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:
[X] Preliminary Proxy Statement*
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
ENESCO GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
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(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.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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* The Registrant has preliminarily scheduled March 18, 2003 as the date to
release definitive proxy materials to stockholders.
PRELIMINARY PROXY MATERIALS
(ENESCO LOGO)
March 18, 2003
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 Thursday, April 24,
2003, 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 April 24th, 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
PRELIMINARY PROXY MATERIALS
ENESCO GROUP, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Date: April 24, 2003
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 II Directors for a three-year term;
- To approve the reincorporation of Enesco Group, Inc. in the State of
Illinois;
- To approve amendments to the 1996 Stock Option Plan to increase the
number of shares available for grant and to change the vesting schedule
for options granted thereunder;
- To ratify the appointment by the Board of Directors of KPMG LLP as
Enesco's independent accountants for 2003;
- To transact other business which may properly be presented at the meeting
and any postponement or adjournment of the meeting.
Stockholders of record as of the close of business on February 28, 2003
will be entitled to vote at the meeting and any postponement or adjournment of
the meeting.
By Order of the Board of Directors,
M. FRANCES DURDEN, Clerk
Itasca, Illinois
March 18, 2003
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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: Change in State of Incorporation................ 12
Proposal 3: Amendments to 1996 Stock Option Plan............ 21
Executive Compensation...................................... 28
Compensation Committee Interlocks and Insider
Participation............................................. 32
Section 16(a) Beneficial Ownership Reporting Compliance..... 32
Compensation and Stock Option Committee Report on Executive
Compensation.............................................. 32
Report of the Audit Committee............................... 34
Performance Graph........................................... 35
Proposal 4: Independent Public Accountants.................. 36
Stockholder Proposals....................................... 37
</Table>
2
PRELIMINARY PROXY MATERIALS
ENESCO GROUP, INC.
PROXY STATEMENT
March 18, 2003
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 April 24, 2003 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 March 18, 2003, we began mailing these proxy materials to all
stockholders of record at the close of business on February 28, 2003 (the
"Record Date"). As of the Record Date there were shares
outstanding and 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
matter 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 Clerk;
- 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 II 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,
2002, including our financial statements for our 2002 fiscal year, accompanies
this proxy statement.
5
OUR LARGEST STOCKHOLDERS
On February 28, 2003, there were outstanding 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 February 28, 2003. To the
best of Enesco's knowledge, the beneficial owners of more than 5% of the common
stock as of December 31, 2002 were as follows: [CHART TO BE UPDATED AS 13GS ARE
FILED]
<Table>
<Caption>
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------- ----------------------- --------
David L. Babson and Company Incorporated................ 1,493,200 shares(1) 10.7%
One Memorial Drive
Cambridge, MA 02142
Fidelity Management & Research Co. ..................... 1,211,900 shares(2) 8.7%
82 Devonshire St.
Boston, Massachusetts 02109
Dimensional Fund Advisors, Inc. ........................ 1,110,800 shares(3) 8.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Royce & Associates, Inc. ............................... 806,000 shares(4) 5.8%
Royce Management Company
1414 Avenue of the Americas
New York, NY 10019
Florida Retirement System (Pension Fund)................ 722,000 shares(5) 5.2%
1801 Hermitage Blvd., Suite 100
Tallahassee, FL 32317
</Table>
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(1) Based on a statement on Schedule 13G filed with the Securities and Exchange
Commission (SEC) on January 30, 2003 by David L. Babson and Company
Incorporated (Babson). Babson has sole voting power over 1,408,350 shares
and sole dispositive power over 1,493,200 shares.
(2) Based on a statement on Schedule 13G filed with the SEC on , 2003
by Fidelity Management Research Co. (Fidelity). Fidelity has sole voting and
dispositive power over 1,211,900 shares.
(3) Based on a statement on Schedule 13G filed with the SEC on , 2003
by Dimensional Fund Advisors, Inc. (DFA). DFA has sole voting and
dispositive power over 1,110,800 shares.
(4) Based on a statement on Schedule 13G filed with the SEC on February , 2003
by Royce & Associates, Inc. (Royce). Royce has sole voting and dispositive
power over 806,000 shares.
(5) Based on a statement on Schedule 13G filed with the SEC on February 4, 2003
by the Florida Retirement System (Pension Fund). The Florida Retirement
System (Pension Fund) has sole voting and dispositive power over 722,000
shares.
6
SHARES HELD BY OUR DIRECTORS AND EXECUTIVE OFFICERS
Our management beneficially owned, as of February 28, 2003, shares of our
common stock as follows: [CHART TO BE UPDATED]
<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................... 30,945 20,750 ***%
Daniel DalleMolle................ 19,168(4) 150,000 ***%
George R. Ditomassi.............. 8,446 750 ***%
Eugene Freedman.................. 119,333(5) 156,400 %
Judith R. Haberkorn.............. 17,225 6,750 ***%
Donald L. Krause................. 6,300 1,332 ***%
Donna Brooks Lucas............... 11,483 2,250 ***%
Thane A. Pressman................ 9,446 750 ***%
Anne-Lee Verville................ 47,759 6,750 ***%
Jeffrey S. Smith................. 4,791(6) 50,000 ***%
Josette V. Goldberg.............. 3,163(7) 27,935 ***%
Jeffrey W. Lemajeur.............. 2,936(8) 16,765 ***%
All Directors and Executive
Officers as a Group (16
persons)....................... 303,168 469,684 %
</Table>
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(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 February 28, 2003.
(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 1,868
shares held in Mr. DalleMolle's 401(k) account as of December 31, 2002.
(5) Reflects 5,365 shares of common stock owned by Mr. Freedman, 105,334 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 are 3,634 shares held in Mr.
Freedman's 401(k) account as of December 31, 2002.
(6) Reflects 1,500 shares of common stock owned by Mr. Smith, 100 shares owned
by Mr. Smith's daughter and 3,191 shares held in Mr. Smith's 401(k) account
as of December 31, 2002.
(7) Reflects 150 shares of common stock owned by Ms. Goldberg and 3,013 shares
held in Ms. Goldberg's 401(k) account as of December 31, 2002.
(8) Reflects 100 shares of common stock owned by Mr. Lemajeur and 2,836 shares
held in Mr. Lemajeur's 401(k) account as of December 31, 2002.
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. 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.
The three current Class II Directors, Daniel DalleMolle, Mr. Eugene
Freedman and Ms. Donna Brooks Lucas, 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 2006.
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 II
TERMS EXPIRING IN 2006
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<Table>
DANIEL DALLEMOLLE President and Chief Executive Officer since March 28, 2001.
Director since 2001 Formerly Group President, Hardware and Tool Companies of
Age 52 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 TruTempair. Member of
Enesco's Executive Committee.
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EUGENE FREEDMAN Founding Chairman since 1998. Formerly Executive Vice
Director since 1997 President of the Company from 1988 until 1998 and Vice
Age 78 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.
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DONNA BROOKS LUCAS President and Chief Executive Officer of DBL Multi-Media
Director since 1999 Group, Chicago, Illinois (creative and strategic business
Age 50 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 and Stock Option
Committee and member of the Audit and Governance Committees.
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</Table>
8
<Table>
DIRECTORS CONTINUING IN OFFICE IN CLASS III
TERMS EXPIRING IN 2004
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JOHN F. CAULEY Chairman of the Board, 1998-2000, Office of the Chairman
Director since 1987 from June 2000 until March 2001. Retired as President of
Age 70 Friendly Ice Cream Corporation, a subsidiary of The
Restaurant Company (restaurants and food products), Memphis,
TN, in 1990. Also, Chairman of Enesco's Governance Committee
Committee and member of the Executive and Audit Committees.
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GEORGE R. DITOMASSI Chief Executive Officer and Director of Summit American
Director since 2000 Television in Naples, Florida since November, 2002. Formerly
Age 68 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 and Stock Option Committees.
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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 57 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 Liberty Funds Group, 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
- ------------------------------------------------------------------------------------------------
JUDITH R. HABERKORN Retired as President-Consumer Sales and Service, Bell
Director since 1993 Atlantic Corp. (telecommunications services), New York, NY,
Age 56 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. Member of the Audit, Governance and
Compensation and Stock Option Committees.
- ------------------------------------------------------------------------------------------------
</Table>
9
<Table>
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 63 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 President and CEO of Carvel Corporation since April, 2002, a
Director since 2000 retailer and distributor of ice cream products. Formerly
Age 57 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 Proctor & 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 and
Stock Option 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
950 shares of common stock and an additional amount of common stock worth
$15,000 per annum, valued as of the day following the Annual Meeting, plus
$1,200 for attendance at each meeting of the Board;
(2) For service as Chairman of the Board, $45,000 per annum, and 950
shares of common stock;
(3) For service as a committee member, an attendance fee of $800
($1,000 for service as Chairman of a 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.
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 fair
market value per share of the common stock on the grant date. The options become
exercisable on the eighth anniversary of the grant, unless they have already
become exercisable under other provisions of Enesco's 1996 Stock Option Plan,
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.
10
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The following table shows the membership of Enesco's committees as of
February 28, 2003. An asterisk indicates chairperson.
<Table>
<Caption>
COMPENSATION AND
NAME AUDIT STOCK OPTION 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
Thane A. Pressman.................................. x x
Anne-Lee Verville.................................. x * x
</Table>
Committees
The Audit Committee held four meetings during 2002. This Committee, which
consists entirely of non-employee 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
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 operates 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. The Audit Committee's responsibilities
include, but are not limited to, appointment of Enesco's independent public
accountants. All members of the Audit Committee are 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, 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.
The Compensation and Stock Option Committee held four meetings during 2002.
This Committee, which also consists entirely of non-employee Directors,
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.
The Executive Committee did not hold a meeting during 2002. This Committee,
which consists of five Directors, three of whom are non-employee 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 Governance Committee held four meetings during 2002. This Committee,
which consists entirely of non-employee Directors, provides the Board with
Director and corporate officer recommendations, proposes to
11
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.
In addition to the Committee meetings referred to above, the full Board
held seven regular meetings during 2002. Each director attended more than 75% of
the total number of meetings of the Board and Committees on which he or she
served.
In accordance with Enesco's Restated Articles of Organization, nominations
for the election of Directors at an annual meeting of stockholders may be made
by the Board, the 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 Clerk 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:
REINCORPORATION OF THE COMPANY IN THE STATE OF ILLINOIS
The Board of Directors has unanimously approved the reincorporation of
Enesco Group, Inc. in the State of Illinois. Through the reincorporation, and
subject to the receipt of stockholder approval, the state of incorporation of
Enesco Group, Inc. would be changed from Massachusetts to Illinois.
The reincorporation proposal that was unanimously approved by the Board of
Directors (the "Reincorporation Proposal") would be accomplished through a
"migratory" merger of the existing Massachusetts corporation with and into a
wholly owned subsidiary that will be formed pursuant to the Illinois Business
Corporation Act of 1983, as amended, solely for this purpose. After the merger,
the name of Enesco will continue to be Enesco Group, Inc., but the existing
Massachusetts corporation will cease to exist and will be replaced by the new
Illinois corporation. For the sake of clarity in the discussion of this Proposal
2, Enesco before the proposed merger is sometimes referred to as "Enesco
Massachusetts" and after the merger is sometimes referred to as "Enesco
Illinois."
If the Reincorporation Proposal is approved by the stockholders, upon
completion of the merger, Enesco will have new Articles of Incorporation (which
are referred to as "Articles of Organization" in Massachusetts)
12
and by-laws and will be governed by Illinois rather than Massachusetts law. As a
result of the reincorporation, and as explained below, certain of the rights of
Enesco's stockholders will be changed.
The Reincorporation Proposal will not result in any change in the business
or management of Enesco, nor will it change the location of Enesco's principal
executive offices. The same individuals that are presently directors and
officers of Enesco Massachusetts will continue to serve as directors and
officers of the new Illinois corporation, with the result that there will be no
change in the directors or officers as a result of the reincorporation.
Enesco currently has only one authorized class of stock, Common Stock, and
this will continue to be the case after reincorporation. In addition, the total
number of issued and outstanding shares of Enesco ( as of the Record
Date) will not change as a result of approval of the Reincorporation Proposal.
The Common Stock of Enesco Massachusetts is listed on the New York Stock
Exchange, and application will be made to list the Enesco Illinois Common Stock
on the New York Stock Exchange. Following the merger, each share of Enesco
Massachusetts Common Stock, par value $0.125, will automatically be converted
into one share of Enesco Illinois Common Stock, par value $0.125. Enesco
Massachusetts Common Stock certificates will be deemed automatically to
represent an equal number of shares of Enesco Illinois Common Stock. Following
the reincorporation, previously outstanding Enesco Massachusetts Common Stock
certificates may be delivered in effecting sales through a broker, or otherwise,
of shares of Enesco Illinois Common Stock. IT WILL NOT BE NECESSARY FOR
STOCKHOLDERS OF ENESCO TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK
CERTIFICATES OF ENESCO ILLINOIS.
If approved by Enesco's stockholders, it is anticipated that the
reincorporation and merger will be completed on or about June 30, 2003; however,
the actual date may be earlier or later than that date, as circumstances
dictate. In any event, the merger may be abandoned, or the merger agreement may
be amended, either before or after stockholder approval if circumstances arise
that, in the opinion of the Board of Directors, make such action advisable,
although subsequent to stockholder approval none of the principal terms may be
amended without further stockholder approval. See "Termination" below.
No federal or state regulatory requirements (other than those imposed by
the corporate laws of Massachusetts and Illinois) must be complied with and no
governmental approval is necessary in connection with the implementation of the
Reincorporation Proposal other than federal securities and applicable state blue
sky laws.
REASONS FOR THE REINCORPORATION PROPOSAL
Enesco was founded in 1931 in the Commonwealth of Massachusetts as Stanley
Home Products, later known as Stanhome Inc. It was considered convenient that
the state of incorporation would mirror the company's physical presence.
However, since Enesco's principal offices were re-located to Illinois from
Massachusetts in 1998, Enesco has had no significant connection to the
Commonwealth of Massachusetts that would warrant maintaining Enesco's legal, as
opposed to physical, presence in that state. Further, for many years Illinois
has followed a policy of encouraging incorporation in that state, and, in
furtherance of that policy, has adopted comprehensive, modern and flexible
corporate laws which are updated and revised periodically to meet changing
business needs. With more than twice the number of for profit corporations
organized in Illinois than in Massachusetts, Illinois courts have been able to
develop considerable expertise in dealing with corporate issues, and a
substantial body of case law has developed construing Illinois law and
establishing public policies with respect to Illinois corporations, factors that
the Board of Directors believes provide
13
increased predictability with respect to corporate legal affairs, which assists
the Board in managing Enesco more efficiently.
CERTAIN CHANGES IN ENESCO'S ARTICLES AND BY-LAWS TO BE MADE BY REINCORPORATION,
AND MATERIAL DIFFERENCES BETWEEN MASSACHUSETTS AND ILLINOIS LAW
The following discussion summarizes certain material differences between
the Amended and Restated Articles of Organization and the by-laws of Enesco
Massachusetts, on the one hand, and the proposed Articles of Incorporation and
by-laws that will be utilized by Enesco Illinois on the other hand. Copies of
the proposed Articles of Incorporation and by-laws of Enesco Illinois are
attached as APPENDIX B and APPENDIX C, respectively, to this Proxy Statement and
all statements herein concerning such documents are qualified by reference to
the exact provisions thereof. If the Reincorporation Proposal is approved and
the merger is accomplished, the stockholders of Enesco will become stockholders
of Enesco Illinois and will be subject to the Articles of Incorporation and
by-laws of Enesco Illinois.
The following discussion also summarizes certain of the principal
differences between the Massachusetts Business Corporation Law ("MBCL") (which
currently governs Enesco and the stockholders), and the Illinois Business
Corporation Act ("IBCA") (pursuant to which Enesco Illinois will be formed and
which will govern Enesco and its stockholders upon implementation of the
Reincorporation Proposal), that may affect the interests of stockholders. This
summary does not purport to be a complete statement of the differences between
the MBCL and the IBCA and related laws affecting stockholders' rights, and this
summary is qualified in its entirety by reference to the provisions of these
laws. You are advised to consult with your own legal counsel regarding these
matters.
Takeover Provisions. The Restated Articles of Organization of Enesco
Massachusetts prevent an "interested stockholder" (defined as an owner of 10% or
more of Enesco's Common Stock) from entering into a business combination with
Enesco that was not first approved by a vote of the holders of 80% of the shares
of Common Stock entitled to vote. This provision does not apply if such business
combination has been approved by a majority of the disinterested members of the
Board of Directors.
Illinois law prevents an "interested stockholder" (defined as an owner of
15% or more of the shares of stock of an Illinois corporation) from entering
into a business combination with the corporation within three years after the
date the interested stockholder acquired such stock, unless (a) prior to the
date that the stockholder became an interested stockholder, the board of
directors of the corporation approved either the business combination or such
acquisition of stock, (b) at the time the interested stockholder acquired such
15% interest, it acquired 85% or more of the outstanding stock of the
corporation, excluding shares held by directors who are also officers and shares
held under certain employee stock plans, or (c) the business combination is
approved by the target company's board of directors and 66 2/3% of the
outstanding shares voting at an annual or special meeting of stockholders,
excluding shares held by the interested stockholder. Once a stockholder has been
an interested stockholder for three years, Illinois law requires that any
business combination with that stockholder be approved by a stockholder vote of
80% of the outstanding shares, plus a simple majority of the shares held by
disinterested stockholders, unless (i) the business combination was first
approved by two-thirds of the disinterested directors or (ii) the fair price and
procedure requirements of Illinois law are met. All of these provisions apply
automatically except in the case of corporations with less than 2,000
stockholders of record and without voting stock listed on a national exchange or
authorized for quotation with a registered national securities association.
Additional exceptions allow Illinois corporations, in certain instances, to
adopt charter or by-law provisions that elect not to be governed by these
provisions. The
14
Articles of Incorporation and by-laws of Enesco Illinois will not contain a
provision electing not to be governed by these provisions.
Accordingly, Enesco will continue to be subject to provisions that will
significantly limit hostile takeovers. However, among the changes that will
occur as a result of the reincorporation, the threshold for who is an
"interested stockholder" will increase from 10% to 15%.
Vote Required for Routine Stockholder Action. Routine actions of the
stockholders of Enesco Massachusetts require the affirmative vote of the holders
of a majority of shares represented in person or by proxy at a meeting where a
quorum (a majority of outstanding shares) is present. Similarly, under the IBCA
and Enesco Illinois' by-laws, routine action by the stockholders of Enesco
Illinois will also require the affirmative vote of a majority of the shares
represented in person or by proxy at a meeting where a quorum (a majority of
votes of shares entitled to vote on a matter) is present. While the IBCA permits
the establishment of supermajority requirements mandating a higher percentage
vote for stockholder action, the Articles of Incorporation and by-laws of Enesco
Illinois will not contain such a provision. As a result, the voting requirements
for routine matters will be effectively the same after the reincorporation as
they currently are for Enesco Massachusetts.
Vote Required for Extraordinary Events. Under both Illinois and
Massachusetts law, the affirmative vote of the holders of at least 66 2/3% of
the outstanding shares entitled to vote is required in order to approve mergers,
consolidations, mandatory share exchanges, sales of substantially all assets and
certain amendments to a corporation's articles, unless the articles supersede
that requirement by specifying a smaller or larger vote requirement. Enesco
Massachusetts's Articles of Organization specify a simple majority vote
requirement for such transactions. Accordingly, the affirmative vote of the
holders of a majority of the shares of Common Stock outstanding and entitled to
vote will be required to approve the Reincorporation Proposal. Enesco Illinois'
Articles of Incorporation will also specify a simple majority vote requirement
for approval of such acts.
Stockholder Action by Written Consent. The MBCL permits stockholder action
by written consent of stockholders without holding a meeting, but only if all
stockholders consent. The IBCA permits stockholder action by written consent of
stockholders without a meeting if stockholders holding the necessary percentage
required for approval consent, unless the articles of incorporation of a
corporation provide otherwise. The Board believes that it is important for all
stockholders to have notice of, and opportunity to participate in, stockholder
votes, and therefore the Articles of Incorporation of Enesco Illinois will
provide that written consents of stockholders without a meeting may not be used.
Cumulative Voting in Election of Directors. Cumulative voting gives
stockholders the right to cast as many votes as are equal to the number of
directors to be elected times the number of shares held, which votes may be
allocated among the candidates or voted for one candidate, as the holder
desires. As a result, stockholders holding a significant percentage of the
outstanding shares entitled to vote in the election of directors may be able to
assure the election of one or more directors. The impact of cumulative voting is
diminished when a corporation has a classified board, as Enesco Massachusetts
does and as Enesco Illinois will, because stockholders with fewer directors to
elect at each annual meeting, have fewer votes to accumulate in favor of
individual directors. Without cumulative voting, holders of a substantial number
of the shares of Common Stock may not have enough voting power to elect any
directors. Under Massachusetts law, stockholders of a corporation do not have
cumulative voting rights. Under Illinois law, stockholders of a corporation
automatically have cumulative voting rights unless the corporation declines or
affirmatively "opts out" of cumulative voting rights in its articles of
incorporation. Consistent with the current rights of stockholders of Enesco
Massachusetts, Enesco Illinois will "opt out" of cumulative voting rights in its
Articles
15
of Incorporation (see APPENDIX B to this Proxy Statement). Thus, the effect of
reincorporation would be that stockholders of the surviving corporation (Enesco
Illinois) would not possess cumulative voting rights with respect to the
election of directors, just as the stockholders of Enesco Massachusetts do not
currently possess cumulative voting rights in the election of directors.
Annual Meetings. Currently the by-laws of Enesco require that the annual
meeting of Enesco's stockholders be held each year on the fourth Thursday of
April. Enesco believes that providing additional flexibility in scheduling the
annual meeting would be beneficial and, accordingly, will provide in the by-laws
of Enesco Illinois that the annual meeting of stockholders will be held each
year on such date and at such time as the Board of Directors will specify by
resolution.
Preferred Stock. Enesco Massachusetts currently has no preferred stock.
Massachusetts law permits the board of directors of a corporation, if authorized
by the by-laws, to issue shares of any class of stock authorized for issuance
under the corporation's articles of organization. The by-laws of Enesco
Massachusetts do not grant this authority to the Board. Under Illinois law, a
corporation may have one or more authorized classes of preferred stock, the
rights of which may be established by the board without stockholder approval.
The Articles of Incorporation of Enesco Illinois will not authorize shares of
preferred stock. Thus, there will be no change in the ability of the Board to
issue shares of preferred stock as a result of the reincorporation.
Preemptive Rights. Under the MBCL, stockholders of a corporation do not
have preemptive rights to subscribe for additional shares of stock unless
specifically granted by the articles of organization or by a by-law adopted by
and subject to amendment by the stockholders. Enesco Massachusetts has not
adopted any such provision. Similarly, under Illinois law stockholders do not
have preemptive rights, except to the extent provided in the articles of
incorporation. The Articles of Incorporation of Enesco Illinois will not grant
preemptive rights to stockholders. Thus, the Reincorporation Proposal will not
alter the stockholders' current rights with respect to preemptive rights.
Call of Special Meetings. Under the by-laws of Enesco Massachusetts,
special meetings of stockholders may be called by the President, by the Board of
Directors, or in any other manner provided by law, provided, however, that if a
special meeting is requested by one or more stockholders, the holders of at
least 90% in interest of the capital stock entitled to vote at the meeting must
submit written application therefor.
Under the IBCA, special meetings of the stockholders of Enesco Illinois may
be called by the President, the Board of Directors, or by the holders of not
less than 20% of the outstanding shares entitled to vote on the matter for which
the meeting is called or by such other officers or persons as may be provided in
the Articles of Incorporation or the by-laws. The Articles of Incorporation and
by-laws will not impose any additional restrictions on the stockholders' ability
to call a special meeting of stockholders. Thus, because of the lower percentage
of stockholder approval required, it will be easier for stockholders of Enesco
Illinois to call a special meeting of stockholders than has previously been the
case for stockholders of Enesco Massachusetts.
Personal Liability of Directors. Massachusetts law permits a corporation
to include in its articles of organization a provision that limits or eliminates
the personal liability of directors to the corporation for monetary damages for
breach of fiduciary duty as a director, subject to certain exceptions. Illinois
law also permits a corporation to include in its articles of incorporation a
provision that limits or eliminates the personal liability of directors to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, subject to certain exceptions.
Enesco Massachusetts currently has a provision limiting director liability
in its Articles of Organization and, if the reincorporation is accomplished,
Enesco Illinois will have a similar provision in its Articles of
16
Incorporation. The Board believes that such a provision aids directors in making
corporate decisions based on the merits, free from any desire to avoid the risk
of personal liability. This provision will have no effect upon any liability
that a director may have to stockholders under federal securities laws or upon
the availability to stockholders of equitable remedies.
Removal of Directors. As permitted by Massachusetts law, the Articles of
Organization of Enesco Massachusetts provide that directors may only be removed
for cause. Under Massachusetts law, the removal of a director may be
accomplished by the vote of a majority of the shares entitled to vote in the
election of directors or by a vote of a majority of the directors then in
office.
Under Illinois law, directors may be removed, with or without cause, by the
vote of the holders of a majority of outstanding shares entitled to vote,
unless, in the case of a corporation whose board is classified, the articles of
incorporation provide that directors may be removed only for cause. The Articles
of Incorporation of Enesco Illinois will provide for a classified board and will
restrict the removal of directors to removal only for cause. As a result, while
directors will continue to be removable only for cause, if the Reincorporation
Proposal is approved, only the stockholders of Enesco, and not the directors,
will be empowered to remove a director.
Vacancies on Board of Directors. Currently, the Articles of Organization
of Enesco Massachusetts provide that a vacancy on the Board that occurs as a
result of an increase in the number of directors may only be filled by a
majority of the directors then in office, provided that a quorum is present, and
any other vacancy occurring on the Board may be filled by a majority of the
directors then in office, even if less than a quorum.
The Articles of Incorporation of Enesco Illinois will also provide that
vacancies on the Board may only be filled by the directors. A director so
appointed to fill a vacancy not resulting from an increase in the number of
directors would serve until the next annual meeting at which his or her
predecessor's term would have expired.
Indemnification. Under both Illinois law and Massachusetts law a
corporation may indemnify directors and officers who are or are threatened to be
made parties to civil, criminal, administrative or investigative proceedings, by
reason of the fact that such person was a director or officer of the
corporation, against expenses, judgments, fines and amounts paid in settlement,
if such person acted in good faith and in a manner reasonably believed to be in,
or not opposed to, the best interests of the corporation and, with respect to
criminal proceedings, had no reasonable cause to believe that the conduct was
unlawful. Both statutes provide that a corporation may purchase insurance on
behalf of any director or officer against liability incurred by such person in
such capacity whether or not the corporation would have power to indemnify such
person against such liability under the statute. Under Illinois law, expenses
incurred by a director or officer in defending a proceeding may be advanced by
the corporation prior to final disposition of the matter if such person
undertakes to repay such amount, unless it will be ultimately determined that
such person is entitled to be indemnified by the corporation pursuant to the
statute. Under Massachusetts law, expenses incurred by a director or officer in
defending a proceeding may be advanced by the corporation prior to final
disposition of the matter if such person undertakes to repay such amount (but
without regard to the financial ability of such person actually to repay such
amount) if it will ultimately be determined that such person is not entitled to
be indemnified by the corporation pursuant to the statute. The by-laws of Enesco
Illinois will provide for the indemnification of directors and officers in
accordance with the foregoing statutory provisions. Under Illinois law, a
corporation is required to notify its stockholders when indemnity has been paid
or expenses advanced. There is no similar provision under Massachusetts law.
Dissenters' Rights. Sections 76, 77, and 85 of the MBCL permit
stockholders of a Massachusetts corporation to dissent and receive payment for
their shares with respect to (i) the vote to consolidate or merge
17
with another corporation or corporations under the provisions of Sections 78
("Consolidation or Merger") or Section 79 ("Consolidation or Merger with Foreign
Corporation") of the MBCL; (ii) the vote to sell, lease, or exchange all or
substantially all of its property and assets, or (iii) the adoption of any
amendment to its articles of organization that adversely affects the rights of
such stockholders because it (a) alters or abolishes any preferential right of
their stock having preferences, (b) creates, alters, or abolishes any right in
respect of redemption of their stock, (c) alters or abolishes any preemptive
right in respect of their stock, (d) creates or alters (other than to abolish)
any restriction on transfer applicable to their stock, or (e) excludes or limits
their rights as stockholders to vote on a matter except as such right may be
limited by voting rights given to new shares then being authorized of an
existing or new class.
To obtain such rights, the stockholders are required to follow certain
procedural steps (which are described under the headings "EXPLANATION OF
APPRAISAL RIGHTS" and "NOTICE OF APPRAISAL RIGHTS" below).
The IBCA permits stockholders of an Illinois corporation to dissent and
receive payment for their shares with respect to (i) the consummation of a plan
of merger, consolidation, or share exchange that requires stockholder approval
or involves the merger of that corporation into its parent corporation or into
another subsidiary corporation of its parent corporation; (ii) the consummation
of a sale, lease, or exchange of all or substantially all of the corporation's
property and assets other than in the ordinary course of business; or (iii) an
amendment to the corporation's articles of incorporation that materially and
adversely affects a stockholder's rights because it alters or abolishes
preferential or redemption rights. To obtain such rights, the stockholders are
required to follow certain procedural steps and the corporation is required to
provide certain financial information plus either a commitment to pay the
estimated fair value of the dissenting shares or a direction to the dissenting
stockholders to sell their shares into the public market, if such market is
available.
Accordingly, there will be no significant changes to the rights of
dissenting stockholders as a result of the implementation of the Reincorporation
Proposal.
Dividends and Repurchases of Shares. Under Massachusetts law, directors of
a corporation may be held personally liable if they vote to authorize any
distribution, whether by dividend, repurchase or redemption of stock or
otherwise, that is in violation of the corporation's articles of organization or
that would render the corporation insolvent. Illinois law prohibits a
corporation from making any distribution to its stockholders if as a result of
such distribution the corporation would be insolvent or the net assets of the
corporation would be less than zero or less than the maximum amount payable at
the time of distribution to stockholders having preferential rights in
liquidation if the corporation were then to be liquidated. No significant change
to these restrictions on Enesco will occur as a result of the reincorporation.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The following summary discussion of certain of the federal income tax
consequences of the Reincorporation Proposal does not address all of the tax
consequences of the Reincorporation Proposal. This discussion is not intended to
apply to stockholders other than individual United States citizens, to dealers
in securities, or to stockholders who acquired their shares upon the exercise of
stock options. This discussion does not address the tax consequences to holders
of options or warrants to acquire Common Stock. Furthermore, no foreign, state,
or local tax considerations are addressed herein. IN VIEW OF THE VARYING NATURE
OF SUCH TAX CONSEQUENCES, EACH STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN
TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE REINCORPORATION PRO-
18
POSAL, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS.
Although the Company has not received an opinion of legal counsel with
respect to the tax effects of the Reincorporation Proposal, Enesco believes
that, for federal income tax purposes, the merger under the Reincorporation
Proposal, if implemented, will constitute a reorganization under the Internal
Revenue Code of 1986, as amended (the "Code"), and that no gain or loss will be
recognized by stockholders (other than those stockholders who exercise their
dissenter and appraisal rights) on the automatic conversion of their shares of
Common Stock of Enesco Massachusetts into shares of Common Stock of Enesco
Illinois as a result of the reincorporation. Stockholders (other than dissenting
stockholders) will have a basis in their Common Stock of Enesco Illinois equal
to their basis in the Common Stock of Enesco Massachusetts immediately prior to
the effective date of the merger. A stockholder's holding period with respect to
the shares of Common Stock of Enesco Illinois will include the period during
which such stockholder held the corresponding shares of Common Stock of Enesco
Massachusetts, provided such shares were held by such stockholder as a capital
asset on the effective date of the merger. Enesco also believes that neither
Enesco Massachusetts nor Enesco Illinois will recognize any gain or loss as a
result of the merger under the Reincorporation Proposal, if implemented, and
that Enesco Illinois generally will succeed to the tax attributes of Enesco
Massachusetts, as specified in Section 381(c) of the Code.
The receipt of cash in exchange for their shares by objecting stockholders
will be a taxable event to such stockholders. Each stockholder is advised to
consult his, her or its own attorney or tax advisor as to the federal, state or
local tax consequences of the proposed reincorporation in view of their
respective individual circumstances.
Enesco has not requested a ruling from the Internal Revenue Service (the
"IRS") with respect to the federal income tax consequences of the
Reincorporation Proposal under the Code.
The state, local or foreign income tax consequences to stockholders may
vary from the federal tax consequences described above.
FEDERAL SECURITIES LAW CONSEQUENCES
The issuance by Enesco Illinois of shares to stockholders of Enesco
Massachusetts pursuant to the Reincorporation Proposal, if implemented, will
constitute an exchange offer under the federal Securities Act of 1933, as
amended (the "Securities Act"). Nevertheless, the shares of Common Stock to be
issued by Enesco Illinois in exchange for the shares of Common Stock of Enesco
Massachusetts will be exempt from registration under the Securities Act.
Pursuant to Rule 145 promulgated under the Securities Act, shares issued under a
statutory merger are subject to registration under the Securities Act unless the
sole purpose of the transaction is to change an issuer's domicile within the
United States. Since the sole purpose of the issuance and exchange is to
implement the Reincorporation Proposal, the exchange and issuance will be exempt
from registration under Rule 145. Shares of Common Stock of Enesco Illinois that
will be issued in exchange for shares of Common Stock of Enesco Massachusetts
that are currently restricted will remain restricted from transfer unless such
shares are subsequently registered or an exemption from registration is
available.
TERMINATION
THE AGREEMENT AND PLAN OF MERGER PURSUANT TO THE REINCORPORATION PROPOSAL
PROVIDES THAT ENESCO'S BOARD OF DIRECTORS MAY TERMINATE AND
19
CANCEL THE MERGER AT ANY TIME PRIOR TO THE EFFECTIVE DATE, EITHER BEFORE OR
AFTER SUBMISSION OF THE MERGER TO A VOTE OF STOCKHOLDERS.
EFFECTIVE DATE OF THE MERGER
It is presently anticipated that the date on which the merger will be
consummated (the "Effective Date") will be on or about June 30, 2003; however,
the actual date may be earlier or later than that date, as circumstances
dictate. In any event, the Board has reserved the right to abandon the merger
prior to the Effective Date of the merger. See "Termination" immediately above.
AGREEMENT AND PLAN OF MERGER AND CORPORATE GOVERNING DOCUMENTS ARE ATTACHED AS
APPENDICES
All stockholders are urged to read the form of the Agreement and Plan of
Merger and the proposed Articles of Incorporation and by-laws of Enesco
Illinois, the text of which documents is attached as APPENDICES A, B, AND C,
respectively, to this Proxy Statement.
VOTE REQUIRED
Adoption of the Reincorporation Proposal requires the consent of a majority
of the total number of outstanding voting shares. Consent to the Reincorporation
Proposal by the stockholders will constitute approval of the Agreement and Plan
of Merger by the stockholders as well as the new Articles of Incorporation and
by-laws of Enesco Illinois.
THE BOARD OF DIRECTORS BELIEVES THAT THE REINCORPORATION PROPOSAL IS IN THE
BEST INTEREST OF THE STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ADOPTION OF THE REINCORPORATION PROPOSAL.
EXPLANATION OF APPRAISAL RIGHTS
If the Reincorporation Proposal is approved by the stockholders and
consummated by Enesco, Enesco will, within ten days after the date on which the
merger becomes effective, notify each stockholder who chooses to exercise the
appraisal rights provided under the applicable provisions of the MBCL (see
section below captioned "NOTICE REGARDING APPRAISAL RIGHTS"), that the
Reincorporation Proposal approved at the Annual Meeting of Stockholders of
Enesco has become effective. The notice will be sent by registered or certified
mail, addressed to the stockholder at his last known address as it appears in
the records of Enesco. Massachusetts law requires that stockholders who intend
to assert appraisal rights not vote in favor of the Reincorporation Proposal. A
stockholder who does not vote on the Reincorporation Proposal, but otherwise
complies with the statute will not be construed to have waived their appraisal
right. A vote against the Reincorporation Proposal, however, will not constitute
the filing of notice of objection to the merger required to be given by
Massachusetts law to the corporation prior to the taking of the vote.
If within twenty (20) days after the date of mailing of the notice
described below in the section captioned "NOTICE REGARDING APPRAISAL RIGHTS" any
stockholder to whom Enesco was required to give such notice will demand in
writing from Enesco payment for such stockholder's stock, Enesco will pay to
such stockholder the fair value of such stockholder's stock within thirty (30)
days after the expiration of the period during which such demand may be made. As
the Common Stock is publicly traded, Enesco intends to determine the fair value
of the Common Stock based upon its closing price on the New York Stock Exchange
on the date on which shares of the Common Stock are tendered for payment. All
shares of Common Stock so tendered will have the status of treasury stock.
20
If the dissenting stockholder does not agree with Enesco's valuation of the
Common Stock, the dissenting stockholder may, within four months after the
thirty (30) day period, demand a determination of the value of the stock of all
dissenting stockholders by filing legal action in the Superior Court of Suffolk
County, Massachusetts, the county where Enesco has its principal office in
Massachusetts. After a hearing the court will enter a decree fixing the fair
value of the stock. The costs of such legal action, excluding attorneys' fees,
may be awarded to either party in the court's discretion. The court may also
award interest on the award from the date of the approval of the Reincorporation
Proposal.
Any stockholder who has demanded payment for such stockholder's stock as
provided herein will not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and will not be entitled to
the payment of dividends or other distributions on the stock (except dividends
or other distributions payable to stockholders of record at a date that is prior
to the date of the vote approving the Reincorporation Proposal) unless (a) such
stockholder and Enesco fail to agree on the value of the Common Stock pursuant
to Section 90 of the MBCL and either (i) fail to institute litigation to require
the Superior Court to determine the value, or (ii) institute litigation to
require the Superior Court to determine the value, but such litigation is
dismissed, or (b) such stockholder and Enesco agree to permit the stockholder to
withdraw his objections.
NOTICE REGARDING APPRAISAL RIGHTS
IF THE REINCORPORATION PROPOSAL IS APPROVED BY THE STOCKHOLDERS AT THE
MEETING AND THEREAFTER CONSUMMATED BY ENESCO, ANY STOCKHOLDER (1) WHO FILES WITH
ENESCO BEFORE THE TAKING OF THE VOTE ON THE APPROVAL OF SUCH ACTION, WRITTEN
OBJECTION TO THE PROPOSED ACTION STATING THAT SUCH STOCKHOLDER INTENDS TO DEMAND
PAYMENT FOR SUCH STOCKHOLDER'S SHARES IF THE ACTION IS TAKEN AND (2) WHOSE
SHARES ARE NOT VOTED IN FAVOR OF SUCH ACTION HAS OR MAY HAVE THE RIGHT TO DEMAND
IN WRITING FROM ENESCO, WITHIN TWENTY (20) DAYS AFTER THE DATE OF MAILING TO
SUCH STOCKHOLDER OF NOTICE IN WRITING THAT THE CORPORATE ACTION HAS BECOME
EFFECTIVE, PAYMENT FOR SUCH STOCKHOLDER'S SHARES AND AN APPRAISAL OF THE VALUE
THEREOF. ENESCO AND ANY SUCH STOCKHOLDER WILL IN SUCH CASES HAVE THE RIGHTS AND
DUTIES AND WILL FOLLOW THE PROCEDURE SET FORTH IN SECTIONS 88 TO 98, INCLUSIVE,
OF CHAPTER 156E OF THE GENERAL LAWS OF MASSACHUSETTS, THE TEXT OF WHICH IS
ATTACHED HERETO AS APPENDIX D.
PROPOSAL 3:
TO AMEND THE 1996 STOCK OPTION PLAN (THE "PLAN")
TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR GRANT
AND TO CHANGE THE VESTING SCHEDULE FOR OPTIONS GRANTED THEREUNDER.
PURPOSE OF PROPOSAL
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 (the
"Plan") as part of a continuing effort to encourage key management employees of
Enesco and its subsidiaries and the non-employee directors of Enesco to acquire
a proprietary interest in Enesco through ownership of Enesco common stock, to
continue in their service with Enesco and to help attract other qualified
persons to become employees and directors. In furtherance of those purposes, on
December 4, 2002, the Board of Directors adopted an amendment (the "Amendment")
to the Plan, that, subject to stockholder approval: (i) increases the number of
shares available for option grants ("Options") under the Plan from 1,500,000 to
3,000,000; and, (ii) provides for vesting of Options over four years, at the
rate of 25% of the Options per year, without the restrictions on the exercise of
vested Options that are currently set forth in the Plan.
21
At the present time, the Board believes that the number of shares of Enesco
common stock (the "Shares") that remain available for grant under the Plan is
not sufficient to continue to make awards at levels consistent with Enesco's
efforts to attract, retain and motivate key employees. As of March 1, 2003, of
the 1,500,000 Shares previously authorized for Option grants under the Plan,
only Shares remained available for future grants. In addition, the Board
has determined that the Plan provisions governing exercise of the Options should
be revised to reflect current practice among the substantial majority of
publicly held companies. Currently, the Plan provides that Options will fully
vest after six months, but are then exercisable for 50% of the Shares subject to
the Option only if the Fair Market Value (as hereinafter defined) of Enesco's
common stock is at or above 125% of the exercise price of the Option on each of
at least ten consecutive trading days, and then, as to the remaining 50% of the
Shares subject to the Option, only if at anytime at or after the initial 50%
becomes exercisable, if ever, the Fair Market Value of Enesco's common stock is
at or above 150% of the exercise price of the Option on each of at least ten
consecutive trading days. Under the Amendment, the Plan would be amended to
provide that Options would vest equally over four years, with 25% of the Shares
subject to the Option vesting on each of the first four anniversary dates of the
date of grant of the Option, with the Options being thereafter exercisable by
the optionee regardless of the Fair Market Value of Enesco's common stock. The
Amendment will only apply to new Options, with the result that previously
granted Options will continue to be governed by the current Plan provisions on
exercisability.
The Board of Directors believes that providing key management employees and
non-employee directors 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 of Directors has directed that the Amendment be submitted to
Enesco's stockholders for their consideration and approval. Approval of the
Amendment requires the affirmative vote of a majority of the shares of common
stock of Enesco which are present in person or represented by proxy at the
Meeting.
ADMINISTRATION OF THE PLAN
The Plan is administered by the Compensation and Stock Option Committee
(the "Committee") of the Board of Directors which consists of not less than
three qualified non-employee 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 Options, to interpret the Plan and such
Options, to prescribe, amend and rescind the rules and regulations relating to
the Plan and the Options and to make other necessary or advisable
determinations. The Committee has responsibility for identifying those key
management employees (including officers and directors if they are employees) of
Enesco and its subsidiaries who are eligible to receive Options under the Plan.
Non-employee directors of Enesco are eligible to receive Options for 1,500
Shares annually. The present members of the Committee are Donna Brooks Lucas
(Chairperson), George R. Ditomassi, Judith R. Haberkorn, and Thane A. Pressman.
Committee members serve in such capacity for terms of one year and until their
successors are elected and qualified.
TERMS OF THE PLAN
Eligibility. The Plan provides that key management employees of Enesco and
its subsidiaries who are selected by the Committee are eligible to receive
Options for up to a maximum of 300,000 Shares. Non-employee directors of Enesco
are eligible, on an annual basis, to receive Options for 1,500 Shares pursuant
to the provisions of the Plan. Subject to the limitations of the Plan, the
Committee, in its sole discretion, selects the management employees to be
granted Options, the time or times when Options will be granted, the type of
22
Option to be granted (i.e. non-qualified stock options or incentive stock
options) and the number of Shares to be covered by each Option.
Shares Issuable under the Plan. If the Amendment is approved, a total of
1,500,000 additional Shares will be authorized to be issued under the Plan. As
of March 1, 2003, a total of Shares were available for option grants
under the Plan and Shares were subject to outstanding options. On March
1, 2003, the closing transaction price of a share of Enesco's common stock, as
reported in the New York Stock Exchange Composite Transactions, was $ .
Duration of Options. Non-qualified stock options granted under the Plan
have the duration that is determined by the Committee at the time of grant,
except that Options granted to non-employee directors of Enesco have fixed
ten-year terms. Incentive stock options granted under the Plan may have a
duration of up to ten years or, in certain limited circumstances, up to five
years.
Exercise of Options. All Options granted under the Plan are exercisable by
the optionee or his or her guardian or legal representative(s) in accordance
with the terms and conditions of the Plan and such other terms and conditions as
the Committee may deem necessary or advisable. The terms and conditions with
respect to each Option are set forth in the certificate evidencing such Option
which is delivered to the optionee at the time of grant. Currently, Options
granted under the Plan are not exercisable during the first six months of their
term and, thereafter, become exercisable: (i) as to 50% of the Shares subject to
the Options if the Fair Market Value (as defined below) of Enesco's common stock
is at or above 125% of the option exercise price on each of at least ten
consecutive trading days; (ii) as to the remaining 50% of the Shares subject to
the Options if, at anytime at or after the initial 50% of such Shares becomes
exercisable under the Option, the Fair Market Value of Enesco's common stock is
at or above 150% of the option exercise price on each of at least ten
consecutive trading days; or (iii) after the eighth anniversary of the date the
Options are granted. All previously issued Options will continue to be subject
to the foregoing provisions on exercisability notwithstanding adoption of the
Amendment.
All Options are non-transferable and non-assignable, except: by will; under
the laws of descent and distribution; pursuant to beneficiary designation
procedures approved by the Committee; as otherwise permitted under Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from
time to time, and allowed by the Committee; or, pursuant to a qualified domestic
relations order as defined in Section 414(p) of the Internal Revenue Code of
1986, as amended (the "Code").
As used in the Plan, the term "Fair Market Value" means the closing
transaction price of a share of Enesco's common stock as reported in the New
York Stock Exchange Composite Transactions on the date as of which such value is
being determined, or, if the common stock is not then listed on the New York
Stock Exchange, the closing transaction price per share of common stock on the
principal national stock exchange on which the common stock is traded on the
date as of which such value is being determined; or, if there are no reported
transactions for such date, on the next preceding date for which a transaction
was reported; provided, however, that if the Fair Market Value for any date
cannot be so determined, the Fair Market Value is to be determined by the
Committee by whatever means or methods the Committee, in the good faith exercise
of its sole discretion, deems appropriate.
Termination of Employment or Service. During the option term, Options may
be exercised only by the optionee while employed or serving as a non-employee
director, except that following termination of employment or service as a
non-employee director, Options may be exercised by the optionee or his or her
guardian or legal representative(s) to the same extent that such Options could
have been exercised preceding the optionee's termination for a period of three
years after termination (other than incentive stock options
23
which must be exercised within three months), where the termination was for
other than "substantial cause", as defined in the Plan, or as a result of a
voluntary resignation or retirement before reaching age 55. Where the cause of
termination was a voluntary resignation or retirement before reaching age 55,
the Options are exercisable for a period of three months following such event.
In the case of a termination for substantial cause, Options are immediately
forfeited and cancelled. In addition, any Options which were granted within the
last six months prior to an optionee's termination, regardless of cause, are
forfeited and cancelled.
Option Price; Payment. The price at which an Option may be exercised (the
"Option Price") may not be less than the greater of either the Fair Market Value
of Enesco's common stock on the date the Option is granted or the par value of
the Shares. In addition, if the Option is an incentive stock option, and is
granted to an individual who, at the time the incentive stock option is granted,
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of Enesco or subsidiary, the Option Price may not be less than
110% of the Fair Market Value. Regardless of the form of Option, the Option
Price must be paid in full upon exercise of an Option, but may be paid in whole
or in part in cash or whole shares of Enesco's common stock, which shares,
however, must have been held by the optionee for at least a six month period.
Adjustments under the Plan. The Plan provides that in the event of a stock
dividend, split-up or combination of shares, recapitalization, reclassification
or merger in which Enesco is the surviving corporation or other similar capital
or corporate structure changes, the Board may adjust the number and kind of
shares of stock subject to the Plan and to any Option granted or to be granted
under the Plan as well as the Option Price and any other relevant provisions.
In the event of a consolidation or merger in which Enesco is not the
surviving corporation, or a complete liquidation of Enesco, each outstanding
Option held by an optionee who is an "insider" (as defined in the Plan) other
than a non-employee director, will become immediately exercisable, and each
outstanding option held by an optionee who is not an insider or who is a
non-employee director will terminate, provided that: (i) with respect to Options
held by non-employee directors, within ten days of the effective date of any
such consolidation or merger, Enesco is required to pay to each non-employee
director optionee an amount in cash equal to the difference between the Option
Price for each such Option and the per share value of the consideration received
in the transaction by each holder of Enesco's common stock, multiplied by the
number of common shares subject to the Option; and, (ii) with respect to Options
held by persons who are not "insiders" and who are not non-employee directors,
Enesco, within twenty days of the effective date of any such consolidation or
merger of Enesco, will: (a) make such Options immediately exercisable, (b)
arrange for the surviving corporation to grant replacement options, or (c) pay
in cash the difference between the Option Price for the unexercised Options and
the per share value of the consideration received in the transaction by each
holder of Enesco's common stock, multiplied by the number of Shares subject to
Option.
Amendments to the Plan. To the extent permitted by law, and subject to the
limitations contained in the Plan, the Board may suspend, terminate, revise or
amend the Plan, provided that the Board may not, without appropriate approval of
the stockholders, increase the maximum number of Shares subject to the Plan
(except as such number may be adjusted pursuant to the provisions of the Plan),
change the designation of the class of employees eligible to receive Options,
decrease the price at which Options may be granted or otherwise change the
provisions of the Plan except as permitted under applicable laws, rules or
regulations.
Termination of the Plan. The Plan (but not Options previously granted
under the Plan) will terminate on January 23, 2006 or upon its earlier
suspension or termination under the provisions of the Plan or on such earlier
date as of which all the Shares subject to Options authorized to be granted
thereunder have been acquired by exercise of such Options.
24
FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a brief summary of certain of the federal income tax
consequences to Option recipients and to Enesco as a result of the grant and
exercise of Options under the Plan, as modified by the Amendment. 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 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 amount of cash and the Fair Market Value
of the Shares received, over (ii) the exercise price paid therefor. An Option
holder will generally have a 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. 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 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 a 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 Option Price in Shares. Under current rulings, 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
25
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 Option 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 Option 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.
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 of Enesco to certain
executive officers of Enesco. However, an exception to this limitation applies
in the case of certain performance-based compensation. The Plan is intended to
satisfy the requirements for this exception.
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
26
following table sets forth, for the named executive officers and for other
executive officers as a group, all stock options received prior to March 1, 2003
under the Plan.
<Table>
<Caption>
NO. OF SHARES UNDERLYING OPTION(S)
NAME AND PRINCIPAL POSITION RECEIVED UNDER 1996 STOCK OPTION PLAN
- --------------------------- -------------------------------------
D. DalleMolle........................................ 100,000
President and Chief Executive Officer
E. Freedman.......................................... 167,600
Founding Chairman
J.S. Smith........................................... 20,000
Senior Vice President, Operations
J.V. Goldberg,....................................... 41,240
Senior Vice President,
Human Resources and Administration
J.W. Lemajeur........................................ 28,060
Treasurer and
Vice President of Finance
All Other Executive Officers
as a Group (4 persons)............................. 84,728
-------
Total...................................... 441,628
=======
</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 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 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.
27
EXECUTIVE COMPENSATION
The following table sets forth, for the years ended December 31, 2002, 2001
and 2000, the compensation of the Chief Executive Officer, and the four other
most highly compensated executive officers in office at the end of 2002. [2002
BONUS PAYMENTS STILL BEING CALCULATED]
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($) ($)(4) OPTIONS (#) ($)
--------------------------- ---- ------------ -------- ------------ ------------ ------------
D. DalleMolle,(5).............. 2002 $ 500,308 $ $ -- 100,000 --
President and Chief 2001 350,769 312,000 -- 300,000 $140,000
Executive Officer 2000 -- -- -- -- --
E. Freedman,................... 2002 501,923 -- -- 20,000 --
Founding Chairman 2001 615,385 -- -- -- --
2000 1,000,000 -- 84,320 40,000 --
J.S. Smith,(6)................. 2002 234,519 -- 20,000
Senior Vice President, 2001 151,400 80,000 -- 50,000 83,996
Operations 2000 -- -- -- -- --
J.V. Goldberg,................. 2002 241,815 -- 20,000 --
Senior Vice President, 2001 225,462 -- -- 25,000 --
Human Resources and 2000 199,692 20,000 -- 11,000 --
Administration
J.W. Lemajeur,(7).............. 2002 207,308 -- 20,000 --
Treasurer and 2001 179,711 -- -- 13,500 --
Chief Financial Officer 2000 156,058 -- -- 9,000 --
</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 2000 for Messrs. DalleMolle and Smith is not provided
because they were not employed at Enesco during that year.
(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. 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) All Other Compensation for Mr. Freedman in 2000 consisted of the following
items on an accrual basis: $9,600 matching and guaranteed money purchase
contributions under the 401K Plan, $50,400 matching and guaranteed money
purchase contributions under the Supplemental Retirement Plan and $500
PAYSOP contribution. Enesco also provided Mr. Freedman with the use of a
leased company car valued at approximately $23,820.
28
(5) 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.
(6) 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 starting bonus and
relocation expense reimbursement of $48,996.
(7) As of January 6, 2003, Mr. Lemajeur became Vice President of Finance,
Strategic Planning, Merger and Acquisitions and continues in the Treasurer
position. Thomas Bradley joined Enesco as Chief Financial Officer on January
6, 2003.
The following table contains information concerning individual grants of
stock options made to each of the Named Executive Officers during 2002:
OPTION GRANTS IN 2002
<Table>
<Caption>
GRANT DATE
INDIVIDUAL GRANTS(1) VALUE
------------------------------------------------------- ----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE GRANT DATE
GRANTED IN FISCAL PRICE PRESENT
NAME (#)(2) YEAR ($/SH) EXPIRATION DATE VALUE $(3)
- ---- ---------- ---------- -------- --------------- ----------
D. DalleMolle.......................... 100,000 23.47% $7.05 April 25, 2012 554,400
E. Freedman............................ 20,000 4.69% $7.05 April 25, 2012 110,880
J.S. Smith............................. 20,000 4.69% $7.05 April 25, 2012 110,880
J.V. Goldberg.......................... 20,000 4.69% $7.05 April 25, 2012 110,880
J.W. Lemajeur.......................... 20,000 4.69% $7.05 April 25, 2012 110,880
</Table>
- ---------------
(1) The individual grants described were all made in the form of non-qualified
stock options under Enesco's 1996 Stock Option Plan. No SARs were granted
during 2002.
(2) All options granted under the 1996 Stock Option Plan have a ten-year term
and become exercisable only (a) after six months from date of grant and upon
Enesco's achievement of certain stock value performance criteria or (b) on
the eighth anniversary of the date of grant, regardless of whether the stock
value performance criteria have been achieved.
(3) Enesco used the Black-Scholes option pricing model to determine the present
value of each option granted as of its date of grant. The assumptions used
relating to the expected volatility, risk-free rate of return, dividend
yield and time of exercise were as follows: (i) volatility was calculated
based on the daily change in the common stock price during the 250 trading
days preceding the option grant date; (ii) risk-free rate of return was the
yield as of the option grant date on U.S. Treasury bonds maturing in ten
years; (iii) dividend yield was computed based on the then most recent four
quarterly dividends paid on the common stock divided by the average of the
highest and lowest closing prices for the common stock during the
twelve-month period ending on the grant date; and (iv) time of exercise was
the full term of the option granted. There were no adjustments made in the
option pricing model for non-transferability or risk of forfeiture of the
options granted.
29
No stock options were exercised by any of the Named Executive Officers
during 2002. The following table sets forth information concerning the value of
unexercised stock options held by each of them as of the end of 2002:
2002 YEAR-END OPTION VALUES
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT YEAR-END(#) YEAR-END($)
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- -------------------------
D. DalleMolle..................................... 150,000/250,000 $132,000/135,000
E. Freedman....................................... 156,400/140,600 75,735/15,566
J.S. Smith........................................ 50,000/20,000 74,000/600
J.V. Goldberg..................................... 27,935/45,565 46,046/29,934
J.W. Lemajeur..................................... 16,765/30,735 30,659/17,585
</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 to the 1996 Stock Option Plan is being
presented to our stockholders for approval at this Annual Meeting. For details,
please see the description of the Plan in Proposal 3 in this Proxy Statement.
Our 1991 Stock Option Plan expired on January 23, 2001 and consequently, future
option grants to employees and directors 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. Upon approval of the proposed
amendment to 1996 Stock Option Plan, increasing the number of shares authorized
for issuance thereunder, Enesco plans to discontinue the granting of stock
options to new hired employees outside of the 1996 Stock Option Plan.
30
Summary Table
The following table sets forth certain information as of December 31, 2002,
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....................... 1,342,019 $15.87 136,526
1991 Stock Option PlaN....................... 835,098 19.44 0
EQUITY SECURITIES NOT APPROVED BY
ENESCO SHAREHOLDERS:
1999 Non-Employee Director Stock Plan........ 74,625 -- 25,375
Warrants to purchase our common stock........ 200,000 4.38 --
Options to purchase common stock............. 390,994 6.14 --
--------- ------ -------
TOTAL........................................ 2,842,736 $14.74 161,901
========= ====== =======
</Table>
Employment Contracts and Change in Control Arrangements
Mr. DalleMolle, President and Chief Executive Officer, has an employment
agreement through March 31, 2003. Under the terms of the agreement, Mr.
DalleMolle receives an annual base salary of $480,000. For 2002, Mr. DalleMolle
received $500,308 as annual base salary (due to Enesco's change from a bi-weekly
to semi-monthly payroll) and a bonus payment of $ under the ROA
Incentive Bonus Plan. In 2002, 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 Compensation and Stock Option Committee.
In addition, Mr. DalleMolle receives certain executive officer fringe benefits,
including use of a company car and medical insurance coverage. 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, Lemajeur 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 Lemajeur, 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.
31
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 2002, Ms. Brooks Lucas, Ms. Haberkorn, Mr. Ditomassi and Mr.
Pressman served on the Board's Compensation and Stock Option 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,
2002 were satisfied.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Enesco's executive compensation program is administered by the Compensation
and Stock Option 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 2002 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 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 2002, merit raises
were not given to any executive officers as Enesco had a wage freeze in place.
Pay for performance bonuses for all Enesco employees were determined under
Enesco's 2002 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
32
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 are exercisable at any time after six months from the date of grant, subject
to the achievement of certain stock value performance criteria or upon the
eighth anniversary of the date of grant under provisions of the 1996 Stock
Option Plan, 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.
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 2002 to Mr. DalleMolle, President and Chief Executive
Officer consisted of $500,308 as base salary and a bonus of $ under the
ROA Incentive Bonus Plan. The bonus was paid due to Enesco's attainment in 2002
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 26, 2002, Mr.
DalleMolle a grant of 100,000 non-qualified stock options to purchase common
stock under the 1996 Stock Option Plan.
The Compensation and Stock Option Committee:
D. Brooks Lucas (Chair)
G.R. Ditomassi
J.R. Haberkorn
T.A. Pressman
33
REPORT OF THE AUDIT COMMITTEE
March 4, 2003
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, 2002 and 2001, and for the three years in the
period ended December 31, 2002.
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, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.
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, as amended, by the Independence Standards
Board, 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 10K for the year ended December 31, 2002.
D.L. Krause, Chair
J.F. Cauley
D. Brooks Lucas
G.R. Ditomassi
J.R. Haberkorn
T.A. Pressman
A.L. Verville
34
PERFORMANCE GRAPH
During 2002, 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)
TOTAL SHAREHOLDER RETURNS
(PERFORMANCE GRAPH)
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
- ------------------------------------------------------------------------------------------------------------------
Enesco Group, Inc. $100.00 94.45 48.22 21.24 28.55 32.09
- ------------------------------------------------------------------------------------------------------------------
S&P SmallCap 600 $100.00 98.69 110.94 124.03 132.13 112.80
- ------------------------------------------------------------------------------------------------------------------
Company's Peer Group $100.00 77.80 68.79 57.07 67.26 70.35
- ------------------------------------------------------------------------------------------------------------------
</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 1997 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
Cross (A.T.) & Co Libbey Inc.
Department 56, Inc. Russ Berrie & Co. Inc.
Enesco Group, Inc. National Presto Industries, Inc.
</Table>
35
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 accountants for 2003, 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.
FISCAL 2002 AUDIT FIRM FEE SUMMARY
During fiscal year 2002, Enesco retained its principal auditor, KPMG, to
provide services in the following categories and amounts: [CHART TO BE UPDATED]
<Table>
Audit Fees.................................................. $325,000
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees
Audit Related Fees........................................ $
--------
Other Fees................................................ $ 15,000
--------
Total All Other Fees...................................... $ 15,000
========
</Table>
The Audit Committee has concluded that the provision of non-audit services
by Enesco's principal auditor is compatible with maintaining auditor
independence.
36
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 2004, stockholder proposals for that meeting must be received by
Enesco on or before November 18, 2003. 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 Clerk of Enesco on or before February 1,
2004. 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, 2002 WITHOUT CHARGE BY WRITING TO THE CLERK OF ENESCO,
AT 225 WINDSOR DRIVE, ITASCA, ILLINOIS 60143.
By order of the Board of Directors,
ENESCO GROUP, INC.
M. FRANCES DURDEN
Clerk
March 18, 2003
37
APPENDIX A
AGREEMENT AND PLAN OF MERGER
OF
ENESCO GROUP, INC.
(A MASSACHUSETTS CORPORATION)
WITH AND INTO
ENESCO GROUP ILLINOIS, INC.
(AN ILLINOIS CORPORATION)
THIS AGREEMENT AND PLAN OF MERGER, by and between Enesco Group, Inc., a
Massachusetts corporation (herein sometimes called the "Massachusetts
Corporation") and Enesco Group Illinois, Inc., an Illinois corporation (herein
sometimes called the "Illinois Corporation"),
W I T N E S S E T H:
WHEREAS, the Massachusetts Corporation is incorporated and in good standing
in the Commonwealth of Massachusetts, and is authorized to issue a total of
80,000,000 shares of Common Stock, with par value of $0.125 per share; and
WHEREAS, the Illinois Corporation is incorporated and in good standing
under the laws of the State of Illinois, and is authorized to issue a total of
80,000,000 shares of common stock, with par value $0.125 per share, and the
total number of shares that are issued and outstanding is 100 shares of common
stock, all of which are owned by the Massachusetts Corporation; and
WHEREAS, the laws of the Commonwealth of Massachusetts and the State of
Illinois permit the merger of said corporations (herein sometimes called the
"constituent corporations") into a single corporation; and,
WHEREAS, it is deemed advisable by the Board of Directors of each of the
constituent corporations that the Massachusetts Corporation merge with and into
the Illinois Corporation;
NOW, THEREFORE, it is agreed as follows:
1. As of the Effective Date (as hereinafter defined), the Massachusetts
Corporation shall be and hereby is merged pursuant to Section 11.35 of
the Illinois Business Corporation Act of 1983 (as amended) into the
Illinois corporation (the "Merger"). The Illinois Corporation shall be
the surviving corporation and it shall continue and shall be deemed to
continue for all purposes whatsoever after the merger of the
Massachusetts Corporation with and into the Illinois Corporation. For
convenience, the Illinois Corporation, as it shall exist after such
merger, is hereinafter referred to as the "Surviving Corporation."
2. The Merger shall become effective when this Agreement has been adopted
by the Massachusetts Corporation and by the Illinois Corporation and
appropriate documentation has been prepared and filed in accordance with
the laws of the Commonwealth of Massachusetts and the State of Illinois.
The time when the Merger shall become effective is referred to herein as
the "Effective Date" and shall be the date fixed in accordance with the
laws of and the documentation filed with and accepted for filing by the
State of Illinois. At that time, the separate legal existence of the
Massachusetts
A-1
Corporation shall cease and all business previously conducted by the
Massachusetts Corporation shall thereafter be conducted by the Illinois
Corporation, which shall remain in existence after the Effective Date as
the Surviving Corporation.
3. From and after the Effective Date, the assets and liabilities of the
Massachusetts Corporation and the Illinois Corporation shall be carried
on the books of the Surviving Corporation at the amounts at which they
shall be carried at such time on the respective books of the
Massachusetts Corporation and the Illinois Corporation, subject to such
inter-corporate adjustments or eliminations, if any, as may be required
to give effect to the Merger; and, subject to such action as may be
taken by the board of directors of the Surviving Corporation in
accordance with generally accepted accounting principles, the paid-in
capital of the Surviving Corporation shall be equal to the sum of the
paid-in capital of the Massachusetts Corporation and the Illinois
Corporation.
4. From and after the Effective Date, the Surviving Corporation shall be
governed by the laws of the State of Illinois. The present Articles of
Incorporation of the Illinois Corporation shall continue to be the
Articles of Incorporation of the Surviving Corporation, except that the
Articles of Incorporation of the Illinois Corporation shall be amended
to provide that the name of the Surviving Corporation shall be Enesco
Group, Inc. The present By-laws of the Illinois Corporation shall be and
remain the By-laws of the Surviving Corporation and the existing By-laws
of the Massachusetts Corporation shall no longer be in effect. The
directors and officers of the Illinois Corporation immediately prior to
the Effective Date shall continue to be the directors and officers of
the Surviving Corporation upon the Effective Date.
5. Each share of Common Stock of the Massachusetts Corporation which shall
be issued and outstanding immediately prior to the Effective Date shall
be converted into one share of Common Stock of the Surviving Corporation
as of the Effective Date, and from and after the Effective Date, the
holders of all said issued and outstanding shares of the Massachusetts
Corporation shall automatically be and become holders of the shares of
all of the issued and outstanding shares of the Illinois Corporation
upon the basis above specified. Each warrant, option, or other
derivative security to purchase Common Stock of the Massachusetts
Corporation, if any, that is effective immediately prior to the
Effective Date shall be converted into a warrant, option, or other
derivative security, as applicable, to purchase Common Stock of the
Surviving Corporation, as of the Effective Date. Such instruments shall
be exercisable in accordance with their terms and conditions.
6. After the Effective Date, each holder of record of any outstanding
certificate or certificates evidencing Common Stock of the Massachusetts
Corporation may surrender the same to the Surviving Corporation's
transfer agent, at its offices in Ridgefield Park, New Jersey, and such
holder shall be entitled upon such surrender to receive in exchange
therefor a certificate or certificates representing a like number of
shares of Common Stock of the Surviving Corporation. Until so
surrendered, each outstanding certificate which prior to the Effective
Date represented one or more shares of Common Stock of the Massachusetts
Corporation shall be deemed for all corporate purposes to evidence
ownership of shares of Common Stock of the Surviving Corporation.
7. No pro rata issuance of the shares of stock of the Illinois Corporation
that are owned by the Massachusetts Corporation immediately prior to the
Merger shall be made, and such shares shall be surrendered and
extinguished.
A-2
8. This Agreement may be terminated and abandoned by action of the Board of
Directors of the Massachusetts Corporation or the Illinois Corporation
at any time prior to the Effective Date, for any reason whatsoever.
9. Upon the Effective Date the rights, capacity, privileges, powers,
franchises and authority of each of the constituent corporations, and
all property real, personal and mixed, and all debts, obligations and
liabilities, due to each of the constituent corporations on whatever
account as well as for subscriptions for shares as for all other things,
belonging to each of the constituent corporations shall be vested in the
Surviving Corporation; and all such property, rights, capacity,
privileges, powers, franchises, authority and immunities and all and
every other interest shall be thereafter as fully and effectually the
property of the Surviving Corporation as though they were the property
of the several and respective constituent corporations, and shall not
revert or be in any way impaired by reason of the merger; provided,
however, that all rights of the creditors of the constituent
corporations shall be preserved unimpaired and all debts, liabilities
(including liability, if any, to dissenting shareholders) and duties of
the respective constituent corporations shall thenceforth be attached to
the Surviving Corporation and may be enforced against it to the same
extent as if said debts, liabilities and duties had been incurred or
contracted by the Surviving Corporation.
10. As the Surviving Corporation, Enesco Group Illinois, Inc. hereby agrees
that it may be sued in the Commonwealth of Massachusetts for any prior
obligation of the Massachusetts Corporation and any obligations
hereafter incurred by Enesco Group Illinois, Inc., including the
obligation created by General Laws, Chapter 156B, Section 85, so long
as any liability remains outstanding against the Massachusetts
Corporation in the Commonwealth of Massachusetts, and it hereby
irrevocably appoints the Secretary of the Commonwealth as its agent to
accept service of process in any action for the enforcement of any such
obligation, including taxes, in the same manner as provided in Chapter
181 of the General Laws of Massachusetts.
11. The address to which a copy of process shall be mailed by the Secretary
of the Commonwealth of the Commonwealth of Massachusetts shall be c/o
M. Frances Durden, Esq., 225 Windsor Drive, Itasca, Illinois 60143.
12. The proposed merger herein certified has been adopted, approved,
certified, executed, and acknowledged by the Massachusetts Corporation
in the manner provided in section 78, Chapter 156B of the General Laws
of Massachusetts, and by the Illinois Corporation in accordance with
Article 11 of the Illinois Business Corporation Act of 1983, as
amended.
13. A copy of this Agreement and Plan of Merger shall be kept with the
records of meetings of shareholders of the Surviving Corporation, shall
be made available at such location for inspection by any shareholder of
the Surviving Corporation or any person who immediately prior to the
Effective Date was a stockholder of the Massachusetts Corporation, and
a copy shall be furnished upon request, without charge, to any
shareholder of the Surviving Corporation or any person who immediately
prior to the Effective Date was a stockholder of the Massachusetts
Corporation.
14. The officers of the Surviving Corporation shall file such additional
documents with the Secretary of State of Illinois and the Secretary of
the Commonwealth of Massachusetts as are required by the Illinois
Business Corporation Act of 1983, as amended, including, but not
limited to, Article 11 thereof, and Chapter 156B of the General Laws of
Massachusetts, and the respective registries of deeds and recorders of
deeds of Massachusetts and Illinois, as are required to document the
completion of the Merger.
A-3
Signed and attested to on , 2003.
ENESCO GROUP, INC.,
A MASSACHUSETTS CORPORATION
By: /s/ DANIEL DALLEMOLLE
------------------------------------
Daniel DalleMolle
President of Enesco Group, Inc.
Attest:
/s/ M. FRANCES DURDEN, ESQ.
- --------------------------------------
M. Frances Durden, Esq.
Clerk and Vice President
of Enesco Group, Inc.
ENESCO GROUP ILLINOIS, INC.,
AN ILLINOIS CORPORATION
By: /s/ DANIEL DALLEMOLLE
------------------------------------
Daniel DalleMolle
President of Enesco Group Illinois,
Inc.
Attest:
/s/ M. FRANCES DURDEN, ESQ.
- --------------------------------------
M. Frances Durden, Esq.
Vice President and Secretary
of Enesco Group Illinois, Inc.
A-4
APPENDIX B
<Table>
<Caption>
Form BCA-2.10 ARTICLES OF INCORPORATION
(Rev. Jan. 1999) This space for use by Secretary of State -----------------------------
Jesse White SUBMIT IN DUPLICATE!
Secretary of State
Department of Business Services
Springfield, IL 62756
http://www.sos.state.il.us
Payment must be made by certi- THIS SPACE FOR USE BY
fied check, cashier's check, Illi- SECRETARY OF STATE
nois attorney's check, Illinois Date
C.P.A.'s check or money order,
payable to "Secretary of State." Franchise Tax $
Filing Fee: $
Approved:
</Table>
1. CORPORATE NAME: Enesco Group Illinois, Inc.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(The corporate name must contain the word "corporation", "company,"
"incorporated," "limited" or an abbreviation thereof.)
- --------------------------------------------------------------------------------
<Table>
2. Initial Registered Agent: M. Frances Durden
------------------------------------------------------------------------------------
First Name Middle Initial Last Name
Initial Registered
Office: 225 Windsor Drive
------------------------------------------------------------------------------------
Number Street Suite #
Itasca IL DuPage 60143
------------------------------------------------------------------------------------
City County Zip Code
</Table>
- --------------------------------------------------------------------------------
3. Purpose of purposes for which the corporation is organized:
(If not sufficient space to cover this point, add one or more sheets of
this size.)
See attachment.
- --------------------------------------------------------------------------------
4. Paragraph 1: Authorized shares, Issued Shares and Consideration Received:
<Table>
<Caption>
Par Value Number of Shares Number of Shares Consideration to be
Class per Share Authorized Proposed to be Issued Received Therefor
- ------------------------------------------------------------------------------------------------------------------
Common $ 80,000,000 $
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
TOTAL
= $
</Table>
Paragraph 2: The preferences, qualifications, limitations, restrictions and
special or relative rights in respect of the shares of each class are:
(If not sufficient space to cover this point, add one or more sheets of this
size.)
None.
(over)
5. OPTIONAL: (a) Number of directors constituting the initial board of
directors of the corporation:
-------------------------- .
(b) Names and addresses of the persons who are to serve as
directors until the first annual meeting of the shareholders
or until their successors are elected and qualify:
Name Residential Address City, State, ZIP
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
6. OPTIONAL (a) It is estimated that the value of all property to be owned
by the corporation for the following year wherever located
will be: $
(b) It is estimated that the value of the property to be located
within the State of Illinois during the following year will
be: $
(c) It is estimated that the gross amount of business that will
be transacted by the corporation during the following year
will be: $
(d) It is estimated that the gross amount of business that will
be transacted from place of business in the State of
Illinois during the following year will be: $
</Table>
- --------------------------------------------------------------------------------
7. OPTIONAL: OTHER PROVISIONS:
Attach a separate sheet of this size for any other provision to be
included in the Articles of Incorporation, e.g., authorizing
preemptive rights, denying cumulative voting, regulating internal
affairs, voting majority requirements, fixing a duration other
than perpetual, etc.
- --------------------------------------------------------------------------------
8. NAME(S) & ADDRESS(ES) OF INCORPORATOR(S)
The undersigned incorporator(s) hereby declare(s), under penalties of
perjury, that the statements made in the foregoing Articles of Incorporation are
true.
<Table>
Dated , 2003
--------------------------- --------
(Month & Day) Year
</Table>
<Table>
<Caption>
SIGNATURE AND NAME
1.
---------------------------------------------------
Signature
M. Frances Durden
---------------------------------------------------
(Type or Print Name)
2.
---------------------------------------------------
Signature
---------------------------------------------------
(Type or Print Name)
3.
---------------------------------------------------
Signature
---------------------------------------------------
(Type or Print Name)
</Table>
<Table>
<Caption>
ADDRESS
1. 225 Windsor Drive
---------------------------------------------------
Street
Itasca IL 60143
---------------------------------------------------
City/Town State ZIP Code
2.
---------------------------------------------------
Street
---------------------------------------------------
City/Town State ZIP Code
3.
---------------------------------------------------
Street
---------------------------------------------------
City/Town State ZIP Code
</Table>
(Signature must be in BLACK INK on original document. Carbon copy, photocopy or
rubber stamp signatures may only be used on conformed copies.)
NOTE: If a corporation acts as incorporator, the name of the corporation and the
state of incorporation shall be shown and the execution shall be by its
president or vice president and verified by him, and attested by its secretary
or assistant secretary.
- --------------------------------------------------------------------------------
FEE SCHEDULE
- The initial franchise tax is assessed at the rate of 15/100 of 1 percent
($1.50 per $1,000) on the paid-in capital represented in this state, with
a minimum of $25.
- The filing fee is $75.
- The MINIMUM TOTAL DUE (franchise tax + filing fee) is $100.
- (Applies when the Consideration to be Received as set forth in Item 4
does not exceed $16,667)
- The Department of Business Services in Springfield will provide
assistance in calculating the total fees if necessary.
Illinois Secretary of State Springfield, IL 62756
Department of Business Services Telephone (217) 782-9522 or
782-9523 C-162.20
ATTACHMENT TO FORM BCA-2.10
ARTICLES OF INCORPORATION OF ENESCO GROUP ILLINOIS, INC.
ARTICLE 3 PURPOSE OR PURPOSES FOR WHICH THE CORPORATION IS ORGANIZED:
The purpose of the corporation is to engage in the following business
activity(ies):
To manufacture, process, assemble, warehouse, buy, sell, distribute and
otherwise engage in and carry on the business of marketing giftware and
collectible products and other items, materials, articles, goods and merchandise
and otherwise dealing in real, personal and intellectual or industrial property
of all kinds and descriptions; to exercise all of the powers conferred upon
business corporations by, and from time to time permitted to be exercised by
business corporations under, the laws of the State of Illinois; and to engage in
and carry on any other lawful business or transaction which may now or hereafter
be permitted under the laws of the State of Illinois to be conducted, whether in
that State or elsewhere, by a business corporation organized under the Illinois
Business Corporation Act.
ARTICLE 7 OPTIONAL: OTHER PROVISIONS
ARTICLE 7A
A. Except as otherwise provided in the Articles of Incorporation or as
otherwise required by law, any merger or consolidation, mandatory share
exchange, sale, lease or exchange of all or substantially all of the
Corporation's assets, including its goodwill, or amendment to these Articles of
Incorporation, which would otherwise require a supermajority vote of
shareholders of this Corporation pursuant to the Illinois Business Corporation
Act, shall instead require the affirmative vote of a majority of the shares of
each class of stock of this Corporation outstanding and entitled to vote on the
question.
B. Any action required or permitted to be taken by the shareholders or any
class of shareholders shall be taken by such shareholders only at a duly
convened meeting, and may not be taken by written consent in lieu of a meeting.
ARTICLE 7B
A. The business and affairs of the Corporation shall be managed by or under
the direction of a Board of Directors consisting of such number of directors as
shall be established from time to time in accordance with the By-laws. The
directors shall be divided into three classes, designated Class I, Class II and
Class III, and each class of directors shall be elected for a term of office to
expire at the third succeeding annual meeting after their election and until
their respective successors shall be elected and shall qualify, subject,
however, to prior death, resignation, retirement, disqualification or removal
from office. The initial term of office of the Class III directors shall expire
at the 2004 annual meeting of shareholders, the initial term of office of the
Class I directors shall expire at the 2005 annual meeting of shareholders, and
the initial term of office of the Class II directors shall expire at the 2006
annual meeting of shareholders. Each class shall consist, as nearly as may be
possible, of one third of the total number of directors constituting the entire
Board of Directors. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible, and any additional director
of any class elected to fill a vacancy resulting from an increase in such class
shall hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors
Page 1 of 3
shorten the term of any incumbent director. Any director elected to fill a
vacancy not resulting from an increase in the number of directors shall have the
same remaining term as that of his or her predecessor.
B. Any vacancy on the Board of Directors that results from an increase in
the number of directors may only be filled by a majority of the Board of
Directors then in office, provided that a quorum is present, and any other
vacancy occurring in the Board of Directors may only be filled by a majority of
the directors then in office, even if less than a quorum, or by a sole remaining
director.
C. Nominations for the election of directors at an annual meeting may be
made by the Board of Directors or a committee appointed by the Board of
Directors or by any shareholder entitled to vote generally in the election of
directors. However, any shareholder may nominate one or more persons for
election as directors at an annual meeting only if written notice of such
shareholders intent to make such nomination or nominations has been given,
either by personal delivery or by United States mail, postage prepaid, to the
Secretary not later than forty-five days prior to the anniversary of the date of
the immediately preceding annual meeting, or such other earlier or later date as
may be required by any law or regulation applicable to the Corporation. Each
such notice shall set forth: (a) the name and address of the shareholder who
intends to make the nomination and of the person or persons to be nominated; (b)
a representation that the shareholder is a holder of record of this Corporation
entitled to vote at such meeting and intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the shareholder 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
shareholder; (d) such other information regarding each nominee proposed by such
shareholder 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. The presiding
officer of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure.
D. A director may not be removed from office without cause, and may be
removed for cause only after a reasonable notice and opportunity to be heard
before the body proposing to remove him or her.
E. No holder of any class of shares of the Corporation shall be entitled to
cumulate his or her votes in any election of directors.
F. Notwithstanding any other provision of these Articles of Incorporation,
the affirmative vote of holders of 80% of the shares entitled to vote at an
election of directors shall be required to amend, alter, change or repeal, or to
adopt any provision as part of these Articles of Incorporation inconsistent with
the purpose and intent of, this Article 7B.
ARTICLE 7C
Except as otherwise provided in these Articles of Incorporation or as
required by law, the Corporation may authorize, at a meeting of shareholders
duly called for the purpose, by a vote of a majority of each class of stock
outstanding and entitled to vote thereon, any amendment of these Articles of
Incorporation.
ARTICLE 7D
The Board of Directors shall have the power to make, amend or repeal the
By-laws of the Corporation in whole or in part.
Page 2 of 3
ARTICLE 7E
Directors of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for any breach of fiduciary
duty as a Director notwithstanding any provision of law imposing such liability;
provided, however, that the foregoing provision shall not be deemed to eliminate
or limit any liability of a Director (i) for any breach of the Director's duty
of loyalty to the Corporation or its shareholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 8.65 of the Illinois Business Corporation Act of
1983, as amended, or (iv) for any transaction from which the Director derived an
improper personal benefit.
ARTICLE 7F
A. Meetings of the shareholders of the Corporation shall be held anywhere
within the United States, as determined by the Board of Directors of the
Corporation, as permitted by the provisions of the Illinois Business Corporation
Act.
B. The effective date of the Articles of Incorporation of the corporation
shall be the date approved and filed by the Illinois Secretary of State.
Page 3 of 3
APPENDIX C
BY LAWS
OF
ENESCO GROUP ILLINOIS, INC.
C-1
BY-LAWS OF ENESCO ILLINOIS, INC.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
ARTICLE
ARTICLE I -- OFFICES......................................................
SEC. 1. Principal Office............................................
SEC. 2. Other Offices...............................................
ARTICLE II -- MEETINGS OF SHAREHOLDERS....................................
SEC. 1. Place of Meetings...........................................
SEC. 2. Quorum and Manner of Acting.................................
SEC. 3. Annual Meetings.............................................
SEC. 4. Special Meetings............................................
SEC. 5. Notices.....................................................
SEC. 6. Adjournments................................................
ARTICLE III -- DIRECTORS..................................................
SEC. 1. Number; Qualifications......................................
SEC. 2. Annual Meetings.............................................
SEC. 3. Regular Meetings............................................
SEC. 4. Special Meetings............................................
SEC. 5. Waiver of Notice............................................
SEC. 6. Quorum......................................................
SEC. 7. Action without Meeting......................................
SEC. 8. Powers......................................................
SEC. 9. Execution of Corporation Documents and Instruments..........
SEC. 10. Committees of the Board of Directors........................
SEC. 11. Remuneration of Outside Directors...........................
ARTICLE IV -- OFFICERS....................................................
SEC. 1. Election of Officers........................................
SEC. 2. Terms of Office.............................................
SEC. 3. Compensation of Officers, Employees and Agents..............
SEC. 4. Vacancies...................................................
</Table>
C-2
<Table>
<Caption>
PAGE
----
CHAIRMAN OF THE BOARD.................................................
SEC. 5. Chairman....................................................
SEC. 6. Office of the Chairman......................................
PRESIDENT.............................................................
SEC. 7. President...................................................
SEC. 8. Powers of the President.....................................
VICE PRESIDENTS.......................................................
SEC. 9. Powers of the Vice Presidents...............................
TREASURER.............................................................
SEC. 10. Duties of the Treasurer.....................................
SEC. 11. Execution of Documents......................................
SEC. 12. Stock Transfer Records......................................
SEC. 13. Additional Powers...........................................
ASSISTANT TREASURERS..................................................
SEC. 14. Assistant Treasurers........................................
SECRETARY............................................................
SEC. 15. Secretary...................................................
ASSISTANT SECRETARIES................................................
SEC. 16. Assistant Secretary.........................................
BONDS................................................................
SEC. 17. Bonds.......................................................
ARTICLE V -- INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS..................................................................
SEC. 1. Indemnification in General..................................
SEC. 2. Indemnification of Litigant.................................
SEC. 3. Payment of Expenses.........................................
SEC. 4. Determination of Conduct....................................
SEC. 5. Advance of expenses.........................................
SEC. 6. Non-exclusivity.............................................
</Table>
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<Table>
<Caption>
PAGE
----
SEC. 7. Right to acquire insurance..................................
SEC. 8. Notice to shareholders......................................
SEC. 9. References to the "Corporation".............................
SEC. 10. Miscellaneous Definitions...................................
ARTICLE VI -- STOCK.......................................................
SEC. 1. Holders to be Recognized....................................
SEC. 2. Form of Stock Certificates..................................
SEC. 3. Replacement of Certificates Lost, Etc.......................
SEC. 4. Fixing Date for Determination of Shareholders of Record.....
SEC. 5. Restrictions on Transfer....................................
ARTICLE VII -- SEAL AND FISCAL YEAR.......................................
SEC. 1. Seal........................................................
SEC. 2. Fiscal Year.................................................
ARTICLE VIII -- AMENDMENT OF BY-LAWS......................................
SEC. 1. Amendment by Shareholders...................................
SEC. 2. Amendment by Board of Directors.............................
</Table>
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ARTICLE I
OFFICES
SEC. 1. Principal Office. The location of the principal office of the
Corporation in the State of Illinois shall be in the City of Itasca, unless such
location shall at any tine be changed as permitted by law.
SEC. 2. Other Offices. The Corporation may also have offices in such
other places within and without the State of Illinois as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SEC. 1. Place of Meetings. Meetings of the shareholders of the
Corporation shall be held anywhere within the United States, as determined by
the Board of Directors of the Corporation, as permitted by the provisions of the
Illinois Business Corporation Act.
SEC. 2. Quorum and Manner of Acting. A majority of the votes of the
shares entitled to vote on the matters to be presented, which is represented by
the holders thereof, either in person or by proxy, shall be a quorum at any
meeting of shareholders. If a quorum is present, the affirmative vote of the
majority of the votes of shares represented at the meeting and entitled to vote
on a matter shall be the act of the shareholders, unless a greater number of
votes or voting by classes is required by the Illinois Business Corporation Act
of 1983, as amended, or the Articles of Incorporation.
SEC. 3. Annual Meetings. The annual meeting of the shareholders shall be
held on such date and at such time as the Board of Directors shall establish by
resolution. In the absence of resolution of the Board, the annual meeting shall
be held on the third Thursday of May in each year at 10:00 A.M. At each annual
meeting the shareholders entitled to vote thereat on the matter shall elect the
class of Directors whose term of office is expiring, in accordance with the
provisions of Article 7B of the Articles of Incorporation of the Corporation, as
amended. At each annual meeting the shareholders entitled to vote thereat on the
matter shall have placed before them for ratification the name of the Auditor
appointed by the Board of Directors in accordance with law.
SEC. 4. Special Meetings. Special meetings of shareholders may be called
by the President, or by the Board of Directors, or by the holders of not less
than 20% of the outstanding shares entitled to vote on the matter for which the
meeting is to be called.
SEC. 5. Notices. Written notice of any meeting of shareholders, stating
the place, day and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered not
less than 10 nor more than 60 days before the date of the meeting, or in the
case of a merger, consolidation, share exchange, dissolution or sale, lease or
exchange of assets, not less than 20 nor more than 60 days before the date of
the meeting, either personally or by mail, by or at the direction of the
President, the Secretary or the officer or persons calling the meeting to each
shareholder of record entitled to vote on any of the matters to be presented at
his or her address as the same appears on the records of the Corporation.
SEC. 6. Adjournments. Any meeting of the shareholders may be adjourned to
any other time and place by the shareholders present or represented by proxy at
the meeting and entitled to vote on the matters to be presented, although less
than a quorum, and it shall not be necessary to notify any shareholder of any
such
C-5
adjournment. Any business which could have been transacted at any meeting of
shareholders as originally called may be transacted at any such adjournment
thereof.
ARTICLE III
DIRECTORS
SEC. 1. Number; Qualifications. The business and affairs of the
Corporation shall be managed by or under the direction of a Board of Directors
consisting of not less than nine nor more than fourteen, the exact number of
directors to be determined from time to time by resolution adopted by the
affirmative role of a majority of the entire Board of Directors. Each Director
shall be a voting shareholder or shall become such prior to acting as a
director.
SEC. 2. Annual Meetings. Following each annual meeting of shareholders
and at the place thereof, if a quorum of the Board of Directors is present
thereat, the annual meeting of the Board of Directors shall proceed thereafter
without notice; but if a quorum of the Board is not present thereat, or, if
present, does not so proceed to hold such meeting, the annual meeting of such
Board shall be called in the manner hereinafter provided with respect to the
call of a special meeting of the Board.
SEC. 3. Regular Meetings. Regular meetings of the Board of Directors may
be held at such times and places within or without the State of Illinois as
shall from time to time be fixed by the Board, and no notice need be given of
regular meetings held at times and places so fixed.
SEC. 4. Special Meetings. Special meetings of the Board of Directors may
be called at any time by the Chairman of the Board or the President, and the
Secretary or an Assistant Secretary shall give notice of any special meeting so
called to all Directors stating the time and place within or without the State
of Illinois, and such notice shall be sufficient if given either (i) by mailing
the same postage prepaid forty-eight hours before the date of the meeting
addressed to each Director at his usual place of business or residence, or (ii)
by delivery thereof in hand or by telegram dispatched prepaid not less than
twenty-four hours before the date of the meeting, or (iii) orally or by
telephone not less than twenty four hours before the date of the meeting.
SEC. 5. Waiver of Notice. Any requirement of notice of any meeting of the
Board of Directors shall be deemed satisfied as to any Director who waives the
same or whose attendance at such meeting constitutes a waiver under the law.
SEC. 6. Quorum. A majority of the Board of Directors in office shall
constitute a quorum for the transaction of business, and a meeting of the Board,
whether a quorum be present or not, may be adjourned by those present without
the necessity of notifying any Director of any such adjournment. Any business
which could legally be transacted at any meeting of the Board of Directors may
be transacted at any adjournment thereof without any new notification.
SEC. 7. Action without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
all Directors consent in writing to such action. Such written consent, setting
forth the action taken, shall be filed by the Secretary with the minutes of the
Board of Directors.
SEC. 8. Powers. The Board of Directors shall manage the business of the
Corporation and shall have all the powers of the Corporation, except such as by
law, the Articles of Incorporation or by the By-Laws of the Corporation are
conferred upon or reserved to the shareholders.
C-6
SEC. 9. Execution of Corporation Documents and Instruments. The Board of
Directors shall designate the persons, in addition to those specifically
authorized elsewhere in these By-Laws, who shall be empowered on behalf of the
Corporation to sign checks, contracts, bids, deeds, releases, securities
devices, notes and other documents and instruments of the Corporation, as well
as the terms and conditions, if any, of such signing.
SEC. 10. Committees of the Board of Directors. The Board of Directors may
establish such committees, including an Executive Committee, consisting of two
or more members elected by it from among its number as it deems advisable in the
conduct of the business of the Corporation and may delegate such functions and
duties to such committees from time to time as may be permitted by law.
SEC. 11. Remuneration of Outside Directors. Any Director who is entitled
to compensation from the Corporation as an officer or employee thereof shall not
receive any additional compensation for his services as a director. The Board of
Directors may provide for remuneration of all other Directors in such amounts
and in such manner as the Board may from time to time deem advisable.
ARTICLE IV
OFFICERS
SEC. 1. Election of Officers. The Officers of the Corporation shall be
elected by the Directors and shall include a President, a Treasurer, and a
Secretary, and, when deemed desirable by the Board of Directors, a Chairman of
the Board, one or more Vice Presidents, one or more Assistant Treasurers, one or
more Assistant Secretaries and such other officers as the Board of Directors
may, from time to time, deem necessary or advisable for the management of the
affairs of the Corporation. The President, Treasurer and Secretary shall be
elected at the Annual Meeting of Directors. All other officers may be elected at
such annual meeting or at any regular or special meeting of the Board of
Directors.
SEC. 2. Terms of Office. The President, the Treasurer and the Secretary
shall (unless sooner removed in accordance with law) hold office until the next
annual meeting of the Board of Directors and until their respective successors
are elected. All other officers shall (unless sooner removed in accordance with
law) hold their respective offices until the next annual meeting and the
election of the first mentioned officers thereat.
SEC. 3. Compensation of Officers, Employees and Agents. The officers,
employees and agents of the Corporation shall receive such compensation and upon
such terms as the Board of Directors may from time to time determine. The
determination of such compensation may be delegated by the Board of Directors to
(i) a Compensation Committee composed of members of the Board who are elected to
that Committee by it or appointed under is authorization except that the
determination of the compensation of the members of the Compensation Committee
cannot be delegated to that Committee, and (ii) to such other individuals or
committees to the extent and in the manner permitted by the law.
SEC. 4. Vacancies. If any corporate office specified in this Article
becomes vacant for any reason, including resignation, the Board of Directors may
elect a successor who shall hold office for the unexpired term unless sooner
removed in accordance with law.
CHAIRMAN OF THE BOARD
SEC. 5. Chairman. The Chairman of the Board shall preside at all meetings
of the shareholders and of the Board of Directors. The Chairman of the Board
shall have the power, on behalf of the Corporation, to sign contracts, deeds and
releases and, with the Treasurer or Assistant Treasurer, to sign or endorse
security
C-7
devices, notes, and, when authorized by the Board of Directors, to sign or
endorse such other documents and instruments as the Board of Directors may
specify. The Chairman of the Board shall also have such additional powers and
duties as the Board of Directors may from time to time assign him.
SEC. 6. Office of the Chairman. In the event there is a vacancy in the
office(s) of the Chief Executive Officer and President, such duties shall be
carried out by the office of the Chairman, which shall be comprised of the
Chairman of the Board of Directors and such other member(s) from the Board of
Directors and executive officer(s) as determined by the Board of Directors in
its sole discretion, until such time as a new Chief Executive Officer and
President is elected.
PRESIDENT
SEC. 7. President. In the absence or disability of the Chairman of the
Board or at his request, or if his office be vacant, the President shall preside
at all meetings of the shareholders and of the Board of Directors.
SEC. 8. Powers of the President. The president shall have the power on
behalf of the Corporation (i) to sign contracts, deeds and releases and (ii)
with the Treasurer or Assistant Treasurer, to sign or endorse certificates of
stock, security devices, notes, and (iii) when authorized by the Board of
Directors, to sign or endorse such other documents and instruments as the Board
of Directors may specify. The President shall have also such additional powers
and duties as the Board of Directors may from time to time assign to him.
VICE PRESIDENTS
SEC. 9. Powers of the Vice Presidents. Each of the Vice-Presidents shall
bear such title and shall have such powers and duties as may be assigned to him
from time to time by the Board of Directors.
TREASURER
SEC. 10. Duties of the Treasurer. The Treasurer shall have the custody of
the money, funds and securities of the Corporation and shall have charge of its
books and keeping of its accounts. He shall make financial and accounting
reports to the Board of Directors at least quarterly and more often when
requested by it, and shall make a report at the annual meeting of shareholders.
He shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all monies and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated from time to time by the Board of Directors.
SEC. 11. Execution of Documents. The Treasurer shall, with the President
or a duly authorized Vice President, sign all certificates of shares, and, with
the Chairman of the Board or the President or a duly authorized Vice President,
sign or endorse security devices and notes and, when authorized by the Board of
Directors, sign or endorse such other documents and instruments as the Board may
specify.
SEC. 12. Stock Transfer Records. The Treasurer shall also keep books for
the recording of shares and transfers thereof and the names and addresses of
shareholders and shall be transfer agent of the Corporation for the transfer of
all certificates of shares; provided that, the Board of Directors may, with
respect to the transfer of shares of any class of the capital stock of the
Corporation, appoint any other person or corporation to act as transfer agent,
and, when the Board deems it desirable, any person or corporation, to act as
registrar thereof.
SEC. 13. Additional Powers. The Treasurer also shall have such additional
powers anal duties as may be assigned to him from time to time by the Board of
Directors.
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ASSISTANT TREASURERS
SEC. 14. Assistant Treasurers. In the absence or disability of the
Treasurer, or if his office be vacant, the Assistant Treasurers, in the order of
the seniority of their election, shall have the powers and duties appertaining
to the office of Treasurer set forth in Sections 10 and 12 above and when duly
authorized by the Board of Directors shall perform all or any part of the duties
set forth in Sections 11 and 13 above. In addition to the foregoing, each of the
Assistant Treasurers shall have such other powers and duties as may be assigned
to him from time to time by the Board of Directors.
SECRETARY
SEC. 15. Secretary. The Secretary shall attend all meetings of the Board
of Directors and the Executive Committee and shall record all votes and minutes
of all proceedings thereat in books to be kept for that purpose. When required
by law or these By Laws, proper notice of meetings of the Board of Directors and
the shareholders shall be given by him. In addition to the foregoing, the
Secretary shall have such other powers and duties as may be assigned to him from
time to time by the Board of Directors.
ASSISTANT SECRETARIES
SEC. 16. Assistant Secretary. In the absence or disability of the
Secretary or at his request, or if his office be vacant, the Assistant
Secretaries, in the order of the seniority of their elections, shall perform the
duties herein assigned to the Secretary. In addition to the foregoing, each
Assistant Secretary shall have such other powers and duties as may be assigned
to him from time to time by the Board of Directors.
BONDS
SEC. 17. Bonds. Any officer of the Corporation may be required to give a
bond for the faithful performance of his duties in such form and with such
sureties as the Board of Directors may direct.
ARTICLE V
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
SEC. 1. Indemnification in General. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the Corporation, or who is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment or
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in, or not
opposed to, the best interests of the
C-9
Corporation, or with respect to any criminal action or proceeding, that the
person had reasonable cause to believe that his or her conduct was unlawful.
SEC. 2. Indemnification of Litigant. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best interests of the
Corporation, provided that no indemnification shall be made in respect of any
claim, issue or matter as to which such persons shall have been adjudged to be
liable for negligence or misconduct in the performance of his or her duty to the
Corporation, unless, and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court shall deem proper.
SEC. 3. Payment of Expenses. To the extent that a director, officer,
employee, or agent of the Corporation has been successful, on the merits or
otherwise, in the defense of any action, suit or proceeding referred to in
Sections 1 and 2 of this Article V, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection therewith, if
such person acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of the Corporation.
SEC. 4. Determination of Conduct. Any indemnification under Sections 1
and 2 of this Article V (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case, upon a determination that
indemnification of the present or former director, officer, employee or agent is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in Sections 1 or 2 of this Article V. Such determination shall
be made with respect to a person who is a director or officer of the Corporation
at the time of the determination by the board of directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding; or, if such a quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion; or, by the shareholders.
SEC. 5. Advance of Expenses. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding, as authorized by the
board of directors in the specific case, upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he or she is not entitled to be indemnified
by the Corporation as authorized in this Article V. Such expenses (including
attorneys fees) incurred by former directors and officers or other employees and
agents may be so paid on such terms and conditions, if any, as the Corporation
deems appropriate.
SEC. 6. Non-Exclusivity. The indemnification provided by this Article V
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any contract, agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
C-10
SEC. 7. Right to Acquire Insurance. The Corporation shall have power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation, as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of his or her status as such, whether or
not the Corporation would have the power to indemnify him or her against such
liability under the provisions of this Article.
SEC. 8. Notice to Shareholders. If the Corporation has paid indemnity or
has advanced expenses to a director, officer, employee or agent, the Corporation
shall report the indemnification or advance in writing to the shareholders with
or before the notice of the next shareholders meeting.
SEC. 9. References to the "Corporation". For purposes of this Article,
references to "the Corporation" shall include, in addition to the surviving
corporation, any merging corporation (including any corporation having merged
with a merging corporation) absorbed in a merger which, if its separate
existence had continued, would have had the power and authority to indemnify its
directors, officers, and employees or agents, so that any person who was a
director, officer, employee or agent of such merging corporation, or was serving
at the request of such merging corporation as a director, officer, employee or
agent of any other corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article V with respect to the surviving corporation as such person would have
with respect to such merging corporation if its separate existence had
continued.
SEC. 10. Miscellaneous Definitions. For purposes of this Article V,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries. A person who acted in good faith and
in a manner he or she reasonably believed to be in the best interests of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interest of the Corporation" as
referred to this Article V.
ARTICLE VI
STOCK
SEC. 1. Holders to be Recognized. The Corporation shall be entitled to
treat the record holder of any share or shares of stock as the holder in fact
thereof and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person except as may
be otherwise expressly provided by law.
SEC. 2. Form of Stock Certificates. All certificates of stock shall be in
such form and contain such information as shall be required by law and be
signed, either manually or by facsimile, as hereinbefore provided.
SEC. 3. Replacement of Certificates Lost, Etc. In case of the alleged
loss, destruction, mutilation, or wrongful taking of a certificate of stock, a
new certificate may be issued in place thereof, upon such terms and conditions
as the Board of Directors may prescribe.
C-11
SEC. 4. Fixing Date for Determination of Shareholders of Record. The
Board of Directors may fix in advance a time, which shall be not more than 60
days before the date of any meeting of shareholders or the date for the payment
of any dividend or the making of any distribution to shareholders or the last
day on which the consent or dissent of shareholders may he effectively expressed
for any purpose, nor less than 10 days, in the case of meeting of shareholders
or, in the case of a merger, consolidation, share exchange, dissolution or sale,
lease or exchange of shares, not less than 20 days, as the record date for
determining the shareholders having the right to notice of and to vote at such
meeting and any adjournment thereof or the right to receive such dividend or
distribution or the right to give such consent or dissent, and in such case only
shareholders of record on such record date shall have such right,
notwithstanding any transfer of stock on the books of the Corporation after the
record date; or without fixing such record date the Board of Directors may for
any of such purposes close the transfer books for all or any part of such
period.
SEC. 5. Restrictions on Transfer. The Board of Directors may impose
restrictions on transfer of securities of the Corporation pursuant to the Rights
Agreement dated as of September 7, 1988 by and between the Corporation and The
Connecticut Bank and Trust Company, N.A. (East Hartford, Connecticut), as and to
the extent required by such Rights Agreement, as amended from time to time.
ARTICLE VII
SEAL AND FISCAL YEAR
SEC. 1. Seal. The seal of the Corporation shall have inscribed thereon
the name of the Corporation. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed to any document.
SEC. 2. Fiscal Year. The fiscal year of the Corporation shall begin on
the first day of January of each year and end on the thirty-first day of
December.
ARTICLE VIII
AMENDMENT OF BY-LAWS
SEC. 1. Amendment by Shareholders. Any of these By-Laws may be added to,
altered, amended or repealed by the shareholders of the Corporation entitled to
vote on the matter at any annual or special meeting of shareholders. The nature
or substance of the proposed addition, alteration, amendment or repeal shall be
stated in the notice of the meeting.
SEC. 2. Amendment by Board of Directors. The Board of Directors shall
also have the power to make, amend or repeal the By-Laws of the Corporation in
whole or in part subject to amendment or repeal by shareholders as provided by
law.
C-12
APPENDIX D
MASSACHUSETTS GENERAL LAWS CHAPTER 156B
SECTIONS 85 98
SECTION 85. DISSENTING STOCKHOLDER; RIGHT TO DEMAND PAYMENT FOR STOCK;
EXCEPTION.
A stockholder in any corporation organized under the laws of Massachusetts
which shall have duly voted to consolidate or merge with another corporation or
corporations under the provisions of sections seventy eight or seventy nine who
objects to such consolidation or merger may demand payment for his stock from
the resulting or surviving corporation and an appraisal in accordance with the
provisions of sections eighty six to ninety eight, inclusive, and such
stockholder and the resulting or surviving corporation shall have the rights and
duties and follow the procedure set forth in those sections. This section shall
not apply to the holders of any shares of stock of a constituent corporation
surviving a merger if, as permitted by subsection (c) of section seventy eight,
the merger did not require for its approval a vote of the stockholders of the
surviving corporation.
SECTION 86. SECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES.
If a corporation proposes to take a corporate action as to which any
section of this chapter provides that a stockholder who objects to such action
shall have the right to demand payment for his shares and an appraisal thereof,
sections eighty seven to ninety eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty two and eighty three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the stockholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
SECTION 87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE OF MEETING;
FORM.
The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting and
effected by the corporation, any stockholder (1) who files with the corporation
before the taking of the vote on the approval of such action, written objection
to the proposed action stating that he intends to demand payment for his shares
if the action is taken and (2) whose shares are not voted in favor of such
action has or may have the right to demand in writing from the corporation (or,
in the case of a consolidation or merger, the name of the resulting or surviving
corporation shall be inserted), within twenty days after the date of mailing to
him of notice in writing that the corporate action has become effective, payment
for his shares and an appraisal of the value thereof. Such corporation and any
such stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the
General Laws of Massachusetts."
D-1
SECTION 88. NOTICE OF EFFECTIVENESS OF ACTION OBJECTED TO.
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the corporation of which he
is a stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall be sent by registered or certified mail,
addressed to the stockholder at his last known address as it appears in the
records of the corporation.
SECTION 89. DEMAND FOR PAYMENT; TIME FOR PAYMENT.
If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty three, or
section eighty eight, any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which such
demand is made shall pay to him the fair value of his stock within thirty days
after the expiration of the period during which such demand may be made.
SECTION 90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE.
If during the period of thirty days provided for in section eighty nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
SECTION 91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE.
If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof. If the
bill is filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares and
with whom the corporation has not reached agreement as to the value thereof and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
D-2
SECTION 92. DECREE DETERMINING VALUE AND ORDERING PAYMENT; VALUATION DATE.
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
SECTION 93. REFERENCE TO SPECIAL MASTER.
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
SECTION 94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL.
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of the
pendency of the bill and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
SECTION 95. COSTS; INTEREST.
The costs of the bill, including the reasonable compensation and expenses
of any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
SECTION 96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT.
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the
corporation, or in the case of a consolidation or merger, the resulting or
surviving corporation, deliver to it a written withdrawal of his objections
to and an acceptance of such corporate action. Notwithstanding the
provisions of clauses (1)
D-3
to (3), inclusive, said stockholder shall have only the rights of a
stockholder who did not so demand payment for his stock as provided in this
chapter.
SECTION 97. STATUS OF SHARES PAID FOR.
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
SECTION 98. EXCLUSIVE REMEDY; EXCEPTION.
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
D-4
THIS PROXY WILL BE VOTED AS DIRECTED BUT IN THE ABSENCE OF SUCH DIRECTION, IT
WILL BE VOTED FOR ITEMS 1, 2, 3 AND 4 BELOW. THIS PROXY REVOKES ANY PROXY
PREVIOUSLY GIVEN.
1. To elect Daniel DalleMolle, Eugene Freedman and Donna Brooks Lucas as Class
II 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.
FOR all WITHHOLD (INSTRUCTION: To
nominees listed AUTHORITY to withhold authority to
above (except vote for all vote for one or more
as marked to nominees listed individual nominees,
the contrary) above write the nominee's
name in the space
provided below.)
__________ __________ _____________________
2. To approve the reincorporation of Enesco Group, Inc. in the State of
Illinois.
FOR AGAINST ABSTAIN
_________ _________ _________
3. To approve amendments to the 1996 Incentive Stock Option Plan to increase the
number of shares available for grant and to change the vesting schedule for
options granted thereunder.
FOR AGAINST ABSTAIN
_________ _________ _________
4. To ratify the appointment by the Board of Directors of KPMG LLP as Enesco's
independent accountants for 2003.
FOR AGAINST ABSTAIN
_________ _________ _________
5. To transact such other business as may properly come before the meeting and
any postponement or adjournment thereof.
FOR AGAINST ABSTAIN
_________ _________ _________
I plan to attend the meeting. _________
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature_____________________ Signature____________________ Date_________, 2003
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.)
- --------------------------------------------------------------------------------
- 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 4PM Eastern Time
the business day prior to annual meeting day.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
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INTERNET TELEPHONE MAIL
http://www.eproxy.com/enc 1-800-435-6710
Use the Internet to vote your proxy. Use any touch-tone telephone to Mark, sign and date
Have your proxy card in hand when vote your proxy. Have your proxy your proxy card
you access the web site. You will be OR card in hand when you call. You will OR and
prompted to enter your control number, be prompted to enter your control return it in the
located in the box below, to create number, located in the box below. enclosed postage-paid
and submit an electronic ballot. and then follow the directions given. envelope.
---------------------------------------- --------------------------------------- -----------------------
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IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
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PROXY ENESCO GROUP, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTIONS
The undersigned, having read the Notice of Annual Meeting of Stockholders and Proxy Statement dated March 18, 2003, receipt of
which is hereby acknowledged, does hereby appoint and constitute DANIEL DALEMOLLE, 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 Thursday, April 24, 2003 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)
- ------------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
ENESCO GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, APRIL 24, 2003
9:30 a.m.
Enesco Showroom Theater
One Enesco Plaza (corner of Busse and Devon)
Elk Grove Village, Illinois 60007
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