SCHEDULE 14A
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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Check the appropriate box:
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by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
CENVEO, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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8310 South Valley Highway, #400
Englewood, Colorado 80112
[CENVEO, INC. LOGO] (303) 790-8023
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
To Our Stockholders:
On April 27, 2005, Cenveo will hold its 2005 annual meeting of
stockholders at its principal executive offices, 8310 South Valley
Highway, #400, Englewood, Colorado. The meeting will begin at 8:30 a.m.
Mountain Time.
Stockholders who owned shares of our common stock at the close of
business on March 4, 2005, may attend and vote at the meeting. We ask
that all stockholders be present at the meeting in person or by proxy so
that we have a quorum. At the meeting, you will be asked to:
1. Elect eight directors for terms expiring at the 2006 annual
meeting of stockholders;
2. Ratify the selection of Ernst & Young, LLP by the Board's audit
committee as our independent auditors for 2005; and
3. Attend to any other business properly presented at the meeting.
We do not know of any other business that will come before the
meeting. In order to vote without attending the meeting, you may sign and
date the enclosed proxy card and return it in the postage prepaid
envelope.
A copy of our 2004 Annual Report is enclosed. This notice and proxy
statement, the proxy card and the 2004 Annual Report are being mailed on
or about March 11, 2005.
By Order of the Board of Directors,
/s/ Mark L. Zoeller
Vice President--General Counsel
and Secretary
Englewood, Colorado
March 11, 2005
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YOUR VOTE IS IMPORTANT TO CENVEO.
Regardless of whether you plan to attend the meeting in person,
we urge you to vote in favor of each of the proposals as soon as
possible.
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PROXY STATEMENT TABLE OF CONTENTS
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QUESTIONS AND ANSWERS...................................................1
PROPOSALS TO BE VOTED ON................................................4
NOMINEES FOR THE BOARD OF DIRECTORS.....................................5
GOVERNANCE, BOARD COMMITTEES AND BOARD COMPENSATION.....................7
OWNERSHIP OF VOTING SECURITIES.........................................11
EXECUTIVE OFFICERS AND KEY EMPLOYEES...................................13
COMPENSATION OF EXECUTIVE OFFICERS.....................................15
REPORT ON EXECUTIVE COMPENSATION.......................................23
REPORT OF THE AUDIT COMMITTEE..........................................26
INDEPENDENT PUBLIC AUDITORS............................................28
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN........................29
OTHER INFORMATION......................................................30
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QUESTIONS AND ANSWERS
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1. Q: WHY AM I RECEIVING THESE MATERIALS?
A: The Board of Directors of Cenveo is providing these proxy
materials to you in connection with Cenveo's annual meeting
of stockholders which will take place on April 27, 2005. As
a stockholder, you are invited to attend the meeting and may
vote on the proposals described in this proxy statement.
2. Q: WHAT INFORMATION IS CONTAINED IN THESE MATERIALS?
A: The information included in this proxy statement relates to
the proposals to be voted on at the meeting, the voting
process, the compensation of directors and executive
officers and certain other required information. Our 2004
Annual Report is also enclosed.
3. Q: WHO MAY VOTE AT THE MEETING?
A: Only stockholders of record at the close of business on
March 4, 2005, may vote at the meeting. As of the record
date, 48,711,979 shares of Cenveo's common stock were issued
and outstanding. Each stockholder is entitled to one vote
for each share of common stock held on the record date.
4. Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A
STOCKHOLDER OF RECORD AND AS A BENEFICIAL OWNER?
A: Most stockholders hold shares through a stockbroker, bank or
other nominee rather than directly in their own name. There
are some distinctions between shares held of record and
shares owned beneficially, which are summarized below:
Stockholder of Record. If your shares are registered
directly in your name with our transfer agent, Computershare
Trust Company, Inc., you are considered to be the
stockholder of record of those shares and these proxy
materials are being sent directly to you by Cenveo. As the
stockholder of record, you have the right to vote by proxy
or to vote in person at the meeting. In that case, we have
enclosed a proxy card for you to use.
Beneficial Owner. If your shares are held in a stock
brokerage account or by a bank or other nominee, you are
considered the beneficial owner of shares held in street
name, and these proxy materials are being forwarded to you
by your broker or bank which is considered to be the
stockholder of record of those shares. As the beneficial
owner, you have the right to direct your broker how to vote
and are also invited to attend the meeting. If you wish to
vote these shares at the meeting, you must contact your bank
or broker for instructions as to how to do so. Your broker
or bank has enclosed a voting instruction card for you to
use in directing the broker or nominee how to vote your
shares for you.
5. Q: WHAT MAY I VOTE ON AT THE MEETING?
A: You may vote to elect eight nominees to serve on Cenveo's
Board of Directors for terms expiring at the next annual
meeting and to ratify the selection of Ernst & Young, LLP as
our independent auditors for 2005.
6. Q: HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE?
A: The Board of Directors recommends that you vote your shares
FOR each of the eight listed director nominees and FOR the
ratification of our independent auditors.
-1 -
7. Q: HOW CAN I VOTE MY SHARES?
A: You may vote either in person at the meeting or by
appointing a proxy. Please refer to the instructions
included on your proxy card to vote by proxy. If you hold
your shares through a bank, broker or other record holder,
then you may vote by the methods your bank or broker makes
available using the instructions the bank or broker has
included with this proxy statement. These methods may
include voting over the internet, by telephone or by using a
traditional proxy card.
8. Q: HOW ARE VOTES COUNTED?
A: In the election of directors, you may vote FOR all of the
director nominees or your vote may be WITHHELD with respect
to one or more nominees. You may vote FOR, AGAINST or
ABSTAIN on the proposal to ratify the auditors.
9. Q: HOW ARE ABSTENTIONS AND BROKER NON-VOTES TREATED?
A: Assuming a quorum is present at the meeting, if a majority
of the shares represented at the meeting vote in favor of a
proposal, then the proposal will be approved (other than in
the election of directors). Abstentions and broker non-votes
will be counted for purposes of determining whether a quorum
is present. Abstentions and broker non-votes will have the
effect of voting against the proposals.
10. Q: CAN I CHANGE MY VOTE?
A: You have the right to revoke your proxy at any time before
the meeting by:
o providing written notice to Cenveo's corporate secretary
that you revoke your proxy,
o voting in person at the meeting, or
o appointing a new proxy before the meeting begins.
Attending the meeting will not by itself revoke a proxy
unless you specifically revoke your proxy in writing.
11. Q: WHO WILL COUNT THE VOTES?
A: ADP/Investor Communication Services will count the votes and
Jeff Dykes, our assistant secretary, will report on the
results at the meeting as the inspector of election.
12. Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: If your shares are registered differently and are held in
more than one account, then you will receive more than one
proxy card. Be sure to vote all of your accounts so that all
of your shares are voted. We encourage you to have all
accounts registered in the same name and address whenever
possible. You can do this by contacting ADP/Investor
Communication Services at 51 Mercedes Way, Edgewood, New
Jersey 11717, phone (631) 274-8024.
13. Q: HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED?
A: We do not know of any business to be considered at the
meeting other than election of eight directors and
ratification of our independent auditors. If any other
business is properly presented at the meeting, your proxy
gives Herbert H. Davis, our senior vice president--corporate
development and chief legal officer, and Mark L. Zoeller,
our vice president--general counsel and secretary, authority
to vote on these matters in their discretion.
14. Q: WHO MAY ATTEND THE MEETING?
A: All stockholders who owned shares of our common stock on
March 4, 2005, may attend the meeting. You may indicate on
the enclosed proxy card if you plan to attend the meeting.
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15. Q: WHERE AND WHEN WILL I BE ABLE TO FIND THE RESULTS OF THE
VOTING?
A: The results of the voting will be announced at the meeting.
We will also publish the final results in our quarterly
report on Form 10-Q for the second quarter of 2005 to be
filed with the Securities and Exchange Commission.
16. Q: IS MY VOTE CONFIDENTIAL?
A: Proxy instructions, ballots and voting tabulations that
identify individual stockholders are handled in a manner
that protects your voting privacy. Your vote will not be
disclosed either within Cenveo or to third parties except:
o as necessary to meet applicable legal requirements,
o to allow for the counting and certification of votes, or
o to help our Board solicit proxies.
17. Q: WHEN ARE STOCKHOLDER PROPOSALS FOR THE 2006 ANNUAL MEETING
DUE?
A: All stockholder proposals to be considered for inclusion in
our proxy statement for the 2006 annual meeting must be
received by our corporate secretary at our principal office
by November 10, 2005.
18. Q: WHO WILL BEAR THE COST OF SOLICITING PROXIES FOR THE MEETING
AND HOW WILL THESE PROXIES BE SOLICITED?
A: We will pay the cost of preparing, assembling, printing,
mailing and distributing these proxy materials, including
the charges and expenses of brokers, banks, nominees and
other fiduciaries who forward proxy materials to their
principals. Proxies may be solicited by mail, in person, by
telephone or by electronic communication by our officers and
employees who will not receive any additional compensation
for these solicitation activities.
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PROPOSALS TO BE VOTED ON
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PROPOSAL 1--ELECTION OF DIRECTORS
Eight directors will be elected this year for terms expiring in 2006. The
nominees for election are:
Thomas E. Costello Jerome W. Pickholz
Paul F. Kocourek Alister W. Reynolds
Martin J. Maloney Susan O. Rheney
David M. Olivier Wellington E. Webb
Each nominee is currently serving as a director of Cenveo. Each person
elected as a director will serve until the 2006 annual meeting of
stockholders or until his or her successor has been elected and
qualified.
The eight nominees receiving the most affirmative votes at the meeting
will be elected as directors assuming a quorum is present. Consequently
any shares not voted at the meeting, whether by abstention or otherwise,
will have no effect on the election of directors. If any of the nominees
should unexpectedly decline or become unable to serve, the proxies we are
soliciting may be voted for a substitute nominee or the Board may reduce
the number of directors to be elected. Stockholders may not cumulate
their votes when electing directors.
Brief biographies of the director nominees are included beginning at page
5. These biographies include their age, business experience and the names
of publicly held and certain other corporations of which they are also
directors. Unless stated otherwise, each director has been engaged in his
or her present occupation for at least the past five years.
The Board recommends a vote FOR election of these eight director nominees.
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PROPOSAL 2--RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The firm of Ernst & Young, LLP has served as our independent auditor
since 1999 and our audit committee has selected the firm as our
independent auditors for 2005. Representatives of Ernst & Young will
attend the annual meeting and will have the opportunity to make a
statement and to answer questions.
Neither Cenveo's governing documents nor law require stockholder
ratification of the appointment of Ernst & Young as our independent
auditor. However, the audit committee recommended, and the Board of
Directors determined, to submit the appointment of Ernst & Young to the
stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the appointment, the audit committee will
reconsider whether or not to retain that firm. Even if appointment is
ratified, the audit committee in its discretion may direct the
appointment of different independent auditors at any time.
The following audit services were performed by Ernst & Young for the year
ended December 31, 2004:
o examination of the financial statements of Cenveo and our
subsidiaries and employee benefit plans,
o examination of the effectiveness of Cenveo's internal controls as
required by Section 404 of the Sarbanes-Oxley Act of 2004,
o services related to our filings with the Securities and Exchange
Commission, and
o consultation on matters related to accounting, internal controls and
financial reporting.
Additional information concerning Ernst & Young's services for Cenveo can
be found on page 26. The affirmative vote of a majority of our shares
represented at the meeting will ratify the selection of Ernst & Young as
our independent auditors.
The Board recommends a vote FOR ratification of Ernst & Young as our
independent auditor for 2005.
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NOMINEES FOR THE BOARD OF DIRECTORS
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Biographies
-----------
o Thomas E. Costello
o Paul F. Kocourek
o Martin J. Maloney
o David M. Olivier
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The following nominees are currently serving as Board members of Cenveo
and are standing for re-election.
THOMAS E. COSTELLO*
Thomas Costello, age 65, became a director in 2003. From 1992 through
retirement in 2002, Mr. Costello served as chief executive officer of
xpedx, a multi-billion dollar distributor of printing and packaging
products, and senior vice president of International Paper Co. xpedx is a
wholly owned division of International Paper. He is also a director of
Cadmus Communications Corporation, a customized content management,
publisher's fulfillment, including printing services, and custom packaging
fulfillment company, Intertape Polymer Group, a manufacturer of tape for
plastic packaging, and Eagle Hospitality Properties, Inc., a real estate
investment trust. He received an MBA from Indiana University. Mr. Costello
is a member of the Compensation and Human Resources committee and chairman
of the Employee Health and Safety committee of the Board of Directors.
PAUL F. KOCOUREK*
Paul Kocourek, age 54, became a director in August 2004. Mr. Kocourek
has been a senior partner with Booz/Allen/Hamilton, a global strategy
and technology consulting firm since 1993. Mr. Kocourek serves as senior
partner for the strategic leadership practice, and previously served as
global managing partner of the Asia Pacific region and global managing
partner of financial services. From 1993 through 1995, Mr. Kocourek
served on the Board of Directors of Booz/Allen/Hamilton. He received an
MBA in finance and accounting from the Wharton School of Business. Mr.
Kocourek is a member of the Audit committee and the Governance and
Nominating committee of the Board of Directors.
MARTIN J. MALONEY*
Martin Maloney, age 60, became a director in 2003. Since 1984 Mr.
Maloney has served as chairman and co-founder of Broadford and Maloney,
Inc., an agency specializing in public relations, advertising and
marketing communications for graphic arts related companies. Since 1989
he has served on the Board of advisors of the New York University Center
for Graphic Arts Management. He is also a director of the Association of
Graphic Communications and serves on the board of governors of Legatus.
Mr. Maloney served as internal auditor and prepared annual reports for
companies for over 20 years. Mr. Maloney is chairman of the Governance
and Nominating committee and a member of the Audit committee of the
Board of Directors.
DAVID M. OLIVIER*
David Olivier, age 61, became a director in 2003. Mr. Olivier was with
Wyeth Corporation, a pharmaceutical company, and its affiliated entities
for over 35 years when he retired in 2002. He was a member of the
executive and finance committees and a corporate senior vice president
at the time of his retirement. He is a director and advisor to Taratec
Corp., a pharmaceutical compliance company, and chairman of Alterna,
LLC, a private equity investment company. He received an MBA from the
University of California at Berkeley. Mr. Olivier is a member of the
Compensation and Human Resources committee and the Employee Health and
Safety committee of the Board of Directors.
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o Jerome W. Pickholz
o Alister W. Reynolds
o Susan O. Rheney
o Wellington E. Webb
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JEROME W. PICKHOLZ*
Jerome Pickholz, age 72, has been a director since 1994. Mr. Pickholz is
chairman emeritus of Ogilvy & Mather Direct Worldwide, a direct advertising
agency, where he served as chief executive officer from 1978 until 1994,
and as chairman in 1994 and 1995. Mr. Pickholz served as founder and
chairman of Pickholz, Tweedy, Cowan, L.L.C., a marketing communications
company, from 1996 until 2001 and he has been a direct marketing consultant
since 2001. He also serves as a director of Gift Certificates.com, Inc., a
provider of gift certificate products and services. Mr. Pickholz is a
certified public accountant and serves as chairman of our Audit committee
and a member of our Governance and Nominating committee of the Board of
Directors.
ALISTER W. REYNOLDS*
Alister Reynolds, age 47, has been a director since 2002. In 2004 Mr.
Reynolds concluded a 22 year career with Quest Diagnostics, Inc., a
provider of diagnostic laboratory testing services, and its former parent
company, Corning Incorporated. Mr. Reynolds served in various positions
including Senior Vice President of Operations and, most recently, Senior
Advisor to the Office of the Chairman. Mr. Reynolds received an MBA in
finance from Cornell University. He is also a Director of three privately
held companies: SomaLogic Incorporated, Healthcare Waste Solutions, and
Viecore Incorporated. Mr. Reynolds serves as Chairman of the Compensation
and Human Resources committee and is a member of the Employee Health and
Safety committee of the Board of Directors.
SUSAN O. RHENEY*
Susan Rheney, age 45, has been a director since 2003 and was appointed
Chairman of the Board in January 2005. Ms. Rheney previously served as a
director of Cenveo from 1993 to 1997. She was a principal in The Sterling
Group, L.P., a private investment company, from 1992 to 2002. Ms. Rheney is
a director of Genesis Energy LP, an oil pipeline company, and Texas
Petrochemical Holdings, Inc., a chemical manufacturer. Texas Petrochemical
filed a voluntary petition for reorganization under Chapter 11 of the
United States Bankruptcy Code in July 2003. In connection with this filing,
the holder of discount notes issued by Texas Petrochemical filed a lawsuit
against the directors and officers of Texas Petrochemical in December 2003,
which suit has been administratively terminated by the bankruptcy court.
Ms. Rheney received an MBA from Harvard University. She is a certified
public accountant and was a public accounting auditor for the accounting
firm of Deloitte & Touche. Ms. Rheney is a member of the Audit committee
and the Governance and Nominating committee of the Board of Directors.
WELLINGTON E. WEBB*
Wellington Webb, age 64, has been a director since August 2004. Former
Mayor Webb was elected Mayor of Denver in 1991 and reelected in 1995 and
1999. In 2003 he established a consulting service, Webb Group International
LLC, which assists cites with local economic projects and economic
opportunities in Asia and Africa. He is also a director of Maximus
Corporation, which provides services to governmental agencies, the National
Homebuyers Association and The Labor's Community Agency and is the Vice
Chair of the Democratic National Committee. Former Mayor Webb is a member
of the Compensation and Human Resources committee and the Employee Health
and Safety committee of the Board of Directors.
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*Determined to be independent as described under Director Independence on
page 8.
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GOVERNANCE, BOARD COMMITTEES AND BOARD COMPENSATION
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NOMINATION OF DIRECTORS
The current term of office of all of our directors expires at the annual
meeting of stockholders. The governance and nominating committee has
nominated eight of our current directors to be re-elected to serve as
directors. Paul V. Reilly, a current director and our president and chief
executive officer, has not been re-nominated. The Board intends to
appoint Mr. Reilly as director emeritus when his current term as director
expires.
Our governance and nominating committee identifies and selects, or
recommends that the Board select, the director nominees for each annual
meeting of stockholders using the criteria set forth in our corporate
governance guidelines. Our guidelines provide that all directors must
have such education, training, experience, skills and expertise as will
allow him or her to perform the duties of a director. The committee has
not established any specific minimum qualification standards for Board
nominees. However, the committee may identify certain skills or
attributes as being particularly desirable for specific director nominees
in order to complement the existing Board composition. To date, the
committee has identified and evaluated nominees for directors based on
several factors, including:
o referrals from our management, existing directors and advisors,
o business and industry experience,
o education,
o diversity,
o leadership abilities,
o professional reputation and affiliation, and
o personal interviews.
This year all nominees were elected by the stockholders on April 29,
2004, to serve as directors of Cenveo until the annual stockholders'
meeting in 2005, except for Mr. Webb and Mr. Kocourek. Mr. Kocourek and
Mr. Webb were selected by the governance and nominating committee to
serve as directors in August 2004 based on referrals from management and
a search firm, and the committee's evaluation of the other factors listed
above. No fee was paid to the search firm. In particular, the committee
considered Mr. Kocourek's expertise in the challenges faced by strategic
"roll-ups", or industry consolidators, as well as his familiarity with
Cenveo resulting from a consulting engagement in connection with our 2001
strategic plan. The committee also considered Mr. Webb's leadership
experience and abilities, reputation and affiliations in considering his
nomination. Cenveo does not currently pay any fee to a third party to
identify or evaluate potential director nominees, although it may retain
search firms to assist in finding qualified candidates.
The committee currently has no policy in place regarding the
consideration of director candidates recommended by stockholders.
Instead, it considers nominees identified in the manner described above.
We believe that our independent governance and nominating committee can
successfully identify appropriate candidates for our board. Stockholders
of record are also entitled to nominate director candidates as provided
in Cenveo's bylaws.
CORPORATE GOVERNANCE
Our Board and management are committed to diligently exercising their
oversight responsibilities throughout Cenveo and managing our affairs
consistent with the highest principles of business ethics. We have
adopted a code of business conduct and ethics that applies to all
employees, including our senior officers. We continue to review our
corporate governance policies and practices along with the provisions of
the Sarbanes-Oxley Act of 2002, the rules of the Securities and Exchange
Commission and the listing standards of the New York Stock Exchange.
Since our 2004 annual stockholders meeting the Board has:
o updated various committee charters
o affirmatively determined that all of our current directors, except
for Mr. Reilly, and all eight of our director nominees, qualify as
independent directors as
- 7 -
defined by the rules of the New York Stock Exchange and our corporate
governance guidelines, and
o affirmatively determined that three of our directors qualify as
audit committee financial experts under the rules of the Securities
and Exchange Commission.
You can view the following information on our website at www.cenveo.com
under "investor relations--governance," or receive copies by writing to
our corporate secretary at Cenveo, Inc., 8310 South Valley Highway, #400,
Englewood, Colorado 80112, phone 303-790-8023:
o the current committee charters for our governance and nominating
committee, our audit committee and our compensation and human
resources committee,
o our corporate governance guidelines, and
o our code of business conduct and ethics
DIRECTOR INDEPENDENCE
We believe that independent directors play a critical role in governing
Cenveo and are committed to ensuring that a majority of our directors are
independent. Currently eight of our nine directors satisfy the
independence requirements of the New York Stock Exchange's listing
standards and the "standards of independence" required by our corporate
governance guidelines. Mr. Reilly is not considered independent because
of his position as president and chief executive officer. Our corporate
governance guidelines can be accessed on our web site at www.cenveo.com
under "investor relations-governance."
The Board has affirmatively determined that each of the eight nominees
for election meet these independence standards. The Board has also
affirmatively determined that each member of our audit committee, our
governance and nominating committee, and our compensation and human
resources committee is independent under these standards. These
determinations were made after reviewing all relevant transactions and
relationships between each director and any of his or her family members,
on one hand, and Cenveo, our senior management and our independent
auditor, on the other hand.
BOARD PROCEDURES AND COMMITTEES
Our full Board of directors considers all major decisions. However, we
have established an audit committee, a compensation and human resources
committee, a governance and nominating committee, and an employee health
and safety committee so that some matters can be addressed in more depth
than may be possible in a full Board meeting. These four committees each
operate under a written charter and are described below.
Governance and Nominating Committee. The current members of the
governance and nominating committee are Mr. Maloney (Chairman), Mr.
Kocourek, Mr. Pickholz and Ms. Rheney. This committee:
o identifies candidates for open director positions,
o selects, or recommends that our Board select, the director nominees
for each annual stockholders meeting,
o oversees the evaluation of our Board's effectiveness, and
o develops and recommends to our Board our corporate governance
principles.
The governance and nominating committee met four times in 2004.
Employee Health and Safety Committee. The current members of our employee
health and safety committee are Mr. Costello (Chairman), Mr. Olivier, Mr.
Reynolds and Mr. Webb. This committee reviews with management:
o our employee health and safety policies and plans,
o our safety results, including employee incident rates,
o our compliance with health and safety laws, and
o our programs and procedures for promoting employee safety.
This committee met six times in 2004.
Audit Committee. The current members of our audit committee are Mr.
Pickholz (Chairman), Mr. Kocourek, Mr. Maloney and Ms. Rheney. The Board
has determined that each member of the committee is financially literate
under the New York Stock Exchange's listing standards
- 8 -
and is independent under special standards established by the Securities
and Exchange Commission for audit committee members. The Board has also
determined that Mr. Kocourek, Mr. Pickholz and Ms. Rheney are each an
audit committee financial expert under the rules of the Securities and
Exchange Commission. A description of each committee member's
qualifications and business experience is found beginning on page 5. The
audit committee met six times during 2004. Our audit committee:
o monitors the integrity of our financial statements, including our
financial reporting process,
o monitors our systems of internal controls regarding finance,
accounting, and compliance with legal and regulatory requirements,
o monitors the independence and performance of our independent
auditor,
o monitors the performance of our internal audit function and our
financial executives,
o reviews our annual and quarterly financial statements and earnings
press releases, and
o annually retains our independent auditor and approves the terms and
scope of the work to be performed.
For more information on the audit committee, see the report of the audit
committee beginning at page 26.
Compensation and Human Resources Committee. The current members of our
compensation and human resources committee are Mr. Reynolds (Chairman),
Mr. Costello, Mr. Olivier and Mr. Webb. This committee:
o reviews and administers our executive compensation programs,
o reviews matters relating to management advancement and succession,
o reviews and recommends to our Board the compensation for our
officers and directors, including incentive compensation plans and
equity-based plans, and
o reviews and approves corporate goals for our chief executive
officer's compensation and evaluates his performance of those goals.
The compensation and human resources committee held ten meetings in 2004.
For more information on the compensation and human resources committee,
see the report of the compensation and human resources committee
beginning at page 23.
Special Ad Hoc Committees. In 2004 we formed two special ad hoc board
committees composed of independent directors. The CEO transition
committee determined the structure of Mr. Reilly's resignation and
severance from the positions of chief executive officer, president and
chairman of Cenveo as described on page 16, and Mr. Reilly's duties until
a successor president and chief executive officer can be selected.
Members of this committee included Mr. Maloney (Chairman), Mr. Costello,
Mr. Olivier and Mr. Pickholz.
A search committee was formed to conduct an executive search for a new
president and chief executive officer. The committee has hired an
independent executive search firm to provide information regarding
potential candidates. Members of this committee are Ms. Rheney (Chair),
Mr. Costello, Mr. Maloney and Mr. Reynolds. Although our corporate
governance guidelines provide that the governance and nominating
committee shall conduct a search for a successor in the event that
Cenveo's chief executive officer is no longer able to serve due to
resignation, the independent directors determined that this role would be
better served in this instance by a special ad hoc committee composed of
two members of the governance and nominating committee and two members of
the compensation and human resources committee and delegated these duties
to the search committee. A majority of our independent directors must
approve the selection of our new chief executive officer and president.
BOARD MEETINGS AND ATTENDANCE
Our Board met ten times during 2004. Each director attended at least 75%
of our Board meetings and the meetings of the Board committees on which
they served. We strongly encourage each director to attend our annual
stockholders meetings, although this is not stated in a formal policy. In
2004, all of our directors then serving as directors attended the annual
stockholders meeting.
- 9 -
Our corporate governance guidelines provide that each regular Board
meeting be scheduled for at least eight hours, including at least one
hour for executive sessions of our independent directors. All
non-management directors meet in executive session at each regular Board
meeting. In 2004, these executive sessions were chaired by the
non-management director then serving as lead director. In 2004 our
non-management directors served as lead directors on a rotating basis
each quarter based on their tenure on the Board. In 2005 the lead
director role will be filled by Ms. Rheney while she is serving as non-
executive chairman of the Board, after which time the Board intends to
select an independent director to serve as non-executive chairman
indefinitely.
BOARD COMPENSATION
During 2004 each non-employee director received:
o an annual retainer of $20,000 paid quarterly,
o $1,500 for each Board meeting attended in person,
o $1,000 for each Board meeting attended by telephone,
o $1,000 for each Board committee meeting attended in person,
o $750 for each Board committee meeting attended by telephone, and
o non-qualified options for 5,000 shares of common stock under our
long-term equity incentive plan described on page 17. These options
may be exercised six months following the grant date.
Non-employee directors who were re-elected at our 2004 annual meeting
also received 2,487 shares of restricted stock valued at approximately
$10,000 on May 1, 2004. These shares vested immediately, but were
restricted from sale for six months after issuance.
In addition, the chairman of the audit committee received $7,500, the
chairman of the compensation and human resources committee received
$5,000 and the chairmen of the other Board committees received $3,500.
Mr. Maloney was paid an additional stipend of $5,000 for his role as lead
director during the fourth quarter of 2004. Directors who are employees
of Cenveo do not receive compensation for their service on the Board.
Board members are reimbursed for expenses incurred in connection with
their attendance at Board meetings and in complying with our corporate
governance policies. Cenveo also provides directors' and officers'
liability insurance and indemnity agreements for its directors.
DIRECTORS EMERITUS
In February, 2005, the Board amended Cenveo's bylaws to provide for
director emeritus positions for former directors who, at the Board's
discretion, may be asked to serve as consultants to the Board. Directors
emeritus are intended to be non-voting participants at Board meetings and
are to be compensated as recommended by the Chairman of the Board and
approved by the compensation committee. In light of Mr. Reilly's lengthy
tenure of service as an officer, director and chairman of the Board of
Cenveo and his extensive knowledge of Cenveo's business, customers and
strategy, the Board intends to appoint him a director emeritus upon
expiration of his term as director at the annual meeting.
COMPENSATION AND HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
No member of the compensation and human resources committee is an
officer, or former officer, or employee of Cenveo. No executive officer
of Cenveo had any interlocking relationship with any other for-profit
entity during 2004.
- 10 -
-------------------------------------------------------------------------
OWNERSHIP OF VOTING SECURITIES
-------------------------------------------------------------------------
This chart shows the common stock ownership for each director and
director nominee, the executive officers named on page 15, and owners of
more than 5 percent of our outstanding common stock as of March 4, 2005.
It includes shares which can be acquired within sixty days of March 4,
2005, through the exercise of stock options. Each stockholder has direct
ownership and sole voting and investment power for the shares listed
unless otherwise noted.
--------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF
AMOUNT OF SHARES COMMON STOCK
BENEFICIAL OWNERS BENEFICIALLY OWNED OUTSTANDING
--------------------------------------------------------------------------------------------------------------------
5% Holders
Wallace R. Weitz & Company 10,248,500 (1) 21.0%
1125 South 103 Street, Suite 600
Omaha, Nebraska 68124
Cenveo 401(k) Savings and Retirement Plan 4,594,544 (2) 9.4%
c/o Cenveo, Inc.
8310 S. Valley Hwy., #400
Englewood, Colorado 80112
FMR Corp. 3,314,130 (3) 6.8%
82 Devonshire Street
Boston, Massachusetts 02109
Directors and Executive Officers
Thomas E. Costello 25,911 (4) *
Paul F. Kocourek 15,000 *
Martin J. Maloney 25,911 (4) *
David M. Olivier 25,911 (4) *
Jerome W. Pickholz 94,798 (5) *
Paul V. Reilly 1,108,344 (6) 2.3%
Alister W. Reynolds 112,808 (7) *
Susan O. Rheney 77,087 (8) *
Wellington E. Webb 0 0
Michel Salbaing 137,433 (9) *
Herbert H. Davis III 166,975 (10) *
Allen C. Conway 18,566 (11) *
Gordon A. Griffiths 166,497 (12) *
Robert A. Hart 193,591 (13) *
All directors and executive officers as a group 2,371,318 (14) 4.9%
(17 persons)
--------------------------------------------------------------------------------------------------------------------
* Less than 1%.
(1) Wallace R. Weitz & Company is a registered investment adviser. This amount reflects the shares held
by its clients based solely on such holder's Schedule 13G/A filed with the Securities and Exchange
Commission on January 12, 2005.
(2) Shares held are voted by trustee Putnam Fiduciary Trust Company at the direction of participants.
Certain of these shares are held by executive officers of Cenveo as indicated in the footnotes below.
(3) Fidelity Management & Research Company is a registered investment adviser and a wholly owned
subsidiary of FMR Corp. This amount reflects the shares held by its clients based solely
on such holder's Schedule 13D filed with the Securities and Exchange Commission on February 14, 2005.
- 11 -
(4) Includes stock options for 20,000 shares.
(5) Includes stock options for 47,400 shares.
(6) Includes 26,698 shares held by his spouse, 696 shares held by a trust benefiting his child of which
Mr. Reilly is trustee, stock options for 961,833 shares, 1,823 shares held through Cenveo's 401(k)
plan and 644 shares held by one of his children. Mr. Reilly disclaims beneficial ownership of the
shares held by his child. Excludes 411,000 shares of restricted stock which have not vested.
(7) Includes stock options for 15,000 shares.
(8) Includes 54,600 shares held by the Rheney Living Trust of which Ms. Rheney is a trustee and stock
options for 20,000 shares.
(9) Includes 4,620 shares held through Cenveo's 401(k) plan and stock options for 127,247 shares.
Excludes 87,000 shares of restricted stock which have not vested.
(10) Includes 21,000 shares held in an individual retirement accounts, 11,985 shares held through Cenveo's
401(k) plan and stock options for 83,248 shares. Excludes 87,000 shares of restricted stock which
have not vested.
(11) Includes stock options for 18,566 shares.
(12) Includes 45,000 shares held by his spouse, stock options for 71,497 shares. Excludes 97,000 shares of
restricted stock which have not vested.
(13) Includes 2,000 shares held by family members and stock options for 175,091 shares. Mr. Hart disclaims
beneficial ownership of the shares held by family members. Excludes 57,000 shares of restricted stock
which have not vested.
(14) Includes stock options for 1,757,744 shares and 40,682 shares held through Cenveo's 401(k) plan.
Excludes 885,119 shares of restricted stock which have not vested.
Executive Stock Ownership Requirement. Effective February 5, 2004, we
established the following stock ownership requirements for our executive
officers in order to more closely align their interests with our
stockholders:
POSITION MULTIPLE OF SALARY TIME TO ATTAIN
-------- ------------------ --------------
Chief executive officer 5 X 5 years
Senior vice presidents 3 X 5 years
Segment presidents 3 X 5 years
Other eligible executives 1 X 5 years
The number of shares of our stock that must be held by an executive is
determined by multiplying his annual base salary on February 5, 2004, or,
for newly hired or promoted executives, his base salary when he is hired
or promoted, by the applicable multiple listed in the chart and dividing
the result by the average closing price of our stock during the
immediately preceding 12 months. These executives have until February 5,
2009, or five years from the date of their hiring or promotion, to
acquire the appropriate number of our shares. The number of shares to be
held will be adjusted annually to reflect any subsequent increase in
salary. In addition to direct ownership of shares, these ownership
requirements may be met by vested or unvested grants of restricted stock,
shares received as payment from stock appreciation rights or performance
restricted unit grants.
- 12 -
------------------------------------------------------------------------------
EXECUTIVE OFFICERS AND KEY EMPLOYEES
------------------------------------------------------------------------------
Biographies
-----------
o Paul V. Reilly
o Gordon A. Griffiths
o Michel P. Salbaing
o Herbert H. ("Woody")
Davis III
o Allen C. Conway
-----------------------------------------------------------------------------
PAUL V. REILLY
Paul Reilly, age 52, served as our president, chief executive officer and
chairman of the Board from 2001 until January 2005 when he announced his
resignation. Mr. Reilly will continue to serve as president and chief
executive officer to assist with the transition to his successor. He has
been a director since 1998. Mr. Reilly was our president and chief
operating officer from 1998 to 2001 and was senior vice president--finance
and chief financial officer from 1995 to 1998. Mr. Reilly spent 14 years
with Polychrome Corporation, a prepress supplier to the printing industry,
where he held a number of positions including assistant corporate
treasurer, corporate treasurer, vice president and chief financial officer
and general manager of United States operations. Mr. Reilly is a certified
public accountant.
GORDON A. GRIFFITHS
Gordon Griffiths, age 62, has served as executive vice president since
2002 and as president of our commercial segment since our reorganization
in October 2003. From April 2002 until October 2003 he served as
president and chief executive officer of our former commercial printing
division. From 2000 until April 2002 Mr. Griffiths was chief executive
officer of Pareto Corporation, a Canadian knowledge services provider.
He continues to serve as a director of Pareto Corporation. In 2000 Mr.
Griffiths co-founded the Caxton Group, a marketing services agency,
which became a public company in 2001. He was president of St. Joseph
Corporation, Canada's largest privately owned printer, from 1997 until
2000.
MICHEL P. SALBAING
Michel Salbaing, age 59, has served as senior vice president--finance
and chief financial officer since 2000. From 1996 to 2000, Mr. Salbaing
was with Quebecor World, the largest North American printer, where he
held a number of positions including chief financial officer of the
overall corporation, president and chief executive officer of Quebecor
Printing Europe and senior vice president and chief financial officer of
Quebecor World North America. Before 1996 Mr. Salbaing held various
senior financial positions with three large Canadian manufacturing firms
and spent eight years with Ernst & Young, LLP. Mr. Salbaing is a member
of the Canadian Institute of Chartered Accountants.
HERBERT H. ("WOODY") DAVIS III
Woody Davis, age 57, has served as senior vice president--corporate
development and chief legal officer since 2001. Before that Mr. Davis
was in the private practice of law and was a partner at the Denver,
Colorado law firm of Rothgerber Johnson & Lyons LLP for over 20 years.
Mr. Davis remains "Of Counsel" at Rothgerber Johnson & Lyons LLP.
ALLEN C. CONWAY, SR.
Allen Conway, age 47, has served as executive vice president and
president of our resale segment since September 2004. Mr. Conway has
served Cenveo and its predecessor companies for over 26 years, including
as vice president of our Printxcel division from 2000 to 2003 and
executive vice president of our resale segment from 2003 until September
2004 when he became president of our resale segment.
-----------------------------------------------------------------------------
- 13 -
o Robert C. Hart
o Brian P. Hairston
o William W. Huffman, Jr.
o D. Robert Meyer, Jr.
o Matthew H. Mitchell
o Keith T. Pratt
o Wayne M. Wolberg
o Mark L. Zoeller
ROBERT C. HART
Bob Hart, age 67, served as senior vice president since 2000 and as
president of our resale segment from October 2003 until September 2004 when
he retired. Mr. Hart agreed to remain as special assistant to the CEO until
February 2006.
BRIAN P. HAIRSTON
Brian Hairston, age 47, has been vice president--human resources since
August 2002. From 2001 through August 2002 he was a human resources
consultant for a variety of firms. From 1999 to 2001 he was senior vice
president--human resources for Kellogg Corporation, a cereal producer. From
1997 to 1999 he served as vice president--human resources for CitiGroup, a
financial institution.
WILLIAM W. HUFFMAN, JR.
Bill Huffman, age 56, has been vice president--corporate controller since
2000. From 1999 to 2000 he was vice president--chief financial officer of
our commercial printing division. In 1997 and 1998 he was a financial
consultant. Mr. Huffman began his career with the accounting firm of
Coopers & Lybrand and is a certified public accountant.
D. ROBERT MEYER, JR.
Rob Meyer, age 48, has been vice president--treasurer since 1998. From 1994
to 1998 Mr. Meyer was a partner in the tax department of the accounting
firm of Deloitte & Touche LLP. Mr. Meyer is a licensed attorney, certified
public accountant and certified financial planner.
MATTHEW H. MITCHELL
Matthew Mitchell, age 40, has been vice president--chief information
officer since December 2003. From 1996 to November 2003 he served as vice
president--information services with Aramark Educational Resources, Inc.,
an educational service provider.
KEITH T. PRATT
Keith Pratt, age 58, has been vice president--purchasing and supply chain
management since 1998. From 1994 to 1998 Mr. Pratt was vice president of
material sourcing and logistics of Ply Gem Industries, a subsidiary of
Nortek, Inc., a building products manufacturer.
WAYNE M. WOLBERG
Wayne Wolberg, age 55, has been vice president--general auditor since 2001.
From 2000 to 2001 he served as vice president--finance of AT&T Broadband.
Mr. Wolberg was vice president and general auditor of MediaOne from 1996 to
2000. He is a certified management accountant.
MARK L. ZOELLER
Mark Zoeller, age 45, has been vice president--general counsel and
secretary since January 2003. He joined Cenveo in 1997 as corporate
counsel, served as assistant general counsel from 2000 to 2001 and was vice
president--corporate development from 2001 until January 2003. He is a
licensed attorney.
------------------------------------------------------------------------------
- 14 -
------------------------------------------------------------------------------
COMPENSATION OF EXECUTIVE OFFICERS
------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
The following table presents information concerning all compensation
received for all services rendered during 2004, 2003 and 2002 by Mr.
Reilly, our chief executive officer and president in 2004, the four other
most highly compensated executive officers in 2004 who were serving as
executive officers at December 31, 2004, and Mr. Hart who served as
president of our resale segment until his retirement from that position
on September 1, 2004.
--------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------------------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND COMPEN- STOCK OPTIONS COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS(1) SATION AWARDS GRANTED SATION
--------------------------------------------------------------------------------------------------------------------------
Paul V. Reilly, 2004 $641,192 $ 0 (2) $372,000(3) 275,000 $ 0
President and 2003 618,077 0 (2) 0 90,000 0
Chief Executive Officer 2002 579,231 192,000 (2) 0 0 0
--------------------------------------------------------------------------------------------------------------------------
Gordon A. Griffiths 2004 $393,269 $ 0 (2) $124,000(3) 105,000 $ 0
Executive Vice 2003 375,000 0 (2) 0 33,750 27,665(4)
President and 2002 271,176(5) 75,000 (2) 142,500(6) 85,000 9,881(7)
President--Commercial
Segment
--------------------------------------------------------------------------------------------------------------------------
Michel P. Salbaing 2004 $360,962 $ 0 (2) $ 93,000(3) 80,000 $ 0
Senior Vice President 2003 349,038 0 (2) 0 25,875 0
and Chief Financial 2002 325,692 75,000 (2) 0 0 0
Officer
--------------------------------------------------------------------------------------------------------------------------
Herbert H. Davis III 2004 $349,692 $ 0 (2) $ 93,000(3) 80,000 $ 0
Senior Vice President-- 2003 336,750 0 (2) 0 25,875 0
Corporate Development 2002 313,750 75,000 (2) 0 0 0
and Chief Legal Officer
--------------------------------------------------------------------------------------------------------------------------
Allen C. Conway 2004 $299,022 $ 0 (2) $ 0 21,000 $ 0
Executive Vice 2003 254,241 72,677 (2) 0 10,000 0
President and 2002 246,330 110,250 (2) 0 0 0
President--Resale
Segment
--------------------------------------------------------------------------------------------------------------------------
Robert A. Hart(8) 2004 $362,423 $ 0 (2) $ 0 83,188 $ 0
Former Senior Vice 2003 349,038 0 (2) 0 33,750 33,805(9)
President and 2002 325,691 75,000 (2) 0 0 25,000(10)
President--Resale
Segment
--------------------------------------------------------------------------------------------------------------------------
(1) Bonus amounts are shown for the year earned and are paid in the following year.
(2) None of the named executive officers has received perquisites the value of which exceeded the lesser
of either $50,000 or 10% of his total salary and bonus. Perquisites paid include contributions to
each person's 401(k) account, tax services, life insurance, the allowance received under our
executive perquisite and benefits expense reimbursement plan described on page 21 and car allowance.
(3) Reflects a grant of restricted stock under our long-term equity incentive plan described on page 17,
based on the closing price of our common stock as quoted on the New York Stock Exchange on December
31, 2004 ($3.10 per share). These shares will vest on May 1, 2009.
(4) Reflects club dues of $13,665 and relocation expenses of $14,000.
(5) $209,133.50 of this amount was paid to Gordon Group Enterprises as a consulting fee. Mr. Griffiths is
the sole owner of Gordon Group Enterprises.
- 15 -
(6) Reflects the grant of performance accelerated restricted stock under our long-term equity incentive
plan described on page 17, based on the closing sale price of our common stock as quoted on the New
York Stock Exchange on December 31, 2002 ($2.50 per share). None of these shares has vested.
(7) Reflects relocation expenses.
(8) Mr. Hart has served as special assistant to the chairman since September 1, 2004.
(9) Reflects club dues of $2,616 and loan forgiveness of $31,189. The loan to Mr. Hart is described on
page 17.
(10) Reflects loan forgiveness for the loan to Mr. Hart described on page 17.
EXECUTIVE AGREEMENTS
Agreements with Mr. Reilly. In 2003 Cenveo entered into an employment and
executive severance agreement with Mr. Reilly. This agreement provides
that if his employment is terminated under certain circumstances which
are not for "cause," Mr. Reilly will receive a payment equal to two
years' salary and bonus, plus a pro rata amount of the current year's
target bonus based on the date of termination. If he is terminated under
certain circumstances relating to a change of control, Mr. Reilly will
receive an additional payment equal to one years' salary. Mr. Reilly
would also be reimbursed for post-termination medical premiums and
receive any salary or other benefits owed to him under Cenveo's various
employee benefit plans and programs.
On January 6, 2005, Cenveo entered into an employment and separation
agreement and general release with Mr. Reilly when Mr. Reilly announced
his resignation as chairman, president and chief executive officer of
Cenveo. The Board accepted Mr. Reilly's resignation as chairman effective
January 6, 2005. Mr. Reilly is continuing to serve as president and chief
executive officer of Cenveo to assist in the transition to a successor
president and chief executive officer. This agreement provides that when
the Board accepts Mr. Reilly's resignation as president and chief
executive officer, Mr. Reilly will receive the following payments and
benefits:
o severance pay of $2,446,200,
o two times his pro-rata 2005 target bonus under our cash bonus annual
incentive plan described on page 21,
o 24 months of premiums paid for medical and dental coverage, and
o outplacement and accounting assistance.
These are generally the benefits Mr. Reilly would have received if his
employment was terminated without cause under his 2003 employment and
executive severance agreement described above. However, as an incentive
for Mr. Reilly to remain in his position as president and chief executive
officer to assist in the transition to a successor, Mr. Reilly will
receive an amount equal to two times his pro-rata 2005 target bonus
rather than one times his bonus provided in his 2003 agreement. Mr.
Reilly also granted Cenveo a general release and agreed to refrain from
competing with Cenveo for two years following his actual termination
date.
Severance Agreements. Cenveo has entered into severance agreements,
triggered by a change in control, with Mr. Salbaing, Mr. Davis, Mr.
Griffiths and Mr. Conway. These agreements provide that if the
executive's employment is terminated in certain circumstances relating to
a change of control, the executive will receive:
o a payment equal to two years' base salary plus two years' target
annual bonus plus the target bonus for the portion of the year
completed before termination,
o reimbursement of post-termination medical and dental premiums, and
o reimbursement of up to $10,000 for outplacement services.
These agreements include covenants from the executive not to compete with
Cenveo for a period of two years after he leaves Cenveo's employ.
- 16 -
Indemnity Agreements. Cenveo has entered into indemnity agreements with
each executive officer which provide that Cenveo will indemnify the
executives in lawsuits brought against any executive in his capacity as
an officer of Cenveo.
Loan to Mr. Salbaing. During 2000 Cenveo loaned $100,000 to Mr. Salbaing
to help him purchase a home in Colorado as part of his relocation. The
loan bears interest at 5% and is due upon the earliest to occur of Mr.
Salbaing's cessation of employment with Cenveo, his sale of certain real
property located in Canada or the sale of Mr. Salbaing's home in
Colorado.
Loan to Mr. Hart. During 2000 Cenveo loaned $50,000 to Mr. Hart to assist
in his relocation to Colorado. The loan bore interest at 8%. Half of this
loan was forgiven in 2002 and the remaining half was forgiven in 2003.
In accordance with our corporate governance guidelines adopted in 2002,
we no longer make loans to executive officers.
LONG-TERM EQUITY INCENTIVE PLAN
In 2001 our stockholders adopted a long-term equity incentive plan which
provides incentive compensation to key officers, employees, directors and
consultants. This plan was amended by stockholders in 2004 to provide,
among other things, that an aggregate of 7,450,000 shares of Cenveo's
common stock may be granted under the plan. Our former stock option plans
were merged into this plan in 2001 and no longer separately exist.
However, options for 3,370,751 shares still outstanding under the old
stock option plans continue to be governed by their grant agreements but
are administered under this plan. Awards may be granted under this plan
for:
o options for our common stock,
o stock appreciation rights based on our common stock,
o restricted shares of our common stock,
o restricted share units based on our common stock, and
o performance awards.
The plan provides that:
o no more than 1,500,000 shares may be issued in connection with
free-standing stock appreciation rights,
o no more than 1,000,000 shares may be granted as restricted stock,
and
o no more than 750,000 shares may be granted as performance restricted
stock or performance restricted units payable in stock.
As of March 4, 2004, the number of shares that were outstanding was as
follows with an additional 2,993,604 shares available for grant in the
future:
o options for 6,774,186 shares,
o 288,788 shares of restricted stock,
o 658,172 shares of performance accelerated restricted stock, and
o 750 shares of stock as performance awards.
No stock appreciation rights or restricted share units have been granted
under the plan. The charts beginning on page 20 show the stock options
and restricted shares which were granted to the named executive officers
in 2004. All awards of restricted shares or stock appreciation rights
have a minimum vesting period of three years for time-based vesting or
one year for performance-based vesting, except for grants of shares to
directors in lieu of cash stipends or fees, which vest immediately.
- 17 -
Shares Available for Awards under the Plan. Shares subject to an award
that are cancelled, expire unexercised, forfeited, settled in cash or
otherwise terminated remain available for awards under the plan. Shares
issued under the plan may be either newly issued shares or shares which
we have reacquired. Shares issued as substitute awards when we assume
outstanding awards previously granted by a company which we acquire do
not reduce the number of shares available for awards. The number of
shares reserved for issuance can be increased only with the approval of
holders of a majority of our outstanding shares.
The plan imposes individual limitations on the amount of certain awards
in order to comply with Section 162(m) of the Internal Revenue Code of
1986. Under these limitations no single participant may generally receive
options or stock appreciation rights in any calendar year that relate to
more than $1 million. Finally, awards may generally be adjusted to
prevent dilution or enlargement of benefits when certain events occur,
such as a stock dividend, reorganization, recapitalization, stock split,
combination, merger or consolidation.
Eligibility. Current and prospective officers, employees, directors and
consultants of Cenveo or its subsidiaries or affiliates may be granted
awards under the plan. As of March 4, 2005, approximately 306 individuals
were eligible to participate in the plan.
Administration. The plan is administered by our compensation and human
resources committee. Awards to directors serving on the committee are
determined and administered by the full Board of Directors. The committee
may:
o select participants,
o determine the type and number of awards to be granted,
o determine the exercise or purchase price, vesting periods and
performance goals, if any,
o determine and later amend the terms and conditions of any award,
o interpret the rules relating to the plan, and
o otherwise administer the plan.
Stock Options and Stock Appreciation Rights. The committee may grant both
incentive stock options, which can result in potentially favorable tax
treatment to the participant, and non-qualified stock options. The
committee may also grant stock appreciation rights either with or without
a related option. The committee determines the terms and individual
vesting schedules for each grant including the exercise price that
generally may not be less than the fair market value of a share of common
stock on the date of the grant. All stock options have been granted at
exercise prices equal to the fair market value of our stock at the date
of grant. In 2004 all stock options granted to management proportionately
vest over either a two-year period or a five-year period on the
anniversary of the grant date, and all non-qualified stock options
granted to directors vest six months following the grant date.
Restricted Shares and Restricted Share Units. The committee may grant
restricted shares of common stock and restricted share units. Restricted
shares are shares of common stock with transfer restrictions. These
restrictions lapse on the basis of performance and/or continued
employment as determined in advance by the committee. They may be
forfeited by participants as specified by the committee in the award
agreement. A participant who has received a grant of restricted shares
will receive dividends and the right to vote those shares. Restricted
shares may not be transferred, encumbered or disposed of during the
restricted period or until after the restrictive conditions are met.
Restricted stock granted to executives in 2004 will vest on the fifth
anniversary of the grant date. Restricted stock granted to directors in
2004 vested six months after the date of grant.
Each restricted share unit has a value equal to the fair market value of
a share of our common stock on the date of grant. The committee
determines the restrictions applicable to the restricted share units. A
participant is credited with dividend equivalents on any vested
restricted share units when dividends are paid to stockholders.
Restricted share units generally may not be transferred, encumbered or
disposed of
- 18 -
unless the participant is continuously employed by Cenveo during the
restricted period or until after the restrictive conditions are met.
Performance Awards. A performance award is a right that is denominated in
cash or shares of common stock, and valued by the achievement of certain
performance goals during performance periods as established by the
committee. The plan specifies the types of goals the committee may
consider when granting performance awards. The committee determines the
form, time and type of payment. Performance awards may be forfeited when
employment is terminated other than for death or total disability. A
participant's rights to any performance award may not be transferred,
encumbered or disposed of in any manner, except by will or the laws of
descent and distribution.
Other Terms.
Other Stock-Based Awards. The committee may grant any other type of
------------------------
awards that are payable in or valued by our common stock. The committee
determines the terms and conditions of these awards.
Change in Control. All outstanding awards vest, become immediately
-----------------
exercisable or payable and have all restrictions lifted immediately when
Cenveo experiences a change in control.
Amendment and Termination. The Board may amend or terminate the plan
-------------------------
subject to applicable stockholder approval. The committee may not amend
the terms of previously granted options to reduce the exercise price or
cancel options and grant substitute options with a lower exercise price
than the cancelled options. The committee also may not adversely affect
the rights of any award holder without the award holder's consent.
Certain Federal Income Tax Consequences. Following is a brief description
of the federal income tax consequences generally arising for awards under
the plan. Tax consequences to Cenveo and to participants receiving awards
will vary with the type of award.
Effects on Participants. Generally a participant will not recognize
-----------------------
income, and Cenveo is not entitled to take a deduction, when an incentive
stock option, a nonqualified option, a stock appreciation right or a
restricted share award is granted. A participant generally will not have
taxable income when he exercises an incentive stock option. When a
participant exercises an option other than an incentive stock option, he
must generally recognize ordinary income equal to the difference between
the exercise price and fair market value of the shares acquired on the
date of exercise.
If a participant sells shares of common stock acquired from an incentive
stock option before the end of two years from the date of grant and one
year from the date of exercise, the participant must generally recognize
ordinary income equal to the difference between the fair market value of
the shares at the date of exercise and the exercise price. Otherwise, a
participant's disposition of shares acquired upon the exercise of an
option generally will result in short-term or long-term capital gain or
loss measured by the difference between the sale price and the
participant's tax basis in the shares.
Effects on Cenveo. Cenveo generally may receive a tax deduction equal to
-----------------
the amount recognized as ordinary income by the participant in connection
with an option. Cenveo generally is not entitled to a tax deduction
relating to amounts that represent a capital gain to a participant.
Accordingly, Cenveo will not be entitled to any tax deduction with
respect to an incentive stock option if the participant holds the shares
of common stock for the incentive stock option holding periods prior to
selling the shares.
Similarly, the exercise of a stock appreciation right will result in
ordinary income on the value of the stock appreciation right to the
participant at the time of exercise. Cenveo will be allowed a deduction
for the amount of ordinary income recognized by a participant with
respect to a stock appreciation right. When restricted stock is granted
the participant will recognize ordinary income on the fair market value
at the time shares of restricted stock become vested unless a participant
makes an election under Section 83(b) of the Internal Revenue Code to be
taxed at the time of grant. The participant also is subject to
- 19 -
capital gains treatment on the sale of any common stock acquired through
the exercise of a stock appreciation right or restricted share award. For
this purpose, the participant's basis in the common stock is generally
its fair market value at the time the stock appreciation right is
exercised or the restricted share becomes vested. Payments made under
performance awards are taxable as ordinary income at the time an
individual attains the performance goals and the payments are made
available to the participant.
Performance-based Compensation. Section 162(m) of the Internal Revenue
------------------------------
Code generally disallows a public company's tax deduction for
compensation paid in excess of $1 million in any tax year to its five
most highly compensated executives. However, compensation that qualifies
as "performance-based compensation" is excluded from this $1 million
deduction limit and therefore remains fully deductible by Cenveo. Cenveo
intends that the following grants will qualify as "performance-based
compensation" so that these awards will not be subject to the Section
162(m) deduction limitations:
o performance awards,
o options granted with an exercise price at least equal to 100% of
fair market value of the underlying shares of common stock at the
date of grant, and
o options granted to employees that the committee expects to be named
executive officers at the time a deduction arises.
STOCK OPTION GRANTS IN 2004
The following table presents information concerning stock options granted
to each of the named executive officers in 2004 under our long-term
equity incentive plan and the potential realizable value for those stock
options based on future appreciation assumptions:
-------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM(1)
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION ----------------------------
NAME GRANTED 2004 PRICE DATE 5%($) 10%($)
-------------------------------------------------------------------------------------------------------------------
Paul V. Reilly 85,000(2) 3.96% $4.06 02-05-11 $ 72,673 $420,998
190,000(3) 8.86% $3.28 08-03-11 253,705 591,240
-------------------------------------------------------------------------------------------------------------------
Gordon A. Griffiths 30,000(2) 1.40% $4.06 02-05-11 49,585 115,554
75,000(3) 3.50% $3.28 08-03-11 100,146 233,384
-------------------------------------------------------------------------------------------------------------------
Michel P. Salbaing 30,000(2) 1.40% $4.06 02-05-11 49,585 115,554
50,000(3) 2.33% $3.28 08-03-11 66,765 155,590
-------------------------------------------------------------------------------------------------------------------
Herbert H. Davis 30,000(2) 1.40% $4.06 02-05-11 49,585 115,554
50,000(3) 2.33% $3.28 08-03-11 66,765 155,590
-------------------------------------------------------------------------------------------------------------------
Allen C. Conway 11,000(2) 0.51% $4.06 02-05-11 18,181 42,370
10,000(3) 0.47% $3.28 08-03-11 13,353 31,118
-------------------------------------------------------------------------------------------------------------------
Robert C. Hart 30,000(2) 1.40% $4.06 02-05-11 49,585 115,554
53,188(3) 2.48% $3.28 08-03-11 71,021 165,510
-------------------------------------------------------------------------------------------------------------------
(1) Potential realizable value is based on an assumption that the market price of our common stock will
appreciate at the stated rates (5% and 10%), compounded annually from the date of grant until the end
of the term. The values are calculated based on rules of the Securities and Exchange Commission and
do not reflect our estimate or projection of future stock prices. Actual gains, if any, on stock
option exercises will depend on the future performance of the price of our common stock and the
timing of exercises.
(2) Granted in February, 2004 under the 2001 Long-Term Equity Incentive Plan. These options vest in equal
increments over a two-year period.
(3) Granted in August, 2004 under the 2001 Long-Term Equity Incentive Plan, as amended. These options
vest in equal increments over a five-year period.
- 20 -
STOCK OPTIONS EXERCISED IN 2004 AND 2004 YEAR-END OPTION VALUES
The following table presents information about the number and value of
stock options exercised in 2004 and held at December 31, 2004, by each
named executive officer. A stock option is "in-the-money" if the closing
market price of Cenveo stock exceeds the exercise price of the stock
option.
-----------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES RECEIVED OPTIONS AT 12-31-04 12-31-04(1)
ACQUIRED UPON ---------------------------------------------------------------------
NAME ON EXERCISE EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-----------------------------------------------------------------------------------------------------------------------
Paul V. Reilly 0 -- 928,925 479,407 $72,540 $28,207
-----------------------------------------------------------------------------------------------------------------------
Gordon A. Griffiths 0 -- 56,497 167,253 21,147 10,578
-----------------------------------------------------------------------------------------------------------------------
Michel P. Salbaing 0 -- 112,247 138,628 16,212 8,110
-----------------------------------------------------------------------------------------------------------------------
Herbert H. Davis 0 -- 68,248 122,627 16,213 8,109
-----------------------------------------------------------------------------------------------------------------------
Allen C. Conway 0 -- 0 11,000 6,266 3,134
-----------------------------------------------------------------------------------------------------------------------
Robert C. Hart 0 -- 133,497 143,441 21,147 10,578
-----------------------------------------------------------------------------------------------------------------------
(1) Based on the closing price per share of Cenveo stock as quoted on the New York Stock Exchange on
December 31, 2004 ($3.10 per share).
LONG-TERM INCENTIVE PLAN AWARDS
The following table presents information about awards of restricted stock
to each of the named executive officers in 2004 under our long-term
equity incentive plan described beginning on page 17. These shares vest
on May 1, 2009.
-----------------------------------------------------------------------------------
PERFORMANCE OR OTHER
NUMBER OF SHARES OF PERIOD UNTIL
RESTRICTED STOCK MATURATION
-----------------------------------------------------------------------------------
Paul V. Reilly 120,000 05-01-09
-----------------------------------------------------------------------------------
Gordon A. Griffiths 40,000 05-01-09
-----------------------------------------------------------------------------------
Michel P. Salbaing 30,000 05-01-09
-----------------------------------------------------------------------------------
Herbert H. Davis 30,000 05-01-09
-----------------------------------------------------------------------------------
Allen C. Conway 0 --
-----------------------------------------------------------------------------------
Robert C. Hart 0 --
-----------------------------------------------------------------------------------
EXECUTIVE PERQUISITE AND BENEFITS EXPENSE REIMBURSEMENT PLAN
Effective April 2004 we adopted an executive perquisite and benefits
expense reimbursement plan for our executive officers. Eligible
executives may receive reimbursement for certain perquisites and benefits
including medical expenses, supplemental life insurance, financial
counseling, airline clubs, health clubs or golf club dues. The chairman
and chief executive officer may be reimbursed a maximum of $13,000
annually and the other eligible executives may be reimbursed a maximum of
$8,000 annually. In addition, each executive receives a car allowance of
$12,000 per year payable in 26 equal installments.
CASH BONUS ANNUAL INCENTIVE PLAN
We have a cash bonus annual incentive plan which provides bonus
compensation to our executives and other key employees. The bonus plan is
designed to promote achievement of our financial goals by making a portion
of each participant's compensation depend on his achievement of goals
established by the Board and individual performance objectives.
Participants must be employed on the date the incentive payments are paid
before they can receive any payment under the bonus plan. The report on
executive compensation beginning on page 23 further describes the cash
bonus plan for 2004.
- 21 -
EQUITY COMPENSATION PLAN INFORMATION
The following table shows shares reserved for issuance for outstanding
options, stock appreciation rights and warrants granted under our equity
compensation plans as of December 31, 2004. All of our equity
compensation plans have been approved by our stockholders.
NUMBER OF SECURITIES
NUMBER OF SECURITIES REMAINING AVAILABLE FOR
TO BE ISSUED UPON WEIGHTED AVERAGE ISSUANCE UNDER EQUITY
EXERCISE OF OUTSTANDING EXERCISE PRICE OF COMPENSATION PLANS
OPTIONS, WARRANTS AND OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
----------------------------------------------------------------------------------------------------------------------
Equity compensation plans not 0 NA 0
approved by stockholders
----------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved 6,991,375 5.55 3,042,315
by stockholders
----------------------------------------------------------------------------------------------------------------------
Total 6,991,375 5.55 3,042,315
----------------------------------------------------------------------------------------------------------------------
OTHER BENEFIT PLANS
We do not provide any defined benefit or actuarial plan that is payable
upon retirement to the named executive officers. The named executive
officers may participate in other benefit plans available to all
employees, two of which are described below.
401(k) Savings Retirement Plans. We adopted a 401(k) savings and
retirement plan in 1994 for non-union employees. United States based,
union-free employees of Cenveo and affiliated companies who are
classified as an employee expected to work a minimum of 1,000 hours per
year are eligible to participate in the plan. For 2004 a participant
could contribute to the plan up to the lesser of $13,000 or 50% of his
compensation. A maximum of $205,000 is considered for purposes of plan
contributions. Contributions are not included in the participant's
current taxable income. During 2004 Cenveo made a matching contribution
to participant accounts equal to 50% of the participant's contributions,
up to a maximum of 6% of the participant's compensation.
We also sponsor a 401(k) savings and retirement plan for union employees.
Collective bargaining agreements determine eligibility for participation
and the amount of employer match.
Plan assets are held in trust. A plan participant can direct the
investment of his contributions and the matching contributions into one
of twelve mutual funds and other investment vehicles, one of which is
Cenveo common stock. Participant contributions to the plan are always
fully vested. Cenveo contributions vest at a rate of 20% for each year of
service completed by the participant. Generally, a participant's vested
plan benefit is distributable upon his retirement, disability, death or
other separation from employment. On August 1, 2004 our former employee
stock ownership plan was merged into our 401(k) plan.
Key Employee Share Option Plan. We adopted a key employee share option
plan in 1997 for executive officers and other key employees. Under the
plan, participants receive options to purchase shares in regulated
investment companies from Cenveo at exercise prices set by the
administering committee. This plan was amended in 2002 to "freeze" both
participation and future contributions to the plan. Participants with
balances at December 31, 2002, maintain their accounts and distributions
to them will continue to be allowed at retirement, disability, death or
other termination from employment. Account balances are held in trust and
are invested in various mutual funds.
- 22 -
-------------------------------------------------------------------------
REPORT ON EXECUTIVE COMPENSATION
-------------------------------------------------------------------------
TO OUR STOCKHOLDERS:
The report of the compensation and human resources committee for 2004
includes our activities related to compensation review and
recommendations for the chief executive officer and the other executive
officers named on page 15. In 2004 the committee engaged an independent
compensation consultant to conduct a comprehensive assessment of our
overall executive compensation program to ensure that our compensation
levels are reasonable, appropriate and competitive. The committee adopted
a balanced executive compensation program after reviewing the market data
and recommendations prepared by our outside consultant. The committee
intends to continue to regularly evaluate the impact of the executive
compensation program on the performance of the executives and Cenveo and
will make changes it believes are necessary to assist in our success.
COMPENSATION PHILOSOPHY
Our executive compensation policies are designed to:
o link executive compensation with our annual and long-term
performance goals,
o attract and retain a highly qualified and motivated management team,
o reward individual performance, and
o emphasize long-term stock incentives that will encourage our
executive officers to maintain their focus on long-term stockholder
interests.
The committee implements these policies through the balanced executive
compensation program which includes:
o setting average base salaries for our executives at the 50th
percentile for salaries given to executives in similar positions
with similar experience,
o providing average annual "pay-for-performance" bonus incentive
opportunities with a target at the 55th percentile, and
o providing incentives under our long-term incentive plan at the 50th
percentile.
The committee has generally designed its policies to compensate our
executives at the 50th percentile when compared to counterparts at
organizations similar in size in general industry and our lines of
business including, but not limited to, those companies listed in
Cenveo's peer group index in the performance chart on page 29. Executives
have an opportunity to receive payment above the 50th percentile for
above average performance.
COMPONENTS OF COMPENSATION
The committee sets total compensation for each executive officer at
competitive levels related to companies of similar type and size based on
the study and recommendations provided by Watson Wyatt. Executive
compensation packages include salary, participation in the cash bonus
annual incentive plan discussed on page 21 and equity awards under the
long-term incentive plan discussed on page 17. To attract and retain
talented executives who will focus on the implementation of Cenveo's
strategic plan, our executive officers also received the severance
agreements described on page 16 and participation in the executive
perquisite and benefits expense reimbursement plan described on page 21.
The committee typically sets our executive officers' compensation in the
first quarter of each year.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid in
any fiscal year to a corporation's chief executive officer and to the
four other most highly paid executive officers. However, this statute
exempts qualifying performance-based compensation from the deduction
limit if certain requirements are met. The committee believes it is in
Cenveo's best interest to try to satisfy the requirements of Section
162(m) by structuring performance-based compensation for executive
- 23 -
officers to satisfy the statute's requirements, such as grants of stock
options and cash bonus incentive plan payments. However, the committee
also recognizes the need to remain flexible when making compensation
decisions so that Cenveo may meet its overall objectives, even if it may
not meet the statute's standards and Cenveo may not be able to deduct all
of the compensation. Accordingly, the Board and the committee have
expressly kept the right to award non-deductible compensation when
appropriate. Because of uncertainties as to the interpretation of Section
162(m) and related regulations, in spite of Cenveo's efforts, it is not
certain that compensation intended by Cenveo to satisfy the deductibility
requirements under Section 162(m) will in fact satisfy those
requirements.
Base Salary. The committee reviews our executives' salaries each year and
fixes base salaries with appropriate performance requirements at levels
at or around the mid-point for amounts paid to senior executives with
similar qualifications, experience and responsibilities at similar
companies. The base salaries also take into account the individual's
performance, experience within the industry and with Cenveo and its
predecessors, and the executive's support of Cenveo's values. Our
chairman and chief executive officer submits salary recommendations each
year to the committee for all other officers. In determining the salary
to be paid, the committee considers individual performance, financial and
operating performance compared to Cenveo's internal operating plan and
external benchmarking data, as well as whether management has reached
certain long-term and short-term strategic goals.
Cash Bonus Annual Incentive Compensation. We offer bonus incentive
compensation to officers and other employees under our cash bonus annual
incentive plan described on page 21, to be paid after the end of a fiscal
year. Incentive compensation is usually paid as a percentage of each
executive's base salary and is based on how well an executive meets
corporate financial goals and individual performance goals established by
the committee. The committee sets minimum, target and maximum goals at
the beginning of each year by examining Cenveo's past performance,
identifying future objectives and evaluating our ability to achieve
corporate goals in light of economic conditions. The weighting of the
goals for officers varies from year to year based on our strategic
business plan.
The bonus opportunity for our named executive officers for 2004 was based
70% on Cenveo achieving a specific target consolidated corporate
financial measure, earnings before interest, taxes, depreciation and
amortization (EBITDA) and 30% on achieving other measures directly
related to our long-term strategy, such as employee satisfaction and
safety, productivity and customer satisfaction. No incentive cash bonus
was paid to any executive for 2004 performance because the minimum
consolidated corporate financial goals were not reached.
Payment of bonuses for 2005 will be based 75% on achieving corporate
financial measures and 25% on achieving other measures directly related
to our long-term strategy, such as employee satisfaction and safety,
productivity, customer satisfaction and financial forecasting. For 2005 a
named executive may potentially earn a cash bonus ranging from 50% to
100% of his salary. The committee believes this level of potential award
strikes the right balance between incentive and reward without offering
undue incentives to management to make short-term decisions that could be
harmful for Cenveo's long-term performance.
Long-Term Equity Incentive Plan. The committee believes that the
long-term interests of stockholders and our key employees, including
officers and directors, are more closely linked when key employees are
given the opportunity to own our common stock. This provides incentives
to reach Cenveo's long-term goals and is an important instrument for
retaining key employees. The amount of stock options and restricted stock
granted to any executive is generally tied to level of responsibility,
position, salary, individual performance, Cenveo's financial performance
and competitive practices. In addition, the committee considers Cenveo's
average three-year grant run-rate to determine the size of the pool for
grants. Management recommends to the committee those executives to whom
grants of stock options or restricted shares should be granted and the
number of options or restricted shares to be granted to them. The
committee solely determines the awards for our chief executive officer.
- 24 -
In 2004 the committee granted restricted stock and options to purchase
common stock to our named executive officers under our long-term equity
incentive plan in allocations of approximately 50% options and 50%
restricted stock. The approximate combined value for these grants ranged
from 100% to 110% of an executive's salary, according to the values
estimated by our independent consultants based on our stock price at the
time of each grant, for the named executives other than the chief
executive officer. The restricted stock granted to the named executive
officers in 2004 will vest in five years on May 1, 2009. There is no
incremental vesting of these shares.
In order to keep our executives' interests linked to that of our
stockholders by motivating executives to remain focused on Cenveo's long-
term performance, the committee also implemented mandatory executive
stock ownership requirements ranging from one to five-times base salary,
depending on their position. Further details are described on page 12.
Employment Agreements. The committee believes that the selective use of
employment, severance and change in control agreements provides
continuity in leadership which benefits Cenveo's shareholders and
employees. Such agreements also allow our executives to focus exclusively
on financial and operational issues affecting our business and create an
incentive for executives to perform in a manner that will contribute to
shareholder value and future growth. Accordingly, we have entered into
agreements with the named executive officers which are described on page 16.
Other Annual Compensation. Cenveo makes certain matching contributions to
our 401(k) plan described on page 22 on behalf of participants which
include executive officers. Our health and insurance plans are the same
for all union-free employees. Our executives also receive a car allowance
and reimbursement for certain expenses under our executive perquisite and
benefits allowance reimbursement plan described on page 21. Benefits and
perquisites are targeted to be at the low end of the competitive range to
provide reasonable levels of security but so as to not emphasize this
compensation component.
CHIEF EXECUTIVE OFFICER COMPENSATION
Based upon the compensation assessment conducted by the committee's
outside consultants, the committee increased Mr. Reilly's salary 3.74% to
$641,192 in 2004 from $618,077 in 2003. Mr. Reilly did not receive a
bonus for 2004 because the minimum consolidated corporate financial goals
were not reached. Mr. Reilly's long-term incentive compensation package
for 2004 included options for 275,000 shares of common stock and 120,000
shares of restricted stock, the value of which together represented
approximately 200% of his salary at May 1, 2004, according to the values
estimated by our independent consultants based on our stock price at the
time of grant. Options for 85,000 shares were granted in February 2004
which vest 50% in 2005 and 50% in 2006. Options for 190,000 shares were
granted in August 2004 which become exercisable in 20% increments on each
of the next five anniversaries of the grant date and the restricted stock
vests in five years on May 1, 2009.
Mr. Reilly's total compensation for 2004, including the estimated value
of the grants of options and restricted stock, was established on the
basis of a comparison to other chief executive officers with comparable
qualifications, experience and responsibilities at comparable companies.
Consistent with our executive compensation philosophy, a significant
portion of Mr. Reilly's total compensation package consisted of long-term
incentive compensation.
On January 6, 2005, Mr. Reilly announced his resignation as chairman,
president and chief executive officer of Cenveo, although he will
continue to serve as president and chief executive officer to assist in
the transition to a successor. The committee will continue to evaluate
Mr. Reilly's compensation in 2005 while he serves as president and chief
executive officer. Mr. Reilly will be eligible to receive a pro-rata
bonus for 2005 based on the number of months he serves as president and
chief executive officer as described on page 16.
CONCLUSION
In summary, the committee believes that our policy of linking executive
compensation to Cenveo's performance was met and that
-25 -
Cenveo's compensation levels properly reflect our philosophy. The
committee believes that compensation for our executive officers has been
competitive, appropriate and comparable to similarly-situated companies.
In addition, Cenveo's executive compensation programs and policies
support our overall objective to enhance stockholder value through the
profitable management of Cenveo's operations. The committee is firmly
committed to the ongoing review and evaluation of Cenveo's executive
compensation program.
RESPECTFULLY SUBMITTED:
Alister W. Reynolds (Chair)
Thomas E. Costello
David M. Olivier
Wellington E. Webb
-------------------------------------------------------------------------
REPORT OF THE AUDIT COMMITTEE
-------------------------------------------------------------------------
The Board has affirmatively determined that all members of Cenveo's audit
committee are independent directors. The committee assists the Board in
fulfilling its responsibility for oversight of the quality and integrity
of its accounting, the system of internal controls established by
management, auditing and reporting practices as summarized beginning on
page 8. The full responsibilities of the committee are described in its
charter which can be accessed on Cenveo's website at www.cenveo.com under
"investor relations--governance."
Management is responsible for internal controls and the financial
reporting process, including the system of internal controls over
financial reporting. Ernst & Young, LLP, Cenveo's independent auditor, is
responsible for expressing an opinion on the conformity of Cenveo's
audited consolidated financial statements with generally accepted
accounting principles and on management's assessment of the effectiveness
of the company's internal controls as required by section 404 of the
Sarbanes-Oxley Act. The audit committee monitors these processes and
reports its findings to the full Board. The committee has reviewed and
discussed Cenveo's audited consolidated financial statements and the
company's internal controls over financial reporting with management and
Ernst & Young. The committee has also discussed with Ernst & Young the
matters required to be discussed by Statement on Auditing Standards No. 61
(communication with audit committees).
The audit committee has reviewed and implemented the provisions of the
Sarbanes-Oxley Act, the rules of the Securities and Exchange Commission
and the listing standards of the New York Stock Exchange. The committee
engaged independent legal counsel to review, assess and make
recommendations on procedures required by the Sarbanes-Oxley Act. The
committee also continues to follow the procedures recommended in the
report of the Blue Ribbon Committee on Improving the Effectiveness of
Corporate Audit Committees issued in February 1999 which is sponsored by
the major securities markets.
At each of its four regular meetings in 2004 the audit committee met with
Ernst & Young and the senior members of Cenveo's financial management
team, including Cenveo's senior vice president--finance and chief
financial officer, vice president and general auditor, vice
president--controller and our vice president--general counsel. During
2004 the committee also met periodically with the chief financial
officers and controllers of Cenveo's operating segments.
The committee reviewed with the financial management team:
o overall audit scopes and plans,
o results of internal and external audit examinations,
o management's discussion and analysis of financial condition and
results of operations contained in Cenveo's quarterly and annual
reports,
o evaluations of Cenveo's internal controls by management and Ernst &
Young, and
o quality of Cenveo's financial reporting.
- 26 -
In particular, the committee monitored and evaluated the process by which
management conducted its assessment of Cenveo's internal controls over
financial reporting as required by section 404 of the Sarbanes-Oxley Act.
The committee considered the need to ensure the independence of Cenveo's
auditors while recognizing that in certain situations Ernst & Young may
possess the expertise and be in the best position to advise Cenveo on
issues and matters other than accounting and auditing. All audit services
and fees payable to Ernst & Young for audit services must be
pre-approved. The committee's charter allows a general pre-approval by
the committee of audit-related services without a specific case-by-case
consideration of each service to be performed by Ernst & Young. The
committee's charter requires that any other services, including any
permitted non-audit services, be approved by the committee or by a
committee member. The committee then communicates its approval to
management. All audit and non-audit services performed by Ernst & Young
during 2004 were pre-approved under these procedures.
Management reviewed Cenveo's 2004 audited financial statements with the
audit committee. In addressing the quality of management's accounting
judgments, the committee asked for management's representations that the
audited consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. The committee
expressed to both management and Ernst & Young its general preference for
conservative policies when a range of accounting options is available.
The committee had a private session at each of its four regular meetings
with Ernst & Young to candidly discuss financial management, accounting
and internal control adequacy and issues. The committee asked Ernst &
Young to address several questions that committee members believe are
particularly relevant to the committee's oversight, including whether:
o there are any significant accounting judgments made by management in
preparing the financial statements that would have been made
differently had Ernst & Young prepared and been responsible for the
financial statements,
o Cenveo's financial statements fairly present to investors, with
clarity and completeness, its financial position and performance for
the reporting period in accordance with generally accepted
accounting principles and disclosure requirements of the Securities
and Exchange Commission,
o Cenveo has implemented internal controls and internal audit
procedures that are appropriate for it, and
o Ernst & Young had discovered any accounting adjustments made by
management during the year that would have been more properly
reflected in prior year results.
The audit committee believes that by focusing its discussions with Ernst
& Young, it can promote a meaningful dialogue that provides a basis for
its oversight judgments.
Based on the audit committee's review and discussions with management and
Ernst & Young referenced in this report and under "auditor independence"
on page 28, the audit committee recommended to the Board of Directors,
and the Board approved, that the audited financial statements be included
in Cenveo's annual report on Form 10-K for the year ending December 31,
2004, for filing with the Securities and Exchange Commission.
RESPECTFULLY SUBMITTED:
Jerome W. Pickholz (Chair)
Paul F. Kocourek
Martin J. Maloney
Susan O. Rheney
- 27 -
-------------------------------------------------------------------------
INDEPENDENT PUBLIC AUDITORS
-------------------------------------------------------------------------
The audit committee selected Ernst & Young, LLP as our independent
auditors for 2005. Representatives of Ernst & Young are expected to
attend the annual meeting and will have the opportunity to make a
statement and answer questions.
FEES
The following table shows the fees we paid to Ernst & Young in 2004 and
2003:
-------------------------------------------------------------------------------------
2004 2003
-------------------------------------------------------------------------------------
Audit fees(1) $1,639,014 $ 946,807
-------------------------------------------------------------------------------------
Audit-related fees(2) 104,400 167,000
-------------------------------------------------------------------------------------
Tax fees(3) 41,000 31,000
-------------------------------------------------------------------------------------
Total $1,784,414 $1,144,807
========== ==========
-------------------------------------------------------------------------------------
(1) For auditing our annual consolidated financial statements and accounting consultations during the
audit and reviews of our interim financial statements in our reports filed with the Securities and
Exchange Commission. In addition, these fees include the audit of our internal controls over
financial reporting and management's assessment of these controls which totaled $801,351 in 2004.
(2) For audits of our employee benefit plans, accounting and auditing consultation services and
assistance with our debt offering in 2004.
(3) For tax return review and preparation and tax advice and planning.
AUDITOR INDEPENDENCE
The audit committee considered the effect that provision of the services
described above under "tax fees" and "all other fees" may have on the
independence of Ernst & Young. These fees amounted to approximately 2.7%
of our total fees paid to Ernst & Young in 2003 and approximately 2.3% of
our total fees paid in 2004. The committee approved these services and
determined that those non-audit services were compatible with maintaining
the independence of Ernst & Young as our principal auditor. Ernst & Young
provided the committee with the written disclosures required by
Independence Standards Board Standard No. 1 (independence discussions
with audit committees), and the committee discussed with Ernst & Young
their independence.
- 28 -
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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
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The following graph presents the cumulative total yearly stockholder
return from investing $100 on December 31, 1999, in each of:
o Cenveo's common stock,
o Standard & Poor's 500 Index which is broad equity market index
published by Standard & Poor's, and
o a peer group chosen by Cenveo with companies similar to Cenveo,
weighted by market capitalization, which includes Consolidated
Graphics, Inc., Deluxe Corporation, R. R. Donnelley & Sons Company
and Standard Register Company.
The amounts shown assume that any dividends were reinvested. Our common
stock is listed on the New York Stock Exchange under the symbol "CVO."
[GRAPH]
---------------------------------
CENVEO PEER GROUP S&P 500
---------------------------------
31-Dec-99 100.00 100.00 100.00
---------------------------------
31-Mar-00 64.35 86.73 102.00
---------------------------------
30-Jun-00 63.89 89.58 99.00
---------------------------------
30-Sep-00 35.19 95.63 97.77
---------------------------------
31-Dec-00 31.94 107.04 89.86
---------------------------------
31-Mar-01 36.15 104.66 78.97
---------------------------------
30-Jun-01 31.48 122.40 83.33
---------------------------------
30-Sep-01 27.41 117.44 70.85
---------------------------------
31-Dec-01 30.37 137.08 78.14
---------------------------------
31-Mar-02 46.52 146.76 78.09
---------------------------------
- 29 -
---------------------------------
CENVEO PEER GROUP S&P 500
---------------------------------
30-Jun-02 38.52 130.85 67.37
---------------------------------
30-Sep-02 7.70 122.65 55.49
---------------------------------
31-Dec-02 18.52 116.57 59.88
---------------------------------
31-Mar-03 15.04 101.89 57.73
---------------------------------
30-Jun-03 18.67 137.79 66.33
---------------------------------
30-Sep-03 25.93 127.42 67.79
---------------------------------
31-Dec-03 34.15 150.74 75.68
---------------------------------
31-Mar-04 33.11 147.65 76.65
---------------------------------
30-Jun-04 21.70 163.72 77.65
---------------------------------
30-Sep-04 25.93 155.51 75.86
---------------------------------
31-Dec-04 22.96 171.62 82.49
---------------------------------
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OTHER INFORMATION
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our directors, executive officers and some other stockholders are
required to report their ownership of our common stock and any changes in
that ownership to the Securities and Exchange Commission and New York
Stock Exchange. To the best of our knowledge, all required filings in
2004 were properly made in a timely fashion, except that (i) filings
relating to a stock option grant to all executive officers in February,
2004 and (ii) filings relating to restricted stock and stock option
grants to our independent directors in April, 2004, were not filed
timely. In making these statements, we have relied on the representations
of the persons involved and on copies of their reports filed with the
Commission.
FINANCIAL MATERIALS
STOCKHOLDERS MAY REQUEST FREE COPIES OF OUR FINANCIAL MATERIALS (ANNUAL
REPORT, FORM 10-K AND PROXY STATEMENT) FROM CENVEO, 8310 SOUTH VALLEY
HIGHWAY, #400, ENGLEWOOD, CO 80112, ATTENTION: CORPORATE SECRETARY. THESE
MATERIALS MAY ALSO BE ACCESSED ON OUR WEB SITE AT www.cenveo.com.
CONTACT THE BOARD
Stockholders may at any time direct questions to the independent lead
director of the Board by sending an e-mail to leaddirector@cenveo.com.
All communications required by law or regulation to be relayed to the
Board will be promptly delivered to the lead director. The lead director
monitors these e-mail messages and facilitates an appropriate response.
The current lead director for 2005 is Ms. Rheney as described on page 10.
We also encourage stockholders to attend the annual meeting to ask
questions of directors concerning Cenveo.
Employees and others may confidentially or anonymously report potential
violations of laws, rules, regulations or our code of business conduct
and ethics, including questionable accounting or auditing practices, by
calling our ethics and business conduct hotline at 1-800-513-4056 or via
the internet at www.mysafeworkplace.com.
- 30 -
[Cenveo logo] VOTE BY INTERNET - www.proxyvote.com
8310 S. VALLEY HWY #400 Use the Internet to transmit your voting
ENGLEWOOD, CO 80112 instructions and for electronic delivery
of information up until 11:59 P.M.
Eastern Time the day before the cut-off
date or meeting date. Have your proxy
card in hand when you access the web site
and follow the instructions to obtain
your records and to create an electronic
voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit
your voting instructions up until
11:59 P.M. Eastern Time the day before
the cut-off date or meeting date.
Have your proxy card in hand when you
call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and
return it in the postage-paid envelope
we've provided or return to Cenveo, Inc.,
c/o ADP, 51 Mercedes Way, Edgewood, NY
11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
CENV01 KEEP THIS PORTION FOR YOUR RECORDS
------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
==============================================================================
CENVEO, INC.
UNLESS OTHERWISE SPECIFIED, THIS PROXY
WILL BE VOTED FOR THE FOLLOWING ITEMS:
---
VOTE ON DIRECTORS
1. To elect as directors the nominees listed below.
01) Thomas E. Costello 05) Jerome W. Pickholz
02) Paul F. Kocourek 06) Alister W. Reynolds
03) Martin J. Maloney 07) Susan O. Rheney
04) David M. Olivier 08) Wellington E. Webb
FOR WITHHOLD FOR ALL
ALL FOR ALL EXCEPT
/ / / / / /
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE THE
NOMINEE'S NUMBER ON THE LINE BELOW.
------------------------------------------------
VOTE ON PROPOSAL
2. To ratify the selection of Ernst & Young LLP, as
our independent auditors for the year ending FOR AGAINST ABSTAIN
December 31, 2005.
/ / / / / /
NOTE: In their discretion, the proxy holders are authorized to vote upon
such other business as may properly come before the meeting or matters
incidental to the conduct of the meeting.
(Please sign exactly as name appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, give full title as such. If a
corporation, please affix corporate seal. If a partnership, please sign in
partnership name by authorized persons. If joint tenants, each joint tenant
should sign.)
YES NO
Please indicate if you plan to attend this meeting / / / /
---------------------------------------- --------------------------------
---------------------------------------- --------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
===============================================================================
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===============================================================================
REVOCABLE PROXY CENVEO, INC.
SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS, APRIL 27, 2005
The undersigned holder of common stock of Cenveo, Inc., a Colorado
corporation (the "Company"), acknowledges receipt of a copy of the Notice of
Annual Meeting of Stockholders dated March 11, 2005, and, revoking any proxy
heretofore given, hereby appoints Mark L. Zoeller and Herbert H. Davis, and
each of them, with full power to each of substitution, as attorneys and
proxies, to appear and vote all shares of common stock of the Company
registered in the name(s) of the undersigned and held by the undersigned of
record as of March 4, 2005, at the Annual Meeting of Stockholders of the
Company to be held at the Company's principal executive offices, 8310 S.
Valley Hwy., #400, Englewood, Colorado, on April 27, 2005, at 8:30 a.m., and
at any postponements and adjournments thereof, upon the following items, as
set forth in the Notice of Annual Meeting, and to vote according to their
discretion on all other matters which may be properly presented for action
at the meeting. All properly executed proxies will be voted as indicated.
THIS PROXY IS SOLICITED BY, AND ON BEHALF OF, THE BOARD OF DIRECTORS, AND
MAY BE REVOKED PRIOR TO ITS EXERCISE. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR PROPOSALS 1 AND 2. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED AS DIRECTED. IF NO DIRECTION IS MADE, IT WILL BE VOTED FOR PROPOSALS 1
---
AND 2.
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY BY USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
===============================================================================
APPENDIX
Page 29 of the proxy statement contains a Performance Graph. The
information contained within the graph is presented in a tabular format
immediately following the graph.