time to time;
(c)	the relocation of the Corporation’s offices at which you are principally employed immediately prior to the date of the Change in Control (your “Principal Location”) to a location more than thirty (30) miles from such location, or the Corporation’s requiring you, without your written consent, to be based anywhere other than your Principal Location, except for required travel on the Corporation’s business to an extent substantially consistent with your present business travel obligations;
(d)	the Corporation’s failure to pay to you any portion of your current compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Corporation within seven (7) days of the date such compensation is due;
(e)	the Corporation’s failure to continue in effect any material compensation or benefit plan or practice in which you participate immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the Corporation’s failure to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the Change in Control;
(f)	the Corporation’s failure to continue to provide you with benefits substantially similar in the aggregate to those enjoyed by you under any of the Corporation’s life insurance, medical, health and accident, disability, pension, retirement, or other benefit plans or practices in which you and your eligible family members were participating at the time of the Change in Control, the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits, or the failure by the Corporation to provide you with the number of paid vacation

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	days to which you are entitled on the basis of years of service with the Corporation in accordance with the Corporation’s normal vacation policy in effect at the time of the Change in Control;
(g)	the Corporation’s failure to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 6 hereof;
(h)	any purported termination of your employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3(vi) hereof (and, if applicable, the requirements of Section 3(iii) hereof), which purported termination shall not be effective for purposes of this Agreement; or
(i)	the continuation or repetition, after written notice of objection from you, of harassing or denigrating treatment of you inconsistent with your position with the Corporation.

Your right to terminate your employment pursuant to this Section 3(iv) shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

     (v) Voluntary Termination and Covered Resignation. You shall be entitled to voluntarily terminate your employment for any reason or no reason at any time after a Change in Control. Any such termination which occurs within the thirty (30) day period following the first anniversary of the occurrence of a Change in Control shall constitute a resignation which entitles you to receive benefits under this Agreement (a “Covered Resignation”).

     (vi) Notice of Termination. Any purported termination of your employment by the Corporation or by you (other than termination due to death which shall terminate your employment automatically) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7. “Notice of Termination” shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated.

     (vii) Date of Termination, Etc. “Date of Termination” shall mean (a) if your employment is terminated due to your death, the date of your death; (b) if your employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), and (c) if your employment is terminated pursuant to Section 3(iii), Section 3(iv) or Section 3(v) or for any other reason (other than death or Disability), the date specified in the Notice of Termination (which, in the case of a termination for Cause shall not be less than thirty (30) days from the date such Notice of Termination is given, and in the case of a termination for Good Reason or in connection with a Covered Resignation shall not be less than fifteen (15) nor more than sixty (60) days from the date such Notice of Termination is given). Notwithstanding anything to the contrary contained in this Section 3(vii), if within fifteen (15) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, then the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the

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parties, or otherwise; provided, however, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence.

     4. Compensation Upon Termination. Following a Change in Control during the term of this Agreement, you shall be entitled to the benefits described below upon termination of your employment, provided that such termination occurs during the term of this Agreement and within the two (2) year period immediately following the date of such Change in Control. The benefits to which you are entitled, subject to the terms and conditions of this Agreement, are:

     (i) If your employment shall be terminated by the Corporation for Cause or by you other than (x) for Good Reason or (y) pursuant to a Covered Resignation, the Corporation shall pay you your full base salary, when due, through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan or practice of the Corporation at the time such payments are due, and the Corporation shall have no further obligations to you under this Agreement.

     (ii) If your employment by the Corporation shall be terminated by you (x) for Good Reason or (y) pursuant to a Covered Resignation, or by the Corporation other than for Cause or Disability, then you shall be entitled to the benefits provided below:

(a)	the Corporation shall pay to you your full base salary, when due, through the Date of Termination at the rate in effect at the time Notice of Termination is given, at the time specified in Section 4(iii), plus all other amounts to which you are entitled under any compensation plan or practice of the Corporation at the time such payments are due;
(b)	in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Corporation shall pay as severance pay to you, at the time specified in Section 4(iii), a lump-sum severance payment (together with the payments provided in Section 4(ii)(c) below, the “Severance Payments”) equal to the sum of the following:

(A)	three (3) times your annual base salary as in effect as of the Date of Termination or immediately prior to the Change in Control, whichever is greater; and
(B)	three (3) times the greater of (x) your targeted annual bonus as in effect as of the Date of Termination or immediately prior to the Change in Control, whichever is greater, or (y) your annual bonus for the year immediately preceding the Date of Termination;

(c)	notwithstanding any provisions of the Corporation’s stock option plans, incentive plans, or other similar plans, the restricted period with respect to any restricted stock granted to you thereunder shall lapse and such shares shall be distributed to you at the time specified in Section 4(iii);
(d)	for a period of one (1) year following the Date of Termination, the Corporation shall, at its sole expense as incurred, provide you with financial planning services of substantially the same type and scope as

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	those which the Corporation was providing to you immediately prior to the Date of Termination, or, if more favorable to you, the date of the Change in Control;
(e)	for a period of two (2) years following the Date of Termination, the Corporation shall, at its sole expense as incurred, provide you with outplacement services, the scope and provider of which shall be selected by you in your sole discretion;
(f)	for a thirty-six (36) month period after such termination, the Corporation shall continue to provide you and your eligible family members, based on the cost sharing arrangement between you and the Corporation on the date of the Change in Control, with medical and dental health benefits at least equal to those which would have been provided to you and them if your employment had not been terminated or, if more favorable to you, as in effect generally at any time thereafter; provided, however, that if you become re-employed with another employer and are eligible to receive medical and dental health benefits under another employer’s plans, the Corporation’s obligations under this Section 4(ii)(f) shall be reduced to the extent comparable benefits are actually received by you during the thirty-six (36) month period following your termination, and any such benefits actually received by you shall be reported to the Corporation. In the event you are ineligible under the terms of such benefit plans or programs to continue to be so covered, the Corporation shall provide you with substantially equivalent coverage through other sources or will provide you with a lump-sum payment in such amount that, after all taxes on that amount, shall be equal to the cost to you of providing yourself such benefit coverage. At the termination of the benefits coverage under the second preceding sentence, you, your spouse and your dependents shall be entitled to continuation coverage pursuant to section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”), sections 601-608 of the Employee Retirement Income Security Act of 1974, as amended, and under any other applicable law, to the extent required by such laws, as if you had terminated employment with the Corporation on the date such benefits coverage terminates. The lump-sum shall be determined on a present value basis using the interest rate provided in section 1274(b)(2)(B) of the Code on the Date of Termination.
(g)	(1) anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment or distribution to you or for your benefit (whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise (the “Payment”) would be subject to the excise tax imposed by section 4999 of the Code (the “Excise Tax”), then you shall be entitled to receive from the Corporation an additional payment (the “Gross-Up Payment”) in an amount such that the net amount of the Payment and the Gross-Up Payment retained by you after the calculation and deduction of all Excise Taxes (including any interest or penalties imposed with respect to such taxes) on the payment and all federal, state and local income tax, employment tax and Excise Tax (including any interest or penalties imposed with respect to such taxes) on the Gross-Up Payment provided for in this Section 4(ii)(g), and taking

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into account any lost or reduced tax deductions on account of the Gross-Up Payment, shall be equal to the Payment;

(2) all determinations required to be made under this Section 4(ii)(g), including whether and when the Gross-Up Payment is required and the amount of such Gross-Up Payment, and the assumptions to be utilized in arriving at such determinations shall be made by the Accountants (as defined below) which shall provide you and the Corporation with detailed supporting calculations with respect to such Gross-Up Payment within fifteen (15) business days of the receipt of notice from you or the Corporation that you have received or will receive a Payment. For the purposes of this Section 4(ii)(g), the “Accountants” shall mean the Corporation’s independent certified public accountants serving immediately prior to the Change in Control. In the event that the Accountants are also serving as accountant or auditor for the individual, entity or group effecting the Change in Control, you shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accountants hereunder). All fees and expenses of the Accountants shall be borne solely by the Corporation.

For the purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, such Payments will be treated as “parachute payments” within the meaning of section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless and except to the extent that in the opinion of the Accountants such Payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Excise Tax. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Gross-Up Payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of your adjusted gross income), and to have otherwise allowable deductions for Federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the Gross-Up Payment in your adjusted gross income. To the extent practicable, any Gross-Up Payment with respect to any Payment shall be paid by the Corporation at the time you are entitled to receive the Payment and in no event will any Gross-Up Payment be paid later than five days after the receipt by you of the Accountant’s determination. Any determination by the Accountants shall be binding upon the Corporation and you. As a result of uncertainty in the

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application of section 4999 of the Code at the time of the initial determination by the Accountants hereunder, it is possible that the Gross-Up Payment made will have been an amount less than the Corporation should have paid pursuant to this Section 4(ii)(g) (the “Underpayment”). In the event that the Corporation exhausts its remedies pursuant to Section 4(ii)(g)(3) and you are required to make a payment of any Excise Tax, the Underpayment shall be promptly paid by the Corporation to or for your benefit; and

(3) you shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of the Gross-Up Payment. Such notification shall be given as soon as practicable after you are informed in writing of such claim and shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. You shall not pay such claim prior to the expiration of the 30-day period following the date on which you give such notice to the Corporation (or such shorter period ending on the date that any payment of taxes, interest and/or penalties with respect to such claim is due). If the Corporation notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall:

(A)	give the Corporation any information reasonably requested by the Corporation relating to such claim;
(B)	take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation;
(C)	cooperate with the Corporation in good faith in order to effectively contest such claim; and permit the Corporation to participate in any proceedings relating to such claims;

provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify you for and hold you harmless from, on an after-tax basis, any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of all related costs and expenses. Without limiting the foregoing provisions of this Section 4(ii)(g), the Corporation shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct you to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and you agree to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however, that if the Corporation directs you to pay such claim and sue for a refund, the Corporation shall advance the

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	amount of such payment to you, on an interest-free basis, and shall indemnify you for and hold you harmless from, on an after-tax basis, any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance (including as a result of any forgiveness by the Corporation of such advance); provided, further, that any extension of the statute of limitations relating to the payment of taxes for the taxable year of you with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and you shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority;
(h)	in any situation where under applicable law the Corporation has the power to indemnify (or advance expenses to) you in respect of any judgments, fines, settlements, loss, cost or expense (including attorneys’ fees) of any nature related to or arising out of your activities as an agent, employee, officer or director of the Corporation or in any other capacity on behalf of or at the request of the Corporation, the Corporation shall promptly on written request, indemnify (and advance expenses to) you to the fullest extent permitted by applicable law, including but not limited to making such findings and determinations and taking any and all such actions as the Corporation may, under applicable law, be permitted to have the discretion to take so as to effectuate such indemnification or advancement. Such agreement by the Corporation shall not be deemed to impair any other obligation of the Corporation respecting your indemnification otherwise arising out of this or any other agreement or promise of the Corporation or under any statute;
(i)	the Corporation shall furnish you for six (6) years following the Date of Termination (without reference to whether the term of this Agreement continues in effect) with directors’ and officers’ liability insurance insuring you against insurable events which occur or have occurred while you were a director or officer of the Corporation, such insurance to have policy limits aggregating not less than the amount in effect immediately prior to the Change in Control, and otherwise to be in substantially the same form and to contain substantially the same terms, conditions and exceptions as the liability issuance policies provided for officers and directors of the Corporation in force from time to time, provided, however, that such terms, conditions and exceptions shall not be, in the aggregate, materially less favorable to you than those in effect on the date hereof; provided, further, that if the aggregate annual premiums for such insurance at any time during such period exceed one hundred and fifty percent (150%) of the per annum rate of premium currently paid by the Corporation for such insurance, then the Corporation shall provide the maximum coverage that will then be available at an annual premium equal to one hundred and fifty percent (150%) of such rate; and

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(j) you shall be fully vested in your accrued benefits under any qualified or nonqualified pension, profit sharing, deferred compensation or supplemental plans maintained by the Corporation for your benefit, and the Corporation shall provide you with additional fully vested benefits under such plans in an amount equal to the benefits which you would have accrued had you continued your employment with the Corporation for three (3) additional years following your Date of Termination; provided, however, that to the extent that the acceleration of vesting or enhanced accrual of such benefits would violate any applicable law or require the Corporation to accelerate the vesting of the accrued benefits of all participants in such plan or plans or to provide additional benefit accruals to such participants, the Corporation shall pay you a lump-sum payment at the time specified in Section 4(iii) in an amount equal to the value of such benefits; provided, further, that to the extent that the present value of all benefits payable to you under this Section 4(ii)(j) is less than $250,000, the Corporation shall pay you a lump-sum payment at the time specified in Section 4(iii) in an amount equal to the difference between $250,000 and the amount of such benefits which are otherwise payable to you under this Section 4(ii)(j); provided, further, that if you are eligible to receive grandfathered benefits under the Corporation’s pension plan, the provisions of this Section 4(ii)(j) shall apply to such grandfathered benefits, without reduction for age, in addition to any other benefits to which you are entitled under this Section 4(ii)(j).

     (iii) The payments provided for in Sections 4(ii)(a), (b), (c), (d) and (j) shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Corporation shall pay to you on such day an estimate, as determined in good faith by the Corporation, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Corporation to you, payable on the fifth day after demand by the Corporation (together with interest at the rate provided in section 1274(b)(2)(B) of the Code).

     (iv) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise nor, except as provided in Section 4(ii)(f), shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer or self-employment, by retirement benefits, by offset against any amount claimed to be owed by you to the Corporation, or otherwise.

     5. Acceleration of Vesting of Options. Notwithstanding anything contained herein, in the event of a Change in Control during the term of this Agreement, all outstanding options (“Options”), if any, granted to you under any of the Corporation’s stock option plans, incentive plans or other similar plans (or options substituted therefor covering the stock of a successor corporation) shall, effective immediately prior to such Change in Control, become fully vested and exercisable as to all shares of stock covered thereby.

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     6. Successors; Binding Agreement.

     (i) The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to terminate your employment and receive compensation from the Corporation in the same amount and on the same terms to which you would be entitled hereunder if you terminate your employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. Unless expressly provided otherwise, “Corporation” as used herein shall mean the Corporation as defined in this Agreement and any successor to its business and/or assets as aforesaid.

     (ii) This Agreement shall inure to the benefit of and be enforceable by you and your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate.

     7. Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Corporation shall be directed to the attention of the Board with a copy to the Secretary of the Corporation, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

     8. Non- Compete, Confidentiality and Non-Solicitation Covenants.

     (i) Non-Compete. In consideration of and in connection with the benefits provided to you under this Agreement, and in order to protect the goodwill of the Corporation, you hereby agree that, if your employment is terminated pursuant to a Covered Resignation, then, for a period of twelve (12) months commencing on the Date of Termination, you shall not, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with any of the following entities (or any subsidiary of any such entity) other than as a shareholder or beneficial owner owning 5% or less of the outstanding securities of a public company: Durand International, the Anchor Hocking unit of Newell Co., Cardinal International, Inc., the Indiana Glass unit of Lancaster Colony Corporation, Oneida LTD or any glass tableware manufacturer, seller or importer for Bormioli Rocco Casa SpA, for the Kedaung group of companies of Indonesia or for the Sisecam group of companies of Turkey including Pasabahce.

     (ii) Confidentiality. You hereby agree that, for the period commencing on the Date of Termination and terminating on the third anniversary thereof, you shall not, directly or indirectly, disclose or make available to any person, firm, corporation, association or other

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entity for any reason or purpose whatsoever, any Confidential Information (as defined below). You agree that, upon termination of your employment with the Corporation, all Confidential Information in your possession that is in written or other tangible form (together with all copies or duplicates thereof, including computer files) shall be returned to the Corporation and shall not be retained by you or furnished to any third party, in any form except as provided herein; provided, however, that you shall not be obligated to treat as confidential, or return to the Corporation copies of any Confidential Information that (i) was publicly known at the time of disclosure to you, (ii) becomes publicly known or available thereafter other than by any means in violation of this Agreement or any other duty owed to the Corporation by any person or entity, or (iii) is lawfully disclosed to you by a third party. As used in this Agreement, the term “Confidential Information” means: information disclosed to you or known by you as a consequence of or through your relationship with the Corporation, about the customers, employees, business methods, public relations methods, organization, procedures or finances, including, without limitation, information of or relating to customer lists, of the Corporation and its affiliates.

     (iii) Non-Solicitation. You hereby agree that, for the period commencing on the Date of Termination and terminating on the third anniversary thereof, you shall not, either on your own account or jointly with or as a manager, agent, officer, employee, consultant, partner, joint venturer, owner or shareholder or otherwise on behalf of any other person, firm or corporation, directly or indirectly solicit or attempt to solicit away from the Corporation any of its officers or employees or offer employment to any person who, on or during the six (6) months immediately preceding the date of such solicitation or offer, is or was an officer or employee of the Corporation; provided, however, that a general advertisement to which an employee of the Corporation responds shall in no event be deemed to result in a breach of this Section 8(iii).

     9. Funding of Obligations. Within a reasonable time following the execution and delivery of this Agreement by you and the Corporation, the Corporation shall partially fund its obligations to provide benefits hereunder (including, without limitation, its obligations under Section 4(ii)(g)) by establishing and irrevocably partially funding a trust for your benefit and the benefit of other executives of the Corporation with whom the Corporation has entered into agreements similar to this Agreement. The Corporation shall initially contribute $1000 to such trust. Such trust shall be a grantor trust described in section 671 of the Code. Upon the occurrence of a Potential Change in Control (as defined below), the Corporation shall fully fund its obligations to provide benefits hereunder (including, without limitation, its obligations under Section 4(ii)(g)) by irrevocably contributing funds to such trust on your behalf. The amount of such contribution shall equal the then present value of the Corporation’s obligations under Section 4 hereof as determined by the firms serving as the Corporation’s actuaries and accountants immediately prior to the Change in Control. Such actuaries and accountants shall be paid by the Corporation. The establishment and funding of such trust shall not affect the obligation of the Corporation to provide benefits under the terms of this Agreement. For purposes of this Agreement a “Potential Change in Control” shall be deemed to occur if:

     (a) the Corporation enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

     (b) any Person (including the Corporation) publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control;

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     (c) any Person who is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation representing ten percent (10%) or more of the combined voting power of the Corporation’s then outstanding securities, increases such Person’s beneficial ownership of such securities by five percent (5%) or more of the Corporation’s then outstanding securities over the percentage so owned by such Person on the date hereof provided however, (i) that this subsection (c) shall not apply to the Baron Group by virtue of their individual or collective beneficial ownership of securities of the Corporation’s outstanding securities as of the date of this letter so long as the Baron Group does not individually or collectively, beneficially own, or increase such beneficial ownership to, twenty-five percent (25%) or more of the combined voting power of the corporation’s then outstanding securities, and (ii) that this subsection (c) shall not apply to Ariel by virtue of its beneficial ownership of the Corporation’s outstanding securities as of the date of this Agreement so long as Ariel does not beneficially own, or increase such beneficial ownership to, twenty percent (20%) or more of the combined voting power of the Corporation’s then outstanding securities; or

     (d) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

     10. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio without regard to its conflicts of law principles. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Except as provided in Section 4(ii)(g) hereunder, any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Corporation under Section 4 shall survive the expiration of the term of this Agreement. The section headings contained in this Agreement are for convenience only, and shall not affect the interpretation of this Agreement.

     11. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

     12. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

     13. Suits, Actions, Proceedings, Etc..

     (i) Jurisdiction and Venue. No suit, action or proceeding with respect to this Agreement, nor any judgment entered by any court in respect thereof, may be brought in any court, domestic or foreign, or before any similar domestic or foreign authority, other than in a court of competent jurisdiction in the State of Ohio, and you and the Corporation hereby irrevocably waive any right which you or the Corporation, as applicable, may otherwise have

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had to bring such a suit, action, proceeding or judgment in any other court, domestic or foreign, or before any similar domestic or foreign authority. You and the Corporation hereby submit to the exclusive jurisdictions of such courts for the purpose of any such suit, action, proceeding or judgment. By your execution and delivery of this Agreement, you appoint the Secretary of the Corporation, at the Corporation’s office in Toledo, Ohio, as your agent upon which process may be served in any such suit, action or proceeding; and by its execution and delivery of this Agreement, the Corporation appoints the Secretary of the Corporation, at its office in Toledo, Ohio, as its agent upon which process may be served in any such suit, action or proceeding. Service of process upon such applicable agent, together with actual notice of such service given to you or the Corporation, as applicable, in the manner provided in Section 7 hereof, shall be deemed in every respect effective service of process upon the applicable party in any suit, action, proceeding or judgment. Nothing herein shall be deemed to limit the ability of you or the Corporation to serve any such writs, process or summonses in any other manner permitted by applicable law. You and the Corporation hereby irrevocably waive any objections which you or the Corporation, as applicable, may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of Ohio, and hereby further irrevocably waive any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Notwithstanding the foregoing, in the event that no court of competent jurisdiction in the State of Ohio will accept such jurisdiction and venue, then any suit, action or proceeding with respect to this Agreement, or any judgment entered by any court in respect thereof, may be brought in any court of competent jurisdiction in the continental United States which has jurisdiction over such suit, proceeding or action and the parties thereto.

     (ii) Compensation During Dispute, Etc.. Your compensation during any disagreement, dispute, controversy, claim, suit, action or proceeding (collectively, a “Dispute”) arising out of or relating to this Agreement or the interpretation of this Agreement shall be as follows: If there is a termination by you or the Corporation followed by a Dispute as to whether you are entitled to the payments and other benefits provided under this Agreement, then, during the period of that Dispute the Corporation shall pay you fifty percent (50%) of the amount specified in Sections 4(ii)(a) and 4(ii)(b) hereof, and the Corporation shall provide you with the other benefits provided in Section 4(ii) of this Agreement, if, but only if, you agree in writing that if the Dispute is resolved against you, you shall promptly refund to the Corporation all payments you receive under Sections 4(ii)(a) and 4(ii)(b) of this Agreement plus interest at the rate provided in Section 1274(d) of the Code, compounded quarterly. If the Dispute is resolved in your favor, promptly after resolution of the dispute the Corporation shall pay you the sum that was withheld during the period of the Dispute plus interest at the rate provided in Section 1274(d) of the Code, compounded quarterly.

     (iii) Legal Fees. The Corporation shall pay to you all legal fees and expenses incurred by you in connection with any Dispute arising out of or relating to this Agreement or the interpretation thereof (including, without limitation, all such fees and expenses, if any, incurred in contesting or disputing any termination of your employment or in seeking to obtain or enforce any right or benefit provided by this Agreement, or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder).

     14. Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior

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agreement of the parties hereto in respect of the subject matter contained herein, including, without limitation, any prior severance agreements, is hereby terminated and cancelled; provided, however, that the Employment Agreement, dated as of May 7, 2007 by and between you and the Corporation, as amended, shall remain in full force and effect and shall, pursuant to the terms and conditions thereof, provide certain severance benefits to you upon certain terminations of employment. Any of your rights hereunder shall be in addition to any rights you may otherwise have under benefit plans or agreements of the Corporation to which you are a party or in which you are a participant, including, but not limited to, any Corporation sponsored employee benefit plans and stock options plans. Provisions of this Agreement shall not in any way abrogate your rights under such other plans and agreements.

If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Corporation the enclosed copy of this letter, which shall then constitute our agreement on this subject.

Sincerely,

LIBBEY INC.

By:

Its: Vice President, General Counsel and Secretary

Agreed and Accepted as of the
7th day of May, 2007

                                                                                                            
Jonathan S. Freeman

EX-10.8

Exhibit 10.8

EMPLOYMENT AGREEMENT

          THIS EMPLOYMENT AGREEMENT (the “Agreement”), dated as of May 23, 2007, between LIBBEY INC., a Delaware corporation (the “Company”), and Gregory T. Geswein (the “Executive”).

          WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company, to serve as an officer of the Company upon the terms and conditions set forth herein.

          NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

     1. Term of Agreement. The term of this Agreement shall commence on the date of this Agreement (the “Effective Date”) and shall continue through December 31, 2007, provided however, that commencing on January 1, 2008 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless not later than September 30 of the year preceding such extension of the term, the Company shall have given written notice to the Executive that it does not wish to extend this Agreement beyond the expiration of the then current term. Employment hereunder by the Company or its affiliates shall continue indefinitely during the term of this Agreement until terminated as provided in Section 4. Not withstanding the foregoing, the term of this Agreement shall automatically end on the last day of the month in which the Executive reaches age 65.

     2. Position and Duties.

          (a) Position. The Executive hereby agrees to serve as an officer of the Company and shall perform all duties assigned by the Company commensurate with such position and shall devote the Executive’s best efforts to the performance of services to the Company in accordance with the terms hereof and as may reasonably be requested by the Company. For purposes of this Agreement “Officer” of the Company shall mean an executive elected by the Board of Directors of the Company (the “Board”) as an officer and who enters into a written employment agreement authorized by the Board.

          (b) Other Activities. While employed pursuant to this Agreement, the Executive shall not, other than in the performance of duties inherent in, and in furtherance of, the business of the Company, engage in any other business or commercial activity as an employee, consultant, or any other capacity, whether or not any compensation is received therefore, provided, however, that nothing herein shall prevent the Executive from (i) making and managing personal investments, (ii) performing occasional assistance to family members and friends, including but not limited to service as a director of a family owned or private business enterprise, (iii) engaging in community and/or charitable activities, including without limitation service as a director, trustee or officer of an educational, welfare, social, religious or civic organization or charity, (iv) serving as a trustee or director or similar position of a public corporation or public business enterprise, but for only one such public corporation or public business enterprise at any one time, or (v) engaging in such other activities as are approved in writing by the Chief Executive Officer, in each case (i) – (v) which singly or in the aggregate do

not interfere with the proper performance of the Executive’s duties and responsibilities to the Company and are consistent with Section 9 of this Agreement.

     3. Compensation. In consideration of the performance of his duties hereunder, the Executive shall be entitled to receive the salary, bonus and benefits set forth on Schedule A. All amounts payable to the Executive under this Section 3 shall be paid in accordance with the Company’s regular payroll practices (e.g., timing of payments and standard employee deductions, such as income and employment tax withholdings, medical benefit contributions and parking fees among others). No additional compensation shall be payable to the Executive by reason of the number of hours worked or any hours worked on Saturdays, Sundays or holidays, by reason of special responsibilities assumed (whether on behalf of the Company or any of its subsidiaries or affiliates), special projects completed, or otherwise. The Executive’s compensation shall be reviewed by the Chief Executive Officer, the Board or the Compensation Committee of the Board (the “Compensation Committee”) periodically for possible merit increases and other changes as such reviewer deems appropriate.

     4. Termination of Employment. Either party may terminate the Executive’s employment hereunder at any time and for any reason, without advance notice; provided, however, that if the Executive’s employment is terminated for any of the following reasons, the following provisions shall apply:

          (a) Termination for Cause. If the Executive’s employment is terminated for Cause, the Company shall pay to the Executive all base salary, when due, through the Date of Termination at the then current rate in effect at the time the Notice of Termination (as defined in Section 4(f)) is given plus, all other amounts and benefits to which the Executive is entitled under any pension plan, retirement savings plan, equity participation plan, stock purchase plan, medical benefits and other benefits of the Company or provided by law, at the time such payments are due and the Company shall have no further obligations to the Executive under this Agreement. Without waiving any rights the Company may have hereunder or otherwise, the Company hereby expressly reserves its rights to proceed against the Executive for damages in connection with any claim or cause of action that the Company may have arising out of or related to the Executive’s employment hereunder. “Cause” shall mean (a) the Executive’s willful and continued failure to substantially perform the Executive’s duties with the Company (other than any such failure resulting from an incapacity due to physical or mental illness or any such actual or anticipated failure after the Executive’s issuance of a Notice of Termination (as defined in Section 4(d)) for Good Reason), after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties, (b) the Executive’s willful and continued failure to substantially follow and comply with the specific and lawful directives of the Board, as reasonably determined by the Board (other than any such failure resulting from an incapacity due to physical or mental illness or any such actual or anticipated failure after the Executive’s issuance of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially followed or complied with the directives of the Board, (c) the Executive’s willful commission of an act of fraud or dishonesty resulting in material economic or financial injury to the Company, or (d) the Executive’s willful engagement in illegal conduct or gross misconduct, in each case which is materially and demonstrably injurious to the Company.

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For purposes of this Section 4(a), no act, or failure to act, shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith. Notwithstanding the foregoing, the Executive shall not be deemed terminated for Cause pursuant to this section unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (³/₄) of the entire membership of the Board at a meeting of the Board (after reasonable notice to the Executive, an opportunity for the Executive, together with counsel, to be heard before the Board and a reasonable opportunity to cure), finding that in the Board’s good faith opinion, the Executive was guilty any of the conduct set forth above in this section and specifying the particulars thereof in reasonable detail.

          (b) Death. If the Executive’s employment is terminated due to the Executive’s death, within sixty (60) days after the Company receives written notice of appointment of a personal representative (on behalf of the Executive’s estate), the Executive’s estate shall be entitled to compensation, vesting and benefits as described under Section 5(a) below.

          (c) Permanent Disability. If the Executive’s employment is terminated due to Executive’s Permanent Disability, the Executive shall be entitled to such compensation, vesting and benefits as described under Section 5(b) below, which in addition to any payments under the Company’s long-term disability policy, shall constitute full and complete satisfaction of the Company’s obligations hereunder. For purposes of this Agreement, “Permanent Disability” means any incapacity due to physical or mental illness, a result of which is that the Executive shall have been absent from the full-time performance of his duties with the Company for six (6) consecutive months and the Executive shall not have returned to the full-time performance of his duties within thirty (30) days after written notice of termination is given to the Executive.

          (d) Termination Without Cause or For Good Reason. If the Executive’s employment is terminated by the Executive with “Good Reason” or by the Company without cause, the Executive shall be entitled to such compensation, vesting and benefits as described under Section 5(b) below. For purposes of this Agreement, the following circumstances shall constitute “Good Reason” unless such circumstances are fully corrected (provided such circumstances are capable of correction) prior to the Date of Termination (as defined in section 4(g)):

1)	The Executive ceases to be an Officer of the Company reporting to another Officer.
2)	The Executive’s Base Salary is reduced by a greater percentage than the reduction applicable to any other Officer.
3)	There is a reduction in the incentive compensation target established for the position held by the Executive that is not similarly applied in the same or similar manner to all other Officers.
4)	There is a reduction or elimination of an executive benefit or an employee benefit which reduction is not applicable to all other Officers in the same or similar manner provided however the number of awards made pursuant to any stock option or equity participation plan

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is at the discretion of the Chief Executive Officer, the Compensation Committee or the Board at all times and shall in no case be deemed to be Good Reason.

5)

There is a material breach of this Agreement by the Company that is not remedied prior to the expiration of the thirty (30) day period after receipt of written notice thereof given by the Executive to the Company.

6)

The Company exercises its right not to extend the term of this Agreement beyond the then current term, unless such right is exercised with respect to all employment agreements in effect with respect to other Officers. For purposes of this Section 4 (d) 6) the term employment agreements does not include agreements of the type described in Section 11(n) relating to a change in control of the Company.

The Executive’s right to terminate employment for Good Reason pursuant to this Section 4(d) shall not be affected by the Executive’s incapacity due to physical or mental illness or continued employment provided however. Good Reason shall be asserted in writing delivered to the Chief Executive Officer within ninety (90) days of the date the Executive knew or should have known of the event giving rise to the Good Reason and if not so asserted within the ninety (90) day period shall be deemed to be conclusively waived.

          (e) Termination by Resignation or Retirement. If the Executive’s employment is terminated by the Executive’s resignation or retirement, other than at the written request of the Company or for Good Reason, the Company shall pay the Executive all base salary, when due, through the date of termination at the then current rate in effect at the time the Notice of Termination is given plus all other amounts and benefits to which the Executive is entitled under any compensation plan, or practice of the Company, pension plan, retirement savings plan, equity participation plan, stock purchase plan, medical benefits and other benefits of the Company or provided by law, at the time such payments are due and the Company shall have no further obligations to the Executive under this Agreement.

          (f) Notice of Termination. Any purported termination of the Executive’s employment by the Company or by the Executive (other than termination due to death which shall terminate employment automatically, voluntary resignation or retirement not for Good Reason) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 4. “Notice of Termination” shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

          (g) Date of Termination, Etc. “Date of Termination” shall mean (a) if the Executive’s employment is terminated due to death, the date of death; (b) if the Executive’s employment is terminated for Permanent Disability, thirty (30) days after Notice of Termination is given (provided that the Executive has not returned to the full-time performance of the Executive’s duties during such thirty (30) day period), (c) if the Executive’s employment is

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terminated for Cause or for Good Reason, or for any other reason (other than death, Disability, voluntary resignation or retirement not for Good Reason), the date specified in the Notice of Termination (which, in the case of a termination for Cause shall not be less than thirty (30) days from the date such Notice of Termination is given, and in the case of a termination for Good Reason shall not be less than fifteen (15) nor more than sixty (60) days from the date such Notice of Termination is given) or (d) if the Executive’s employment is terminated by the Executive’s resignation or retirement, other than at the written request of the Company or for Good Reason, the Date of Termination shall be the date when the Executive ceases to be an employee of the Company by reason of the resignation or retirement. Notwithstanding anything to the contrary contained in this Section 4(g), if within fifteen (15) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, then the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, or otherwise; provided, however, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence; provided, further, that in the event of the Executive’s death pending a dispute, if the resolution of such dispute is ultimately in the Executive’s favor, then the Date of Termination shall be the date specified in the Notice of Termination.

     5. Compensation upon Termination.

          (a) Death. If the Executive’s employment with the Company is terminated by reason of the Executive’s death, the Executive’s estate shall be entitled to the following:

               (i) payment of the Executive’s base salary accrued through the Date of Termination;

               (ii) payment of the Executive’s incentive compensation under all plans in effect at the Date of Termination paid at target but prorated over the period of each applicable plan through the Date of Termination;

               (iii) one (1) times the sum of the Executive’s annual base salary at the then current rate in effect as of the Date of Termination payable in one (1) lump-sum payment;

               (iv) continuation of the Executive’s medical, prescription drug, dental and vision benefits for the Executive’s covered dependents for a period of twelve (12) months following the Date of Termination without any contribution required of the Executive’s dependents; and

               (v) The Executive’s equity participation awards granted pursuant to any equity participation plan of the Company shall immediately vest as of the Date of Termination and be exercisable for a period of three years following the Date of Termination or for such longer period following the Date of Termination specified by the award granted to the Executive, provided however, nothing in this Agreement shall act to extend the term of any equity participation award and no equity participation award may

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be exercised after the expiration of the term of the award specified in the award granted to the Executive.

          (b) Termination for Permanent Disability, Without Cause or for Good Reason. If the Executive’s employment with the Company is terminated for Permanent Disability, or by the Company without Cause, or by the Executive for Good Reason, the Executive shall be entitled to the following:

               (i) payment of the Executive’s base salary accrued through the Date of Termination;

               (ii) payment of the Executive’s annual incentive compensation paid at the lesser of the Executive’s annual target or the average percentage of the target paid to all other Officers, but prorated over the period of each applicable plan through the Date of Termination;

               (iii) payment of the Executive’s long term incentive compensation under all plans in effect at the Date of Termination paid at the Executive’s target, but prorated over the period of each applicable plan through the Date of Termination;

               (iv) two (2) times the sum of Executive’s annual Base Compensation at the then current rate in effect at the time of the Notice of Termination, payable in equal installments over a period of twenty-four (24) months following the Date of Termination, or at the election of the Company payable in one (1) lump-sum payment;

               (v) payment of the Executive’s annual incentive compensation pursuant to the terms of the annual incentive compensation plan at the lesser of the Executive’s annual target or the average percentage of the target paid to all other Officers, for all annual compensation periods ending twenty four (24) months after the Date of Termination, with the final payment prorated to the end of the twenty four month period;

               (vi) continuation of the Executive’s medical, prescription drug, dental and life insurance benefits for a period of twenty-four (24) months following the Date of Termination without any contribution required of the Executive and the dependents of the Executive; and

               (vii) the Executive’s equity participation awards granted pursuant to any equity participation plan of the Company shall immediately vest as of the Date of Termination and be exercisable for a period of three years following the Date of Termination or for such longer period following the Date of Termination specified by the award granted to the Executive, provided however, nothing in this Agreement shall act to extend the term of any equity participation award and no equity participation award may be exercised after the expiration of the term of the award specified in the award granted to the Executive.

          (c) Payments. Payment of benefits under Section 5 (a) is subject to reasonable evidence of authority to act for the decedent’s estate. Payment of benefits under

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Sections 5 (b)(ii),(iii),(iv) and (v) are subject to the release provided under Section 5 (d) becoming effective. Except as otherwise provided in this Agreement or accelerated by the Company at its election all payments under this Section 5 shall be made in accordance with the Company’s normal pay practices, and shall be subject to applicable withholdings. Continuation of benefits under Section 5(a)(iv) or 5(b)(vi), shall be in addition to and not concurrent with any continuation rights Executive may have under the Consolidated Omnibus Budget Reconciliation Act of 1985, or similar state law.

          (d) Release. Payment of any amount to, or on behalf of, the Executive pursuant to Sections 5(b)(ii),(iii),(iv) and (v) of this Agreement and Executive’s acceptance of such amounts shall be subject to the execution of a general waiver and release of claims in the form attached hereto as Exhibit A or such other form as the Company may reasonably request to provide a complete release of all claims and causes of action the Executive or the Executive’s estate may have against the Company except claims and causes of action arising out of, or related to, the obligations of the Company pursuant to this Agreement and Claims (as defined in Exhibit A) for vested benefits under any pension plan, retirement plan and savings plan, rights under any equity participation plan and stock purchase plan and rights to continuation of medical care coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 and any similar state law.

          (e) No Offset for Benefits. There shall be no offset to any compensation or other benefits otherwise payable to, or on behalf of, the Executive pursuant to the terms of Section 5 of this Agreement as a result of the receipt by Executive of any pension, retirement or other benefit payments (including, but not limited to, accrued vacation) except that there shall be an offset for severance compensation payable pursuant to the Company’s benefit plans and programs based on the length of service with the Company and except as provided by Section 11(n).

          (f) Excise Tax.

               (i) Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment or distribution to the Executive or for the Executive’s benefit (whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise (the “Payment”) would be subject to the excise tax imposed by section 4999 of the Code or any successor provision (the “Excise Tax”), then the Executive shall be entitled to receive from the Company an additional payment (the “Gross-Up Payment”) in an amount such that the net amount of the Payment and the Gross-Up Payment retained by the Executive after the calculation and deduction of all Excise Taxes (including any interest or penalties imposed with respect to such taxes) on the payment and all federal, state and local income tax, employment tax and Excise Tax (including any interest or penalties imposed with respect to such taxes) on the Gross-Up Payment provided for in this Section 5(g), and taking into account any lost or reduced tax deductions on account of the Gross-Up Payment, shall be equal to the Payment;

               (viii) all determinations required to be made under this Section 5, including whether and when the Gross-Up Payment is required and the amount of such Gross-Up Payment, and the assumptions to be utilized in arriving at such determinations

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shall be made in good faith by the Accountants (as defined below) which shall provide the Executive and the Company with detailed supporting calculations with respect to such Gross-Up Payment within fifteen (15) business days of the receipt of notice from the Executive or the Company that has received or will receive a Payment. For the purposes of this Section 5(f), the “Accountants” shall mean the Company’s independent certified public accountants serving immediately prior to the change in control that with other events results in the imposition of the Excise Tax. In the event that the Accountants are also serving as accountant or auditor for the individual, entity or group effecting a change in control that with other events results in the imposition of the Excise Tax, the Company shall appoint another recognized public accounting firm to make the determinations required hereunder (which accounting firm shall also be referred to herein as the “Accountants”). All fees and expenses of the Accountants shall be borne solely by the Company. For the purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, such Payments will be treated as “parachute payments” within the meaning of section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless and except to the extent that in the opinion of the Accountants such Payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Excise Tax. For purposes of calculating whether the Excise Tax is applicable and determining the amount of the Gross-Up Payment, (A) to the extent not otherwise specified herein, reasonable assumptions and approximations may be made, (B) good faith interpretations of the Code may be relied upon and (C) the Executive shall be deemed to pay Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Gross-Up Payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of your adjusted gross income), and to have otherwise allowable deductions for Federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the Gross-Up Payment in the Executive’s adjusted gross income. To the extent practicable, any Gross-Up Payment with respect to any Payment shall be paid by the Company at the time the Executive is entitled to receive the Payment and in no event will any Gross-Up Payment be paid later than five days after the receipt by the Executive of the Accountant’s determination. Any determination by the Accountants shall be binding upon the Company and the Executive. As a result of uncertainty in the application of section 4999 of the Code at the time of the initial determination by the Accountants hereunder, it is possible that the Gross-Up Payment made will have been an amount less than the Company should have paid pursuant to this Section 5(f) (the “Underpayment”). In the event that the Company exhausts its remedies pursuant to Section 5(f) and the Executive is required to make a payment of any Excise Tax, the Underpayment shall be promptly paid by the Company to or for the Executive’s benefit; and

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               (ix) the Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes, interest and/or penalties with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

               (A) give the Company any information reasonably requested by the Company relating to such claim;

               (B) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company;

               (C) cooperate with the Company in good faith in order to effectively contest such claim; and

               (D) permit the Company to participate in any proceedings relating to such claims;

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify the Executive for and hold the Executive harmless from, on an after-tax basis, any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of all related costs and expenses. Without limiting the foregoing provisions of this Section 5(f), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify the Executive for and hold the Executive harmless from, on an after-tax basis, any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance (including as a result of any forgiveness by the Company of such advance); provided, further, that any extension of the statute of limitations relating to the payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to

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issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

     6. Termination Obligations.

          (a) The Executive hereby acknowledges and agrees that all personal property and equipment furnished to or prepared by the Executive in the course of or incident to the Executive’s employment by the Company belongs to the Company and shall be promptly returned to the Company upon termination of the employment. “Personal property” includes, without limitation, all books, manuals, records, reports, notes, contracts, lists, blueprints, and other documents, or materials, or copies thereof (including computer files), and all other proprietary information relating to the business of the Company or any affiliate. Following termination of employment, the Executive will not retain any written or other tangible material containing any proprietary information or Confidential Information (as defined below) of the Company or any affiliate of the Company.

          (b) Upon termination of the employment, the Executive shall be deemed to have resigned from all offices and directorships then held with the Company or any affiliate of the Company.

          (c) The representations and warranties contained herein and the Executive’s obligations and/or agreements under Sections 6, 7, 8, 9, 10 and 11 hereof shall survive termination of the employment and the expiration of this Agreement.

          (d) Construction. Any reference to the Company in this Section 6 shall include the Company and any entity which owns, is owned by or under common ownership with the Company (an “Affiliate”).

     7. Records and Confidential Data.

          (a) The Executive acknowledges that in connection with the performance of his duties during the term of this Agreement, the Company will make available to the Executive, or the Executive will have access to, certain Confidential Information (as defined below) of the Company. The Executive acknowledges and agrees that any and all Confidential Information learned or obtained by the Executive during the course of his employment by the Company or otherwise (including, without limitation, information that the Executive obtained through or in connection with the Executive’s stock ownership in and employment by the Company prior to the date hereof) whether developed by the Executive alone or in conjunction with others or otherwise, shall be and is the property of the Company.

          (b) The Executive shall keep all Confidential Information confidential and will not use such Confidential Information other than in connection with the Executive’s discharge of his duties hereunder. The Executive will safeguard the Confidential Information from unauthorized disclosure. This covenant is not intended to, and does not limit in any way, any of the Executive’s duties or obligations to the Company under statutory or common law not to disclose or to make personal use of the Confidential Information or trade secrets.

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          (c) Following the Executive’s termination hereunder, as soon as possible after the Company’s written request, the Executive will return to the Company all written Confidential Information which has been provided to the Executive and the Executive will destroy all copies of any analyses, compilations, studies or other documents prepared by the Executive or for the Executive’s use containing or reflecting any Confidential Information. Within ten (10) business days of the receipt of such request by the Executive, the Executive shall, upon written request of the Company, deliver to the Company a notarized document certifying that such written Confidential Information has been returned or destroyed in accordance with this Section 7(c).

          (d) For the purposes of this Agreement, “Confidential Information” shall mean all confidential and proprietary information of the Company, including, without limitation, the Company’s marketing strategies, pricing policies or characteristics, customers and customer information, product or product specifications, designs, software systems, cost of equipment, customer lists, business or business prospects, plans, proposals, codes, marketing studies, research, reports, investigations, public relations methods, or other information of similar character. For purposes of this Agreement, the Confidential Information shall not include and the Executive’s obligations under this Section 7 shall not extend to (i) information which is available in the public domain, (ii) information obtained by the Executive from third persons (other than employees of the Company or its affiliates) not under agreement to maintain the confidentiality of the same and (iii) information which is required to be disclosed by law or legal process.

          (e) Construction. Any reference to the Company in this Section 7 shall include the Company and its Affiliates.

     8. Assignment of Inventions.

          (a) Definition of Inventions. “Inventions” mean discoveries, developments concepts, ideas, methods, designs, improvements, inventions, formulas, processes, techniques, programs, know-how and data, whether or not patentable or registerable under copyright or similar statutes, except any of the foregoing that (i) is not related to the business of the Company or the Company’s actual or demonstrable research or development, (ii) does not involve the use of any equipment, supplies, facility or Confidential Information of the Company, (iii) was developed entirely on the Executive’s own time, and (iv) does not result from any work performed by the Executive for the Company.

          (b) Assignment. The Executive agrees to and hereby does assign to the Company, without further consideration, all of his right, title and interest in any and all Inventions the Executive may make during the term hereof.

          (c) Duty to Disclose and Assist. The Executive agrees to promptly disclose in writing all Inventions to the Company, and to provide all assistance reasonably requested by the Company in the preservation of the Company’s interests in the Inventions including obtaining patents in any country throughout the world. Such services will be without additional compensation if the Executive is then employed by the Company and for reasonable compensation and subject to his reasonable availability if he is not. If the Company cannot, after reasonable effort, secure the Executive’s signature on any document or documents

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needed to apply for or prosecute any patent, copyright, or other right or protection relating to an Invention, whether because of his physical or mental incapacity or for any other reason whatsoever, the Executive hereby irrevocably designates and appoints the Company and its duly authorized Officers and agents as his agent and attorney-in-fact, to act for and on his behalf and in his name and stead for the purpose of executing and filing any such application or applications and taking all other lawfully permitted actions to further the prosecution and issuance of patents, copyrights, or similar protections thereon, with the same legal force and effect as if executed by the Executive.

          (d) Ownership of Copyrights. The Executive agrees that any work prepared for the Company which is eligible for United States copyright protection or protection under the Universal Copyright Convention or other such laws or protections including, but not limited to, the Berne Copyright Convention and/or the Buenos Aires Copyright Convention shall be a work made for hire and ownership of all copyrights (including all renewals and extensions) therein shall vest in the Company. If any such work is deemed not to be a work made for hire for any reason, the Executive hereby grants, transfers and assigns all right, title and interest in such work and all copyrights in such work and all renewals and extensions thereof to the Company, and agrees to provide all assistance reasonably requested by the Company in the establishment, preservation and enforcement of the Company’s copyright in such work, such assistance to be provided at the Company’s expense but without any additional compensation to the Executive. The Executive hereby agrees to and does hereby waive the enforcement of all moral rights with respect to the work developed or produced hereunder, including without limitation any and all rights of identification of authorship and any and all rights of approval, restriction or limitation on use or subsequent modifications.

          (e) Litigation. The Executive agrees to render assistance and cooperation to the Company at its request regarding any matter, dispute or controversy with which the Company may become involved and of which the Executive has or may have reason to have knowledge, information or expertise. Such services will be without additional compensation if the Executive is then employed by the Company and for reasonable compensation and subject to his reasonable availability if he is not.

          (f) Construction. Any reference to the Company in this Section 7 shall include the Company and its Affiliates.

     9. Additional Covenants.

          (a) Non-Interference with Customer Accounts. Executive covenants and agrees that (i) during employment and (ii) for a period of twenty four (24) months commencing on the Date of Termination, except as may be required by Executive’s employment by the Company, Executive shall not directly or indirectly, personally or on behalf of any other person, business, corporation, or entity, contact or do business with any customer of the Company with respect to any product, business activity or service which is competitive with any product, business, activity or service of the type sold or provided by the Company.

          (b) Non-Competition. In consideration of and in connection with the benefits provided to the Executive under this Agreement and in order to protect the goodwill of the Company, the Executive hereby agrees that if the Executive’s employment is terminated, then,

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unless the Company otherwise agrees in writing, for a period of twenty four (24) months commencing on the Date of Termination, the Executive shall not, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with any entity engaged in a business which sells, in competition with the Company and its affiliates, the same type of products as sold by the Company, including without limitation glass tableware, ceramic dinnerware, metal flatware and plastic supplies to the foodservice industry other than as a shareholder or beneficial owner owning five percent (5%) or less of the outstanding securities of a public company. Without limiting the foregoing, currently the following business operations among others sell, in competition with the Company and its affiliates, the same type of products as sold by the Company and its affiliates: Arc International, Anchor Hocking, currently a unit of Newell Rubbermaid Inc., Cardinal International, Inc., Indiana Glass Company, currently a unit of Lancaster Colony Corporation, Oneida Ltd. and any glass tableware manufacturer, seller or importer for Bormioli Rocco Casa SpA, for the Kedaung group of companies of Indonesia or for the Sisecam group of companies of Turkey including Pasabahce.

          (c) No Diversion. The Executive covenants and agrees that in addition to the other Covenants set forth in this Section 9, (i) during his employment and (ii) for a period of two years following his Date of Termination, Executive shall not divert or attempt to divert or take advantage of or attempt to take advantage of any actual or potential business opportunities of the Company (e.g., joint ventures, other business combinations, investment opportunities, potential investors in the Company, and other similar opportunities) of which the Executive became aware as a result of his employment with the Company.

          (d) Non-Recruitment. The Executive acknowledges that the Company has invested substantial time and effort in assembling its present workforce. Accordingly, the Executive covenants and agrees that during employment and for period of twenty four (24) months commencing on the Date of Termination, the Executive shall not either for the Executive’s own account or jointly with or as a manager, agent, officer, employee, consultant, partner, joint venture owner or shareholder or otherwise on behalf of any other person, firm or corporation directly or indirectly entice, solicit, attempt to solicit, or seek to induce or influence any Officer or employee of the Company to leave his or her employment with the Company or to offer employment to any person who on or during the six (6) month period immediately preceding the date of such solicitation or offer was an employee of the Company; provided, however, that this Section 9(d) shall not be deemed to be breached with respect to an employee or former employee of the Company who responds to a general advertisement seeking employment or who otherwise initiates contact for the purpose of seeking employment.

          (e) Non-Disparagement. Executive covenants and agrees that during the Executive’s employment and for period of twenty four (24) months commencing on the Date of Termination, Executive shall not induce or incite claims of discrimination, wrongful discharge, or any other claims against the Company or any of its directors, Officers, employees or equity holders, by any other persons, executives or entities, and the Executive shall not undertake any harassing or disparaging conduct directed at the Company or any of its directors, Officers, employees or equity holders, other than such statements made as part of testimony compelled by law or legal process.

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          (f) Remedies. The Executive acknowledges that should the Executive violate any of the covenants contained in Sections 6, 7, 8, or 9 hereof (collectively, the “Covenants”), it would be difficult to determine the resulting damages to the Company and, in addition to any other remedies it may have, the Company shall be entitled to (x) temporary injunctive relief without being required to post a bond, (y) permanent injunctive relief without the necessity of proving actual damage and (z) forfeiture of all benefits otherwise payable to or for the account of the Executive under Sections 5(b)(ii),(iii),(iv) and (v) following the violation. The Executive shall be liable to pay all costs including reasonable attorneys’ fees which the Company may incur in enforcing or defending, to any extent, these Covenants, whether or not litigation is actually commenced and including litigation of any appeal taken or defended by the Company, where the Company succeeds in enforcing any part of these Covenants. The Company may elect to seek one or more of these remedies at its sole discretion on a case by case basis. Failure to seek any or all remedies in one case does not restrict the Company from seeking any remedies in another situation. Such action by the Company shall not constitute a waiver of any of its rights.

          (g) Severability and Modification of any Unenforceable Covenant. It is the parties’ intent that each of the Covenants be read and interpreted with every reasonable inference given to its enforceability. However, it is also the parties’ intent that if any term, provision or condition of the Covenants is held to be invalid, void or unenforceable, the remainder of the provisions thereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Finally, it is also the parties’ intent that if it is determined any of the Covenants are unenforceable because of over breadth, then the covenants shall be modified so as to make it reasonable and enforceable under the prevailing circumstances.

          (h) Tolling. If the Executive breaches any Covenant, the running of the period of restriction shall be automatically tolled and suspended for the amount of time that the breach continues, and shall automatically recommence when the breach is remedied so that the Company shall receive the benefit of the Executive’s compliance with the Covenants. This paragraph shall not apply to any period for which the Company is awarded and receives actual monetary damages for breach by the Executive of a Covenant with respect to which this paragraph applies.

          (i) Construction. Any reference to the Company in this Section 9 shall include the Company and its affiliates.

     10. No Assignment. This Agreement and the rights and duties hereunder are personal to the Executive and shall not be assigned, delegated, transferred, pledged or sold by the Executive without the prior written consent of the Company. The Executive hereby acknowledges and agrees that the Company may assign, delegate, transfer, pledge or sell this Agreement and the rights and duties hereunder (a) to an affiliate of the Company or (b) to any third party in connection with (i) the sale of all or substantially all of the assets of the Company or (ii) a stock purchase, merger, or consolidation involving the Company. This Agreement shall inure to the benefit of and be enforceable by the parties hereto, and their respective heirs, personal representatives, successors and assigns.

     11. Miscellaneous Provisions.

          (a) Payment of Taxes. Except as specifically provided for in this Agreement,

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to the extent that any taxes become payable by the Executive by virtue of any payments made or benefits conferred by the Company, the Company shall not be liable to pay or obligated to reimburse the Executive for any such taxes or to make any adjustment under this Agreement. Any payments otherwise due under this Agreement to the Executive, including, but not limited to, the base salary and any bonus compensation shall be reduced by any required withholding for federal, state and/or local taxes and other appropriate payroll deductions.

          (b) Notices. All notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as properly given or made (i) if delivered personally or (ii) after the expiration of five days from the date upon which such notice was mailed from within the United States by certified mail, return receipt requested, postage prepaid, (iii) upon receipt by prepaid telegram or facsimile transmission (with written confirmation of receipt) or (iv) after the expiration of the second business day following deposit with an overnight delivery service. All notices given or made pursuant hereto shall be so given or made to the parties at the following addresses:

If to the Executive:

Gregory T. Geswein
3625 Wood Hollow Road
Kettering, OH 45429

If to the Company:

Libbey Inc.
300 Madison Avenue
P.O. Box 10060
Toledo, Ohio 43604
Facsimile: (419) 325-2585
Attention: Secretary

The address of any party hereto may be changed by a notice in writing given in accordance with the provisions hereof.

          (c) Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal or unenforceable, such provision shall be severed and enforced to the extent possible or modified in such a way as to make it enforceable, and the invalidity, illegality or unenforceability thereof shall not affect the validity, legality or enforceability of the remaining provisions of this Agreement.

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          (d) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio applicable to contracts executed in and to be performed entirely within that state, except with respect to matters of law concerning the internal corporate affairs of any corporate entity which is a party to or the subject of this Agreement, and as to those matters, the law of the jurisdiction under which the respective entity derives its powers shall govern. The parties irrevocably agree that all actions to enforce an arbitrator’s decision pursuant to Section 11(l) of this Agreement shall be instituted and litigated only in federal, state or local courts sitting in Toledo, Ohio and each of such parties hereby consents to the exclusive jurisdiction and venue of such court and waives any objection based on forum non conveniens.

          (e) WAIVER OF JURY TRIAL. THE PARTIES HEREBY WAIVE, RELEASE AND RELINQUISH ANY AND ALL RIGHTS THEY MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTIONS TO ENFORCE AN ARBITRATOR’S DECISION PURSUANT TO SECTION 11(l) OF THIS AGREEMENT.

          (f) Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument.

          (g) Entire Understanding. This Agreement including all Exhibits and Recitals hereto which are incorporated herein by this reference, together with the other agreements and documents being executed and delivered concurrently herewith by the Executive, the Company and certain of its affiliates, constitute the entire understanding among all of the parties hereto and supersedes any prior understandings and agreements, written or oral, among them respecting the subject matter within.

          (h) Limitation on Liabilities. If the Executive is awarded any damages as compensation for any breach of this Agreement or a breach of any covenant contained in this Agreement (whether express or implied by either law or fact), such damages shall be limited to contractual damages (including reasonable attorneys’ fees) and shall exclude (i) punitive damages and (ii) consequential and/or incidental damages (e.g., lost profits and other indirect or speculative damages). The maximum amount of damages that the Executive may recover for any reason shall be all amounts owed (but not yet paid) to the Executive pursuant to this Agreement.

          (i) Pronouns and Headings. As used herein, all pronouns shall include the masculine, feminine, neuter, singular and plural thereof wherever the context and facts require such construction. The headings, titles and subtitles herein are inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof.

          (j) Amendment. Except as set forth in Sections 9(g) and 11(c) above, this Agreement shall not be changed or amended unless in writing and signed by both the Executive and the Chairman of the Board of Directors or unless amended by the Company in any manner provided that the rights and benefits of the Executive shall not be diminished by any amendment made by the Company without the Executive’s written consent to such amendment.

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          (k) Advice of Counsel. The Executive acknowledges (i) that he has consulted with or has had the opportunity to consult with independent counsel of his own choice concerning this Agreement and has been advised to do so by the Company, and (ii) that he has read and understands this Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment.

          (l) Arbitration. Notwithstanding anything herein to the contrary, in the event that there shall be a dispute among the parties arising out of or relating to this Agreement, or the breach thereof, the parties agree that such dispute shall be resolved by final and binding arbitration in Toledo, Ohio, administered by the American Arbitration Association (the “AAA”), in accordance with AAA’s Employment ADR Rules. The arbitrator’s decision shall be final and binding upon the parties, and may be entered and enforced in any court of competent jurisdiction by either of the parties. The arbitrator shall have the power to grant temporary, preliminary and permanent relief, including without limitation, injunctive relief and specific performance. The arbitrator’s fees and expenses shall be paid by the Company.

          (m) Attorney’s Fees. If any arbitration or other proceeding, including without limitation any hearing before the Board, any arbitration proceeding, any proceeding to enforce an arbitration award, any legal action and any appeal, is brought by one party against the other relating to, or in connection with this Agreement, the Company shall reimburse the Executive reasonable attorneys’ fees and other costs within a reasonable time after the same are incurred in addition to any other relief to which the Executive may be entitled.

          (n) Effect on Other Agreements. It is the intention of the parties hereto and thereto that this Agreement provide benefits which are not otherwise provided by the Letter Agreement dated as of May 7, 2007, between the Executive and the Company (the “Letter Agreement”) that provides to Executive certain benefits if a change of control (as defined in the Letter Agreement) of the Company occurs. Therefore, if during the term of this Agreement the Executive is entitled to payment under both this Agreement and the Letter Agreement, the Executive shall only receive the greater of the benefits provided under this Agreement or under the Letter Agreement, but not both. If Executive receives benefits under this Agreement, all rights to receive any benefits under the Letter Agreement shall be waived, and vice versa.

     IN WITNESS WHEREOF, this Agreement has been executed as of the date and year first above written.

LIBBEY INC.

By:

Name: Susan A. Kovach

Title: Vice President, General Counsel & Secretary

Name: Gregory T. Geswein

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SCHEDULE 1

1.	Base salary of the Executive as of the date of this Agreement and subsequent revisions.
2.	The Executive shall be eligible to participate in the following benefit plans and programs of the Company:

a.	The annual performance incentive compensation plan for corporate Officers (currently the “Senior Management Incentive Plan”). The target percentage for an Executive’s participation shall be the target percentage currently in effect for the position as of the date of this Agreement (namely, 60% of annual base salary) and any subsequent revisions.
b.	The long term incentive compensation plan (currently the Libbey Inc. Long Term Incentive Compensation Plan). The target percentage for an Executive’s participation shall be the target percentage currently in effect for the position as of the date of this Agreement (namely, 80% of annual base salary) and any subsequent revisions.
c.	Stock option and equity participation plan (currently the 2006 Omnibus Incentive Plan of Libbey Inc.)
d.	Libbey Inc. Retirement Savings Plan
e.	Libbey Inc. Executive Savings Plan
f.	Financial Investment Counseling
g.	Executive Physical
h.	Deferred Compensation Plan (if and when adopted)
i.	Such other benefit plans and arrangements as the Company provides, from time to time, to salaried employees generally

EXHIBIT A

GENERAL RELEASE AND WAIVER OF CLAIMS

          The undersigned,                      resident of the State of                      (“Releasor”), in accordance with and pursuant to the terms of Section 5(d) of the Employment Agreement (the “Agreement”), dated as of                     , 2007, between Libbey Inc., a Delaware corporation (the “Company”), and Releasor, and the consideration therein provided, except as set forth herein, hereby remises, releases and forever discharges and covenants not to sue, and by these presents does for Releasor and Releasor’s legal representatives, trustees, beneficiaries, heirs and assigns (Releasor and such persons referred to herein, collectively, as the “Releasing Parties”) hereby remise, release and forever discharge and covenant not to sue the Company and its affiliates and the respective Officers, directors, employees, equity holders, agent and representatives of each of them and all of their respective successor and assigns (each a “Released Party” and collectively, the “Released Parties”), of and from any and all manner of actions, proceedings, claims, causes of action, suits, promises, damages, judgments, executions, claims and demands, of any nature whatsoever, and of every kind and description, choate and inchoate, known or unknown, at law or in equity (collectively, “Claims”), which the Releasing Parties, or any of them, now have or ever had, or hereafter can, shall or may have, for, upon or by reason of any matter, cause or thing whatsoever, against the Released Parties, and each of them, from the beginning of time to the date hereof;

     (i) arising from Releasor’s employment, compensation, commissions, deferred compensation plans, insurance, stock ownership, stock options, employee benefits, and other terms and conditions of employment or employment practices of the Company under federal, state or local law or regulation, including, but not limited to the Employee Retirement Income Security Act of 1974, as amended;

     (ii) relating to the termination of Releasor’s employment or the circumstances surrounding thereof based on any contract, tort, whistleblower, personal injury, retaliatory, wrongful discharge or any other theory under any federal, state or local constitution, law, regulation, common law or otherwise;

     (iii) relating to payment of any attorneys’ fees incurred by Releasor; and

     (iv) based on any alleged discrimination on the basis of race, color, religion, sex, age, national origin, handicap, disability or another category protected by any federal, state or local law or regulation, including, but not limited to, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Fair Labor Standards Act, the Older Workers Benefit Protection Act of 1990, or Executive Order 11246 (as any of these laws or orders may have been amended) or any other similar federal, state or local labor, employment or anti-discriminatory laws.

          Notwithstanding any other provision of this General Release and Waiver of Claims, Releasor does not release or waive Releasor’s rights and Claims against the Company arising out of, or related to, the obligations of the Company pursuant to the Agreement, Claims for Releasor’s vested benefits under any pension plan, retirement plan and savings plan, rights under any equity participation plan and stock purchase plan and rights to continuation of

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medical care coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 and any similar state law.

          Releasor represents and warrants on behalf of the Releasing Parties that there has been, and there will be, no assignment or other transfer of any right or interest in any Claims which Releasor has or may have against the Released Parties, and Releasor hereby agrees to indemnify and hold each Released Party harmless from any Claims, costs, expenses and attorney’s fees directly or indirectly incurred by any of the Released Parties as a result of any person asserting any right or interest pursuant to his, her or its assignment or transfer of any such right or interest.

          Releasor agrees that if any Releasing Party hereafter commences, joins in, or in any manner seeks relief through any suit arising out of, based upon, or relating to any of the Claims released hereunder, or in any manner asserts against any Released Party any of the Claims released hereunder, then Releasor will pay to such Released Party, in addition to any and all damages and compensation, direct or indirect, all attorney’s fees incurred in defending or otherwise responding to such suit or Claims.

          Releasor acknowledges that (i) Releasor has received the advice of legal counsel in connection with this General Release and Waiver of Claims, (ii) Releasor has read and understands that this is a General Release and Waiver of Claims, and (iii) Releasor intends to be legally bound by the same.

          Releasor acknowledges that Releasor has been given the opportunity to consider this Release for twenty-one (21) days and has been encouraged and given the opportunity to consult with legal counsel of Releasor’s choosing before signing it. Releasor understands that Releasor shall have seven (7) days from the date on which Releasor executes this General Release and Waiver of Claims (as indicated by the date below his signature) to revoke Releasor’s signature and agreement to be bound hereby by providing written notice of revocation to the Company within such seven (7) day period. Releasor further understands and acknowledges this Release shall become effective, if not sooner revoked, on the eighth day after the execution hereof by Releasor (the “Effective Date”).

          IN WITNESS WHEREOF, Releasor has executed and delivered this General Release and Waiver of Claims on behalf of the Releasing Parties as of the day and year set forth below.

Dated:                     , 20__.

RELEASOR:

Name:

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EX-10.9

Exhibit 10.9

May 23, 2007

Gregory T. Geswein
3625 Wood Hollow Road
Kettering, OH 45429

Dear Greg:

Libbey Inc. (the “Corporation”) considers it essential to the best interests of its shareholders to foster the continuous employment of key management personnel. In connection with this, the Corporation’s Board of Directors (the “Board”) recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of the Corporation may exist and that the uncertainty and questions that it may raise among management could result in the departure or distraction of management personnel to the detriment of the Corporation and its shareholders.

The Board has decided to reinforce and encourage the continued attention and dedication of members of the Corporation’s management, including yourself, to their assigned duties without the distraction arising from the possibility of a change in control of the Corporation.

In order to induce you to remain in its employ, the Corporation hereby agrees that after this letter agreement (this “Agreement”) has been fully executed, you shall receive the severance benefits set forth in this Agreement in the event your employment with the Corporation is terminated under the circumstances described below subsequent to a Change in Control (as defined in Section 2).

     1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 2007; provided, however, that commencing on January 1, 2008 and on each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Corporation shall have given notice that it does not wish to extend this Agreement; provided, further, that if a Change in Control (as defined in Section 2), occurs during the original or any extended term of this Agreement, the term of this Agreement shall continue in effect for a period of not less than thirty-six (36) months beyond the month in which such Change in Control occurred.

     2. Change in Control. No benefits shall be payable hereunder unless there has been a Change in Control. For purposes of this Agreement, a Change in Control shall be deemed to occur if:

     (a) any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Corporation representing twenty percent (20%) or more of the combined voting power of the Corporation’s then outstanding securities. For purposes of this Agreement, the term “Person” is used as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); provided, however, that the term shall not include the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, and any corporation owned, directly or indirectly, by the shareholders of the Corporation, in substantially the same proportions as their ownership of stock of the Corporation, and provided further that for purposes of this subsection (a) the term person shall not apply to Baron Capital Group, Inc., BAMCO,

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Inc., Baron Capital Management, Inc., Baron Asset Fund or Ronald Baron (collectively the “Baron Group”), by virtue of their individual or collective beneficial ownership of securities of the Corporation’s outstanding securities as of the date of this letter so long as the Baron Group does not individually or collectively, beneficially own, or increase such beneficial ownership to, twenty-five percent (25%) or more of the combined voting power of the corporation’s then outstanding securities. For purposes of this Agreement, the term “Beneficial Owner” shall have the meaning given to such term in Rule 13d-3 under the Exchange Act;

     (b) during any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in Sections 2(a), (c) or (d)) whose election by the Board or nomination for election by the Corporation’s shareholders was approved by a vote of at least two-thirds (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 so approved (hereinafter referred to as “Continuing Directors”), cease for any reason to constitute at least a majority thereof;

     (c) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation (or other entity), other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing 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 the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation;

     (d) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation’s assets; or

     (e) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation representing ten percent (10%) or more of the combined voting power of the Corporation’s then outstanding securities (a “10% Owner”) and (A) the identity of the Chief Executive Officer of the Corporation is changed during the period beginning sixty (60) days before the attainment of the ten percent (10%) beneficial ownership and ending two (2) years thereafter, or (B) individuals constituting at least one-third (1/3) of the members of the Board at the beginning of such period shall cease for any reason to serve on the Board during the period beginning sixty (60) days before the attainment of the ten percent (10%) beneficial ownership and ending two (2) years thereafter; provided, however, (i) that this subsection (e) shall not apply to (i) any Person who is a 10% Owner as of the date hereof so long as such Person does not increase such beneficial ownership by five percent (5%) or more over the percentage so owned by such Person as of the date hereof; (ii) that this subsection (e) shall not apply to the Baron Group by virtue of their individual or collective beneficial ownership of securities of the Corporation’s outstanding securities as of the date of this letter so long as the Baron Group does not individually or collectively, beneficially own, or increase such beneficial ownership to, twenty-five percent (25%) or more of the combined voting power of the corporation’s then outstanding securities, and (iii) that this subsection (e) shall not apply to Ariel Capital Management (“Ariel”) by virtue of its

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beneficial ownership of the Corporation’s outstanding securities as of the date of this Agreement so long as Ariel does not beneficially own, or increase such beneficial ownership to, twenty percent (20%) or more of the combined voting power of the Corporation’s then outstanding securities.

     3. Termination Following Change in Control. (i) General. During the term of this Agreement, if any of the events described in Section 2 constituting a Change in Control shall have occurred, you shall be entitled to the benefits provided in Section 4(ii) upon the subsequent termination of your employment, provided that such termination occurs during the term of this Agreement and within the two (2) year period immediately following the date of such Change in Control, unless such termination is (a) because of your death or Disability (as defined in Section 3(ii)), (b) by the Corporation for Cause (as defined in Section 3(iii)), or (c) by you other than (1) for Good Reason (as defined in Section 3(iv)), or (2) in a Covered Resignation (as defined in Section 3(v)). In the event that you are entitled to such benefits, such benefits shall be paid notwithstanding the subsequent expiration of the term of this Agreement. In the event your employment with the Corporation is terminated for any reason and subsequently a Change in Control occurs, you shall not be entitled to any benefits hereunder.

     (ii) Disability. If, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Corporation for six (6) consecutive months, and within thirty (30) days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your employment may be terminated for “Disability.”

     (iii) Cause. Termination by the Corporation of your employment for “Cause” shall mean termination (a) upon your willful and continued failure to substantially perform your duties with the Corporation (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after your issuance of a Notice of Termination (as defined in Section 3(vi)) either (x) for Good Reason, or (y) in connection with a Covered Resignation, after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, (b) upon your willful and continued failure to substantially follow and comply with the specific and lawful directives of the Board, as reasonably determined by the Board (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after your issuance of a Notice of Termination for Good Reason or in connection with a Covered Resignation), after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, (c) upon your willful commission of an act of fraud or dishonesty resulting in material economic or financial injury to the Corporation, or (d) upon your willful engagement in illegal conduct or gross misconduct, in each case which is materially and demonstrably injurious to the Corporation. For purposes of this Section 3(iii), no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you not in good faith. Notwithstanding the foregoing, you shall not be deemed terminated for Cause pursuant to Sections 3(iii)(a), (b) or (d) hereof unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board (after reasonable notice to you, an opportunity for you, together with your counsel, to be heard before the Board and a reasonable opportunity to cure), finding that in the Board’s good faith opinion you were guilty of conduct set forth above in this Section 3(iii) and specifying the particulars thereof in reasonable detail.

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     (iv) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, “Good Reason” shall mean, without your express written consent, the occurrence after a Change in Control of any of the following circumstances unless, in the case of Sections 3(iv)(a), (e), (f), (g), (h) or (i), such circumstances are fully corrected (provided such circumstances are capable of correction) prior to the Date of Termination (as defined in Section 3(vii)) specified in the Notice of Termination given in respect thereof:

(a)	the assignment to you of any duties inconsistent with the position in the Corporation that you held immediately prior to the Change in Control, a significant adverse alteration in the nature or status of your responsibilities or the conditions of your employment from those in effect immediately prior to such Change in Control, including by virtue of the Corporation ceasing to be a publicly-held corporation, or any other action by the Corporation that results in a material diminution in your position, authority, duties or responsibilities;
(b)	the Corporation’s reduction of your annual base salary as in effect on the date hereof or as the same may be increased from time to time;
(c)	the relocation of the Corporation’s offices at which you are principally employed immediately prior to the date of the Change in Control (your “Principal Location”) to a location more than thirty (30) miles from such location, or the Corporation’s requiring you, without your written consent, to be based anywhere other than your Principal Location, except for required travel on the Corporation’s business to an extent substantially consistent with your present business travel obligations;
(d)	the Corporation’s failure to pay to you any portion of your current compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Corporation within seven (7) days of the date such compensation is due;
(e)	the Corporation’s failure to continue in effect any material compensation or benefit plan or practice in which you participate immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the Corporation’s failure to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the Change in Control;
(f)	the Corporation’s failure to continue to provide you with benefits substantially similar in the aggregate to those enjoyed by you under any of the Corporation’s life insurance, medical, health and accident, disability, pension, retirement, or other benefit plans or practices in which you and your eligible family members were participating at the time of the Change in Control, the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits, or the failure by the Corporation to provide you with the number of paid vacation

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	days to which you are entitled on the basis of years of service with the Corporation in accordance with the Corporation’s normal vacation policy in effect at the time of the Change in Control;
(g)	the Corporation’s failure to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 6 hereof;
(h)	any purported termination of your employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3(vi) hereof (and, if applicable, the requirements of Section 3(iii) hereof), which purported termination shall not be effective for purposes of this Agreement; or
(i)	the continuation or repetition, after written notice of objection from you, of harassing or denigrating treatment of you inconsistent with your position with the Corporation.

Your right to terminate your employment pursuant to this Section 3(iv) shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

     (v) Voluntary Termination and Covered Resignation. You shall be entitled to voluntarily terminate your employment for any reason or no reason at any time after a Change in Control. Any such termination which occurs within the thirty (30) day period following the first anniversary of the occurrence of a Change in Control shall constitute a resignation which entitles you to receive benefits under this Agreement (a “Covered Resignation”).

     (vi) Notice of Termination. Any purported termination of your employment by the Corporation or by you (other than termination due to death which shall terminate your employment automatically) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7. “Notice of Termination” shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated.

     (vii) Date of Termination, Etc. “Date of Termination” shall mean (a) if your employment is terminated due to your death, the date of your death; (b) if your employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), and (c) if your employment is terminated pursuant to Section 3(iii), Section 3(iv) or Section 3(v) or for any other reason (other than death or Disability), the date specified in the Notice of Termination (which, in the case of a termination for Cause shall not be less than thirty (30) days from the date such Notice of Termination is given, and in the case of a termination for Good Reason or in connection with a Covered Resignation shall not be less than fifteen (15) nor more than sixty (60) days from the date such Notice of Termination is given). Notwithstanding anything to the contrary contained in this Section 3(vii), if within fifteen (15) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, then the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the

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parties, or otherwise; provided, however, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence.

     4. Compensation Upon Termination. Following a Change in Control during the term of this Agreement, you shall be entitled to the benefits described below upon termination of your employment, provided that such termination occurs during the term of this Agreement and within the two (2) year period immediately following the date of such Change in Control. The benefits to which you are entitled, subject to the terms and conditions of this Agreement, are:

     (i) If your employment shall be terminated by the Corporation for Cause or by you other than (x) for Good Reason or (y) pursuant to a Covered Resignation, the Corporation shall pay you your full base salary, when due, through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan or practice of the Corporation at the time such payments are due, and the Corporation shall have no further obligations to you under this Agreement.

     (ii) If your employment by the Corporation shall be terminated by you (x) for Good Reason or (y) pursuant to a Covered Resignation, or by the Corporation other than for Cause or Disability, then you shall be entitled to the benefits provided below:

(a)	the Corporation shall pay to you your full base salary, when due, through the Date of Termination at the rate in effect at the time Notice of Termination is given, at the time specified in Section 4(iii), plus all other amounts to which you are entitled under any compensation plan or practice of the Corporation at the time such payments are due;
(b)	in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Corporation shall pay as severance pay to you, at the time specified in Section 4(iii), a lump-sum severance payment (together with the payments provided in Section 4(ii)(c) below, the “Severance Payments”) equal to the sum of the following:

(A)	three (3) times your annual base salary as in effect as of the Date of Termination or immediately prior to the Change in Control, whichever is greater; and
(B)	three (3) times the greater of (x) your targeted annual bonus as in effect as of the Date of Termination or immediately prior to the Change in Control, whichever is greater, or (y) your annual bonus for the year immediately preceding the Date of Termination;

(c)	notwithstanding any provisions of the Corporation’s stock option plans, incentive plans, or other similar plans, the restricted period with respect to any restricted stock granted to you thereunder shall lapse and such shares shall be distributed to you at the time specified in Section 4(iii);
(d)	for a period of one (1) year following the Date of Termination, the Corporation shall, at its sole expense as incurred, provide you with financial planning services of substantially the same type and scope as

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	those which the Corporation was providing to you immediately prior to the Date of Termination, or, if more favorable to you, the date of the Change in Control;
(e)	for a period of two (2) years following the Date of Termination, the Corporation shall, at its sole expense as incurred, provide you with outplacement services, the scope and provider of which shall be selected by you in your sole discretion;
(f)	for a thirty-six (36) month period after such termination, the Corporation shall continue to provide you and your eligible family members, based on the cost sharing arrangement between you and the Corporation on the date of the Change in Control, with medical and dental health benefits at least equal to those which would have been provided to you and them if your employment had not been terminated or, if more favorable to you, as in effect generally at any time thereafter; provided, however, that if you become re-employed with another employer and are eligible to receive medical and dental health benefits under another employer’s plans, the Corporation’s obligations under this Section 4(ii)(f) shall be reduced to the extent comparable benefits are actually received by you during the thirty-six (36) month period following your termination, and any such benefits actually received by you shall be reported to the Corporation. In the event you are ineligible under the terms of such benefit plans or programs to continue to be so covered, the Corporation shall provide you with substantially equivalent coverage through other sources or will provide you with a lump-sum payment in such amount that, after all taxes on that amount, shall be equal to the cost to you of providing yourself such benefit coverage. At the termination of the benefits coverage under the second preceding sentence, you, your spouse and your dependents shall be entitled to continuation coverage pursuant to section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”), sections 601-608 of the Employee Retirement Income Security Act of 1974, as amended, and under any other applicable law, to the extent required by such laws, as if you had terminated employment with the Corporation on the date such benefits coverage terminates. The lump-sum shall be determined on a present value basis using the interest rate provided in section 1274(b)(2)(B) of the Code on the Date of Termination.
(g)	(1) anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment or distribution to you or for your benefit (whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise (the “Payment”) would be subject to the excise tax imposed by section 4999 of the Code (the “Excise Tax”), then you shall be entitled to receive from the Corporation an additional payment (the “Gross-Up Payment”) in an amount such that the net amount of the Payment and the Gross-Up Payment retained by you after the calculation and deduction of all Excise Taxes (including any interest or penalties imposed with respect to such taxes) on the payment and all federal, state and local income tax, employment tax and Excise Tax (including any interest or penalties imposed with respect to such taxes) on the Gross-Up Payment provided for in this Section 4(ii)(g), and taking

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into account any lost or reduced tax deductions on account of the Gross-Up Payment, shall be equal to the Payment;

(2) all determinations required to be made under this Section 4(ii)(g), including whether and when the Gross-Up Payment is required and the amount of such Gross-Up Payment, and the assumptions to be utilized in arriving at such determinations shall be made by the Accountants (as defined below) which shall provide you and the Corporation with detailed supporting calculations with respect to such Gross-Up Payment within fifteen (15) business days of the receipt of notice from you or the Corporation that you have received or will receive a Payment. For the purposes of this Section 4(ii)(g), the “Accountants” shall mean the Corporation’s independent certified public accountants serving immediately prior to the Change in Control. In the event that the Accountants are also serving as accountant or auditor for the individual, entity or group effecting the Change in Control, you shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accountants hereunder). All fees and expenses of the Accountants shall be borne solely by the Corporation.

For the purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, such Payments will be treated as “parachute payments” within the meaning of section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless and except to the extent that in the opinion of the Accountants such Payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Excise Tax. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Gross-Up Payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of your adjusted gross income), and to have otherwise allowable deductions for Federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the Gross-Up Payment in your adjusted gross income. To the extent practicable, any Gross-Up Payment with respect to any Payment shall be paid by the Corporation at the time you are entitled to receive the Payment and in no event will any Gross-Up Payment be paid later than five days after the receipt by you of the Accountant’s determination. Any determination by the Accountants shall be binding upon the Corporation and you. As a result of uncertainty in the

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application of section 4999 of the Code at the time of the initial determination by the Accountants hereunder, it is possible that the Gross-Up Payment made will have been an amount less than the Corporation should have paid pursuant to this Section 4(ii)(g) (the “Underpayment”). In the event that the Corporation exhausts its remedies pursuant to Section 4(ii)(g)(3) and you are required to make a payment of any Excise Tax, the Underpayment shall be promptly paid by the Corporation to or for your benefit; and

(3) you shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of the Gross-Up Payment. Such notification shall be given as soon as practicable after you are informed in writing of such claim and shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. You shall not pay such claim prior to the expiration of the 30-day period following the date on which you give such notice to the Corporation (or such shorter period ending on the date that any payment of taxes, interest and/or penalties with respect to such claim is due). If the Corporation notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall:

(A)	give the Corporation any information reasonably requested by the Corporation relating to such claim;
(B)	take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation;

(C)

cooperate with the Corporation in good faith in order to effectively contest such claim; and permit the Corporation to participate in any proceedings relating to such claims;

provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify you for and hold you harmless from, on an after-tax basis, any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of all related costs and expenses. Without limiting the foregoing provisions of this Section 4(ii)(g), the Corporation shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct you to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and you agree to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however, that if the Corporation directs you to pay such claim and sue for a refund, the Corporation shall advance the

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	amount of such payment to you, on an interest-free basis, and shall indemnify you for and hold you harmless from, on an after-tax basis, any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance (including as a result of any forgiveness by the Corporation of such advance); provided, further, that any extension of the statute of limitations relating to the payment of taxes for the taxable year of you with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and you shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority;
(h)	in any situation where under applicable law the Corporation has the power to indemnify (or advance expenses to) you in respect of any judgments, fines, settlements, loss, cost or expense (including attorneys’ fees) of any nature related to or arising out of your activities as an agent, employee, officer or director of the Corporation or in any other capacity on behalf of or at the request of the Corporation, the Corporation shall promptly on written request, indemnify (and advance expenses to) you to the fullest extent permitted by applicable law, including but not limited to making such findings and determinations and taking any and all such actions as the Corporation may, under applicable law, be permitted to have the discretion to take so as to effectuate such indemnification or advancement. Such agreement by the Corporation shall not be deemed to impair any other obligation of the Corporation respecting your indemnification otherwise arising out of this or any other agreement or promise of the Corporation or under any statute;
(i)	the Corporation shall furnish you for six (6) years following the Date of Termination (without reference to whether the term of this Agreement continues in effect) with directors’ and officers’ liability insurance insuring you against insurable events which occur or have occurred while you were a director or officer of the Corporation, such insurance to have policy limits aggregating not less than the amount in effect immediately prior to the Change in Control, and otherwise to be in substantially the same form and to contain substantially the same terms, conditions and exceptions as the liability issuance policies provided for officers and directors of the Corporation in force from time to time, provided, however, that such terms, conditions and exceptions shall not be, in the aggregate, materially less favorable to you than those in effect on the date hereof; provided, further, that if the aggregate annual premiums for such insurance at any time during such period exceed one hundred and fifty percent (150%) of the per annum rate of premium currently paid by the Corporation for such insurance, then the Corporation shall provide the maximum coverage that will then be available at an annual premium equal to one hundred and fifty percent (150%) of such rate; and

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(j) you shall be fully vested in your accrued benefits under any qualified or nonqualified pension, profit sharing, deferred compensation or supplemental plans maintained by the Corporation for your benefit, and the Corporation shall provide you with additional fully vested benefits under such plans in an amount equal to the benefits which you would have accrued had you continued your employment with the Corporation for three (3) additional years following your Date of Termination; provided, however, that to the extent that the acceleration of vesting or enhanced accrual of such benefits would violate any applicable law or require the Corporation to accelerate the vesting of the accrued benefits of all participants in such plan or plans or to provide additional benefit accruals to such participants, the Corporation shall pay you a lump-sum payment at the time specified in Section 4(iii) in an amount equal to the value of such benefits; provided, further, that to the extent that the present value of all benefits payable to you under this Section 4(ii)(j) is less than $250,000, the Corporation shall pay you a lump-sum payment at the time specified in Section 4(iii) in an amount equal to the difference between $250,000 and the amount of such benefits which are otherwise payable to you under this Section 4(ii)(j); provided, further, that if you are eligible to receive grandfathered benefits under the Corporation’s pension plan, the provisions of this Section 4(ii)(j) shall apply to such grandfathered benefits, without reduction for age, in addition to any other benefits to which you are entitled under this Section 4(ii)(j).

     (iii) The payments provided for in Sections 4(ii)(a), (b), (c), (d) and (j) shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Corporation shall pay to you on such day an estimate, as determined in good faith by the Corporation, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Corporation to you, payable on the fifth day after demand by the Corporation (together with interest at the rate provided in section 1274(b)(2)(B) of the Code).

     (iv) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise nor, except as provided in Section 4(ii)(f), shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer or self-employment, by retirement benefits, by offset against any amount claimed to be owed by you to the Corporation, or otherwise.

     5. Acceleration of Vesting of Options. Notwithstanding anything contained herein, in the event of a Change in Control during the term of this Agreement, all outstanding options (“Options”), if any, granted to you under any of the Corporation’s stock option plans, incentive plans or other similar plans (or options substituted therefor covering the stock of a successor corporation) shall, effective immediately prior to such Change in Control, become fully vested and exercisable as to all shares of stock covered thereby.

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     6. Successors; Binding Agreement.

     (i) The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to terminate your employment and receive compensation from the Corporation in the same amount and on the same terms to which you would be entitled hereunder if you terminate your employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. Unless expressly provided otherwise, “Corporation” as used herein shall mean the Corporation as defined in this Agreement and any successor to its business and/or assets as aforesaid.

     (ii) This Agreement shall inure to the benefit of and be enforceable by you and your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate.

     7. Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Corporation shall be directed to the attention of the Board with a copy to the Secretary of the Corporation, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

     8. Non- Compete, Confidentiality and Non-Solicitation Covenants.

     (i) Non-Compete. In consideration of and in connection with the benefits provided to you under this Agreement, and in order to protect the goodwill of the Corporation, you hereby agree that, if your employment is terminated pursuant to a Covered Resignation, then, for a period of twelve (12) months commencing on the Date of Termination, you shall not, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with any of the following entities (or any subsidiary of any such entity) other than as a shareholder or beneficial owner owning 5% or less of the outstanding securities of a public company: Durand International, the Anchor Hocking unit of Newell Co., Cardinal International, Inc., the Indiana Glass unit of Lancaster Colony Corporation, Oneida LTD or any glass tableware manufacturer, seller or importer for Bormioli Rocco Casa SpA, for the Kedaung group of companies of Indonesia or for the Sisecam group of companies of Turkey including Pasabahce.

     (ii) Confidentiality. You hereby agree that, for the period commencing on the Date of Termination and terminating on the third anniversary thereof, you shall not, directly or indirectly, disclose or make available to any person, firm, corporation, association or other

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entity for any reason or purpose whatsoever, any Confidential Information (as defined below). You agree that, upon termination of your employment with the Corporation, all Confidential Information in your possession that is in written or other tangible form (together with all copies or duplicates thereof, including computer files) shall be returned to the Corporation and shall not be retained by you or furnished to any third party, in any form except as provided herein; provided, however, that you shall not be obligated to treat as confidential, or return to the Corporation copies of any Confidential Information that (i) was publicly known at the time of disclosure to you, (ii) becomes publicly known or available thereafter other than by any means in violation of this Agreement or any other duty owed to the Corporation by any person or entity, or (iii) is lawfully disclosed to you by a third party. As used in this Agreement, the term “Confidential Information” means: information disclosed to you or known by you as a consequence of or through your relationship with the Corporation, about the customers, employees, business methods, public relations methods, organization, procedures or finances, including, without limitation, information of or relating to customer lists, of the Corporation and its affiliates.

     (iii) Non-Solicitation. You hereby agree that, for the period commencing on the Date of Termination and terminating on the third anniversary thereof, you shall not, either on your own account or jointly with or as a manager, agent, officer, employee, consultant, partner, joint venturer, owner or shareholder or otherwise on behalf of any other person, firm or corporation, directly or indirectly solicit or attempt to solicit away from the Corporation any of its officers or employees or offer employment to any person who, on or during the six (6) months immediately preceding the date of such solicitation or offer, is or was an officer or employee of the Corporation; provided, however, that a general advertisement to which an employee of the Corporation responds shall in no event be deemed to result in a breach of this Section 8(iii).

     9. Funding of Obligations. Within a reasonable time following the execution and delivery of this Agreement by you and the Corporation, the Corporation shall partially fund its obligations to provide benefits hereunder (including, without limitation, its obligations under Section 4(ii)(g)) by establishing and irrevocably partially funding a trust for your benefit and the benefit of other executives of the Corporation with whom the Corporation has entered into agreements similar to this Agreement. The Corporation shall initially contribute $1000 to such trust. Such trust shall be a grantor trust described in section 671 of the Code. Upon the occurrence of a Potential Change in Control (as defined below), the Corporation shall fully fund its obligations to provide benefits hereunder (including, without limitation, its obligations under Section 4(ii)(g)) by irrevocably contributing funds to such trust on your behalf. The amount of such contribution shall equal the then present value of the Corporation’s obligations under Section 4 hereof as determined by the firms serving as the Corporation’s actuaries and accountants immediately prior to the Change in Control. Such actuaries and accountants shall be paid by the Corporation. The establishment and funding of such trust shall not affect the obligation of the Corporation to provide benefits under the terms of this Agreement. For purposes of this Agreement a “Potential Change in Control” shall be deemed to occur if:

     (a) the Corporation enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

     (b) any Person (including the Corporation) publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control;

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     (c) any Person who is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation representing ten percent (10%) or more of the combined voting power of the Corporation’s then outstanding securities, increases such Person’s beneficial ownership of such securities by five percent (5%) or more of the Corporation’s then outstanding securities over the percentage so owned by such Person on the date hereof provided however, (i) that this subsection (c) shall not apply to the Baron Group by virtue of their individual or collective beneficial ownership of securities of the Corporation’s outstanding securities as of the date of this letter so long as the Baron Group does not individually or collectively, beneficially own, or increase such beneficial ownership to, twenty-five percent (25%) or more of the combined voting power of the corporation’s then outstanding securities, and (ii) that this subsection (c) shall not apply to Ariel by virtue of its beneficial ownership of the Corporation’s outstanding securities as of the date of this Agreement so long as Ariel does not beneficially own, or increase such beneficial ownership to, twenty percent (20%) or more of the combined voting power of the Corporation’s then outstanding securities; or

     (d) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

     10. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio without regard to its conflicts of law principles. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Except as provided in Section 4(ii)(g) hereunder, any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Corporation under Section 4 shall survive the expiration of the term of this Agreement. The section headings contained in this Agreement are for convenience only, and shall not affect the interpretation of this Agreement.

     11. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

     12. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

     13. Suits, Actions, Proceedings, Etc..

     (i) Jurisdiction and Venue. No suit, action or proceeding with respect to this Agreement, nor any judgment entered by any court in respect thereof, may be brought in any court, domestic or foreign, or before any similar domestic or foreign authority, other than in a court of competent jurisdiction in the State of Ohio, and you and the Corporation hereby irrevocably waive any right which you or the Corporation, as applicable, may otherwise have

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had to bring such a suit, action, proceeding or judgment in any other court, domestic or foreign, or before any similar domestic or foreign authority. You and the Corporation hereby submit to the exclusive jurisdictions of such courts for the purpose of any such suit, action, proceeding or judgment. By your execution and delivery of this Agreement, you appoint the Secretary of the Corporation, at the Corporation’s office in Toledo, Ohio, as your agent upon which process may be served in any such suit, action or proceeding; and by its execution and delivery of this Agreement, the Corporation appoints the Secretary of the Corporation, at its office in Toledo, Ohio, as its agent upon which process may be served in any such suit, action or proceeding. Service of process upon such applicable agent, together with actual notice of such service given to you or the Corporation, as applicable, in the manner provided in Section 7 hereof, shall be deemed in every respect effective service of process upon the applicable party in any suit, action, proceeding or judgment. Nothing herein shall be deemed to limit the ability of you or the Corporation to serve any such writs, process or summonses in any other manner permitted by applicable law. You and the Corporation hereby irrevocably waive any objections which you or the Corporation, as applicable, may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of Ohio, and hereby further irrevocably waive any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Notwithstanding the foregoing, in the event that no court of competent jurisdiction in the State of Ohio will accept such jurisdiction and venue, then any suit, action or proceeding with respect to this Agreement, or any judgment entered by any court in respect thereof, may be brought in any court of competent jurisdiction in the continental United States which has jurisdiction over such suit, proceeding or action and the parties thereto.

     (ii) Compensation During Dispute, Etc.. Your compensation during any disagreement, dispute, controversy, claim, suit, action or proceeding (collectively, a “Dispute”) arising out of or relating to this Agreement or the interpretation of this Agreement shall be as follows: If there is a termination by you or the Corporation followed by a Dispute as to whether you are entitled to the payments and other benefits provided under this Agreement, then, during the period of that Dispute the Corporation shall pay you fifty percent (50%) of the amount specified in Sections 4(ii)(a) and 4(ii)(b) hereof, and the Corporation shall provide you with the other benefits provided in Section 4(ii) of this Agreement, if, but only if, you agree in writing that if the Dispute is resolved against you, you shall promptly refund to the Corporation all payments you receive under Sections 4(ii)(a) and 4(ii)(b) of this Agreement plus interest at the rate provided in Section 1274(d) of the Code, compounded quarterly. If the Dispute is resolved in your favor, promptly after resolution of the dispute the Corporation shall pay you the sum that was withheld during the period of the Dispute plus interest at the rate provided in Section 1274(d) of the Code, compounded quarterly.

     (iii) Legal Fees. The Corporation shall pay to you all legal fees and expenses incurred by you in connection with any Dispute arising out of or relating to this Agreement or the interpretation thereof (including, without limitation, all such fees and expenses, if any, incurred in contesting or disputing any termination of your employment or in seeking to obtain or enforce any right or benefit provided by this Agreement, or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder).

     14. Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior

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agreement of the parties hereto in respect of the subject matter contained herein, including, without limitation, any prior severance agreements, is hereby terminated and cancelled; provided, however, that the Employment Agreement, dated as of May 23, 2007 by and between you and the Corporation, as amended, shall remain in full force and effect and shall, pursuant to the terms and conditions thereof, provide certain severance benefits to you upon certain terminations of employment. Any of your rights hereunder shall be in addition to any rights you may otherwise have under benefit plans or agreements of the Corporation to which you are a party or in which you are a participant, including, but not limited to, any Corporation sponsored employee benefit plans and stock options plans. Provisions of this Agreement shall not in any way abrogate your rights under such other plans and agreements.

If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Corporation the enclosed copy of this letter, which shall then constitute our agreement on this subject.

Sincerely,

LIBBEY INC.

By:

Its: Vice President, General Counsel and Secretary

Agreed and Accepted as of the
23rd day of May, 2007

Gregory T. Geswein

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John F. Meier, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Libbey Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2007	By	/s/ John F. Meier
	John F. Meier,
	Chief Executive Officer

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EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Gregory T. Geswein, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Libbey Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2007	By	/s/ Gregory T. Geswein
	Gregory T. Geswein,
	Chief Financial Officer

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EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Libbey Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 9, 2007	/s/ John F. Meier
	John F. Meier
	Chief Executive Officer

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EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Libbey Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 9, 2007	/s/ Gregory T. Geswein
	Gregory T. Geswein
	Chief Financial Officer

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