UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-K/A

 

(Amendment No. 1)

 

 

Commission File No. 1-5842

Bowne & Co., Inc.

(Exact name of Registrant as specified in its charter)

 

 

(212) 924-5500

 

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

 

Securities registered pursuant to Section 12(g) of the Act:

None

 

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  Yes o     No þ

 

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 has submitted electronically and posted to its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

 

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

 

(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).  Yes o     No þ

 

The aggregate market value of the Common Stock issued and outstanding and held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $166.5 million. For purposes of the foregoing calculation, the registrant’s 401(K) Savings Plan is deemed to be an affiliate of the registrant.

 

The registrant had 40,094,746 shares of Common Stock outstanding as of March 1, 2010.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

EXPLANATORY NOTE

 

The sole purpose of this Amendment No. 1 to our Annual Report on Form 10-K for the year ended December 31, 2009 (the “Form 10-K”), which was filed with the Securities and Exchange Commission on March 2, 2010 is to set forth the information required by Items 10, 11, 12, 13 and 14 of Part III of Form 10-K because a definitive proxy statement containing such information will not be filed within 120 days after the end of the fiscal year covered by the Original Filing. Because of our pending merger with R.R. Donnelley & Sons Company (“R.R. Donnelley”), we have postponed our annual meeting of stockholders. If our merger with R.R. Donnelley closes in the interim, then we will not hold an annual meeting of stockholders because we will be a wholly owned subsidiary of R.R. Donnelley. This Amendment amends and restates in its entirety Items 10, 11, 12, 13 and 14 of Part III of the Original Filing. Except as expressly set forth herein, this Amendment does not reflect events occurring after the date of the Original Filing or modify or update any of the other disclosures contained therein in any way other than as required to reflect the amendments discussed above. The reference on the cover of the Original Filing to the incorporation by reference of the registrant’s definitive proxy statement into Part III of the Original Filing is hereby deleted.

 

TABLE OF CONTENTS

 

 

 

Board of Directors

 

Information relating to our Directors is set forth below.

 

 

Periodically throughout the year, the Board of Directors and its standing committees meet to direct and oversee management of the Company. The Board of Directors held six meetings during 2009. In addition, the committees of the Board met a total of 18 times and took action without formal meetings by written consents when appropriate.

Board members also share information and exchange views with the Chairman and with each other informally and in executive sessions of non-management directors and separate executive sessions of independent directors following Board meetings on matters that concern the Company and its stockholders. Mr. Schwarz, the Company’s Presiding Director, chairs these executive sessions.

 

During fiscal year 2009 each member of the Board of Directors participated in at least 75% of the Board of Director and committee meetings which he or she was entitled to attend. The Company’s corporate governance guidelines state that directors are expected to attend the Annual Meeting of Stockholders. All of the directors attended the previous year’s Annual Meeting of Stockholders.

 

Board Composition

 

The Board of Directors seeks to ensure that the Board is composed of members whose particular experience, qualifications, attributes and skills, when taken together, will allow the Board to satisfy its oversight responsibilities effectively.

 

How Directors are Chosen

 

The Nominating and Corporate Governance Committee (the “Nominating Committee”) is responsible for assisting the Board in identifying individuals qualified to become Board members and recommending director nominees to the Board for each annual or special meeting of stockholders. It is the Nominating Committee’s policy to consider candidates recommended by stockholders, Company management, other Board members or any interested person. The same criteria the Nominating Committee uses for evaluating director nominees will be used to evaluate candidates recommended by stockholders.

 

The Nominating Committee considers the qualifications of candidates based upon its charter and the Company’s corporate governance guidelines. The Nominating Committee selects individuals as director nominees who have the highest personal and professional integrity, who have demonstrated exceptional ability and judgment and who would be most effective, in conjunction with the other members of the Board of Directors, in collectively serving the long-term interests of the stockholders, and all other factors it considers appropriate. In accordance with the Corporate Governance Guidelines adopted by the Board of Directors the Nominating Committee also considers diversity in identifying and selecting nominees for director. The Nominating Committee views diversity broadly to include race, gender and national origin as well as differences of viewpoint, professional experience, financial, business, academic, public sector and other expertise, education, skill and other individual qualities and attributes that contribute to board heterogeneity. The Nominating Committee has authority to retain search firms to assist in identifying and evaluating director candidates and to approve fees and retention terms for such advisors. After conducting an initial evaluation of a candidate, the Nominating Committee will interview that candidate if it believes the candidate might be suitable to be a director and may also ask the candidate to meet with other directors and members of management. If the Nominating Committee believes a candidate would be a valuable addition to the Board, it will recommend to the full Board that candidate’s election.

 

Director Suitability

 

The Nominating Committee believes that the current directors of the Company have the experience, qualifications, attributes and skills, taken as a whole, to enable the board to satisfy its oversight responsibilities effectively in light of the Company’s business and structure. In particular, the Nominating Committee considers important and valuable the following with respect to such directors:

 

Mr. Crosetto is an experienced former senior executive of the Company with extensive background and knowledge with respect to the Company and the industry. He has also served on the Company’s Board of Directors since 2000.

 

Mr. Fox is an experienced senior business executive, management consultant and private investor. Mr. Fox has specific expertise in risk assessment and financial reporting and the Board of Directors has determined that he is an “audit committee financial expert”, as that term is defined in the Securities and Exchange Commission rules. He has also served on the Company’s Board of Directors since 2001 including Board standing committee service.

Ms. Hooper is an experienced management consultant and private investor. She has extensive experience in the venture capital industry and as a director or advisor in the private and public sectors. Ms. Hooper has specific expertise in risk assessment and financial reporting and the Board of Directors has determined that she is an “audit committee financial expert”, as that term is defined in the Securities and Exchange Commission rules. She has also served on the Board of Directors since 2006, including Board standing committee service.

 

Mr. Kucera is an experienced former senior executive of the Company, with extensive background and knowledge of the Company and the industry.

 

Mr. Murphy is an experienced investment banker with extensive financial expertise and has served on the boards of directors of a number of public companies and charitable institutions.

 

Ms. Portela is a former partner of a major law firm with significant expertise in employment and other human resource matters.

 

Mr. Schwarz has had a distinguished career as the Chairman of the Board and Chief Executive Officer of a major financial institution.

 

Mr. Shea, the Chairman and Chief Executive of the Company, has extensive background and knowledge of the Company and the industry.

 

Ms. Stanley is an experienced financial planning consultant. She has also served on the Company’s Board of Directors since 1998 including Board standing committee service.

 

Mr. Tese has extensive private and public sector background and experience and long service on boards of directors of a number of public companies and charitable institutions.

 

Mr. West has a distinguished career as the dean of several of the nation’s top business schools as well as long service on boards of directors of a number of public real estate and investment companies.

 

In addition, with respect to Ms. Portela, Mr. Schwarz, Mr. Tese and Mr. West, the Nominating Committee considers important their valuable contributions to the Company’s success during their many years of Board service.

 

Leadership Structure

 

The Board of Directors determined that combining the Chairman and Chief Executive Officer positions is the appropriate leadership structure for the Company. The Board of Directors believes that “one-size” does not fit all, and the decision of whether to combine or separate the positions of Chief Executive Officer and Chairman will vary company to company and depend upon a company’s particular circumstances at a given point in time. The Company’s Corporate Governance Guidelines provide that the two positions may or may not be the same person, depending on several factors as determined by the Board, including the succession planning process. Accordingly, the Board of Directors carefully considers from time to time whether the Chairman and Chief Executive Officer positions should be combined based on what the Board believes is best for the Company and its shareholders. The Board of Directors believes that appointment of a non-management Presiding Director is necessary for effective governance. Accordingly, the Company’s Corporate Governance Guidelines provide that the Chairman of the Executive Committee serves as the Presiding Director. In addition to presiding at meetings of the Board when the Chairman is not present and at executive sessions of the non-management directors, the responsibilities of the Presiding Director, which are set forth in the Company’s Corporate Governance Guidelines, include:

 

 

The Board of Directors believes that the responsibilities delegated to the Presiding Director are substantially similar to several of the functions typically fulfilled by a board chairman. The Board of Directors believes that its Presiding Director position balances the need for effective and independent oversight of management with the need for strong, unified leadership.

 

The Board of Directors also believes that one of the key elements of effective, independent oversight is that the non-management as well as its independent directors meet in executive session on a regular basis without the presence of management. Accordingly, in 2009, following each of the six in-person Board meetings, the non-management directors as well as the independent directors met in executive session with the Presiding Director presiding at such meetings. The Board of Directors believes that its current structure is in the best interest of the Company at this time as it allows for a balance of responsibilities between the Chairman and Chief Executive Officer and the non-management and independent directors and provides an environment in which its directors are fully informed, have significant input into the content of Board meeting agendas and are able to provide objective and thoughtful oversight of management.

 

Committees of the Board

 

The Board of Directors has four standing committees. The principal functions and current membership of each committee is as follows:

 

 

Report of the Audit Committee

 

The Audit Committee of the Board of Directors (the “Audit Committee”) assists the Board in fulfilling its responsibility to relevant constituencies, including stockholders and potential stockholders of the Company, regarding internal controls and risk management, corporate accounting practices, reporting practices, and the quality and integrity of the financial reports of the Company. The Audit Committee also maintains free and open communication among the Board, the Company’s financial management, including its Chief Financial Officer and its Director of Internal Audit, other Company executives, including its General Counsel, and its independent registered public accountants, Crowe Horwath LLP (the “auditors”). Company management has primary responsibility for the financial statements, internal control over financial reporting, and for the Company’s compliance with legal and regulatory requirements. The Company’s auditors are responsible for expressing an opinion on conformity of the Company’s audited financial statements with generally accepted accounting principles in the United States, and annually auditing the effectiveness of internal control over financial reporting. It is the Audit Committee’s responsibility to monitor and oversee the performance of these responsibilities and to report to the full Board of Directors.

 

Our Board of Directors has determined that each member of the Audit Committee is an “independent director” as defined in the Listing Standards of the Exchange and the Company’s corporate governance standards. In addition, our Board of Directors has determined that Stephen V. Murphy, Douglas B. Fox and Marcia J. Hooper are “audit committee financial experts”, as defined by Securities and Exchange Commission rules.

 

The Audit Committee reviewed and discussed the audited financial statements and the auditor’s evaluation of the Company’s internal controls over financial reporting for fiscal 2009 with the Company’s auditors, with management, and with the entire Board of Directors. The Committee also discussed with the auditors the matters required to be discussed by Statement on Auditing Standards No. 61 (“Communication with Audit Committee,” as amended). In addition, the Audit Committee has received from the auditors the letter and written disclosures respecting fiscal 2009, which are required by the Public Company Accounting Oversight Board, and has discussed with them their independence from the Company and its management. Furthermore, the Audit Committee considered and determined that the auditors’ non-audit services to the Company were consistent with the guidelines established to ensure auditor independence.

 

Based upon our reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board agreed, that the audited financial statements for fiscal 2009 be included in the Company’s annual report on Form 10-K for the year ended December 31, 2009, for filing with the Securities and Exchange Commission.

 

This report by the Audit Committee is not to be deemed filed under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, and is not to be incorporated by reference into any other filing of the Company under those statutes except to the extent that the Company may expressly refer to this report for incorporation by reference in a particular instance.

 

The undersigned, being all the members of the Audit Committee, submit this report to the Company’s stockholders.

 

Stephen V. Murphy, Chairman
Douglas B. Fox
Marcia J. Hooper
Lisa A. Stanley

 

 

Oversight of Risk Management

 

The Company is exposed to a number of risks, principally financial risks and operational risks. Other major risks relate to general economic conditions, regulatory changes and technology innovations.

 

The Company’s Chief Financial Officer reports to the Chairman and Chief Executive Officer and provides regular updates to the Audit Committee concerning financial and other risks. In fulfilling his risk management responsibilities, the Chief Financial Officer works closely with members of senior management, including the Company’s General Counsel; the Treasurer and Vice President of Tax and Finance; the Vice President, Chief Accounting Officer and Corporate Controller; the Director of Internal Audit; and each of the divisional presidents.

 

The Chairman and Chief Executive Officer is kept advised regarding Company risk matters, including financial and operational risks, at each of the periodic senior staff meetings and through discussions with the President as well as senior staff in between senior staff meetings. The senior staff has the responsibility to addresses operational risks on a continuous basis and to keep the Chairman and Chief Executive Officer advised of the actions being taken to address operational risks.

 

On behalf of the Board, the Audit Committee plays a key role in the oversight of the Company’s risk management function. In accordance with the Audit Committee’s Charter, the Audit Committee discusses with management and the independent auditors, as appropriate, concerning the Company’s risk assessment and risk management policies, including the Company’s major financial risk exposures and steps taken by management to monitor and mitigate such exposures. In that regard, the Company’s Chief Financial Officer, General Counsel, Treasurer and Vice President of Tax and Finance, Vice President, Chief Accounting Officer and Corporate Controller, and Director of Internal Audit advise the Audit Committee at its periodic meetings as to financial and other risks facing the Company. The Audit Committee also reports to the Board at its periodic meetings to apprise them of their discussions with management regarding the Company’s risk management efforts. Finally, the Chief Financial Officer and the General Counsel report directly to the Board at its periodic meetings to apprise them of the Company’s risks and risk management efforts. In furtherance of its role in the oversight of the Company’s risk management function, the Audit Committee reviews and discusses the major financial risks facing the Company. In consultation with management, the Audit Committee prepares a list of such major risks and establishes a schedule for management to present an analysis to the Audit Committee concerning these risks, including the Company’s processes for addressing these risks. The list of major financial risks is subject to revision and update by the Audit Committee at its periodic meetings. Management prepares analyses of these risks and the analyses are discussed by the Audit Committee at its periodic meetings. These risk management discussions are reported to the Board at its periodic meetings by the Audit Committee and the related analyses are made available to the Board for its review. The Chairman and Chief Executive Officer apprises the Board at its periodic meetings of the Company’s operational risks and efforts to address such risks.

 

Executive Officers

 

The information required by this Item 10 with respect to the Company’s executive officers appears as a Supplemental Item in Part I of this Annual Report under the caption “Executive Officers of the Registrant.”

Section 16(a) Beneficial Ownership Reporting Compliance

 

The Company believes that during fiscal year 2009 all reports for the Company’s executive officers and directors that were required to be filed under Section 16 of the Securities Act of 1934 were timely filed.

 

Ethics

 

In accordance with the Sarbanes-Oxley Act and Exchange listing requirements, the Company has adopted a code of ethics that covers its directors, officers and employees including, without limitation, its principal executive officer, principal financial officer, principal accounting officer, and controller. The code of ethics is posted on the Company’s website (www.bowne.com) and is available in print without charge to any shareholder who requests it from the Corporate Secretary. We will disclose on our website amendments to or waivers from our code of ethics applicable to directors or executive officers in accordance with applicable laws and regulations.

 

Corporate Governance Information

 

The Company’s corporate governance guidelines as well as charters for the Company’s Audit Committee, Compensation and Management Development Committee, and Nominating and Corporate Governance Committee are available on the Company’s website (www.bowne.com) and are available in print without charge to any shareholder who requests them from the Corporate Secretary.

 

Executive Certifications

 

The Company has submitted to the Exchange the annual Chief Executive Officer certification required by the rules of the Exchange. The Company also submitted to the SEC all certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act as exhibits to its Form 10-Qs and Form 10-K for fiscal year 2009.

 

 

Report of the Compensation and Management Development Committee

 

The Compensation Committee has overall responsibility for approving and evaluating the director and executive officer compensation plans, policies and programs of the Company. The Compensation Committee recommends to the independent members of the Board compensation for the Chairman and Chief Executive Officer and other officers, and recommends to the Nominating and Corporate Governance Committee compensation for directors. Members of the Compensation Committee are appointed by the Board, on the recommendation of the Nominating and Corporate Governance Committee. Compensation Committee members may be removed and replaced by the Board.

 

In 2009 the Compensation Committee consisted of three directors — Vincent Tese, Chairman; Gloria M. Portela and Marcia J. Hooper. All three directors have extensive management and/or Board experience in managing, overseeing, and/or researching in the fields of employment and/or executive compensation. As determined by the Board, all three directors meet the independence requirements of the Exchange and other legal requirements for the proper administration of the Company’s compensation plans and programs, including requirements under the Federal securities laws and the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). In addition, each Compensation Committee member is neither a current nor former employee of the Company.

 

The Compensation Committee operates under a charter, which is posted in the “Corporate Governance” section of the Company’s website (www.bowne.com). The Compensation Committee Charter was approved by the Board of Directors on November 20, 2003 and was most recently reviewed and updated on March 6, 2008.

 

The Compensation Committee’s authority and responsibilities include the following:

 

 

 

In 2009 the Compensation Committee met six times. With the exception of two meetings, all meetings were regularly scheduled to coincide with the dates of Board meetings. The Compensation Committee Chairman and the Company’s Senior Vice President, Human Resources determined the agenda for each meeting. Compensation Committee members generally received agendas and discussion materials several days in advance, to provide them with time for adequate review and preparation for the meetings.

 

In March 2009, the Compensation Committee selected PricewaterhouseCoopers LLP (“PwC”) as its compensation consultant. Services provided by PwC in support of the Compensation Committee’s charter included competitive compensation benchmarking of executive officer positions, industry research on design of compensation and employment programs and the compensation of non-employee directors, presentation and analysis of long-term incentive design alternatives, assistance in connection with compliance with tax laws, disclosure rules and regulations governing compensation and benefits, and other technical advice. PwC’s fees related to providing advice to the Compensation Committee during 2009 were approximately $239,500.

 

For the past several years, PwC has provided technical compensation and other human resource and tax services under the direction of the Company’s management. The Compensation Committee reviewed PwC’s work in these areas. The total fees for the services provided in 2009 were $309,810 and covered the following areas:

 

 

 

The characteristics of PwC’s relationship with the Compensation Committee include the following:

 

 

At the Compensation Committee’s request, from time to time members of management attend portions of Compensation Committee meetings. During 2009 they included the Chairman and Chief Executive Officer; Senior Vice President and Chief Financial Officer; Senior Vice President, General Counsel and Corporate Secretary; and Senior Vice President, Human Resources.

 

On an annual basis, the Senior Vice President, Human Resources presents to the Compensation Committee a summary of the Company’s Management Continuity System including performance evaluations and development plans for each of the Company’s senior executive officers and a review of the talent profile of the Company.

 

In addition, on an annual basis the Compensation Committee reviews and approves increases or changes to each element of the total direct compensation package of each individual executive officer, with the exception of the Chairman and Chief Executive Officer. The Compensation Committee Chairman presents recommendations for the Chairman and Chief Executive Officer for review by the Compensation Committee. The Compensation Committee’s recommendations are then presented to the independent Board members for approval.

 

The 2009 review included comparisons to competitive levels of compensation based on peer groups as approved by the Compensation Committee, as well as year-over-year comparisons. The Compensation Committee concluded that total direct compensation levels, as well as individual elements of compensation, were reasonable for all executive officers in light of Company performance, business unit performance, individual performance, and competitive practice.

 

At each meeting in 2009 the Compensation Committee held an executive session. No members of management, consultants or other outsiders attended these executive sessions. Among other topics, discussions and decisions regarding performance, succession and compensation of the Chairman and Chief Executive Officer took place during these executive sessions.

 

The Compensation Committee took the following key actions at its meetings in 2009:

 

 

 

In addition the Compensation Committee took the below actions in the first quarter of 2010:

 

 

The Compensation Committee has reviewed the compensation discussion and analysis, discussed it with management and, based on such review and discussions, recommends its inclusion in the Company’s annual report on Form 10-K.

 

Vincent Tese, Chairman
Gloria M. Portela
Marcia J. Hooper

 

Compensation Discussion and Analysis

 

Executive Summary

 

Key objectives of the Company’s executive compensation programs are as follows:

 

 

Principal components of ongoing compensation for our executive officers include the following:

 

 

The Company believes that its executive compensation policies, plans and programs advance the objectives listed above and adhere to high standards of corporate governance.

 

Objectives of the Company’s Executive Compensation Programs

 

The Company’s executive compensation programs have four key objectives described above in the Executive Summary. To accomplish these objectives, the Company’s executive compensation programs are based on the following guiding principles:

 

 

 

The Senior Vice President, Human Resources provides support to the Compensation Committee to carry out its responsibilities including its review and recommendation of executive compensation programs for Named Executive Officers.

 

To help inform the Compensation Committee’s decisions and monitor the Company’s executive compensation programs, the Compensation Committee commissioned a benchmarking study of compensation levels for the executive officer positions. The benchmarking study was conducted by the Compensation Committee’s compensation consultant, PwC. Comparisons were made to executive compensation levels at 13 publicly traded companies generally viewed as comparable in size and/or industry and with which the Company is considered to compete for executive talent. These are: Blue Coat Systems, Broadridge Financial Solutions, Cenveo, Consolidated Graphics, Deluxe Corporation, Ennis Incorporated, Harte Hanks, Interactive Data Corporation, M& F Worldwide Corporation, MDC Partners, Omniture, Standard Register Company, Valassis Communications. The Compensation Committee also considers data obtained by the Compensation Committee’s compensation consultant from a general industry sample of similarly sized companies, particularly for positions that must be competitive with employers across a wide spectrum of industries.

 

Based on the market analysis prepared in December 2009:

 

 

Analysis of the Company’s Executive Compensation Programs

 

The following section provides details on each of the Company’s executive compensation programs. It demonstrates how these programs — individually and in total — accomplish the objectives established for them and follow the guiding principles set forth above.

 

Base Salary Program.  Base salary represents, on average, approximately one-third of an executive officer’s total direct compensation package. This approach is consistent with industry practice, as demonstrated by the competitive benchmarking study commissioned by the Compensation Committee.

The Compensation Committee did not approve any salary increases for the Named Executive Officers or other executives of the Company for 2009. For 2010, an increase was approved for one executive officer of the Company.

 

Annual Incentive Plan.  The Company’s AIP is formula-based and designed to reward executive officers based on the following:

 

 

The financial factor is based on the Company’s consolidated EBITDA for several reasons. It is a stable measure of the Company’s operating cash flow, is a key measure in the Company’s planning and budgeting processes, is a measure that is regularly monitored in the Company’s management reporting, and is easily calculated for the total Company. Threshold, target, and maximum levels of respective consolidated EBITDA for use in the AIP calculations were approved by the Compensation Committee at the January 2009 meeting based on the Company’s 2009 budget and on historical Company and peer performance.

 

Strategic initiatives are quantifiable measures of operating performance that are aligned with the Company’s operating and strategic plans and are critical to the Company’s success. For 2009 the selected metrics are related to improvement in days outstanding of receivable balances, cost savings and operating efficiencies and maintaining within budgeted amounts for Technology capital expenditures, and attainment of non-transactional and divisional related revenues. The selected strategic initiatives are approved by the Compensation Committee based on the strategic and operating plans for the Company and on the recommendation of the Chairman and Chief Executive Officer. Strategic initiatives for the Chairman and Chief Executive Officer are reviewed and approved by the Compensation Committee. The Compensation Committee sets AIP targets at levels designed to challenge the Company’s management to achieve operating and strategic plans to improve year over year performance. In 2009, one of the strategic goals was not achieved. The remaining three strategic goals were attained at 50% of target, 75% of target and 200% of target. In 2008, the entry point of the financial factor was not attained therefore no AIP awards linked to the strategic goals were paid.

 

The financial factors and strategic initiatives for a fiscal year are approved by the Compensation Committee in January of that fiscal year subject to adjustments for significant corporate events, and are based on the Company’s strategic and operating plans approved by the Board of Directors in December of the prior year. The Compensation Committee (and, in the case of Mr. Shea, the independent Board members) reviews and approves the target AIP awards for executive officers, including all Named Executive Officers, in December of the prior fiscal year.

 

The Compensation Committee then confirms the fiscal year results against the financial targets and strategic goals previously established and approves payments of the AIP awards during the first quarter of the following year, after completion of the Company’s audited financial statements and assessment of strategic initiatives.

 

Each Named Executive Officer has a threshold, target, and maximum AIP award as approved by the Compensation Committee (and, in the case of Mr. Shea, the independent Board members) in December of the prior fiscal year, which are reported in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” columns of the 2009 Grants of Plan-Based Awards Table.

 

These incentive formulas directly link each Named Executive Officer’s incentive payment to the financial performance of the Company and to strategic initiatives that are critical to the Company’s overall success. Also, these awards are intended to be fully deductible expenses on the Company’s tax returns.

 

The Company attained 30.6% of the financial targets established for 2009 and attained 40.6% of the strategic goals. AIP awards consistent with such attainments were approved and paid for the Named Executive Officers and all other participants in the AIP.

Long Term Incentive Plan.

 

At the March 4, 2009 meeting, the Compensation Committee (and in the case of Mr. Shea, the independent Board members) approved a new LTIP for a three-year cycle beginning January 1, 2009 and ending December 31, 2011. Any awards earned at the end of the performance cycle will be settled in the first quarter of 2012. The LTIP incorporates individual award targets and requires achievement of specified levels of ROIC performance. The LTIP awards were made, and will be settled, in cash rather than awarded in RSUs and settled in shares of Common Stock as under prior years’ plans. The primary reason for the change in the form of payment is the current and anticipated future volatility of the Company’s stock price over the three-year cycle. Granting and paying these awards in cash will serve to avoid the commitment of a large number of shares and the possibility of corresponding gains from a subsequent share price rebound. The ROIC targets are calculated based on a three-year average of the Company’s ROIC for fiscal years 2009, 2010 and 2011. Attainment of a 9.0% three-year average ROIC will fund 50% of the LTIP awards, 100% payment of the LTIP awards will be made upon attainment of a 10.5% average ROIC over the three years, and the maximum payment of 200% of the LTIP awards will be made if the three year average ROIC is 13.5% or higher. If the Company’s average ROIC during the first two years of performance cycle (2009-2010) exceeds the predetermined maximum level of 13.5%, then the awards will become vested and paid at a maximum of 150%, but will still be settled in the first quarter of 2012. In addition, the LTIP design for 2009-2011 allows for participants to earn reduced awards for average ROIC performance over any two consecutive year periods during the cycle, or for ROIC performance in any single year of the cycle. The Company again chose ROIC as the principal measure for the LTIP because it comprises both growth in profitability and capital efficiency and it is a primary driver of shareholder value.

 

The Compensation Committee (and, in the case of Mr. Shea, the independent Board members) approved all awards to the Chairman and Chief Executive Officer and other Named Executive Officers and approved the threshold, target and maximum levels of ROIC based on the Company’s strategic plan, and historical and peer analysis. As of the grant date, the estimated compensation expense that could be recognized for the 2009 LTIP at the target performance metric for the years ended December 31, 2009 through 2012, was approximately $2.3 million, $3.0 million, $3.0 million and $0.8 million, respectively. For 2009, the Company did not accrue compensation expense for the 2009 LTIP. As of December 31, 2009, the total estimated compensation expense that can be recognized through 2012 related to the 2009 LTIP is $0 to approximately $11.5 million, depending on the level of performance achieved during the remaining performance cycle. Compensation expense under the 2009 LTIP is intended to be fully tax-deductible by the Company.

 

Restricted Stock, RSUs and Stock Option Grants.

 

Any stock option grants are made with exercise prices that are no less than the fair market value (“FMV”) of the Common Stock on the date of grant. The FMV is defined as the mean of the highest and the lowest trading prices reported on the Exchange on that day. The grant dates of the restricted stock, RSU and stock option grants correspond to predetermined meetings of the Compensation Committee and Board, during which the awards are approved. In December 2009, the Company granted stock options and RSUs to the Named Executive Officers and other executives. In conjunction with the market analysis and benchmarking study, the Compensation Committee reviewed and approved new Equity Grant Guidelines for both stock options and RSUs. The guidelines are intended to support the Company’s targeted 65th percentile positioning within the competitive market and provide the flexibility to reward performance, expertise, and tenure with the Company. Based on these guidelines, the Compensation Committee, (and in the case of Mr. Shea, the independent Board members) approved total grants of 429,000 options and 121,500 RSUs to the Named Executive Officers and other executives..

 

Stock Ownership Guidelines.  In 2009, based on changes in the Company’s stock price, no senior executive officer was in compliance with the established stock ownership guidelines, which were based on dollar values equal to multiples of their base salaries. The Compensation Committee approved new ownership guidelines in the form of net share retention guidelines. Under this approach each member of the Board of Directors and senior executive officer will be required to hold at least 50% of any net shares acquired through the Company’s Board of Directors compensation programs or executive equity incentive plans until they leave the Board of Directors or employment with the Company. Net shares are defined as shares acquired net of any shares used to pay required exercise price and/or tax liability. The Compensation Committee believes this approach, which does not depend on the underlying stock price, will be more meaningful than the previous approaches to executive stock ownership, while ensuring long term alignment of executive and stockholder interests.

Benefits and Executive Perquisites.  It is the Company’s policy to provide limited executive perquisites and special benefits, most of which are business-related. The Chairman and Chief Executive Officer and the other Named Executive Officers participate in the Company’s tax-qualified 401(k) Savings Plan on the same basis as all other U.S. based full-time employees. If a contribution the Company makes under the 401 (k) Savings Plan for the benefit of an executive who is a participant in the LTIP would exceed the limit imposed by the Employee Retirement Income Security Act (“ERISA”), then the Company makes only the allowable contribution to the executive’s account and credits an amount equal to 140% of the balance to a deferred cash account in the first quarter of the subsequent year. Deferred amounts are credited with interest at the rate of 120% of the long term applicable federal rate as published by the Internal Revenue Service. The 401(k) match on employee contributions is currently suspended due to the severe economic environment. Accordingly, no credits were made to deferred accounts in 2010 for the 2009 plan year.

 

The Chairman and Chief Executive Officer and other Named Executive Officers also receive an auto allowance or the use of a company provided car, which benefit is also provided to a wider group of executives in the Company. In addition, the Company provides business-related perquisites in the form of payment of membership fees in a country club to some of the Named Executive Officers which may be used for both personal and business functions.

 

The incremental costs related to perquisites for Named Executive Officers are disclosed in the “All Other Compensation” column of the Summary Compensation Table, along with details on their valuations.

 

Termination Protection Agreements.  The Company has Termination Protection Agreements (“TPAs”) with the Chairman and Chief Executive Officer and other Named Executive Officers (as well as certain other officers of the Company). The TPAs are designed to:

 

 

A more detailed description of the benefits payable under the TPAs, as well as estimated payments that would be paid to the Chairman and Chief Executive Officer and other Named Executive Officers if a change-in-control related termination had occurred on the last business day of 2009, are included following the tabular disclosures below.

 

The Company does not have any specified termination plans or policies related to terminations not in connection with a change in control, nor does it have employment agreements in place for the Chairman and Chief Executive Officer or any of its other Named Executive Officers.

 

Impact of Regulatory Requirements

 

In making executive compensation decisions, the Compensation Committee is mindful of the impact of regulatory requirements on those decisions. In particular, regulatory requirements affect the Compensation Committee’s decisions in the following ways:

 

 

 

Conclusions

 

The Company and its Compensation Committee regularly consider ways to improve the ability of its total direct compensation program to meet the objectives established for it. The Company believes that its executive compensation programs are reasonable, appropriate, and in the best interests of shareholders. Key reasons for this conclusion include the following:

 

 

Summary Compensation Table

 

The table below summarizes the total compensation paid or earned by each of the executive officers of the Company whose name appears in the table (“Named Executive Officers”) for the fiscal year ended December 31, 2009. The Company has not entered into any employment agreements with any of the Named Executive Officers. When setting the total compensation for each of the Named Executive Officers, the Compensation Committee reviews total compensation which includes the executive’s current cash compensation (base salary and annual incentive awards), long-term and equity-based compensation.

 

Amounts listed under column (e), “Non-Equity Incentive Plan Compensation” for 2009 were determined by the Compensation Committee at its March 2, 2010 meeting in accordance with previously approved financial targets and strategic goals established in January 2008.

 

Based on the grant date fair value of equity awards granted to Named Executive Officers in 2009 and the base salary of the Named Executive Officers, “Salary” accounted for approximately 21% of the total compensation of the Named Executive Officers in 2009.

 

 

 

Notes:

 

 

 

 

 

 

 

2009 Grants of Plan-Based Awards

 

 

Notes:

 

 

2009 Outstanding Equity Awards at Fiscal Year-End

 

 

 

Notes:

 

 

2009 Options Exercised and Stock Vested

 

The following Named Executive Officers exercised stock options or had restrictions lapse on shares of restricted stock and RSUs during 2009. The value realized upon vesting of restricted stock and RSUs was calculated using the FMV on the vesting date.

 

 

 

Notes:

 

 

2009 Pension Benefits

 

The table below shows the present value of accumulated benefits payable to each of the Named Executive Officers, including the number of years of service credited to each such Named Executive Officer, under each of the Bowne Pension Plan (“Pension Plan”) and the Supplemental Executive Retirement Plan (“SERP”), determined using the interest rate and mortality rate assumptions consistent with those used in the Company’s financial statements.

 

Retirement Plan Potential Annual Payments and Benefits

 

 

Notes:

 

 

The Pension Plan is a qualified defined benefit pension plan and provides for a retirement benefit equal to a percentage of average compensation to be paid upon termination of employment on or after normal retirement. Normal retirement means retirement on or after attainment of age 65. The percentage is equal to 1.25% times pre-2003 credited service plus 0.75% times post-2002 (and pre-2008) credited service. For Mr. Penders, the percentage is equal to 1.25% times pre-2008 credited service. Average compensation is defined as the average of the 5 highest consecutive years of compensation in the last 10 years of employment with the Company. Compensation includes base salary, annual cash incentive compensation and commissions but excludes all forms of special pay. The pension plan was amended as of December 31, 2007 to cease benefit accruals under the percentage of average compensation formula described above and to provide future benefit accruals under a cash balance design. Starting January 1, 2008, the Pension Plan established a cash balance account for each executive which will be credited with annual contribution credits equal to 3% of compensation and investment credits equal to the 10-year Treasury Rate plus 25 basis points, such rate not to be less than 2% nor greater than 7%.

 

The Pension Plan provides for early retirement after attainment of age 55 and completion of 5 years of credited service (or 30 years of service if the executive was hired prior to November 1, 1989). Payments attributable to the pre-2008 accrued benefit that commence prior to age 65 are actuarially reduced to reflect early commencement. An executive whose employment is terminated prior to age 65 because of total and permanent disability may receive an actuarially reduced pension. If an executive terminates employment prior to age 65 and before completing three years of service, no benefit is payable from the Pension Plan. The Pension Plan also provides a death benefit to the beneficiary of an executive who dies after completing at least 5 years of service and prior to the commencement of payments under the Pension Plan. The death benefit is equal to 50% of the pre-2008 benefit the executive was entitled to receive at his date of death assuming the executive elected the 50% joint and survivor annuity option plus 100% of the post-2007 cash balance account balance. The death benefit is payable in a lump sum if the beneficiary is not the executive’s spouse. Participants and spouse beneficiaries can elect optional forms of payment, including a lump sum, on an actuarially equivalent basis.

 

The SERP is an unfunded nonqualified defined benefit pension plan which was adopted in 1999. The objectives of the SERP are to provide pension credit for compensation that exceeds the limitations imposed by the Internal Revenue Code and to serve as a recruitment tool for mid-career hire executives in lieu of providing significant sign-on bonuses and/or equity grants.

 

The SERP provides for a target benefit equal to 2.5% of average compensation times years of credited service (not greater than 20 years) to be paid upon retirement at normal retirement. Average compensation is defined as the average of the 5 highest years of compensation in the last 10 years of employment with the Company. Compensation includes base salary plus annual cash incentive compensation determined on an accrual basis. Normal retirement means retirement after attainment of age 62 and completion of 5 years of credited service or completion of 30 years of service, regardless of age. Years of credited service may include up to 15 years of employment with a prior employer if approved by the Chairman and Chief Executive Officer of the Company. In 2004, the SERP was amended to provide that the actual number of years of prior employer service credited may not exceed the actual number of years the participant worked at the Company. Prior employer service is disregarded if an executive terminates employment prior to attainment of age 50. The Named Executive Officers that have been granted prior

employer service are Mr. Shea (a maximum of 15 years), Mr. Walker (a maximum of 10 years), Ms. Cummiskey (a maximum of 15 years) and Mr. Spitzer (a maximum of 15 years). The portion of the Present Value of Accumulated Benefit in the table on page 24 attributable to the years of prior service credited for each of the named executive officers are for Mr. Shea $1,153,104 (based on 3.833 years of prior service credit); Mr. Walker $215,560 (based on 3.250 years of prior service credit); Ms. Cummiskey $652,218 (based on 7.167 years of prior service credit); and Mr. Spitzer $726,540 (based on 8.667 years of prior service credit).

 

Effective January 1, 2010, the target benefit under the SERP for the Chairman and Chief Executive Officer of the Company was amended to 3.0% of the sum of the average of the highest three years of base salary and the average of the highest three years of bonus times years of credited services (not greater than 20 years).

 

The actual SERP benefit is the excess of the target benefit over the sum of the Pension Plan benefit and the actuarial equivalent of the ratable portion of the prior employer’s benefit for those executives who were granted prior employer service. The ratable portion is determined based on the ratio of the additional years of credited service needed to complete 20 years to the number of years of prior employer service granted. The SERP provides a reduced early pension benefit upon retirement after attainment of age 55 and the completion of 5 years of service. The target benefit, net of any prior employer benefits, is reduced 5% for each year retirement precedes age 62 and then is further reduced by the Pension Plan benefit. An executive who terminates employment after completing 5 years of credited service, but before attainment of age 55 is eligible for a reduced early retirement benefit commencing at age 55; however, any prior employer service is disregarded unless the Company terminates the executive without cause after attainment of age 50. The SERP also provides a pension benefit, commencing at normal retirement, in the event an executive, who has completed at least 5 years of credited service, becomes totally and permanently disabled, as defined in the qualified Pension Plan. The SERP pension benefit for a disabled executive is determined as of normal retirement based on the average compensation as of his or her date of disability with continued credited service granted to normal retirement. The SERP also provides a survivor benefit payable to the beneficiary of an executive who dies in active service or while permanently disabled. The benefit payable to the beneficiary is equal to 50% of the executive’s average compensation as of his or her date of death reduced by the survivor benefit payable from the qualified Pension Plan and this amount is payable in 10 annual installments. The SERP contains a non-competition provision which requires the repayment of any benefits paid under the SERP as well as the forfeiture of any future payments to which the participant is entitled under the SERP if the participant enters into competition with the Company following retirement. For purposes of this provision, entering into competition includes the disclosure of confidential information, investment in a competing business, providing consulting assistance to a competing business, or serving as an officer or director of a competing business.

 

The SERP contains a change in control provision which provides that if an executive experiences a termination of employment within two years after a change in control, the SERP will make a lump sum distribution of the accumulated supplemental pension benefit calculated assuming benefits commence at age 55 or actual termination of employment, if later. The change in control benefit includes any prior employer service previously granted by the Chairman and Chief Executive Officer of the Company.

 

2009 Non-Qualified Deferred Compensation

 

The table below contains information about the DSUs and cash balances credited under the Company’s Long-term Performance Plan and Deferred Award Plan for each of the Named Executive Officers.

 

DSUs in this table represent the right to receive a like number of shares of Common Stock when the executive retires or terminates employment. A holder of these units may not vote them, but the Company credits him or her with the equivalent of any dividends paid on the Common Stock and converts that amount into additional units. These DSUs are comparable with those awarded under some circumstances to the Company’s non-employee directors, as described on page 30 under the heading “Compensation of Directors.” The Compensation Committee awarded the DSUs shown in this table under two plans described below.

 

 

 

In a case of financial hardship, the Compensation Committee has discretion to make an early distribution from an executive’s account. The distribution in an appropriate case will be the minimum number of shares of Common Stock and/or cash sufficient to cover the hardship. The Compensation Committee also has discretion to revoke any award made under these incentive plans if an executive competes against the Company or discloses confidential information.

 

2009 Non-Qualified Deferred Compensation

 

 

 

Notes:

 

 

Termination Protection Agreements

 

The Company’s continuing Named Executive Officers are entitled to specified benefits 1) upon a change in control of the Company and 2) upon termination following a change in control of the Company. These benefits are provided for under the TPAs, and as specified in the Company’s 1999 Incentive Compensation Plan and accompanying award agreements.

The TPAs provide severance and other benefits if a covered executive’s employment is terminated by the Company without cause, or by the executive for “good reason” at any time within two years and six months following a change in control event.

 

A change in control is generally defined in the TPA and in the 1999 Incentive Compensation Plan as any of the following:

 

 

Good reason is generally defined as a diminution in the executive’s title, duties, responsibilities, status or reporting relationship, the removal from or failure to re-elect to any positions held prior to the change in control, a reduction in base salary or a material change in place of employment.

 

Benefits provided under the TPAs include the following:

 

 

The TPAs also provide for the immediate lapsing of exercise restrictions on outstanding stock options and of restrictions on sale of restricted stock or RSUs as of the date of a change in control.

 

In addition, the Company’s 1999 Incentive Compensation Plan and relevant award agreements provide for:

 

 

Potential Payments Upon Termination After Change in Control

 

The following table shows the potential payments or other benefits upon termination by the Company without cause, or by the executive for good reason, within the specified period after a change in control for the Company’s Named Executive Officers as of December 31, 2009.

 

 

 

Notes

 

 

Cash Out Value of Acceleration of Equity and Incentive Awards on Change in Control

 

The following table provides the potential amounts payable to the Named Executive Officers due to the acceleration of vesting and/or payment of stock options, RSU and LTIP awards if a change of control would have occurred. In cases of termination of employment not in connection with a change in control, amounts payable to executives, other than Mr. Walker who is not fully vested, are limited to the amounts shown in the Present Value of Accumulated Benefit column of the Retirement Plan Potential Annual Payments and Benefits Table on page 24 and the Aggregate Balance at Last Fiscal Year column of the Non-Qualified Defined Contribution and Other Deferred Compensation Plans Table on page 27.

 

Compensation of Directors

 

Directors who are employees of the Company (currently, Mr. Shea) receive no fees for Board and committee service. Except as described below with respect to Mr. Crosetto, each non-employee director received during 2009 a $120,000 annual retainer payable in quarterly installments following each fiscal quarter. The Presiding Director receives an additional annual retainer of $25,000 payable in quarterly installments following each fiscal quarter. Non-employee members of the Audit Committee receive an additional retainer of $10,000 per year, or $20,000 in the case of the chairman of that committee. Members of the Executive Committee receive an additional retainer of $8,000 per year, or $16,000 in the case of the chairman of that committee. The members of the Nominating Committee as well as the non-employee members of the Compensation Committee receive an additional retainer of $5,000 per year, or $10,000 in the case of the chairman of the committee. Directors who are not employees also receive a fee of $1,000 for each Board meeting attended. When directors take action by written consent without a formal meeting, they receive no compensation for that service.

 

In connection with Mr. Crosetto’s retirement as an executive of the Company in 2003, the Company signed a two-year consulting agreement with Mr. Crosetto. The consulting agreement was renewed in 2005 for one year ending December 31, 2006 and again in 2006 and 2008, each a renewal for a two-year term ending December 31, 2008 and December 31, 2010, respectively. Pursuant to the renewed consulting agreement, Mr. Crosetto continues as a member of the Board and provides the Company and its affiliates with assistance in sales and marketing and with other projects. In consideration of these services and non-competition provisions, Mr. Crosetto receives $255,000 in annual consulting fees and reimbursement for reasonable business-related expenses. The consulting agreement also provides that the consulting fees are in lieu of Board retainers and fees.

 

The Company has encouraged its Board members to hold substantial equity interests by requiring each director to defer at least $85,000 of the annual Board of Directors retainer and by permitting each director, on an annual basis, to elect voluntary deferral of some or all of the remaining fees and retainers. Until December 31, 2007, directors could choose either non-qualified stock options or DSUs in place of cash. After December 31, 2007, directors may elect to defer fees and retainers in DSUs only, as long as they notify the company of their decision before the year begins. For 2009, eight of the directors made voluntary deferrals of some or all of their compensation. The Stock Plan for Directors and the 1999 Stock Incentive Plan govern these deferrals of compensation.

 

DSUs represent the right to receive a like number of shares of Common Stock at a future date, subject to distribution rules. DSUs earn the equivalent of the Company’s dividends, which are paid in cash, but they do not confer voting rights. The Company further encourages deferral by adding a 20% match to any Board of Directors and committee compensation that a director voluntarily defers, but not that portion of the annual Board of Directors retainer which he or she must defer. The fair market value of the Common Stock for each day of the three day period following the date the DSU is granted is the value the Company uses in converting Board of Directors compensation for retainer payments or attendance fees earned during a calendar quarter into DSUs. When a non-employee director retires from the Board of Directors, the Company will issue him or her shares equal in number to the DSUs accrued through the retirement date. The Company normally distributes these shares in two installments within fifteen months following the director’s retirement.

 

For the first quarter of 2009, all of the directors’ deferred compensation, including both the portion that was mandatorily deferred and the portion the director previously may have elected to defer and convert into DSUs, was credited as a cash-based deferral. Any portion of the directors’ compensation that was voluntarily deferred was also credited with a 20% match. All amounts deferred in cash are credited with interest at the rate of 120% of the long term applicable federal rate as published by the IRS. All cash deferrals and credited interest upon the deferrals will be paid when a non-employee director retires from the Board of Directors. In May 2009, the Nominating Committee approved changes to the deferral arrangements for directors, reinstituting deferrals in DSUs, but subject to a maximum number of DSUs that can be issued in a calendar year to any one director of 12,000. If the maximum number of DSUs is issued to satisfy a director’s mandatory and voluntary deferrals, any additional deferred amounts will be credited as a cash-based deferral, with interest credited as described above.

 

As a further measure to increase equity participation by the Board of Directors and better align the directors’ interests with those of other stockholders, a new non-employee director who joins the Board of Directors receives an

award of DSUs equivalent in market value to $30,000. This one-time award vests over the director’s first four years of Board service, and the Company will then issue the corresponding Common Stock when the director retires from Board service.

 

The Company has stock ownership guidelines that are designed to increase linkage between shareholders and non-employee directors, as well as senior executives, through retention of stock. The Company also reimburses reasonable travel expenses, that its directors incur in attending Board of Directors and committee meetings and fees and expenses in connection with director continuing education.

 

2009 Director Compensation Table

 

 

 

Notes:

 

 

 

 

 

 

As of March 15, 2010, there were 40,095,996 shares of the Company’s common stock outstanding.

 

Securities Ownership of Certain Beneficial Owners

 

The Company does not know of any individual who is the beneficial owner of more than 5% of the Company’s common stock that was outstanding as of March 15, 2010. The only institutional investors known to have held more than 5% of the Company’s common stock on that date are set forth in the following table which shows each firm’s percentage of shares actually outstanding on March 15, 2010. This information is derived from the most recent reports on Schedule 13G, as filed for each such firm with the SEC before March 15, 2010.

 

 

 

Notes:

 

 

 

Stock Ownership of Management

 

The following table shows the number of shares of the Company’s common stock owned by each member of the board of directors and each of its Named Executive Officers (as previously defined), as of March 15, 2010. The table also includes the aggregate number of shares of common stock owned beneficially, as a group, by the directors and corporate officers. The following table assumes that an individual beneficially owns any shares which he or she may acquire by exercising options which are exercisable within 60 days after March 15, 2010, by converting stock equivalents or by withdrawing from an employee benefit plan, even if that individual has not yet made the exercise, conversion or withdrawal of the stock.

 

No individual listed in the following table beneficially owned more than 1% of the common stock outstanding on March 15, 2010 (including for this purpose shares subject to stock options which will become exercisable within 60 days after March 15, 2010). The number of shares listed in the following table as beneficially owned for all directors and officers as a group is 5.31% of the Company’s common stock outstanding as of March 15, 2010.

 

 

 

Notes:

 

 

 

 

The table assumes that all DSUs are fully distributed and may be converted into common stock within 60 days after the record date, and that cash dividends payable on DSUs through March 15, 2010, have been reinvested in additional shares.

 

 

 

Director Independence

 

It is the Board of Directors’ objective that at least a majority of the Board of Directors should consist of independent directors. For a director to be considered independent, the Board of Directors must determine that the director does not have any direct or indirect material relationship with the Company. The Board of Directors maintains categorical standards to assist it in determining director independence, which are consistent with the Exchange listing rules. The categorical standards are part of our corporate governance guidelines and are set forth on the Company’s website (www.bowne.com). In evaluating director independence, the Board considered the following: Mr. Shea is currently an executive of the Company; and Mr. Crosetto is formerly an executive of the Company and is currently a consultant to the Company. The Board of Directors has determined that the following nine directors satisfy the Exchange’s independence requirements and Bowne’s categorical standards as described above: Mr. Fox, Ms. Hooper, Mr. Kucera, Mr. Murphy, Ms. Portela, Mr. Schwarz, Ms. Stanley, Mr. Tese and Mr. West.

 

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