SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
ENESCO GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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(ENESCO GROUP LOGO)
April 16, 2004
Dear Stockholder:
On behalf of the Enesco Group, Inc. Board of Directors, you are invited to
attend the Annual Meeting of Stockholders to be held on Wednesday, May 19, 2004,
at the Enesco Showroom Theater, One Enesco Plaza (corner of Busse and Devon),
Elk Grove Village, Illinois 60007. The meeting will start at 9:30 a.m.
In addition to the formal items of business to be conducted at the meeting,
we will report on the operations of Enesco and will respond to stockholder
questions.
It is important to ensure that your shares are represented at the Annual
Meeting. Whether or not you plan to attend the meeting, we hope you will vote as
soon as possible. You may vote over the Internet, as well as by telephone or by
returning the enclosed proxy card in the envelope provided. Voting over the
Internet, by phone or by written proxy will ensure your representation at the
meeting if you do not attend in person. Please review the instructions on the
proxy card regarding each of these voting options.
Space limitations may make it necessary to limit attendance only to Enesco
stockholders. Accordingly, admission to the meeting will be on a first-come,
first-served basis.
We look forward to seeing you on May 19th, and thank you for your continued
support of Enesco Group, Inc.
Sincerely,
-S- DANIEL DALLEMOLLE
DANIEL DALLEMOLLE
President and Chief Executive Officer
225 Windsor Drive, Itasca, Illinois 60143 - Telephone 630-875-5300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
ENESCO GROUP, INC.
Date: May 19, 2004
Time: 9:30 a.m. Central
Place:Enesco Showroom Theater
One Enesco Plaza
Corner of Busse and Devon
Elk Grove Village, Illinois 60007
Purposes:
- To elect three Class III Directors for a three-year term;
- To approve the amendment and restatement of the 1999 Non-Employee
Director Plan to increase the number of shares available for grant and to
provide for stock option grants thereunder;
- To approve the amendment and restatement of the 1996 Stock Option Plan to
be renamed the 1996 Long-Term Incentive Plan and to provide for long-term
incentive awards in addition to stock options;
- To ratify the appointment by the Board of Directors of KPMG LLP as
Enesco's independent accountants for 2004; and
- To transact such other business as may properly come before the meeting
and any postponement or adjournment of the meeting.
Stockholders of record as of the close of business on March 31, 2004 will
be entitled to vote at the meeting and any postponement or adjournment of the
meeting.
By Order of the Board of Directors,
-s- M. FRANCES DURDEN
M. FRANCES DURDEN, Secretary
Itasca, Illinois
April 16, 2004
---------------------
IMPORTANT
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. PLEASE NOTE
THAT SPACE LIMITATIONS MAY MAKE IT NECESSARY TO LIMIT ATTENDANCE ONLY TO ENESCO
STOCKHOLDERS. ACCORDINGLY, ADMISSION TO THE MEETING WILL BE ON A FIRST-COME,
FIRST-SERVED BASIS. WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON, YOU ARE URGED
TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED. THIS WILL ASSURE YOUR REPRESENTATION AND A QUORUM FOR THE
TRANSACTION OF BUSINESS AT THE MEETING. YOU MAY ALSO VOTE OVER THE INTERNET OR
BY TELEPHONE. INSTRUCTIONS ARE PROVIDED ON THE PROXY CARD FOR VOTING OVER THE
INTERNET OR BY TELEPHONE. IF YOU DO ATTEND THE MEETING, YOU MAY VOTE IN PERSON,
EVEN IF YOU HAVE RETURNED A PROXY CARD.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Enesco Group, Inc. ......................................... 3
The Annual Meeting.......................................... 3
Voting Instructions......................................... 4
Annual Report............................................... 5
Our Largest Stockholders.................................... 6
Shares Held by Our Directors and Executive Officers......... 7
Proposal 1: Election of Directors........................... 8
Compensation of Non-Employee Directors...................... 10
Committees of the Board..................................... 11
Proposal 2: Amendment and Restatement of 1999 Non-Employee
Directors Stock Plan...................................... 13
Proposal 3: Amendment and Restatement of 1996 Stock Option
Plan...................................................... 18
Executive Compensation...................................... 25
Compensation Committee Interlocks and Insider
Participation............................................. 29
Section 16(a) Beneficial Ownership Reporting Compliance..... 29
Compensation Committee Report on Executive Compensation..... 29
Report of the Audit Committee............................... 31
Performance Graph........................................... 32
Proposal 4: Independent Public Accountants.................. 33
Stockholder Proposals....................................... 35
Annex A: Audit Committee Charter............................ A-1
Annex B: Amended and Restated 1999 Non-Employee Director
Stock Plan................................................ B-1
Annex C: Amended and Restated 1996 Stock Option Plan, to be
renamed the 1996 Long-Term Incentive Plan.......... C-1
</Table>
2
ENESCO GROUP, INC.
PROXY STATEMENT
April 16, 2004
ENESCO GROUP, INC.
We are engaged in the marketing and sale of quality branded gifts,
collectibles and decorative accents, including designed and licensed collectible
figurines and ornaments, action musicals, decorative home accessories and other
giftware, principally at wholesale, to independent retailers, mass marketers,
catalogers and direct response distributors. Our principal executive offices are
located at 225 Windsor Drive, Itasca, Illinois 60143, and our telephone number
is (630) 875-5300. Our website is located at www.enesco.com on the Internet.
THE ANNUAL MEETING
Attending the Annual Meeting
Our meeting will be held on May 19, 2004 at 9:30 a.m., at the Enesco
Showroom Theater, One Enesco Plaza (corner of Busse and Devon), Elk Grove
Village, Illinois.
This Proxy Statement
We are sending you these proxy materials because our Board of Directors is
soliciting your proxy to vote your shares at the meeting. If you own Enesco
common stock in more than one account, such as individually and also jointly
with your spouse, you may receive more than one set of these proxy materials. To
assist us in saving money and to provide you with better shareholder services,
we encourage you to have all your accounts registered in the same name and
address. You may do this by contacting Mellon Investor Services LLC. In order to
vote all your shares by proxy, you should vote the shares in each different
account as described below.
On April 16, 2004, we began mailing these proxy materials to all
stockholders of record at the close of business on March 31, 2004 (the "Record
Date"). As of the Record Date there were 14,196,501 shares outstanding and 2,311
holders of record.
Quorum Requirement
A quorum is necessary to hold a valid meeting. The attendance in person or
by proxy (by mail, telephone or over the Internet) of holders of a majority of
the shares entitled to vote at the meeting will constitute a quorum to hold the
meeting. Abstentions and broker non-votes are counted as present for
establishing a quorum. A broker non-vote occurs when a broker votes on some
matters on the proxy card but not on others because the broker does not have the
authority to do so.
3
VOTING INSTRUCTIONS
You are entitled to one vote for each share of common stock that you own as
of the close of business on the Record Date. Please carefully read the
instructions below on how to vote your shares. Because the instructions vary
depending on how you hold your shares, it is important that you follow the
instructions that apply to your particular situation.
If Your Shares are Held in Your Name
VOTING BY PROXY. Even if you plan to attend the meeting, you can vote
before the meeting by proxy. There are three ways to vote by proxy:
- you can vote by telephone by calling toll-free (1-800-435-6710) and
following the instructions on the proxy card;
- you can vote by Internet by following the instructions on the proxy card;
or
- you can vote by mail by signing, dating and mailing the enclosed proxy
card.
VOTING IN PERSON AT THE MEETING. If you plan to attend the meeting, you can
vote in person. In order to vote at the meeting, you will need to bring
identification or evidence of your share ownership with you to the meeting.
REVOKING YOUR PROXY. As long as your shares are registered in your name,
you may revoke your proxy at any time before it is exercised. There are several
ways you can do this:
- by filing a written notice of revocation with our Secretary;
- by following appropriate Internet or telephone voting procedures;
- by signing and delivering another proxy that bears a later date; or
- by attending the meeting and voting in person.
If Your Shares are Held in "Street Name"
VOTING BY PROXY. If your shares are registered in the name of your broker
or nominee, you will receive instructions from the holder of record that you
must follow in order for your shares to be voted. Certain brokers and banks will
also offer telephone and Internet voting.
VOTING IN PERSON AT THE MEETING. If you plan to attend the meeting and vote
in person, you should contact your broker or nominee to obtain a broker's proxy
card and bring it and your account statement or other evidence of your share
ownership as of the Record Date with you to the meeting
REVOKING YOUR PROXY. If your shares are held in street name, you must
contact your broker to revoke your proxy.
4
Voting Rules
By giving us your proxy, you authorize the individuals named on the proxy
card to vote your shares in the manner you indicate at the meeting or any
postponements or adjournments of the meeting. With respect to the election of
nominees for director, you may:
- vote "for" the election of all nominees for director named in this proxy
statement;
- "withhold" authority to vote for all nominees; or
- "withhold" authority to vote for one or more of the nominees and vote
"for" the remaining nominee(s).
If a quorum is present at the meeting, a nominee will be elected to serve
as a Class III Director if a majority of the shares of Common Stock voting at
the meeting vote for the nominee, whether present, in person, by telephone or
Internet vote or represented by proxy. Because of this rule, non-voted shares
will not affect the outcome of the election of directors and will not prevent
that nominee from being elected.
We actively solicit proxy participation. We will bear the cost of
soliciting proxies. In addition to this notice by mail, we request and encourage
brokers, custodians, nominees and others to supply proxy materials to
stockholders, and we will reimburse them for their expenses. Our officers and
employees may, by letter, telephone, electronic mail, or in person, make
additional requests for the return of proxies, although we do not reimburse our
own employees for soliciting proxies. In addition, we have hired Mellon Investor
Services, LLC in New York, New York to solicit proxies at a fee of approximately
$8,500.
ANNUAL REPORT
The Annual Report to Stockholders of Enesco for the year ended December 31,
2003, including our financial statements for our 2003 fiscal year, accompanies
this proxy statement.
5
OUR LARGEST STOCKHOLDERS
On March 31, 2004, there were outstanding 14,196,501 shares of our common
stock, which is the only class of stock outstanding and entitled to vote at the
Annual Meeting. The holders of these shares will be entitled to cast one vote
for each share of common stock held of record as of March 31, 2004. To the best
of Enesco's knowledge, the beneficial owners of more than 5% of the common stock
as of December 31, 2003 were as follows:
<Table>
<Caption>
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------- ----------------------- --------
Dimensional Fund Advisors, Inc. ........................ 1,066,711 shares(1) 7.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Fidelity Management & Research Co. ..................... 1,029,600 shares(2) 7.3%
82 Devonshire St.
Boston, Massachusetts 02109
David L. Babson and Company Incorporated................ 943,050 shares(3) 6.6%
One Memorial Drive
Cambridge, MA 02142
Heartland Advisors...................................... 764,300 shares(4) 5.4%
789 North Water Street
Milwaukee, WI 53202
</Table>
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(1) Based on a statement on Schedule 13G filed with the SEC on February 6, 2004
by Dimensional Fund Advisors, Inc. (DFA). DFA has sole voting and
dispositive power over 1,066,711 shares.
(2) Based on a statement on Schedule 13G filed with the SEC on February 17, 2004
by Fidelity Management Research Co. (Fidelity). Fidelity has sole
dispositive power over 1,029,600 shares.
(3) Based on a statement on Schedule 13G filed with the Securities and Exchange
Commission (SEC) on February 10, 2004 by David L. Babson and Company
Incorporated (Babson). Babson has sole voting power over 846,900 shares and
sole dispositive power over 943,050 shares.
(4) Based on a statement on Schedule 13G filed with the SEC on February 13, 2004
by Heartland Advisors, Inc. (Heartland). Heartland has shared voting power
of 755,800 shares and shared dispositive power over 764,300 shares.
6
SHARES HELD BY OUR DIRECTORS AND EXECUTIVE OFFICERS
Our management beneficially owned, as of March 31, 2004, shares of our
common stock as follows:
<Table>
<Caption>
SHARES UNDERLYING
OUTSTANDING SHARES STOCK OPTIONS-AMOUNT
OF THE COMMON STOCK- AND NATURE OF
AMOUNT AND NATURE BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OWNERSHIP(1)(2) OF CLASS(3)
- ------------------------ -------------------------- -------------------- -----------
John F. Cauley................... 32,835 21,875 ***%
Daniel DalleMolle................ 20,486(4) 425,000 3.14%
George R. Ditomassi.............. 10,336 3,375 ***%
Eugene Freedman.................. 150,331(5) 91,600 1.70%
Judith R. Haberkorn.............. 19,115 7,875 ***%
Donald L. Krause................. 8,190 3,207 ***%
Donna Brooks Lucas............... 15,373 4,875 ***%
Hector J. Orci................... 661 0 ***%
Thane A. Pressman................ 11,336 3,375 ***%
Anne-Lee Verville................ 52,482 7,875 ***%
Jeffrey S. Smith................. 7,648(6) 78,262 ***%
Josette V. Goldberg.............. 3,757(7) 63,500 ***%
Thomas F. Bradley................ 6,214(8) 36,208 ***%
All Directors and Executive
Officers as a Group (15
persons)....................... 343,802 789,402 7.98%
</Table>
- ---------------
(1) Unless otherwise noted, the nature of beneficial ownership is sole voting
and/or investment power. Fractional amounts have been rounded to the nearest
whole share of the common stock.
(2) Reflects the number of shares of common stock which the Directors, executive
officers and Directors and executive officers as a group beneficially own by
reason of options which are exercisable within 60 days of March 31, 2004.
(3) Unless otherwise noted, the percent of class is less than 1%.
(4) Reflects 17,300 shares of common stock owned by Mr. DalleMolle and 3,186
shares held in Mr. DalleMolle's 401(k) account as of December 31, 2003.
(5) Reflects 5,365 shares of common stock owned by Mr. Freedman, 135,734 shares
of common stock owned by the Eugene Freedman Family Limited Partnership, of
which Mr. Freedman is the general partner, and 5,000 shares owned by the
Eugene Freedman Family Foundation, of which Mr. Freedman is an officer and a
director. Mr. Freedman shares voting and investment power over these shares
and disclaims any beneficial interest in all such shares, except to the
extent of his direct and indirect pecuniary interest in the Limited
Partnership and the Foundation. There were 4,232 shares held in Mr.
Freedman's 401(k) account as of December 31, 2003.
(6) Reflects 1,500 shares of common stock owned by Mr. Smith, 100 shares owned
by Mr. Smith's daughter and 6,048 shares held in Mr. Smith's 401(k) account
as of December 31, 2003.
(7) Reflects 150 shares of common stock owned by Ms. Goldberg and 3,607 shares
held in Ms. Goldberg's 401(k) account as of December 31, 2003.
(8) Reflects 6,000 shares of common stock owned by Mr. Bradley and 214 shares
held in Mr. Bradley's 401(k) account as of December 31, 2003.
7
PROPOSAL 1: ELECTION OF DIRECTORS
Effective as of the Annual Meeting, the Board consists of nine members who
are divided into three classes serving three years each, with one class being
elected each year. As required under the New York Stock Exchange rules, a
majority of the members of the Board are independent, non-employee directors.
The Board has adopted several policies concerning resignation and retirement of
Directors from the Board, one providing for review by the Board of the continued
membership of a Director following a change in his or her principal employment,
and another providing for a Director's mandatory retirement at age 72, except
for Mr. Freedman, who is not subject to this policy. Mr. Cauley is retiring from
the Board and not standing for re-election.
The three current Class III Directors, Mr. George R. Ditomassi, Mr. Hector
J. Orci and Ms. Anne-Lee Verville, are nominated for re-election to the Board.
The Board proposes their re-election for three-year terms scheduled to expire at
the Annual Meeting of Stockholders in 2007.
If for any reason any nominee is not available to serve when the election
occurs, the persons named as proxies in the proxy cards will vote the proxies in
accordance with their best judgment. The Board has no reason to believe that any
nominee will not be available to serve as a Director.
INFORMATION AS TO BOARD OF DIRECTORS AND NOMINEES
NOMINEES FOR DIRECTORS IN CLASS III
TERMS EXPIRING IN 2007
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<Table>
GEORGE R. DITOMASSI Chief Executive Officer and Director of Summit American
Director since 2000 Television in Naples, Florida since November, 2002. Formerly
Age 69 Co-Chief Executive Officer and Director of Shop At Home
Network from October 2001 until October 2002. Chairman of
the Board at the Milton Bradley Company and Chief Operating
Officer of Hasbro, Inc. from 1990-1998, and past President
of Hasbro International from 1996 to 1997. Also on Board of
Directors for Milton Bradley Company, the Basketball Hall of
Fame and Toy Manufacturers of America. Mr. Ditomassi served
on the Audit and the Compensation and Stock Option Committee
in 2000, and he currently is a member of the Executive,
Audit and Compensation Committees.
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HECTOR J. ORCI Founding General Manager of La Agencia de Orci & Associates
Director since 2003 since 1986. Instructor of Hispanic marketing and advertising
Age 61 at UCLA University in Los Angeles, CA and columnist for La
Opinion, a Los Angeles newspaper. Previously held positions
at Alberto-Culver and Procter & Gamble. Past president of
the Association of Hispanic Advertising Agencies (AHAA).
Inducted into the Se Habia Espanol Hall of Fame in 1997.
Also on the Board of Directors/Trustees for the New Visions
Foundation and the Los Angeles Children's Bureau. Member of
the Audit and Governance Committees.
- ------------------------------------------------------------------------------------------------
</Table>
8
<Table>
ANNE-LEE VERVILLE Chairman of the Board since 2001. Interim President and CEO
Director since 1991 from January through March, 2001; Office of the Chairman
Age 58 from June 2000 until March 2001. Retired as General Manager-
Worldwide Education Industry of International Business
Machines Corporation ("IBM") (advanced information
technologies), White Plains, NY, in 1997, after 30 years
with IBM. Also, Trustee of Columbia Management Funds,
Boston, MA and Director of Fleet Hedge Fund, Boston, MA.
Member of the Audit, Executive and Governance Committees.
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DIRECTORS CONTINUING IN OFFICE IN CLASS I
TERMS EXPIRING IN 2005
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JUDITH R. HABERKORN Retired as President-Consumer Sales and Service, Bell
Director since 1993 Atlantic Corp. (telecommunications services), New York, NY,
Age 57 in 2000. Formerly President- Public and Operator Services,
at Bell Atlantic Corp. from 1997 to 1998, having previously
served as Vice President, Individual Communication Services,
NYNEX Corporation, New York, NY ("NYNEX"), from 1995 to
1997, and as Vice President-Consumer Markets, at NYNEX, from
1994 to 1995. Also Director of Armstrong World Industries
Inc., Lancaster, PA. and MCI, Ashburn, VA. Member of the
Audit, Governance and Compensation Committees.
- ------------------------------------------------------------------------------------------------
DONALD L. KRAUSE Retired as Senior Vice President and Controller of Newell
Director since 2001 Rubbermaid, Inc. in 1999. Formerly President of Newell's
Age 64 Industrial Companies Business Unit from February 1988 to
February 1990 and Vice President-Controller from November
1974 to January 1988. Also on the Board of Circuit Check
Inc. Chairman of Enesco's Audit Committee and a member of
the Governance Committee.
- ------------------------------------------------------------------------------------------------
THANE A. PRESSMAN Formerly President and CEO of Carvel Corporation from April
Director since 2000 2002 until April 2003, a retailer and distributor of ice
Age 58 cream products. Formerly President and CEO of Tone Brothers,
Inc. from 1998 until 2001, a $300 million U.S. subsidiary of
Burns Philip & Co., Ltd., and second largest herb and spice
company in the U.S. President and CEO, Labatt-USA from 1993
until 1998. Previously held positions at Procter & Gamble
and Sara Lee. Also a Trustee, Springfield College and has
served as a Trustee of AFS International and Director
AFS-USA (American Field Service). Member of the Audit and
Compensation Committees.
- ------------------------------------------------------------------------------------------------
DIRECTORS CONTINUING IN OFFICE IN CLASS II
TERMS EXPIRING IN 2006
- ------------------------------------------------------------------------------------------------
DANIEL DALLEMOLLE President and Chief Executive Officer since March 28, 2001.
Director since 2001 Formerly Group President, Hardware and Tool Companies of
Age 53 Newell Rubbermaid, Inc. from 1999 until 2001. President and
Chief Operating Officer of Intermatic, Inc. from 1998 until
1999. President of Lee Rowan Company of Newell Rubbermaid
from 1996 until 1998. President of Anchor Hocking Glass of
Newell from 1992 until 1996. Also Director of Juno Lighting
Inc., Bushnell Optics and Ames TrueTemper. Member of
Enesco's Executive Committee.
- ------------------------------------------------------------------------------------------------
EUGENE FREEDMAN Founding Chairman since 1998. Formerly Executive Vice
Director since 1997 President of the Company from 1988 until 1998 and Vice
Age 79 Chairman from 1997 until 1998. Also served as Founding
Chairman of Enesco Corporation, a former subsidiary of
Enesco, of which he was a founder in 1959. Member of
Enesco's Executive Committee.
- ------------------------------------------------------------------------------------------------
</Table>
9
<Table>
DONNA BROOKS LUCAS President and Chief Executive Officer of DBL Multi-Media
Director since 1999 Group, Chicago, Illinois (creative and strategic business
Age 51 communications) since 1995. Formerly President, BR&R
Communications, Inc., a public relations agency specializing
in African-American consumer and healthcare marketing,
having previously served as Senior Vice President, Director
of Marketing at Burson-Marsteller. Member of the Economic
Club of Chicago, Northwestern University Medill School of
Journalism Board of Visitors, the Executive Leadership
Council, the Urban League, the NAACP and The Links
Incorporated. Chair of the Compensation Committee and member
of the Audit and Governance Committees.
- ------------------------------------------------------------------------------------------------
</Table>
COMPENSATION OF NON-EMPLOYEE DIRECTORS
The Board establishes the compensation paid to each Director who is not an
employee of Enesco. Effective at the Annual Meeting the current compensation
amounts are as follows:
(1) For service as a non-Chairman member of the Board, a retainer of
$30,000 per annum, of which $15,000 is paid in common stock valued as of
the day following the Annual Meeting, plus $1,500 for attendance at each
meeting of the Board;
(2) For service as Chairman of the Board, $75,000 per annum, of which
$37,500 is paid in common stock valued as of the day following the Annual
Meeting, plus $1,500 for attendance at each meeting of the Board and $1,500
for attendance at a committee meeting;
(3) For service as a committee member, an attendance fee of $1,500
($3,000 for service as Chairman of a committee and $5,000 for service as
Chairman of an Audit Committee meeting) and for each other meeting attended
by any Director, which is held in connection with the selection of
potential nominees for positions on the Board.
10
In addition, each then serving non-employee Director receives a grant as of
the day following the Annual Meeting in that year, of 1,500 non-qualified
options to purchase Enesco common stock at an exercise price equal to the
closing price of the common stock on the grant date. This will increase to a
grant of 2,000 non-qualified options annually to each non-employee Director if
the amendment and restatement of the 1999 Non-Employee Directors Stock Plan is
approved at the Annual Meeting. The options become exercisable equally over four
years, with 25% of the shares of common stock subject to the option becoming
exercisable on each of the first four anniversary dates of the date of grant of
the option, and expire on the tenth anniversary of the grant.
Directors also receive reimbursement from Enesco for expenses incurred
while serving as Directors. Directors who are also employees of Enesco receive
no additional compensation for their services as Directors.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The following table shows the membership of Enesco's committees as of March
31, 2004. An asterisk indicates chairperson.
<Table>
<Caption>
NOMINATING AND
NAME AUDIT COMPENSATION EXECUTIVE GOVERNANCE
- ---- ----- ---------------- --------- --------------
John F. Cauley.................................. x x *
Daniel DalleMolle............................... x
George R. Ditomassi............................. x x x
Eugene Freedman................................. x
Judith R. Haberkorn............................. x x x
Donald L. Krause................................ * x
Donna Brooks Lucas.............................. x * x
Hector J. Orci.................................. x x
Thane A. Pressman............................... x x
Anne-Lee Verville............................... x * x
</Table>
Committees
The Audit Committee held three meetings during 2003. This Committee, which
consists entirely of non-employee, independent Directors, provides oversight of
the Enesco audit, accounting, reporting and control practices and provides a
non-management link between the Board and the Enesco internal audit function.
This Committee reviews the activities of the internal auditors and the Enesco
independent public accountants. It also reviews the adequacy of the Enesco
accounting, financial and operating controls and reports to the full Board as
necessary. The Audit Committee's responsibilities also include appointment of
Enesco's independent public accountants.
During 2003, the Audit Committee operated pursuant to an Audit Committee
Charter which complies with Rule 303 of the New York Stock Exchange Listed
Company Manual relating to Audit Committee standards. All members of the Audit
Committee were independent as defined in Rule 303, except Anne-Lee Verville,
former Interim President and Chief Executive Officer (on a non-employee basis)
from January 1, 2001 until March 28, 2001. Under the override provision of
Section 303.02(D) of the Manual, the Board of Directors determined that during
the period when serving as Interim President and Chief Executive Officer,
11
Ms. Verville was independent of management and had no relationship that would
interfere with her independent judgment as a member of the Audit Committee. The
Board further determined in its business judgment that Ms. Verville's membership
on the Audit Committee was required in the best interests of Enesco and its
stockholders.
Effective March 29, 2004, all members of the Audit Committee were
determined to be "independent" as defined in Rule 303A. The criteria used by the
Board to determine independence are that the Audit Committee member (i) must be
free of any relationship with the Company that would interfere with his or her
exercise of independent judgment; (ii) cannot have received any compensation
from Enesco, other than Director and committee fees; (iii) cannot have been an
Enesco employee within a three year period prior to his/her appointment; (iv)
cannot be affiliated with or employed by, or have an immediate family member who
is affiliated with or employed in a professional capacity by, KPMG; and (v)
cannot be employed by, or have an immediate family member who is employed by,
another company where any of Enesco's executive officers serve on that company's
compensation committee. Donald Krause, Chairman of the Audit Committee, has been
designated as a "financial expert" under SEC regulations and meets the financial
expert requirements under the New York Stock Exchange rules. The Audit Committee
now operates pursuant to an Audit Committee Charter which complies with Rule
303A.06 of the New York Stock Exchange Listed Company Manual relating to Audit
Committee standards, a copy of which is attached as Annex A and also posted on
the Investor Relations -- Governance section of Enesco's website at
www.enesco.com.
The Human Resources and Compensation Committee held five meetings during
2003. This Committee, which also consists entirely of non-employee, independent
Directors (who meet the independence requirements under the New York Stock
Exchange rules), determines compensation policy for Enesco, approves or
recommends to the Board compensation of the Directors and officers of Enesco and
reviews and acts on recommendations from the Chief Executive Officer regarding
the award of stock options and administration of the stock option plans of
Enesco and the Non-employee Director Stock Plan. A copy of the Human Resources
and Compensation Committee Charter is posted on the Investor
Relations -- Governance section of Enesco's website.
The Executive Committee did not hold a meeting during 2003. This Committee,
which consists of five Directors, three of whom are non-employee independent
Directors, acts on behalf of the Board on important matters that arise between
meetings of the Board and performs other tasks as delegated by the Board.
The Nominating and Governance Committee held three meetings during 2003.
This Committee, which consists entirely of non-employee, independent Directors
(who meet the independence requirements under the New York Stock Exchange
rules), provides the Board with Director and corporate officer recommendations,
proposes to the Board each year a slate of Directors for recommendation and
submission to the stockholders at the next annual meeting of stockholders and
deals with all aspects of the Director selection process, reviewing prospective
Director candidates in the light of anticipated resignations and retirements and
Board composition. The criteria used by the Nominating and Governance Committee
in selecting new Directors, which criteria have been approved by the Board,
include, but are not limited to, integrity, sound judgment, record of proven
accomplishments as at least a general manager with responsibility for business
profit and loss, willingness to take the time necessary to gain a strong
understanding of Enesco's business, and compatibility with Enesco's business and
other Directors. A copy of the Nominating and Governance Committee Charter is
posted on the Investor Relations -- Governance section of Enesco's website.
In addition to the Committee meetings referred to above, the full Board
held nine regular meetings during 2003. Each director attended more than 75% of
the total number of meetings of the Board and
12
Committees on which he or she served. Each director is invited to attend the
Annual Meeting of Stockholders and last year all members of the Board attended
the Annual Meeting.
The non-employee independent Directors meet in executive session at each
meeting of the Board. Anne-Lee Verville, the Chairman of the Board, presides at
the executive sessions. You may communicate with the Board of Directors by
writing a letter to the Chairman of the Board, the Chairman of the Nominating
and Governance Committee or to any independent director c/o Enesco Group, Inc.,
225 Windsor Drive, Itasca, IL 60143 Attn: Secretary and General Counsel. The
Secretary and General Counsel will regularly forward to the addressee all
letters relevant to the running of the business. In that regard, the Enesco
Board of Directors has requested that certain items unrelated to the duties and
responsibilities of the Board not be forwarded, such as: spam, junk mail and
mass mailing, product complaints, product inquiries, new product suggestions,
resumes and other forms of job inquiries, surveys and business solicitations or
advertisements. In addition, any material that is unduly hostile, threatening,
illegal or similarly unsuitable will be excluded, with the provision that any
material that is not forwarded will be made available to any outside Director
upon request.
In accordance with Enesco's Articles of Incorporation, nominations for the
election of Directors at an annual meeting of stockholders may be made by the
Board, the Nominating and Governance Committee or any stockholder entitled to
vote generally in the election of Directors. However, a stockholder may nominate
one or more persons for election as a Director at an annual meeting of
stockholders only if the stockholder gives notice in writing to the Secretary of
Enesco at least 45 days in advance of the anniversary of the date of the
previous annual meeting of stockholders, which notice includes:
(a) The name and address of the stockholder who intends to make the
nomination and the name and address of each person to be nominated;
(b) A representation that the stockholder is a holder of record of
common stock and intends to appear in person or by proxy at the next annual
meeting of stockholders to nominate the person or persons identified in the
notice;
(c) A description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to
be made by the stockholder;
(d) Such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission; and
(e) The consent of each nominee to serve as a Director if so elected.
PROPOSAL 2:
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE 1999 NON-EMPLOYEE DIRECTOR
STOCK PLAN
GENERAL
On January 20, 1999, the Board of Directors of Enesco adopted the 1999
Non-Employee Director Stock Plan (the "1999 Director Plan"). The Amended and
Restated 1999 Non-Employee Director Stock Plan described herein amends and
restates in its entirety the 1999 Non-Employee Director Stock Plan. The
13
Amended and Restated 1999 Non-Employee Director Stock Plan (the "Director Plan")
was adopted by the Board on December 9, 2003, subject to stockholder approval.
The Amended and Restated 1999 Non-Employee Director Stock Plan increases
the number of shares available for grant from 100,000 to 300,000 shares of
Enesco common stock. The amendment also provides for the annual automatic grant
of non-qualified stock options to non-employee directors which is currently
provided for under the 1996 Stock Option Plan. Amendments to the 1996 Stock
Option Plan are being proposed (as Proposal No. 3) to remove the stock option
grants to non-employee directors from the 1996 Stock Option Plan provisions.
Additional changes to the 1999 Director Plan were made to accommodate the
inclusion of option grants, with terms such as acceleration of vesting,
adjustments in capitalization and change in control and transferability.
The Director Plan is intended to encourage non-employee directors of Enesco
to acquire or increase their ownership of common stock of Enesco on reasonable
terms, and to foster a strong incentive to put forth maximum effort for the
continued success and growth of Enesco and its subsidiaries. The Director Plan
provides for the granting of non-qualified stock options to purchase an
aggregate of 2,000 shares of the common stock and stock awards the day after
each annual meeting of stockholders to each of the non-employee directors of
Enesco. The non-employee directors who will be eligible to receive stock options
and stock awards under the Director Plan are George R. Ditomassi, Judith R.
Haberkorn, Donald L. Krause, Donna Brooks Lucas, Hector J. Orci, Thane A.
Pressman and Anne-Lee Verville.
The complete text of the Director Plan is attached as Annex B to this Proxy
Statement. The following summary is qualified in its entirety by reference to
Annex B.
OPTION GRANTS
Each of the directors eligible to participate in the Director Plan will be
entitled to receive an option to purchase 2,000 shares of common stock the day
following each annual meeting of the stockholders of Enesco. If the number of
shares available to grant under the Director Plan on a scheduled date of grant
is insufficient to make all the grants, then each eligible director will receive
an option to purchase a pro rata number of the available shares.
The option price per share for grants will be the fair market value of the
shares of common stock on the date of grant. Under the Director Plan, fair
market value is generally the closing price of the common stock on the New York
Stock Exchange ("NYSE") on the date of grant if it is a business day (if the
date of grant is not a business day, then fair market value is the closing price
of the common stock on the last business day prior to the date of grant).
The options granted under the Director Plan will be exercisable for a term
of ten years from the date of grant, subject to earlier termination, and unless
determined otherwise by the Board may be exercised on the earlier of (i) 25%
annual increments commencing on the first anniversary of the date of grant and
(ii) (a) 50% of the shares subject to the option if the fair market value of the
shares is above 125% of the exercise price for 10 consecutive trading days, (b)
the remaining 50% of the shares if the fair market value of the shares is above
150% of the exercise price for at least 10 consecutive trading days.
STOCK AWARDS
Each of the non-employee directors shall also be entitled to receive a
stock award on the day after the annual meeting of stockholders of Enesco. Such
grant shall be that number of shares having a fair market
14
value equal to the dollar amount designated by the Board from time to time as
part of its remuneration policy. The Board has currently designated: (a) $37,500
as Chairman of the Board compensation to be paid in stock, which would entitle
the Chairman of the Board to 3,260 shares based on $11.50 per share (the closing
price of Enesco common stock on March 31, 2004) and (b) $15,000 as non-employee
director compensation to be paid in stock, which would entitle each of the
non-employee directors to 1,304 shares based on a $11.50 per share (the closing
price of Enesco common stock on March 31, 2004). No fractional shares will be
issued to such directors. The directors may be required to pay the par value of
the shares granted. Each of George R. Ditomassi, Judith R. Haberkorn, Donald L.
Krause, Donna Brooks Lucas, Hector J. Orci, Thane A. Pressman and Anne-Lee
Verville will be entitled to a grant on the day following the Annual Meeting
held May 19, 2004 if the Director Plan is approved. Under the Director Plan,
fair market value is generally the closing price of the common stock on the NYSE
on the date of the grant (if the date of grant is not a business day, then fair
market value is the closing price of the common stock on the last business day
prior to the date of grant).
SHARES SUBJECT TO THE DIRECTOR PLAN
The Director Plan as amended authorizes the issuance of 300,000 shares of
Enesco common stock. There are currently 100,000 shares authorized of which
4,903 are available for issuance. Shares relating to awards that are forfeited,
terminated or cancelled will be available for future issuance. Assuming approval
of the Director Plan 204,903 shares will be available for future grants. The
committee may adjust the aggregate number of shares under the Director Plan in
the event of a change affecting the Enesco common stock, such as stock
dividends, recapitalization, reorganization and mergers.
ACCELERATION OF VESTING
In the event that a director ceases to be a member of the Board (other than
for cause), an option may be exercised by the director (to the extent the
director was entitled to do so at the time he/she ceased to be a member of the
Board) at any time within three years after he/she ceases to be a member of the
Board, but not beyond the term of the option. If the director is removed for
cause then all outstanding options will be forfeited and cancelled.
Notwithstanding the foregoing, in the event a director ceases to be a member of
the Board for any reason within six months of the date of grant of any options,
any outstanding options granted within such six month period will be forfeited
and cancelled.
ADJUSTMENTS IN CAPITALIZATION AND CHANGE IN CONTROL
Options granted under the Director Plan will be subject to adjustment upon
a stock dividend, stock split, combination or exchange of shares,
recapitalization, reclassification, merger, consolidation, separation,
reorganization, partial or complete liquidation, or other similar events
affecting the common stock. Options will not be transferable other than by will
or pursuant to the laws of descent and distribution or pursuant to a qualified
domestic relations order, and will be exercisable during the lifetime of an
option holder only by such holder or his personal representative in the event of
disability.
In the case of an unusual corporate event such as a liquidation, merger,
reorganization or other business combination, acquisition or change of control
of Enesco through tender offer or otherwise, the Board may, on a case by case
basis, terminate any options upon the consummation of the unusual corporate
event provided that prior to the consummation of the unusual corporate event any
outstanding options that will be terminated shall become immediately vested.
15
AMENDMENTS AND TERMINATION
The Director Plan will terminate January 20, 2009 and neither options nor
stock awards may be granted under the Director Plan after that date, although
the terms of any option may be amended in accordance with the Director Plan at
any date prior to the end of the term of such option. Any options outstanding at
the time of termination of the Director Plan will continue in full force and
effect according to the terms and conditions of the option and the Director
Plan. The Director Plan may be amended by the Board, provided that stockholder
approval will be necessary if any amendment to the Director Plan or option
increases or decreases any exercise price after the date of grant, or as
required under Rule 16b-3 or the rules of any exchange on which the Company's
securities are listed, and no amendment may impair any of the rights of any
holder of an option previously granted under the Director Plan without the
holder's consent.
ADMINISTRATION
The Director Plan will be administered by the Board; however, the Board may
delegate its administrative duties to the Human Resources and Compensation
Committee of Enesco. Most of the principal terms of the option grants are fixed
in the Director Plan, therefore, the Committee will have no discretion to select
which directors receive options, the number of shares of common stock subject to
such grants, or the exercise price of options.
FEDERAL INCOME TAX CONSEQUENCES
Non-Qualified Options. Option holders will not generally realize taxable
income upon the grant of a non-qualified stock option. Upon the exercise of a
non-qualified stock option, an option holder will recognize ordinary
compensation income in an amount equal to the excess of (i) the fair market
value of the shares received, over (ii) the exercise price paid therefore. An
option holder will generally have tax basis in any shares received pursuant to
the exercise of a non-qualified stock option that equals the fair market value
of such shares on the date of exercise. Enesco (or a subsidiary) will be
entitled to a deduction for federal income tax purposes that corresponds as to
timing and amount with the compensation income recognized by an option holder
under the foregoing rules.
Stock Awards. Generally, a director to whom a stock award is made will
recognize ordinary income for federal income tax purposes in an amount equal to
the excess of the fair market value of the shares of common stock received at
the time the shares first become transferable or are no longer subject to
forfeiture over the purchase price, if any, paid by the director for such common
stock, and such amount will then be deductible for federal income tax purposes
by Enesco. Alternatively, if the recipient of a stock award so elects, the
recipient will recognize ordinary income on the date of grant in an amount equal
to the excess of the fair market value of the shares of common stock (without
taking into account any lapse restrictions) on such date, over the purchase
price, if any, paid by the director for such common stock, and such amount will
then be deductible by Enesco. In the event of the forfeiture of the common stock
included in a stock award, the director will not be entitled to any deduction
except to the extent the director paid for such common stock. Upon a sale of the
common stock included in the stock award, the director will recognize a capital
gain or loss, which will be a long term capital gain or loss if held for more
than one year, equal to the difference between the amount realized from such
sale and the director's tax basis for such shares of common stock.
16
NEW PLAN BENEFITS
On May 20, 2004, each of George R. Ditomassi, Judith R. Haberkorn, Donald
L. Krause, Donna Brooks Lucas, Hector J. Orci, Thane A. Pressman and Anne-Lee
Verville (assuming re-election) will be entitled to an option to purchase 2,000
shares of common stock of Enesco at an exercise price equal to the closing price
of the common stock on the NYSE on May 20, 2004 and such aggregate number of
shares having a value of $125,000 based on the closing price on the NYSE on May
20, 2004.
The Common Stock grants that will be made to non-employee directors under
the Plan, are described under "Compensation of Non-Employee Directors" and
dependent upon the closing price of Enesco's common stock as of the day
following its annual meetings. If approved, each non-employee director will
receive a grant of 2,000 non-qualified options to purchase Enesco common stock
on the day following the annual meeting each year. The following table sets
forth, for each of the non-employee directors and for the non-employee directors
as a group, all stock grants received prior to March 31, 2004 under the Plan.
<Table>
<Caption>
NO. OF OPTIONS
RECEIVED UNDER
NO. OF SHARES RECEIVED UNDER 1996 STOCK OPTION
NAME OF NON-EMPLOYEE DIRECTOR 1999 NON-EMPLOYEE DIRECTOR PLAN PLAN
- ----------------------------- ------------------------------- -----------------
John F. Cauley............................ 9,500 12,000
George R. Ditomassi....................... 10,336 5,663
Judith R. Haberkorn....................... 13,363 12,000
Donald L. Krause.......................... 8,190 4,332
Donna Brooks Lucas........................ 12,973 6,000
Hector J. Orci............................ 661 674
Thane A. Pressman......................... 10,336 5,663
Anne-Lee Verville......................... 21,462 12,000
All Non-Employee Directors as a group 86,821 58,332
------ ------
Total................................ 86,821 58,332
====== ======
</Table>
VOTE NECESSARY TO APPROVE THE AMENDED AND RESTATED 1999 DIRECTOR PLAN
The affirmative vote of the holders of a majority of the shares of Enesco's
common stock voted on this matter at the Annual Meeting, a quorum being present,
will be required to approve the Amended and Restated 1999 Non-Employee Director
Plan. Abstentions will count as a vote against the proposal, but broker
non-votes will have no effect. If the Amended and Restated 1999 Non-Employee
Director Plan is not approved by Enesco stockholders at the Annual Meeting, the
1999 Director Plan will continue to read in the form currently in effect
providing for only stock awards; however, there will not be a sufficient number
of shares available under the Plan to make the full awards in 2004.
THE BOARD OF DIRECTORS OF ENESCO RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
OF PROPOSAL NO. 2.
17
PROPOSAL 3:
APPROVAL OF THE AMENDMENT AND RESTATEMENT
OF THE 1996 STOCK OPTION PLAN TO PROVIDE FOR LONG-TERM
INCENTIVE AWARDS IN ADDITION TO STOCK OPTIONS.
On January 24, 1996, the Board of Directors of Enesco adopted, and on April
25, 1996, Enesco's stockholders approved, the 1996 Stock Option Plan as part of
a continuing effort to encourage key management employees of Enesco and its
subsidiaries to acquire a proprietary interest in Enesco through ownership of
Enesco common stock, to continue in their service with Enesco and help attract
other qualified persons to become employees and directors. On December 4, 2002
the Board adopted an amendment to the 1996 Stock Option Plan, which was approved
by the Enesco stockholders on April 24, 2003.
On December 9, 2003, the Board adopted the Amended and Restated 1996 Stock
Option Plan and renamed it the Amended and Restated 1996 Long-Term Incentive
Plan (the "Amended and Restated Incentive Plan"), subject to stockholder
approval. The Amended and Restated Incentive Plan amends and restates the 1996
Stock Option Plan in its entirety.
In order to provide the Human Resources and Compensation Committee with a
more competitive equity compensation package, the Amended and Restated Incentive
Plan provides for the grant of restricted shares, stock awards, performance
awards and stock appreciation rights, in addition to both incentive and non-
qualified option awards as previously provided for under the provisions of the
plan. The Amended and Restated Incentive Plan also: (1) modifies the vesting
provisions of the option awards to provide the Committee with more flexibility;
(2) imposes restrictions on the number of awards granted; (3) eliminates the
non-employee director options grant provisions (now contained in the Amended and
Restated 1999 Non-Employee Director Stock Plan); (4) modifies the acceleration
and termination provisions relating to options; and (5) provides the Committee
with discretion to make tax gross-up payments, among other matters.
The Board believes that providing key management employees with a
proprietary interest in the growth and performance of Enesco that more closely
mirrors common practices both among competitors and among corporations
generally, is crucial to providing an effective incentive to individual
performance while at the same time enhancing stockholder value.
The Board has directed that the Amended and Restated Incentive Plan be
submitted to Enesco's stockholders for their consideration and approval. The
complete text of the Amended and Restated Incentive Plan is attached as Annex C
to this Proxy Statement. The following summary is qualified in its entirety by
reference to Annex C.
The following provides a description of the terms of the Amended and
Restated Incentive Plan.
ADMINISTRATION OF THE PLAN
The Amended and Restated Incentive Plan is administered by the Human
Resources and Compensation Committee of the Board which consists of not less
than three qualified non-employee, independent directors of Enesco, who are
appointed by the Board. Subject to the provisions of the plan and approval of
the Board, the Committee is authorized to grant awards, to interpret the plan
and such awards, to prescribe, amend and rescind the rules and regulations
relating to the plan and the awards and to make other necessary or advisable
determinations. The Committee has responsibility for identifying those officers
and key management employees of Enesco and its subsidiaries who are eligible to
receive awards under the plan. The present members of the Committee are Donna
Brooks Lucas (Chairperson), George R. Ditomassi, Judith R.
18
Haberkorn, and Thane A. Pressman. Committee members serve in such capacity for
terms of one year and until their successors are elected and qualified after
each annual meeting.
TERMS OF THE PLAN
Eligibility. The Amended and Restated Incentive Plan provides that
officers and key employees of Enesco and its subsidiaries who are selected by
the Committee are eligible to receive awards for up to a maximum of 200,000
shares, of which only 100,000 shares may be subject to performance plan awards,
SARs, restricted stock awards, and stock awards. In addition, the Committee may
not make grants of performance plan awards, SARs, restricted stock awards or
stock awards in excess of 900,000 shares over the life of the plan. Subject to
the limitations of the plan, the Committee, in its sole discretion, selects the
officers and key employees to be granted awards, the time or times when awards
will be granted, the type of awards to be granted and the number of shares to be
covered by each award. As of March 31, 2004 approximately 40 individuals were
entitled to participate in the plan.
Shares Issuable Under the Plan. If the Amended and Restated Incentive Plan
is approved, a total of 3,000,000 shares will be authorized to be issued under
the plan. This number has not been modified in connection with the amendment and
restatement. Shares that are subject to awards that are forfeited, terminated or
cancelled will be available for future issuance. As of March 31, 2004, a total
of 1,474,648 shares were available for awards under the plan and 1,462,609
shares were subject to outstanding options. On March 31, 2004, the closing
transaction price of a share of Enesco's common stock, as reported in the New
York Stock Exchange Composite Transactions, was $11.50.
OPTION AWARDS
The Committee may grant incentive stock options, non-qualified stock
options, or a combination of the two.
The exercise price of each incentive stock option may not be less than the
fair market value of the common stock at the date of grant. Under the Amended
and Restated Incentive Plan, the fair market value is generally the closing
price of the common stock on the NYSE on the date of grant if it is a business
day (if the date of grant is not a business day, then fair market value is the
closing price of the common stock on the last business day prior to the date of
grant). Unless the Committee determines otherwise, the option price per share of
any non-qualified stock option shall be the fair market value of the shares of
common stock on the date the option is granted. The exercise price of each
incentive stock option granted to any participant possessing more than 10% of
the combined voting power of all classes of capital stock of Enesco, or, if
applicable, a parent or subsidiary of Enesco, on the date of grant must not be
less than 110% of the fair market value on that date, and no such option may be
exercisable more than five years after the date of grant.
Options granted will be exercisable for a term of not more than ten years
from the date of grant. In addition, no employee may be granted an incentive
stock option to the extent the aggregate fair market value, as of the date of
grant, of the common stock with respect to which incentive stock options are
first exercisable by such participant during any calendar year exceeds $100,000.
RESTRICTED STOCK AWARDS
Restricted stock awards are rights granted by the Human Resources and
Compensation Committee for shares of common stock subject to forfeiture and
other restrictions determined by the Committee. Until the restrictions with
respect to any restricted stock award lapse, the shares will be held by Enesco
and may not be
19
sold or otherwise transferred by the employee. Except as otherwise determined by
the Committee, until the restrictions lapse, the shares will be forfeited if the
employee's employment is terminated for any reason. Until the lapse of the
restrictions, recipients may not dispose of their restricted stock. Restricted
stock awards may be granted in tandem with an option or on a stand alone basis.
The Committee may require the employees to pay Enesco an amount equal to the
aggregate par value of the shares of common stock to be issued.
STOCK APPRECIATION RIGHTS
A SAR is a right granted to a participant to receive shares of common stock
or cash, or a combination thereof, in an amount equal to the excess of (a) the
fair market value of a share of common stock on the date the SAR is exercised
over (b) the fair market value of a share of common stock on the date the SAR
was granted or, if granted in tandem with an option, at the discretion of the
Committee, the option price of the shares subject to the option. SARs may be
granted in tandem with an option or on a stand alone basis.
Each SAR granted in tandem with an option is exercisable only to the extent
the related option is exercisable. SARs granted on a stand alone basis are
exercisable for a term to be determined by the Committee. Those SARs which are
granted in tandem with incentive stock options are not exercisable unless the
fair market value of the shares of common stock on the date of exercise exceeds
the option price and in no event may the amounts paid pursuant to the SAR exceed
the difference between the fair market value of the shares on the date of
exercise and the option price.
STOCK AWARDS
Stock awards may be granted on such terms as the Human Resources and
Compensation Committee may determine. The Committee may require the employee to
pay Enesco an amount equal to the aggregate par value of the shares of common
stock to be issued.
PERFORMANCE PLAN AWARDS
Performance plan awards may be granted in such form as the Human Resources
and Compensation Committee may determine. These awards may include the grant of
options, restricted stock awards, stock awards or units (payable in cash or
shares) and are subject to the achievement in whole or in part, of certain
performance criteria over a designated performance period specified by the
Committee. Performance plan awards may be granted alone, in addition to, or in
tandem with other awards under the plan. In determining the performance goals
the Committee may use such measures as cumulative or non-cumulative return or
equity return on assets and operating income, earnings growth, revenue growth or
such other individual or aggregate measure or measures it deems appropriate.
TAX GROSS-UP PAYMENTS
The Human Resources and Compensation Committee, in its sole discretion, may
provide that Enesco will make cash payments to a participant who receives an
award in an amount equal to the aggregate amount of federal, state and local
income and/or excise taxes which such employee would be required to pay as a
result of the receipt of shares of common stock pursuant to any award (other
than an incentive stock option).
ADJUSTMENTS IN CAPITALIZATION AND CHANGE IN CONTROL
Awards granted under the Amended and Restated Incentive Plan will be
subject to adjustment upon stock dividend, stock split, combination or exchange
of shares, recapitalization, partial or complete liquidation,
20
or other similar event affecting the common stock. An award will not be
transferable, other than by will or the laws of descent and distribution or, in
certain circumstances, pursuant to a qualified domestic relations order, and an
award may be exercised, during the lifetime of the holder of the Award, only by
the holder, or the holder's personal representative in the event of disability.
In the case of an unusual corporate event such as a liquidation, merger,
reorganization or other business combination, acquisition or change of control
of Enesco through tender offer or otherwise, the Board may, on a case by case
basis, terminate any awards upon the consummation of the unusual corporate
event, provided, however, prior to the consummation of the unusual corporate
event, the vesting provisions of those awards that will be terminated will
accelerate and all restrictions shall lapse.
AMENDMENT OR TERMINATION OF THE AMENDED AND RESTATED INCENTIVE PLAN
The Amended and Restated Incentive Plan will terminate on January 23, 2006,
and awards will not be granted under the Amended and Restated Incentive Plan
after that date although the terms of any award may be amended in accordance
with the Amended and Restated Incentive Plan at any date prior to the end of the
term of such award. Any awards outstanding at the time of termination of the
Amended and Restated Incentive Plan will continue in full force and effect
according to the terms and conditions of the award and the Amended and Restated
Incentive Plan.
The Amended and Restated Incentive Plan may be amended by the Board of
Directors, provided that stockholder approval will be necessary to increase the
number of shares subject to the plan, change the designation of the class of
employees eligible to receive awards, decrease the price at which options may be
granted, increase or decrease the exercise price of options after the date of
grant, or as required under Section 422 of the Tax Code or Rule 16b-3, and the
rules of any exchange on which Enesco's shares are listed, and provided further
that no amendment may impair any rights of any holder of an award previously
granted under the Amended and Restated Incentive Plan without the holder's
consent.
AMENDED AND RESTATED INCENTIVE PLAN BENEFITS
No grants under the Amended and Restated Incentive Plan have been made,
although there are outstanding options under the existing version of the Plan.
It is not possible at the present time to predict the number of grants that will
be made or who will receive grants under the Amended and Restated Incentive Plan
because these awards are discretionary, although as of March 31, 2004,
approximately 40 employees would have been eligible to receive grants under the
Plan.
FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a brief summary of certain of the federal income tax
consequences to award recipients and to Enesco as a result of the grant and
exercise of awards under the Amended and Restated Incentive Plan. This summary
is based on statutory provisions, treasury regulations thereunder, judicial
decisions and Internal Revenue Service rulings in effect on the date hereof. The
summary does not discuss any potential foreign, state or local tax consequences
and is not intended as specific tax advice to any option holder.
Non-Qualified Stock Options. Option holders will not generally realize
taxable income upon the grant of a non-qualified stock option. Upon the exercise
of a non-qualified stock option, an option holder will recognize ordinary
compensation income (subject to withholding by Enesco or a subsidiary) in an
amount equal to the excess of (i) the fair market value of the shares received,
over (ii) the exercise price paid therefor. An option holder will generally have
tax basis in any shares received pursuant to the exercise of a non-qualified
stock
21
option that equals the fair market value of such shares on the date of exercise.
Subject to the discussion under "Tax Code Limitations on Deductibility," Enesco
(or a subsidiary) will be entitled to a deduction for federal income tax
purposes that corresponds as to timing and amount with the compensation income
recognized by an option holder under the foregoing rules.
Incentive Stock Options. Persons eligible to receive an incentive stock
option will not have taxable income for regular tax purposes upon the grant or
exercise of such an option. Upon exercise of an incentive stock option, the
excess of the fair market value of the shares received over the exercise price
will increase the alternative minimum taxable income of the option holder, which
may cause such option holder to incur alternative minimum tax. The payment of
any alternative minimum tax attributable to the exercise of an incentive stock
option would be allowed as a credit against the option holder's regular tax
liability in a later year to the extent the option holder's regular tax
liability is in excess of an alternative minimum tax for that year. Upon the
disposition of shares acquired upon exercise of an incentive stock option that
have been held for the requisite holding period (two years from the date of
grant and one year from the date of exercise of the incentive stock option) an
option holder will generally recognize capital gain (or loss) equal to the
excess (or shortfall) of the amount received in the disposition over the
exercise price paid by the option holder for the shares. However, if an option
holder disposes of shares that have not been held for the requisite holding
period (a "Disqualifying Disposition"), the option holder will recognize
ordinary compensation income in the year of the Disqualifying Disposition in an
amount equal to the amount by which the fair market value of the shares at the
time of exercise of the incentive stock option (or, if less, the amount realized
in the case of a arms-length Disqualifying Disposition to an unrelated party)
exceeds the exercise price paid by the option holder for such shares. An option
holder would also recognize capital gain to the extent the amount realized in
the Disqualifying Disposition exceeds the fair market value of the shares on the
exercise date.
Enesco and its subsidiaries will generally not be entitled to any federal
income tax deduction upon the grant or exercise of an incentive stock option,
unless an option holder makes a Disqualifying Disposition of the shares. If an
option holder makes a Disqualifying Disposition, Enesco (or a subsidiary) will
then, subject to discussion below under "Tax Code Limitations on Deductibility"
be entitled to a tax deduction that corresponds as to timing and amount with a
compensation income recognized by an option holder under the rules described in
the preceding paragraph.
Payment of Exercise Price in Shares. If an option holder transfers
previously held shares of Enesco's stock (other than common shares acquired by
exercise of an incentive stock option that have not been held for the requisite
holding period) in satisfaction of part or all of the exercise price of a
non-qualified stock option or incentive stock option, no additional gain will be
recognized on the transfer of such previously held shares in satisfaction of the
non-qualified stock option or incentive stock option exercise price (although an
option holder would still recognize ordinary compensation income upon exercise
of a non-qualified stock option in the manner described above). Moreover, that
number of shares received upon exercise of an option which equals the number of
previously held shares surrendered in satisfaction of the exercise price of the
non-qualified stock option or incentive stock option will have a tax basis that
equals, and a holding period that includes, the tax basis and the holding period
of the previously held shares surrendered in payment of the exercise price of
the non-qualified stock option or incentive stock option. Any additional shares
received upon exercise of an option will have a tax basis that equals the amount
of cash (if any) paid by the option holder, plus the amount of compensation
income recognized by the option holder under the rules described above.
Restricted Stock Awards and Stock Awards. Generally, an employee to whom a
restricted stock or stock award is made will recognize ordinary income for
federal income tax purposes in an amount equal to the excess of the fair market
value of the shares of common stock received at the time the shares first become
22
transferable or are no longer subject to forfeiture over the purchase price, if
any, paid by the employee for such common stock, and such amount will then be
deductible for federal income tax purposes by Enesco. Alternatively, if the
recipient of a restricted stock or stock award so elects, the recipient will
recognize ordinary income on the date of grant in an amount equal to the excess
of the fair market value of the shares of common stock (without taking into
account any lapse restrictions) on such date, over the purchase price, if any,
paid by the employee for such common stock, and such amount will then be
deductible by Enesco (or its subsidiary). In the event of the forfeiture of the
common stock included in a restricted stock or stock award, the employee will
not be entitled to any deduction except to the extent the employee paid for such
common stock. Upon a sale of the common stock included in the restricted stock
or stock award, the employee will recognize a capital gain or loss, which will
be a long term capital gain or loss if held for more than one year, as the case
may be, equal to the difference between the amount realized from such sale and
the employee's tax basis for such shares of common stock.
Performance Plan Awards. The federal income tax consequences and Section
16 restrictions will generally be the same for performance plan awards as the
underlying grant of options, restricted stock awards, or stock awards. A
recipient of units payable in cash or shares of common stock will generally
recognize ordinary income for federal income tax purposes in an amount equal to
the amount of cash and/or the then fair market value of the shares of common
stock received, in the tax year in which received, and Enesco will normally be
entitled to a tax deduction for an equivalent amount for the same year.
Tax Gross-Up Payments. Any cash payment received in conjunction with an
award under the Amended and Restated Incentive Plan will be taxed to the
employee as ordinary income at the time he or she receives it, and Enesco will
be entitled, subject to the limitations of Sections 280G and 162(m) of the Tax
Code, to a corresponding tax deduction at such time.
Stock Appreciation Rights. A recipient employee will not recognize taxable
income upon the grant of a SAR. The employee will generally recognize ordinary
income for federal income tax purposes in an amount equal to the amount of cash
and/or the then fair market value of the shares of common stock received upon
exercise of the SAR, in the tax year in which payment is made in respect of a
SAR, and Enesco will normally be entitled to a tax deduction for an equivalent
amount for the same year.
Tax Code Limitations on Deductibility. In order for the amounts described
above to be deductible by Enesco (or a subsidiary), such amounts must constitute
reasonable compensation for services rendered or to be rendered and must be
ordinary and necessary business expenses. The ability of Enesco (or a
subsidiary) to obtain a deduction for future payments under the Plan could also
in some circumstances be limited by the golden parachute payment rules of
Section 280G of the Code, which prevent the deductibility of certain excess
parachute payments made in connection with a change in control of a corporation.
Finally, the ability of Enesco (or a subsidiary) to obtain a deduction for
amounts paid under the Plan could be limited by Section 162(m) of the Code,
which limits to $1,000,000 per officer the deductibility for federal income tax
purposes of most compensation paid during a taxable year to certain executive
officers of Enesco. However, an exception to this limitation applies in the case
of certain performance-based compensation. The Amended and Restated Plan is
intended to satisfy the requirements for this exception for option grants and
SARs.
TAX WITHHOLDING
Enesco is authorized to withhold from any award granted under the plan any
withholding taxes due in respect of the award or payment. Subject to Human
Resources and Compensation Committee approval, a
23
participant may elect to satisfy his or her obligations for the payment of
withholding taxes by delivery of shares of common stock.
BENEFITS UNDER THE PLAN
The Option grants, if any, that will be made to eligible persons under the
Plan, other than non-employee directors, are subject to the discretion of the
Committee and, therefore, are not determinable at this time. The following table
sets forth, for the named executive officers and for other executive officers as
a group, all stock options received prior to March 31, 2004 under the Plan.
<Table>
<Caption>
NO. OF SHARES UNDERLYING OPTION(S)
NAME AND PRINCIPAL POSITION RECEIVED UNDER 1996 STOCK OPTION PLAN
- --------------------------- -------------------------------------
D. DalleMolle.......................................... 200,000
President and Chief Executive Officer
E. Freedman............................................ 187,600
Founding Chairman
J.S. Smith............................................. 50,762
Senior Vice President,
Sales, Marketing and Product Development
J.V. Goldberg,......................................... 71,240
Senior Vice President,
Human Resources and Administration
T.F. Bradley........................................... 43,708
Treasurer
Chief Financial Officer
All Other Executive Officers
as a Group (2 persons)............................... 61,020
-------
Total........................................ 614,330
=======
</Table>
VOTE NECESSARY TO APPROVE AMENDMENT
The affirmative vote of the holders of a majority of the shares of Enesco's
common stock voted on this matter at the Annual Meeting, a quorum being present,
will be required to approve the Amendment. Abstentions will count as a vote
against the proposal, but broker non-votes will have no effect. Stockholder
approval for the Amendment is needed in order to permit a full federal income
tax deduction to Enesco for certain "performance-based" awards and to comply
with the listing rules of the New York Stock Exchange. If the Amendment is not
approved by the stockholders at the Annual Meeting, the Plan will continue to
read in the form currently in effect, without the changes incorporated in the
Amendment.
THE BOARD OF DIRECTORS OF ENESCO RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
OF THE AMENDMENT.
24
EXECUTIVE COMPENSATION
The following table sets forth, for the years ended December 31, 2003, 2002
and 2001, the compensation of the Chief Executive Officer, and the four other
most highly compensated executive officers in office at the end of 2003.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS(2)
-------------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($)(3) BONUS($) ($) OPTIONS (#) ($)
- --------------------------- ---- ------------ -------- ------------ ------------ ------------
D. DalleMolle,(4).............. 2003 $480,000 $457,169 $ -- 100,000 --
President and Chief 2002 500,308 472,914 -- 100,000 --
Executive Officer 2001 350,769 312,000 -- 300,000 $140,000
E. Freedman.................... 2003 $400,000 $153,699 -- 20,000 --
Founding Chairman 2002 501,923 -- -- 20,000 --
2001 615,385 -- -- -- --
J.S. Smith,(5)................. 2003 $240,000 $163,270 -- 30,762 --
Senior Vice President, 2002 234,519 158,342 -- 20,000 --
Sales, Marketing and Product
Development 2001 151,400 80, 000 -- 50,000 $ 83,996
J.V. Goldberg.................. 2003 $232,000 $157,832 -- 30,000 --
Senior Vice President, 2002 241,815 163,268 -- 20,000 --
Human Resources and
Administration 2001 225,462 -- -- 25,000 --
T.F. Bradley,(6)............... 2003 $240,000 $161,489 -- 43,708 $ 37,513
Treasurer and 2002 -- -- -- -- --
Chief Financial Officer 2001 -- -- -- -- --
</Table>
- ---------------
(1) Annual compensation includes bonus compensation for the year, whether paid
in the year indicated or in the succeeding year. Annual compensation also
includes amounts deferred under Enesco's retirement plans. Compensation
information for 2002 and 2001 for Mr. Bradley is not provided because he was
not employed at Enesco during those years.
(2) All Long-Term Compensation Awards to the Named Executive Officers during the
three-year period were made in the form of non-qualified stock options
granted under Enesco's 1991 and/or 1996 Stock Option Plans, or in the case
of Messrs. DalleMolle and Smith in 2001, non-qualified stock options from
treasury stock as an additional incentive to accept employment with Enesco.
No stock appreciation rights ("SARs") were awarded either singly or in
tandem with the granted options.
(3) In 2002, Enesco changed from a bi-weekly to semi-monthly payroll, causing
each employee to receive six (6) additional days pay and an adjustment for a
24 versus 26 pay-period calculation.
(4) Mr. DalleMolle commenced his employment at Enesco on March 28, 2001. Under
the terms of his employment agreement, in addition to his base salary, he
was paid a guaranteed bonus of $312,000 for 2001 and a signing bonus of
$140,000.
(5) Mr. Smith commenced his employment at Enesco on June 5, 2001. In addition to
his base salary, he was paid a guaranteed bonus of $80,000 for 2001. All
Other Compensation for 2001 is comprised of a $35,000
25
starting bonus and relocation expense reimbursement of $48,996. Mr. Smith
received a non-qualified stock option grant under the 1996 Stock Option Plan
to purchase 762 shares at an exercise price of $6.56 as an Achievement Award
winner in 2003. He also received a non-qualified stock option grant under
the 1996 Stock Option Plan to purchase 30,000 shares at an exercise price of
$7.94 on April 25, 2003.
(6) Mr. Bradley commenced his employment at Enesco on January 6, 2003. Mr.
Bradley received a non-qualified stock option grant under the 1996 Stock
Option Plan to purchase 33,708 shares as an incentive to accept employment
with Enesco. He also received a non-qualified stock option grant under the
1996 Stock Option Plan to purchase 10,000 shares at an exercise price of
$7.94 on April 25, 2003. All other compensation for 2003 is comprised of a
$10,000 starting bonus and relocation expense reimbursement of $27,513.
The following table contains information concerning individual grants of
stock options made to each of the Named Executive Officers during 2003:
OPTION GRANTS IN 2003
<Table>
<Caption>
GRANT DATE
INDIVIDUAL GRANTS(1) VALUE
-------------------------------------------------------------- ----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE OR GRANT DATE
GRANTED IN FISCAL BASE PRICE PRESENT
NAME (#)(2) YEAR ($/SH) EXPIRATION DATE VALUE $(5)
- ---- ---------- ---------- ----------- --------------- ----------
D. DalleMolle........... 100,000 19.40 $7.94 April 25, 2013 500,800
E. Freedman............. 20,000 3.88 $7.94 April 25, 2013 100,160
J.S. Smith.............. 30,762(3) 5.97 $6.56/$7.94 March 5/April 25, 2013 153,318
J.V. Goldberg........... 30,000 5.82 $7.94 April 25, 2013 150,240
T.F. Bradley............ 43,708(4) 8.48 $7.12/$7.94 Jan. 6/April 25, 2013 201,024
</Table>
- ---------------
(1) The individual grants described were all made in the form of non-qualified
stock options under Enesco's 1996 Stock Option Plan. No SARs were granted
during 2003.
(2) All options granted under the 1996 Stock Option Plan in 2003 have a ten-year
term and become exercisable only (a) after six months from date of grant and
(b) either upon the achievement of certain performance criteria or as to 25%
of the shares underlying the option on the anniversary of the grant.
(3) Mr. Smith received a non-qualified stock option grant under the 1996 Stock
Option Plan to purchase 762 shares at an exercise price of $6.56 as an
Achievement Award winner in 2003. He also received a non-qualified stock
option grant under the 1996 Stock Option Plan to purchase 30,000 shares at
an exercise price of $7.94 on April 25, 2003.
(4) Mr. Bradley received a non-qualified stock option grant under the 1996 Stock
Option Plan to purchase 33,708 shares at an exercise price of $7.12 per
share as an incentive to accept employment with Enesco. He also received a
non-qualified stock option grant under the 1996 Stock Option Plan to
purchase 10,000 shares at an exercise price of $7.94 on April 25, 2003.
(5) Enesco used the Black-Scholes option pricing model to determine the present
value of each option granted as of its date of grant. The assumptions used
relating to the expected volatility, risk-free rate of return, dividend
yield and time of exercise were as follows: (i) volatility was calculated
based on the daily
26
change in the common stock price during the 250 trading days preceding the
option grant date; (ii) risk-free rate of return was the yield as of the
option grant date on U.S. Treasury bonds maturing in ten years; (iii)
dividend yield was computed based on the then most recent four quarterly
dividends paid on the common stock divided by the average of the highest and
lowest closing prices for the common stock during the twelve-month period
ending on the grant date; and (iv) time of exercise was the full term of the
option granted. There were no adjustments made in the option pricing model
for non-transferability or risk of forfeiture of the options granted.
The following table sets forth information concerning the exercise of stock
options by each of the Named Executive Officers during the last fiscal year and
the value of unexercised stock options held by each of them as of the end of the
fiscal year:
AGGREGATED OPTION EXERCISES IN 2003
AND 2003 YEAR END OPTION VALUES
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FY-END(#) FY-END($)
EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- -------- ------------------------- -------------------------
D. DalleMolle............... -- -- 350,000/150,000 $1,399,500/$401,500
E. Freedman................. 33,400 $189,963 113,000/150,600 32,700/116,650
J.S. Smith.................. -- -- 60,762/40,000 271,565/104,100
J.V. Goldberg............... -- -- 37,935/65,565 149,055/179,815
T.F. Bradley................ -- -- 16,854/26,854 53,933/77,733
</Table>
EQUITY COMPENSATION PLANS
Enesco historically has three equity incentive plans under which our equity
securities have been authorized for issuance to our employees or directors: (1)
the 1991 Stock Option Plan; (2) the 1996 Stock Option Plan; and (3) the 1999
Non-Employee Director Stock Plan. The 1991 and 1996 Stock Option Plans have each
been approved by our stockholders. The 1999 Non-Employee Director Stock Plan was
not approved by stockholders, as it provides for automatic, annual grants from
treasury shares to each non-employee director as part of their compensation for
serving on Enesco's Board. An amendment and restatement of each of the 1996
Stock Option Plan and the 1999 Non-Employee Director Stock Plan is being
presented to our stockholders for approval at this Annual Meeting. For details,
please see the description of the plans in Proposal 2 and 3 in this Proxy
Statement. Our 1991 Stock Option Plan expired on January 23, 2001 and
consequently, future option grants to employees will be made from the 1996 Stock
Option Plan.
In addition, from time to time, Enesco has issued (a) warrants to purchase
shares of our common stock to non-employees, such as licensors and (b) options
to purchase shares of our common stock to newly hired employees as an additional
incentive to accept employment with Enesco. These warrants and stock option
grants to newly hired employees were approved by the Board of Directors, but
were not approved by our stockholders. Only treasury shares may be issued upon
the exercise of these warrants and stock options.
27
Summary Table
The following table sets forth certain information as of December 31, 2003,
with respect to compensation plans under which shares of Enesco common stock may
be issued. As a result of the expiration of the 1991 Stock Option Plan, no
further shares are available for issuance under that Plan.
<Table>
<Caption>
WEIGHTED-
NUMBER OF AVERAGE EXERCISE NUMBER OF
SECURITIES TO BE PRICE OF SECURITIES
ISSUED UPON OUTSTANDING REMAINING AVAILABLE
EXERCISE OF OPTIONS, FOR FUTURE ISSUANCE
OPTIONS, WARRANTS WARRANTS AND UNDER EQUITY
PLAN CATEGORY AND RIGHTS(#) RIGHTS($) COMPENSATION PLANS
- ------------- ----------------- ---------------- -------------------
EQUITY COMPENSATION PLANS APPROVED BY OUR
SHAREHOLDERS:
1996 Stock Option Plan........................ 1,599,339 $12.72 1,341,638
1991 Stock Option PlaN........................ 637,242 18.69 0
EQUITY SECURITIES NOT APPROVED BY ENESCO
SHAREHOLDERS:
1997 President and Chief Executive Officer
Stock Option Plan........................... 100,000 $27.31 --
1998 Chairman Stock Option Plan............... 14,000 $25.81 --
1999 Non-Employee Director Stock Plan......... 95,097 -- 4,903
1999 cancellation of Non-Employee Directors
Retirement Plan............................. 20,523 -- --
Shares issued as partial compensation for
services Chair of Executive Search
Committee................................... 17,292 -- --
Warrants to purchase common stock............. 200,000 4.38 --
Options to purchase common stock.............. 367,997 6.13 --
--------- ------ ---------
TOTAL......................................... 3,051,490 $13.18 1,346,541
========= ====== =========
</Table>
Employment Contracts and Change in Control Arrangements
Mr. DalleMolle, President and Chief Executive Officer, has an employment
agreement through March 31, 2006. Under the terms of the agreement, Mr.
DalleMolle receives an annual base salary of $480,000. For 2003, Mr. DalleMolle
received $480,000 as annual base salary and a bonus payment of $457,169 under
the ROA Incentive Bonus Plan. In 2003, Mr. DalleMolle's bonus was subject to the
attainment of certain operating profit and return on asset targets, as
determined and approved by the Board's Human Resources and Compensation
Committee. In addition, Mr. DalleMolle receives certain executive officer fringe
benefits, including use of a company car. The employment agreement also contains
confidentiality, non-compete and non-solicitation covenants.
Enesco has separate change in control agreements or commitments with
Messrs. DalleMolle, Freedman, Smith, Bradley and Ms. Goldberg under which each
of these individuals is entitled to both (i) a severance benefit, payable upon
or before termination for any reason (other than death, disability, retirement,
termination for substantial cause or voluntary termination without good reason)
occurring within two years following a change in control of Enesco, up to three
(two in the case of each of Messrs. Smith and Bradley,
28
and Ms. Goldberg) times the annual base salary rate plus bonus and (ii) certain
fringe benefits for up to a three-year term. In accordance with their change in
control agreements and severance agreements, Messrs. DalleMolle and Freedman
also will be reimbursed for any excise tax and other taxes incurred as a result
of such reimbursement. The types of events constituting a change in control
under these agreements include those that require reporting under Item 6(e) of
Schedule 14A of Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and certain other events specified in the change
in control agreements.
Any terminations of the remaining Named Executive Officers absent a change
in control of Enesco will be governed by the employee severance policy of Enesco
under which each of them may (subject to certain conditions) be entitled to a
severance benefit of up to 26 weeks of base salary depending on designated
criteria and to certain other continuing group medical, life and accidental
death and dismemberment insurance coverage.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2003, Ms. Brooks Lucas, Ms. Haberkorn, Mr. Ditomassi and Mr.
Pressman served on the Board's Human Resources and Compensation Committee. None
of them were then an officer or employee of Enesco or any of its subsidiaries.
No current member of the Committee is a former officer of Enesco or any of its
subsidiaries, and none had any other relationship requiring disclosure.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on Enesco records and other information, Enesco believes that all SEC
filing requirements under Section 16(a) of the Exchange Act applicable to its
Directors and executive officers with respect to the year ending December 31,
2003 were satisfied, except that the Form 4 filing for Donna Brooks Lucas
reporting a purchase of Enesco common stock on November 18, 2003 was reported on
December 18, 2003.
HUMAN RESOURCES AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Enesco's executive compensation program is administered by the Human
Resources and Compensation Committee of the Board. The Committee is comprised of
non-employee Directors who approve or recommend to the Board salary and bonus
amounts and other annual compensation and long-term compensation awards for the
executive officers.
Enesco's executive compensation program during 2003 consisted of three
components: base salary and fringe benefits; incentive bonus opportunity; and
option awards to purchase shares of common stock. The Committee's compensation
policies regarding these components are designed to provide a compensation
package which is targeted at the median level of total compensation for
similarly situated executive officers in a comparator group of other U.S.
companies of comparable size and geographic diversity. The comparator group used
in establishing Enesco's compensation levels is composed of companies that
participate in the "Watson Wyatt Executive Compensation Survey," a well
established and nationally recognized annual executive compensation survey. This
survey includes some of the companies included in the indices shown in the
Performance Graph set forth below. The Committee believes that evaluating data
from the broad group of industries and companies represented in this survey is
important in establishing the true market for executive talent. To compete
effectively in this market, Enesco believes that it must be aware of
compensation levels in
29
various industries and companies of all sizes and, accordingly, does not limit
its compensation analyses to those constituting the indices shown in the
Performance Graph.
Base salaries and fringe benefits are set at the annual base salary and
fringe benefit amounts of comparable executive officers. In 2003, merit raises
were not given to any executive officers as Enesco had a wage freeze in place
for executive officers. Pay for performance bonuses for all Enesco employees
were determined under Enesco's 2003 ROA Incentive Bonus Plan based on achieving
certain specified targets for operating profit and return on assets. Options to
purchase shares of common stock are granted in amounts that are competitive with
long-term incentive award practices of comparable U.S. companies, considering
the number of options that have been previously granted to each of the executive
officers. The options are granted generally on an annual basis at the then
market value of common stock and vest after six months from the date of grant,
in each case for a ten-year term, thus providing a direct relationship between
the executive officers' potentially realizable long-term compensation amounts
and actually recognizable increases in stockholder value. The options become
exercisable either based on the achievement of certain performance criteria or
as to 25% of the shares underlying the option on the anniversary date of the
grant. Executive officer and Director stock ownership guidelines have been
adopted with the objective of further aligning the executive officers' and
Directors' and stockholders' interests. The Committee's compensation policies
are intended to reinforce Enesco's performance-oriented compensation practices
and are not impacted by potential non-deductibility of certain compensation
amounts for federal tax purposes under the provisions of Section 162(m) of the
Internal Revenue Code.
Compensation paid in 2003 to Mr. DalleMolle, President and Chief Executive
Officer consisted of $480,000 as base salary and a bonus of $457,169 under the
ROA Incentive Bonus Plan. The bonus was paid due to Enesco's attainment in 2003
of certain levels of operating profit and return on assets for each of the U.S.,
Canadian and U.K. operations. The Committee also awarded, on April 25, 2003, Mr.
DalleMolle a grant of 100,000 non-qualified stock options to purchase common
stock under the 1996 Stock Option Plan.
The Human Resources and Compensation Committee:
D. Brooks Lucas (Chair)
G.R. Ditomassi
J. R. Haberkorn
T.A. Pressman
30
REPORT OF THE AUDIT COMMITTEE
March 4, 2004
To the Board of Directors of Enesco Group, Inc.
We have reviewed and discussed with management Enesco's audited financial
statements as of December 31, 2003 and 2002, and for the three years in the
period ended December 31, 2003.
We have discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees, as amended.
We have received and reviewed the written disclosures and the letter from
the independent auditors required by Independence Standard No. 1, Independence
Discussions with Audit Committees, and have discussed with the auditors the
auditors' independence.
Based on the reviews and discussions referred to above, we recommend to the
Board of Directors that the financial statements referred to above be included
in Enesco's Annual Report on Form 10-K for the year ended December 31, 2003.
D.L. Krause, Chair
J.F. Cauley
D. Brooks Lucas
G.R. Ditomassi
J.R. Haberkorn
H.J. Orci
T.A. Pressman
A.L. Verville
31
PERFORMANCE GRAPH
During 2003, Enesco common stock was included in the Standard & Poor's
Small Cap 600 Index. A performance graph comparing Enesco common stock
performance with the performance of this stock index is provided.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG THE COMPANY,
THE STANDARD & POOR'S ("S&P") SMALL CAP 600 INDEX AND THE COMPANY'S PEER
GROUP INDEX(1)
COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN
(PERFORMANCE GRAPH)
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------
12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
- ------------------------------------------------------------------------------------------------------------------
Enesco Group, Inc. $100.00 51.05 22.49 30.23 33.97 49.52
- ------------------------------------------------------------------------------------------------------------------
S&P SmallCap 600 $100.00 112.40 125.67 133.88 114.30 158.63
- ------------------------------------------------------------------------------------------------------------------
Company's Peer Group $100.00 88.41 73.36 86.45 90.42 100.66
- ------------------------------------------------------------------------------------------------------------------
</Table>
- ---------------
(1) This graphic presentation assumes (a) one-time $100 investments in the
common stock and in market capital base-weighted amounts apportioned among
all the companies whose equity securities constitute the above named board
equity market index and Enesco's selected peer group index, in each case
made as of the market close on the last trading day in 1998 and (b) the
automatic reinvestment of dividends, if any, in additional shares of the
same class of equity securities constituting such investments at the
frequency with which dividends were paid on such securities during the
applicable fiscal years. Enesco has chosen to present a peer group index
composed of the companies that constitute the S&P SmallCap 600 Products
Housewares and Specialties Index. Enesco's peer group is made up of the
following six companies:
<Table>
S&P Consumer (Housewares and Specialties) -- Small Cap 600 Libbey Inc.
Department 56, Inc. Russ Berrie & Co. Inc.
Enesco Group, Inc. National Presto Industries, Inc.
</Table>
32
PROPOSAL 4: INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP has been engaged by Enesco as independent public accountants since
June 2002. Enesco has had no disagreements with KPMG on accounting and financial
disclosures. As recommended by its Audit Committee, the Board has appointed that
firm as independent public accountants for 2004, subject to ratification by the
stockholders. Valid proxies of stockholders containing no designation to the
contrary will be voted for the reappointment of that firm as recommended by the
Audit Committee.
Representatives of KPMG LLP are expected to attend the Annual Meeting and
be available to respond to appropriate questions and to make a statement if they
so desire.
The Audit Committee has established policies and procedures to pre-approve
all audit and permissible non-audit services performed by KPMG after January 1,
2003. To minimize relationships that could appear to impair the objectivity of
KPMG, our Audit Committee has restricted the non-audit services that KPMG may
provide to Enesco primarily to tax and merger and acquisition due diligence and
audit services, and has determined that even these non-audit services will be
obtained from KPMG only when the services offered by KPMG are more effective or
economical than services available from other service providers.
Prior to commencement of the 2004 audit, management will submit a schedule
of all proposed services expected to be rendered during that year for each of
four categories of services to the Audit Committee for approval.
Prior to engagement, the Audit Committee pre-approves these services by
category of service. The fees are budgeted and the Audit Committee requires the
independent auditor and management to report on the actual fees versus the
budget periodically. In each case, the Audit Committee also sets a specific
limit on the amount of such services to be provided by KPMG and requires
specific pre-approval for any engagement over $25,000. During the year,
circumstances may arise when it may become necessary to engage the independent
auditor for additional services not contemplated in the original pre-approval.
In those instances, the Audit Committee requires specific pre-approval before
engaging the independent auditor.
The Audit Committee may delegate pre-approval authority to one or more of
its members. The member to whom such authority is delegated must report any
pre-approval decisions to the Audit Committee at its next scheduled meeting.
The aggregate fees billed for professional services by KPMG in 2002 and
2003 are as follows (certain amounts for 2002 have been reclassified to conform
to the 2003 presentation):
2002 AND 2003 AUDIT FIRM FEE SUMMARY
<Table>
<Caption>
2002 2003
-------- --------
Audit Fees.............................................. $337,147 $451,513
Audit-related Fees...................................... 5,737 7,144
Tax Fees................................................ 73,696 86,412
All Other Fees.......................................... 37,926 27,864
-------- --------
Total................................................. $454,506 $572,933
======== ========
</Table>
33
Our Audit Committee has adopted restrictions on Enesco employing any KPMG
partner, director, manager, staff, advising member of the department of
professional practice, reviewing actuary, reviewing tax professional and any
other persons having responsibility for providing audit services related to
Enesco's financial statements. The Audit Committee also requires key KPMG
partners assigned to our audit to be rotated at least every five years.
STOCKHOLDER PROPOSALS
The Annual Meeting is called for the purposes set forth in the Notice.
Although Enesco knows of no items of business which will be presented at the
Annual Meeting other than those described, proxies in the accompanying form will
confer discretionary authority to Enesco's management proxy holders to use in
accordance with their best judgment with respect to any such items which may
come before the Annual Meeting to the extent permitted by the applicable rules
of the SEC. In order to be considered under Rule 14a-8 for inclusion in Enesco's
proxy materials to be distributed in connection with the Annual Meeting of
Stockholders in 2005, stockholder proposals for that meeting must be received by
Enesco on or before November 19, 2004. In order for a stockholder proposal
submitted outside of Rule 14a-8 to be considered "timely" within the meaning of
Rule 14a-4(c) for possible presentation at the meeting (other than a proposal
with respect to the nomination for election of one or more directors, for which
procedures are set forth above under the caption "Committees of the Board"),
such a proposal must be received by the Secretary of Enesco on or before
February 2, 2005. Enesco's management proxy holders will be permitted to use
their discretionary voting authority, as conferred by any valid proxy, in
accordance with their best judgment when such a proposal is raised at that
meeting.
ENESCO FILES AN ANNUAL REPORT ON FORM 10-K WITH THE SECURITIES AND EXCHANGE
COMMISSION. STOCKHOLDERS MAY OBTAIN A COPY OF THE ANNUAL REPORT FOR THE FISCAL
YEAR ENDED DECEMBER 31, 2003 WITHOUT CHARGE BY WRITING TO THE SECRETARY OF
ENESCO, AT 225 WINDSOR DRIVE, ITASCA, ILLINOIS 60143.
By order of the Board of Directors,
/s/ M. Frances Durden
ENESCO GROUP, INC.
M. FRANCES DURDEN
Secretary
April 16, 2004
34
ANNEX A
ENESCO GROUP, INC.
AUDIT COMMITTEE CHARTER
COMPARISON TO SARBANES OXLEY ACT OF 2002
AS OF JANUARY 5, 2004
ROLE AND INDEPENDENCE
The Audit Committee of the Board of Directors (the "Committee") assists the
Board in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing and reporting practices of the Company and
such other duties as are directed by the Board. The Committee shall consist of
at least three directors who are generally knowledgeable in financial and
auditing matters, including at least one member with accounting or related
financial management expertise, whose name and relationship with the issuer
shall be disclosed. Each member shall be free of any relationship that, in the
opinion of the Board, would interfere with his or her individual exercise of
independent judgement, and shall meet the director's independence requirements
for serving on audit committees as set forth in the corporate governance
standards of the New York Stock Exchange.
Regarding Committee members, if any, who serve on the Audit Committee of
more than three public companies, the Board will determine if such service does
not impair the individual's ability to effectively serve the committee, and will
disclose such determination in its annual proxy statement.
The Committee is expected to maintain free and open communication
(including private executive sessions) with the independent accountants and the
internal auditors.
The Board of Directors shall appoint one member of the Committee as
chairperson. He or she shall be responsible for leadership of the Committee,
including approving the agenda, presiding over the meetings, making Committee
assignments and reporting to the Board of Directors. The chairperson will also
maintain regular liaison with the CEO, CFO, the lead independent audit partner
and the director of internal audit.
The Committee shall meet with such frequency and at such intervals, as it
shall determine is necessary to carry out its duties and responsibilities.
Routine meetings are scheduled for February, May and December. The Secretary of
the Corporation shall serve as the Secretary of the Committee except for the
private executive sessions.
A. RESPONSIBILITIES REGARDING THE ENGAGEMENT OF THE INDEPENDENT ACCOUNTANTS AND
THE APPOINTMENT OF THE INTERNAL AUDITOR
1. Review and recommend to the Board of Directors the independent
accountants to be selected to audit the annual financial statements and
review the quarterly financial statements of the Company. The Committee
shall have the authority and responsibility to appoint, evaluate and
replace the independent auditor, as well as determine their
qualifications, independence and adequacy. The independent auditor shall
be accountable to the Board of Directors and the Audit Committee. The
Committee will also review and approve fees paid to the independent
accountants.
2. Oversee the independent auditor relationship by initially reviewing and
approving the scope of the audit and subsequently discussing with the
auditor the nature and rigor of the audit process, changes
A-1
in scope, receiving and reviewing audit reports, and providing the
auditor full access to the Committee (and the Board of Directors) to
report on any and all appropriate matters.
3. Review and approve requests for any significant management consulting
engagements to be performed by the independent accountants.
4. Review and concur in the appointment, replacement, reassignment or
dismissal of the Director of Internal Audit and determine the reporting
structure appropriate for independence.
5. Ensure that the independent accountants deliver to the Committee
annually a formal written statement delineating all relationships
between the independent accountants and the Company and addressing at
least the matters set forth in Independence Standards Board Standard No.
1; discuss with the independent accountants any relationships or
services disclosed in such statement that may impact the objectivity and
recommend that the Board of Directors take appropriate action in
response to this statement to satisfy itself of the independent
accountants' independence.
6. Review on an annual basis other services performed by the external
auditors and related fees, and inquire as to the extent to which
independent public accountants other than the principal auditor are to
be used and understand the rationale for using them. The Committee
should request that the work of other independent public accountants be
coordinated and that an appropriate review of their work be performed
by, the principal auditor.
7. Perform an annual assessment of the of the Company's internal audit
function and independent auditors, including a review and evaluation of
the lead partner of the independent auditor. In addition to assuring the
regular rotation of the lead audit partner, the Committee will also
consider whether there should be regular rotation of the audit firm
itself. The Committee will present its conclusions with respect to the
independent auditor to the full Board.
8. At least annually, the Committee will obtain and review a report by the
independent auditor describing:
- The firm's internal quality-control procedures;
- Any material issues raised by the most recent internal quality-control
review or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more independent
audits carried out by the firm, including any steps taken to deal with
any such issues; and
- All relationships between the independent auditor and the Company
B. RESPONSIBILITIES FOR REVIEWING INTERNAL AUDITS, THE ANNUAL EXTERNAL AUDIT
AND THE REVIEW OF FINANCIAL STATEMENTS
The Committee will:
1. Request the independent accountants to confirm that they are accountable
to the Board of Directors and the Committee and that they will provide
the Committee with timely analyses of significant financial reporting
and internal control issues.
2. Review with management significant risks and exposures identified by
management and steps undertaken by management to minimize such risks.
A-2
3. Review the scope of the internal and external audits with the Director
of Internal Audit and the independent accountants.
4. Provide guidance and oversight to the internal audit activities of the
Company including reviewing the organization, plans and results of such
activity. This includes oversight of the annual internal controls report
to be certified by management and filed with the Company's Form 10-K
annual report.
5. Review with management, the independent accountants and the Director of
Internal Audit:
- The Company's internal controls, including computerized information
system controls and security.
- Any significant findings and recommendations made by the independent
accountants or internal audit staff.
6. Review the audited financial statements, proxy and Form 10-K (including
year-end management certification letter and Management's Discussion and
Analysis of Financial Condition and Results of Operation) and discuss
them with management and the independent auditor. These discussions
shall include consideration of the quality of the Company's accounting
principles as applied in its financial reporting, including review of
estimates, reserves and accruals, review of judgmental areas, review of
audit adjustments whether or not recorded and such other inquiries as
may be appropriate. Based on the review, the Committee shall make its
recommendation to the Board of Directors as to the inclusion of the
Company's audited financial statements in the Company's annual report on
Form 10-K.
7. Discuss the company's earnings press releases, as well as financial
information and earnings guidance provided to analysts and rating
agencies.
8. Review with management and the independent accountants the quarterly
financial information prior to the Company's filing of Form 10-Q and
related quarterly management certification letter. The Committee or its
chairperson may perform this review.
9. Discuss the Company's policies with respect to financial risk assessment
and risk management.
10. Periodically meet separately with representatives of management,
internal audit and the independent auditors.
11. Review with the independent auditor any audit issues and management's
response, including any restrictions on the scope of the independent
auditor's activities or access to requested information, and any
significant disagreements with management.
C. OTHER RESPONSIBILITIES:
1. Review recent and prospective opinions of the FASB and similar
organizations and their impact upon the Company's accounting and
financial statements.
2. Review on an annual basis, policies and procedures covering officers'
expense accounts and perquisites, including the use of corporate assets,
and consider the results of any review of those areas by the Director of
Internal Audit or the independent accountants.
A-3
3. Review periodically with the General Counsel any legal and regulatory
matters that may have a material effect on the Company's financial
statements, operations, compliance policies and programs.
4. Review on an annual basis with the General Counsel the monitoring of
senior financial officer compliance with the Company's Code of Conduct.
5. Report Audit Committee activities to the full Board of Directors and
issue annually a report to be included in the proxy statement (including
appropriate oversight conclusions) for submission to the shareholders.
In addition, the Committee will report regularly to the Board regarding
any issues that arise with respect to:
- The quality or integrity of the company's financial statements,
- The company's compliance with legal or regulatory requirements,
- The performance and independence of the company's independent auditors
and internal audit function.
6. Review and reassess the adequacy of its charter on an annual basis,
provide the New York Stock Exchange with an annual written affirmation
regarding the annual review and reassessment of the adequacy of the
charter, and affirm the independence and other qualifications of the
Audit Committee members. If revised, the Charter will be published in
the next proxy. Otherwise the Charter will be published every third year
in the proxy.
7. Set guidelines for committee education and orientation to assure
understanding of the business and the environment in which the company
operates.
8. Set guidelines for development of an annual audit committee plan that is
responsive to the primary audit committee responsibilities, and for the
review and approval of the plan by the full Board.
9. Communicate committee expectations and the nature, timing, and extent of
committee information needs to management, internal and external
auditors, and others.
10. Set clear hiring policies for employees or former employees of the
independent auditors.
11. Provide the Board and management the opportunity to perform an annual
performance evaluation of the Committee and their performance.
D. OTHER AUTHORITY
The Committee is authorized to confer with Company management and other
employees to the extent it may deem necessary or appropriate to fulfill its
duties. The Committee is authorized to conduct or authorize investigations or
special audits into any matters within the Committee's scope of
responsibilities. The Committee also is authorized to seek outside legal or
other advice to the extent it deems necessary or appropriate, provided it shall
keep the Board advised as to the nature and extent of such outside advice. The
Committee will perform such other functions as are authorized for this Committee
by the Board of Directors.
A-4
ANNEX B
AMENDED AND RESTATED
ENESCO GROUP, INC.
1999 NON-EMPLOYEE DIRECTOR STOCK PLAN
AS OF MAY 19, 2004
1. Purposes.
The purposes of the Amended and Restated Enesco Group, Inc. 1999
Non-Employee Director Stock Plan are (i) to align the interests of the
stockholders of Enesco Group, Inc. (the "Company") and non-employee members of
the Board by increasing their proprietary interest in the Company's growth and
success, (ii) to advance the interests of the Company by attracting and
retaining non-employee directors and (iii) to motivate non-employee directors to
act in the long-term best interests of the Company's stockholders.
2. Definitions.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change in Control" means a Change in Control of a nature that
would, in the opinion of the Company counsel, be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Exchange Act; provided that, without limitation, such a Change in
Control shall be deemed to have occurred if: (i) any "Person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act (other than the
Company or any subsidiary of the Company, any trustee or fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of the stock of the Company)) becomes the "beneficial owner" (as
defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; or (ii) during any
period of two consecutive years (not including any period prior to the
effective date of this Plan), individuals who at the beginning of such
period constitute the Board and any new director (other than a director
designated by a Person who has entered into an agreement with the Company
to effect a transaction described in clause (i), (iii), or (iv) of this
paragraph) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved cease for any reason to constitute a majority
thereof; or (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of
any trustee or other fiduciary holding securities under an employee benefit
plan of the Company, at least 75% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person acquires 25% or more of the
combined voting power of the Company's then
B-1
outstanding securities; or (iv) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's
assets.
(c) "Code" shall mean the Internal Revenue Code of 1986, as in effect
at the time of reference, or any successor revenue code which may hereafter
be adopted in lieu thereof and reference to any specific provision of the
code shall refer to corresponding provisions of the Code as it may
hereafter be amended or replaced.
(d) "Committee" shall mean the Human Resources and Compensation
Committee of the Board or any other committee appointed by the Board which
is invested by the Board with the responsibility for the administration of
the Plan which committee shall be composed of not less than three (3)
directors of the Company elected or to be elected as member of the
Committee from time to time by the Board. Each Committee member shall meet
any applicable stock exchange requirements.
(e) "Company" shall mean Enesco Group, Inc., a corporation organized
under the laws of Illinois, or any successor corporation.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
in effect at the time of reference, or any successor law which may
hereafter be adopted in lieu thereof, and any reference to any specific
provisions of the Exchange Act shall refer to corresponding provisions of
the Exchange Act as it may hereafter be amended or replaced.
(g) "Fair Market Value" shall mean with respect to the Shares, (i) the
closing price of the Shares on the New York Stock Exchange or such other
exchange on which Shares are then traded or admitted to trading, on the
date of grant if it is a business day (if the date of grant is not a
business day, then the closing price of the common stock on the last
business day prior to the date of grant), (ii) if no sale takes place on
such day on any such exchange, the average of the last reported closing bid
and asked prices on such day as officially quoted on any such exchange, or
(iii) if the Shares are not then listed or admitted to trading on any such
exchange, the average of the last reported closing bid and asked prices on
such day on the over-the-counter market; provided, however, if there shall
be no public market for the Shares the price shall be the fair market value
determined in good faith by the Board, or the Committee if one has been
appointed, in its discretion, which determination may, but need not, be
based on (i) the advice of an independent financial advisor or (ii) the
last known price per Share paid by a purchaser in an arm's length
transaction. For purposes of (i) above, the National Association of
Securities Dealers National Market System shall be deemed a principal stock
exchange. If there shall be a public market for the Shares, and the
foregoing references are unavailable or inapplicable, then the Fair Market
Value shall be determined on the basis of the appropriate substitute public
market price indicator as determined by the Committee, in its sole
discretion.
(h) "Non-Qualified Stock Option" shall mean any Option other than one
that is intended to meet the requirements and contains the limitations and
restrictions set forth in Section 422 of the Code.
(i) "Option" shall mean the right to purchase the number of Shares
specified in Section 5 of the Plan on the terms and conditions set forth in
the Plan.
(j) "Participant" shall mean a non-employee member of the Board.
(k) "Plan" shall mean this Amended and Restated 1999 Enesco Group,
Inc. Non-Employee Director Stock Plan, as amended from time to time.
B-2
(l) "Plan Year" shall mean the calendar year.
(m) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations of the Securities and Exchange Commission as in effect at the
time of reference, or any successor rules or regulations which may
hereafter be adopted in lieu thereof, and any reference to any specific
provisions of Rule 16b-3 shall refer to corresponding provisions of Rule
16b-3 as it may hereafter be amended or replaced.
(n) "Shares" shall mean the common stock of the Company, par value
$0.125 per share.
(o) "Trading Day" shall mean a day on which the Company's common stock
may be traded on a stock exchange or, if the Company's common stock is not
listed on any exchange in the over-the-counter market.
3. Available Shares.
The aggregate number of Shares reserved which may be issued to Participants
pursuant to Sections 4 or 5 of the Plan shall not exceed three hundred thousand
(300,000) Shares, subject to adjustment as provided in Section 6 hereof. Such
Shares shall be either authorized and unissued Shares or issued Shares that have
been reacquired by the Company. Any Shares subject to issuance upon exercise of
Options, but which are not issued because of a surrender, lapse, expiration,
forfeiture or termination of any such Option prior to issuance of the Shares
shall once again be available for issuance to Participants in accordance with
the terms of the Plan.
4. Grants of Shares.
An individual who is a Participant on the day following the Annual
Stockholders Meeting of the Company during a Plan Year, commencing in 1999,
shall receive on such day and for such Plan Year a grant of a number of Shares,
increased to the nearest whole Share, having an aggregate Fair Market Value
equal to the dollar amount designated by the Board from time to time for
purposes of this Plan as part of the Board remuneration policy of the Company.
An individual who becomes a Participant at any later time during a Plan Year
shall receive a prorated grant of Shares for that Plan Year in which he or she
becomes a Participant. The grant shall be prorated based on the date the
Participant becomes eligible under the Plan through the end of the Plan Year.
5. Options.
In addition to the grants made to Participants under Section 4 above, each
individual who is a Participant on the day following the Annual meeting of the
stockholders of the Company during a Plan Year, commencing in 2004, shall
receive an Option on the terms set forth in this Section 5.
(a) Grant of Options. On the day following each Annual Stockholders'
Meeting, commencing in 2004, each person who is a Participant immediately
after such meeting shall automatically be granted an Option to purchase
2,000 Shares. All such Options shall be Non-Qualified Stock Options. The
price at which each Share covered by such Options shall be purchased shall
be the greater of (i) 100% of the Fair Market Value of the Company's common
stock on the date the Option is granted, or (ii) the par value of the
Company's common stock subject to the Option.
(b) Exercise of Options.
B-3
(1) Except as otherwise provided herein, including, without
limitation, the vesting provisions set forth below, an Option granted to
the Participant may be exercised only after six months of continued
service as a Director of the Company following the date the Option is
granted, and only during the continuance of the Participant serving on
the Board and such additional period as is provided for below. The
Option may be exercised by the Participant or his or her guardian or
legal representative(s) during the period that the Participant remains a
member of the Board and with respect to vested Options for a period of
three years thereafter, subject to the conditions of exercise set forth
below in subsection 5(c) and, provided further, that in no event shall
the Option be exercisable more than ten years after the date of grant.
Notwithstanding the foregoing, in the event a Participant is removed as
a member for cause (as defined by the Board) all outstanding Options
shall be forfeited and canceled. Subject to the foregoing, unless
determined otherwise by the Board, the Options will vest on the earlier
of (i) twenty-five percent (25%) of the total number of Shares subject
to an Option will vest and become exercisable on the first four
anniversary dates of the grant, and (ii) as to 50% of the Shares subject
to the Option, if the fair market value of the Shares is at or above
125% of the exercise price on each of at least ten consecutive Trading
Days and, as to the remaining 50% of the Shares if, at any time at or
after the initial 50% of the Shares becomes exercisable, the fair market
value of the Shares is at or above 150% of the exercise price on each of
at least ten consecutive Trading Days.
(2) Notwithstanding the foregoing and subject to the provisions of
Section 5(d), upon the Participant's service as a Director of the
Company terminating at any time for any reason, all outstanding Options
granted within the last six months prior to the Participant's
termination shall thereupon be forfeited by the Participant and canceled
by the Company.
(c) Exercise of Rights Under Options.
(1) Notice of Exercise. A Participant entitled to exercise an
Option shall do so by delivery of a written notice to that effect
specifying the number of Shares with respect to which the Option is
being exercised and any other relevant information the Committee may
require. The notice shall be accompanied by payment in full of the
purchase price of any Shares to be purchased, which payment may be made
in cash or, with the Committee's approval, in Shares held by the
Participant for at least six months and that are held free and clear of
all liens and encumbrances valued at Fair Market Value at the time of
exercise or a combination thereof. No Shares shall be issued upon
exercise of an Option until full payment has been made therefor. All
notices or requests provided for herein shall be delivered to the
Company's Secretary, or such other person as the Committee may
designate.
(2) Cashless Exercise Procedures. The Company, in its sole
discretion, may establish procedures whereby a Participant, subject to
the requirements of Rule 16b-3, Regulation T, federal income tax laws,
and other federal, state and local tax and securities laws, can exercise
an Option or a portion thereof without making a direct payment of the
exercise price to the Company; provided, however, that these cashless
exercise procedures shall not apply to any Option granted to a
Participant where the utilization of the cashless exercise procedure
would be deemed a violation of Section 13(k) of the Exchange Act. If the
Company so elects to establish a cashless exercise program, the Company
shall determine, in its sole discretion, and from time to time, such
administrative procedures and policies as it deems appropriate and such
procedures and policies shall be binding on any Participant wishing to
utilize the cashless exercise program.
B-4
(d) Acceleration of Options. In the event of a consolidation or
merger in which the Company is not the surviving corporation or of a Change
in Control including, but not limited to, Changes in Control in which the
Company is the surviving corporation, the Board may, in its discretion
terminate each Option outstanding under the provisions of this Section 5
upon consummation of the merger, consolidation or Change in Control,
provided that prior to the effective date of any such consolidation,
merger, or "Change in Control", the Participant shall be entitled to
exercise any outstanding Options in full without regard to any vesting
limitations.
(e) Nontransferability. No Option granted hereunder shall be
transferable other than: (i) by will or the laws of descent and
distribution, and an Option subject to exercise may be exercised, during
the lifetime of the holder of the Option, only by the holder of the Option
or in the event of death, the holder's successor, or in the event of
disability, the holder's personal representative, (ii) as otherwise
permitted under Rule 16b-3 under the Exchange Act from time to time and
allowed by the Board, or (iii) pursuant to a qualified domestic relations
order, as defined in the Code or ERISA or the rules thereunder.
(f) Rights of Holders. The holder of an Option shall not have any
rights as a stockholder with respect to Shares subject to purchase under an
Option except that stockholder rights with respect to any Option shall
arise at the time and to the extent that one or more certificates for such
Shares shall be delivered to the holder upon the due exercise of the
Option.
6. Effect of Certain Changes.
In the event of any stock dividend, stock split, combination or exchange of
shares, recapitalization, reclassification, merger, consolidation, separation,
reorganization, partial or complete liquidation, or similar events, or in the
event of extraordinary cash or non-cash dividends being declared with respect to
the Shares, or other similar transaction having the same effect of the
foregoing, the number and kind of shares available for grant under the Plan or
any Option granted hereunder may be equitably adjusted by the Board, in its sole
discretion, to reflect such event.
7. No Rights to Continuance as Director.
Nothing in the Plan or in any grant made pursuant hereto shall confer upon
any Participant the right to continue to serve as a member of the Board or to be
entitled to any remuneration or benefits not set forth in the Plan, provided,
however, that each Participant shall be entitled to fees for meetings attended,
in accordance with the Board remuneration policy of the Company.
8. Administration.
The Board shall be invested with the responsibility for the administration
of the Plan; provided, however, the Board may appoint a Committee which shall be
invested with the responsibility for the administration of the Plan. The
Committee shall have the authority to make such interpretations and
constructions of the Plan as are necessary to administer the Plan in accordance
with, and subject to, the Plan's provisions. All determinations of the Committee
shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by unanimous written
consent. All decisions, determinations and interpretations of the Committee
shall be final and binding on all persons, including the Company, the
Participant (or any person claiming any rights under the Plan from or through
any Participant) and any stockholder of the Company.
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9. Taxes.
(a) Right to Withhold Required Taxes. The Company shall have the
right to require a person entitled to receive Shares pursuant to the
exercise of an Option under the Plan to pay the Company the amount of any
taxes which the Company is or will be required to withhold with respect to
such Shares before the certificate for such Shares is delivered pursuant to
the Option. Furthermore, the Company may elect to deduct such taxes from
any other amounts then payable in cash or in Shares or from any other
amounts payable any time thereafter to the Participant.
(b) Participant Election to Withhold Shares. Subject to Board
approval, a Participant may elect to satisfy his tax liability with respect
to the exercise of an Option by having the Company withhold Shares
otherwise issuable upon exercise of the Option; provided, however, that if
a Participant is subject to Section 16(b) of the Exchange Act, such
election must satisfy the requirements of Rule 16b-3.
10. Amendment and Termination of the Plan.
The Board at any time and from time to time may suspend, terminate, modify
or amend the Plan, provided, however, no amendment to the Plan or any Option may
be made without stockholder approval that increases the maximum number of Shares
subject to the Plan, decreases the price at which Options may be granted, or
increases or decreases any option price after the date of grant and provided
further, that an amendment which requires stockholder approval in order for the
Plan to comply with any law, regulation or stock exchange requirement shall not
be effective unless approved by the requisite vote of stockholders of the
Company. Except as provided in Section 6 hereof, no suspension, termination,
modification or amendment of the Plan may adversely affect any grant previously
made, unless the written consent of the Participant is obtained.
11. Governing Law.
The Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of Illinois without giving
effect to the choice of law principles thereof, except to the extent that such
law is preempted by federal law.
12. Term.
The Plan shall take effect upon approval by the stockholders of the
Company, and shall remain in effect until January 20, 2009 or on such earlier
date if suspended or terminated by the Board, as permitted by law.
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ANNEX C
ENESCO GROUP, INC.
F/N/A STANHOME INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
AS OF MAY 19, 2004
TO BE RENAMED THE
AMENDED AND RESTATED 1996 LONG-TERM INCENTIVE PLAN
1. Purpose. The purpose of this Amended and Restated 1996 Long-Term
Incentive Plan (the "Plan") is to advance the interests of Enesco Group, Inc.
(the "Company") by encouraging key management employees of the Company and its
Subsidiaries to acquire a proprietary interest in the Company through ownership
of common stock of the Company. Such ownership will encourage the participants
to remain with the Company and will help attract other qualified persons to
become employees and directors.
2. Definitions. When used herein, the following terms shall have the
meaning set forth below:
2.1 "Award" means an Option, an Option granted in tandem with a SAR,
a Performance Plan Award, a Restricted Stock Award, a Restricted Stock
Award granted in tandem with an Option, a SAR or a Stock Bonus Award.
2.2 "Award Agreement" means a written agreement in such form as may
be from time to time, hereafter approved by the Committee, which shall be
duly executed by the Company and the Employee and which shall set forth the
terms and conditions of an Award under the Plan.
2.3 "Board" means the Board of Directors of Enesco Group, Inc.
2.4 "Code" means the Internal Revenue Code of 1986, as in effect at
the time of reference, or any successor revenue code which may hereafter be
adopted in lieu thereof, and reference to any specific provisions of the
Code shall refer to the corresponding provisions of the Code as it may
hereafter be amended or replaced.
2.5 "Committee" means the Human Resources and Compensation Committee
of the Board or any other committee appointed by the Board which is
invested by the Board with responsibility for the administration of the
Plan which committee shall be composed of not less than three directors of
the Company elected or to be elected as members of the Committee from time
to time by the Board. Each member of the Committee shall be a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act, an
"outside director" within the meaning of Section 162(m) of the Code and any
applicable stock exchange requirements.
2.6 "Company" means Enesco Group, Inc.
2.7 "Employee Stockholder" means an Employee who, at the time an
Incentive Stock Option is granted owns, as defined in Section 424 of the
Code, stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of: (a) the Company; or (b) if
applicable, a Subsidiary or a Parent.
2.8 "Employees" means officers (including officers who are members of
the Board) and other key employees of the Company or any of its
Subsidiaries.
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2.9 "ERISA" means the Employee Retirement Income Security Act of
1974, as in effect at the time of reference, or any successor law which may
hereafter be adopted in lieu thereof, and any reference to any specific
provisions of ERISA shall refer to the corresponding provisions of ERISA as
it may hereafter be amended or replaced.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as in
effect at the time of reference, or any successor law which may hereafter
be adopted in lieu thereof, and any reference to any specific provisions of
the Exchange Act shall refer to the corresponding provisions of the
Exchange Act as it may hereafter be amended or replaced.
2.11 "Fair Market Value" means with respect to the Shares, (a) the
closing price of the Shares on the New York Stock Exchange or such other
exchange on which Shares are then traded or admitted to trading, on the
date of the grant if it is a business day (if the date of grant is not a
business day, then the closing price of the common stock on the last
business day prior to the date of grant), (b) if no sale takes place on
such day on any such exchange, the average of the last reported closing bid
and asked prices on such day as officially quoted on any such exchange, or
(c) if the Shares are not then listed or admitted to trading on any such
exchange, the average of the last reported closing bid and asked prices on
such day on the over-the-counter market; provided, however, if there shall
be no public market for the Shares the price shall be the fair market value
determined in good faith by the Board, or the Committee if one has been
appointed, in its discretion, which determination may, but need not, be
based on (i) the advice of an independent financial advisor or (ii) the
last known price per Share paid by a purchaser in an arm's length
transaction. For purposes of (a) above, the National Association of
Securities Dealers National Market System shall be deemed a principal stock
exchange. If there shall be a public market for the Shares, and the
foregoing references are unavailable or inapplicable, then the Fair Market
Value shall be determined on the basis of the appropriate substitute public
market price indicator as determined by the Committee, in its sole
discretion.
2.12 "Incentive Stock Option" means an Option intending to meet the
requirements and containing the limitations and restrictions set forth in
Section 422 of the Code and designated in the Award Agreement as an
Incentive Stock Option.
2.13 "Non-Qualified Stock Option" means an Option other than an
Incentive Stock Option.
2.14 "Option" means the right to purchase the number of Shares
specified by the Committee, at a price and for a term fixed by the
Committee, in accordance with the Plan, and subject to such other
limitations and restrictions as the Plan and the Committee may impose.
2.15 "Parent" means any corporation, other than the employer
corporation, in an unbroken chain of corporations ending with the employer
corporation if, at the time of the granting of the Option, each of the
corporations other than the employer corporation owns stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
2.16 "Performance Goals" has the meaning ascribed to it in Section 11
of the Plan.
2.17 "Performance Period" has the meaning ascribed to it in Section
11 of the Plan.
2.18 "Performance Plan Award" means the right to receive Options,
Restricted Stock Awards, SARs, Shares, Stock Bonus Awards or units
(representing such monetary amount as designated by the Committee and
payable in cash or in Shares) pursuant to Section 11 of the Plan, which
right is based on,
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or subject to, in whole or in part, the achievement of certain performance
criteria specified by the Committee.
2.19 "Plan" means the Amended and Restated 1996 Stock Option Plan of
Enesco Group, Inc. as of May 19, 2004, now known as the Amended and
Restated Long-Term Incentive Plan.
2.20 "Regulation T" means Part 220, chapter II, title 12 of the Code
of Federal Regulations, issued by the Board of Governors of the Federal
Reserve System pursuant to the Exchange Act, as amended from time to time,
or any successor regulation which may hereafter be adopted in lieu thereof.
2.21 "Restricted Stock Award" means the right to receive Shares, but
subject to forfeiture and/or other restrictions set forth in the related
Restricted Stock Award Agreement and the Plan.
2.22 "Restricted Stock Award Agreement" means an Award Agreement
executed in connection with a Restricted Stock Award.
2.23 "Rule 16b-3" means Rule 16b-3 of the General Rules and
Regulations of the Securities and Exchange Commission as in effect at the
time of reference, or any successor rules or regulations which may
hereafter be adopted in lieu thereof, and any reference to any specific
provisions of Rule 16b-3 shall refer to the corresponding provisions of
Rule 16b-3 as it may hereafter be amended or replaced.
2.24 "SAR" means a stock appreciation right, which is a right to
receive an amount in cash, or Shares, or a combination of cash and Shares,
as determined or approved by the Committee, no greater than the excess, if
any, of (i) the Fair Market Value of a Share on the date the SAR is
exercised, over (ii) the SAR Base Price.
2.25 "SAR Base Price" means the Fair Market Value of a Share on the
date a SAR was granted, or if the SAR was granted in tandem with an Option
(whether or not the Option was granted on a different date than the SAR),
in the Committee's discretion, the option price of a Share subject to the
Option.
2.26 "Shares" means shares of the Company's common stock $0.125 par
value each or, if by reason of the adjustment provisions contained herein,
any rights under an Award under the Plan pertain to any other security,
such other security.
2.27 "Stock Bonus Award" means the right to receive Shares as
provided in Section 10 of the Plan.
2.28 "Subsidiary" or "Subsidiaries" means any corporation or
corporations other than the employer corporation in an unbroken chain of
corporations beginning with the employer corporation if each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
2.29 "Substantial Cause" means (a) the willful and continued failure
by the Employee to perform substantially the Employee's duties with the
Company or a Subsidiary (other than any such failure resulting from the
Employee's incapacity due to physical or mental illness) after a written
demand for substantial performance is delivered to the Employee by the
Board, which demand specifically identifies the manner in which the Board
believes that the Employee has not substantially performed the Employee's
duties or (b) the willful engagement by the Employee in conduct which is
demonstrably and materially injurious to the Company or its Subsidiaries .
For purposes of clauses (a) and (b) of this definition, no act or failure
to act by the Employee shall be deemed "willful" unless done, or omitted to
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be done, by the Employee not in good faith and without reasonable belief
that the Employee's act or failure to act was in the best interests of the
Company.
2.30 "Successor" means the legal representative of the estate of a
deceased Employee or the person or persons who shall acquire the right to
exercise or receive an Award by bequest or inheritance or by reason of the
death of the Employee.
2.31 "Term" means the period during which a particular Award may be
exercised.
3. Administration. The Plan shall be administered by the Committee.
Subject to the provisions of the Plan and the approval of the Board, except that
the Board of Directors shall have no discretion with respect to the selection of
officers within the meaning of Rule 16a-1(f), directors or 10% or more
shareholders ("Insiders") for participation and decisions concerning the timing,
pricing and amount of a grant or award to such "Insiders", the Committee is
authorized to grant Awards under the Plan and to interpret the Plan and such
Awards, to prescribe, amend and rescind rules and regulations relating to the
Plan and the Awards, and to make other determinations necessary or advisable for
the administration of the Plan, all of which determinations shall be conclusive.
The Committee shall act pursuant to a majority vote or by unanimous written
consent. The Committee shall hold its meetings at such times and places as it
shall deem advisable. A majority of its members shall constitute a quorum. The
Committee shall make such rules and regulations for the conduct of its business
as it shall deem advisable.
4. Stock Subject to the Plan. The aggregate number of shares which may be
issued under Awards granted pursuant to the Plan shall not exceed 3,000,000
shares of the Company's common stock $0.125 par value each. Such Shares shall be
either authorized but unissued Shares or issued Shares which shall have been
reacquired by the Company. Such aggregate number of Shares may be adjusted under
Section 18 below. Any Shares subject to issuance upon exercise of Options or
SARs, or vesting of Performance Plan Awards, but which are not issued because of
a surrender, lapse, expiration, forfeiture or termination of any such Option,
SAR or Performance Plan Award prior to issuance of the Shares shall once again
be available for issuance in satisfaction of Awards. Similarly, any Shares
issued pursuant to a Restricted Stock Award which are subsequently forfeited
pursuant to the terms of the related Restricted Unit Award Agreement shall once
again be available for issuance in satisfaction of Awards.
5. Eligibility. Awards shall be granted under the Plan to such selected
key full-time salaried and commissioned employees (including officers and
directors if they are employees) of the Company or any of its Subsidiaries as
the Committee shall determine from time to time. In determining the Employees to
whom Awards shall be granted and the number of Shares to be issued or subject to
purchase or issuance under such Awards, the Committee shall take into account
the recommendations of the Company's management as to the duties of the
respective Employees, their present and potential contributions to the success
of the Company and its Subsidiaries, and such other factors as the Committee
shall deem relevant in connection with accomplishing the purposes of the Plan.
No Awards shall be granted, on or after May 19, 2004, to any member of the
Committee so long as his or her membership on the Committee continues or to any
member of the Board who is not also an officer or key employee of the Company or
any Subsidiary. All options granted under the Plan to non-employee directors
prior to May 19, 2004, shall not be affected by the amendment and restatement of
the Plan and will remain outstanding under the Plan and the specific terms of
their Award Agreements.
6. Allotment of Shares. The Committee shall determine the total number of
Shares to be offered to each Employee under the Plan; provided, however, that no
Employee may be granted (a) Options which exceed 200,000 Shares under the Plan
in any calendar year, and (b) Performance Plan Awards, SARs,
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Restricted Stock Awards and Stock Bonus Awards which exceed 100,000 Shares under
the Plan in any calendar year. In addition, the Committee may not make grants of
Performance Plan Awards, SARs, Restricted Stock Awards and Stock Bonus Awards
which exceed 900,000 Shares.
7. Stock Options.
7.1 Types of Options. Options granted pursuant to the Plan may be
either Incentive Stock Options or Non-qualified Stock Options. It is the
intent of the Company that Non-qualified Stock Options granted under the
Plan not be classified as Incentive Stock Options, that the Incentive Stock
Options granted under the Plan be consistent with and contain or be deemed
to contain all provisions required under Section 422 and the other
appropriate provisions of the Code and any implementing regulations (and
any successor provisions thereof), and that any ambiguities in construction
shall be interpreted in order to effectuate such intent. The Award
Agreement shall designate whether an Option is an Incentive Stock Option or
a Non-Qualified Stock Option.
7.2 Option Price. The Shares shall be offered from time to time
under the Plan at a price which shall be not less than the greater of (a)
100% of the Fair Market Value of the Company's common stock on the date the
Option is granted, or (b) the par value of the Company's common stock
subject to the Option; provided, however, that the price shall be not less
than 110% of such Fair Market Value in the case of Shares offered under any
Incentive Stock Option granted to an Employee Stockholder.
7.3 Terms and Conditions of Options. The Committee shall have power,
subject to the limitations contained in the Plan, to prescribe the terms
and conditions of any Option granted hereunder. Each such Option shall be
evidenced by an Award Agreement in such form as the Committee shall from
time to time determine, which Award Agreement shall prescribe the following
terms and conditions and such other terms and conditions as the Committee
may deem necessary or advisable:
(a) Duration of Options. Except as hereinafter otherwise provided,
Options granted under the Plan shall not be exercisable for a term of
more than ten (10) years from the date of grant, but shall be subject to
earlier termination as hereinafter provided. No Option granted in tandem
with a SAR shall be exercisable during the first six months following
the date of grant of the SAR, except that this limitation shall not
apply in the event that it is permissible under Rule 16b-3 to exercise
the Option prior to the expiration of the six month period.
Notwithstanding anything herein to the contrary, if an Incentive Stock
Option is granted to an Employee Stockholder, then such Incentive Stock
Option shall not be exercisable more than five years from the date of
grant thereof, but shall be subject to earlier termination as
hereinafter provided.
(b) Termination of Options. (1) Disability or Retirement at or
after age 55. If the Employee's employment with the Company or any
Subsidiary terminates by reason of disability or retirement at or after
age 55, if not sooner terminated pursuant to their terms, all
outstanding Options then held by the Employee that have vested shall be
exercisable for the remainder of the term of the Option by the Employee
or his or her guardian or legal representative(s), except further that
in the case of Incentive Stock Options the period for such exercise
following such termination shall be limited to three months. (2)
Termination by Voluntary Resignation or Termination by the Company for
any reason other than Death, Disability, Retirement or Substantial
Cause. If the Employee's employment with the Company or any Subsidiary
is terminated either by voluntary resignation or termination by the
Company for any reason other than death, disability or retirement, all
outstanding Options, which have vested, then held by the Employee shall
be exercisable during the sixth month period following any such
termination of employment by the Employee or his or her
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guardian or legal representative(s). (3) Death. If the Employee's
employment with the Company or any Subsidiary is terminated by reason of
death, all outstanding Options that have vested and those that will vest
within one year of the date of death then held by the Employee shall be
exercisable during the twelve-month period following the date of death
by the Employee's Successor. (4) Termination for Substantial Cause. If
the Employee's employment with the Company or any Subsidiary is
terminated for Substantial Cause, all outstanding Options then held by
the Employee shall thereupon be forfeited by the Employee and canceled
by the Company.(5) Termination within Six Months of Grant.
Notwithstanding the foregoing, upon the Employee's employment with the
Company or any Subsidiary terminating at any time for any reason, all
outstanding Options granted within the last six months prior to the
Employee's termination shall thereupon be forfeited by the Employee and
canceled by the Company.
For purposes of this subsection, the meaning of the word "disability"
shall be determined under the provisions of Section 22(e)(3) of the Code
or any successor provisions thereof.
8. Stock Appreciation Rights.
8.1 Grant of SAR. The Committee, in its discretion, may grant an
Employee a SAR in tandem with an Option or may grant an Employee a SAR on a
stand alone basis. The Committee, in its discretion, may grant a SAR in
tandem with an Option either at the time the Option is granted or at any
time after the Option is granted, to the extent that such Options at such
time have not been exercised and have not been terminated, so long as the
grant of the SAR is made during the period in which grants of SARs may be
made under the Plan. The Committee, in its discretion, may grant a SAR in
tandem with an Option which is exercisable either in lieu of, or in
addition to, the exercise of the related Option.
8.2 Limitations on Exercise. Each SAR granted in tandem with an
Option shall be exercisable to the extent, and only to the extent, the
related Option is exercisable and shall be for such Term as the Committee
may determine (which Term, not to exceed ten (10) years, may expire prior
to the Term of the related Option). Each SAR granted on a stand alone basis
shall be exercisable to the extent, and for such Term, as the Committee may
determine. The SARs shall be subject to such other terms and conditions as
the Committee, in its discretion, shall determine, which are not otherwise
inconsistent with the Plan. The terms and conditions may include Committee
approval of the exercise of the SAR, limitations on the time within which
and the extent to which such SAR shall be exercisable, limitations, if any,
on the amount of appreciation in value which may be recognized with regard
to such SAR, and specification of what portion, if any, of the amount
payable to the Employee upon exercise of such SAR shall be payable in cash
and what portion if any, shall be payable in Shares. If, and to the extent,
that Shares are issued in satisfaction of amounts payable on exercise of a
SAR, the Shares shall be valued at their Fair Market Value on the date of
exercise.
8.3 SARs in Tandem with Incentive Stock Options. With respect to
SARs granted in tandem with Incentive Stock Options, the following shall
apply:
(a) No SAR shall be exercisable unless the Fair Market Value of the
Shares on the date of exercise exceeds the option price of the related
Incentive Stock Option.
(b) In no event shall any amounts paid pursuant to the SAR exceed
the difference between the Fair Market Value of the Shares on the date
of exercise and the option price of the related Incentive Stock Option.
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8.4 Surrender of Option or SAR Granted in Tandem. If the Award
Agreement related to the grant of a SAR in tandem with an Option provides
that the SAR can only be exercised in lieu of the related Option, then,
upon exercise of such SAR, the related Option or portion thereof with
respect to which such SAR is exercised shall be deemed surrendered and
shall not thereafter be exercisable, and, similarly, upon exercise of the
Option, the related SAR or portion thereof with respect to which such
Option is exercised shall be deemed surrendered and shall not thereafter be
exercisable. If the Award Agreement related to the grant of a SAR in tandem
with an Option provides that the SAR can be exercised in addition to the
related Option, then, upon exercise of such SAR, the related Option or
portion thereof with respect to which such SAR is exercised shall not be
deemed surrendered and shall continue to be exercisable and, similarly,
upon exercise of the Option, the related SAR or portion thereof with
respect to which such Option is exercised shall not be deemed surrendered
and shall continue to be exercisable.
9. Restricted Stock Awards. Restricted Stock Awards granted under the Plan
shall be subject to such terms and conditions, including, without limitation,
performance criteria, vesting, dividend deferral or dividend reinvestment
requirements, as the Committee may, in its discretion, determine and set forth
in the related Restricted Stock Award Agreements. The Committee, in its
discretion, may grant an Employee a Restricted Stock Award on a stand alone
basis or in tandem with an Option. Restricted Stock Awards shall be granted in
accordance with, and subject to, the provisions set forth below.
9.1 Issuance of Shares. Each Restricted Stock Award shall be
evidenced by a Restricted Stock Award Agreement which shall set forth the
number of Shares issuable under the Restricted Stock Award. Subject to the
restrictions in Section 9.3 of the Plan, and subject further to such other
restrictions or conditions established by the Committee, in its discretion,
and set forth in the related Restricted Stock Award Agreement (such as
requiring the Employee to pay an amount equal to the aggregate par value of
the Shares to be issued thereunder), the number of Shares granted under a
Restricted Stock Award shall be issued in the recipient Employee's name on
the date of grant of such Restricted Stock Award or as soon as reasonably
practicable thereunder.
9.2 Right of Recipient Employees. Shares received pursuant to
Restricted Stock Awards shall be duly issued or transferred to the
Employee, and a certificate or certificates for such Shares shall be issued
in the Employee's name. Subject to the restrictions in Section 9.3 of the
Plan, and subject further to such other restrictions or conditions
established by the Committee, in its discretion, and set forth in the
related Restricted Stock Award Agreement, the Employee shall thereupon be a
stockholder with respect to all the Shares represented by such certificate
or certificates and shall have the rights of a stockholder with respect to
such Shares, including the right to vote such Shares and to receive
dividends and other distributions paid with respect to such Shares. In aid
of the restrictions in Section 9.3 of the Plan and in the related
Restricted Stock Award Agreement, the certificate or certificates for
Shares awarded hereunder, together with a suitably executed stock power
signed by such recipient Employee, shall be held by the Company in its
control for the account of such Employee (i) until the restrictions in
Section 9.3 of the Plan and in the related Restricted Stock Award Agreement
lapse pursuant to the Plan and the Restricted Stock Award Agreement, at
which time a certificate for the appropriate number of Shares (free of all
restrictions imposed by the Plan or the Restricted Stock Award Agreement)
shall be delivered to the Employee, or (ii) until such Shares are forfeited
to the Company and canceled as provided by the Plan or the Restricted Stock
Award Agreement.
9.3 Restrictions. Except as otherwise determined by the Committee in
its sole discretion, each Share issued pursuant to a Restricted Stock Award
Agreement shall be subject, in addition to any other
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restrictions set forth in the related Restricted Stock Award Agreement, to
the following restrictions until such restrictions have lapsed pursuant to
Section 9.4 of the Plan:
(a) Disposition. The Shares awarded to an Employee and held by the
Company pursuant to Section 9.2 of the Plan, and the right to vote such
Shares or receive dividends on such Shares, may not be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of; provided,
however, that such Shares may be transferred upon the death of the
Employee to the Employee's Successor. Any transfer or purported transfer
of such Shares in violation of the restrictions outlined in this Section
9.3 shall be null and void and shall result in the forfeiture of the
Shares transferred or purportedly transferred to the Company without
notice and without consideration.
(b) Forfeiture. Subject to the provisions of Section 9.4, the
Shares awarded to an Employee and held by the Company pursuant to
Section 9.2 of the Plan shall be forfeited to the Company without notice
and without consideration therefor immediately upon the termination of
the Employee's employment with the Company and all Subsidiaries of the
Company for any reason whatsoever.
9.4 Lapse of Restrictions. The Committee, in its sole discretion,
shall determine the circumstances upon which the restrictions set forth in
Section 9.3 of the Plan on Shares issued under a Restricted Stock Award
shall lapse on, and certificates for the Shares held for the account of the
Employee in accordance with Section 9.2 of the Plan hereof shall be
appropriately distributed to the Employee as soon as reasonably practical
after, the lapse of such restrictions.
9.5 Surrender of Options or Restricted Stock Granted in Tandem. If
the Restricted Stock Award Agreement related to the grant of a Restricted
Stock Award in tandem with an Option provides that the Option can only be
exercised in lieu of the scheduled vesting for the Restricted Stock Award,
then, upon vesting of the Shares subject to the Restricted Stock Award, the
related Option or portion thereof with respect to which such Restricted
Stock Award becomes vested shall be deemed surrendered and shall not
thereafter be exercisable and, similarly, upon exercise of the Option, the
Shares subject to the related Restricted Stock Award or portion thereof
with respect to which such Option is exercised shall be deemed forfeited to
the Company and shall be canceled as provided by the Plan or the Restricted
Stock Award Agreement.
10. Stock Bonus Awards. Stock Bonus Awards may be granted under the Plan
with respect to Shares, and shall be granted, subject to the provisions of the
Plan, upon such terms and conditions as the Committee may determine in its
discretion. The Committee, in its discretion, may require the Employees to whom
Stock Bonus Awards are granted to pay the Company an amount equal to the
aggregate par value of the Shares to be issued to such Employees. Subject to the
Employee delivering in cash or by check the amounts, if any, required to be paid
pursuant to this Section 10 or pursuant to Section 21 of the Plan (relating to
taxes), a certificate or certificates for such Shares shall be issued in the
Employee's name as soon as reasonably practicable following the date of grant,
or if such payments are required, following the date of such payments. The
Company shall deliver such certificate or certificates to the Employee and the
Employee shall thereupon be a stockholder with respect to all Shares represented
by such certificate or certificates and shall have all the rights of a
stockholder with respect to such Shares.
11. Performance Plan Awards.
11.1 Performance Plan Awards. Performance Plan Awards may be granted
under the Plan in such form as the Committee may from time to time approve.
Performance Plan Awards may be granted
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alone, in addition to or in tandem with other Awards under the Plan.
Subject to the terms of the Plan, including the terms of the Plan
applicable to any underlying type of Award that is the subject of a
Performance Plan Award (i.e., an Option, an Option granted in tandem with a
SAR, a Restricted Stock Award, a Restricted Stock Award granted in tandem
with an Option, a SAR or a Stock Bonus Award, as the case may be), the
Committee shall determine the number of Performance Plan Awards to be
granted to an Employee, the terms and conditions applicable to any
particular Performance Plan Award made to an Employee and, in the case of a
Performance Plan Award of units, the monetary amount represented by each
such unit.
11.2 Performance Goals and Performance Periods. A Performance Plan
Award shall provide that in order for an Employee to vest, in whole or in
part, in such Performance Plan Award the Company and/or the Employee must
achieve certain individual and/or aggregate performance criteria
("Performance Goals") over a designated performance period, which period
may be no less than twelve months subject to earlier termination by reason
of death, disability or termination of employment, as determined by the
Committee ("Performance Period"). The Performance Goals and Performance
Period shall be established by the Committee, in its sole discretion. The
Committee may also establish a schedule or schedules for any such
Performance Period setting forth the portion of the Performance Plan Award
which will be earned or forfeited based on the degree of achievement of the
Performance Goals actually achieved or exceeded. In setting Performance
Goals the Committee may use such measures as cumulative or non-cumulative
return on equity, return on assets and operating income, earnings growth,
revenue growth or such other individual and/or aggregate measure or
measures of performance in such manner as it deems appropriate. During the
Performance Period, the Committee, except as provided otherwise in the
Award Agreement evidencing the Performance Plan Award, shall have the
authority to adjust upward or downward the Performance Goals in such manner
as it deems appropriate.
11.3 Payments of Units. An employee who has been granted a
Performance Plan Award of units shall be entitled to receive a payment with
respect to such units in an amount equal to the number of units earned at
the conclusion of the respective Performance Period times the dollar value
of each unit. Payment in settlement of such unit shall be made in cash, in
Shares, or in any combination thereof, as the Committee in its sole
discretion shall determine, and shall be made as soon as practicable
following the conclusion of the respective Performance Period and the
calculation of the dollar value of such units.
12. Cash Payments for Taxes. The Committee may, in its sole discretion,
provide in an Award Agreement that the Company will make a cash payment to the
Employee covered thereby equal to the aggregate of the amount of federal, state
and local income taxes which such Employee would be required to pay to each such
taxing authority attributable to the realization of taxable income, if any, as a
result of the receipt of Shares pursuant to any Award (other than an Incentive
Stock Option) granted under the Plan. The Committee may, in its discretion
require the Employee to make an election to be taxed immediately under Section
83(b) of the Code as a condition to receiving such payment. In computing the
amount of such payment, it shall be assumed that every Employee granted an Award
under the Plan is subject to tax by each taxing authority at the highest
marginal tax rate in the respective taxing jurisdiction of such Employee
(provided that the highest marginal tax rate for federal income tax purposes
shall be determined under Section 1 of the Code), taking into account the city
and state in which such Employee resides, but giving effect to the tax benefit,
if any, which such Employee may enjoy to the extent that any such tax is
deductible in determining the tax liability of any other taxing jurisdiction
(disregarding the effects of Code Section 68 in determining deductibility for
federal income tax purposes). Likewise, the Committee may, in its sole
discretion, provide in an Award Agreement that the Company will make a cash
payment to the Employee
C-9
covered thereby equal to the amount of excise taxes (i.e., an "excise tax
gross-up payment") which such Employee would be required to pay pursuant to
Section 4999 of the Code as a result of all or any part of such Employee's Award
being treated as an "excess parachute payment" within the meaning of Section
280G(b) of the Code. In addition to the foregoing, the Committee may, in its
discretion, increase each cash payment due to an Employee hereunder, such that
each Employee who receives Shares and/or an excise tax gross-up payment pursuant
to any Award granted under this Plan shall receive such Shares and/or excise tax
gross-up payment net of all income and/or excise taxes imposed on such employee
on account of the receipt of such Shares and/or excise tax gross-up payment.
13. Date of Grant. The date of grant of an Award granted hereunder shall
be the date on which the Committee acts in granting the Award.
14. Exercise of Rights Under Options or SARs.
14.1 Notice of Exercise. An Employee entitled to exercise an Option
or a SAR shall do so by delivery of a written notice to that effect
specifying the number of Shares with respect to which the Option or SAR is
being exercised and any other relevant information the Committee may
require. The notice shall be accompanied by payment in full of the purchase
price of any Shares to be purchased, which payment may be made in cash or,
with the Committee's approval (which in the case of Incentive Stock Options
must be given at the time of grant), in Shares held by the Employee for at
least six months and that are held free and clear of all liens and
encumbrances valued at Fair Market Value at the time of exercise or a
combination thereof. No Shares shall be issued upon exercise of an Option
or a SAR until full payment has been made therefor. All notices or requests
provided for herein shall be delivered to the Company' s Secretary, or such
other person as the Committee may designate.
14.2 Cashless Exercise Procedures. The Company, in its sole
discretion, may establish procedures whereby an Employee, subject to the
requirements of Rule 16b-3 , Regulation T, federal income tax laws, and
other federal, state and local tax and securities laws, can exercise an
Option or a portion thereof without making a direct payment of the exercise
price to the Company; provided, however, that these cashless exercise
procedures shall not apply to (a) Incentive Stock Options which are
outstanding on the date the Company establishes such procedures unless the
application of such procedures to such Options is permitted pursuant to the
Code and the regulations thereunder without affecting the Options'
qualification under Code Section 422 as Incentive Stock Options or (b) any
Award to a participant where the utilization of the cashless exercise
procedure would be deemed a violation of Section 13(k) of the Exchange Act.
If the Company so elects to establish a cashless exercise program, the
Company shall determine, in its sole discretion, and from time to time,
such administrative procedures and policies as it deems appropriate and
such procedures and policies shall be binding on any Employee wishing to
utilize the cashless exercise program.
15. Award Terms and Conditions. Each Award or each Award Agreement shall
contain such other terms and conditions not inconsistent herewith as shall be
approved by the Committee.
16. Rights of Award Holder. The holder of an Award shall not have any of
the rights of a stockholder with respect to the Shares subject to purchase or
receipt under the Award, except that (a) an Award holder's rights with respect
to a Restricted Stock Award shall be as prescribed in Section 9.2 and (b)
stockholder rights with respect to any other Award shall arise at the time and
to the extent that one or more certificates for such Shares shall be delivered
to the holder upon the due exercise or grant of the Award.
C-10
17. Nontransferability of Awards. An Award shall not be transferable other
than: (a) by will or the laws of descent and distribution, and an Award subject
to exercise may be exercised, during the lifetime of the holder of the Award,
only by the holder or in the event of death, the holder's Successor, or in the
event of disability, the holder's personal representative, (b) as otherwise
permitted under Rule 16b-3 under the Exchange Act from time to time and allowed
by the Board, or (c) pursuant to a qualified domestic relations order, as
defined in the Code or ERISA or the rules thereunder; provided, however, that an
Incentive Stock Option may not be transferred pursuant to a qualified domestic
relations order unless such transfer is otherwise permitted pursuant to the Code
and the regulations thereunder without affecting the Option's qualification
under Code Section 422 as an Incentive Stock Option.
18. Changes in Stock. In the event of a stock dividend, stock split,
combination or exchange of shares, recapitalization, reclassification, merger,
consolidation, separation, reorganization, partial or complete liquidation or
similar events, or in the event of extraordinary cash or non-cash dividends
being declared with respect to the Shares, or other similar transaction having
the same effect of the foregoing, the number and kind of Shares at the time of
such change remaining subject to the Plan and to any Award granted or to be
granted pursuant to the Plan, the applicable purchase price and any other
relevant provisions may be appropriately adjusted by the Board of Directors of
the Company, whose determination shall be binding on all persons. No adjustment
provided for in this Section 18 shall require the Company to issue or sell a
fractional share under any Award hereunder and any fractional share resulting
from any such adjustment shall be deleted from the Award involved.
Notwithstanding anything herein to the contrary, in the event of a "Change
in Control" as defined below, including certain consolidation or merger events
otherwise giving rise to the adjustments or alternatives described in the above
paragraph, the Committee may in its discretion, taking into account the purposes
of the Plan, determine that the Awards granted under the Plan shall terminate
upon the consummation of the consolidation or merger event or Change in Control,
provided that prior to the merger, consolidation or Change in Control, the
Employees shall be entitled to exercise any outstanding Award without regard to
vesting limitations and all restrictions with respect to outstanding Awards
shall lapse. As used herein, "Change in Control" means a Change in Control of a
nature that would, in the opinion of the Company counsel, be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act; provided that, without limitation, such a Change in
Control shall be deemed to have occurred if: (i) any "Person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company or
any subsidiary of the Company, any trustee or fiduciary holding securities under
an employee benefit plan of the Company or any of its subsidiaries or a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of the stock of the
Company)) becomes the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Company's then outstanding
securities; or (ii) during any period of two consecutive years (not including
any period prior to the effective date of this Plan), individuals who at the
beginning of such period constitute the Board of Directors and any new director
(other than a director 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) whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved cease for any reason to constitute a majority thereof; or
(iii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to
C-11
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, at least 75% of the combined voting power of the voting securities
of the Company or such surviving entity outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no Person
acquires 25% or more of the combined voting power of the Company's then
outstanding securities; or (iv) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets.
19. Effective Date; Stockholder Approval; Term. The Plan was originally
adopted by the Board of Directors on January 24, 1996 and became effective as of
January 24, 1996 and was amended as of April 24, 2003. The Amended and Restated
Plan was adopted by the Board on December 9, 2003 and shall become effective as
of May 19, 2004 if approved by the requisite vote of the stockholders. No Award
hereunder shall be granted after January 23, 2006 or the earlier suspension or
termination of the Plan in accordance with its terms. The Plan shall terminate
on January 23, 2006 or on such earlier date as it may be suspended or terminated
under the provisions of Section 20 below or as of which all Shares subject to
Awards authorized to be granted under the Plan shall have been acquired.
20. Amendment or Discontinuance of the Plan. The Board of Directors of the
Company may, insofar as permitted by law, at any time or from time to time,
suspend or terminate the Plan or revise or amend it in any respect whatsoever
except that, without the appropriate approval of the stockholders of the common
stock, no such revision or amendment shall increase the maximum number of Shares
subject to the Plan, change the designation of the class of employees eligible
to receive options, decrease the price at which Options may be granted, increase
or decrease any option price after the date of grant, or otherwise change the
provisions of this Plan, to the extent approval of the holders of the common
stock of the Company is required under the applicable laws, rules and/or
regulations of the Exchange Act, the Code and/or the New York Stock Exchange.
21. Taxes.
21.1 Right To Withhold Required Taxes. The Company shall have the
right to require a person entitled to receive Shares pursuant to the
receipt, vesting or exercise of an Award under the Plan to pay the Company
the amount of any taxes which the Company is or will be required to
withhold with respect to such Shares before the certificate for such Shares
is delivered pursuant to the Award. Furthermore, the Company may elect to
deduct such taxes from any other amounts then payable in cash or in shares
or from any other amounts payable any time thereafter to the Employee. The
Company shall also have the right to deduct from any cash payment payable
to a person pursuant to an Award the amount of any taxes which the Company
is required by law to withhold with respect to such cash payment. If the
Employee disposes of Shares acquired pursuant to an Incentive Stock Option
in any transaction considered to be a disqualifying disposition under
Sections 421 and 422 of the Code, the Employee shall notify the Company of
such transfer and the Company shall have the right to deduct any taxes
required by law to be withheld from any amounts otherwise payable then or
at any time thereafter to the Employee.
21.2 Employee Election to Withhold Shares. Subject to Committee
approval (which in the case of Incentive Stock Options must be given at the
time of grant), an Employee may elect to satisfy the tax liability with
respect to the exercise of an Option by having the Company withhold Shares
otherwise issuable upon exercise of the Option; provided, however, that if
an Employee is subject to Section 16(b)
C-12
of the Exchange Act at the time the Option is exercised, such election must
satisfy the requirements of Rule 16b-3.
22. Applicable Laws or Regulations and Notification of Disposition. The
Company's obligation to sell and deliver Shares under an Award is subject to
such compliance as the Company deems necessary or advisable with federal and
state laws, rules and regulations applying to the authorization, issuance,
listing or sale of securities. The Company may also require in connection with
any exercise of an Incentive Stock Option that the Employee agree to notify the
Company when making any disposition of the Shares, whether by sale, gift, or
otherwise, within two years of the date of grant or within one year of the date
of exercise.
23. No Employment Right; No Obligation to Exercise Option. Nothing
contained in the Plan, or in any Award granted under it, shall confer upon any
participant any right to continued employment by the Company or any of its
subsidiaries or to continued membership on the Board of Directors of the Company
or limit in any way the right of the Company or any subsidiary to terminate the
Employee's employment at any time.
C-13
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PROXY ENESCO GROUP, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having read the Notice of Annual Meeting of Stockholders
and Proxy Statement dated April 16, 2004, receipt of which is hereby
acknowledged, does hereby appoint and constitute DANIEL DALLEMOLLE, THOMAS
BRADLEY and CHARLES E. SANDERS, and each of any of them, the attorneys and
proxies of the undersigned, with power of substitution to each, for and in the
name of the undersigned to vote and act at the Annual Meeting of Stockholders of
Enesco Group, Inc. to be held at the Enesco Showroom Theater, One Enesco Plaza
(corner of Busse and Devon), Elk Grove Village, Illinois, on Wednesday, May 19,
2004 at 9:30 a.m. and at any postponement or adjournment thereof, with respect
to all shares of Common Stock, par value $.125 per share, of said Company,
standing in the name of the undersigned or with respect to which the undersigned
is entitled to vote or act, with all the powers that the undersigned would
possess if personally present and acting, as follows:
(CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE)
------------------------------------------------------------------------
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
------------------------------------------------------------------------
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
ENESCO GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, MAY 19, 2004
9:30 A.M.
Enesco Showroom Theater
One Enesco Plaza (corner of Busse and Devon)
Elk Grove Village, Illinois 60007
- --------------------------------------------------------------------------------
<Table>
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THIS PROXY WILL BE VOTED AS DIRECTED BUT IN THE ABSENCE OF SUCH DIRECTION, IT WILL BE VOTED FOR ITEMS 1, 2, 3 Please [ ]
AND 4 BELOW. THIS PROXY REVOKES ANY PROXY PREVIOUSLY GIVEN. Mark Here
for Address
Change or
Comments
SEE REVERSE SIDE
1. To elect FOR all nominees WITHHOLD AUTHORITY
listed to the left (except as to vote for all nominees
marked to the contrary) listed to the left
01 George R. Ditomassi [ ] [ ]
02 Hector J. Orci
03 Anne-Lee Verville
as Class III Directors for a three-year term. If any of such nominees should be
unavailable, the proxies or any of them may vote for substitute nominee(s) at
their discretion.
INSTRUCTION: To withhold authority to vote for one or more individual
nominees, write the nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. To approve the amendment and restatement [ ] [ ] [ ]
of the 1999 Non-Employee Directors Plan.
FOR AGAINST ABSTAIN
3. To approve the amendment and restatement of [ ] [ ] [ ]
the 1996 Stock Option Plan.
4. To ratify the appointment by the Board of FOR AGAINST ABSTAIN
Directors of KPMG LLP as Enesco's independent [ ] [ ] [ ]
accountants for 2004.
5. To transact such other business as may properly come before the meeting and any
postponement or adjournment thereof.
I PLAN TO ATTEND [ ] PLEASE SIGN, DATE AND RETURN THE
THE MEETING PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
SIGNATURE SIGNATURE DATE , 2004
------------------------------------- ------------------------------------- ------------------------
PLEASE SIGN ABOVE EXACTLY AS NAME(S) APPEAR(S) HEREON. (WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN,
ETC., GIVE TITLE AS SUCH. IF JOINT ACCOUNT, EACH JOINT OWNER SHOULD SIGN.)
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- FOLD AND DETACH HERE -
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EASTERN TIME
THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
- ----------------------------------- ----------------------------------- -----------------------------------
INTERNET TELEPHONE MAIL
http://www.eproxy.com/enc 1-800-435-6710 Mark, sign and date
Use the Internet to vote your proxy. Use any touch-tone telephone to your proxy card
Have your proxy card in hand when OR vote your proxy. Have your proxy OR and
you access the web site. card in hand when you call. return it in the
enclosed postage-paid
envelope.
- ----------------------------------- ----------------------------------- -----------------------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
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</Table>