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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
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BOWNE & CO., INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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BOWNE & CO., INC.
345 Hudson Street
New York, New York 10014
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(LOGO) ROBERT M. JOHNSON
Chairman and
Chief Executive Officer
April 7, 1999
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DEAR FELLOW STOCKHOLDER,
You are cordially invited to attend the Annual Meeting of Stockholders of
Bowne & Co., Inc. on Thursday, May 27, 1999. We will meet at 10:00 A.M.
(local time) in the rooftop ballroom on the 20th floor of the St. Regis
Hotel, 2 East 55th Street, New York City.
Enclosed, along with our Proxy Statement for the meeting, you will find a
voting card, a reply envelope and a copy of our 1998 Annual Report. The
Proxy Statement and the voting card also explain how you may vote using
either the Internet or the telephone, if you prefer. Please take a few
minutes to look through the information and instructions inside.
This year for the first time we intend to broadcast the meeting live on
the Internet. To participate, just visit the Company's website
(www.Bowne.com) during the last few days before May 27 in order to
register. We will post specific information there on how our "webcast"
will work.
The theme of the meeting will be "1 + 1 = 3." We will use various media
to demonstrate how Bowne is harnessing the strong positions we already
have in our various businesses, and how we are leveraging our
considerable assets. These efforts are creating greater value than could
be realized from any or all of our businesses and assets individually. At
the meeting we will also review major developments at Bowne since our
last stockholders' meeting in 1998.
I hope to see you at the meeting. Even if you cannot be with us, your
vote is very important. Whether you plan to attend or not, please return
your signed voting card, or give us your instructions by e-mail or
telephone, to guarantee that your shares will be properly represented.
Sincerely,
/s/ Robert M. Johnson
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(LOGO)
BOWNE & CO., INC.
345 Hudson Street
New York, New York 10014
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The stockholders of Bowne & Co., Inc. will hold their Annual Meeting on
THURSDAY, MAY 27, 1999, beginning at 10:00 A.M. (local time), in the rooftop
ballroom on the 20th floor of the St. Regis Hotel, 2 East 55th Street (at the
corner of Fifth Avenue) in New York City. We will take action on these two
proposals:
PROPOSAL A - To elect four Directors (Robert M. Johnson, H. Marshall Schwarz,
Wendell M. Smith and Harry Wallaesa) to serve on the Company's Board of
Directors; and
PROPOSAL B - To approve the Company's 1999 Incentive Compensation Plan.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF BOTH PROPOSALS.
Attached to this notice is our Proxy Statement for the meeting. It discusses the
two proposals and contains other information about the Company. The Proxy
Statement also explains how you may vote at the meeting in person or by proxy,
and how you may use your voting card or the Internet or telephone. The
stockholders may act on additional business if it is proper for consideration at
the meeting under Delaware law.
The stockholders who will be entitled to vote are those listed on the Company's
records at the close of business on March 29, 1999. You do not need a ticket of
admission to attend in person.
April 7, 1999 By order of the Board of Directors,
DOUGLAS F. BAUER
Counsel & Corporate Secretary
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PROXY STATEMENT
CONTENTS
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VOTING AT THE ANNUAL MEETING................................ 1
Your vote is important to Bowne........................ 1
Who may vote?.......................................... 1
How do the Proxies vote for you?....................... 1
How can you revoke instructions?....................... 2
How do we count votes?................................. 2
What if you give no instructions?...................... 2
Who pays for this solicitation?........................ 2
Webcast of the meeting................................. 3
Other business at the meeting.......................... 3
About this Proxy Statement............................. 3
PROPOSALS: "A" - TO ELECT FOUR DIRECTORS.................... 4
"B" - TO APPROVE THE 1999 INCENTIVE COMPENSATION
PLAN............................................. 5
INFORMATION ABOUT THE NOMINEES AND OTHER DIRECTORS.......... 10
ABOUT THE BOARD AND ITS COMMITTEES.......................... 12
The Board.............................................. 12
How Directors are chosen............................... 12
Committees of the Board................................ 12
Compensation Committee interlocks and insider
participation......................................... 13
Compensation of Directors.............................. 13
OWNERSHIP OF THE COMMON STOCK............................... 15
Principal stockholders................................. 15
Stock ownership of management.......................... 15
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN................... 18
REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION
COMMITTEE................................................. 20
EXECUTIVE COMPENSATION...................................... 23
Summary compensation table............................. 23
Option grants in last fiscal year...................... 25
Aggregated option exercises in last fiscal year and
year-end option values................................ 26
Long-term incentive plans -- awards in last fiscal
year.................................................. 26
Pension plan table..................................... 28
CONTRACTUAL ARRANGEMENTS WITH EXECUTIVES.................... 29
OTHER INFORMATION........................................... 30
Proposals and nominations by stockholders.............. 30
How to get Form 10-K................................... 30
APPENDIX: 1999 INCENTIVE COMPENSATION PLAN.................. A-1
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VOTING AT THE ANNUAL MEETING
YOUR VOTE IS IMPORTANT TO BOWNE. In case you cannot attend our Annual Meeting
in person, the Company's Board of Directors has named two people to act as your
Proxies, and we ask you to let them vote your shares at the meeting. For that
purpose, we urge you to sign and return the enclosed voting card even if you
plan to attend the meeting, or else to vote over the Internet or the telephone
by following the instructions given on this page.
An explanation of voting procedures for the meeting follows.
WHO MAY VOTE? The record date for the meeting was March 29, 1999. This means
that you are entitled to vote if our records show that you held the common stock
at the close of business on that date. Each share of common stock is entitled to
one vote on each of the proposals explained in this Proxy Statement, and all
votes will be confidential. The enclosed voting card shows the exact number of
shares you held on the record date, and you may cast that same number of votes.
A total of 36,834,123 shares of common stock were outstanding and entitled to
vote on the record date, and no shares were outstanding in any other class of
voting securities. A list of the stockholders eligible to vote will be made
available on request, during the ten days before the meeting, in the Company's
executive offices at 345 Hudson Street, New York, New York.
We will not hold the Annual Meeting unless there is a quorum of the
stockholders, either present in person or represented by proxy. Stockholders
entitled to vote just over half the number of shares outstanding on the record
date (that is, at least 18,417,062 shares) will constitute a quorum.
HOW DO THE PROXIES VOTE FOR YOU? If you owned common stock in your own name on
the record date, you are a holder of record. This means you may use the enclosed
voting card to tell the Proxies how you want them to vote your shares. Be sure
to sign, date and mail the voting card in the postage-paid envelope which Bowne
has provided.
Or you may send your instructions to the Proxies either by e-mail on the
Internet or by telephone. If you use e-mail or telephone, these methods of
voting will automatically confirm for you that we have recorded your
instructions properly. Both methods require the personalized control number we
have printed for you on the voting card enclosed with this Proxy Statement.
- - To vote by e-mail, visit our electronic voting website on the Internet:
http://proxy.shareholder.com/BNE. Enter your control number in the on-screen
box and click on "Submit." Then follow the on-screen instructions. When you
finish, review your vote; if it is correct, click again on "Submit" to
register your vote.
- - To vote by telephone, call our toll-free number from any Touch-Tone telephone
in the United States or Canada: 1-800-575-8306. When prompted, enter your
control number followed by the # sign. Then follow the recorded instructions.
When you finish, the recording will recap your vote; if it is correct, press
"2" to register your vote.
You have the same choice of ways to vote if your shares were in Bowne's Direct
Stock Purchase and Dividend Reinvestment Plan on the record date. We have
described that plan on page 54 of the Company's Annual Report.
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On the other hand, if a broker, bank or other nominee holds common stock for
your benefit, but not in your own name, then your shares are in street name. In
that case, your broker, bank or other nominee will advise you how to vote the
shares. Bowne reimburses them for forwarding this Proxy Statement and the
Company's Annual Report to you. If you have not heard from the broker, bank or
nominee who holds your stock in street name, please contact that person or firm
as early as possible.
Whether you mail your instructions or send them by e-mail or telephone, the
Proxies will vote your shares exactly as you tell them to. You may change or
revoke your voting instructions at any time before the stockholders vote at the
meeting. When you submit your voting card or file instructions by e-mail or
telephone, the Proxies will vote in the way the Company's Board of Directors
recommends unless you tell the Proxies to vote otherwise. If there is an
interruption or adjournment of the meeting before we complete the agenda, the
Proxies may still vote your shares when the meeting resumes.
Of course, you may come to the Annual Meeting in person and vote your shares by
written ballot at that time. If you want to vote in person, be sure to revoke
any voting instructions you gave before the meeting.
HOW CAN YOU REVOKE INSTRUCTIONS? To revoke or change voting instructions you
have given to the Proxies or to anyone else, you must tell the Corporate
Secretary of the Company in writing before the stockholders vote at the meeting.
HOW DO WE COUNT VOTES? The Bank of New York is the Company's registrar and
transfer agent and will count all the votes. If you give instructions to the
Proxies to vote for you, or if you attend the meeting in person, then your
shares will count when we determine whether there is a quorum, even if you
decide to abstain from the actual voting or to vote against a particular
proposal.
When a stockholder fails to vote or chooses to abstain on one or both of the
proposals, his or her shares will not count as votes for or against that
proposal. This means that the unvoted shares will not affect the outcome of the
vote on that proposal. If a broker, bank or other nominee holds your common
stock, that person or firm will normally ask for your instructions and vote your
shares according to your instructions. With your permission, the broker, bank or
nominee will tell the Proxies to vote in the way you instruct. Shares
represented at the meeting by a broker, bank or nominee will be counted when we
determine if there is a quorum, whether or not the street name holder votes or
abstains.
If you attend the Annual Meeting and want to vote shares held for you in street
name, you must bring a written proxy from the broker, bank or nominee. It must
name you as the sole representative entitled to vote. You must give the written
proxy to the Corporate Secretary of the Company before the voting starts.
WHAT IF YOU GIVE NO INSTRUCTIONS? The Exchange has determined that proposal A
is discretionary and that proposal B is non-discretionary. This means that, when
the stockholders act on proposal A, brokers, banks and other nominees may vote
stock they hold for you in street name even if you have not given specific
instructions for proposal A. On the tenth day before the meeting, unless you
have specified otherwise, your broker, bank or nominee may direct the Proxies to
vote your shares in favor of proposal A. But, when proposal B comes to a vote,
brokers, banks and nominees may not vote stock they hold for you unless you have
given them specific instructions.
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WHO PAYS FOR THIS SOLICITATION? Bowne will pay the cost of solicitating your
voting instructions for the Proxies. Employees and agents of the Company may
solicit by personal interview or by any other means of communication including
mail, fax, e-mail and telephone. The Company reimburses brokers, banks and other
nominees for expenses they incur in forwarding copies of this Proxy Statement
and other Company material to stockholders and in gathering their voting
instructions. The Company has retained the proxy-soliciting firm of D. F. King &
Co., Inc. to assist in this solicitation for a fee that will not exceed $10,000,
plus out-of-pocket expenses.
WEBCAST OF THE MEETING. Stockholders who are unable to attend the meeting in
person may follow it live on the Internet. About May 24 the Company intends to
post information on our website (www.Bowne.com) about how this webcast will
work. To participate, stockholders must register before the meeting begins.
OTHER BUSINESS AT THE MEETING. The Company does not know of any business to be
presented at the Annual Meeting besides the two proposals described in this
Proxy Statement. However, if other business comes before the meeting and if it
is proper under Delaware law, the Proxies will use their discretion in casting
all the votes they are entitled to cast, unless they have written instructions
to the contrary.
ABOUT THIS PROXY STATEMENT. The Company's management prepared this Proxy
Statement and began sending it to stockholders of record on or about April 7,
1999. Again this year, Bowne is proud to be participating in the Securities and
Exchange Commission's "plain English" initiative by offering proxy information
to our stockholders in language that is easier to read and understand.
Please note that some words have special meanings when we use them in this Proxy
Statement. The terms "Company" and "Bowne," as well as the words "we," "us" and
"our," refer to Bowne & Co., Inc., a Delaware corporation, or its predecessor, a
New York corporation of the same name. The "Proxies" are the two people (Robert
M. Johnson and Douglas F. Bauer) who will vote for you at the meeting, or anyone
else they choose to be their substitutes. We refer to the American Stock
Exchange as the "Exchange," and the terms "common stock," "stock" and "shares"
all mean the Company's Common Stock, par value $.01 per share, which trades on
the Exchange. Finally, "plan" means the Company's 1999 Incentive Compensation
Plan, which we have summarized on pages 5 through 9 of this Proxy Statement, but
we refer to the Company's other compensation arrangements by their full names
unless the identity of a particular plan is clear from the context.
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PROPOSAL A - TO ELECT FOUR DIRECTORS
THE BOARD RECOMMENDS THAT YOU VOTE IN FAVOR OF ELECTING THESE FOUR NOMINEES TO
SERVE AS DIRECTORS OF THE COMPANY:
Robert M. Johnson
H. Marshall Schwarz
Wendell M. Smith
Harry Wallaesa
The nominees currently serve as Directors. They have all consented to being
nominated, and they agree to continue to serve if the stockholders elect them at
the meeting. The Proxies who will vote for you at the meeting intend to vote for
the election of all four nominees, unless you specify otherwise.
Each Director will be elected by a plurality of the votes cast at the Annual
Meeting. A plurality is a number of shares which is larger than the numbers cast
for any competing candidates. You may vote for four nominees but may not cast
more than one vote for any particular nominee. If any nominee becomes
unavailable before the meeting, the Proxies may vote your shares in favor of a
substitute nominee proposed by the Board of Directors.
The Company has three classes of Directors with staggered terms of three-years
each. Class I has fewer members than the other classes because of retirements in
prior years. Therefore, the Board has nominated Mr. Wallaesa to become a member
of Class I for the remaining year of a term that will expire at the Company's
Annual Meeting in 2000 and when his successor is elected. The other three
nominees will become Directors in Class III if elected, and their full
three-year terms will expire at the Annual Meeting in 2002 and when their
respective successors are elected. Following the election of four Directors at
the meeting, there will be a total of nine members on the Board of Directors,
evenly divided among the three classes.
On pages 10 and 11 of this Proxy Statement, we have printed biographies of all
the current Directors arranged in alphabetical order. We have included their
principal occupations during the last five years and their ages as of the date
of the meeting. Asterisks identify the four nominees for proposal A. You can
find more information about the Board of Directors and its standing committees
on pages 12 through 14 of this Proxy Statement.
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PROPOSAL B - TO APPROVE THE 1999 INCENTIVE COMPENSATION PLAN
THE BOARD RECOMMENDS THAT YOU VOTE IN FAVOR OF APPROVING THE COMPANY'S 1999
INCENTIVE COMPENSATION PLAN.
The full text of the proposed plan appears in the appendix to this Proxy
Statement. The Board of Directors adopted the plan at its regular meeting on
February 25, 1999, subject to approval by stockholders. The Proxies who will
vote for you at the meeting intend to vote to approve this plan, unless you
specify otherwise.
The plan will take effect on May 27, 1999 if stockholders vote at least a
majority of the common stock at the meeting, whether represented in person or by
proxy, in favor of approving the plan. The purposes of the proposed plan are:
- To advance the interests of the Company and its stockholders by providing
means to attract, retain and reward employees and others who provide
services to the Company and its subsidiaries;
- To create shareholder value by linking the participants' compensation to
the Company's performance with stock-based and cash-based incentives; and
- To promote a closer identity of interests between participants and
stockholders by enabling them to acquire or increase their ownership of a
stake in the Company.
A brief summary of the plan follows. The summary omits some details, and
therefore the text of the plan in the appendix takes precedence over the
summary.
NUMBER OF SHARES AUTHORIZED. If approved by stockholders, the plan will
authorize the Company to issue up to a total of 3,450,000 shares of common stock
from time to time in specific awards under the plan. This number of authorized
shares represents approximately 9.4% of the Company's outstanding stock on the
date of the Annual Meeting. They may be treasury shares or other currently
unissued shares.
Plan awards may take a number of forms, including stock options, stock
appreciation rights (called SARs), limited SARs, restricted stock, deferred
stock units, bonus shares, stock granted in place of another kind of
compensation, and other awards tied to the market value of the stock or factors
that influence its value. Options and SARs allow a participant to benefit from
increases in the market price of the common stock after the date of his or her
grant. On the other hand, awards which are not options or SARs may allow a
participant to receive the current value of common stock on the grant date in
addition to later appreciation in value, and therefore these may be more costly
to the Company. From the total number of shares authorized by the proposed plan,
the Company will not issue more than 300,000 shares as awards which are not
options or SARs.
The Company may adjust the number of shares authorized by the plan if there is a
stock-split, stock dividend, merger or other extraordinary event. In those
cases, the Company may also adjust individual awards outstanding under the plan
in addition to adjusting the limit, mentioned earlier, on the number of shares
available for awards which are not options or SARs. These adjustments will not
enlarge the proportionate interest which the shares represented before the
extraordinary event, but they will prevent an unfair reduction in the value of
the shares, sometimes called dilution.
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Other shares will also be available under the plan. These include approximately
186,000 shares already authorized but not yet granted under the Company's 1997
Stock Incentive Plan, as well as any shares that may become available because of
forfeitures and cancellations under the Company's 1992 Stock Option Plan or 1997
Stock Incentive Plan. Stockholders previously approved each of the earlier
option plans.
On the record date, the Company had 3,010,050 shares reserved for already
outstanding options and further grants under the earlier option plans. The
Company also had 600,000 shares reserved on the record date for future issue
under its Long-Term Performance Plan, Deferred Award Plan and Stock Plan for
Directors to settle deferred stock units awarded in place of cash compensation.
Altogether, the shares reserved under these other plans and the new shares the
proposed plan would authorize will represent approximately 17.5% of the
Company's outstanding stock if and when all are fully issued. The closing price
of the common stock on the record date for the Annual Meeting was $12.6875 per
share.
In addition, if the Company issues common stock in substitution for awards under
a stock-based plan of an acquired corporation, those shares will not count
against the shares authorized in this plan. The plan will, however, govern the
additional shares issued for the acquired corporation.
ELIGIBILITY. Executives and other key employees of the Company, non-employee
Directors and others who provide substantial services to the Company and its
subsidiaries will be eligible for awards under the plan. A person who is offered
employment will also be eligible but cannot receive any benefit under his or her
award until after beginning employment. As discussed later, the plan puts limits
on the awards which any one individual may receive in a particular year. The
Committee estimates that approximately 500 people could be eligible for awards
under the plan, but the number of actual participants is likely to be much
smaller.
ADMINISTRATION OF THE PLAN. Initially, the Compensation Committee of the Board
of Directors will have authority to administer the proposed plan. The Board may
later appoint another committee to administer the plan, but none of the
Directors who serve on it may be employees of the Company. The Board itself may
also administer the plan, and only the Board may make awards to Directors. For
convenience, we will refer to anyone who administers the plan as the Committee.
Administration includes selecting the individuals who will receive awards,
determining the type of awards and their specific terms, and deciding whether
specific awards should be accelerated or cancelled in appropriate cases. In
fixing the terms of each award, the Committee will determine the valuation of
the shares, the vesting schedule, the expiration date, and the extended period
of time following retirement or termination of employment within which an
employee may exercise an award.
The plan spells out counting rules to assure that all awards are properly
counted and not counted twice. These rules will take account of shares
previously authorized under any other plan when they become subject to the
proposed plan. For most purposes, the rules will also recognize all forms of
awards permitted by the plan as interchangeable. Forfeited, terminated or
expired awards of shares, as well as awards settled in cash without issuing any
shares, will become available for future awards. So too will any shares a
participant surrenders to pay the exercise price of an award and those which the
Company withholds to satisfy a withholding tax obligation.
STOCK OPTIONS AND SARS. The plan authorizes the Committee to grant stock
options and SARs. Options include both incentive stock options (called ISOs),
which can result in favorable tax treatment to the participant, and
non-qualified stock options. A SAR or a limited SAR entitles the participant to
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receive payment of the amount of appreciation in the market value of his or her
shares on the date of exercise over the original grant price. A limited SAR is a
SAR that is exercisable only following a change in control of the Company. The
Committee will determine exercise prices for options and grant prices for SARs
and limited SARs, but these may not be less than the fair market value of the
stock on the grant date.
Options will have a maximum term of ten years. The participant may pay the
exercise price of an option in cash, stock, other awards that have in-the-money
value, or other means approved by the Committee. These could include notes or
obligations to make payment on a deferred basis or broker-assisted cashless
exercise procedures.
RESTRICTED STOCK AND DEFERRED STOCK UNITS. Under the proposed plan, the
Committee may also grant restricted stock or deferred stock units. Restricted
stock is a grant of shares that are subject to a risk of forfeiture if
employment or service terminates, and they are non-transferable for a period set
by the Committee. Deferred stock units give a participant the right to receive
shares at the end of a defined deferral period. In either case, a participant
may forfeit the award if his or her employment or service terminates before a
fixed date, which may be earlier than the end of the defined deferral period.
Restricted stock normally carries voting and dividend rights, while deferred
stock units do not, but the Committee may authorize the payment of dividend
equivalents on deferred stock units.
PERFORMANCE-BASED AWARDS INCLUDING ANNUAL INCENTIVE AWARDS. The Committee may
require a participant to meet performance goals as a condition of any award or
as a condition to exercise or to an acceleration of settlement. Performance
goals will consist of one or more business criteria and a targeted performance
level. We have described some of the business criteria for performance awards on
pages 8 and 9 under the heading "Compliance with section 162(m)." Performance
awards may take the form of annual incentive awards that are subject to
settlement in cash or in stock when the participant achieves the performance
goals for a particular year. In this way, the Committee intends to qualify such
annual incentive awards in order to avoid the loss of tax deductions under
section 162(m) of the Internal Revenue Code. The Committee may adjust
performance conditions and other terms of performance awards in keeping with
extraordinary corporate events or changes in laws, regulations or accounting
principles, but any adjustment to an award intended to qualify as
performance-based must still conform to the requirements of section 162(m).
OTHER TERMS. The Committee may settle awards under the proposed plan in cash,
shares, other awards or other property. The Committee may also make awards in
exchange for other awards or other rights to payment from the Company. All
awards will be non-transferable, except upon death or as may be permitted in
individual cases for estate planning and similar purposes. Participants will not
normally give consideration for awards under the proposed plan, other than their
services to the Company. The Committee will make an effort to withhold any taxes
that apply to these awards, and may allow a participant to withhold or surrender
shares to meet tax obligations.
If a change in control occurs, as defined in the proposed plan, outstanding
awards will immediately vest and become fully exercisable, while any settlement
deferral, forfeiture conditions and other restrictions will lapse. The Committee
may also decide that participants have met their performance goals and other
conditions in the event of a change in control.
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The plan will terminate when no shares remain available for issuance and when
the Company has no further obligations under outstanding awards. Before
termination, the Board of Directors may amend, suspend or terminate the plan
without further stockholder approval unless the law or Exchange rules require
such approval, but no amendment may have a negative effect on awards previously
granted. Specifically, stockholders need not approve amendments that might
increase the cost of the plan. In its discretion, however, the Board may submit
other amendments for stockholder approval.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary of the usual
federal income tax consequences of plan awards. The grant of an option or SAR
will trigger no federal income tax for a participant or a deduction for the
Company. Nor will the participant have taxable income upon exercising an ISO,
although the alternative minimum tax may apply. On the exercise of a
non-qualified option, the difference between the exercise price and the fair
market value of the option shares is taxable to the participant as ordinary
income. On the exercise of a SAR, the cash or the fair market value of the
shares received will also be taxable as ordinary income.
If a participant disposes of ISO shares before the end of applicable ISO holding
periods, he or she will be taxed on ordinary income equal to the lesser of (1)
the fair market value of the shares at exercise minus the exercise price, or (2)
the amount realized upon the disposition minus the exercise price. Otherwise, a
disposition of shares acquired by exercising an option or SAR will result in
short-term or long-term capital gain or loss equal to the sale price minus the
participant's tax basis in such shares. The tax basis is the exercise price paid
plus any amount previously taxed as ordinary income upon exercise of the award.
The Company is normally entitled to a tax deduction equal to the amount taxed as
ordinary income to the participant. The Company will not be entitled to a tax
deduction for amounts taxed as capital gain to the participant. Therefore, the
Company will not be entitled to a tax deduction if a participant exercises an
ISO and holds the shares received for the ISO holding periods.
In the case of awards other than options and SARs, the participant will be taxed
on ordinary income equal to the fair market value of shares, cash or other
property received. This tax will accrue at the time of receipt, except in the
case of an award that is non-transferable and subject to a risk of forfeiture.
In that case, the tax may not accrue until lapse of at least one of the
restrictions, although the participant may elect to be taxed at the time of
grant. Subject to an exception discussed below, the Company will be entitled to
a tax deduction in an amount equal to the ordinary income taxed to the
participant.
COMPLIANCE WITH SECTION 162(M). The Committee intends that some awards under
the plan should qualify as performance-based, as defined in section 162(m) of
the Internal Revenue Code. Section 162(m) imposes a cap of $1 million on the
amount of tax deductions the Company may take for compensation to a particular
executive in a single year, but qualifying performance-based compensation
remains fully deductible regardless of its amount. Under the plan, therefore,
options and SARs, annual incentive awards to employees whom the Committee
expects to be named executives, and other awards conditioned on achievement of
performance goals are intended to qualify as performance-based compensation.
By approving the proposed plan, stockholders will also be approving the
eligibility of executive officers and others to participate, the per-person
limitations, and general business criteria on which performance objectives for
performance-based awards may be based. The plan imposes per-person limitations,
so that a participant may not receive awards intended to qualify as
performance-based in
8
<PAGE> 13
excess of his or her annual limit. For each type of award, a participant's
annual limit is 1.5 million shares plus the amount of his or her unused annual
limit for that same type of award at the end of the previous year. In the case
of awards not valued in a way in which the share limitation would be
effective -- for example, cash annual incentive awards -- a participant may not
be paid during any calendar year an amount that exceeds his or her annual limit,
which is $3.5 million each year plus the amount of the participant's unused cash
annual limit for the previous year. A participant's annual limit applies if it
is potentially earnable, even if there is a deferral of payout. Options, SARs,
limited SARs, restricted stock, deferred stock units, other stock-based awards,
annual incentive awards and long-term performance awards each represent a
separate type of award for purposes of the annual limit.
In establishing goals for a performance-based award to an executive who is
subject to section 162(m), the Committee may select any of the following
business criteria: (1) earnings per share; (2) revenues; (3) cash flow, free
cash flow, or cash flow return on investment; (4) interest expense after taxes;
(5) return on net assets, return on assets, return on investment, return on
investment capital, or return on equity; (6) value created; (7) operating
margin; (8) net income before or after taxes, pretax earnings, pretax earnings
before interest, depreciation and amortization, pretax operating earnings after
interest expense and before incentives, service fees, and extraordinary or
special items, operating earnings, or net cash provided by operations; (9) stock
price or total stockholder return; (10) sales above a specified threshold or in
relation to prior periods; and (11) strategic business criteria, consisting of
one or more objectives based on meeting specified market penetration, geographic
business expansion goals, cost targets, management of employment practices and
employee benefits, supervision of litigation and information technology, and
goals relating to acquisitions or divestitures. These business criteria may
apply to the Company on a consolidated basis or to specified subsidiaries or
business units. Both annual incentive awards and long-term performance awards
may incorporate these criteria. Stockholder approval of the proposed plan,
including these business criteria without specific targeted levels of
performance, will qualify awards as performance-based for a period of five
years. After the fifth year, the plan would authorize further awards of options
and SARs that may continue to qualify as performance-based under section 162(m),
as well as other awards that will not qualify.
A number of other requirements must be met in order for particular compensation
to qualify as performance-based under section 162(m). There can be no assurance
that compensation resulting from plan awards intended to qualify under section
162(m) will in fact be fully deductible under all circumstances. In addition,
the plan would authorize a number of types of awards that will not qualify as
performance-based. Compensation paid as a result of these awards may be subject
to the cap on deductibility under section 162(m) if it and other
non-performance-based compensation exceed $1 million in a given year.
- --------------------------------------------------------------------------------
PAGES 10 THROUGH 29 PRESENT MORE INFORMATION ABOUT THE COMPANY'S DIRECTORS AND
OFFICERS, ABOUT THE COMPENSATION OF ITS EXECUTIVES, AND ABOUT THE RETURN ON ITS
STOCKHOLDERS' INVESTMENT. NO SPECIFIC PROPOSAL REGARDING THIS INFORMATION IS ON
THE AGENDA OTHER THAN PROPOSALS A AND B, DISCUSSED ON THE PRECEDING PAGES.
9
<PAGE> 14
INFORMATION ABOUT THE NOMINEES AND OTHER DIRECTORS
<TABLE>
<S> <C>
[ROBERT M. CONWAY ROBERT M. CONWAY (Age 55)
PHOTO] Limited Partner of Goldman, Sachs & Co. Mr. Conway also serves on the supervisory board of
Bowne Williams Lea International, a joint venture in which the Company participates. A Director
of the Company since 1994, he currently serves as a Director in Class II whose term will expire
in 2001.
[ROBERT M. JOHNSON ROBERT M. JOHNSON (Age 53)*
PHOTO] Chairman of the Board and Chief Executive Officer of the Company since 1997. Mr. Johnson had
previously been President and Chief Executive Officer of the Company from 1996. He was formerly
Publisher, President and Chief Executive Officer of Newsday, Inc., a subsidiary of The Times
Mirror Company. Mr. Johnson was first elected to the Company's Board in 1996.
[JAMES P. O'NEIL JAMES P. O'NEIL (Age 54)
PHOTO] President and Chief Operating Officer of the Company since 1997. Mr. O'Neil was formerly
Executive Vice President and prior to that Vice President, Finance of the Company. First
elected to the Board in 1996, he is a Director in Class II whose current term will expire in
2001.
[H. MARSHALL SCHWARZ H. MARSHALL SCHWARZ (Age 62)*
PHOTO] Chairman of the Board and Chief Executive Officer of U.S. Trust Corporation. Mr. Schwarz, who
is Chairman of the Company's Executive Committee, also serves as a director of Atlantic Mutual
Companies. He was first elected to the Company's Board in 1986.
[WENDELL M. SMITH WENDELL M. SMITH (Age 64)*
PHOTO] President of Polestar Ltd. Until 1996, Mr. Smith served as Chairman of the Board of Baldwin
Technology, Inc. He was elected to the Company's Board of Directors for the first time in 1992.
[LISA A. STANLEY LISA A. STANLEY (Age 43)
PHOTO] Financial planning consultant, affiliated with Tax & Financial Group of Newport Beach,
California. Ms. Stanley was elected to the Company's Board of Directors in 1998 as a Director
in Class II whose current term will expire in 2001.
</TABLE>
10
<PAGE> 15
<TABLE>
<S> <C>
[VINCENT TESE PHOTO] VINCENT TESE (Age 56)
Cable television owner and operator. Mr. Tese is also a director of Bear Stearns & Co., Inc.,
Cablevision, Inc., Allied Waste Industries, Inc., Custodial Trust Company, and Mack-Cali Realty
Corp. He was first elected to the Company's Board in 1996 and is a Director in Class I whose
current term will expire in 2000.
[HARRY WALLAESA PHOTO] HARRY WALLAESA (Age 48)**
President, Chief Operating Officer and a director of Safeguard Scientifics, Inc. Mr. Wallaesa
is also Chairman of Aligne, Inc. and a director of Tangram Enterprise Solutions, Inc.
Previously he was Chief Information Officer of Campbell Soup Company. Mr. Wallaesa was first
elected to the Company's Board on March 25, 1999.
[RICHARD R. WEST RICHARD R. WEST (Age 61)
PHOTO] Dean Emeritus, Stern School of Business, New York University. Previously, Mr. West was Dean of
the Stern School of Business and Professor of Finance. He is also a director of Alexander's
Inc., Vornado Realty Trust, and mutual funds advised either by Merrill Lynch Asset Management,
Inc. and its affiliates or by Hotchkis and Wiley. Elected to the Board in 1994, Mr. West is a
Director in Class I whose current term will expire in 2000.
- -----------------------------------------------------------------------------------------------------------------------
* Candidate for election as a Director in Class III with a term expiring in 2002.
** Candidate for election as a Director in Class I with a term expiring in 2000.
</TABLE>
11
<PAGE> 16
ABOUT THE BOARD AND ITS COMMITTEES
THE BOARD. The Board of Directors and its committees meet periodically
throughout the year to direct and oversee management of the Company. The Board
held seven formal meetings during 1998. In addition, Board members share
information and exchange views with the Chairman and with each other at their
committee meetings and by telephone and other means of communication on matters
that concern the Company and its stockholders.
HOW DIRECTORS ARE CHOSEN. Candidates for the Board of Directors may be
recommended by stockholders, by other Board members, by Company management or by
any interested person. A stockholder who wants to recommend a candidate should
write to: Douglas F. Bauer, Counsel & Corporate Secretary, Bowne & Co., Inc.,
345 Hudson Street, New York, New York 10014. Stockholders may also nominate
Board candidates at the Annual Meeting, and we have described the procedure for
this, and the advance notice required, under the heading "Proposals and
nominations by stockholders" on page 30 of this Proxy Statement.
COMMITTEES OF THE BOARD. The Board has four standing committees. Membership on
these committees rotates periodically. The following describes their principal
functions and current membership.
- - Executive Committee. The Executive Committee has many of the powers of the
full Board in directing management of the Company and may exercise those
powers between regular Board meetings. However, this committee may not amend
the Company's by-laws, fill vacancies on the Board, make other fundamental
corporate changes or take actions which require the vote of the full Board
under Delaware law. The Executive Committee also oversees matters of corporate
responsibility which may involve interests other than those directly
benefiting stockholders, such as the concerns of employees, customers and the
public at large. From time to time the committee considers candidates for the
Board of Directors including those recommended by stockholders. The current
members of the Executive Committee are Mr. Schwarz (chairman), Mr. Johnson and
Mr. Conway. During 1998, this committee held two formal meetings and took
action at three other times without meetings by adopting resolutions with the
unanimous written consent of its members.
- - Audit Committee. The Audit Committee chooses independent public accountants
to serve as the Company's auditors. Together with the Company's Chief
Financial Officer, this committee reviews the scope and the results of the
annual audit, as well as the fees the auditors charge and the other activities
they perform for the Company. The Audit Committee also oversees internal
financial controls and looks into other accounting matters when the need
arises. During 1998, the Committee approved the Company's replacement of Ernst
& Young LLP with KPMG LLP as the Company's auditors for fiscal year 1998, and
more recently approved the re-appointment of the latter firm for 1999. There
was no disagreement with Ernst & Young LLP which would have caused them to
reference a disagreement in their reports for any years they audited. The
current members of the Audit Committee are Mr. Smith (chairman), Ms. Stanley
and Mr. West. They met twice during 1998.
- - Finance Committee. The Finance Committee reviews the financial reports of the
Company.
12
<PAGE> 17
In addition, this committee oversees investment policies and the investment
performance of the respective funds held in trust for the Company's employee
benefits plans. The current members of the Finance Committee are Mr. Conway
(chairman), Ms. Stanley, Mr. Tese and Mr. West. They met three times during
1998.
- - Compensation Committee. The Compensation Committee reviews and approves
salaries, bonuses and incentive compensation for officers of the Company and
other members of management. This committee administers compensation programs
which involve present or deferred awards of the common stock, as well as those
calling for cash payments. The Compensation Committee reviews any newly
proposed compensation and benefits plans, while overseeing the administration
of existing retirement and related plans for the Company's employees. Normally
the committee asks the full Board of Directors to approve any significant
changes that will affect employees generally. The current members of this
committee are Mr. West (chairman), Mr. Schwarz, Mr. Smith and Mr. Tese. They
met four times during 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. No member of the
Compensation Committee was an officer or employee of the Company or any of its
subsidiaries during 1998. The only person who served on that committee during
1998, other than the four current members named above, was Thomas O. Stanley.
Mr. Stanley retired on May 28, 1998 in keeping with the policy of the Board of
Directors calling for mandatory retirement by age 72.
COMPENSATION OF DIRECTORS. Each Director who is not a Company employee receives
an annual retainer of $20,000 and a fee of $1,000 for each Board meeting
attended. Members of the Executive Committee receive an additional annual
retainer of $5,000, or $6,000 in the case of the chairman of that committee.
Members of the other standing committees have no retainer but receive $750 for
each committee meeting attended, except that the chairman of each committee
receives $1,250 for any meeting at which he presides. When the Directors take
action by consenting to resolutions in writing without attending a formal
meeting, they receive no compensation for that service. The two Directors who
are Bowne employees (Mr. Johnson and Mr. O'Neil) receive no fees for their
services on the Board.
The Company's Stock Plan for Directors went into effect on January 1, 1998.
Under that plan, the Company converts some Board retainers and fees into
deferred stock units. Deferred stock units represent the right to receive shares
of common stock with a value equivalent in each case to the particular fee or
retainer converted under the plan. When a non-employee Director leaves the
Board, the Company will issue him or her the total number of shares deferred up
to that point. We will issue these shares from the Company's treasury in two
installments during the 15 months after the Director leaves the Board.
The Stock Plan for Directors requires deferral of at least one half of the
annual retainer paid for service on the Board of Directors. The same plan also
allows a Director to choose, on an annual basis, whether or not to convert the
other half of the retainer fee and any of the Board attendance and committee
retainers or fees. When we pay cash dividends to other stockholders, the Company
calculates dividends on these deferred stock units as if they had already been
issued to the Directors as common stock. We automatically reinvest the computed
13
<PAGE> 18
dividends into additional deferred stock units for distribution when a Director
leaves the Board. Deferred stock units have no voting rights.
Prior to 1998, the Company had a retirement program for non-employee members of
the Board. That program paid a cash retirement benefit, subject to customary
vesting rules, equal to five times the retainer payments a Director received
during 1997. When the new Stock Plan for Directors replaced that program, the
Company converted whatever cash retirement benefit a Director had under the
prior program into deferred stock units with an equivalent value. When he or she
leaves the Board, the Director will receive the total number of shares of common
stock deferred as a result of this conversion from the prior program. Based on
the length of each Director's service on the Board, the retirement benefits
converted into deferred stock units under this feature of the plan were
respectively: Mr. Conway, $34,000; Mr. Schwarz, $85,000; Mr. Smith, $51,000; and
Mr. West, $34,000.
When the Board approved the Stock Plan for Directors, it provided for a one-time
award of deferred stock units to any Director who was not entitled to a cash
retirement benefit under the prior program, and also to any Director who joins
the Board after the new plan went into effect. This one-time award vests in four
equal installments over the Director's first four years of Board service and
will be distributed after the Director leaves the Board. Therefore, when they
satisfy the vesting rules, Ms. Stanley, Mr. Tese and Mr. Wallaesa will each
receive deferred stock units based on an initial valuation of $20,000.
In addition, the Company has a Matching Gifts Program for non-employee
Directors. Under this program, the Company matches a Director's qualified
charitable contributions up to $5,000 each year. The Company also offers to
reimburse reasonable travel expenses which Directors incur in attending Board
and committee meetings.
During 1998, there was no member of the Board of Directors who failed to attend
at least 75% of the Board and committee meetings which he or she was entitled to
attend.
14
<PAGE> 19
OWNERSHIP OF THE COMMON STOCK
PRINCIPAL STOCKHOLDERS. The Company does not know of any individual who is the
beneficial owner of more than 5% of the common stock that was outstanding on the
record date for the Annual Meeting. An investment management firm reported to
the Securities and Exchange Commission, in a Schedule 13G report as of December
31, 1998, that it held the common stock shown below for the benefit of clients
who share voting power with the firm.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL STOCKHOLDERS OF THE COMPANY
Stockholder Address No. of shares % of Outstanding
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lazard Freres & Co., LLC 30 Rockefeller 2,392,000 6.5%
Plaza New York, NY
10020
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
STOCK OWNERSHIP OF MANAGEMENT. The following table shows the number of shares
of common stock which each Director owned beneficially as of the record date,
including the nominees for election to the Board. The table also shows how many
shares the Company's five most highly compensated executives owned beneficially
on the record date, together with the aggregate of shares owned beneficially by
22 Directors and officers as a group.
No individual listed in the table beneficially owned more than 1% of the common
stock outstanding on the record date. The number of shares shown for all
Directors and officers as a group would represent approximately 2.1% of the
outstanding shares if the options and stock equivalents among those shares had
all been issued and outstanding on the record date.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
STOCK OWNERSHIP OF MANAGEMENT Amount and Nature of
Name of Director or Executive Beneficial Ownership(1)
- ------------------------------------------------------------------------------------------------------
<S> <C>
Robert M. Conway 22,043(2)
Carl J. Crosetto 51,109(3)
Susan W. Cummiskey 6,676(4)
Denise K. Fletcher 32,479(5)
Robert M. Johnson 201,286(6)
James P. O'Neil 146,243(7)
H. Marshall Schwarz 8,629(8)
Wendell M. Smith 3,668(9)
Lisa A. Stanley 191,123(10)
Vincent Tese 3,425(11)
Harry Wallaesa --(12)
Richard R. West 10,510(13)
All Directors and officers as a group 783,767(14)
- ------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 20
NOTES ON STOCK OWNERSHIP OF MANAGEMENT:
(1) Beneficial ownership is the ownership of stock, either direct or indirect,
which includes power to vote or power to dispose of the stock. Stock which an
individual may acquire by exercising options, by converting other securities or
by withdrawing from an employee benefits plan is beneficially owned even if he
or she has not yet taken the necessary action.
These figures include shares of common stock which the named individuals
beneficially owned outright on the record date, either as holders of record or
in street name. The Company understands that each individual has sole power to
vote or to dispose of those shares.
In addition, the figures in the table include shares subject to incentive stock
options which the executives could have exercised on the record date under the
Company's stock option plans, or which will become exercisable within 60 days
after the record date. The figures also include shares held in the Employees'
Stock Purchase Plan for the benefit of individual officers, which we have
determined from the latest quarterly calculation of account balances under that
plan.
The table reflects deferred stock units credited to individual Board members
under the Stock Plan for Directors, including units resulting from the
conversion of cash retirement benefits which accrued to individual Directors
prior to the effective date of the Stock Plan for Directors, as well as units
resulting from the one-time award made to each Director elected after the plan
went into effect. The table also reflects deferred stock units awarded to
individual executives under the Company's Long-Term Performance Plan or its
Deferred Award Plan. The figures in the table assume that deferred stock units
are fully vested and could be converted into common stock within 60 days after
the record date, although many units are not currently eligible for conversion.
The figures also assume the reinvestment of cash dividends payable on deferred
stock units through the record date.
For each individual, a footnote indicates the number of options, deferred stock
units and other shares included in his or her total. All beneficial ownership
reported in the table is direct, except for shares held indirectly under one of
the plans mentioned earlier in this note. This Proxy Statement describes the
Stock Plan for Directors under the heading "Compensation of Directors," and the
Company's stock option plans, Employees' Stock Purchase Plan, Long-Term
Performance Plan and Deferred Award Plan under the heading "Executive
Compensation."
(2) Includes 4,443 deferred stock units under the Stock Plan for Directors.
(3) Includes options to purchase 27,750 shares which are currently exercisable
or which will become exercisable within 60 days after the record date; also
includes 1,546 shares held in the Employees' Stock Purchase Plan, and 21,813
deferred stock units under other plans named above.
(4) Includes options to purchase 4,000 shares which are currently exercisable or
which will become exercisable within 60 days after the record date; also
includes 166 shares held in the Employees' Stock Purchase Plan, and 2,510
deferred stock units under other plans named above; but this figure does not
include the shares held for the benefit of other participants in the Employees'
Stock Purchase Plan, of which Ms. Cummiskey is a trustee.
(5) Includes options to purchase 17,500 shares which are currently exercisable
or which will become exercisable within 60 days after the record date; also
includes 390 shares held in the Employees' Stock Purchase Plan, and 12,589
deferred stock units under other plans named above; but this figure does not
include the shares held for the benefit of other participants in the Employees'
Stock Purchase Plan, of which Ms. Fletcher is a trustee.
(6) Includes options to purchase 60,000 shares which are currently exercisable
or which will become exercisable within 60 days after the record date; also
includes 583 shares held in the Employees' Stock
16
<PAGE> 21
Purchase Plan, and 87,369 deferred stock units under other plans named above.
This figure also includes 53,334 restricted shares which Mr. Johnson acquired
when he was elected Chief Executive Officer and which are not yet fully vested
under his agreement with the Company; the agreement may require Mr. Johnson to
return some of those shares if he leaves the Company before January 2001.
(7) Includes options to purchase 65,500 shares which are currently exercisable
or which will become exercisable within 60 days after the record date; also
includes 998 shares held in the Employees' Stock Purchase Plan, and 24,571
deferred stock units under other plans named above; but this figure does not
include the shares held for the benefit of other participants in the Employees'
Stock Purchase Plan, of which Mr. O'Neil is a trustee.
(8) Includes 6,629 deferred stock units under the Stock Plan for Directors.
(9) Includes 3,468 deferred stock units under the Stock Plan for Directors.
(10) Includes 1,861 deferred stock units under the Stock Plan for Directors.
This figure assumes full vesting, which Ms. Stanley will achieve in 2002.
(11) Includes 3,425 deferred stock units under the Stock Plan for Directors.
This figure assumes full vesting, which Mr. Tese will achieve in 2001.
(12) The one-time award Mr. Wallaesa received on his election to the Board
cannot be converted into deferred stock units until January 2000, when the
year-end market value of the Company's stock will be known. Mr. Wallaesa will
achieve full vesting in this award in 2003.
(13) Includes 4,510 deferred stock units under the Stock Plan for Directors.
(14) Includes 7,127 shares owned outright by officers not named in the table;
options to purchase 57,800 shares which are currently exercisable or will become
exercisable within 60 days after the record date; 36,890 deferred stock units;
and 4,764 shares held in the Employees' Stock Purchase Plan for the benefit of
all officers not named in the table. This total does not include the remainder
of the 576,654 shares held in the latter plan for the accounts of all
participating employees.
17
<PAGE> 22
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
The graph printed below shows yearly changes in the total return on investment
in Bowne common stock on a cumulative basis for the Company's last five fiscal
years. The graph also compares two other measures of performance: total return
on the Standard & Poor's 500 Index, and total return on the Standard & Poor's
Services (Commercial & Consumer) Index.
For convenience, we refer to the two comparison measures as "S&P 500" and "S&P
Services Index." We chose the S&P 500 because it is a broad index of the equity
markets. We chose the S&P Services Index as our own peer group because it
represents the capital-weighted performance results of companies in specialized
commercial and consumer services. The S&P 500 includes the companies represented
in the S&P Services Index.
The method we used to calculate yearly changes in Bowne's return is the same
method used for both the S&P 500 and the S&P Services Index. In each case, we
assumed an initial investment of $100 on October 31, 1993. In order to measure
the cumulative yearly change in that investment over the next five years, we
first calculated the difference between, on one hand, the price per share of the
respective securities on October 31, 1993 and, on the other hand, their price
per share at the end of each succeeding fiscal year. Finally, we turned the
result into a percentage of change by dividing that result by the difference
between the price per share on October 31, 1993 and the price per share at the
end of the particular fiscal year. Throughout the five years we assumed that all
dividends paid on the Company's common stock were reinvested into additional
shares.
For financial reporting purposes, the Company changed its fiscal year during
1997 from one ending October 31 to one ending December 31. The graph therefore
represents fiscal years 1994 through 1996 with October 31 data, and fiscal 1997
and 1998 with December 31 data. We have not restated the return on investment
for years before this change, and we have represented 1997 with data for the
14-month period from October 31, 1996 through December 31, 1997. The Company
paid no dividends during the two-month stub period created by the change in its
fiscal year.
18
<PAGE> 23
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN GRAPH
<TABLE>
<CAPTION>
BOWNE & CO., INC. S&P 500 S&P SERVICES INDEX
----------------- ------- ------------------
<S> <C> <C> <C>
10/31/93 100.00 100.00 100.00
10/31/94 79.73 103.87 100.19
10/31/95 94.72 131.33 122.94
10/31/96 121.01 162.97 137.01
12/31/97 210.72 235.46 174.92
12/31/98 189.39 193.15 224.90
</TABLE>
19
<PAGE> 24
REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION COMMITTEE
For the fiscal year ended December 31, 1998, the Compensation Committee of the
Board of Directors determined the compensation of the Company's senior
executives and major business unit managers, including the Chief Executive
Officer and the other most highly compensated individuals who are named in the
"Summary Compensation Table" of the Company's Proxy Statement. This
determination included reviewing and approving base salaries, bonuses, long-term
incentive awards and stock options. In performing these functions, the Committee
supported the policies of Company management designed to attract and retain
superior executive talent, to provide incentives and rewards to executives who
contribute to the Company's long-term success, and to link executive
compensation with corporate performance and the creation of shareholder value.
The Committee believes that so aligning the interests of executives with those
of the stockholders serves both the immediate and the long-term interests of the
Company and its stockholders.
Annual base salaries. In reviewing base salaries proposed by the Chief
Executive Officer for other senior executives, the Committee's benchmark was a
1998 comparison of peer companies conducted by a leading consulting firm that
specializes in executive compensation. The consultants chose more than a dozen
principal comparators after soliciting advice from various sources, including
the Company's own human resources staff. The Committee's long-standing policy
has been to maintain base salaries at competitive but reasonable levels in
keeping with the Company's leadership position in several highly specialized
business areas. The Committee concluded from the consultants' comparison of peer
companies that the 1998 base salaries of the Company's executives were
consistent with this policy.
In addition to comparing compensation at peer companies, the Committee
considered a number of other factors as well. Overall financial performance of
the Company was taken into account, as was the Committee's subjective perception
of the contributions each individual made to Company performance and to the
operating results of a particular business unit or functional area of
responsibility. The Committee also consulted recently published survey data on
compensation generally, inasmuch as the retention of well-qualified executives,
especially in various professional positions, usually requires the Company's
compensation to be competitive with employers across a wide spectrum of
industries which may not necessarily be considered peers of the Company.
Bonuses and long-term incentives. Based upon recommendations by the Chief
Executive Officer, the Committee awarded cash bonuses to the other senior
executives within the respective ranges of bonus potential that were determined
when the 1998 fiscal year began. These bonuses, to be distributed in March 1999
although earned in 1998, were linked in part to the amount by which net income
of the Company exceeded a target previously set and, for executives who manage
specific operating units, in part to the operating income of their respective
units. The remainder of each bonus was linked to the individual's achievement of
strategic objectives. Such objectives were highly specific and personalized,
having been negotiated with each executive at the beginning of the year, and
individuals were evaluated separately. While some of the objectives were
20
<PAGE> 25
quantitative, others were qualitative, such as the integration of new business
units and new customer services; the strengthening of internal organization with
special emphasis on more efficient teamwork; the introduction of cost-
reductions and operating efficiencies; and the successful application of new
technologies. The relevant corporate earnings targets, which the Committee
considered aggressive, were exceeded for 1998, while on average about 85% of the
personal goals set for the executives were also achieved during the year.
One component of each bonus was calculated under the Company's long-term
incentive plan which encourages and rewards improvements in its free cash flow
return on invested capital. Under this plan, such improvements were measured on
a three-year averaging basis, and a uniform target was set for all senior
executives. The plan recognizes the close correlation between free cash flow and
increasing shareholder value, while improved cash flow will also help the
Company's acquisition and diversification strategy. Because the Company did not
fully realize its previously established target for improvement in 1998, all
awards under this plan were made at 50% of the targeted level.
In a few cases, annual bonuses were paid partly in cash and partly in deferred
stock units. Such units are stock equivalents which accrue imputed dividends but
do not confer ownership or voting rights until converted into outstanding common
stock of the Company when the executive's employment terminates. Deferred stock
units were awarded, in place of cash bonuses, to the extent that an executive
exceeded either his or her annual bonus target or long-term bonus target, both
of which were capped at a percentage above the target. In such cases, or if an
executive elected voluntarily to defer some or all of his or her incentive
compensation, the Company matched the amount so deferred with an additional 20%.
The Committee does not reveal the mathematical formulas used in its bonus
calculations inasmuch as they involve highly confidential commercial
information, disclosure of which could be detrimental to the Company's
competitive position. Similarly, neither the performance targets set for
executives and business units nor the personalized goals negotiated with the
executives can be disclosed without jeopardizing the Company's advantage in its
highly competitive businesses.
Stock options. Under a qualified plan approved by the Company's stockholders,
the Committee awarded incentive stock options during 1998 to members of senior
management, including the Chief Executive Officer and other executives named in
the Summary Compensation Table, as well as to a number of other key employees.
Because these options will become exercisable over a period of four years
following each grant, the Committee believes that they will help secure the
continuing service of grantees. The Chief Executive Officer recommended specific
numbers of options to be granted to other senior executives, based in each case
on the individual's personal achievements, as well as a subjective view of his
or her opportunity for contribution to the overall performance of the Company.
In making these awards, the Committee also took into account the
responsibilities of the respective employees and any prior grants made to them,
together with certain valuation methods including the Black-Scholes model. A
significant equity position in the Company, the Committee believes, not only
rewards sustained efforts by an executive but also focuses those efforts upon
enhancing shareholder value.
21
<PAGE> 26
The Chief Executive Officer. The Committee determined the base salary, bonus,
long-term incentive and stock option awards made to the Chief Executive Officer
in the same manner as described above for other executives. Several of his
confidential targets, however, were more aggressive than those set for most
other executives.
Limitation on deductibility. Section 162(m) of the Internal Revenue Code may
forbid the Company to deduct certain forms of annual compensation in excess of
$1 million to any one executive unless the relevant compensation plan or program
is performance-based and expressly approved by stockholders. Because the
Company's stock incentive plans meet these criteria, options granted under those
plans are not a factor affecting the deductibility of compensation. Other
incentive compensation awarded in the form of deferred stock units or
voluntarily converted by an executive into such stock equivalents is not
considered to be compensation paid during the year, and therefore it too is
excluded for purposes of section 162(m). For 1998 and future years, the
Committee intends to defer any other compensation awarded to an executive which
would not be deductible under section 162(m), if possible, and will convert such
amount into deferred stock units with a 20% match by the Company.
Ratification. The Board of Directors unanimously approved or ratified all
actions and recommendations of the Committee during 1998 which required full
Board approval or ratification.
This report is submitted as of February 25, 1999 by the undersigned, being all
the members of the Compensation Committee.
Richard R. West, Chairman
H. Marshall Schwarz
Wendell M. Smith
Vincent Tese
22
<PAGE> 27
EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE Annual Compensation Long-Term Compensation
------------------- ----------------------
No. of Shares Deferred Long-Term
Underlying Stock Incentive
Name and Principal Position Year Salary(1) Bonus(1) Options(2) Awards(3) Payouts(4)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Johnson 1998 $450,000 $379,913 120,000 $ 66,417(6) $ 43,750
Chairman of the Board and 1997 420,000 500,000 80,000 410,160 70,000
Chief Executive Officer 1996 400,000 400,000 80,000 180,000 --
-------------------------------------------------------------------------------
James P. O'Neil 1998 325,000 214,988 80,000 5,220 42,500
President and 1997 300,000 240,000 50,000 147,840 80,000
Chief Operating Officer 1996 218,000 207,500 40,000 85,050 --
-------------------------------------------------------------------------------
Carl J. Crosetto 1998 275,000 253,825 40,000 12,668 20,625
Executive Vice 1997 250,000 267,500 30,000 182,400 25,000
President 1996 228,000 260,000 25,000 32,400 --
-------------------------------------------------------------------------------
Denise K. Fletcher(7) 1998 260,000 127,530 30,000 38,102 2,500
Senior Vice President and 1997 200,000 150,000 30,000 85,920 20,000
Chief Financial Officer 1996 -- -- -- -- --
-------------------------------------------------------------------------------
Susan W. Cummiskey(8) 1998 170,000 91,075 25,000 419 12,500
Senior Vice President, 1997 -- -- -- -- --
Human Resources 1996 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
SUMMARY COMPENSATION TABLE
All Other
Compensation
- ------------------------------------------------
<S> <C>
Robert M. Johnson $ 83,711
Chairman of the Board and 148,918
Chief Executive Officer 88,057
-------------
James P. O'Neil 53,415
President and 81,595
Chief Operating Officer 48,267
-------------
Carl J. Crosetto 46,182
Executive Vice 72,154
President 56,046
-------------
Denise K. Fletcher(7) 31,264
Senior Vice President and 49,109
Chief Financial Officer --
-------------
Susan W. Cummiskey(8) 20,172
Senior Vice President, --
Human Resources --
- ------------------------------------------------
</TABLE>
NOTES ON SUMMARY COMPENSATION TABLE:
(1) Salary and bonus. The individuals named in this table were the five most
highly compensated executives of the Company in 1998. In the column headed
"Salary," we calculated their annual base salaries on a fiscal year basis for
the year ended October 31, 1996, and on a calendar year basis for the years
ended December 31, 1997 and 1998, because the Company changed its fiscal year
during 1997. The column headed "Bonus" reports cash payments these individuals
received under the Company's annual bonus program. The Compensation Committee
awarded bonuses to the named individuals and to other senior executives, within
ranges of bonus potential established at the beginning of each year. The
Committee linked part of each award to the amount by which the Company's net
income exceeded a previously set target for the year, and the individual's
achievement of specific strategic objectives determined the remainder of the
award. We have restated bonuses reported for 1996 and 1997 in order to exclude
amounts shown in the column "Long-Term Incentive Payouts," which the Company's
1998 Proxy Statement had combined with these cash bonuses into a single number.
(2) Shares underlying options. The numbers of shares have been adjusted to
reflect the Company's two-for-one stock-split in August 1998. A separate table
on page 25 entitled "Option Grants in Last Fiscal Year" gives more details about
awards made under the Company's stock option plans during 1998.
(3) Deferred stock awards. The table indicates the cash value of deferred stock
units awarded during 1998 to the named individuals under the Company's Long-Term
Performance Plan and Deferred Award Plan, described on pages 26 and 27. When an
executive retires or terminates employment, the Company's treasury will issue
him or her one share of common stock for each unit. The Company also calculates
the cash dividends that would be payable on these units if they were outstanding
shares, and
23
<PAGE> 28
converts the resulting amount into additional units for the individual's
account. We have calculated their cash value using the average fair market value
of the common stock for the last five days of the calendar year to which each
award relates or, in the case of dividends, the market price of the common stock
on the dates when cash dividends became payable.
(4) Long-term incentive payouts. A separate table on page 26 entitled
"Long-Term Incentive Plans -- Awards in Last Fiscal Year" gives more details
about these cash payments under the Company's Long-Term Performance Plan and
Deferred Award Plan.
(5) All other compensation. The amounts shown in this column include the
Company's tax-deferred contributions under its Profit-Sharing Plan and
Employees' Stock Purchase Plan, as well as payments made under the Company's
Excess ERISA Plan, described below.
- - Profit-Sharing Plan. This is a defined contribution plan for eligible
employees which meets regulatory requirements. Under this plan, the Company
makes a contribution to the account of an employee based on his or her
considered compensation as defined in the plan. The contribution may not be
greater than 10% of pre-tax income, before deducting the contribution, nor can
it be greater than 15% of considered compensation overall. Account balances
under this plan are not taxable until benefits are distributed at retirement
or when employment terminates.
- - Employees' Stock Purchase Plan. This is also a defined contribution plan
which meets regulatory requirements. Under this plan, eligible employees who
elect to participate may contribute up to $200 per month from their after-tax
compensation. The plan provides for matching contributions by the Company
equal to one-half of an employee's contributions, subject to customary vesting
rules. The trustees of the plan use the aggregate of all contributions to
purchase shares of common stock on the open market, and they reinvest cash
dividends paid on those shares into additional shares. The Company's
contributions are not taxable until the employee withdraws his or her stock or
terminates employment.
- - Excess ERISA Plan. This is a supplemental arrangement which allows certain
key executives to avoid being adversely affected by limits which the Employee
Retirement Income Security Act of 1974, as amended, imposes on contributions
under the Profit-Sharing Plan.
Because the Company changed its fiscal year, senior executives who received
bonuses for 1997 also received interim bonuses and long-term incentive payouts
which they had earned in the two-month period intervening between the Company's
1997 and 1998 fiscal years. Each interim award, distributed during 1998,
equalled one-sixth of the bonus paid to the executive for the 12 months ended
October 31, 1997. Four of the named individuals received cash bonuses and
deferred stock units as follows: Mr. Johnson $76,764 and 4,338 units; Mr. O'Neil
$39,998 and 1,556 units; Mr. Crosetto $40,415 and 1,916 units; and Ms. Fletcher
$16,666 and 904 units. The table does not reflect these amounts.
(6) Excludes 26,666 shares of restricted common stock which the Board agreed to
convert into deferred stock units as of December 31, 1998 from the 80,000
restricted shares Mr. Johnson received under the agreement he reached with the
Company when he accepted the position of Chief Executive Officer in January
1996.
(7) Ms. Fletcher became a corporate officer in July 1996.
(8) Ms. Cummiskey became a corporate officer in January 1998.
24
<PAGE> 29
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Number of % of Total
Shares Under- Options Exercise
OPTION GRANTS IN LAST lying Options Granted Price Expiration Grant Date
FISCAL YEAR Granted(1) in Year Per Share Date Present Value(2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mr. Johnson 120,000 14.6% $14.125 Dec. 15, 2008 $614,400
Mr. O'Neil 80,000 9.8% 14.125 Dec. 15, 2008 409,600
Mr. Crosetto 40,000 4.9% 14.125 Dec. 15, 2008 204,800
Ms. Fletcher 30,000 3.7% 14.125 Dec. 15, 2008 153,600
Ms. Cummiskey 25,000 3.0% 14.125 Dec. 15, 2008 128,000
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES ON OPTION GRANTS:
(1) In 1981, 1992 and 1997, the Board of Directors adopted, and the stockholders
approved, three stock option plans which meet regulatory requirements. These
plans authorize the Board or the Compensation Committee to grant incentive stock
options to key employees, including the individuals named in this table and
other officers and key employees of the Company. Each option permits the grantee
to purchase shares of common stock. The exercise price per share, the vesting
schedule by which the options become exercisable, and all other terms of the
options are fixed on the grant date. The exercise price of each grant is equal
to the fair market value of the common stock on the grant date. Option grants
are normally made at the end of a calendar year, when the Committee evaluates
the contributions made by each employee.
A grantee may exercise his or her vested options at any time until the tenth
anniversary of the grant date, unless the option terminates earlier according to
its terms. Options are not transferable and may be forfeited under certain
circumstances including competition against the Company. The earliest of the
three plans has expired, but some options granted under it remain outstanding.
The Board or the Committee has discretion to accelerate the exercisability of
any option. The exercisability of each option will automatically accelerate if
there is a change of control of the Company. The plans define change of control
to include anyone's acquisition of at least 15% of the outstanding stock, a
tender offer by a party other than the Company itself, the election of Directors
comprising at least a third of the Board but not nominated by the current Board,
or a merger, consolidation or liquidation of the Company or sale of all or
substantially all its assets.
The Committee granted the options shown in the table on December 16, 1998. The
exercise price is the mean of the highest and lowest trading prices reported on
the Exchange for that date. The terms of each option granted in 1998 provide
that 25% of each grant will become exercisable on the first anniversary of the
grant date, and 25% on each of the three following anniversaries.
(2) We calculated present values using the Black-Scholes option-pricing model.
In addition to information presented in the table, the method we used relied on
these assumptions: first, that the common stock has a volatility rate of 40.13%
based on a weighted average of monthly closing prices over the five-year period
preceding the grant date; second, that 4.32% represents the current risk-free
rate of return on Treasury bills; and third, that the annual dividend yield of
the stock is 1.56%. We did not adjust the present values to reflect the non-
transferability of options or the risk of forfeiture.
25
<PAGE> 30
The values which an optionee may actually realize from the exercise of these
options may be substantially different from the present values shown in the
table. Future events and factors currently unknown will continue to influence
the Company's performance. Furthermore, stockholders and other investors should
not view these present values as a forecast of the performance of the common
stock or the future growth in its market price.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND Securities Underlying Value of Unexercised
YEAR-END OPTION VALUES* Shares Unexercised Options In-the-Money Options
Acquired Value at Year-End at Year-End
on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Johnson........................ -- $ -- 60,000 220,000 $270,000 $750,000
Mr. O'Neil......................... 31,000 405,125 65,500 167,500 450,750 699,500
Mr. Crosetto....................... 26,750 329,879 27,750 93,000 179,375 395,875
Ms. Fletcher....................... -- -- 17,500 62,500 67,500 187,500
Ms. Cummiskey...................... -- -- 4,000 37,000 -- 100,000
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
*NOTE: Numbers of shares in the table reflect the Company's stock-split in
August 1998.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST Deferred Stock
FISCAL YEAR** Units Awarded
----------------------------------------------------------------------
<S> <C>
Mr. Johnson 8,208
Mr. O'Neil 2,765
Mr. Crosetto 2,892
Ms. Fletcher 3,589
Ms. Cummiskey 631
</TABLE>
** NOTE: Deferred stock units shown in this table represent the right to receive
the same number of shares of common stock when the executive retires or
terminates employment. A holder of these units may not vote. The Compensation
Committee awarded the units reported in this table in accordance with two
incentive plans of the Company: the Long-Term Performance Plan and the Deferred
Award Plan. The Committee made no awards under these plans before 1997.
- - Long-Term Performance Plan. At the beginning of fiscal 1998, the Committee
set specific goals under this plan for eligible executives to encourage and
reward improvement in the Company's free cash flow return on invested capital.
The Committee also determined a target bonus for each executive in relation to
the desired cash flow improvement. At the end of the year, the Committee
awarded bonuses in the form of cash for performance up to the target and, in
appropriate cases, deferred stock units for performance that exceeded the
goals previously set. The formula used to determine each award measures the
amount by which actual performance exceeded the goal.
26
<PAGE> 31
Under this plan, an eligible executive must decide, before each fiscal year
begins, whether to take his or her award under the Long-Term Performance Plan
in cash, up to the amount of the target bonus, or to convert some or all of
that amount into deferred stock units. On the other hand, deferral into stock
units is mandatory in the case of any amounts earned above the target bonus.
In either case, the Company calculates the number of units by multiplying 1.2
times the portion of the cash bonus that the executive is deferring. In the
Summary Compensation Table on page 23, we have reported under "Long-Term
Incentive Payouts" whatever amount a named individual elected to receive as
cash, and under "Deferred Stock Awards" the cash value of any portion of the
award which he or she has deferred.
- - Deferred Award Plan. This plan also provides for mandatory deferral of
incentive compensation in certain cases. Under the annual bonus plan, any
amount earned in excess of the target bonus must be paid in the form of
deferred stock units. Furthermore, deferral is mandatory to the extent that
section 162(m) of the Internal Revenue Code forbids the Company to take a tax
deduction for a particular cash bonus payment. In both cases, this plan
provides that the executive will receive stock units equivalent in value to
1.2 times the portion of his or her bonus that must be deferred.
The Deferred Award Plan also applies if a contribution to be made under the
Profit-Sharing Plan for the benefit of a particular executive would exceed
limits set by the Internal Revenue Service. In such a case, the plan provides
that the Company will make only the allowable contribution to his or her
account and will convert the balance into deferred stock units. To calculate
the number of such stock units, the Company multiplies 1.4 times the amount by
which the contribution would have exceeded the limits, as an allowance for
income taxes on the disallowed portion.
The Compensation Committee has discretion to revoke any award made under these
incentive plans if the executive competes against the Company or discloses
confidential information. In a case of financial hardship, the Committee also
has discretion to make an early distribution from an executive's account. Such a
distribution will be a number of shares of common stock with a market value
sufficient to cover the hardship. If there is a change of control of the
Company, the Compensation Committee may convert the stock units into the cash
value of the original bonus.
The number shown for Mr. Johnson, however, excludes 26,666 shares of restricted
stock units which he agreed to convert into deferred stock units as of December
31, 1998 under the amended terms of the agreement he entered into with the
Company in January 1996. All numbers in the table reflect the Company's
stock-split in August 1998, and stock units created by that split are not
separately reported.
27
<PAGE> 32
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
PENSION PLAN TABLE* Annual Benefit at Age 62 if Average Compensation is:
$300,000 $400,000 $600,000 $800,000 $1,000,000
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mr. Johnson $150,000 $200,000 $300,000 $400,000 $500,000
Mr. O'Neil 150,000 200,000 300,000 400,000 500,000
Mr. Crosetto 150,000 200,000 300,000 400,000 500,000
Ms. Fletcher 150,000 200,000 300,000 400,000 500,000
Ms. Cummiskey 150,000 200,000 300,000 400,000 500,000
</TABLE>
* NOTE: Each individual named in the table participates in the Company's Pension
Plan along with most other employees of the Company and its U.S. subsidiaries.
They also participate in a Supplemental Retirement Plan for certain key
employees designated by the Board. Their retirement benefits under the
combination of these two plans, shown in this table and described below, do not
appear in the Summary Compensation Table on page 23.
- - Pension Plan. This is a defined benefit plan which meets regulatory
requirements. A participant's age, length of service and the average of his or
her five highest years of cash compensation determine benefits under this
plan. Cash compensation for this purpose is the sum of the salary and bonus
shown under the heading "Annual Compensation" in the Summary Compensation
Table on page 23. These benefits are payable as a life annuity upon normal
retirement at age 65 or the actuarial equivalent of such an annuity. A
participant may elect a discounted benefit on early retirement after age 55
and after five years of service.
- - Supplemental Retirement Plan. This unfunded plan supplements the Company's
Pension Plan by providing an additional life annuity for each of a small
number of key employees, including the named individuals. During 1998, the
Board of Directors approved an update to this plan in order to keep executive
compensation competitive with peer companies. The updated plan provides an
annual benefit which, when combined with the annual benefit payable under the
Pension Plan and with payments from recognized pension plans of other
employers, generally equals one-half of a participant's average base salary,
bonus and deferred bonus for his or her 60 highest consecutive months during
the last ten years of service.
Under this plan, a participant will receive the combined benefit in full if he
or she has been with the Company at least five years, and retires at age 62
with 20 years of credited service or at any age after 30 years of service with
the Company. The plan recognizes prior service under another employer's
pension plan in appropriate cases to determine credited service. If a
participant retires after age 55 (or earlier in Mr. O'Neil's case if his
employment terminates involuntarily), the plan reduces his or her benefit by
5% for each year between the date of early retirement and age 62. A change of
control of the Company may also make partial benefits available prior to age
62. Mr. Crosetto will have had 30 years in 2003, and his benefit will not be
subject to reduction at that time. The plan also provides benefits in case a
participant dies or becomes disabled while employed, regardless of age.
28
<PAGE> 33
CONTRACTUAL ARRANGEMENTS WITH EXECUTIVES
The senior executives named in the Summary Compensation Table on page 23 and
some other key employees of the Company have signed identical Termination
Protection Agreements with the Company. These agreements will provide a benefit
to the employee if the Company terminates his or her employment without cause
and within 30 months after a change in control of the Company, as the agreements
define those terms. The employee will receive the same benefit when a change of
control is imminent if he or she chooses to resign due to a reduction in
responsibilities or compensation, or if an outside party acquiring control asks
the Company to terminate the employee. The benefit in such cases would normally
be twice the sum of the employee's base salary and latest target bonus under the
annual bonus program.
In January 1996, the Company signed a separate agreement with Mr. Johnson and
amended it by mutual agreement in September 1998. The agreement would apply if
the Company terminates him without cause or if he resigns with good cause. In
addition to retirement benefits available to other senior executives of the
Company, Mr. Johnson would receive a lump sum payment equal to the bonus he
received for his last fiscal year before the termination. For 18 months after
the termination, he would continue to receive payments equal to his base salary
in effect at the time of termination. Mr. Johnson's agreement also granted him
restricted stock, subject to certain vesting rules that may require him to
return some or all of the shares if he leaves the Company before January 2001.
The amendment to this agreement gave the Compensation Committee authority to
convert these shares into deferred stock units as they vest, and the Committee
converted 26,666 shares as of December 31, 1998.
29
<PAGE> 34
OTHER INFORMATION
PROPOSALS AND NOMINATIONS BY STOCKHOLDERS. A stockholder may ask the Company to
consider including his or her own proposal in our Proxy Statement for the Annual
Meeting in the year 2000. The proposal may be a nomination for the Board of
Directors, a by-law amendment or any other matter that is proper under Delaware
law. We must receive the proposal by December 9, 1999, in the Company's
executive offices at 345 Hudson Street, New York, New York 10014, marked to the
attention of Douglas F. Bauer, Counsel & Corporate Secretary.
Any stockholder proposal must be in writing and identify the stockholder who
proposes it. The nomination of a candidate for the Board of Directors must also
include written consent by the candidate that he or she will serve, if elected,
as well as all the information about both the candidate and the proposing
stockholder which the rules and regulations of the Securities and Exchange
Commission or the Exchange would require in a proxy statement relating to the
election of that candidate.
The Company has no notice that any stockholder will offer a nomination, by-law
amendment or other proposal at this year's Annual Meeting on May 27, 1999.
HOW TO GET FORM 10-K. EVERY YEAR THE COMPANY FILES AN ANNUAL REPORT ON FORM
10-K WITH THE SECURITIES AND EXCHANGE COMMISSION. ON REQUEST, WE WILL SEND ANY
STOCKHOLDER A COPY OF THAT REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.
YOU MAY REQUEST YOUR COPY BY WRITING TO: DOUGLAS F. BAUER, COUNSEL & CORPORATE
SECRETARY, BOWNE & CO., INC., 345 HUDSON STREET, NEW YORK, NEW YORK 10014.
30
<PAGE> 35
APPENDIX
BOWNE & CO., INC.
1999 INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this 1999 Incentive Compensation Plan (the "Plan")
of Bowne & Co., Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company and its stockholders by providing a means to attract,
retain and reward employees of the Company and its subsidiaries, non-employee
directors of the Company, and consultants and other persons who provide
substantial services to the Company or its subsidiaries, to link compensation to
measures of the Company's performance in order to provide additional stock-based
and cash-based incentives to such persons for the creation of stockholder value,
and to enable such persons to acquire or increase a proprietary interest in the
Company in order to promote a closer identity of interests between such persons
and the Company's stockholders.
2. Definitions. For purposes of the Plan, the following terms shall be defined
as set forth below, in addition to the terms defined in Section 1 and elsewhere
in the Plan:
(a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(c) to receive a cash payment, Stock or other
Award, unless otherwise determined by the Committee, based on performance
in a specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR), Restricted
Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or
Annual Incentive Award, together with any related right or interest,
granted to a Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death. If, upon a
Participant's death, there is no designated Beneficiary or surviving
designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Board" means the Company's Board of Directors.
(e) "Change in Control" and related terms have the meanings specified in
Section 9.
(f) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, including regulations thereunder and successor provisions and
regulations thereto.
(g) "Committee" means a committee of two or more directors designated by
the Board to administer the Plan; provided, however, that directors
appointed as members of the Committee shall not be employees of the Company
or any subsidiary. In appointing members of the Committee, the Board will
consider whether a member is or will be a Qualified Member, but such
members are not required to be Qualified Members at the time of appointment
or during their term of service on the Committee. Initially, the
Compensation Committee of the Board shall
A-1
<PAGE> 36
be the Committee hereunder. The foregoing notwithstanding, the term
"Committee" shall refer to the full Board in any case in which it is
performing any function of the Committee under the Plan.
(h) "Covered Employee" means an Eligible Person who is a Covered Employee
as specified in Section 11(j) of the Plan.
(i) "Deferred Stock" means a right, granted to a Participant under Section
6(e), to receive Stock, cash or a combination thereof at the end of a
specified deferral period.
(j) "Dividend Equivalent" means a right, granted to a Participant under
Section 6(g), to receive cash, Stock, other Awards or other property equal
in value to dividends paid with respect to a specified number of shares of
Stock, or other periodic payments.
(k) "Effective Date" means the effective date specified in Section 11(n).
(l) "Eligible Person" has the meaning specified in Section 5.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, including rules thereunder and successor provisions and
rules thereto.
(n) "Fair Market Value" means the fair market value of Stock, Awards or
other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee,
the Fair Market Value of Stock shall be the mean between the highest and
lowest sales prices reported on a composite basis for securities traded on
the principal securities exchange or automated quotation system on which
Stock is then traded, on the date of the determination or, if there was no
trade reported for that date or the Committee so directs, on the latest
date for which a trade was reported.
(o) "Incentive Stock Option" or "ISO" means any Option intended to be and
designated as an incentive stock option within the meaning of Code Section
422 or any successor provision thereto.
(p) "Limited SAR" means a right granted to a Participant under Section
6(c).
(q) "Option" means a right, granted to a Participant under Section 6(b), to
purchase Stock or other Awards at a specified price during specified time
periods.
(r) "Other Stock Based Awards" means Awards granted to a Participant under
Section 6(h).
(s) "Participant" means a person who has been granted an Award under the
Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(t) "Performance Award" means a right, granted to a Participant under
Section 8, to receive Awards or payments based upon performance criteria
specified by the Committee.
(u) "Preexisting Plans" means the Company's 1992 Stock Option Plan and 1997
Stock Incentive Plan.
(v) "Qualified Member" means a member of the Committee who is a
"Non-Employee Director" within the meaning of Rule 16b-3(b)(3) and an
"outside director" within the meaning of Regulation 1.162-27 under Code
Section 162(m).
(w) "Restricted Stock" means Stock granted to a Participant under Section
6(d)
A-2
<PAGE> 37
which is subject to certain restrictions and to a risk of forfeiture.
(x) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(y) "Stock" means the Company's Common Stock, par value $.01 per share, and
such other securities as may be substituted (or resubstituted) for Stock
pursuant to Section 11(c).
(z) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c).
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee, which shall have full and final authority, in each case subject to
and consistent with the provisions of the Plan, to select Eligible Persons to
become Participants; to grant Awards; to determine the type and number of
Awards, the dates on which Awards may be exercised and on which the risk of
forfeiture or deferral period relating to Awards shall lapse or terminate, the
acceleration of any such dates, the expiration date of any Award, whether, to
what extent, and under what circumstances an Award may be settled, or the
exercise price of an Award may be paid, in cash, Shares, other Awards, or other
property, and other terms and conditions of, and all other matters relating to,
Awards; to prescribe documents evidencing or setting terms of Awards (such Award
documents need not be identical for each Participant) and rules and regulations
for the administration of the Plan; to construe and interpret the Plan and Award
documents and correct defects, supply omissions or reconcile inconsistencies
therein; and to make all other decisions and determinations as the Committee may
deem necessary or advisable for the administration of the Plan. Decisions of the
Committee with respect to the administration and interpretation of the Plan
shall be final, conclusive, and binding upon all persons interested in the Plan,
including Participants, Beneficiaries, transferees under Section 11(b) and other
persons claiming rights from or through a Participant, and stockholders. The
foregoing notwithstanding, the Board shall perform the functions of the
Committee for purposes of granting Awards under the Plan to non-employee
directors, and the Board otherwise may perform any function of the Committee
under the Plan, including for the purpose of ensuring that transactions under
the Plan by Participants who are then subject to Section 16 of the Exchange Act
in respect of the Company are exempt under Rule 16b-3.
(b) Manner of Exercise of Committee Authority. At any time that a member of the
Committee is not a Qualified Member, (A) any action of the Committee relating to
an Award intended by the Committee to qualify as "performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder may be taken by a subcommittee, designated by the Committee, composed
solely of two or more Qualified Members, and (B) any action relating to an Award
granted or to be granted to a Participant who is then subject to Section 16 of
the Exchange Act in respect of the Company may be taken either by such a
subcommittee or by the Committee but with each such member who is not a
Qualified Member abstaining or recusing himself or herself from such action,
provided that, upon such abstention or recusal, the Committee remains composed
of two or more Qualified Members. Such action, authorized by such a subcommittee
or by the Committee upon
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the abstention or recusal of such non-Qualified Member(s), shall be the action
of the Committee for purposes of the Plan. The express grant of any specific
power to the Committee, and the taking of any action by the Committee, shall not
be construed as limiting any power or authority of the Committee. The Committee
may delegate to officers or managers of the Company or any subsidiary, or
committees thereof, the authority, subject to such terms as the Committee shall
determine, to perform such functions, including administrative functions, as the
Committee may determine, to the extent that such delegation will not result in
the loss of an exemption under Rule 16b-3(d) for Awards granted to Participants
subject to Section 16 of the Exchange Act in respect of the Company and will not
cause Awards intended to qualify as "performance-based compensation" under Code
Section 162(m) to fail to so qualify. The Committee may appoint agents to assist
it in administering the Plan.
(c) Limitation of Liability. The Committee and each member thereof shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him or her by any executive officer, other officer or employee of
the Company or a subsidiary, the Company's independent auditors, consultants or
any other agents assisting in the administration of the Plan. Members of the
Committee and any officer or employee of the Company or a subsidiary acting at
the direction or on behalf of the Committee shall not be personally liable for
any action or determination taken or made in good faith with respect to the
Plan, and shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action or determination.
4. Stock Subject to Plan.
(a) Overall Number of Shares Available for Delivery. Subject to adjustment as
provided in Section 11(c) , the total number of shares of Stock reserved and
available for delivery in connection with Awards under the Plan shall be
3,450,000 plus the number of shares of Stock remaining available under the
Preexisting Plans immediately prior to the Effective Date or subject to awards
under the Preexisting Plans which become available in accordance with Section
4(b) after the Effective Date; provided, however, that the total number of
shares which may be issued and delivered in connection with Awards other than
Options and SARs shall not exceed 300,000. Any shares of Stock delivered under
the Plan shall consist of authorized and unissued shares or treasury shares.
(b) Share Counting Rules. The Committee may adopt reasonable counting procedures
to ensure appropriate counting, avoid double counting (as, for example, in the
case of tandem or substitute awards) and make adjustments if the number of
shares of Stock actually delivered differs from the number of shares previously
counted in connection with an Award. Shares of Stock subject to an Award under
the Plan or an award under the Preexisting Plans or under the 1981 Stock Option
Plan that is canceled, expired, forfeited, settled in cash or otherwise
terminated without a delivery of shares to the Participant will again be
available for Awards under the Plan, and shares withheld in payment of the
exercise price or taxes relating to any Award or Preexisting Plans award, and a
number of shares equal to the number surrendered in payment of any exercise
price or taxes relating to any such Award or award, shall likewise be deemed to
constitute Shares not delivered to the Participant and shall be deemed to again
be available for Awards under the Plan. In addition,
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in the case of any Award granted in substitution for an award of a company or
business acquired by the Company or a subsidiary, shares issued or issuable in
connection with such substitute Award shall not be counted against the number of
shares reserved under the Plan, but shall be deemed to be available under the
Plan by virtue of the Company's assumption of the plan or arrangement of the
acquired company or business. The foregoing provisions of this Section 4(b)
shall apply to the number of shares reserved and available for ISOs only to the
extent consistent with applicable regulations relating to ISOs under the Code.
5. Eligibility; Per-Person Award Limitations. Awards may be granted under the
Plan only to Eligible Persons. For purposes of the Plan, an "Eligible Person"
means an executive officer of the Company, an employee of the Company or any
subsidiary, a non-employee director of the Company, a consultant or other person
who provides substantial services to the Company or a subsidiary, and any person
who has been offered employment by the Company or a subsidiary, provided that
such prospective employee may not receive any payment or exercise any right
relating to an Award until such person has commenced employment with the Company
or a subsidiary. An employee on leave of absence may be considered as still in
the employ of the Company or a subsidiary for purposes of eligibility for
participation in the Plan. In each calendar year during any part of which the
Plan is in effect, an Eligible Person may be granted Awards intended to qualify
as "performance-based compensation" under Code Section 162(m) under each of
Section 6(b), 6(c), 6(d), 6(e), 6(f), 6(g) or 6(h) relating to up to his or her
Annual Limit (such Annual Limit to apply separately to Awards under each
subsection). A Participant's Annual Limit, in any year during any part of which
the Participant is then eligible under the Plan, shall equal 1.5 million shares
plus the amount of the Participant's unused Annual Limit relating to the same
type of Award as of the close of the previous year, subject to adjustment as
provided in Section 11(c). In the case of an Award which is not valued in a way
in which the limitation set forth in the preceding sentence would operate as an
effective limitation satisfying Treasury Regulation 1.162-27(e)(4) (including a
Performance Award under Section 8 not related to an Award specified in Section
6), an Eligible Person may not be granted Awards authorizing payment during any
calendar year of an amount that exceeds the Participant's Annual Limit, which
for this purpose shall equal $3.5 million plus the amount of the Participant's
unused cash Annual Limit as of the close of the previous year (this limitation
is separate and not affected by the number of Awards granted during such
calendar year subject to the limitation in the preceding sentence). For this
purpose, a Participant's Annual Limit is used if it may be potentially earned or
paid under a Performance Award, regardless of whether it is in fact earned or
paid.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set forth in
this Section 6. In addition, the Committee may impose on any Award or the
exercise thereof, at the date of grant or thereafter (subject to Section 11(e)),
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall determine, including terms requiring forfeiture
of Awards in the event of termination of employment or service by the
Participant and terms permitting a Participant to make elections relating to his
or her Award. The Committee shall retain full power and discretion with respect
to any term or condition of an
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Award that is not mandatory under the Plan. Except in cases in which the
Committee is authorized to require other forms of consideration under the Plan,
or to the extent other forms of consideration must by paid to satisfy the
requirements of the Delaware General Corporation Law, no consideration other
than services may be required for the grant (but not the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to Participants on
the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock purchasable
under an Option (including both ISOs and non-qualified Options) shall be
determined by the Committee, provided that such exercise price shall be not
less than the Fair Market Value of a share of Stock on the date of grant of
such Option.
(ii) Option Term; Time and Method of Exercise. The Committee shall
determine the term of each Option, provided that in no event shall the term
exceed a period of ten years from the date of grant. The Committee shall
determine the time or times at which or the circumstances under which an
Option may be exercised in whole or in part (including based on achievement
of performance goals and/or future service requirements), the methods by
which such exercise price may be paid or deemed to be paid, the form of
such payment, including, without limitation, cash, Stock, other Awards or
awards granted under other plans of the Company or any subsidiary, or other
property (including notes or other contractual obligations of Participants
to make payment on a deferred basis, such as through "cashless exercise"
arrangements, to the extent permitted by applicable law), and the methods
by or forms in which Stock will be delivered or deemed to be delivered to
Participants.
(iii) ISOs. The terms of any ISO granted under the Plan shall comply in
all respects with the provisions of Code Section 422, including but not
limited to the requirement that no ISO shall be granted more than ten years
after the Effective Date. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to ISOs (including any SAR in
tandem therewith) shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be exercised, so as to
disqualify either the Plan or any ISO under Code Section 422, unless the
Participant has first requested the change that will result in such
disqualification.
(c) Stock Appreciation Rights. The Committee is authorized to grant SAR's to
Participants on the following terms and conditions:
(i) Right to Payment. An SAR shall confer on the Participant to whom it is
granted a right to receive, upon exercise thereof, the excess of (A) the
Fair Market Value of one share of Stock on the date of exercise over (B)
the grant price of the SAR as determined by the Committee.
(ii) Other Terms. The Committee shall determine at the date of grant or
thereafter, the time or times at which and the circumstances under which a
SAR may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the method of
exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed
to be
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delivered to Participants, whether or not a SAR shall be in tandem or in
combination with any other Award, and any other terms and conditions of any
SAR. Limited SARs that may only be exercised in connection with a Change in
Control or other event as specified by the Committee may be granted on such
terms, not inconsistent with this Section 6(c), as the Committee may
determine. SARs and Limited SARs may be either freestanding or in tandem
with other Awards.
(d) Restricted Stock. The Committee is authorized to grant Restricted Stock to
Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions,
if any, as the Committee may impose, which restrictions may lapse
separately or in combination at such times, under such circumstances
(including based on achievement of performance goals and/ or future service
requirements), in such installments or otherwise, as the Committee may
determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any Award document relating to
the Restricted Stock, a Participant granted Restricted Stock shall have all
of the rights of a stockholder, including the right to vote the Restricted
Stock and the right to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee). During the
restricted period applicable to the Restricted Stock, subject to Section
11(b) below, the Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service during the applicable restriction
period, Restricted Stock that is at that time subject to restrictions shall
be forfeited and reacquired by the Company; provided that the Committee may
provide, by rule or regulation or in any Award document, or may determine
in any individual case, that restrictions or forfeiture conditions relating
to Restricted Stock will lapse in whole or in part, including in the event
of terminations resulting from specified causes.
(iii) Certificates for Stock. Restricted Stock granted under the Plan may
be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of
the Participant, the Committee may require that such certificates bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock, that the Company retain physical
possession of the certificates, and that the Participant deliver a stock
power to the Company, endorsed in blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of an Award of
Restricted Stock, the Committee may require that any cash dividends paid on
a share of Restricted Stock be automatically reinvested in additional
shares of Restricted Stock or applied to the purchase of additional Awards
under the Plan. Unless otherwise determined by the Committee, Stock
distributed in connection with a Stock split or Stock dividend, and other
property
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distributed as a dividend, shall be subject to restrictions and a risk of
forfeiture to the same extent as the Restricted Stock with respect to which
such Stock or other property has been distributed.
(e) Deferred Stock. The Committee is authorized to grant Deferred Stock to
Participants, which are rights to receive Stock, cash, or a combination thereof
at the end of a specified deferral period, subject to the following terms and
conditions:
(i) Award and Restrictions. Issuance of Stock will occur upon expiration
of the deferral period specified for an Award of Deferred Stock by the
Committee (or, if permitted by the Committee, as elected by the
Participant). In addition, Deferred Stock shall be subject to such
restrictions (which may include a risk of forfeiture) as the Committee may
impose, if any, which restrictions may lapse at the expiration of the
deferral period or at earlier specified times (including based on
achievement of performance goals and/or future service requirements),
separately or in combination, in installments or otherwise, and under such
other circumstances as the Committee may determine. Deferred Stock may be
satisfied by delivery of Stock, cash equal to the Fair Market Value of the
specified number of shares of Stock covered by the Deferred Stock, or a
combination thereof, as determined by the Committee at the date of grant or
thereafter.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service during the applicable deferral period
or portion thereof to which forfeiture conditions apply (as provided in the
Award document evidencing the Deferred Stock), all Deferred Stock that is
at that time subject to deferral (other than a deferral at the election of
the Participant) shall be forfeited; provided that the Committee may
provide, by rule or regulation or in any Award document, or may determine
in any individual case, that restrictions or forfeiture conditions relating
to Deferred Stock will lapse in whole or in part, including in the event of
terminations resulting from specified causes.
(iii) Dividend Equivalents. Unless otherwise determined by the Committee
at date of grant, Dividend Equivalents on the specified number of shares of
Stock covered by an Award of Deferred Stock shall be either (A) paid with
respect to such Deferred Stock at the dividend payment date in cash or in
shares of unrestricted Stock having a Fair Market Value equal to the amount
of such dividends, or (B) deferred with respect to such Deferred Stock and
the amount or value thereof automatically deemed reinvested in additional
Deferred Stock, other Awards or other investment vehicles, as the Committee
shall determine; provided, however, that the Committee may permit a
Participant to make elections relating to Dividend Equivalents if and to
the extent that such elections will not result in the Participant being in
constructive receipt of amounts otherwise intended to be subject to
deferral for tax purposes.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized
to grant Stock as a bonus, or to grant Stock or other Awards in lieu of
obligations of the Company or a subsidiary to pay cash or deliver other property
under the Plan or under other plans or compensatory arrangements. Stock or
Awards granted hereunder shall be subject to
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such other terms as shall be determined by the Committee. In the case of any
grant of Stock to an officer or non-employee director of the Company in lieu of
salary, fees or other cash compensation, the number of shares granted in place
of such compensation shall be reasonable, as determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Stock,
other Awards, or other property equal in value to dividends paid with respect to
a specified number of shares of Stock, or other periodic payments. Dividend
Equivalents may be awarded on a free-standing basis or in connection with
another Award. The Committee may provide that Dividend Equivalents shall be paid
or distributed when accrued or shall be deemed to have been reinvested in
additional Stock, Awards, or other investment vehicles, and subject to such
restrictions on transferability and risks of forfeiture, as the Committee may
specify.
(h) Other Stock-Based and Cash Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock or factors that may influence
the value of Stock, as deemed by the Committee to be consistent with the
purposes of the Plan, including, without limitation, convertible or exchangeable
debt securities, other rights convertible or exchangeable into Stock, purchase
rights for Stock, Awards with value and payment contingent upon performance of
the Company or any other factors designated by the Committee, and Awards valued
by reference to the book value of Stock or the value of securities of or the
performance of specified subsidiaries. The Committee shall determine the terms
and conditions of such Awards. Stock delivered pursuant to an Award in the
nature of a purchase right granted under this Section 6(h) shall be purchased
for such consideration, paid for at such times, by such methods, and in such
forms, including, without limitation, cash, Stock, other Awards, or other
property, as the Committee shall determine. Cash awards, as an element of or
supplement to any other Award under the Plan, may also be granted pursuant to
this Section 6(h).
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution or exchange for, any other
Award or any award granted under another plan of the Company, any subsidiary, or
any business entity to be acquired by the Company or a subsidiary, or any other
right of a Participant to receive payment from the Company or any subsidiary.
Awards granted in addition to or in tandem with other Awards or awards may be
granted either as of the same time as or a different time from the grant of such
other Awards or awards. The in-the-money value of any surrendered Award or award
may be applied to reduce the exercise price of any Option, grant price of any
SAR, or purchase price of any other Award conferring a right to purchase Stock,
at the time of grant or exercise.
(b) Term of Awards. The term of each Award shall be for such period as may be
determined by the Committee, subject to the express limitations set forth in
Section 6(b)(ii) and elsewhere in the Plan.
(c) Form and Timing of Payment under Awards; Deferrals. Subject to the terms of
the Plan and
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any applicable Award document, payments to be made by the Company or a
subsidiary upon the exercise of an Option or other Award or settlement of an
Award may be made in such forms as the Committee shall determine, including,
without limitation, cash, Stock, other Awards or other property, and may be made
in a single payment or transfer, in installments, or on a deferred basis. The
settlement of any Award may be accelerated, and cash paid in lieu of Stock in
connection with such settlement, in the discretion of the Committee or upon
occurrence of one or more specified events (in addition to a Change in Control).
Installment or deferred payments may be required by the Committee (subject to
Section 11(e) of the Plan, including the consent provisions thereof in the case
of any deferral of an outstanding Award not provided for in the original Award
document) or permitted at the election of the Participant on terms and
conditions established by the Committee. Payments may include, without
limitation, provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents or other amounts in respect of installment or deferred payments
denominated in Stock.
(d) Exemptions from Section 16(b) Liability. With respect to a Participant who
is then subject to the reporting requirements of Section 16(a) of the Exchange
Act in respect of the Company, the Committee shall implement transactions under
the Plan and administer the Plan in a manner that will ensure that each
transaction by such a Participant is exempt from liability under Rule 16b-3,
except that this provision shall not limit sales by such a Participant, and such
a Participant may engage in other non-exempt transactions under the Plan. The
Committee may authorize the Company to repurchase any Award or shares of Stock
resulting from any Award in order to prevent a Participant who is subject to
Section 16 of the Exchange Act from incurring liability under Section 16(b).
Unless otherwise specified by the Participant, equity securities or derivative
securities acquired under the Plan which are disposed of by a Participant shall
be deemed to be disposed of in the order acquired by the Participant.
(e) Loan Provisions. With the consent of the Committee, and subject at all
times to, and only to the extent, if any, permitted under and in accordance
with, laws and regulations and other binding obligations or provisions
applicable to the Company, the Company may make, guarantee, or arrange for a
loan or loans to a Participant with respect to the exercise of any Option or
other payment in connection with any Award, including the payment by a
Participant of any or all federal, state, or local income or other taxes due in
connection with any Award. Subject to such limitations, the Committee shall have
full authority to decide whether to make a loan or loans hereunder and to
determine the amount, terms, and provisions of any such loan or loans, including
the interest rate to be charged in respect of any such loan or loans, whether
the loan or loans are to be with or without recourse against the borrower, the
terms on which the loan is to be repaid and conditions, if any, under which the
loan or loans may be forgiven.
8. Performance and Annual Incentive Awards.
(a) Performance Conditions. The right of a Participant to exercise or receive a
grant or settlement of any Award, and the timing thereof, may be subject to such
performance conditions as may be specified by the Committee. The Committee may
use such business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions, and may exercise its
discretion to
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reduce or increase the amounts payable under any Award subject to performance
conditions, except as limited under Sections 8(b) and 8(c) in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m).
(b) Performance Awards Granted to Designated Covered Employees. If the
Committee determines that a Performance Award to be granted to an Eligible
Person who is designated by the Committee as likely to be a Covered Employee
should qualify as "performance-based compensation" for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Performance Award shall be
contingent upon achievement of preestablished performance goals and other terms
set forth in this Section 8(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this Section 8(b).
Performance goals shall be objective and shall otherwise meet the
requirements of Code Section 162(m) and regulations thereunder (including
Regulation 1.162-27 and successor regulations thereto), including the
requirement that the level or levels of performance targeted by the
Committee result in the achievement of performance goals being
"substantially uncertain." The Committee may determine that such
Performance Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant, exercise and/or
settlement of such Performance Awards. Performance goals may differ for
Performance Awards granted to any one Participant or to different
Participants.
(ii) Business Criteria. One or more of the following business criteria for
the Company, on a consolidated basis, and/or for specified subsidiaries or
business units of the Company (except with respect to the total stockholder
return and similar measures applicable to the Company as a whole), shall be
used by the Committee in establishing performance goals for such
Performance Awards: (1) earnings per share; (2) revenues; (3) cash flow,
free cash flow, or cash flow return on investment; (4) interest expense
after taxes; (5) return on net assets, return on assets, return on
investment, return on investment capital, or return on equity; (6) value
created; (7) operating margin; (8) net income before or after taxes, pretax
earnings, pretax earnings before interest, depreciation and amortization,
pretax operating earnings after interest expense and before incentives,
service fees, and extraordinary or special items, operating earnings, or
net cash provided by operations; (9) stock price or total stockholder
return; (10) sales above a specified threshold or in relation to prior
periods; and (11) strategic business criteria, consisting of one or more
objectives based on meeting specified market penetration, geographic
business expansion goals, cost targets, management of employment practices
and employee benefits, supervision of litigation and information
technology, and goals relating to acquisitions or divestitures. The
targeted level or levels of performance with respect to such business
criteria may be established at such levels and in such
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terms as the Committee may determine, in its discretion, including in
absolute terms, as a goal relative to performance in prior periods, or as a
goal compared to the performance of one or more comparable companies or an
index covering multiple companies.
(iii) Performance Period; Timing for Establishing Performance Goals.
Achievement of performance goals in respect of such Performance Awards
shall be measured over a performance period of up to ten years, as
specified by the Committee. Performance goals shall be established not
later than 90 days after the beginning of any performance period applicable
to such Performance Awards, or at such other date as may be required or
permitted for "performance-based compensation" under Code Section 162(m).
(iv) Performance Award Pool. The Committee may establish a Performance
Award pool, which shall be an unfunded pool, for purposes of measuring
performance of the Company in connection with Performance Awards. The
amount of such Performance Award pool shall be based upon the achievement
of a performance goal or goals based on one or more of the business
criteria set forth in Section 8(b)(ii) during the given performance period,
as specified by the Committee in accordance with Section 8(b)(iii) . The
Committee may specify the amount of the Performance Award pool as a
percentage of any of such business criteria, a percentage thereof in excess
of a threshold amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
(v) Settlement of Performance Awards; Other Terms. Settlement of such
Performance Awards shall be in cash, Stock, other Awards or other property,
in the discretion of the Committee. The Committee may, in its discretion,
reduce the amount of a settlement otherwise to be made in connection with
such Performance Awards, but may not exercise discretion to increase any
such amount payable to a Covered Employee in respect of a Performance Award
subject to this Section 8(b). The Committee shall specify the circumstances
in which such Performance Awards shall be paid or forfeited in the event of
termination of employment by the Participant or other event (including a
Change in Control) prior to the end of a performance period or settlement
of Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered Employees. The
Committee may grant an Annual Incentive Award to an Eligible Person who is
designated by the Committee as likely to be a Covered Employee. Such Annual
Incentive Award will be intended to qualify as "performance-based compensation"
for purposes of Code Section 162(m), and therefore its grant, exercise and/or
settlement shall be contingent upon achievement of preestablished performance
goals and other terms set forth in this Section 8(c).
(i) Grant of Annual Incentive Awards. Not later than the end of the 90th
day of each fiscal year, or at such other date as may be required or
permitted in the case of Awards intended to be "performance-based
compensation" under Code Section 162(m), the Committee shall determine the
Covered Employees who will potentially receive Annual Incentive Awards, and
the amount(s)
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potentially payable thereunder, for that fiscal year. The amount(s)
potentially payable shall be based upon the achievement of a performance
goal or goals based on one or more of the business criteria set forth in
Section 8(b)(ii) in the given performance year, as specified by the
Committee. The Committee may designate an annual incentive award pool as
the means by which Annual Incentive Awards will be measured, provided that
the portion of such pool potentially payable to the Covered Employee shall
be preestablished. In all cases, the maximum Annual Incentive Award of any
Participant shall be subject to the limitation set forth in Section 5.
(ii) Payout of Annual Incentive Awards. After the end of each fiscal year,
the Committee shall determine the amount, if any, of the Annual Incentive
Award for that fiscal year payable to each Participant. The Committee may,
in its discretion, determine that the amount payable to any Participant as
a final Annual Incentive Award shall be reduced from the amount of his or
her potential Annual Incentive Award, including a determination to make no
final Award whatsoever, but may not exercise discretion to increase any
such amount. The Committee shall specify the circumstances in which an
Annual Incentive Award shall be paid or forfeited in the event of
termination of employment by the Participant or other event (including a
Change in Control) prior to the end of a fiscal year or settlement of such
Annual Incentive Award.
(d) Written Determinations. Determinations by the Committee as to the
establishment of performance goals, the amount potentially payable in respect of
Performance Awards and Annual Incentive Awards, the achievement of performance
goals relating to Performance Awards and Annual Incentive Awards, and the amount
of any final Performance Award and Annual Incentive Award shall be recorded in
writing, except in the case of Performance Awards not intended to qualify under
Section 162(m). Specifically, the Committee shall certify in writing, in a
manner conforming to applicable regulations under Section 162(m), prior to
settlement of each such Award granted to a Covered Employee, that the
performance objective relating to operating profits and other material terms of
the Award upon which settlement of the Award was conditioned have been
satisfied. The Committee may not delegate any responsibility relating to such
Performance Awards or Annual Incentive Awards, and the Board shall not perform
such functions at any time that the Committee is composed solely of members who
qualify as "outside directors" under the Section 162(m) regulations.
9. Change in Control.
(a) Effect of "Change in Control." In the event of a "Change in Control," the
following provisions shall apply unless otherwise provided in the Award
document:
(i) Any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested as of the
time of the Change in Control and shall remain exercisable and vested for
the balance of the stated term of such Award without regard to any
termination of employment or service by the Participant, subject only to
applicable restrictions set forth in Section 11(a);
(ii) The restrictions, deferral of settlement, and forfeiture conditions
applicable to any other Award granted under the Plan shall lapse and such
Awards shall be deemed
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<PAGE> 48
fully vested as of the time of the Change in Control, except to the extent
of any waiver by the Participant and subject to applicable restrictions set
forth in Section 11(a); and
(iii) With respect to any outstanding Award subject to achievement of
performance goals and conditions under the Plan, such performance goals and
other conditions will be deemed to be met if and to the extent so provided
by the Committee in the Award document relating to such Award or other
agreement with the Participant.
(b) Definition of "Change in Control." A "Change in Control" shall be deemed to
have occurred if:
(i) a change is proposed by the stockholders of the Company as to the
number of members, or incumbent membership of the Company's Board of
Directors such that the incumbent members of said Board of Directors
immediately prior to such change would no longer constitute at least a
majority of the Board of Directors after such change, and such proposal is
enacted; or the Board of Directors as constituted immediately prior to any
action by the Company's stockholders with respect to such proposal
determines that such proposal, if enacted, would constitute a change in
control of the Company, and such proposal is enacted;
(ii) any determination is made by the Board of Directors of the Company
that there has been a change in the control of the Company because a person
(as such term is used in Section 13(d) of the Exchange Act), together with
such person's affiliates (as such term is defined in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act), has become, at any
date after the effective date of the Plan, and is not on the date hereof,
the beneficial owner (as such term is defined in Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), directly or indirectly of
10% or more of the voting power of the Company's then outstanding
securities;
(iii) any person (other than (x) any employee stock ownership trust or
similar entity created by the Company for the benefit of its employees, (y)
an underwriter participating in a public offering of stock of the Company
or (z) an entity owned by the Company's stockholders in substantially the
same proportions as their ownership of stock of the Company prior to an
acquisition of stock of the Company by such entity in connection with a
reorganization), together with its affiliates, has become, at any date
after the Effective Date, and is not on the date hereof, the beneficial
owner, directly or indirectly, of 33% or more of the voting power of the
Company's then outstanding securities entitled generally to vote for the
election of the Company's directors; or
(iv) the approval by the stockholders of the Company of (i) the sale of all
or substantially all the assets of the Company, (ii) a liquidation of the
Company or (iii) the merger or consolidation of the Company with any other
Company, unless the incumbent members of the Board of Directors of the
Company as constituted immediately prior to such merger or consolidation
shall constitute at least a majority of the directors of the surviving
parent (as such term is defined in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act) of such Company.
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Any determination of the occurrence of any Change in Control made in good faith
by the Board of Directors of the Company, on the basis of information available
at the time to it, shall be conclusive and binding for all purposes under the
Plan.
10. Additional Award Forfeiture Provisions
(a) Forfeiture of Options and Other Awards and Gains Realized Upon Prior Option
Exercises. Unless otherwise determined by the Committee, each Award granted
hereunder shall be subject to the following additional forfeiture conditions, to
which each Participant who accepts an Award hereunder shall agree. If any of the
events specified in Section 10(b)(i), (ii), or (iii) occurs (a "Forfeiture
Event"), all of the following forfeitures will result:
(i) The unexercised portion of the Option, whether or not vested, and any
other Award not then settled (except for an Award that has not been settled
solely due to an elective deferral by the Participant) will be immediately
forfeited and cancelled upon the occurrence of the Forfeiture Event; and
(ii) The Participant will be obligated to repay to the Company, in cash,
within five business days after demand is made therefor by the Company, the
total amount of Option Gain (as defined herein) realized by Participant
upon each exercise of an Option that occurred on or after (A) the date that
is six months prior to the occurrence of the Forfeiture Event, if the
Forfeiture Event occurred while Participant was employed by the Company or
a subsidiary, or (B) the date that is six months prior to the date
Participant's employment by the Company or a subsidiary terminated, if the
Forfeiture Event occurred after Participant ceased to be so employed. For
purposes of this Section, the term "Option Gain" in respect of a given
exercise shall mean the product of (X) the Fair Market Value per share of
Stock at the date of such exercise (without regard to any subsequent change
in the market price of shares) minus the exercise price times (Y) the
number of shares as to which the Option was exercised at that date.
(b) Events Triggering Forfeiture. The forfeitures specified in Section 10(a)
will be triggered upon the occurrence of any one of the following Forfeiture
Events at any time during Participant's employment by the Company or a
subsidiary or during the one-year period following termination of such
employment (but not later than 18 months after the Award terminates or, in the
case of an Option, is fully exercised):
(i) Participant, acting alone or with others, directly or indirectly, prior
to a Change in Control, (A) engages, either as employee, employer,
consultant, advisor, or director, or as an owner, investor, partner, or
stockholder unless the Participant's interest is insubstantial, in any
business in an area or region in which the Company conducts business at the
date the event occurs, which is directly in competition with a business
then conducted by the Company or a subsidiary; (B) induces any customer or
supplier of the Company or a subsidiary with whom Participant has had
contacts or relationships, directly or indirectly, during and within the
scope of his employment with the Company or any subsidiary, to curtail,
cancel, not renew, or not continue his or her or its business with the
Company or any subsidiary; or (C) induces, or attempts to influence, any
employee of or service provider to the Company or a subsidiary to terminate
such employment or
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service. The Committee shall, in its discretion, determine which lines of
business the Company conducts on any particular date and which third
parties may reasonably be deemed to be in competition with the Company. For
purposes of this Section 10(b)(i), a Participant's interest as a
stockholder is insubstantial if it represents beneficial ownership of less
than five percent of the outstanding class of stock, and a Participant's
interest as an owner, investor, or partner is insubstantial if it
represents ownership, as determined by the Committee it its discretion, of
less than five percent of the outstanding equity of the entity;
(ii) Participant discloses, uses, sells, or otherwise transfers, except in
the course of employment with or other service to the Company or any
subsidiary, any proprietary information of the Company or any subsidiary so
long as such information has not otherwise been disclosed to the public or
is not otherwise in the public domain, except as required by law or
pursuant to legal process, or Participant makes statements or
representations, or otherwise communicates, directly or indirectly, in
writing, orally, or otherwise, or takes any other action which may,
directly or indirectly, disparage or be damaging to the Company or any of
its subsidiaries or affiliates or their respective officers, directors,
employees, advisors, businesses or reputations, except as required by law
or pursuant to legal process; or
(iii) Participant fails to cooperate with the Company or any subsidiary by
making himself or herself available to testify on behalf of the Company or
such subsidiary in any action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, or otherwise fails to assist
the Company or any subsidiary in any such action, suit, or proceeding by
providing information and meeting and consulting with members of management
of, other representatives of, or counsel to, the Company or such
subsidiary, as reasonably requested.
(c) Agreement Does Not Prohibit Competition or Other Participant
Activities. Although the conditions set forth in this Section 10 are deemed to
be incorporated into an Award, a Participant is not thereby prohibited from
engaging in any activity, including but not limited to competition with the
Company and its subsidiaries. Rather, the non-occurrence of the Forfeiture
Events set forth in Section 10(b) is a condition to Participant's right to
realize and retain value from his or her compensatory Options and Awards, and
the consequence under the Plan if Participant engages in an activity giving rise
to any such Forfeiture Event, which Forfeiture Events and activities are hereby
acknowledged to be harmful to the Company, are the forfeitures specified herein.
The Company and Participant shall not be precluded by this provision or
otherwise from entering into other agreements concerning the subject matter of
Section 10(a) and 10(b).
(d) Right of Setoff. Participant agrees that the Company or any subsidiary may,
to the extent permitted by applicable law, deduct from and set off against any
amounts the Company or a subsidiary may owe to Participant from time to time,
including amounts owed as wages or other compensation, fringe benefits, or other
amounts owed to Participant, such amounts as may be owed by Participant to the
Company under Section 10(a), although Participant shall remain liable for any
part of Participant's payment
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<PAGE> 51
obligation under Section 10(a) not satisfied through such deduction and setoff.
(e) Committee Discretion. The Committee may, in its discretion, waive in whole
or in part the Company's right to forfeiture under this Section, but no such
waiver shall be effective unless evidenced by a writing signed by a duly
authorized officer of the Company. In addition, the Committee may impose
additional conditions on Awards, by inclusion of appropriate provisions in the
document evidencing any such Award.
11. General Provisions.
(a) Compliance with Legal and Other Requirements. The Company may, to the extent
deemed necessary or advisable by the Committee, postpone the issuance or
delivery of Stock or payment of other benefits under any Award until completion
of such registration or qualification of such Stock or other required action
under any federal or state law, rule or regulation, listing or other required
action with respect to any stock exchange or automated quotation system upon
which the Stock or other securities of the Company are listed or quoted, or
compliance with any other obligation of the Company, as the Committee may
consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other obligations. The
foregoing notwithstanding, in connection with a Change in Control, the Company
shall take or cause to be taken no action, and shall undertake or permit to
arise no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Stock or payment of benefits under
any Award or the imposition of any other conditions on such issuance, delivery
or payment, to the extent that such postponement or other condition would
represent a greater burden on a Participant than existed on the 90th day
preceding the Change in Control.
(b) Limits on Transferability; Beneficiaries. No Award or other right or
interest of a Participant under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party (other than the Company or a subsidiary), or assigned
or transferred by such Participant otherwise than by will or the laws of descent
and distribution or to a Beneficiary upon the death of a Participant, and such
Awards or rights that may be exercisable shall be exercised during the lifetime
of the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than ISOs and SARs in
tandem therewith) may be transferred to one or more transferees during the
lifetime of the Participant, and may be exercised by such transferees in
accordance with the terms of such Award, but only if and to the extent such
transfers are permitted by the Committee pursuant to the express terms of an
Award document (subject to any terms and conditions which the Committee may
impose thereon). A Beneficiary, transferee, or other person claiming any rights
under the Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award document applicable to such Participant,
except as otherwise determined by the Committee, and to any additional terms and
conditions deemed necessary or appropriate by the Committee.
(c) Adjustments. In the event that any dividend or other distribution (whether
in the form of
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cash, Stock, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or
event affects the Stock such that an adjustment is determined by the Committee
to be appropriate under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and kind of shares of
Stock which may be delivered in connection with Awards granted thereafter, (ii)
the number and kind of shares of Stock by which annual per-person Award
limitations are measured under Section 5, (iii) the number and kind of shares of
Stock subject to or deliverable in respect of outstanding Awards and (iv) the
exercise price, grant price or purchase price relating to any Award or, if
deemed appropriate, upon a Change in Control, the Committee may make provision
for a cash payment to the holder of an outstanding Option in consideration for
the cancellation of such Option in an amount equal to the excess, if any, of the
amount of cash and fair market value of property that is the price per share
paid in any transaction triggering the Change in Control over the per share
exercise price of such Option, multiplied by the number of shares of Stock
covered by such Option. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and the criteria included in, Awards
(including Performance Awards and performance goals, and Annual Incentive Awards
and any Annual Incentive Award pool or performance goals relating thereto) in
recognition of unusual or nonrecurring events (including, without limitation,
events described in the preceding sentence, as well as acquisitions and
dispositions of businesses and assets) affecting the Company, any subsidiary or
any business unit, or the financial statements of the Company or any subsidiary,
or in response to changes in applicable laws, regulations, accounting
principles, tax rates and regulations or business conditions or in view of the
Committee's assessment of the business strategy of the Company, any subsidiary
or business unit thereof, performance of comparable organizations, economic and
business conditions, personal performance of a Participant, and any other
circumstances deemed relevant; provided that no such adjustment shall be
authorized or made if and to the extent that such authority or the making of
such adjustment would cause Options, SARs, Performance Awards granted under
Section 8(b) or Annual Incentive Awards granted under Section 8(c) to
Participants designated by the Committee as Covered Employees and intended to
qualify as "performance-based compensation" under Code Section 162(m) and
regulations thereunder to otherwise fail to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.
(d) Taxes. The Company and any subsidiary is authorized to withhold from any
Award granted, any payment relating to an Award under the Plan, including from a
distribution of Stock, or any payroll or other payment to a Participant, amounts
of withholding and other taxes due or potentially payable in connection with any
transaction involving an Award, and to take such other action as the Committee
may deem advisable to enable the Company and Participants to satisfy obligations
for the payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or receive Stock or
other property and to make cash payments in respect thereof in satisfaction of a
Participant's mandatory withholding obligations, either on a mandatory or
elective basis in the
A-18
<PAGE> 53
discretion of the Committee. No authority to withhold is conferred under the
Plan to the extent that, solely due to such authority, an Award would be
accounted for as a "variable" award under APB 25.
(e) Changes to the Plan. The Board may amend, suspend, or terminate the Plan or
the Committee's authority to grant Awards under the Plan without the consent of
stockholders or Participants; provided, however, that, except in the case of
adjustments authorized under Section 11(c), no amendment shall reduce the
exercise price of any outstanding Option, grant price of any outstanding SAR, or
purchase price of any other outstanding Award conferring a right to purchase
Stock to an amount less than the Fair Market Value of a share at the date of
grant of the outstanding award; and provided further, that any amendment to the
Plan shall be subject to the approval of the Company's stockholders not later
than the annual meeting for which the record date is after the date of such
Board action if such stockholder approval is required by any federal or state
law or regulation or the rules of any stock exchange or automated quotation
system on which the Stock may then be listed or quoted, and the Board may
otherwise, in its discretion, determine to submit other amendments to the Plan
to stockholders for approval; and provided further that, without the consent of
an affected Participant, no such Board action may materially and adversely
affect the rights of such Participant under any outstanding Award. Anything in
the Plan to the contrary notwithstanding, if any right under this Plan would
cause a transaction to be ineligible for pooling of interest accounting that
would, but for the right hereunder, be eligible for such accounting treatment,
the Committee may modify or adjust the right so that pooling of interest
accounting shall be available, including the substitution of Stock having a Fair
Market Value equal to the cash otherwise payable hereunder for the right which
caused the transaction to be ineligible for pooling of interest accounting.
(f) Limitation on Rights Conferred under Plan. Neither the Plan nor any action
taken hereunder shall be construed as (i) giving any Eligible Person or
Participant the right to continue as an Eligible Person or Participant or in the
employ or service of the Company or a subsidiary, (ii) interfering in any way
with the right of the Company or a subsidiary to terminate any Eligible Person's
or Participant's employment or service at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the Plan or to be
treated uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance with
the terms of an Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or obligation to deliver
Stock pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may authorize the creation
of trusts and deposit therein cash, Stock, other Awards or other property, or
make other arrangements to meet the Company's obligations under the Plan. Such
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan unless the Committee otherwise determines with the consent of each
affected Participant.
A-19
<PAGE> 54
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board
nor its submission to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board or a committee
thereof to adopt such other incentive arrangements as it may deem desirable
including incentive arrangements and awards which do not qualify under Code
Section 162(m), including the granting of awards otherwise than under the Plan,
and such arrangements may be either applicable generally or only in specific
cases.
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise
determined by the Committee, in the event of a forfeiture of an Award with
respect to which a Participant paid cash consideration, the Participant shall be
repaid the amount of such cash consideration. No fractional shares of Stock
shall be issued or delivered pursuant to the Plan or any Award. The Committee
shall determine whether cash, other Awards or other property shall be issued or
paid in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(j) Compliance with Code Section 162(m). It is the intent of the Company that
Options and SARs granted to Covered Employees and other Awards designated as
Awards to Covered Employees subject to Section 8 shall constitute qualified
"performance-based compensation" within the meaning of Code Section 162(m) and
regulations thereunder (including Proposed Regulation 1.162-27). Accordingly,
the terms of Sections 8(b), (c), and (d), including the definitions of Covered
Employee and other terms used therein, shall be interpreted in a manner
consistent with Code Section 162(m) and regulations thereunder. The foregoing
notwithstanding, because the Committee cannot determine with certainty whether a
given Participant will be a Covered Employee with respect to a fiscal year that
has not yet been completed, the term Covered Employee as used herein shall mean
only a person designated by the Committee, at the time of grant of Performance
Awards or an Annual Incentive Award, as likely to be a Covered Employee with
respect to a specified fiscal year. If any provision of the Plan or any Award
document relating to a Performance Award or Annual Incentive Award that is
designated as intended to comply with Code Section 162(m) does not comply or is
inconsistent with the requirements of Code Section 162(m) or regulations
thereunder, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements, and no provision shall be deemed to
confer upon the Committee or any other person discretion to increase the amount
of compensation otherwise payable in connection with any such Award upon
attainment of the applicable performance objectives.
(k) Governing Law. The validity, construction and effect of the Plan, any rules
and regulations under the Plan, and any Award document shall be determined in
accordance with the Delaware General Corporation Law, the laws of the state of
New York applicable to contracts made and to be performed in the State of New
York, without regard to principles of conflicts of laws, and applicable federal
law.
(l) Awards under Preexisting Plans. Upon approval of the Plan by stockholders
of the Company as required under Section 11(n), no further awards shall be
granted under the Preexisting Plans.
(m) Awards to Participants Outside the United States. The Committee may modify
the terms of any Award under the Plan made to or held by
A-20
<PAGE> 55
a Participant who is then resident or primarily employed outside of the United
States in any manner deemed by the Committee to be necessary or appropriate in
order that such Award shall conform to laws, regulations, and customs of the
country in which the Participant is then resident or primarily employed, or so
that the value and other benefits of the Award to the Participant, as affected
by foreign tax laws and other restrictions applicable as a result of the
Participant's residence or employment abroad, shall be comparable to the value
of such an Award to a Participant who is resident or primarily employed in the
United States. An Award may be modified under this Section 11m in a manner that
is inconsistent with the express terms of the Plan, so long as such
modifications will not contravene any applicable law or regulation or result in
actual liability under Section 16(b) for the Participant whose Award is
modified.
(n) Plan Effective Date and Stockholder Approval. The Plan shall become
effective if, and at such time as, the stockholders of the Company have approved
it by the affirmative votes of the holders of a majority of the voting
securities of the Company present, or represented, and entitled to vote on the
subject matter at a duly held meeting of stockholders. Unless earlier terminated
by action of the Board of Directors, the Plan will remain in effect until such
time as no Stock remains available for delivery under the Plan and the Company
has no further rights or obligations under the Plan with respect to outstanding
Awards under the Plan.
A-21
<PAGE> 56
BOWNE is a registered trademark, and
EMPOWERING YOUR INFORMATION
is a service mark, of the Bowne companies.
<PAGE> 57
[BOWNE LOGO]
BOWNE & CO., INC.
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, MAY 27, 1999
YOUR VOTING CARD IS ATTACHED BELOW.
YOU MAY VOTE BY E-MAIL, BY TELEPHONE OR BY CONVENTIONAL MAIL.
PLEASE READ THE OTHER SIDE OF THIS CARD CAREFULLY FOR INSTRUCTIONS.
HOW EVER YOU DECIDE TO VOTE, YOUR REPRESENTATION
AT THE ANNUAL MEETING OF STOCKHOLDERS IS IMPORTANT TO BOWNE.
- DETACH HERE IF YOU ARE VOTING BY MAIL -
- --------------------------------------------------------------------------------
DETACH HERE
Please detach this portion of the card
before returning it in the enclosed envelope
PROXY
[BOWNE LOGO]
YOUR PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Revoking any prior appointment, the undersigned appoints Robert M.
Johnson and Douglas F. Bauer, and each of them, attorneys-in-fact and agents
with power of substitution, to vote as Proxy for the undersigned at the Annual
Meeting of Stockholders of Bowne & Co., Inc., to be held at the St. Regis Hotel,
2 East 55th Street, New York, New York, on Thursday, May 27, 1999, beginning at
10:00 A.M. local time, and at any adjournment thereof, with respect to the
number of shares the undersigned would be entitled to vote if personally
present.
THE SHARES COVERED BY THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED
(A) FOR THE ELECTION OF DIRECTORS; AND (B) TO APPROVE THE 1999 INCENTIVE
COMPENSATION PLAN; AND IN ACCORDANCE WITH THE DISCRETION OF THE NAMED
ATTORNEYS-IN-FACT AND AGENTS ON ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE
THE MEETING, UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED ON THE REVERSE
SIDE.
The undersigned acknowledges receipt of a copy of the Proxy Statement
which was mailed to all stockholders of record beginning on or about April 7,
1999, relating to the Annual Meeting.
BOWNE & CO., INC.
P.O. Box 11066
New York, N.Y. 10203-0066
(Continued, and to be dated and signed, on the other side)
<PAGE> 58
[BOWNE LOGO]
TO VOTE BY E-MAIL:
- - Visit our electronic voting website on the Internet:
http://proxy.shareholder.com/BNE
- - Enter your "control number" in the on-screen box, then click on
"Submit." Your control number is printed below.
- - Follow the on-screen instructions.
- - When you finish, review your vote. If the on-screen confirmation is
correct, click again on "Submit" to register your vote.
TO VOTE BY TELEPHONE:
- - Call our toll-free number from any Touch-Tone telephone in the United
States or Canada: 1-800-575-8306
- - When prompted, enter your "control number," followed by the # sign.
Your control number is printed below.
- - Follow the recorded instructions.
- - When you finish, you will hear a recorded recap. If it is correct,
press "2" to register your vote.
TO VOTE BY MAIL:
- - Mark, sign and date the voting card which is attached below.
- - Return it in the postage-paid envelope we have provided. Make sure the
pre-printed address shows through the envelope window.
If you submit your vote by e-mail or by
telephone, you do not need to mail back your
voting card.
CONTROL NUMBER
- DETACH HERE IF YOU ARE VOTING BY MAIL -
- --------------------------------------------------------------------------------
DETACH HERE
Please detach this portion of the card
before returning it in the enclosed envelope
A. TO ELECT DIRECTORS: three in Class III (01 - R.M. JOHNSON; 02 - H.M.
SCHWARZ; 03 - W.M. SMITH) and one in Class I (04 - H. WALLAESA).
In favor of all Against all
nominees [ ] nominees [ ] Exceptions* [ ]
*To withhold authority to vote for any nominee, mark the box
next to "Exceptions" and strike out that nominee's name.
B. TO APPROVE THE 1999 INCENTIVE COMPENSATION PLAN.
In favor [ ] Against [ ] Abstain [ ]
The proxies are authorized to vote in
accordance with their discretion on any
other business that may properly come before
the meeting.
IF YOU HAVE NOTED AN ADDRESS CHANGE OR
COMMENTS ON EITHER SIDE OF THIS CARD, PLEASE
MARK HERE: [ ]
(Signatures should conform exactly to the
name imprinted on this card. Executors,
administrators, guardians, trustees,
attorneys-in-fact and officers signing for
corporations should state full title or
signatory capacity.)
Dated ________________________________, 1999
Signed _____________________________________
____________________________________________
SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED ENVELOPE. VOTES MUST
BE INDICATED (X) IN BLACK OR BLUE INK: [X]
<PAGE> 59
[BOWNE LOGO]
BOWNE & CO., INC.
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, MAY 27, 1999
YOUR VOTING CARD IS ATTACHED BELOW.
PLEASE USE IT TO TELL THE TRUSTEES OF THE EMPLOYEES'
STOCK PURCHASE PLAN HOW TO VOTE THE SHARES IN YOUR ACCOUNT.
YOU MAY REPLY BY E-MAIL, BY TELEPHONE OR BY CONVENTIONAL MAIL.
PLEASE READ THE OTHER SIDE OF THIS CARD CAREFULLY FOR INSTRUCTIONS.
- DETACH HERE IF YOU ARE REPLYING BY MAIL -
- --------------------------------------------------------------------------------
DETACH HERE
Please detach this portion of the card
before returning it in the enclosed envelope
[BOWNE LOGO]
VOTING INSTRUCTIONS
YOUR VOTING INSTRUCTIONS TO THE TRUSTEES ARE SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS.
Revoking any prior appointment, the undersigned participant in the
Bowne & Co., Inc. Employees' Stock Purchase Plan, acting as beneficial owner of
certain shares under that Plan, instructs the Trustees of the Plan and their
proxies to vote at the Annual Meeting of Stockholders of Bowne & Co., Inc., to
be held at the St. Regis Hotel, 2 East 55th Street, New York, New York, on
Thursday, May 27, 1999, beginning at 10:00 A.M. local time, and at any
adjournment thereof, with respect to the number of shares held by the Trustees
for the account of the undersigned as of March 29, 1999.
THE SHARES COVERED BY THESE INSTRUCTIONS, WHEN PROPERLY EXECUTED, WILL
BE VOTED (A) FOR THE ELECTION OF DIRECTORS; AND (B) TO APPROVE THE 1999
INCENTIVE COMPENSATION PLAN; AND IN ACCORDANCE WITH THE DISCRETION OF THE NAMED
ATTORNEYS-IN-FACT AND AGENTS ON ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE
THE MEETING, UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED ON THE REVERSE
SIDE. ANY SHARES UNDER THE PLAN FOR WHICH NO VOTING INSTRUCTIONS ARE RECEIVED
WILL BE VOTED BY THE TRUSTEES IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE
BOARD OF DIRECTORS.
The undersigned acknowledges receipt of a copy of the Proxy Statement
which was mailed to all stockholders of record beginning on or about April 7,
1999, relating to the Annual Meeting.
BOWNE & CO., INC.
P.O. Box 11066
New York, N.Y. 10203-0066
(Continued, and to be dated and signed, on the other side)
<PAGE> 60
[BOWNE LOGO]
TO VOTE BY E-MAIL:
- - Visit our electronic voting website on the Internet:
http://proxy.shareholder.com/BNE
- - Enter your "control number" in the on-screen box, then click on
"Submit." Your control number is printed below.
- - Follow the on-screen instructions.
- - When you finish, review your vote. If the on-screen confirmation is
correct, click again on "Submit" to register your vote.
TO VOTE BY TELEPHONE:
- - Call our toll-free number from any Touch-Tone telephone in the United
States or Canada: 1-800-575-8306
- - When prompted, enter your "control number," followed by the # sign.
Your control number is printed below.
- - Follow the recorded instructions.
- - When you finish, you will hear a recorded recap. If it is correct,
press "2" to register your vote.
TO VOTE BY MAIL:
- - Mark, sign and date the voting card which is attached below.
- - Return it in the postage-paid envelope we have provided. Make sure the
pre-printed address shows through the envelope window.
If you submit your instructions by e-mail or
by telephone, you do not need to mail back
the attached card.
CONTROL NUMBER
- DETACH HERE IF YOU ARE REPLYING BY MAIL -
- --------------------------------------------------------------------------------
DETACH HERE
Please detach this portion of the card
before returning it in the enclosed envelope
A. TO ELECT DIRECTORS: three in Class III (01 - R.M. JOHNSON; 02 - H.M.
SCHWARZ; 03 - W.M. SMITH) and one in Class I (04 - H. WALLAESA)
In favor of all Against all
nominees [ ] nominees [ ] Exceptions* [ ]
*To withhold authority to vote for any nominee, mark the box
next to "Exceptions" and strike out that nominee's name.
B. TO APPROVE THE 1999 INCENTIVE COMPENSATION PLAN.
In favor [ ] Against [ ] Abstain [ ]
The Trustees are authorized to vote in
accordance with their discretion on any
other business that may properly come before
the meeting.
IF YOU HAVE NOTED AN ADDRESS CHANGE OR
COMMENTS ON EITHER SIDE OF THIS CARD, PLEASE
MARK HERE: [ ]
(Signatures should conform exactly to the name
imprinted on this card.)
Dated ____________________________________________, 1999
Signed _________________________________________________
SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED ENVELOPE. VOTES MUST
BE INDICATED (X) IN BLACK OR BLUE INK: [X]
