UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Section 240.14a-12
CENVEO, INC.
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[CENVEO, INC. LOGO]
March 30, 2007
Dear Fellow Shareholders:
I would like to extend a personal invitation for you to join us at our
Annual Meeting of Shareholders which will be held Thursday, May 3, 2007,
at 12:00 p.m. EDT at the Four Seasons Hotel, 57 East 57th Street, New
York City. We look forward to your attendance either in person or by
proxy.
We are once again holding our annual meeting in New York for various
reasons. First and foremost, given last year's large attendance, holding
the meeting in New York will once again give us the opportunity to put on
a full business presentation to our investor base, which is very
concentrated within the city. Our senior management team will also be
available to meet with investors after the meeting for additional Q&A.
Lastly, it will also reduce travel expenses, and reduce the amount of
time that our senior management team and I will need to be away from the
business.
I am looking forward to this opportunity to share with you the progress
that the Company has made as well as give you an update on our growth
plans including our recent acquisitions of Printegra and Cadmus. As you
all know, Cenveo made great strides in 2006, and I am excited to share
with you our vision for the future.
Again, I am looking forward to discussing with you our results, our
business plan for the future and the positive momentum that the Company
has generated in 2006. I encourage all of our investors who can attend
this meeting to join us in New York in May.
/s/ Robert G. Burton
Robert G. Burton
Chairman and Chief Executive Officer
Cenveo, Inc.
201 Broad Street
One Canterbury Green
Stamford, CT 06901
(203) 595-3000
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
To Our Shareholders:
On May 3, 2007, Cenveo, Inc. will hold its 2007 annual meeting of
shareholders at the Four Seasons Hotel, 57 East 57th Street, New York,
New York. The meeting will begin at 12:00 noon Eastern Time.
Shareholders who owned shares of our common stock at the close of
business on March 23, 2007 may attend and vote at the meeting. We ask
that all shareholders 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 seven directors for terms expiring at the 2008 annual
meeting of shareholders;
2. Ratify the selection of Deloitte & Touche LLP by the board's audit
committee as our independent auditors for 2007;
3. Approve the Company's 2007 Long-Term Equity Incentive Plan; and
4. Attend to any other business properly presented at the meeting or
any adjournment thereof.
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 2006 Annual Report is enclosed. This notice and proxy
statement, the proxy card and the 2006 Annual Report are being mailed on
or about March 30, 2007.
By Order of the Board of Directors,
/s/ Timothy M. Davis
Timothy M. Davis
Senior Vice President, General
Counsel and Secretary
Stamford, Connecticut
March 30, 2007
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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
PROPOSALS TO BE VOTED ON......................................... 1
NOMINEES FOR THE BOARD OF DIRECTORS.............................. 3
GOVERNANCE, BOARD COMMITTEES AND BOARD COMPENSATION.............. 5
OWNERSHIP OF VOTING SECURITIES................................... 9
EXECUTIVE OFFICERS............................................... 10
COMPENSATION OF EXECUTIVE OFFICERS............................... 11
REPORT OF THE AUDIT COMMITTEE.................................... 22
INDEPENDENT PUBLIC AUDITORS...................................... 24
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS............ 24
SUMMARY OF CENVEO, INC. 2007 LONG-TERM EQUITY INCENTIVE PLAN..... 25
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN.................. 29
OTHER INFORMATION................................................ 30
QUESTIONS AND ANSWERS............................................ 30
CENVEO, INC. 2007 LONG-TERM EQUITY INCENTIVE PLAN................ EXHIBIT A
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PROPOSALS TO BE VOTED ON
PROPOSAL 1--ELECTION OF DIRECTORS
Seven directors will be elected this year for terms expiring in 2008. The
nominees for election are:
Robert G. Burton, Sr. Robert T. Kittel
Patrice M. Daniels Robert B. Obernier
Leonard C. Green Thomas W. Oliva
Mark J. Griffin
Each nominee is currently serving as a director of Cenveo. Each person
elected as a director will serve until the 2008 annual meeting of
shareholders or until such director's successor has been elected and
qualified or such director's earlier resignation or removal.
Assuming a quorum is present, the seven nominees receiving the most
affirmative votes at the meeting will be elected as directors.
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. Shareholders may
not cumulate their votes when electing directors.
Brief biographies of the director nominees are included beginning on page
3. These biographies include their age, business experience and the names
of publicly held and certain other corporations and organizations of
which they are also directors. Each director nominee has served as a
director of Cenveo since September 12, 2005.
THE BOARD RECOMMENDS A VOTE FOR ELECTION OF THESE SEVEN DIRECTOR NOMINEES.
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PROPOSAL 2--RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Our audit committee has selected the firm of Deloitte & Touche LLP
("Deloitte & Touche") as our independent auditors for 2007. Neither
Cenveo's governing documents nor applicable law requires shareholder
ratification of the appointment of our independent auditors. However, the
audit committee has recommended, and the board of directors has
determined, to submit the appointment of Deloitte & Touche to the
shareholders for ratification as a matter of good corporate practice. If
the shareholders fail to ratify the appointment, the audit committee will
reconsider whether or not to retain Deloitte & Touche. Even if the
shareholders ratify the appointment, the audit committee has the
discretion to change the independent auditors at any time.
On March 14, 2007, our audit committee dismissed our former auditors,
Ernst & Young LLP ("Ernst & Young"). On March 15, 2007, the audit
committee appointed Deloitte & Touche as our auditors for 2007. No
accountant's report on the financial statements for the Company's fiscal
years ended December 31, 2005 and 2006 and any interim period subsequent
to December 31, 2006 through March 14, 2007 contained an adverse opinion
or disclaimer of opinion, or was qualified or modified as to uncertainty,
audit scope or accounting principles. There were no "disagreements" (as
such term is used in Item 304 (a)(1)(iv) of Regulation S-K) with Ernst &
Young at any time during the periods described above regarding any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure that, if not resolved to the satisfaction of
Ernst & Young, would have caused it to make reference to the subject
matter of the disagreement in connection with its reports. In addition,
during the same periods, no "reportable events" (as such term is defined
in Item 304(a)(1)(v) of Regulation S-K) arose in the context of the
Company's relationship with Ernst & Young.
During the periods described above prior to engaging Deloitte & Touche,
the Company did not consult with Deloitte & Touche regarding either: (i)
the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on the Company's financial statements, and Deloitte & Touche did
not provide either a written report or oral advice to the Company that
Deloitte & Touche concluded was an important factor considered by the
Company in reaching a decision as to the accounting, auditing or
financial reporting issue; or (ii) any matter that was either the subject
of a disagreement or a reportable event.
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Additional information can be found on page 24. The selection of Deloitte
& Touche as our independent auditors will be ratified if the votes in
favor of ratification exceed the votes against. Abstensions will have no
effect on this proposal.
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF DELOITTE & TOUCHE AS OUR
INDEPENDENT AUDITOR FOR 2007.
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PROPOSAL 3--APPROVAL OF CENVEO, INC. 2007 LONG-TERM EQUITY INCENTIVE PLAN
You are being asked to approve our 2007 Long-Term Equity Incentive Plan.
The plan authorizes the issuance of 2,000,000 shares of our common stock,
no more than 1,500,000 of which may be issued with respect to restricted
stock, restricted stock units ("RSUs") or other stock-based awards. Any
shares not used for these awards may be used for awards of stock options
and stock appreciation rights. In addition, the plan authorizes cash
performance awards. If shareholders approve the plan, we will be able to
grant all or a portion of our annual bonuses for executive officers as
performance awards under the plan that qualify for deductibility under
Section 162(m) of the Internal Revenue Code.
If the plan is approved, we will cease making awards under our prior
equity plans, and any unused shares previously authorized under those
plans will be rolled over into the 2007 plan.
The plan is summarized more fully beginning on page 25, and the full plan
is attached to this proxy statement as Exhibit A.
The plan will be approved if the votes cast in favor of the proposal
exceed the votes cast against the proposal. Accordingly, abstentions and
broker non-votes will have no effect on the proposal.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE 2007 LONG-TERM EQUITY
INCENTIVE PLAN.
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NOMINEES FOR THE BOARD OF DIRECTORS
The following nominees are currently serving as members of Cenveo's board
of directors and are standing for re-election.
ROBERT G. BURTON, SR.
[PHOTO] Mr. Burton, 67, has been Cenveo's Chairman and Chief
Executive Officer since September 2005. In January 2003,
he formed Burton Capital Management, LLC, a company that
invests in middle market manufacturing companies, and
has been its Chairman, Chief Executive Officer and
sole managing member since its formation. From
December 2000 through December 2002, Mr. Burton was
the Chairman, President and Chief Executive Officer
of Moore Corporation Limited, a leading printing
company with over $2.0 billion in revenue for fiscal
year 2002. Preceding his employment at Moore, Mr.
Burton was Chairman, President, and Chief Executive Officer of Walter
Industries, Inc., a diversified holding company. From April 1991 through
October 1999, he was the Chairman, President and Chief Executive Officer
of World Color Press, Inc., a leading commercial printing company. From
1981 through 1991, he held a series of senior executive positions at
Capital Cities/ABC, including President of ABC Publishing. Mr. Burton was
also employed for 10 years as a senior executive of SRA, the publishing
division of IBM. Mr. Burton serves on our executive committee (Chair).
PATRICE M. DANIELS
[PHOTO] Ms. Daniels, 46, has been a director of Cenveo since
September 2005. She has been Senior Vice President--
Corporate Lending at GE Commercial Finance since June
2006. From November 2005 until June 2006, Ms. Daniels
served as Chief Operating Officer of International
Education Corporation, a private post-secondary education
company. Since its founding in 2001, Ms. Daniels has
been a Partner of Onyx Capital Ventures, L.P., a
minority-owned private equity investment firm. She
previously served as Managing Director, Corporate and
Leveraged Finance for CIBC World Markets and Bankers
Trust Company, investment-banking firms. Ms. Daniels serves as board
member and audit committee chair of real estate services firm CB Richard
Ellis Group and on the advisory council of the University of Chicago
Graduate School of Business. Ms. Daniels holds a B.S. from the University
of California, Berkeley and an M.B.A. from the University of Chicago
Graduate School of Business. Ms. Daniels serves on our audit committee,
compensation committee (Chair), executive committee and nominating and
governance committee (Chair).
LEONARD C. GREEN
[PHOTO] Mr. Green, 70, has been a director of Cenveo since
September 2005. He has been President of The Green Group,
a financial services firm of CPAs, consultants and
entrepreneurs, since 1976. Mr. Green is a Professor of
Entrepreneurship at Babson College in Wellesley,
Massachusetts. He is presently, and has served, on
the board of directors of a number of private
companies. Mr. Green serves on our compensation
committee, audit committee (Chair) and executive
committee.
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MARK J. GRIFFIN
[PHOTO] Dr. Griffin, 58, has been a director of Cenveo since
September 2005. He is the founder of the Eagle Hill School,
an independent private school in Greenwich, Connecticut,
and has been its headmaster since 1975. Since 1991,
Dr. Griffin has served on the board of directors of
the National Center for Learning Disabilities, and he
has been a member of its Executive Committee since
2003. Dr. Griffin has also been on the board of the
Learning Disabilities Association of America since
1993. Dr. Griffin served on the board of directors of
World Color Press, Inc. from October 1996 to 1999,
where he was a member of the audit and compensation
committees. Dr. Griffin serves on our audit committee, compensation
committee and nominating and governance committee.
ROBERT T. KITTEL
[PHOTO] Mr. Kittel, 35, has been a director of Cenveo since
September 2005. He has been a Partner of Goodwood Inc.,
an investment management firm, since June 2003, and with
Goodwood since June 2002. From June 2000 until February
2002, he was a Vice President at Silvercreek Management
Inc., an investment management firm. From May 1997
until May 2000, Mr. Kittel was employed by Cadillac
Fairview Corporation, a commercial real estate
development company. Mr. Kittel is a Chartered
Accountant and Chartered Financial Analyst. Mr.
Kittel serves on our audit committee, executive
committee and nominating and governance committee.
ROBERT B. OBERNIER
[PHOTO] Mr. Obernier, 69, has been a director of Cenveo since
September 2005. He has served as the Chairman and Chief
Executive Officer of Horizon Paper Company, Inc., a
paper supply company, since 1991. Mr. Obernier is
Chairman of the Norwalk Hospital Foundation and a
Trustee of Norwalk Hospital in Norwalk, Connecticut.
Mr. Obernier also serves on the audit committee of
the board of the Juvenile Diabetes Research
Foundation as a volunteer. Mr. Obernier serves on our
audit committee, compensation committee and executive
committee.
THOMAS W. OLIVA
[PHOTO] Mr. Oliva, 49, has been a director of Cenveo since
September 2005 and has served as Cenveo's President since
January 2006. He served as President of Cenveo's Envelopes,
Forms and Labels segment from September 2005 until
January 2006. From December 2002 until January 2004,
Mr. Oliva was the President and Chief Operating
Officer of Moore Wallace Inc., a commercial printing
company. From December 2000 until December 2002, he
was the Group President of the Forms and Labels
Division of Moore Corporation Limited (Moore acquired
Wallace Computer Services, Inc. and changed its name
to Moore Wallace Inc. during 2003). From June 2002 until December 2002,
he was also the Group President of the Outsourcing Division of Moore.
From 1998 until 2000, Mr. Oliva was the Group President for the Gravure
Catalog and Magazine Division of World Color Press, which became Quebecor
World following its acquisition by Quebecor Printing in 1999. Between
1979 and 1998, Mr. Oliva served in a number of sales and management
positions at R.R. Donnelley & Sons Company, Quebecor Printing Inc. and
World Color Press.
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GOVERNANCE, BOARD COMMITTEES AND BOARD COMPENSATION
NOMINATION OF DIRECTORS
The current term of office of all of our directors expires at the annual
meeting of shareholders. The nominating and governance committee has
nominated all seven of our current directors for re-election.
Our nominating and governance committee identifies and selects, or
recommends to the full board for its consideration, the director nominees
for each annual meeting of shareholders 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 them 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:
* referrals from our management, existing directors and advisors,
* business and industry experience,
* education,
* diversity,
* leadership abilities,
* professional reputation and affiliation, and
* personal interviews.
We do not currently pay any fee to a third party to identify or evaluate
potential director nominees, although we may in the future 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 shareholders.
Instead, it considers nominees identified in the manner described above.
We believe that our nominating and governance committee, consisting
entirely of independent directors, can successfully identify appropriate
candidates for our board. Shareholders of record are entitled to nominate
director candidates in the manner provided in Cenveo's bylaws. These
requirements are summarized in the Questions and Answers section of this
proxy statement, which begins on page 30.
CORPORATE GOVERNANCE
Our board and management are committed to diligently exercising their
oversight responsibilities throughout Cenveo and managing Cenveo's
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 to ensure compliance 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. The board has determined that:
* all of our current directors, except for Mr. Burton and Mr. Oliva,
qualify as independent directors as defined by the rules of the New
York Stock Exchange and our corporate governance guidelines, and
* Mr. Green qualifies as an audit committee financial expert under the
rules of the Securities and Exchange Commission.
You can view the following documents on our website at www.cenveo.com
under "Investors--Governance," or receive copies by writing to our
corporate secretary at Cenveo, Inc., 201 Broad Street, One Canterbury
Green, Stamford, CT 06901:
* the current committee charters for our nominating and governance
committee, our audit committee and our compensation committee,
* our corporate governance guidelines, and
* our code of business conduct and ethics.
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DIRECTOR INDEPENDENCE
We believe that independent directors play a critical role in governing
Cenveo, and we are committed to ensuring that a majority of our directors
are independent. Currently five of our seven 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. Messrs. Burton and Oliva are not considered
independent because of their positions with Cenveo. Our corporate
governance guidelines can be accessed on our website at www.cenveo.com
under "Investors--Governance."
In addition to the board's determination that five of the seven nominees
for election meet the foregoing independence standards, the board has
also determined that each member of our audit committee, our nominating
and governance committee and our compensation 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 committee, a
nominating and governance committee and an executive committee so that
some matters can be addressed in more depth than may be possible in a
full board meeting and (except for the executive committee) so that
certain matters may be considered, recommended or approved solely by
independent directors.
NOMINATING AND GOVERNANCE COMMITTEE. The current members of the
nominating and governance committee are Ms. Daniels (Chair), Dr. Griffin
and Mr. Kittel. This committee:
* identifies candidates for open director positions,
* selects, or recommends that our board select, the director nominees
for each annual shareholders meeting,
* oversees the evaluation of our board's effectiveness, and
* develops and recommends to our board our corporate governance
principles.
The nominating and governance committee met one time during 2006.
AUDIT COMMITTEE. The current members of our audit committee are Mr. Green
(Chair), Ms. Daniels, Dr. Griffin, Mr. Kittel and Mr. Obernier. The board
has determined that each member of the committee is financially literate
under the New York Stock Exchange's listing standards and is independent
under special standards established by the Securities and Exchange
Commission for audit committee members. The board has also determined
that Mr. Green is 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 in the
biographies beginning on page 3. Our audit committee:
* monitors the integrity of our financial statements, including our
financial reporting process,
* monitors our systems of internal controls regarding finance,
accounting, and compliance with legal and regulatory requirements,
* monitors the independence and performance of our independent
auditor,
* monitors the performance of our internal audit function and our
financial executives,
* reviews our annual and quarterly financial statements and earnings
press releases, and
* annually retains our independent auditor and approves the terms and
scope of the work to be performed.
The audit committee met five times during 2006. For more information on
the audit committee, see the report of the audit committee beginning on
page 22.
COMPENSATION COMMITTEE. The current members of our compensation committee
are Ms. Daniels (Chair), Mr. Green, Dr. Griffin and Mr. Obernier. This
committee:
* oversees the design, development and implementation of our executive
compensation programs,
* evaluates the performance of the CEO and determines CEO
compensation,
* reviews matters relating to management advancement and succession,
and
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* reviews and approves the compensation for our officers and
directors, including incentive compensation plans and equity-based
plans.
The compensation committee held four meetings during 2006.
EXECUTIVE COMMITTEE. The current members of our executive committee are
Mr. Burton (Chair), Ms. Daniels, Mr. Green, Mr. Kittel and Mr. Obernier.
The executive committee exercises the full powers of the board in
intervals between meetings of the board. This committee did not meet
during 2006.
SPECIAL COMMITTEE TO REVIEW THE CENVEO, INC. RIGHTS AGREEMENT. In 2006, a
special committee of independent directors was constituted to review the
Company's Rights Agreement (sometimes called a "poison pill") that had
been adopted by the Company's former directors (who were subsequently
replaced in the proxy contest that resulted in their resignation on
September 12, 2005). The members of the special committee were Dr.
Griffin (Chair), Mr. Green and Mr. Obernier. The special committee held
two meetings. At the July 27, 2006 meeting of the full board of
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directors, the committee presented its recommendation, and the full board
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voted, to terminate the Rights Agreement effective August 7, 2006. As its
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mandate had been completed, the special committee was dissolved at the
board meeting on July 27, 2006.
BOARD MEETINGS AND ATTENDANCE
The full board of directors met eight times during 2006. Each incumbent
director attended at least 75% of our board meetings and the meetings of
the board committees on which he or she served. We strongly encourage
each director to attend our annual shareholders' meeting. All seven of
our directors attended our 2006 annual meeting of shareholders.
All non-management directors meet in executive session at each regular
board meeting. During 2006, these executive sessions were chaired by the
non-management director then serving as lead director. During 2006, our
non-management directors served as lead directors on a rotating basis
each quarter.
BOARD COMPENSATION
OVERVIEW
Directors who are employees of Cenveo do not receive compensation for
their service on the board. Our non-employee directors receive a
combination of cash and equity compensation. The cash component is
intended to compensate our outside directors for their expertise, time
and effort. The equity component is intended to align our directors'
interests with those of our shareholders and to allow our directors to
benefit from increases in our stock price that occur during their term.
In addition, our equity grants contain deferred vesting requirements in
order to provide an incentive for directors to remain with the Company
for an extended period of time. Accordingly, more than half of the value
our directors' compensation is in the form of equity grants.
In addition, in 2007, we amended our employee stock purchase plan to
enable non-employee directors to purchase Cenveo stock, at market prices
with no discount but commission-free, through deductions from their cash
retainer and fees. Directors can purchase up to $30,000 of stock per
calendar quarter.
CASH COMPENSATION TO BOARD MEMBERS
Each of our non-employee directors receives an annual retainer of
$20,000. They also receive $1,500 for each board meeting attended in
person and $1,200 for each board meeting attended by telephone. Members
of our board committees receive $1,200 for each board committee meeting
attended in person and $1,000 for each board committee meeting attended
by telephone. In addition, the chair of the audit committee receives
$10,000 annually, the chair of the compensation committee receives $7,500
annually and the chair of the nominating and governance committee
receives $5,000 annually.
EQUITY COMPENSATION TO BOARD MEMBERS
On September 12, 2006, the same date of our 2006 equity grants to Company
employees, each of our non-employee directors received a grant of options
to purchase 5,000 shares of common stock at $20.55 per share, the closing
price of
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our common stock on the date of the grant. These options vest one year
from the date of issuance, provided the director has not ceased to be a
director of the Company for any reason prior to the vesting date. The
options vest immediately upon a change of control of the Company.
On the same date, each of our non-employee directors received 4,230
restricted stock units (RSUs). These RSUs vest one year from the date of
issuance, provided the director has not ceased to be a director of the
Company for any reason prior to the vesting date. Each RSU entitles the
holder to receive one share of our common stock on the vesting date.
Prior to vesting, RSUs do not carry any shareholder voting, dividend or
other rights. RSUs that do not vest are forfeited. The RSUs vest
immediately upon a change of control of the Company.
OTHER
Board members are reimbursed for expenses incurred in connection with
their attendance at board meetings and in complying with our corporate
governance policies. Cenveo also provides directors' and officers'
liability insurance and indemnity agreements for our directors. No other
compensation is provided to our directors.
NON-MANAGEMENT DIRECTORS' COMPENSATION FOR FISCAL 2006
The following table shows the cash compensation and value of equity
compensation received by each of our non-employee directors.
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NON-EQUITY
FEES EARNED OR INCENTIVE PLAN ALL OTHER
PAID IN CASH STOCK AWARDS OPTION AWARDS COMPENSATION COMPENSATION TOTAL
NAME ($)(1) ($)(2) ($)(3) ($) ($)(4) ($)
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Patrice M. Daniels $43,600 $64,925 $46,056 -- -- $154,581
Leonard C. Green $41,000 $64,925 $46,056 -- -- $151,981
Mark J. Griffin $44,600 $64,925 $46,056 -- -- $155,581
Robert T. Kittel $33,200 $64,925 $46,056 -- -- $144,181
Robert B. Obernier $40,000 $64,925 $46,056 -- -- $150,981
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(1) This column reports the amount of cash compensation earned
in 2006 for Board and committee service, including retainer
and meeting fees.
(2) This column represents the dollar amount recognized for
financial statement reporting purposes with respect to the
2006 fiscal year for the fair value of RSUs granted in 2006
and 2005, in accordance with Financial Accounting Standards
Board Statement of Financial Accounting Standard No. 123(R)
("SFAS 123R"). The grant date fair value of the award of
4,230 RSUs granted to each non-management director during
2006 was $86,926.50 (calculated using the closing price of
Cenveo stock on the grant date of $20.55). These awards were
granted on September 12, 2006 and are scheduled to vest on
the first anniversary of the date of grant. At December 31,
2006, each non-management director had 4,230 unvested RSUs
outstanding.
(3) This column represents the dollar amount recognized for
financial statement reporting purposes with respect to the
2006 fiscal year for the fair value of stock options granted
in 2006 and 2005, in accordance with SFAS 123R. The fair
value was estimated using the Black-Scholes option-pricing
model. The fair value per option was $10.72, based on
assumptions of 1.0 years expected life, expected volatility
of 0.512%, expected dividend yield of 0.00%, and a risk-free
interest rate of 4.74%. At December 31, 2006, each director
had 5,000 vested options and 5,000 unvested options
outstanding.
(4) None of our non-management directors received any
perquisites or compensation in 2006 other than cash fees and
equity awards.
-8 -
OWNERSHIP OF VOTING SECURITIES
This chart shows the common stock ownership for each director and
director nominee, the executive officers named on page 10 (the "named
executives"), and owners of more than five percent of our outstanding
common stock as of March 12, 2007. Each stockholder has direct ownership
and sole voting and investment power for the shares listed unless
otherwise noted. Unless otherwise specified, the address for each
stockholder named below is c/o Cenveo, Inc., 201 Broad Street, One
Canterbury Green, Stamford, CT 06901.
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AMOUNT & NATURE OF PERCENTAGE OF COMMON
BENEFICIAL OWNERS SHARES BENEFICIALLY OWNED STOCK OUTSTANDING
--------------------------------------------------------------------------------------------------------------
Robert G. Burton, Sr. 3,468,356 (a) 6.5%
Thomas W. Oliva 408,899 (b) *
Sean S. Sullivan 69,319 (c) *
Harry R. Vinson 41,981 (d) *
Timothy M. Davis 19,837 (e) *
Patrice M. Daniels 18,820 (f) *
Leonard C. Green 735,000 (g) 1.4%
Mark J. Griffin 15,220 (h) *
Robert T. Kittel 18,820 (i) *
Robert B. Obernier 28,920 (j) *
All directors and executive officers as a group 4,825,171 9.0%
Ronald Gutfleish 4,151,689 (k) 7.8%
FMR Corp. 6,405,328 (l) 12.0%
--------------------------------------------------------------------------------------------------------------
* Less than 1%.
(a) For Mr. Burton: includes (i) 412,501 shares owned by Mr.
Burton; (ii) 2,780,855 shares owned by Burton Capital
Management, LLC (Mr. Burton is the Chairman, CEO and
Managing Member of BCM, which was formed to invest in middle
market manufacturing companies that provide an opportunity
for increased shareholder value through intense management
and operational changes and organic and acquisitive growth);
(iii) 125,000 stock options that are vested and exercisable;
and (iv) 150,000 shares of unvested restricted stock. Does
not include 225,000 shares underlying unvested restricted
share unit awards or 575,000 shares issuable upon exercise
of unvested stock options.
(b) For Mr. Oliva: includes (i) 365,149 shares owned by Mr.
Oliva; and (ii) 43,750 stock options that are vested and
exercisable. Does not include 65,000 shares underlying
unvested restricted share unit awards or 256,250 shares
issuable upon exercise of unvested stock options.
(c) For Mr. Sullivan: includes (i) 31,819 shares owned by Mr.
Sullivan; and (ii) 37,500 stock options that are vested and
exercisable. Does not include 40,000 shares underlying
unvested restricted share unit awards or 187,500 shares
issuable upon exercise of unvested stock options.
(d) For Mr. Vinson: includes (i) 16,981 shares owned by Mr.
Vinson; and (ii) 25,000 stock options that are vested and
exercisable. Does not include 34,000 shares underlying
unvested restricted share unit awards or 140,000 shares
issuable upon exercise of unvested stock options.
(e) For Mr. Davis: includes (i) 10,087 shares owned by Mr.
Davis; (ii) 1,000 shares owned by his spouse; and (iii)
8,750 stock options that are vested and exercisable. Does
not include 20,000 shares underlying unvested restricted
share unit awards or 91,250 shares issuable upon exercise of
unvested stock options.
(f) For Ms. Daniels: includes (i) 13,820 shares owned by Ms.
Daniels; and (ii) 5,000 stock options that are vested and
exercisable. Does not include 4,230 shares underlying
unvested restricted share unit awards or 5,000 shares
issuable upon exercise of unvested stock options.
(g) For Mr. Green: includes (i) 584,120 shares owned by Mr.
Green; (ii) 5,000 stock options that are vested and
exercisable; (iii) 27,780 shares owned by his spouse; (iv)
52,100 shares owned by Dalled, Inc.; (v) 18,700 shares owned
by Jobel Management Corp.; (vi) 11,200 shares owned by
Market Investments, LP; (vii) 9,900 shares owned by Southern
States Investment Co., Inc.; (viii) 700 shares owned by
Altman Trust-Green Realty Associates; (ix) 11,000 shares
owned by Canal Corporation; and (x) 14,500 shares owned by
Founder, Inc. Mr. Green disclaims beneficial ownership of
the foregoing shares except to the extent of his pecuniary
interest
-9 -
therein. Includes 299,880 shares held in a margin account.
Does not include 4,230 shares underlying unvested restricted
share unit awards or 5,000 shares issuable upon exercise of
unvested stock options.
(h) For Dr. Griffin: includes (i) 10,220 shares owned by Dr.
Griffin; and (ii) 5,000 stock options that are vested and
exercisable. Does not include 4,230 shares underlying
unvested restricted share unit awards or 5,000 shares
issuable upon exercise of unvested stock options.
(i) For Mr. Kittel: includes (i) 8,820 shares owned by Mr.
Kittel; (ii) 5,000 shares owned by his spouse; and (iii)
5,000 stock options that are vested and exercisable. Does
not include 4,230 shares underlying unvested restricted
share unit awards or 5,000 shares issuable upon exercise of
unvested stock options.
(j) For Mr. Obernier: includes (i) 23,920 shares owned by Mr.
Obernier; and (ii) 5,000 stock options that are vested and
exercisable. Does not include 4,230 shares underlying
unvested restricted share unit awards or 5,000 shares
issuable upon exercise of unvested stock options.
(k) The address for Mr. Gutfleish is c/o Elm Ridge Capital
Management, LLC, 3 West Main Street, 3rd Floor, Irvington,
New York 10533. Mr. Gutfleish is the managing member of two
limited liability companies that each manages one or more
private investment funds that own our common stock. The
foregoing information is based solely on the Schedule 13G/A
filed by Mr. Gutfleish with the SEC on February 13, 2007.
(l) The address for FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02105. Fidelity Management & Research Company
is a registered investment adviser and a wholly owned
subsidiary of FMR Corp. and is the beneficial owner of
5,738,928 shares. Edward C. Johnson, III is the Chairman of
FMR Corp. As such, he may be deemed to be the beneficial
owner of the 5,738,928 shares beneficially owned by Fidelity
Management & Research Company. Fidelity International
Limited, or FIL, provides investment advisory and management
services to a number of non-U.S. investment companies and
certain institutional investors, and is the beneficial owner
of 666,400 shares. Edward C. Johnson, III is the Chairman of
FIL. As such, he may be deemed to be the beneficial owner of
the 666,400 shares beneficially owned by FIL. The foregoing
information is based solely on the Schedule 13G/A filed by
FMR Corp. and Mr. Johnson with the SEC on February 14, 2007.
EXECUTIVE OFFICERS
Please refer to pages 3 and 4 for the biographies of Mr. Burton, our
Chairman and Chief Executive Officer, and Mr. Oliva, our President.
SEAN S. SULLIVAN
Mr. Sullivan, 39, has served as Cenveo's Chief Financial Officer since
September 2005. He served as the Executive Vice President--Chief
Financial Officer of Spencer Press, Inc., a privately held printer that
produced catalogs, direct mail and general commercial print products,
from October 2004 until September 2005. Prior to that, he served as the
Executive Vice President of BCM from May 2003 to September 2004. Prior to
May 2003, Mr. Sullivan served as the Senior Vice President, Finance and
Corporate Development for Moore Corporation Limited from August 2001 to
June 2002. Prior to that, Mr. Sullivan served as the Vice President of
Mergers and Acquisitions for Engage, Inc., an enterprise marketing
software and interactive media company. Mr. Sullivan began his career at
Ernst & Young and held various positions in the audit and M&A groups from
1989 through 1998. Mr. Sullivan is a certified public accountant.
HARRY R. VINSON
Mr. Vinson, 46, has served as Cenveo's Senior Vice President, Purchasing
and Logistics since September 2005. From October 2003 until September
2005 he was the General Manager of Central Region Sheetfed Operations of
MAN Roland, a printing press manufacturer. From February 2002 until July
2003, Mr. Vinson served as Senior Vice President and General Manager of
the Publication and Directory Group at Moore Wallace (formerly Moore
Corporation Limited). From February 1990 until February 2002 he served in
various senior sales positions at Quebecor World (formerly World Color
Press).
TIMOTHY M. DAVIS
Mr. Davis, 52, has served as Cenveo's Senior Vice President, General
Counsel and Secretary since November 2005. From July 1989 until he joined
the Company, he was Senior Vice President, General Counsel and Secretary
of American Color Graphics, Inc., a commercial printing company.
-10 -
COMPENSATION OF EXECUTIVE OFFICERS
COMPENSATION DISCUSSION AND ANALYSIS
OVERVIEW
The goal of our executive compensation program is the same as our goal
for operating the company--to create long-term value for our
shareholders. Toward this goal, we have designed and implemented our
compensation programs with the following objectives:
* PAY FOR PERFORMANCE - All Or Nothing Bonuses
* establish a direct relationship between executive compensation and
our financial and operating performance;
* provide performance-based compensation (including equity awards)
that allow executive officers to earn rewards for maximizing
shareholder value;
* align the interests of our executives with those of our
shareholders;
* attract and retain the executives necessary for our long-term
success; and
* reward individual initiative and the achievement of specified goals.
Most of our compensation elements simultaneously fulfill one or more of
these objectives. The primary elements of our compensation program are
salary, annual incentive bonus, and equity. We also offer an employee
stock purchase plan, a 401(k) plan, severance protection, and certain
personal benefits. In deciding the type and amount of compensation for
each executive, we consider the Company's performance, the individual
executive's performance, compensation levels and equity awards by our
peers, the overall competitive environment for executives, the level of
compensation necessary to retain executive talent, our executives'
compensation at their prior employment, and the recommendations of senior
management.
Base salary is designed to be commensurate with the executive's scope of
responsibilities and management experience. Our annual bonus plan,
Management By Objectives, is designed to reward annual achievements and
effectiveness. Our equity compensation focuses on motivating and
challenging the executive to achieve superior, longer-term and sustained
results. It is our intent that more than one-half of the compensation
packages for our most senior executive officers, including the named
executive officers, be incentive-based. No bonus dollars are paid unless
--------------------------------
all financial objectives are achieved.
-------------------------------------
COMPENSATION OBJECTIVES
The objectives of our compensation program can be summarized as
performance, alignment, and retention. Our compensation program is
designed to achieve these goals as follows.
PERFORMANCE. Elements of compensation that depend upon the executive's
and the Company's performance include:
* Bonus: Our annual cash bonus is based solely on achievement by the
Company and the executive of pre-determined measures such as
non-GAAP EPS and Adjusted EBITDA (as defined on page 16) that have
been communicated to our investors. These dollars are paid on an all
or nothing basis, such that no bonus is paid unless the financial
targets are met.
* Equity Awards: Equity incentive compensation in the form of stock
options, restricted stock and restricted stock units (RSUs) will
have a value that is contingent upon the performance of the
Company's share price. In addition, no equity awards will be issued
unless we are on track to achieve our financial goals.
ALIGNMENT. We seek to align the interests of our executive officers with
those of our investors by evaluating executive performance on the basis
of key financial measurements that we believe closely correlate to
shareholder value, including non-GAAP EPS, and Adjusted EBITDA. These
factors represent a major component of the goals used to determine annual
bonuses. The element of compensation that most directly aligns the
interests of our executive officers with shareholders is equity incentive
compensation, which links a significant portion of compensation to
shareholder value because the total value of those awards over time
corresponds to stock price appreciation. Such alignment is also
facilitated by our employee stock purchase plan, which allows all of our
employees and directors to purchase shares of the Company's stock at
market prices, but without paying brokerage commissions, by means of
deductions from pay, and by our 401(k) plan, pursuant to which employees
may purchase shares of the Company's stock on a pre-tax basis. We do not
have a 401(k) match, except as required under existing collective
bargaining agreements.
-11 -
RETENTION. We attempt to retain our executives who meet our performance
standards by providing competitive compensation packages and by having
equity compensation awards vest over a four-year period. We also retain
our executives by rewarding exceptional performance with advancement
opportunities within the Company. Over 50 of our senior managers have
worked with Mr. Burton in other printing company turn-arounds.
IMPLEMENTING OUR OBJECTIVES
DETERMINING COMPENSATION. The Compensation Committee (the "Committee")
relies on its judgment in making compensation decisions, after reviewing
the performance of the Company and the recommendations of management and
evaluating an executive's performance during the year against established
goals, operational performance, business responsibilities, current
compensation arrangements and long-term potential to enhance shareholder
value. Specific factors affecting compensation decisions for our
executive officers, in accordance with the executive's expected and
accomplished role in each, include:
* key financial measurements such as non-GAAP EPS, Adjusted EBITDA and
cost savings plans, which are the measures specifically used in our
executive incentive bonus program;
* strategic objectives such as acquisitions and dispositions;
* promoting commercial excellence by continuously improving products
and services, being a leading market player and attracting and
retaining customers;
* achieving specific operational goals for the company or particular
business or business unit led by the named executive;
* achieving excellence in their organizational structure and among
their employees; and
* supporting our values by promoting a culture of integrity through
compliance with law and our ethics policies, as well as commitment
to diversity.
Although our compensation philosophy intends that more than one-half of
the compensation packages for our most senior executive officers be
incentive-based, we incorporate flexibility into our compensation
programs and in the assessment process to respond to and adjust for the
evolving business environment. We consider competitive market
compensation paid by other companies, but we do not attempt to maintain a
certain target percentile within a peer group or otherwise rely on that
data to determine executive compensation. In this regard, we consider the
executive compensation packages available at certain peers identified by
us. The companies we use to define the market for executive compensation
purposes include a broad range of printing and publishing companies
similar in revenue size to Cenveo, as well as certain other printing
companies that are our direct competitors. In addition, comparative
market compensation data are collected from general industry compensation
surveys.
We strive to achieve an appropriate mix between equity incentive awards
and cash payments in order to meet our objectives. Any apportionment goal
is not applied rigidly and does not control our compensation decisions;
we use it as another tool to assess an executive's total pay
opportunities and whether we have provided the appropriate incentives to
accomplish our compensation objectives. The magnitude and mix of
compensation elements are designed to reward recent results and motivate
long-term performance through a combination of cash and equity incentive
awards. We also seek to balance compensation elements that are based on
financial, operational and strategic metrics with others that are based
on the performance of the Company's stock.
ROLE OF COMPENSATION COMMITTEE AND CEO. The Committee oversees the
design, development and implementation of the compensation program for
the CEO and the other named executives. The Committee evaluates the
performance of the CEO and determines CEO compensation in light of the
goals and objectives of the compensation program. Although the Committee
makes all compensation decisions regarding the named executive officers
and approves the measurements relating to bonus payments and equity
awards, the Committee relies in part on the recommendations of the CEO in
its decision-making. The CEO receives and reviews formal self-appraisals
and departmental personnel appraisals from department heads and submits
them with his comments to the Committee for decision-making. The
---
financial goals for participants in the executive bonus program are the
-----------------------------------------------------------------------
same as the financial targets for the Company publicly announced to the
-----------------------------------------------------------------------
market by our CEO in our year-end earnings calls. These targets are
------------------------------------------------
approved by our full Board of Directors. The CEO also, in conjunction
with senior Human Resource executives, annually reviews the performance
of each of the executives participating in the executive bonus program,
the results of which also are submitted to the Committee. Notwithstanding
the CEO's active role in the Committee's compensation process, the
Committee evaluates all information and recommendations submitted to it
and independently makes its compensation determinations.
-12 -
ROLE OF COMPENSATION CONSULTANT. Neither the Company nor the Committee
has formally used the services of any compensation consultant in matters
affecting senior executive or director compensation.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS. Our CEO has an employment
agreement that, as amended in November 2006, provides for his employment
by Cenveo through December 31, 2010, subject to automatic one-year
renewals absent notice of non-renewal by either party at least 90 days
before the end of the term. The employment agreement, as amended, also
provides for an annual base salary of at least $1,000,001 and a target
bonus opportunity of 300% of base salary to be earned on an "all or
nothing" basis, so that our CEO will not be entitled to any bonus unless
all the target goals are satisfied, and certain personal benefits. Our
other named executives have employment agreements that provide for
severance in the event the Company terminates their employment without
cause or they terminate their employment for good reason. If the Company
terminates a named executive's employment "without cause," or if the
named executive terminates his employment for "good reason," each as
defined in the agreement, the executive's severance would include a lump
sum severance payment, COBRA coverage for a specified period and
immediate vesting of all outstanding stock options and other equity
grants, each in the amounts specified under "Employment Agreements" on
page 21.
We believe that providing this level of financial security is a key
factor in enabling us to attract and retain high-performing executives,
and also serves as protection to the Company upon termination of the
named executives' employment with the Company. The employment agreements
each contain non-competition and non-solicitation agreements on the part
of the executives that match or exceed the time period for which
severance is paid.
STOCK OWNERSHIP REQUIREMENTS. In order to ensure that the Company's
managers have a stake in the success of the Company, and to further align
management with the Company's other shareholders, the Company has
instituted a policy requiring that named executive officers and other
senior management of the Company own specified values of the Company's
stock. The levels are calculated as a multiple of the manager's base
salary, and managers are given five years to reach their ownership
levels. The levels are as follows: Chairman and CEO - five times base
salary; President, Executive Vice Presidents and Senior Vice Presidents -
three times base salary; and Vice Presidents - two times base salary.
Our CEO has purchased 3,118,356 shares of the Company's stock as of the
date of this proxy statement, all at market prices. In 2006 alone, he
invested over $3,400,000 in the Company's stock. In 2007 to date, our CEO
has invested over an additional $1,360,000 into the Company by purchasing
stock. Our other named executive officers have also invested in
substantial amounts of the Company's stock. For their current stock
ownership, see Ownership of Voting Securities on page 9.
EQUITY GRANT PRACTICES. The exercise price of each stock option awarded
to our senior executives and other employees under our long-term
incentive plan is the closing price of the Company's stock on the date of
grant. We do not expect to make grants more than once in any year, and
expect that they will be made on the same day of every year - September
12, the anniversary of the date the current management assumed control of
Cenveo. We do not re-price stock options.
TAX DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal Revenue
Code imposes a $1 million limit on the amount that a public company may
deduct for compensation paid to the company's CEO or any of certain other
executive officers. This limitation does not apply to compensation that
meets the requirements under Section 162(m) for "qualifying
performance-based" compensation (i.e., compensation paid only if the
individual's performance meets pre-established objective goals based on
performance criteria approved by shareholders). We consider ways to
maximize deductibility of executive compensation, but the compensation
committee retains the flexibility to compensate executive officers in a
manner commensurate with performance and the competitive environment for
executive talent regardless of the ultimate deductibility of such
compensation. Our current long-term equity incentive plan and the new
long-term equity incentive plan that shareholders are being asked to
approve at this year's annual meeting are structured to give the
compensation committee the flexibility to grant awards that qualify as
performance based under Section 162(m) as well as awards that do not
qualify.
ELEMENTS USED TO ACHIEVE COMPENSATION OBJECTIVES
ANNUAL CASH COMPENSATION
BASE SALARY. The Committee periodically reviews the base salary of the
Chief Executive Officer and his direct reports. The Committee considers
various factors in assessing specific salaries, including the executive's
historical
-13 -
performance and future potential, job content, level of responsibility,
comparisons with peers within and outside the Company, salary before
joining Cenveo, and accountability. Base salaries for senior officers of
the Company, including the named executive officers, are not routinely
increased, which is consistent with the Company's philosophy that a
significant part of executives' compensation should be contingent on the
achievement of performance objectives.
ANNUAL INCENTIVE BONUS - MANAGEMENT BY OBJECTIVES. Potential payout
amounts (expressed as a percentage of salary) under our Management by
Objectives (MBO) bonus plan are established by the Committee early in the
fiscal year, after assessing recommendations of management and
considering the factors used to determine base salary. At that time, the
Committee also approves the use of the Company-based financial goals that
apply to all of the named executives, as well as specific qualitative and
quantitative goals within each executive's area of responsibility. At the
end of each year, the CEO reviews the Company's full-year financial
results against the financial and other goals set by the Committee for
the year. No bonus is paid unless the Company-based financial goals are
-------------------------------------------------------------
satisfied. The CEO recommends to the Committee the specific bonus payout
---------
for each of the named executives other than himself based on the levels
of achievement of the criteria established by the Committee. The
Committee has the discretion to increase or decrease the bonus from the
CEO's recommendation.
The salaries and annual incentive bonuses paid to the named executive
officers in 2006 are discussed below and shown in the Summary
Compensation Table on page 17.
EQUITY AWARDS
STOCK OPTIONS, RESTRICTED STOCK AND RSUS. To further align the interests
of management with the interests of shareholders, our executive
compensation package includes stock option grants, restricted stock and
RSU awards. No stock awards will be made unless we are on track to
achieve our annual non-GAAP EPS and Adjusted EBITDA targets.
Options have a per share exercise price of 100% of the fair market value
of a share of our common stock on the date of grant and, accordingly, the
value of the option is dependent on the future market performance of the
common stock. The number of shares of common stock subject to options
granted to our executive officers is generally based on the salary,
responsibilities and performance of each officer. In addition, the
compensation committee reviews the number and value of options granted by
selected peer companies in making option grants to our executive
officers.
Restricted shares are shares of common stock that are subject to
forfeiture. The shares vest on the basis of performance and/or continued
employment as determined in advance by the Committee. The shares
generally are forfeited by participants if they leave Cenveo before the
shares have vested. 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 until
they have vested.
Each RSU entitles the holder to receive one share of common stock on the
date specified in the award agreement (generally the vesting date). The
RSUs vest on the basis of performance or continued employment, as
determined by the Committee. A participant is credited with dividend
equivalents on any vested RSUs when dividends are paid to shareholders,
but is not entitled to dividend equivalents on unvested RSUs. RSUs
generally may not be transferred prior to the delivery of the common
stock.
When determining the appropriate combination of stock options, restricted
stock and RSUs, our goal is to weigh the cost of these grants with their
potential benefits as a compensation tool. We believe that providing
combined grants of stock options, on the one hand, and restricted stock
and/or RSUs on the other effectively balances our objective of focusing
the named executives on delivering long-term value to our shareholders,
with our objective of providing value to the executives with the equity
awards. Stock options only have value to the extent the price of the
Company's stock on the date of exercise exceeds the exercise price on the
grant date, and thus are an effective compensation element only if the
stock price increases over the term of the award. In this sense, stock
options are a motivational tool. Unlike stock options, restricted stock
and RSUs offer executives the opportunity to receive shares of the
Company's stock on the date the restriction lapses. In this regard, RSUs
serve both to reward and retain executives, as some of the RSUs we have
granted vest upon satisfaction of performance targets and others vest
over an extended period of time and the value of the RSUs is linked to
the price of the Company's stock on the date the RSU vests. Unvested
stock options and RSUs are forfeited if the executive voluntarily leaves
the Company and generally are
-14 -
vested upon a change in control of the Company or if the Company
terminates the executive's employment without cause. The compensation
committee has discretion to accelerate the vesting of stock options, but
not RSUs.
The allocation of the number and mix of stock options, restricted shares
and RSUs issued to a particular executive is not based on a rigid
formula, but rather is determined on an individual basis based on the
variety and mix of equity grants by our peers, a consideration of the
respective incentives created by the various equity grants with respect
to the particular executive, his particular role at the Company and other
factors.
During 2006, Mr. Burton vested in 50,000 shares of restricted stock and
25,000 RSUs. Also during 2006, Mr. Oliva, Mr. Sullivan and Mr. Vinson
vested in 20,000, 15,000 and 10,000 RSUs, respectively, based on
achievement of a specific cost-saving objective. In addition, Mr. Burton,
Mr. Oliva, Mr. Sullivan, Mr. Vinson and Mr. Davis vested in 125,000,
43,750, 37,500, 25,000 and 8,750 stock options, respectively, in 2006.
All of these awards were granted in 2005. The value realized by each
executive upon such vesting is set forth in the Option Exercises and
Stock Vested Table on page 19. During 2006, each of the named executives
was granted stock options and RSUs. The number of shares subject to such
awards and their full value for financial reporting purposes is set forth
in the Grants of Plan-Based Awards Table on page 18.
OTHER ELEMENTS
STOCK PURCHASE PLAN. In 2005, we adopted an employee stock purchase plan
that allows our employees, including executives, to purchase our common
stock at market prices on a monthly basis through payroll deductions. In
2007, we amended the plan to allow participation by our non-employee
directors. Payroll deductions may not exceed $10,000 per month. The
Company does not subsidize the stock purchases under the plan, except by
payment of brokerage commissions. Mr. Burton is purchasing stock through
the plan at the $10,000 per month level.
OTHER COMPENSATION. We provide our named executives with other benefits,
reflected in the All Other Compensation column in the Summary
Compensation Table on page 17, that we believe are reasonable,
competitive and consistent with the company's overall executive
compensation program. We believe that these benefits generally allow our
executives to work more efficiently. The costs of these benefits, which
included car allowances and life insurance premiums, constitute only a
small percentage of each named executive's total compensation.
PENSION AND RETIREMENT BENEFITS
NO RETIREMENT COMPENSATION FOR EXECUTIVES. Our CEO and other named
executives receive no pension or other retirement payments or
contributions.
NO DEFERRED COMPENSATION PLAN FOR EXECUTIVES. We have no deferred
compensation plan for our named executives.
401(K) PLAN. We have a 401(k) plan to which all our employees can
contribute a portion of their compensation on a pre-tax basis. A plan
participant can direct the investment of contributions into one of twelve
mutual funds and other investment vehicles, including the Company's
common stock. We do not match employee contributions under this plan,
except as required under existing collective bargaining agreements.
COMPENSATION FOR THE NAMED EXECUTIVES IN 2006
NO AUTOMATIC INCREASES. No named executive officer is entitled to any
automatic or contractual increase in compensation. Notwithstanding the
strong performance of the Company against key financial and operational
measurements in 2006, the Committee did not make changes to the base
salary and bonus opportunities of its named executive officers during
that year, except in connection with changes in employment terms: For Mr.
Oliva, upon his promotion to President of the Company in January 2006,
and for Mr. Burton, upon his extension of his employment agreement. Upon
his promotion, Mr. Oliva's incentive bonus target was increased to
$675,000. Our other named executives received no increases in 2006 in
their base salaries or incentive bonus targets, which remain at the level
originally established upon each of their initial hiring in 2005. A more
detailed analysis of our financial and operational performance is
contained in the Management's Discussion & Analysis section of our 2006
Annual Report filed with the SEC.
EXTENSION OF CEO EMPLOYMENT AGREEMENT. Due to the strong performance of
the Company in 2006 and Mr. Burton's extension of his employment term
with the Company, in November 2006 the Committee increased our CEO's base
annual salary from $950,000 to $1,000,001 and increased his annual
incentive bonus opportunity from
-15 -
200% to 300% of his base salary. These increases were in consideration
for Mr. Burton's agreement to extend his employment agreement through
2010 in order to demonstrate to investors his long-term commitment to
Cenveo. In determining the amount of compensation to provide in the
amendment, the compensation committee took into account both compensation
of other printing industry CEO's and Mr. Burton's performance at Cenveo,
in particular that he had achieved all of his two-year objectives for
turning around the Company in only a year. The Committee believes that
Cenveo and its shareholders have benefited greatly from Mr. Burton's
vision, direction and day to day contribution at Cenveo. Since Mr.
Burton's arrival, the Company's stock price has increased from $9.54 per
share on September 12, 2005 to $24.75 a share on March 12, 2007, as
listed on the New York Stock Exchange.
2006 BONUSES. Our named executives' annual bonus is 100%
performance-based and is earned on an "all or nothing" basis under the
guidelines of our MBO plan. That is, in order for each executive to
receive any bonus for 2006, the Company had to achieve all of the
following financial goals, which are the same as the targets for the
Company communicated to investors on the Company's investor call on March
1, 2006:
* Adjusted EBITDA $145,887,000
* Adjusted EBITDA Margin 9.5%
* Non-GAAP EPS $.50
Note regarding non-GAAP financial measures: The Company defines Adjusted
EBITDA as earnings before interest, taxes, depreciation and amortization,
excluding restructuring, impairment, and other charges, gain (loss) on
sale of non-strategic businesses, divested operations EBITDA, additional
stock compensation expenses on the adoption of SFAS 123R, loss on early
extinguishment of debt, and income (loss) from discontinued operations,
net of taxes. The Company defines Adjusted EBITDA Margin as Adjusted
EBITDA divided by net sales. Non-GAAP EPS is Non-GAAP net income per
diluted share. Non-GAAP net income excludes restructuring, impairment and
other charges, gain (loss) on sale of non strategic businesses, loss on
early extinguishment of debt, the income tax benefit on the recognition
of deferred tax assets, and income (loss) from discontinued operations,
net of taxes.
The Company surpassed all of the financial targets set forth above. To
provide a context for these goals, our CEO and our other named executives
arrived at Cenveo in late 2005. The Company had negative EPS in fiscal
2005 and 2004. Accordingly, accomplishment of the above targets was far
from assured.
Even with these financial targets met, the bonuses of our CEO and other
named executives were subject to reduction from their full bonus
opportunities. A portion of their bonuses was linked to the
accomplishment of specific goals within each executive's area of
responsibility. For our CEO, these other goals included cost savings
requirements, building a management team that provides growth
opportunities for all, including women and minorities, and providing
leadership to grow Cenveo to be an industry leader in areas including
customer service and stock price performance. For our President, these
goals included operations-specific management, sales, and productivity
initiatives. For our CFO, these goals included capital structure
improvements and development of the Company's finance employees. For our
SVP Purchasing and Logistics, these goals included centralization of the
Company's purchasing function and specific rebate targets (which are
confidential but which the Company would characterize as challenging).
For our General Counsel, these goals included resolution of disputes and
satisfaction of corporate governance and compliance objectives. As the
financial and other goals were achieved by all named executives, each
earned their full bonus potential in respect of fiscal 2006.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the above
Compensation Discussion and Analysis with the Company's management. Based
on the review and discussions, the Committee recommended to the Company's
Board of Directors that the Compensation Discussion and Analysis be
included in the Company's Annual Report on Form 10-K for 2006 and this
proxy statement. This report is provided by the following independent
directors, who comprise the committee:
THE COMPENSATION COMMITTEE
Patrice M. Daniels (Chair)
Leonard C. Green
Mark J. Griffin
Robert B. Obernier
-16 -
SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN
PENSION
VALUE
NON- AND NON-
EQUITY QUALIFIED
INCENTIVE DEFERRED
PLAN COMPEN- ALL OTHER
STOCK OPTION COMPEN- SATION COMPEN-
NAME AND BONUS AWARD(S) AWARDS SATION EARNINGS SATION TOTAL
PRINCIPAL POSITION YEAR SALARY (1) (2) (3) (4) (5) (6) (7)
---------------------------------------------------------------------------------------------------------------------------------
ROBERT G. BURTON 2006 $957,387 -- $1,784,166 $1,227,343 $3,000,003 -- $14,544 $6,983,443
Chairman and Chief
Executive Officer
---------------------------------------------------------------------------------------------------------------------------------
THOMAS W. OLIVA 2006 $500,000 -- $563,010 $586,621 $675,000 -- $23,999 $2,348,630
President
---------------------------------------------------------------------------------------------------------------------------------
SEAN S. SULLIVAN 2006 $375,000 -- $368,437 $411,035 $425,000 -- $19,827 $1,599,299
Chief Financial Officer
---------------------------------------------------------------------------------------------------------------------------------
HARRY R. VINSON 2006 $250,000 -- $290,731 $316,855 $225,000 -- $19,855 $1,102,441
Senior Vice President,
Purchasing & Logistics
---------------------------------------------------------------------------------------------------------------------------------
TIMOTHY M. DAVIS 2006 $335,000 -- $123,018 $243,705 $175,000 -- $19,669 $896,392
Senior Vice President,
General Counsel and
Secretary
---------------------------------------------------------------------------------------------------------------------------------
(1) 100% of our annual cash bonus is performance-based, and is
therefore included under the "Non-Equity Incentive Plan
Compensation" column. The requirements for receiving this
bonus are described in footnote (4) to this table and
elsewhere in this proxy statement.
(2) Represents the dollar amount recognized for financial
statement reporting purposes with respect to fiscal 2006 for
the fair value of restricted stock and RSUs granted in 2006
and 2005, in accordance with SFAS 123R. Pursuant to SEC
rules, the amounts shown exclude the impact of estimated
forfeitures related to service-based vesting conditions.
Fair value is calculated using the closing price of Cenveo
stock on the date of grant. For additional information,
refer to note 12 of the consolidated financial statements in
the Company's Annual Report on Form 10-K for the year ended
December 31, 2006. These amounts reflect the company's
accounting expense for these awards, and do not correspond
to the actual value that will be recognized by the named
executives.
(3) Represents the dollar amount recognized for financial
statement reporting purposes with respect to fiscal 2006 for
the fair value of stock options granted in 2006 and 2005, in
accordance with SFAS 123R. Pursuant to SEC rules, the
amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. For additional
information on the valuation assumptions, refer to note 12
of the consolidated financial statements in the Company's
Annual Report on Form 10-K for the year ended December 31,
2006. These amounts reflect the company's accounting expense
for these awards, and do not correspond to the actual value
that will be recognized by the named executives.
(4) This column shows the annual bonuses earned for 2006, which
are completely performance-based and are governed by our
Management by Objectives (MBO) plan. The bonuses are earned
----------------------
on an "all or nothing" basis that requires every financial
----------------------------------------------------------
target in an executive's MBO statement to be achieved before
------------------------------------------------------------
the executive is eligible for any portion of such
-------------------------------------------------
executive's bonus. For 2006 these financial targets included
------------------
the Adjusted EBITDA, non-GAAP EPS and Adjusted EBITDA Margin
targets for the entire Company that were communicated to
investors on the Company's quarterly investor call on March
1, 2006. See "2006 Bonuses" on page 16 for the target
numbers that were required to be obtained for 2006.
(5) We pay no pension or other retirement compensation to, and
have no deferred compensation plan for, our named
executives.
(6) This column reports perquisites of life insurance premiums
and car allowances.
(7) These total amounts include the company's accounting expense
in 2006 for equity awards granted in 2006 and 2005, and,
accordingly, do not correspond to the actual value that will
be recognized by the named executives.
-17 -
GRANTS OF PLAN-BASED AWARDS IN 2006
The following table provides information about equity and non-equity
awards granted to the named executives in 2006.
-----------------------------------------------------------------------------------------------------------------------
ESTIMATE POSSIBLE ALL OTHER ALL OTHER
PAYOUTS UNDER NON- STOCK AWARDS: OPTION AWARDS: EXERCISE OR FULL
EQUITY INCENTIVE NUMBER OF NUMBER OF BASE PRICE GRANT DATE
PLAN AWARDS(1) SHARES OF SECURITIES OF OPTION FAIR VALUE
GRANT -------------------- STOCK OR UNDERLYING AWARDS(4) OF EQUITY
NAME DATE TARGET UNITS(2) OPTIONS(3) (PER SHARE) AWARDS(5)
-----------------------------------------------------------------------------------------------------------------------
Robert G. Burton -- $3,000,003
9/12/06 150,000 $3,082,500
9/12/06 200,000 $20.55 $1,908,000
-----------------------------------------------------------------------------------------------------------------------
Thomas W. Oliva -- $675,000
9/12/06 65,000 $1,335,750
9/12/06 125,000 $20.55 $1,192,500
-----------------------------------------------------------------------------------------------------------------------
Sean S. Sullivan -- $425,000
9/12/06 40,000 $822,000
9/12/06 75,000 $20.55 $715,500
-----------------------------------------------------------------------------------------------------------------------
Harry R. Vinson -- $225,000
9/12/06 34,000 $698,700
9/12/06 65,000 $20.55 $620,100
-----------------------------------------------------------------------------------------------------------------------
Timothy M. Davis -- $175,000
9/12/06 20,000 $411,000
9/12/06 65,000 $20.55 $620,100
-----------------------------------------------------------------------------------------------------------------------
(1) This column shows the potential value of the payout for each
named executive under our incentive bonus plan that was
available if the executive's target goals were satisfied for
2006. The potential payouts were performance-driven and
therefore completely at risk. No bonus would be paid unless
certain financial targets for the Company and the
executive's division, as applicable, were met. Even if the
financial targets were met, the target bonus could be
subject to reduction if certain other non-financial goals
were not met. The business measurements, performance goals
and salary for determining the payout are described under
the heading "2006 Bonuses" on page 16.
(2) This column shows the number of RSUs granted in 2006 to the
named executives. Each award vests 25% per year over four
years beginning September 12, 2007, the first anniversary of
the date of grant.
(3) This column shows the number of stock options granted in
2006 to the named executives. These options vest and become
exercisable 25% per year over four years beginning September
12, 2007, the first anniversary of the date of grant.
(4) This column shows the exercise price for the stock options
granted, which was the closing price of Cenveo stock on the
date of grant.
(5) This column shows the full grant date fair value of the RSUs
and stock options under SFAS 123R granted to the named
executives in 2006. Generally, the full grant date fair
value is the total amount that the Company would expense in
its financial statements over the award's vesting schedule.
For RSUs, fair value is calculated using the closing price
of Cenveo stock on the grant date ($20.55). For stock
options, fair value is calculated using the Black Scholes
value on the grant date ($9.54). For additional information
on the valuation assumptions for these awards, see note 12
of the consolidated financial statements in the Company's
Annual Report on Form 10-K for the year ended December 31,
2006. These amounts reflect the Company's total accounting
expense over the four year vesting period, and do not
correspond to the actual value that will be recognized by
the named executives. Actual amounts received by our
executives will depend on our executives' continued
employment through the vesting period and our stock price
when the executives ultimately sell the stock.
-18 -
OUTSTANDING EQUITY AWARDS AT 2006 FISCAL YEAR-END
The following table provides information on the current holdings of stock
options and stock awards by the named executives. This table includes
unexercised and unvested option awards; unvested RSUs; and unvested
restricted stock. Each equity grant is shown separately for each named
executive. Each grant shown in the table vests 25% per year over four
years beginning on the first anniversary of the date of grant, except
that each October 27, 2005 grant vests 25% per year over four years
beginning on September 12, 2006. The market value of the stock awards
shown in the table is based on the closing market price of our stock on
December 29, 2006, the last business day of the fiscal year, which was
$21.20.
----------------------------------------------------------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
--------------------------------------------------- --------------------------------
NUMBER OF NUMBER OF
SECURITIES SECURITIES NUMBER MARKET VALUE
UNDERLYING UNDERLYING OF SHARES OR OF SHARES OR
UNEXERCISED UNEXERCISED OPTION OPTION UNITS OF STOCK UNITS OF STOCK
GRANT OPTIONS- OPTIONS- EXERCISE EXPIRATION THAT HAVE THAT HAVE
NAME DATE EXERCISABLE UNEXERCISABLE PRICE DATE NOT VESTED(1) NOT VESTED
----------------------------------------------------------------------------------------------------------------------------------
Robert G. Burton 10/27/2005 125,000 375,000 $9.52 10/27/2012 150,000 $3,180,000
10/27/2005 -- -- -- -- 75,000 $1,590,000
9/12/2006 0 200,000 $20.55 9/12/2012 150,000 $3,180,000
----------------------------------------------------------------------------------------------------------------------------------
Thomas W. Oliva 10/27/2005 43,750 131,250 $9.52 10/27/2012 -- --
9/12/2006 0 125,000 $20.55 9/12/2012 65,000 $1,378,000
----------------------------------------------------------------------------------------------------------------------------------
Sean S. Sullivan 10/27/2005 37,500 112,500 $9.52 10/27/2012 -- --
9/12/2006 0 75,000 $20.55 9/12/2012 40,000 $848,000
----------------------------------------------------------------------------------------------------------------------------------
Harry R. Vinson 10/27/2005 25,000 75,000 $9.52 10/27/2012 -- --
9/12/2006 0 65,000 $20.55 9/12/2012 34,000 $720,800
----------------------------------------------------------------------------------------------------------------------------------
Timothy M. Davis 11/18/2005 8,750 26,250 $11.98 11/18/2012 -- --
9/12/2006 0 65,000 $20.55 9/12/2012 20,000 $424,000
----------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Burton's 150,000 unvested shares granted on 10/27/2005
are restricted stock. All other numbers in this column are
unvested RSUs.
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2006
This table shows the options exercised and the restricted stock and RSUs
that vested in 2006.
-------------------------------------------------------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
------------------------------------ -------------------------------------
NUMBER OF NUMBER OF
SHARES ACQUIRED VALUE REALIZED SHARES ACQUIRED VALUE REALIZED
NAME ON EXERCISE(1) ON EXERCISE ON VESTING ON VESTING(4)
-------------------------------------------------------------------------------------------------------------------------------
Robert G. Burton -- -- 50,000(2) $1,027,500
25,000(2) $513,750
-------------------------------------------------------------------------------------------------------------------------------
Thomas W. Oliva -- -- 20,000(3) $397,000
-------------------------------------------------------------------------------------------------------------------------------
Sean S. Sullivan -- -- 15,000(3) $297,750
-------------------------------------------------------------------------------------------------------------------------------
Harry R. Vinson -- -- 10,000(3) $198,500
-------------------------------------------------------------------------------------------------------------------------------
Timothy M. Davis -- -- -- --
-------------------------------------------------------------------------------------------------------------------------------
(1) None of our named executive officers exercised any options
in 2006.
(2) 50,000 are shares of restricted stock and 25,000 are
restricted stock units. Each represents vesting of 25% of
stock awards granted to Mr. Burton on October 27, 2005.
(3) Restricted Stock Units. Represents vesting of 100% of awards
granted on October 27, 2005. These were performance-based
awards that vested upon the achievement by the Company of a
cost savings target.
(4) Amounts reflect the market price of the stock on the date
the award vested. Mr. Burton's stock awards vested on
9/12/2006; closing price of Cenveo stock on that date was
$20.55 per share. The stock awards of Messrs. Oliva,
Sullivan and Vinson vested on 12/15/2006; closing price of
Cenveo stock on that date was $19.85 per share.
-19 -
POTENTIAL PAYMENTS UPON TERMINATION
The following table describes the potential payments and benefits that
each of the named executive officers would be entitled to receive upon
termination of employment under various circumstances and upon a change
of control. In each case, the table assumes the executive's termination
or the change of control occurred on December 31, 2006. The table does
not include payments the executive would be entitled to receive in the
absence of one of these specified events, such as from the exercise of
previously-vested stock options (which amount can be calculated from the
Outstanding Equity Awards at Fiscal Year-End Table on page 19).
--------------------------------------------------------------------------------------------------------------------------
ACCELERATED TOTAL
CASH SEVERANCE CONTINUATION OF VESTING OF EQUITY TERMINATION
PAYMENT MEDICAL BENEFITS(1) AWARDS(2) BENEFITS
--------------------------------------------------------------------------------------------------------------------------
ROBERT G. BURTON, SR.
*Voluntary Resignation $0 $0 $0 $0
*Retirement $0 $0 $0 $0
*Death $0 $0 $3,180,000 $3,180,000
*Disability $2,000,002 $0 $3,180,000 $5,180,002
*Without Cause or For Good Reason $8,061,494 $18,120 $3,180,000 $11,259,614
*Change of Control $0 $0 $12,460,000 $12,460,000
--------------------------------------------------------------------------------------------------------------------------
THOMAS W. OLIVA
*Voluntary Resignation $0 $0 $0 $0
*Retirement $0 $0 $0 $0
*Death $0 $0 $0 $0
*Disability $0 $0 $0 $0
*Without Cause or For Good Reason $1,797,282 $19,692 $2,992,250 $4,809,224
*Change of Control $0 $0 $2,992,250 $2,992,250
--------------------------------------------------------------------------------------------------------------------------
SEAN S. SULLIVAN
*Voluntary Resignation $0 $0 $0 $0
*Retirement $0 $0 $0 $0
*Death $0 $0 $0 $0
*Disability $0 $0 $0 $0
*Without Cause or For Good Reason $1,024,784 $16,410 $2,210,750 $3,251,944
*Change of Control $0 $0 $2,210,750 $2,210,750
--------------------------------------------------------------------------------------------------------------------------
HARRY R. VINSON
*Voluntary Resignation $0 $0 $0 $0
*Retirement $0 $0 $0 $0
*Death $0 $0 $0 $0
*Disability $0 $0 $0 $0
*Without Cause or For Good Reason $494,832 $13,128 $1,639,050 $2,147,010
*Change of Control $0 $0 $1,639,050 $1,639,050
--------------------------------------------------------------------------------------------------------------------------
TIMOTHY M. DAVIS
*Voluntary Resignation $0 $0 $0 $0
*Retirement $0 $0 $0 $0
*Death $0 $0 $0 $0
*Disability $0 $0 $0 $0
*Without Cause or For Good Reason $528,883 $13,128 $708,275 $1,250,286
*Change of Control $0 $0 $708,275 $708,275
--------------------------------------------------------------------------------------------------------------------------
(1) Reflects payment of COBRA premiums under the executives'
employment agreements.
(2) Reflects the value of restricted stock and RSUs whose
vesting is accelerated on the termination of employment and
the option spread of stock options whose vesting is
accelerated on the termination of employment, in each case
based on the closing price of the Company's common stock of
$21.20 on December 29, 2006, the last business day of the
fiscal year.
-20 -
EMPLOYMENT AGREEMENTS. The Company is party to employment agreements with
Messrs. Burton, Oliva, Sullivan, Vinson and Davis (collectively, the
"Employment Agreements"). The Employment Agreements provide for
termination of the executive's employment at any time by the Company with
or without cause and by the executive with or without good reason. The
executive would be entitled to a lump sum severance payment and certain
health and welfare benefits upon the occurrence of certain events: (1)
the Company's termination of the executive's employment for reasons other
than for cause or (2) the executive's termination of his employment for
good reason. Under the Employment Agreements, the lump sum severance
payment for Mr. Burton would be equal to two times his annualized total
compensation, for Mr. Oliva, one and one-half times his annualized total
compensation, for Mr. Sullivan, one and one-quarter times his annualized
total compensation, and for Messrs. Vinson and Davis, one times their
annualized total compensation. Annualized total compensation is defined
as the executive's base salary, target bonus opportunity and annual car
allowance, at the effective rate immediately prior to the executive's
termination date. The executive would also be reimbursed for "COBRA"
coverage under the company medical and dental plans for a period of up to
12 months for Mr. Vinson and Mr. Davis, 15 months for Mr. Sullivan, 18
months for Mr. Oliva and 24 months for Mr. Burton. For Messrs. Oliva,
Sullivan, Vinson and Davis, all outstanding stock options and other
equity grants would immediately vest. Mr. Burton's employment agreement
does not provide for accelerated vesting of equity awards upon
termination of employment; however, his restricted stock would vest under
the terms of the grant. There is no gross-up for excise taxes in any of
the Employment Agreements.
In the event an executive's employment is terminated for any other
reason, including death, disability or upon voluntary termination by the
executive without good reason, the executive is entitled to only receive
his earned but unpaid salary through the date of termination plus all
other amounts (other than any severance benefits) payable under the terms
of the Company's benefit plans through the date of termination. However,
if Mr. Burton's employment is terminated on account of a "disability," he
will be paid a lump sum equal to two times his base salary in effect at
the time of such termination under his employment agreement.
The employment agreements each contain non-competition and
non-solicitation of employees agreements on the part of the executives
that match the time period for which severance is paid (12 months for Mr.
Vinson and Mr. Davis, 15 months for Mr. Sullivan, 18 months for Mr. Oliva
and 24 months for Mr. Burton).
DEFINITIONS
"Cause" is defined for purposes of the Employment Agreements to mean:
* willful and continued failure of the executive to perform his duties
under the Employment Agreement,
* willful engagement in illegal conduct or misconduct materially
damaging to the Company and its subsidiaries,
* conviction of, or pleading nolo contendere to a felony, or
* dishonesty or misappropriation relating to the Company and failure
to cure all such failures within 30 days following written notice
thereof from the Company (and an affirmative vote by two-thirds of
the Board in the case of Mr. Burton).
"Good Reason" is defined for purposes of the Employment Agreements to
mean:
* an adverse change in the executive's functions, duties,
responsibilities, titles, or offices (and in the case of Mr. Oliva,
a requirement to report to anyone other than the CEO or the Board of
Directors),
* reduction in executive's salary, target bonus or other incentive
opportunities,
* relocation of the executive's place of employment more than 35
miles,
* a material breach of the Employment Agreement by the Company or
notification by the Company of its intention not to perform a
material obligation under the Employment Agreement,
* failure to maintain participation of the executive in the Company's
employee benefits program at a level comparable to executives in
similar positions,
* in Mr. Burton's agreement "Good Reason" also means:
* failure of a successor company to assume the Employment
Agreement,
* failure to provide office space, related facilities and support
personnel appropriate for the executive's responsibilities and
position, and
* without executive's prior written consent, removal of or failure
to nominate, re-elect or re-appoint the executive to the Board,
or failure by the Company to renew the Employment Agreement.
-21 -
REPORT OF THE AUDIT COMMITTEE
The Board has determined that all members of Cenveo's audit committee are
independent directors. The audit 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 on page 6. The
full responsibilities of the audit committee are described in its
charter, a copy of which can be accessed on our website at www.cenveo.com
under "Investors -- Governance."
Management is responsible for internal controls and the financial
reporting process, including the system of internal controls over
financial reporting. 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 audit committee has reviewed and discussed Cenveo's audited
consolidated financial statements and the Company's internal controls
over financial reporting with management and Cenveo's independent
auditor. The audit committee has also discussed with Cenveo's independent
auditor 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 audit
committee engaged independent legal counsel to review, assess and make
recommendations on procedures required by the Sarbanes-Oxley Act. The
audit 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. In 2006, the audit committee also held a
continuing education session for its members.
At each of its regular meetings in 2006, the audit committee met with
Ernst & Young, Cenveo's independent auditor for fiscal 2006, and the
senior members of Cenveo's financial management team.
The audit committee reviewed with the financial management team:
* overall audit scopes and plans,
* results of internal and external audit examinations,
* management's discussion and analysis of financial condition and
results of operations contained in Cenveo's quarterly and annual
reports,
* evaluations of Cenveo's internal controls by management and Ernst &
Young, and
* quality of Cenveo's financial reporting.
In particular, the audit 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 audit committee considered the need to ensure the independence of
Cenveo's auditors while recognizing that in certain situations Cenveo's
independent auditor 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 Cenveo's independent
auditor for audit services must be pre-approved. The audit committee's
charter allows a general pre-approval by the audit committee of
audit-related services without a specific case-by-case consideration of
each service to be performed by Cenveo's independent auditor. The audit
committee's charter requires that any other services, including any
permitted non-audit services, be approved by the audit committee or by an
audit committee member. The audit committee then communicates its
approval to management. All audit and non-audit services performed by
Ernst & Young during 2006 were pre-approved under these procedures.
The audit committee reviewed and discussed Cenveo's 2006 audited
financial statements with management. 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.
-22 -
The audit 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 audit committee
asked Ernst & Young to address several questions that audit committee
members believe are particularly relevant to the audit committee's
oversight, including whether:
* 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,
* 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,
* Cenveo has implemented internal controls and internal audit
procedures that are appropriate for it, and
* Ernst & Young had discovered any accounting adjustments made by
management during the year that would have been more properly
reflected in prior year results.
Based on the audit committee's review and discussions with management and
Ernst & Young referenced in this report and under Auditor Independence on
page 24, management's report of its assessment of the effectiveness of
the Company's internal control over financial reporting and Ernst &
Young's audit report of the Company's internal control over financial
reporting, and Ernst & Young's audit report on the Company's consolidated
financial statements, 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, 2006, for filing with the Securities and Exchange
Commission.
RESPECTFULLY SUBMITTED:
Leonard C. Green (Chair)
Patrice M. Daniels
Mark J. Griffin
Robert T. Kittel
Robert B. Obernier
-23 -
INDEPENDENT PUBLIC AUDITORS
The audit committee selected Deloitte & Touche LLP as our independent auditors
for 2007. Representatives of Deloitte & Touche will be present at our annual
meeting and will be available to respond to appropriate questions. They will
have the opportunity to make a statement if they desire to do so.
Representatives of Ernst & Young, our former auditors, are not expected to be
present at our annual meeting.
FEES
The following table shows the fees we paid to Ernst & Young, our former
auditors, in 2006 and 2005:
2006 2005
---------- ----------
Audit fees(1) $1,509,017 $1,383,852
Audit-related fees(2) 649,379 48,818
Tax fees(3) 50,000 28,000
All other fees -- --
---------- ----------
Total $2,208,396 $1,460,670
(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. Also includes fees
relating to the audit of our Canadian subsidiary, Supremex,
in connection with its sale. In addition, these fees include
the audit of our internal controls over financial reporting
and of management's assessment of these controls.
(2) For audits of our employee benefit plans in 2006 and 2005
and due diligence services rendered in connection with
acquisitions in 2006 and 2007.
(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" may have had on the independence of
Ernst & Young. These fees amounted to approximately 1.2% of our total
fees paid to Ernst & Young in 2006 and approximately 2.0% of our total
fees paid in 2005. 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 and the letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions With Audit Committees), and the committee discussed with
Ernst & Young their independence.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
SETTLEMENT AND GOVERNANCE AGREEMENT. On September 9, 2005, Cenveo's
former management entered into a settlement and governance agreement with
Burton Capital Management and Robert G. Burton, Sr. Pursuant to the
settlement and governance agreement, Cenveo's incumbent board of
directors approved a reconstituted board of directors. This agreement was
filed as an exhibit to the Company's Form 8-K filed with SEC on September
12, 2005.
INDEMNITY AGREEMENTS. Cenveo has entered into indemnity agreements with
each executive officer that provide that Cenveo will indemnify the
executives in lawsuits brought against any executive in his or her
capacity as an officer of Cenveo.
POLICY. The Company's policy requires that all related person transactions
required to be disclosed by SEC rules be approved by at least three of the
Company's disinterested directors. This policy is set forth in the
Settlement and Governance Agreement. In reviewing any such transactions, the
disinterested directors consider the benefit of the transaction to the
Company; whether the transaction involves standard prices, rates or charges;
the nature of the related person's interest in the transaction; the
materiality of the transaction to each party; whether the transaction might
affect the status of a director as independent under the independence
standards of the NYSE; and other factors that help to determine whether the
transaction is in the best interest of the Company. Any director who is a
related person with respect to a transaction is recused from the review of
the transaction.
-24 -
SUMMARY OF CENVEO, INC. 2007 LONG-TERM EQUITY INCENTIVE PLAN
INTRODUCTION
The Board of Directors recommends that shareholders approve the Cenveo,
Inc. 2007 Long-Term Equity Incentive Plan (the 2007 Plan). The purpose of
the 2007 Plan is to attract and retain key officers, employees and
directors of the Company, motivate them to contribute to the Company's
future success, and enable them to participate in the long-term growth of
the Company. The plan provides for a variety of types of equity awards,
which may, but need not, be performance-based, as well as for cash
performance awards. If shareholders approve the plan, we intend to grant
all or a portion of the annual incentive bonuses for executive officers
as cash performance awards under the plan that qualify for deductibility
under Section 162(m) of the Internal Revenue Code.
This section summarizes the 2007 Plan, and is qualified in its entirety
by the full text of the plan, which is included in Exhibit A to this
proxy statement. If approved by the shareholders, the 2007 Plan will
replace our 2001 Long-Term Equity Incentive Plan (the 2001 Plan). Upon
shareholder approval of the 2007 Plan, no further awards will be granted
under the 2001 Plan. For information on outstanding equity compensation
awards under our existing plans as of December 31, 2006, see the Equity
Compensation Plan Information Table on page 28.
KEY FEATURES OF THE 2007 PLAN
* Limitation on shares requested. The maximum number of shares which
may be issued under the 2007 Plan is 2 million shares, of which no
more than 1.5 million may be issued as restricted shares, restricted
stock units (RSUs) or other stock-based awards. Any shares not used
for these awards may be used for awards of stock options and stock
appreciation rights. The 2 million shares represent approximately
3.7% of Cenveo's outstanding shares as of the record date for the
annual meeting. In addition to these 2 million shares, any shares
previously authorized for grant under the 2001 Plan and prior plans
which remain available for grant or become available as a result of
forfeitures will be rolled over into the 2007 Plan. As of March 23,
2007 there were 711,420 shares available for stock options and 1,250
shares available for restricted stock and/or RSU awards under the
2001 and prior plans.
* Limitation on term of stock option grants. The term of each stock
option will not exceed seven years.
* No repricing or grant of discounted stock options. The 2007 Plan
does not permit the repricing of options or stock appreciation
rights either by amending an existing award or by substituting a new
award at a lower price. The plan prohibits the granting of stock
options or stock appreciation rights with an exercise price less
than the fair market value of Cenveo stock on the date of grant.
* Limitation on vesting. In general, time-vested awards can vest no
earlier than in installments over 3 years from the date of grant and
performance-vested awards can vest no earlier than one year from the
date of grant. Awards may vest sooner upon a change of control and
certain terminations of employment. Awards to non-employee directors
are not subject to these vesting limitations.
* Limitation on share replenishment. Shares surrendered for the
payment of the exercise price or withholding taxes with respect to
stock options or stock appreciation rights do not again become
available for issuance under the plan.
DESCRIPTION OF THE PLAN
ELIGIBILITY. Employees, directors, and consultants of Cenveo and our
subsidiaries and affiliates are eligible to be granted awards under the
2007 Plan.
ADMINISTRATION. The plan will be administered by a committee of the board
consisting of non-employee directors (the Committee), except that the full
board will administer the plan as it relates to awards to non-employee
directors. (References to the Committee in this description include the
board with respect to non-employee director awards.) The Committee will have
the authority to establish rules and guidelines for the administration of
the plan; select the individuals to whom awards are granted; determine the
types of awards to be granted and the number of shares or amount of cash
covered by such awards; set the terms and conditions of such awards; amend
awards; interpret the plan and award documents; and make all determinations
necessary for the administration of the plan. The Committee may delegate to
a committee of two or more officers or managers the authority to grant
awards other than to executive officers and directors.
-25 -
SHARES AVAILABLE FOR AWARDS. The number of shares which may be issued
under the 2007 Plan is 2 million shares, of which no more than 1.5
million may be issued as restricted stock, RSUs, or other stock-based
awards. Any shares not used for these awards may be used for awards of
stock options or stock appreciation rights. In addition, any shares
previously authorized for grant under the 2001 Plan or prior plans which
remain available for grant on the effective date of the 2007 Plan or
subsequently become available as a result of forfeitures will be rolled
over into the 2007 Plan. If any shares covered by an award under the plan
are forfeited or otherwise terminated without delivery of shares, then
the shares covered by such an award will again be available for future
awards under the plan. In an acquisition, any awards made and any of the
shares delivered upon the assumption of or in substitution for
outstanding grants made by the acquired company will not be counted
against shares available for granting awards under the 2007 Plan. Any
dividend equivalents paid in shares will also not be counted against the
share limit for the plan. Shares surrendered for the payment of the
exercise price or withholding taxes under stock options or stock
appreciation rights, and shares that were not issued upon the net
settlement or net exercise of such awards, will not become available for
future awards under the plan; however shares withheld from other awards
to pay tax withholding obligations will become available for future
grants. The last sales price of the Company's stock on March 12, 2007 was
$24.75 as reported on the New York Stock Exchange.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. The Committee may award
stock options (which may be non-qualified options or incentive stock
options) or stock appreciation rights, each with a maximum term of seven
years. Each stock option or SAR must have an exercise price not less than
the fair market value of Cenveo stock on the date of grant. Repricing is
prohibited. The Committee will establish the vesting schedule for the
award, which will generally be no faster than installments over three
years from the date of grant in the case of time-vested awards, and one
year from the date of grant in the case of performance-vested awards. The
Committee may permit faster vesting upon certain terminations of
employment and with respect to awards to non-employee directors. The
Committee will establish the method of payment of the option exercise
price, which may include cash, shares, broker-assisted cashless exercise,
and net exercise. No participant may be granted options and SARs in any
calendar year that relate to more than 750,000 shares. No more than
500,000 shares may be issued with respect to incentive stock options.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS. The Committee may award
restricted stock and restricted stock units and establish the conditions
on which they vest, which may include continued employment and/or
satisfaction of performance objectives. The Committee will establish the
vesting schedule, which will generally be no faster than installments
over three years from the date of grant in the case of time-vested
awards, and one year from the date of grant in the case of
performance-vested awards. The Committee may permit faster vesting upon
certain terminations of employment and with respect to awards to
non-employee directors. The Committee may provide for payment of an award
upon vesting or at a later date. The Committee may determine whether
unvested awards entitle the holder to receive dividends or dividend
equivalents, and if so, the terms on which such amounts will be paid.
Holders of vested awards whose payment is deferred are entitled to
dividend equivalents.
OTHER STOCK-BASED AWARDS. The Committee may grant other stock-based
awards that are denominated or payable in shares or valued in whole or in
part by reference to shares, under such terms and conditions as the
Committee may determine.
PERFORMANCE AWARDS. The Committee may grant performance awards, which may be
cash or other awards authorized by the plan, which are payable upon the
achievement of performance goals during performance periods, as established
by the Committee. Performance awards may, but need not, be structured to
comply with the requirements for deductible "performance-based compensation"
under Section 162(m) of the Internal Revenue Code. No individual may be
granted performance awards of more than 150,000 shares or $5,000,000 cash in
any calendar year. Performance awards may be based on any one or more of the
following performance measures, which may be applied to the Company as a
whole or to a subsidiary, operating unit or division: (1) earnings before
interest, taxes, depreciation and/or amortization; (2) operating income or
profit; (3) operating efficiencies; (4) return on equity, assets, capital,
capital employed, or investment; (5) after tax operating income; (6) net
income; (7) earnings or book value per share; (8) cash flow(s); (9) total
sales or revenues, or sales or revenues per employee; (10) production
(separate work units or SWU's); (11) stock price or total shareholder
return; (12) dividends; and (13) strategic business objectives, consisting
of one or more objectives based on meeting specified cost targets, business
expansion goals, and goals relating to acquisitions or divestitures. Each
goal may be expressed on an absolute and/or relative basis, may be based on
or otherwise employ comparisons based on internal targets, past performance,
and/or
-26 -
performance of other companies, and the earnings-based measures may use
comparisons relating to capital, shareholders' equity and/or shares
outstanding, or to assets or net assets.
LIMITATIONS ON TRANSFER. Awards are not transferable otherwise than by
will or the laws of descent and distribution unless determined otherwise
by the Committee.
CHANGE IN CONTROL. All awards will become fully vested upon a change in
control and will be paid as soon afterwards as permitted under tax laws.
A change in control is deemed to occur in very general terms upon (1) the
acquisition of 40% or more of the Company's voting securities, (2) the
failure of the current directors (and any directors approved by them) to
constitute two-thirds of the Company's board, (3) a merger in which the
Company's shareholders before the transaction fail to own at least 60% of
the voting power of the surviving corporation or the Company's directors
fail to constitute at least two-thirds of the board of the surviving
corporation, and (4) shareholder approval of a liquidation or dissolution
of the Company or an agreement for the sale of substantially all of the
Company's assets.
ADJUSTMENTS. In the event of certain corporate transactions or events
affecting the number or type of outstanding common shares of the Company,
including, for example, a dividend or other distribution (whether in cash
or stock), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of shares or issuance of warrants, the Committee
will make adjustments as it deems appropriate to prevent dilution or
enlargement of benefits. These adjustments include changing the number
and type of shares to be issued under the plan and as particular types of
awards; changing the per-participant limitations on awards; and changing
the number of shares (or amount of other property) subject to outstanding
awards and the grant, purchase or exercise price of outstanding awards.
The Committee may also make adjustments in the terms of awards in
connection with certain acquisitions, and make adjustments in performance
award criteria or in the terms and conditions of other awards in
recognition of unusual or non-recurring events affecting the Company or
its financial statements or of changes in applicable laws, regulations,
or accounting principles.
AMENDMENTS. The Board may amend the plan from time to time. The Board
will seek shareholder approval of material amendments to the plan as may
be required by law, regulation or stock exchange. The Committee may waive
conditions or amend the term of outstanding awards, subject to certain
limitations, such as the prohibition on repricing.
FEDERAL INCOME TAX CONSEQUENCES
The following is a very general description of some of the basic tax
principles that apply to awards under the 2007 Plan. The grant of an
option or stock appreciation right will create no tax consequences for
the participant or the Company. A participant will have no taxable income
upon exercise of an incentive stock option, except that the alternative
minimum tax may apply. Upon exercise of a non-qualified option, a
participant generally must recognize ordinary income equal to the fair
market value of the shares acquired minus the exercise price. Upon a
disposition of shares acquired by exercise of an incentive stock option
before the end of the applicable incentive stock option holding periods,
the participant generally must recognize ordinary income equal to the
lesser of (1) the fair market value of the shares at the date of exercise
minus the exercise price, or (2) the amount realized upon the disposition
of the incentive stock option shares minus the exercise price. Otherwise,
a participant's disposition of shares acquired upon the exercise of an
option generally will result in capital gain or loss. Other awards under
the plan, including stock appreciation rights, restricted stock, and RSUs
generally will result in ordinary income to the participant at the later
of the time of delivery of cash or shares or the time that either the
risk of forfeiture or restriction on transferability lapses on previously
delivered shares or other property.
Except as discussed below, the Company generally will be entitled to a
tax deduction equal to the amount recognized as ordinary income by the
participant in connection with an award, but will be entitled to no tax
deduction relating to amounts that represent a capital gain to a
participant. Thus, the Company will not be entitled to any tax deduction
with respect to an incentive stock option if the participant holds the
shares for the incentive stock option holding periods.
Section 162(m) of the Internal Revenue Code generally limits the tax
deductibility of compensation paid to each of certain executive officers
to $1 million per year, but allows deductions in excess of this amount
for "performance-based compensation" as defined under Section 162(m). The
-27 -
Company intends that options and stock appreciation rights granted under the
2007 Plan will qualify as performance-based compensation under Section
162(m). The Company intends to make all or a portion of the future annual
bonus awards to executive officers as cash performance awards under the plan
that qualify for deductibility under Section 162(m). A number of
requirements must be met in order for particular compensation to so qualify,
however, so there can be no assurance that such compensation under the plan
will be fully deductible under all circumstances. In addition, other awards
under the plan, such as restricted stock, RSUs and other stock-based awards,
generally may not qualify, so that compensation paid to executive officers
in connection with such awards may not be deductible.
This general tax discussion is intended for the information of
shareholders considering how to vote with respect to this proposal and
not as tax guidance to participants in the plan. Different tax rules may
apply to specific participants and transactions under the plan.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE CENVEO, INC.
2007 LONG-TERM EQUITY INCENTIVE PLAN.
EQUITY COMPENSATION PLAN INFORMATION
The following table shows shares reserved for issuance for outstanding
awards granted under our equity compensation plans as of December 31,
2006. This table does not include the shares which will become issuable
under the 2007 Long-Term Equity Incentive Plan upon its approval by
shareholders.
------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES WEIGHTED AVERAGE
TO BE ISSUED UPON EXERCISE PRICE OF NUMBER OF SECURITIES REMAINING
EXERCISE OF OUTSTANDING OUTSTANDING AVAILABLE FOR ISSUANCE UNDER EQUITY
OPTIONS, WARRANTS OPTIONS, WARRANTS COMPENSATION PLANS (EXCLUDING
PLAN CATEGORY AND RIGHTS AND RIGHTS SECURITIES REFLECTED IN COLUMN(a))
------------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved
by stockholders 3,933,930(1) $14.71(2) 712,670(3)
------------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by stockholders(4) n/a n/a n/a
------------------------------------------------------------------------------------------------------------------------
Total 3,933,930 $14.71 712,670
------------------------------------------------------------------------------------------------------------------------
(1) Includes 3,326,780 shares subject to outstanding stock
options and 607,150 shares subject to outstanding RSU
awards. The table does not include shares subject to
restricted stock awards because such shares are already
issued, although they are subject to forfeiture.
(2) The weighted average exercise price does not take
outstanding RSU awards into account because such awards have
no exercise price.
(3) These shares are available for issuance under our 2001
Long-Term Equity Incentive Plan. This plan, as approved by
shareholders, provides that any unused shares authorized
under prior plans (and shares that become available due to
forfeitures of awards granted under such plans) are rolled
over into the 2001 Plan. The 2001 Plan provides for the
grant of stock options, stock appreciation rights,
restricted stock, restricted stock units, and other
stock-based awards. Of the shares available for grant under
this plan as of December 31, 2006, no more than 1,250 are
available for restricted stock awards and/or RSU awards.
(4) Does not include shares purchased under our employee stock
purchase plan, which are purchased on the open market. The
employees and directors participating in the plan pay the
full market price for the shares. The Company does not
reserve shares for this plan.
-28 -
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph presents the cumulative total yearly shareholder
return from investing $100 on December 31, 2001, in each of:
* Cenveo's common stock,
* Standard & Poor's 500 Index, which is a broad equity market index
published by Standard & Poor's; and
* Standard & Poor's 1500 Commercial Printing Index, which is an equity
market index published by Standard & Poor's of companies that are in
the same industry as Cenveo.
The amounts shown assume that any dividends were reinvested. Our common
stock is listed on the New York Stock Exchange under the symbol "CVO."
Mr. Burton and his management team assumed control of Cenveo on September
12, 2005.
[GRAPH]
YEARS ENDED DECEMBER 31
--------------------------------------------------------
2001 2002 2003 2004 2005 2006
--------------------------------------------------------------------------------------------------------
Cenveo 100.00 60.98 112.44 75.61 320.98 517.07
S&P 500 Index 100.00 78.04 100.16 110.92 116.28 134.43
S&P 1500 Commercial Printing Index 100.00 85.45 106.89 130.29 126.34 139.72
--------------------------------------------------------------------------------------------------------
-29 -
OTHER INFORMATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our directors, executive officers and certain other shareholders are
required to report their ownership of our common stock and any changes in
that ownership to the Securities and Exchange Commission. To the best of
our knowledge, all required filings in 2006 were made in a timely
fashion, except that our director Leonard C. Green filed one late report
(filed on September 14, 2006) relating to a purchase of 240 shares
(purchased on August 31, 2006). Mr. Green's other 243,480 shares
purchased in 2006 were timely reported. 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
SHAREHOLDERS MAY REQUEST FREE COPIES OF OUR FINANCIAL MATERIALS (ANNUAL
REPORT, FORM 10-K AND PROXY STATEMENT) FROM CENVEO, INC., ONE CANTERBURY
GREEN, 201 BROAD STREET, STAMFORD, CT 06901, ATTENTION: CORPORATE
SECRETARY. THESE MATERIALS MAY ALSO BE ACCESSED ON OUR WEB SITE AT
www.cenveo.com.
SHAREHOLDER LIST
A list of registered shareholders on the record date for the annual
meeting will be available for inspection from April 5, 2007 through the
annual meeting at the offices of Hughes Hubbard & Reed LLP, One Battery
Park Plaza, New York, New York 10004.
CONTACT THE BOARD
Shareholders may at any time direct questions to the independent
directors of the Board by sending an e-mail to
independentdirector@cenveo.com. All communications required by law or
regulation to be relayed to the Board will be promptly delivered to our
independent directors. The independent directors monitor these
e-mail messages and facilitate an appropriate response.
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.
QUESTIONS AND ANSWERS
Q: WHY AM I RECEIVING THESE MATERIALS?
A: Cenveo is providing these proxy materials to you and
soliciting your vote in connection with its annual meeting
of shareholders, which will take place on May 3, 2007. As a
shareholder, you are invited to attend the meeting and may
vote on the proposals described in this proxy statement.
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 2006
Annual Report is also enclosed.
Q: WHO MAY VOTE AT THE MEETING?
A: Only shareholders of record at the close of business on
March 23, 2007 may vote at the meeting. As of the record
date, 53,535,107 shares of Cenveo's common stock were issued
and outstanding. Each shareholder is entitled to one vote
for each share of common stock held on the record date.
Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A
SHAREHOLDER OF RECORD AND AS A BENEFICIAL OWNER?
A: Most shareholders 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:
Shareholder 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
SHAREHOLDER OF RECORD of those shares and
-30 -
these proxy materials are being sent directly to you by
Cenveo. As the SHAREHOLDER 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
SHAREHOLDER 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.
Q: WHAT MAY I VOTE ON AT THE MEETING?
A: You may vote on the following three proposals:
o to elect seven nominees to serve on Cenveo's board of
directors for terms expiring at the next annual meeting,
o to ratify the selection of Deloitte & Touche LLP as our
independent auditors for 2007, and
o to approve the Company's 2007 Long-Term Equity Incentive
Plan.
Q: HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE?
A: The board recommends that you vote your shares FOR each of
the seven listed director nominees, FOR the ratification of
our independent auditors, and FOR approval of the 2007
Long-Term Equity Incentive Plan.
Q: HOW CAN I VOTE MY SHARES?
A: You may vote either in person at the meeting or by proxy.
Please refer to the instructions included on your proxy card
to vote by proxy. If you hold your shares in street name
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 mailing a voting
instruction card.
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 and the
proposal to approve the 2007 Long-Term Equity Incentive
Plan.
Q: WHAT IS A "QUORUM", AND WHY IS IT NECESSARY?
A: Conducting business at the annual meeting requires a quorum.
For a quorum to exist, shareholders representing a majority
of the outstanding shares entitled to vote must be present
in person or represented by proxy. Under the Colorado
Business Corporation Act, abstentions and broker non-votes
are treated as present for purposes of determining whether a
quorum exists. A broker non-vote occurs when a broker cannot
exercise discretionary voting power and has not received
instructions from the beneficial owner.
In accordance with the rules of the New York Stock Exchange,
brokers will be permitted to exercise discretionary
authority in voting shares held in street name for the
election of the nominees named in this proxy statement and
for ratification of the selection of auditors. However,
brokers will not be permitted to exercise discretionary
authority with respect to approval of the 2007 Long-Term
Equity Incentive Plan. If you fail to provide voting
instructions to your broker with respect to this proposal,
your shares will be broker non-votes.
Q: WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL, AND HOW WILL
VOTES BE COUNTED?
A: If a quorum is present, directors will be elected by a
plurality of the votes cast. This means that the seven
nominees receiving the highest number of votes will be
elected as directors. Cenveo's articles of incorporation do
not permit shareholders to cumulate their votes. Abstentions
will have no effect on the vote for directors. There will be
no broker non-votes.
Each of the proposals other than the election of directors
will be adopted if the votes cast in favor of the proposal
exceed the votes cast against the proposal. Abstentions and
broker non-votes will have no effect on the proposal.
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
-31 -
o signing a later-dated proxy card and submitting it so that it
is received before the meeting begins.
Attending the meeting will not by itself revoke a proxy
unless you specifically revoke your proxy in writing.
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
York 11717, phone (631) 274-8024.
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 seven directors, ratification
of our independent auditors and approval of the 2007
Long-Term Equity Incentive Plan. If any other business is
properly presented at the meeting, your proxy gives Sean S.
Sullivan, our Chief Financial Officer, and Timothy M. Davis,
our Senior Vice President, General Counsel and Secretary,
authority to vote on these matters in their discretion.
Q: WHO MAY ATTEND THE MEETING?
A: All shareholders who owned shares of our common stock on the
record date, March 23, 2007, may attend the meeting. You may
indicate on the enclosed proxy card if you plan to attend
the meeting.
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 2007, which we
will file with the Securities and Exchange Commission.
Q: WHEN ARE SHAREHOLDER PROPOSALS FOR THE 2008 ANNUAL MEETING
DUE?
A: In order to be considered for inclusion in our proxy
statement for the 2008 annual meeting a shareholder proposal
must be received by our Corporate Secretary at our principal
office by December 1, 2007. A shareholder of record may
introduce a proposal to be voted on at our 2008 annual
meeting that is not included in our proxy statement for that
meeting. In order to do so, the shareholder must provide
written notice of such intention that is received by our
Corporate Secretary at our principal office no later than
February 3, 2008. Such notice must include a brief
description of the proposal desired to be introduced, the
reason for it, and the proposing shareholder's interest in
the matter; the proposing shareholder's name and address as
they appear on the Company's books; the number of shares of
common stock owned beneficially by the proposing shareholder
and the date they were acquired; and a representation that
the shareholder intends to appear at the annual meeting and
present the proposal.
Q: HOW CAN SHAREHOLDERS NOMINATE A CANDIDATE FOR DIRECTOR?
A: A shareholder of record may nominate a candidate for
director by providing written notice to our Corporate
Secretary at our principal office. If the nomination relates
to an election to be held at our annual meeting, the notice
must be received by our Corporate Secretary no later than 90
days before the anniversary date of the previous year's
annual meeting, and if it relates to an election to be held
at a special meeting, it must be received by the close of
business on the tenth day after the day notice of the
special meeting was first mailed or publicly disclosed. The
notice must include all information about the proposed
nominee required by SEC rules to be included in a proxy
statement, the nominee's written consent to serve if
elected, the nominating shareholder's name and address as
they appear on the Company's books and the number of shares
beneficially owned by the nominating shareholder.
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.
-32 -
EXHIBIT A
CENVEO, INC.
2007 LONG-TERM EQUITY INCENTIVE PLAN
SECTION 1. PURPOSE
This plan shall be known as the Cenveo, Inc. 2007 Long-Term Equity
Incentive Plan (the "Plan"). The purpose of the Plan is to promote the
interests of Cenveo, Inc. (the "Company") and its Subsidiaries and the
Company's stockholders by (i) attracting and retaining key officers,
employees, and directors of, and consultants to, the Company and its
Subsidiaries and any future Affiliates; (ii) motivating such individuals
by means of performance-related incentives to achieve long-range
performance goals; (iii) enabling such individuals to participate in the
long-term growth and financial success of the Company; (iv) encouraging
ownership of stock in the Company by such individuals; and (v) linking
their compensation to the long-term interests of the Company and its
stockholders. With respect to any awards granted under the Plan that are
intended to comply with the requirements of "performance-based
compensation" under Section 162(m) of the Code, the Plan shall be
interpreted in a manner consistent with such requirements.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "AFFILIATE" shall mean (i) any entity that, directly or
indirectly, is controlled by the Company, (ii) any entity in
which the Company has a significant equity interest, (iii) an
affiliate of the Company, as defined in Rule 12b-2 promulgated
under Section 12 of the Exchange Act, and (iv) any entity in
which the Company has at least twenty percent (20%) of the
combined voting power of the entity's outstanding voting
securities, in each case as designated by the Board as being a
participating employer in the Plan.
(b) "AWARD" shall mean any Option, Stock Appreciation Right,
Restricted Share Award, Restricted Share Unit, Performance
Award, Other Stock-Based Award or other award granted under
the Plan, whether singly, in combination, or in tandem, to a
Participant by the Committee (or the Board) pursuant to such
terms, conditions, restrictions and/or limitations, if any, as
the Committee (or the Board) may establish.
(c) "AWARD AGREEMENT" shall mean any written agreement, contract,
or other instrument or document evidencing any Award, which
may, but need not, be executed or acknowledged by a
Participant.
(d) "BOARD" shall mean the board of directors of the Company.
(e) "CHANGE IN CONTROL" shall mean, unless otherwise defined in
the applicable Award Agreement, any of the following events:
(i) An acquisition (other than directly from the Company)
of any voting securities of the Company (the "Voting
Securities") by any "Person" (as the term Person is
used for purposes of Section 13(d) or 14(d) of the
Exchange Act) immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of forty
percent (40%) or more of the combined voting power of
the then outstanding Voting Securities; provided,
however, that in determining whether a Change in
Control has occurred, Voting Securities which are
acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which
would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (i) an
employee benefit plan (or a trust forming a part
thereof) maintained by (A) the Company or (B) any
Subsidiary or (ii) the Company or any Subsidiary;
(ii) The individuals who, as of the date hereof, are members
of the Board (the "Incumbent Board"), cease for any
reason to constitute at least a majority of the Board;
provided, however, that if the election or nomination
for election by the Company's stockholders of any new
director was approved by a vote of at least two-thirds
of the Incumbent Board, such new director shall, for
purposes of this Agreement, be considered as a member
of the Incumbent Board; provided, further, however,
that no individual shall be considered a member of the
Incumbent Board if (1)
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such individual initially assumed office as a result of
either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange
Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason
of any agreement intended to avoid or settle any
Election Contest or Proxy Contest or (2) such
individual was designated by a Person who has entered
into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of
this paragraph;
(iii) Consummation of a merger, consolidation or
reorganization involving the Company, unless,
(A) The stockholders of the Company immediately
before such merger, consolidation or
reorganization, own, directly or indirectly,
immediately following such merger, consolidation
or reorganization, at least sixty percent (60%)
of the combined voting power of the outstanding
Voting Securities of the corporation (the
"Surviving Corporation") in substantially the
same proportion as their ownership of the Voting
Securities immediately before such merger,
consolidation or reorganization;
(B) The individuals who were members of the
Incumbent Board immediately prior to the
execution of the agreement providing for such
merger, consolidation or reorganization
constitute at least two-thirds of the members of
the board of directors of the Surviving
Corporation; and
(C) No Person (other than the Company, any
Subsidiary, any employee benefit plan (or any
trust forming a part thereof) maintained by the
Company, the Surviving Corporation or any
Subsidiary, or any Person who, immediately prior
to such merger, consolidation or reorganization,
had Beneficial Ownership of forty percent (40%)
or more of the then outstanding Voting
Securities) has Beneficial Ownership of forty
percent (40%) or more of the combined voting
power of the Surviving Corporation's then
outstanding Voting Securities; or
(iv) Approval by the shareholders of the Company of:
(A) A complete liquidation or dissolution of the
Company; or
(B) An agreement for the sale or other disposition
of all or substantially all of the assets of the
Company to any Person (other than a transfer to
a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person")
acquired Beneficial Ownership of more than the permitted amount of
the outstanding Voting Securities as a result of the acquisition of
Voting Securities by the Company which, by reducing the number of
Voting Securities outstanding, increased the proportional number of
shares Beneficially Owned by the Subject Person, provided that if a
Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of Voting Securities by the
Company, and after such share acquisition by the Company, the Subject
Person becomes the Beneficial Owner of any additional Voting
Securities Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
(f) "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time. Any reference to a section of the
Code shall include all regulations promulgated thereunder and
any successor provision thereto as in effect from time to
time.
(g) "COMMITTEE" shall mean a committee of the Board composed
entirely of Non-Employee Directors, each of whom shall in
addition satisfy the requirements to qualify as a
"non-employee director" for purposes of Exchange Act Section
16 and Rule 16b-3 thereunder and an "outside director" for
purposes of Section 162(m).
(h) "CONSULTANT" shall mean any consultant to the Company or its
Subsidiaries or Affiliates.
(i) "DIRECTOR" shall mean a member of the Board.
(j) "EMPLOYEE" shall mean a current or prospective officer or
employee of the Company or of any Subsidiary or Affiliate.
(k) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
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(l) "FAIR MARKET VALUE" with respect to the Shares, shall mean,
(1) for all purposes other than a sale of the Shares on the
open market, (i) the closing sales price of the Shares on the
New York Stock Exchange, or any other exchange or market which
is the primary trading market for the Shares, on such date, or
in the absence of reported sales on such date, the closing
sales price on the immediately preceding date on which sales
were reported or (ii) in the event there is no public market
for the Shares on such date, the fair market value as
determined, in good faith, by the Committee in its sole
discretion; and (2) for purposes of a sale of a Share on the
open market as of any date, the actual sales price on that
date.
(m) "INCENTIVE STOCK OPTION" shall mean an option to purchase
Shares from the Company that is granted under Section 6 of the
Plan and that is both designated as an Incentive Stock Option
and qualifies as an incentive stock option within the meaning
of Section 422 of the Code.
(n) "NON-QUALIFIED STOCK OPTION" shall mean an option to purchase
Shares from the Company that is granted under Section 6 of the
Plan which either is designated as a Non-Qualified Stock
Option or does not qualify as an incentive stock option within
the meaning of Section 422 of the Code.
(o) "NON-EMPLOYEE DIRECTOR" shall mean a member of the Board who
is not an officer or employee of the Company or any Subsidiary
or Affiliate.
(p) "OPTION" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option.
(q) "OPTION PRICE" shall mean the purchase price payable to
purchase one Share upon the exercise of an Option.
(r) "OTHER STOCK-BASED AWARD" shall mean any Award granted under
Section 9 of the Plan.
(s) "PARTICIPANT" shall mean any Employee, Director, Consultant or
other person who receives an Award under the Plan.
(t) "PERFORMANCE AWARD" shall mean any Award granted under Section
8 of the Plan.
(u) "PERSON" shall mean any individual, corporation, partnership,
limited liability company, associate, joint-stock company,
trust, unincorporated organization, government or political
subdivision thereof or other entity.
(v) "RESTRICTED SHARE" shall mean any Share granted under Section
7 of the Plan.
(w) "RESTRICTED SHARE UNIT" or "RSU" shall mean any unit granted
under Section 7 of the Plan.
(x) "SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
(y) "SECTION 16" shall mean Section 16 of the Exchange Act and the
rules promulgated thereunder and any successor provision
thereto as in effect from time to time.
(z) "SECTION 162(m)" shall mean Section 162(m) of the Code.
(aa) "SECTION 409A" shall mean Section 409A of the Code.
(bb) "SHARES" shall mean shares of the common stock, $0.01 par
value, of the Company.
(cc) "STOCK APPRECIATION RIGHT" or "SAR" shall mean a stock
appreciation right granted under Section 6 of the Plan that
entitles the holder to receive, with respect to each Share as
to which the award is granted, the amount determined by the
Committee and specified in an Award Agreement. In the absence
of such a determination, the holder shall be entitled to
receive, with respect to each Share as to which the award is
granted, the excess of the Fair Market Value of a Share on the
date of exercise over the Fair Market Value of a Share on the
date of grant.
(dd) "SUBSIDIARY" shall mean any Person (other than the Company) of
which a majority of its voting power or its equity securities
or equity interest is owned directly or indirectly by the
Company.
(ee) "SUBSTITUTE AWARDS" shall mean Awards granted solely in
assumption of, or in substitution for, outstanding awards
previously granted by a company acquired by the Company or
with which the Company combines.
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SECTION 3. ADMINISTRATION
3.1 Authority of Committee. The Plan shall be administered by the
----------------------
Committee, which shall be appointed by and serve at the pleasure of the
Board; provided, however, with respect to Awards to Non-Employee
Directors, all references in the Plan to the Committee shall be deemed to
be references to the Board. Subject to the terms of the Plan and
applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee
shall have full power and authority in its discretion to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to
a Participant (which may include tandem awards, pursuant to which a
Participant may receive the benefit of one Award only to the extent he or
she relinquishes the tandem Award); (iii) determine the number of Shares
to be covered by, or with respect to which payments, rights, or other
matters are to be calculated in connection with Awards; (iv) determine
the timing, terms, and conditions of any Award; (v) accelerate the time
at which all or any part of an Award may be settled or exercised (subject
to any limitations imposed by Section 409A); (vi) determine whether, to
what extent, and under what circumstances Awards may be settled or
exercised in cash, Shares, other securities, other Awards or other
property, or canceled, forfeited, or suspended and the method or methods
by which Awards may be settled, exercised, canceled, forfeited, or
suspended; (vii) determine whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other
property, and other amounts payable with respect to an Award shall be
deferred either automatically or at the election of the holder thereof or
of the Committee; (viii) interpret and administer the Plan and any
instrument or agreement relating to, or Award made under, the Plan; (ix)
except to the extent prohibited by Section 6.2 and after taking Section
409A into consideration, amend or modify the terms of any Award at or
after grant (with the consent of the holder of the Award to the extent
required by Section 14.2); (x) establish, amend, suspend, or waive such
rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (xi) make any
other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan, subject to the
exclusive authority of the Board under Section 14.1 hereunder to amend or
terminate the Plan.
3.2 Committee Discretion Binding. Unless otherwise expressly provided in
----------------------------
the Plan, all designations, determinations, interpretations, and other
decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall
be final, conclusive, and binding upon all Persons, including the
Company, any Subsidiary or Affiliate, any Participant and any holder or
beneficiary of any Award.
3.3 Action by the Committee. The Committee shall hold its meetings at
-----------------------
such times and places and in such manner as it may determine. All
determinations of the Committee shall be made by not less than a majority
of its members. Any decision or determination reduced to writing and
signed by all of the members of the Committee shall be fully effective as
if it had been made by a majority vote at a meeting duly called and held.
The Committee may appoint a Secretary and may make such rules and
regulations for the conduct of its business, as it shall deem advisable.
3.4 Delegation. Subject to the terms of the Plan and applicable law, the
----------
Committee may delegate to a committee of two or more officers or managers
of the Company or of any Subsidiary or Affiliate the authority, subject
to such terms and limitations as the Committee shall determine, to grant
Awards to, or to cancel, modify or waive rights with respect to, or to
alter, discontinue, suspend, or terminate Awards held by Participants who
are not officers or directors of the Company for purposes of Section 16
or who are otherwise not subject to such Section.
3.5 No Liability. No member of the Board or Committee or any officer or
------------
employee of the Company to whom they have delegated authority under the
Plan shall be liable for any action taken or determination made in good
faith with respect to the Plan or any Award granted hereunder, and the
Company shall indemnify such individuals, to the fullest extent permitted
by law, in respect of any such action or determination made in good
faith.
SECTION 4. SHARES AVAILABLE FOR AWARDS
4.1 Shares Available. Subject to the provisions of Section 4.2 hereof,
----------------
the stock to be subject to Awards under the Plan shall be the Shares of
the Company and the maximum number of Shares with respect to which Awards
may be granted under the Plan shall be 2 million Shares plus any unused
Shares authorized for Awards under the Cenveo, Inc. 2001 Long-Term Equity
Incentive Plan (the "2001 Plan") (including unused Shares authorized
under prior plans which were rolled into the 2001 Plan). Of the Shares
available for Awards under this Plan, no more than 1,500,000 Shares (plus
any unused Shares previously authorized for restricted share or RSU
awards under prior plans) shall be granted as Restricted Shares or issued
with respect to Restricted Share Units or other full value share awards. No
A-4
more than 500,000 Shares shall be issued with respect to Incentive Stock
Options. Notwithstanding the foregoing and subject to adjustment as
provided in Section 4.2, the maximum number of Shares with respect to
which Awards may be granted under the Plan shall be increased by the
number of Shares with respect to which stock options or other awards
granted under the Mail-Well, Inc. 1994 Stock Option Plan, Mail-Well, Inc.
1996 Directors Stock Option Plan, Mail-Well, Inc. 1997 Non-Qualified
Stock Option Plan, Mail-Well, Inc. 1998 Stock Option Plan, and the 2001
Plan were outstanding as of the effective date of this Plan, but which
terminate, expire unexercised, or are settled for cash, forfeited or
canceled without the delivery of Shares under the terms of such plans
after the effective date of this Plan.
If, after the effective date of the Plan, any Shares covered by an Award
granted under this Plan, or to which such an Award relates, are
forfeited, or if such an Award is settled for cash or otherwise
terminates, expires unexercised, or is canceled without the delivery of
Shares, then the Shares covered by such Award, or to which such Award
relates, or the number of Shares otherwise counted against the aggregate
number of Shares with respect to which Awards may be granted, to the
extent of any such settlement, forfeiture, termination, expiration, or
cancellation, shall again become Shares with respect to which Awards may
be granted. In the event that withholding tax liabilities arising from
any Award other than Options or SARs are satisfied by the withholding of
Shares from such Award, the number of Shares available for Awards under
the Plan shall be increased by the number of Shares withheld.
Notwithstanding the foregoing and subject to adjustment as provided in
Section 4.2 hereof, no Participant may receive Options or SARs under the
Plan in any calendar year that relate to more than 750,000 Shares.
4.2 Adjustments. In the event that the Committee determines that any
-----------
dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property) recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an adjustment
is determined by the Committee, in its sole discretion, to be appropriate
in order to prevent dilution or enlargement of benefits under the Plan,
then the Committee shall, in such manner as it may deem equitable and
taking Section 409A into account (and, with respect to Incentive Stock
Options, in such manner as is consistent with Section 422 of the Code and
the regulations thereunder): (i) adjust any or all of (1) the aggregate
number of Shares or other securities of the Company (or number and kind
of other securities or property) with respect to which Awards may be
granted under the Plan; (2) the number of Shares or other securities of
the Company (or number and kind of other securities or property) subject
to outstanding Awards under the Plan; and (3) the grant or exercise price
with respect to any Award under the Plan, provided that the number of
shares subject to any Award shall always be a whole number; (ii) if
deemed appropriate, provide for an equivalent award in respect of
securities of the surviving entity of any merger, consolidation or other
transaction or event having a similar effect; or (iii) if deemed
appropriate, make provision for a cash payment to the holder of an
outstanding Award.
4.3 Substitute Awards. Any Shares issued by the Company as Substitute
-----------------
Awards in connection with the assumption or substitution of outstanding
grants from any acquired corporation or company with which the Company
combines shall not reduce the Shares available for Awards under the Plan.
4.4 Sources of Shares Deliverable Under Awards. Any Shares delivered
------------------------------------------
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or of issued Shares that have been reacquired by the
Company.
SECTION 5. ELIGIBILITY
Any Employee, Director or Consultant shall be eligible to be granted
Awards under the Plan; provided, however, that Non-Employee Directors
shall only be eligible to receive Awards granted consistent with Section
10.
SECTION 6. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.1 Grant. Subject to the provisions of the Plan, the Committee shall
-----
have sole and complete authority to determine the Participants to whom
Options and SARs shall be granted, the number of Shares subject to each
Award, the Option exercise price or SAR base price and the conditions and
limitations applicable to the exercise of each Option and SAR. The
Committee shall have the authority to grant Incentive Stock Options, or
to grant Non-Qualified Stock Options, or to grant both types of Options,
in each case with or without tandem SARs. In the case of Incentive Stock
Options or tandem SARs related to such Options, the terms and conditions
of such grants shall be subject to and comply with such rules as may be
prescribed by Section 422 of the Code. A person who has been granted an
Option or SAR under this Plan may be granted additional Options or SARs
under the Plan if the Committee shall so determine;
A-5
provided, however, that to the extent the aggregate Fair Market Value
(determined at the time the Option is granted) of the Shares with respect
to which all incentive stock options are exercisable for the first time
by an Employee during any calendar year (under all plans described in
Section 422(d) of the Code of the Company and its Subsidiaries) exceeds
$100,000 (or such higher amount as is permitted in the future under
Section 422(d) of the Code) such Options shall be Non-Qualified Stock
Options.
6.2 Price. The Committee in its sole discretion shall establish the
-----
Option Price at the time each Option is granted. Except in the case of
Substitute Awards, the Option Price of an Option may not be less than
100% of the Fair Market Value of a Share on the date of grant of such
Option. Notwithstanding the foregoing and except as permitted by the
provisions of Section 4.2 and Section 14 hereof, the Committee shall not
have the power to (i) amend the terms of previously granted Options to
reduce the Option Price of such Options, or (ii) cancel such Options and
grant substitute Options with a lower Option Price than the canceled
Options. Except with respect to Substitute Awards, SARs may not be
granted with a base price less than the Fair Market Value of a Share on
the date of grant.
6.3 Term. Subject to the provisions of Section 6.6, each Option and SAR
----
and all rights and obligations thereunder shall expire on the date
determined by the Committee and specified in the Award Agreement. The
Committee shall be under no duty to provide terms of like duration for
Options or SARs granted under the Plan. Notwithstanding the foregoing, no
Option or SAR shall be exercisable after the expiration of seven (7)
years from the date such Option or SAR was granted.
6.4 Exercise.
--------
(a) Each Option and SAR shall be exercisable at such times and
subject to such terms and conditions as the Committee may, in
its sole discretion, specify in the applicable Award Agreement
or thereafter. The Committee shall have full and complete
authority to determine, subject to Section 6.6 herein, whether
an Option or SAR will be exercisable in full at any time or
from time to time during the term of the Option or SAR, or to
provide for the exercise thereof in such installments, upon
the occurrence of such events and at such times during the
term of the Option or SAR as the Committee may determine.
Notwithstanding the foregoing, an Option or SAR may not be
exercisable faster than in equal installments over three (3)
years after grant (for time-based vesting) or prior to one (1)
year after grant (for performance-based vesting), except (i)
pursuant to a Change in Control, (ii) for Awards to
Non-Employee Directors, and (iii) as provided in Section 12.
(b) The Committee may impose such conditions with respect to the
exercise of Options, including without limitation, any
relating to the application of federal, state or foreign
securities laws or the Code, as it may deem necessary or
advisable. The exercise of any Option granted hereunder shall
be effective only at such time as the sale of Shares pursuant
to such exercise will not violate any state or federal
securities or other laws.
(c) An Option or SAR may be exercised in whole or in part at any
time, with respect to whole Shares only, within the period
permitted thereunder for the exercise thereof, and shall be
exercised by written notice of intent to exercise the Option
or SAR, delivered to the Company at its principal office, and
payment in full to the Company at the direction of the
Committee of the amount of the Option Price for the number of
Shares with respect to which the Option is then being
exercised, together with any applicable withholding taxes
(unless the Committee has approved an alternative manner of
satisfying the withholding requirements). A tandem SAR that is
related to an Incentive Stock Option may be exercised only to
the extent that the related Option is exercisable and only
when the Fair Market Value of a Share exceeds the Option Price
of the related Option. The exercise of either an Option or
tandem SAR shall result in the termination of the other to the
extent of the number of Shares with respect to which either
the Option or tandem SAR is exercised.
(d) Payment of the Option Price shall be made in cash or cash
equivalents, or, at the discretion of the Committee and
subject to applicable securities laws, (i) in whole Shares
valued at the Fair Market Value of such Shares on the date of
exercise, (ii) by a combination of such cash (or cash
equivalents) and such Shares, (iii) by delivering a notice of
exercise of the Option and simultaneously selling the Shares
thereby acquired, pursuant to a brokerage or similar agreement
approved in advance by proper officers of the Company, using
the proceeds of such sale as payment of the Option Price,
together with any applicable withholding taxes, or (iv) by any
other exercise method (including attestation of shares)
approved by the Committee. Until the optionee has been issued
the Shares subject to such exercise, he or she shall possess
no rights as a stockholder with respect to such Shares.
A-6
(e) At the Committee's discretion, the amount payable as a result
of the exercise of an SAR may be settled in cash, Shares, or a
combination of cash and Shares. A fractional Share shall not
be deliverable upon the exercise of a SAR but a cash payment
will be made in lieu thereof.
6.5 [Reserved].
6.6 Ten Percent Stock Rule. Notwithstanding any other provisions in the
----------------------
Plan, if at the time an Option or SAR is otherwise to be granted pursuant
to the Plan the optionee or rights holder owns directly or indirectly
(within the meaning of Section 424(d) of the Code) Shares of the Company
possessing more than ten percent (10%) of the total combined voting power
of all classes of Stock of the Company or its parent or Subsidiary or
Affiliate corporations (within the meaning of Section 422(b)(6) of the
Code), then any Incentive Stock Option or tandem SAR to be granted to
such optionee or rights holder pursuant to the Plan shall satisfy the
requirement of Section 422(c)(5) of the Code, and the Option Price shall
be not less than 110% of the Fair Market Value of the Shares of the
Company, and such Option by its terms shall not be exercisable after the
expiration of five (5) years from the date such Option is granted.
SECTION 7. RESTRICTED SHARES AND RESTRICTED SHARE UNITS
7.1 Grant.
-----
(a) Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Participants
to whom Restricted Shares and Restricted Share Units shall be
granted, the number of Restricted Shares and/or the number of
Restricted Share Units to be granted to each Participant, the
duration of the period during which, and the conditions under
which, the Restricted Shares and Restricted Share Units may be
forfeited to the Company, and the other terms and conditions
of such Awards. The Restricted Share and Restricted Share Unit
Awards shall be evidenced by Award Agreements in such form as
the Committee shall from time to time approve, which
agreements shall comply with and be subject to the terms and
conditions provided hereunder and any additional terms and
conditions established by the Committee that are consistent
with the terms of the Plan.
(b) Each Restricted Share and Restricted Share Unit Award made
under the Plan shall be for such number of Shares as shall be
determined by the Committee and set forth in the Award
Agreement containing the terms of such Restricted Share or
Restricted Share Unit Award. The Award Agreement shall set
forth a period of time during which the grantee must remain in
the continuous employment of the Company in order for the
forfeiture and transfer restrictions to lapse. If the
Committee so determines, the restrictions may lapse during
such restricted period in installments with respect to
specified portions of the Shares covered by the Restricted
Share or Restricted Share Unit Award. The restrictions shall
lapse no sooner than in equal installments over a period of at
least three (3) years from the date of grant (for time-based
vesting) or one (1) year from the date of grant for
performance-based vesting, except (i) pursuant to a Change in
Control, (ii) for Awards to Non-Employee Directors, and (iii)
as provided in Section 12. The Award Agreement may also, in
the discretion of the Committee, set forth performance or
other conditions that will subject the Shares to forfeiture
and transfer restrictions. Subject to the foregoing provisions
of this Section 7.1(b), the Committee may, at its discretion,
waive all or any part of the restrictions applicable to any or
all outstanding Restricted Share and Restricted Share Unit
Awards except that the Committee may not waive restrictions
with respect to awards intended to qualify under Section
162(m) if such waiver would cause the award to fail to qualify
as "performance-based" under Section 162(m).
7.2 Delivery of Shares and Transfer Restrictions. At the time of a
--------------------------------------------
Restricted Share Award, a certificate representing the number of Shares
awarded thereunder shall be registered in the name of the grantee. Such
certificate shall be held by the Company or any custodian appointed by
the Company for the account of the grantee subject to the terms and
conditions of the Plan, and shall bear such a legend setting forth the
restrictions imposed thereon as the Committee, in its discretion, may
determine. Except as provided by the Committee pursuant to Section 15.9,
the grantee shall have all rights of a stockholder with respect to the
Restricted Shares, including the right to receive dividends and the right
to vote such Shares, subject to the following restrictions: (i) the
grantee shall not be entitled to delivery of the stock certificate until
the expiration of the restricted period and the fulfillment of any other
restrictive conditions set forth in the Award Agreement with respect to
such Shares; (ii) none of the Shares may be sold, assigned, transferred,
pledged, hypothecated or otherwise encumbered or disposed of during such
restricted period or until after the fulfillment of any such other
restrictive conditions; (iii) except as otherwise determined by the
Committee at or after
A-7
grant, all of the Shares shall be forfeited and all rights of the grantee
to such Shares shall terminate, without further obligation on the part of
the Company, unless the grantee remains in the continuous employment of
the Company for the entire restricted period in relation to which such
Shares were granted and unless any other restrictive conditions relating
to the Restricted Share Award are met; and (iv) the grantee's right to
dividends shall be subject to the Committee's discretion under Section
15.2 hereof. Any Shares, any other securities of the Company and any
other property (except for cash dividends) distributed with respect to
the Shares subject to Restricted Share Awards shall be subject to the
same restrictions, terms and conditions as such Restricted Shares.
7.3 Termination of Restrictions. At the end of the restricted period and
---------------------------
provided that any other restrictive conditions of the Restricted Share
Award are met, or at such earlier time as otherwise determined by the
Committee, all restrictions set forth in the Award Agreement relating to
the Restricted Share Award or in the Plan shall lapse as to the
Restricted Shares subject thereto, and a stock certificate for the
appropriate number of Shares, free of the restrictions and restricted
stock legend, shall be delivered to the Participant or the Participant's
beneficiary or estate, as the case may be.
7.4 Payment of Restricted Share Units. Each Restricted Share Unit shall
---------------------------------
have a value equal to the Fair Market Value of a Share. Restricted Share
Units shall be paid in cash, Shares, other securities or other property,
as determined in the sole discretion of the Committee, upon the lapse of
the restrictions applicable thereto, or otherwise in accordance with the
applicable Award Agreement. A Participant shall be credited with dividend
equivalents on any vested Restricted Share Units credited to the
Participant's account at the time of any payment of dividends to
stockholders on Shares. The amount of any such dividend equivalents shall
equal the amount that would have been payable to the Participant as a
stockholder in respect of a number of Shares equal to the number of
vested Restricted Share Units then credited to the Participant. Any such
dividend equivalents shall be credited to the Participant's account as of
the date on which such dividend would have been payable and shall be
converted into additional Restricted Share Units (which shall be
immediately vested) based upon the Fair Market Value of a Share on the
date of such crediting. The grantee's right to dividend equivalents in
respect of Restricted Share Units that are not yet vested shall be
subject to the Committee's discretion under Section 15.2 hereof. Except
as otherwise determined by the Committee at or after grant, Restricted
Share Units may not be sold, assigned, transferred, pledged, hypothecated
or otherwise encumbered or disposed of, and all Restricted Share Units
and all rights of the grantee to such Restricted Share Units shall
terminate, without further obligation on the part of the Company, unless
the grantee remains in continuous employment of the Company for the
entire restricted period in relation to which such Restricted Share Units
were granted and unless any other restrictive conditions relating to the
Restricted Share Unit Award are met.
SECTION 8. PERFORMANCE AWARDS
8.1 Grant. The Committee shall have sole and complete authority to
-----
determine the Participants who shall receive a Performance Award, which
shall consist of a right that is (i) denominated in cash or Shares, (ii)
valued, as determined by the Committee, in accordance with the
achievement of such performance goals during such performance periods as
the Committee shall establish, (which may be annual performance periods)
and (iii) payable at such time and in such form as the Committee shall
determine. All Performance Awards shall be subject to the terms and
provisions of Section 11 hereof, and may be in the form of cash, Options,
SARs, Restricted Shares, RSUs, or Other Stock-Based Awards.
8.2 Terms and Conditions. Subject to the terms of the Plan and any
--------------------
applicable Award Agreement, the Committee shall determine the performance
goals to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award and the amount
and kind of any payment or transfer to be made pursuant to any
Performance Award, and may amend specific provisions of the Performance
Award; provided, however, that such amendment may not adversely affect
existing Performance Awards made within a performance period commencing
prior to implementation of the amendment.
8.3 Payment of Performance Awards. Performance Awards may be paid in a
-----------------------------
lump sum or in installments following the close of the performance period
or, in accordance with the procedures established by the Committee, on a
deferred basis. Except as provided by the Committee, termination of
employment prior to the end of any performance period, other than for
reasons of death or disability, will result in the forfeiture of the
Performance Award, and no payments will be made. A Participant's rights
to any Performance Award may not be sold, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed of in any manner, except
by will or the laws of descent and distribution, and/or except as the
Committee may determine at or after grant.
A-8
SECTION 9. OTHER STOCK-BASED AWARDS
The Committee shall have the authority to determine the Participants who
shall receive an Other Stock-Based Award, which shall consist of any
right that is (i) not an Award described in Sections 6, 7 and 8 above and
(ii) an Award of Shares or an Award denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to,
Shares (including, without limitation, securities convertible into
Shares), as deemed by the Committee to be consistent with the purposes of
the Plan. Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the terms and conditions of any
such Other Stock-Based Award.
SECTION 10. DIRECTOR AWARDS
10.1 Awards to Non-Employee Directors. The Board may provide that all or
--------------------------------
a portion of a Non-Employee Director's annual retainer, meeting fees
and/or other awards or compensation as determined by the Board, be
payable (either automatically or at the election of a Non-Employee
Director) in the form of Non-Qualified Stock Options, SARs, Restricted
Shares, Restricted Share Units and/or Other Stock-Based Awards, including
unrestricted Shares. The Board shall determine the terms and conditions
of any such Awards, including the terms and conditions which shall apply
upon a termination of the Non-Employee Director's service as a member of
the Board, and shall have full power and authority in its discretion to
administer such Awards, subject to the terms of the Plan and applicable
law.
10.2 Awards in lieu of Cash Stipends. Notwithstanding any minimum
-------------------------------
vesting or restricted periods for Awards, grants of SARs, Restricted
Shares and RSUs to Directors shall have no minimum vesting period or
restrictive period, and shall vest as may be determined in the sole
discretion of the Board.
SECTION 11. PROVISIONS APPLICABLE TO PERFORMANCE AWARDS
11.1 Notwithstanding anything in the Plan to the contrary, Performance
Awards shall be subject to the terms and provisions of this Section 11.
11.2 The Committee may grant Performance Awards which are intended to
qualify as "performance-based compensation" under Section 162(m), whose
grant or vesting is based solely upon the attainment of performance
targets related to one or more performance goals selected by the
Committee from among the goals specified below. For the purposes of this
Section 11, performance goals shall be limited to one or more of the
following Company, Subsidiary, operating unit or division financial
performance measures:
(a) earnings before interest, taxes, depreciation and/or
amortization;
(b) operating income or profit;
(c) operating efficiencies;
(d) return on equity, assets, capital, capital employed, or
investment;
(e) after tax operating income;
(f) net income;
(g) earnings or book value per Share;
(h) cash flow(s);
(i) total sales or revenues or sales or revenues per employee;
(j) production (separate work units or SWU's);
(k) stock price or total shareholder return;
(l) dividends; or
(m) strategic business objectives, consisting of one or more
objectives based on meeting specified cost targets, business
expansion goals, and goals relating to acquisitions or
divestitures; or any combination thereof.
Each goal may be expressed on an absolute and/or relative basis, may be
based on or otherwise employ comparisons based on internal targets, the
past performance of the Company or any Subsidiary, operating unit or
division of the Company and/or the past or current performance of other
companies, and in the case of earnings-based measures, may use or employ
comparisons relating to capital, shareholders' equity and/or Shares
outstanding, or to assets or net assets.
11.3 With respect to any Participant, the maximum annual number of
Shares in respect of which all Share-denominated Performance Awards may
be granted under Section 8 of the Plan is 150,000 and the maximum annual
A-9
amount of any cash-denominated Performance Award is $5,000,000. These
limits are in addition to the annual limits on Option/SAR grants set
forth in Section 4.1.
11.4 To the extent necessary to comply with Section 162(m), with respect
to grants of Performance Awards, no later than 90 days following the
commencement of each performance period (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee
shall, in writing, (1) select the performance goal or goals applicable to
the performance period, (2) establish the various targets and bonus
amounts which may be earned for such performance period, and (3) specify
the relationship between performance goals and targets and the amounts to
be earned by each Participant for such performance period. Following the
completion of each performance period, the Committee shall certify in
writing whether the applicable performance targets have been achieved and
the amounts, if any, payable to Participants for such performance period.
In determining the amount earned by a Participant for a given performance
period, unless otherwise provided in any applicable Award Agreement, the
Committee shall have the right to reduce (but not increase) the amount
payable at a given level of performance to take into account additional
factors that the Committee may deem relevant to the assessment of
individual or corporate performance for the performance period.
SECTION 12. TERMINATION OF EMPLOYMENT
The Committee shall have the full power and authority to determine the
terms and conditions that shall apply to any Award upon the Company's
termination of a Participant's employment with the Company, its
Subsidiaries and Affiliates without cause, a Participant's termination of
employment for good reason, or by reason of death, disability or
retirement, and may provide such terms and conditions in the Award
Agreement or by amendment thereto or in such rules and regulations as it
may prescribe.
SECTION 13. CHANGE IN CONTROL
Upon a Change in Control, all outstanding Awards shall vest, become
immediately exercisable or payable and have all restrictions lifted.
Notwithstanding the foregoing, if payment is not permitted under Section
409A, such payment shall be made at the earliest date permitted under
Section 409A.
SECTION 14. AMENDMENT AND TERMINATION
14.1 Amendments to the Plan. The Board may amend, alter, suspend,
----------------------
discontinue, or terminate the Plan or any portion thereof at any time;
provided that no such amendment, alteration, suspension, discontinuation
or termination shall be made without stockholder approval if such
approval is necessary to comply with any tax, stock exchange, or other
regulatory requirement with which the Board deems it necessary or
desirable to comply; provided that any such waiver, amendment,
alteration, suspension, discontinuance or termination that would
materially adversely affect the rights of any Participants, or any holder
or beneficiary, under any Award theretofore granted, shall not to that
extent be effective without the consent of the affected Participant,
holder, or beneficiary. Notwithstanding the foregoing, the Board reserves
the right to amend the Plan without stockholder or Participant consent to
the extent the Board determines that such amendment is necessary or
desirable in order to comply with Section 409A.
14.2 Amendments to Awards. Subject to the restrictions of Section 6.2,
--------------------
the Committee may waive any conditions or rights under, amend any terms
of, or alter, suspend, discontinue, cancel or terminate, any Award
theretofore granted, prospectively or retroactively; provided that any
such waiver, amendment, alteration, suspension, discontinuance,
cancellation or termination that would materially adversely affect the
rights of any Participants, or any holder or beneficiary of any Award
theretofore granted, shall not to that extent be effective without the
consent of the affected Participant, holder, or beneficiary.
Notwithstanding the foregoing, the Committee reserves the right to amend
any Award without Participant consent to the extent the Committee
determines that such amendment is necessary or desirable in order to
comply with Section 409A.
14.3 Adjustments of Awards Upon the Occurrence of Certain Unusual or
---------------------------------------------------------------
Nonrecurring Events. The Committee is hereby authorized to make
-------------------
adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including,
without limitation, the events described in Section 4.2 hereof) affecting
the Company, any Subsidiary or Affiliate, or the financial statements of
the Company or any Subsidiary or Affiliate, or of changes in applicable
laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to
be made available under the Plan. In addition, prior to a merger or other
A-10
corporate transaction the Committee may require that all outstanding
Options and/or SARs be exercised within a period of at least ten business
days prior to such transaction, and that any Options and/or SARs not
exercised within such period shall be forfeited.
SECTION 15. GENERAL PROVISIONS
15.1 Limited Transferability of Awards. Except as otherwise provided in
---------------------------------
the Plan, no Award shall be assigned, alienated, pledged, attached, sold
or otherwise transferred or encumbered by a Participant, except by will
or the laws of descent and distribution and/or as may be provided by the
Committee in its discretion, at or after grant. No transfer of an Award
by will or by laws of descent and distribution shall be effective to bind
the Company unless the Company shall have been furnished with written
notice thereof and an authenticated copy of the will and/or such other
evidence as the Committee may deem necessary or appropriate to establish
the validity of the transfer.
15.2 Dividends and Dividend Equivalents. Except as provided in Section
----------------------------------
7.4 with respect to vested RSUs, in the sole and complete discretion of
the Committee, an Award other than Options or SARs may provide the
Participant with dividends or dividend equivalents, which may be payable
in cash, Shares, other securities or other property on a current or
deferred basis. All dividends or dividend equivalents which are not paid
currently may, at the Committee's discretion, accrue interest, be
reinvested into additional Shares or RSUs, or be credited as additional
Awards and paid to the Participant if and when, and to the extent that,
payment is made pursuant to the underlying Award. The total number of
Shares available for grant under Section 4 shall not be reduced to
reflect any dividends or dividend equivalents that are reinvested into
additional Shares or credited as additional Awards.
15.3 No Rights to Awards. No Person shall have any claim to be granted
-------------------
any Award, and there is no obligation for uniformity of treatment of
Participants or holders or beneficiaries of Awards. The terms and
conditions of Awards need not be the same with respect to each
Participant.
15.4 Share Restrictions. All Shares or other securities of the Company
------------------
or any Subsidiary or Affiliate delivered under the Plan pursuant to any
Award or the exercise thereof shall be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable under
the Plan or the rules, regulations and other requirements of the SEC or
any state securities commission or regulatory authority, any stock
exchange or other market upon which such Shares or other securities are
then listed, and any applicable Federal or state laws, and the Committee
may cause a legend or legends to be put on any certificates for such
Shares or other securities to make appropriate reference to such
restrictions.
15.5 Share Certificates. All provisions under this Plan calling for the
------------------
delivery of Share certificates may be satisfied by recording the
respective person as the owner of the Shares on the books of the Company,
if permitted by applicable law.
15.6 Withholding. A Participant may be required to pay to the Company or
-----------
any Subsidiary or Affiliate, and the Company or any Subsidiary or
Affiliate shall have the right and is hereby authorized to withhold from
any Award, from any payment due or transfer made under any Award or under
the Plan, or from any compensation or other amount owing to a Participant
the amount (in cash, Shares, other securities, other Awards or other
property) of any applicable withholding or other taxes in respect of an
Award, its exercise or vesting, or any payment or transfer under an Award
or under the Plan and to take such other action as may be necessary in
the opinion of the Company to satisfy all obligations for the payment of
such taxes.
15.7 Award Agreements. Each Award hereunder shall be evidenced by an
----------------
Award Agreement that shall be delivered to the Participant and may
specify the terms and conditions of the Award and any rules applicable
thereto. In the event of a conflict between the terms of the Plan and any
Award Agreement, the terms of the Plan shall prevail.
15.8 Tax Treatment. Although the Company may endeavor to qualify an
-------------
Award for favorable tax treatment or to avoid unfavorable tax treatment,
the Company makes no representation that the desired tax treatment will
be available and expressly disclaims any liability for the failure to
maintain favorable or avoid unfavorable tax treatment.
15.9 No Limit on Other Compensation Arrangements. Nothing contained in
-------------------------------------------
the Plan shall prevent the Company or any Subsidiary or Affiliate from
adopting or continuing in effect other compensation arrangements, which
may, but need not, provide for the grant of options, SARs, restricted
shares, restricted share units, other stock-based awards or other types
of Awards provided for hereunder.
A-11
15.10 No Right to Employment. The grant of an Award shall not be
----------------------
construed as giving a Participant the right to be retained in the employ
of the Company or any Subsidiary or Affiliate. Further, the Company or a
Subsidiary or Affiliate may at any time dismiss a Participant from
employment, free from any liability or any claim under the Plan, unless
otherwise expressly provided in an Award Agreement.
15.11 No Rights as Stockholder. Subject to the provisions of the Plan
------------------------
and the applicable Award Agreement, no Participant or holder or
beneficiary of any Award shall have any rights as a stockholder with
respect to any Shares to be distributed under the Plan until such person
has become a holder of such Shares. Notwithstanding the foregoing, in
connection with each grant of Restricted Shares hereunder, the applicable
Award Agreement shall specify if and to what extent the Participant shall
not be entitled to the rights of a stockholder in respect of such
Restricted Shares.
15.12 Governing Law. The validity, construction and effect of the Plan
-------------
and any rules and regulations relating to the Plan and any Award
Agreement shall be determined in accordance with the laws of the State of
Colorado without giving effect to conflicts of laws principles.
15.13 Severability. If any provision of the Plan or any Award is, or
------------
becomes, or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, such provision shall be
construed or deemed amended to conform to the applicable laws, or if it
cannot be construed or deemed amended without, in the determination of
the Committee, materially altering the intent of the Plan or the Award,
such provision shall be stricken as to such jurisdiction, Person or Award
and the remainder of the Plan and any such Award shall remain in full
force and effect.
15.14 Other Laws. The Committee may refuse to issue or transfer any
----------
Shares or other consideration under an Award if, acting in its sole
discretion, it determines that the issuance or transfer of such Shares or
such other consideration might violate any applicable law or regulation
(including applicable non-U.S. laws or regulations) or entitle the
Company to recover the same under Exchange Act Section 16(b), and any
payment tendered to the Company by a Participant, other holder or
beneficiary in connection with the exercise of such Award shall be
promptly refunded to the relevant Participant, holder, or beneficiary.
15.15 No Trust or Fund Created. Neither the Plan nor any Award shall
------------------------
create or be construed to create a trust or separate fund of any kind or
a fiduciary relationship between the Company or any Subsidiary or
Affiliate and a Participant or any other Person. To the extent that any
Person acquires a right to receive payments from the Company or any
Subsidiary or Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company
or any Subsidiary or Affiliate.
15.16 No Fractional Shares. No fractional Shares shall be issued or
--------------------
delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be paid
or transferred in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
15.17 Headings. Headings are given to the sections and subsections of
--------
the Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
SECTION 16. TERM OF THE PLAN
16.1 Effective Date. The Plan shall be effective as of February 22,
--------------
2007, the date it was approved by the Board, subject to approval by the
Company's stockholders at the 2007 annual meeting.
16.2 Expiration Date. No new Awards shall be granted under the Plan
---------------
after the tenth (10th) anniversary of the Effective Date. Unless
otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award granted hereunder may, and the authority of the
Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award or to waive any conditions or rights under any
such Award shall, continue after the tenth (10th) anniversary of the
Effective Date.
No award intended to qualify as performance-based compensation under
Section 162(m) shall be granted after the Company's annual meeting held
in 2012 unless the material terms of the performance goals (as defined in
Section 162(m)) have been reapproved by the Company's stockholders within
the five years prior to such grant.
A-12
[Cenveo logo] VOTE BY INTERNET - www.proxyvote.com
c/o COMPUTERSHARE TRUST COMPANY Use the Internet to transmit your voting
350 INDIANA STREET instructions and for electronic delivery
SUITE 800 of information up until 11:59 P.M.
GOLDEN, CO 80401 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
have provided or return it to Cenveo,
Inc., c/o ADP, 51 Mercedes Way, Edgewood,
NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
CENVI1 KEEP THIS PORTION FOR YOUR RECORDS
------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
==============================================================================
CENVEO, INC.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ALL LISTED NOMINEES
VOTE ON DIRECTORS
1. Election of seven directors
NOMINEES:
01) Robert G. Burton, Sr. 05) Robert T. Kittel
02) Patrice M. Daniels 06) Robert B. Obernier
03) Leonard C. Green 07) Thomas W. Oliva
04) Mark J. Griffin
FOR WITHHOLD FOR ALL
ALL FOR ALL EXCEPT
/ / / / / /
To withhold authority to vote for any individual
nominee(s), mark "For All Except" and write the
number(s) of the nominee(s) on the line below.
------------------------------------------------
2. Proposal to ratify the selection of Deloitte
& Touche LLP as the corporation's independent FOR AGAINST ABSTAIN
auditors for the fiscal year ending December
31, 2007. / / / / / /
3. Approval of Cenveo, Inc. 2007 Long-Term FOR AGAINST ABSTAIN
Equity Incentive Plan.
/ / / / / /
The shares represented by this proxy will be voted in the manner
directed. In the absence of any direction, the shares will be voted FOR each
named director nominee and FOR Proposals 2 and 3 and in accordance with their
discretion on such other matters as may properly come before the meeting.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THIS SIDE
(Signature(s) should conform to names as
registered. For jointly owned shares, each
owner should sign. When signing as attorney,
executor, administrator, trustee, guardian
or officer of a corporation, please give
full title).
YES NO
Please indicate if you plan to attend this meeting. / / / /
---------------------------------- ------ -------------------------- ------
---------------------------------- ------ -------------------------- ------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
===============================================================================
-------------------------------------------------------------------------------
===============================================================================
REVOCABLE PROXY
CENVEO, INC.
SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS, MAY 3, 2007
The undersigned, revoking any proxy heretofore given, hereby
appoints, as proxies for the undersigned, SEAN S. SULLIVAN and TIMOTHY
DAVIS, or either of them, with full power of substitution, to vote all
shares of the capital stock of CENVEO, INC., a Colorado corporation
(hereinafter, the "corporation"), that the undersigned is entitled to vote
at the corporation's annual meeting of shareholders to be held on Thursday,
May 3, 2007, at 12:00 p.m., Eastern time, at the Four Seasons Hotel, 57 West
57th Street, New York, New York 10022, receipt of notice of which meeting
and the proxy statement accompanying the same being hereby acknowledged by
the undersigned, and at any adjournments or postponements thereof, upon the
matters described in the notice of meeting and proxy statement and upon such
other business as may properly come before the meeting or any adjournments
or postponements thereof, hereby revoking any proxies heretofore given.
Each properly executed proxy will be voted in accordance with the
specifications made on the reverse side of this card and in the discretion
of the proxies on any other matter that may come before the meeting. Where
no choice is specified, this proxy will be voted FOR all listed nominees to
serve as directors and FOR Proposals 2 and 3.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE
===============================================================================
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.