UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
ENESCO GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------
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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(ENESCO GROUP LOGO)
April 15, 2005
Dear Stockholder:
On behalf of the Enesco Group, Inc. Board of Directors, you are invited to
attend the Annual Meeting of Stockholders to be held on Wednesday, May 18, 2005,
at the Enesco Showroom Theater, One Enesco Plaza (corner of Busse Road and Devon
Avenue), 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 for non-stockholders will be
on a first-come, first-served basis.
We look forward to seeing you on May 18th, and thank you for your continued
support of Enesco Group, Inc.
Sincerely,
/s/ CYNTHIA PASSMORE-MCLAUGHLIN
CYNTHIA PASSMORE-MCLAUGHLIN
President and Chief Executive Officer
225 Windsor Drive, Itasca, Illinois 60143 - Telephone 630-875-5300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
ENESCO GROUP, INC.
Date: May 18, 2005
Time: 9:30 a.m. Central
Place:Enesco Showroom Theater
One Enesco Plaza
Corner of Busse Road and Devon Avenue
Elk Grove Village, Illinois 60007
Purposes:
- To elect two Class I directors for a three-year term;
- To ratify the appointment by the Audit Committee of the Board of
Directors of KPMG LLP as Enesco's independent accountants for 2005; and
- To transact such other business as may properly come before the meeting
and any postponement or adjournment of the meeting.
Stockholders of record as of the close of business on March 31, 2005 will
be entitled to vote at the meeting and any postponement or adjournment of the
meeting.
By Order of the Board of Directors,
/s/ CHARLES E. SANDERS
CHARLES E. SANDERS, Secretary
Itasca, Illinois
April 15, 2005
---------------------
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 FOR NON-STOCKHOLDER 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
Executive Compensation...................................... 14
Compensation Committee Interlocks and Insider
Participation............................................. 18
Section 16(a) Beneficial Ownership Reporting Compliance..... 18
Compensation Committee Report on Executive Compensation..... 18
Report of the Audit Committee............................... 21
Performance Graph........................................... 22
Proposal 2: Independent Public Accountants.................. 23
Stockholder Proposals....................................... 24
Householding of Proxy Materials............................. 25
Annex A: Audit Committee Charter............................ A-1
</Table>
2
ENESCO GROUP, INC.
PROXY STATEMENT
April 15, 2005
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.
THE ANNUAL MEETING
Attending the Annual Meeting
Our meeting will be held on May 18, 2005 at 9:30 a.m., at the Enesco
Showroom Theater, One Enesco Plaza (corner of Busse Road and Devon Avenue), 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 writing
at 85 Challenger Rd., Ridgefield, New Jersey 07660 or by calling toll-free (800)
288-9541. In order to vote all your shares by proxy, you should vote the shares
in each different account as described below.
On April 15, 2005, we began mailing these proxy materials to all
stockholders of record at the close of business on March 31, 2005 (the "Record
Date"). As of the Record Date there were 14,659,496 shares outstanding and 2,237
holders of record.
Quorum Requirement
A quorum is necessary to hold a valid meeting. The attendance in person or
by proxy (by mail, telephone or over the Internet) of holders of a majority of
the shares entitled to vote at the meeting will constitute a quorum to hold the
meeting. Abstentions and broker non-votes are counted as present for
establishing a quorum. A broker non-vote occurs when a broker votes on some
matters on the proxy card but not on others because the broker does not have the
authority to do so.
3
VOTING INSTRUCTIONS
You are entitled to one vote for each share of common stock that you own as
of the close of business on the Record Date. Please carefully read the
instructions below on how to vote your shares. Because the instructions vary
depending on how you hold your shares, it is important that you follow the
instructions that apply to your particular situation.
If Your Shares are Held in Your Name
VOTING BY PROXY. Even if you plan to attend the meeting, you can vote
before the meeting by proxy. There are three ways to vote by proxy:
- you can vote by telephone by calling toll-free (866) 540-5760 and
following the instructions on the proxy card;
- you can vote via the 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.
REVOKING YOUR PROXY. As long as your shares are registered in your name,
you may revoke your proxy at any time before it is exercised. There are several
ways you can do this:
- by filing a written notice of revocation with our Secretary;
- by following appropriate Internet or telephone voting procedures;
- by signing and delivering another proxy that bears a later date; or
- by attending the meeting and voting in person.
If Your Shares are Held in "Street Name"
VOTING BY PROXY. If your shares are registered in the name of your broker
or nominee, you will receive instructions from the holder of record that you
must follow in order for your shares to be voted. Certain brokers and banks will
also offer telephone and Internet voting.
VOTING IN PERSON AT THE MEETING. If you plan to attend the meeting and vote
in person, you should contact your broker or nominee to obtain a broker's proxy
card and bring it and your account statement or other evidence of your share
ownership as of the Record Date with you.
REVOKING YOUR PROXY. If your shares are held in street name, you must
contact your broker to revoke your proxy.
4
Voting Rules
By giving us your proxy, you authorize the individuals named on the proxy
card to vote your shares in the manner you indicate at the meeting or any
postponements or adjournments of the meeting. With respect to the election of
nominees for director, you may:
- vote "for" the election of all nominees for director named in this proxy
statement;
- "withhold" authority to vote for all nominees; or
- "withhold" authority to vote for one or more of the nominees and vote
"for" the remaining nominee(s).
If a quorum is present at the meeting, a nominee will be elected to serve
as a Class III director if a majority of the shares of Common Stock voting at
the meeting vote for the nominee, whether present, in person, by telephone or
Internet vote or represented by proxy. Because of this rule, non-voted shares
will not affect the outcome of the election of directors and will not prevent
that nominee from being elected.
We actively solicit proxy participation. We will bear the cost of
soliciting proxies. In addition to this notice by mail, we request and encourage
brokers, custodians, nominees and others to supply proxy materials to
stockholders, and we will reimburse them for their expenses. Our officers and
employees may, by letter, telephone, electronic mail, or in person, make
additional requests for the return of proxies, although we do not reimburse our
own employees for soliciting proxies. In addition, we have hired Mellon Investor
Services, LLC in New York, New York to solicit proxies at a fee of approximately
$5,000.
ANNUAL REPORT
The Annual Report to Stockholders of Enesco for the year ended December 31,
2004, including our consolidated financial statements for our 2004 fiscal year,
accompanies this proxy statement.
5
OUR LARGEST STOCKHOLDERS
On March 31, 2005, there were outstanding 14,659,496 shares of our common
stock, which is the only class of stock outstanding and entitled to vote at the
Annual Meeting. The holders of these shares will be entitled to cast one vote
for each share of common stock held of record as of March 31, 2005. To the best
of Enesco's knowledge, the beneficial owners of more than 5% of the common stock
as of December 31, 2004 were as follows:
<Table>
<Caption>
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------- ----------------------- --------
Fidelity Management & Research Co. ..................... 1,439,800 shares(1) 9.8%
82 Devonshire Street
Boston, MA 02109
Dimensional Fund Advisors, Inc. ........................ 1,216,211 shares(2) 8.3%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Babson Capital Management LLC........................... 749,735 shares(3) 5.1%
One Memorial Drive
Cambridge, MA 02142
</Table>
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(1) Based on a statement on Schedule 13G filed with the Securities and Exchange
Commission (SEC) on February 14, 2005 by Fidelity Management Research Co.
(Fidelity). Fidelity has sole dispositive power over 1,439,800 shares.
(2) Based on a statement on Schedule 13G filed with the SEC on February 9, 2005
by Dimensional Fund Advisors, Inc. (DFA). DFA has sole voting and
dispositive power over 1,216,211 shares.
(3) Based on a statement on Schedule 13G filed with the SEC on February 11, 2005
by Babson Capital Management LLC (Babson). Babson has sole voting power over
667,585 shares, shared voting power over 82,150 shares and sole dispositive
power over 749,735 shares.
6
SHARES HELD BY OUR DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers beneficially owned, as of March 31,
2005, shares of our common stock as follows:
<Table>
<Caption>
OUTSTANDING SHARES SHARES UNDERLYING
OF THE COMMON STOCK- STOCK OPTIONS-
AMOUNT AND NATURE AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OWNERSHIP(1)(2) OF CLASS(3)
- ------------------------ -------------------- ----------------- -----------
Thomas F. Bradley..................... 6,214(4) 36,208 ***%
Donna Brooks Lucas.................... 17,049 5,750 ***%
Leonard A. Campanaro.................. 717 0 ***%
Daniel DalleMolle..................... 20,486(5) 183,400 1.4%
George R. Ditomassi................... 12,012 4,831 ***%
M. Frances Durden..................... 4,849(6) 51,500 ***%
Josette V. Goldberg................... 4,878(7) 84,750 ***%
Judith R. Haberkorn................... 20,791 7,250 ***%
Hector J. Orci........................ 2,337 668 ***%
Cynthia Passmore-McLaughlin........... 25,261(8) 0 ***%
Thane A. Pressman..................... 13,012 4,831 ***%
Jeffrey S. Smith...................... 12,624(9) 93,262 ***%
Anne-Lee Verville..................... 56,672 7,250 ***%
All Directors and Executive Officers
as a Group (15 persons)............. 210,160 487,950 4.8%
</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 March 31, 2005.
(3) Unless otherwise noted, the percent of class is less than 1%.
(4) Reflects the outstanding share information by Mr. Bradley on a Form 4, filed
with the SEC on May 24, 2004. Mr. Bradley resigned from the Company on
August 16, 2004. Enesco has no additional information regarding Mr.
Bradley's share ownership.
(5) Reflects the outstanding share information by Mr. DalleMolle on a Form 4,
filed with the SEC on April 28, 2003. Mr. DalleMolle passed away on April
20, 2004. Enesco has no additional information regarding Mr. DalleMolle's
estate share ownership.
(6) Reflects 1,500 shares of common stock owned by Ms. Durden and 3,349 shares
held in Ms. Durden's 401(k) account as of December 31, 2004.
(7) Reflects 150 shares of common stock owned by Ms. Goldberg and 4,728 shares
held in Ms. Goldberg's 401(k) account as of December 31, 2004.
(8) Reflects 25,000 shares of restricted common stock held by Ms.
Passmore-McLaughlin, which will vest one-third each year on the anniversary
date of the grant until fully vested and 261 shares held in Ms.
Passmore-McLaughlin's 401(k) account as of December 31, 2004.
(9) Reflects 3,500 shares of common stock owned by Mr. Smith, 100 shares owned
by each of Mr. Smith's three children and 8,824 shares held in Mr. Smith's
401(k) account as of December 31, 2004.
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. Currently, there is one vacancy in Class I. As required under
the New York Stock Exchange rules, a majority of the members of the Board are
independent, non-employee directors. The Board has adopted several policies
concerning resignation and retirement of directors from the Board, one providing
for review by the Board of the continued membership of a director following a
change in his or her principal employment, and another providing for a
director's mandatory retirement at age 72.
The standards used by the Board to evaluate a member's independence are the
New York Stock Exchange (NYSE) Listing Rules. All directors, except Ms. Cynthia
Passmore-McLaughlin, are independent in accordance with the NYSE Listing Rules.
The two current Class I directors, Ms. Judith R. Haberkorn and Mr. Thane A.
Pressman, 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 2008. Although there is a vacancy in Class I, proxies can not be
voted for a greater number of persons than the nominees named below. The Company
is currently undertaking an active search to potentially fill this vacancy, and
it will be filled when a suitable candidate is found.
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 OFFICE CLASS I
TERMS EXPIRING IN 2008
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<Table>
JUDITH R. HABERKORN Retired as President-Consumer Sales and Service, Bell
Director since 1993 Atlantic Corp. (telecommunications services), New York, NY,
Age 58 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") (communication
services), from 1995 to 1997, and as Vice President-Consumer
Markets, at NYNEX, from 1994 to 1995. Also Director of
Armstrong World Industries Inc., Lancaster, PA. and MCI,
Ashburn, VA. Chair of the Governance Committee and member of
the Audit, and Compensation Committees. Ms. Haberkorn is an
independent director.
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THANE A. PRESSMAN Formerly CEO of Carvel Corporation from April 2002 until
Director since 2000 April 2003, a retailer and distributor of ice cream
Age 59 products. Formerly President and CEO of Tone Brothers, Inc.
from 1998 until 2001, a $300 million U.S. subsidiary of
Burns Philip & Co., Ltd., and second largest herb and spice
company in the U.S. President and CEO, Labatt-USA from 1993
until 1998 (beverage). Previously held positions at Procter
& Gamble and Sara Lee. Also a Trustee, Springfield College
and has served as a Trustee of AFS International and
Director AFS-USA (American Field Service). Chair of the
Compensation Committee and member of the Executive and Audit
Committees. Mr. Pressman is an independent director.
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</Table>
8
<Table>
DIRECTORS CONTINUING IN OFFICE IN CLASS II
TERMS EXPIRING IN 2006
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DONNA BROOKS LUCAS President and Chief Executive Officer of DBL Multi-Media
Director since 1999 Group LLC, Chicago, IL (creative and strategic business
Age 52 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 (public relations). 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. Member of the Audit, Governance and
Compensation Committees. Ms. Brooks Lucas is an independent
director.
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LEONARD A. CAMPANARO Retired Chief Financial Officer and Senior Vice President of
Director since 2005 Armstrong Industries, Inc. (building materials industry),
Age 55 serving as such from April 2001 through December 2004.
Formerly President, Chief Operating Officer and Director of
Harsco Corporation (provider of industrial services and
products) from January 1998 until July 2000. Served in a
variety of financial and operations positions at Harsco for
over 20 years, including Senior Vice President and Chief
Financial Officer from 1992 until 1997. Chair of the Audit
Committee and member of the Executive and Compensation
Committees. Mr. Campanaro is an independent director.
- ------------------------------------------------------------------------------------------------
CYNTHIA PASSMORE-MCLAUGHLIN Chief Executive Officer since January 15, 2005 and President
Director since 2005 since October 1, 2004. Formerly Senior Vice President of
Age 42 Customer Marketing and Retail Design for Revlon, Inc.
(cosmetic and beauty products) from April 2002 until
February 2004 and Senior Vice President, Customer Business
Management North America from April 2001 until April 2003,
General Manager of Revlon Canada from March 1999 until April
2003 and Regional Vice President Marketing for Europe,
Eastern Europe and Middle East from January 1996 until March
1999. Member of the Executive Committee.
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DIRECTORS CONTINUING IN CLASS III
TERMS EXPIRING IN 2007
- ------------------------------------------------------------------------------------------------
GEORGE R. DITOMASSI Chief Executive Officer and Director of Summit American
Director since 2000 Television (home television shopping) in Naples, FL from
Age 70 November 2002 until April 2004. Interim CEO of Enesco from
August 2004 through January 15, 2005. Formerly 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 (toys and games) and Chief
Operating Officer of Hasbro, Inc. (toys and games) 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. Member of the Executive, Audit and Compensation
Committees. Mr. Ditomassi is an independent director.
- ------------------------------------------------------------------------------------------------
</Table>
9
<Table>
HECTOR J. ORCI Founding General Manager of La Agencia de Orci & Associates
Director since 2003 (marketing consultants) since 1986. Instructor of Hispanic
Age 62 marketing and advertising at UCLA University in Los Angeles,
CA and columnist for La Opinion, a Los Angeles newspaper.
Previously held positions at Alberto-Culver and Procter &
Gamble. Past president of the Association of Hispanic
Advertising Agencies (AHAA). Inducted into the Se Habia
Espanol Hall of Fame in 1997. Also on the Board of
Directors/Trustees for the New Visions Foundation and the
Los Angeles Children's Bureau. Member of the Audit and
Governance Committees. Mr. Orci is an independent director.
- ------------------------------------------------------------------------------------------------
ANNE-LEE VERVILLE Chairman of the Board since 2001. Interim President and CEO
Director since 1991 of Enesco from January through March 2001; Office of the
Age 59 Chairman of Enesco from June 2000 until March 2001. Retired
as General Manager-Worldwide Education Industry of
International Business Machines Corporation ("IBM")
(advanced information technologies), White Plains, NY, in
1997, after 30 years with IBM. Also, Trustee of Columbia
Management Funds, Boston, MA. Member of the Executive, Audit
Compensation and Governance Committees. Ms. Verville is an
independent director.
- ------------------------------------------------------------------------------------------------
</Table>
COMPENSATION OF NON-EMPLOYEE DIRECTORS
The Board establishes the compensation paid to each director who is not an
employee of Enesco. Effective at the Annual Meeting, the current compensation
amounts are as follows:
(1) For service as a non-Chairman member of the Board, a retainer of
$30,000 per annum, of which $15,000 is paid in common stock valued as of
the day following the Annual Meeting, plus $1,500 for attendance at each
meeting of the Board;
(2) For service as Chairman of the Board, $75,000 per annum, of which
$37,500 is paid in common stock valued as of the day following the Annual
Meeting, plus $1,500 for attendance at each meeting of the Board and $1,500
for attendance at a committee meeting;
(3) For service as a committee member, an attendance fee of $1,500 per
meeting, $3,000 for service as Chair of a committee (other than the Audit
Committee) and $5,000 for service as Chair of the Audit Committee meeting.
In addition, each then serving non-employee director receives a grant as of
the day following the Annual Meeting in that year, of 2,000 non-qualified
options to purchase Enesco common stock at an exercise price equal to the
closing price of the common stock on the grant date. The options become
exercisable equally over four years, with 25% of the shares of common stock
subject to the option becoming exercisable on each of the first four anniversary
dates of the date of grant of the option, and expire on the tenth anniversary of
the grant.
Directors also receive reimbursement from Enesco for expenses incurred
while serving as directors. Directors who are also employees of Enesco receive
no additional compensation for their services as directors.
10
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The following table shows the membership of Enesco's committees as of March
31, 2005. An asterisk indicates chairperson.
<Table>
<Caption>
HUMAN RESOURCE NOMINATING AND
NAME AUDIT AND COMPENSATION EXECUTIVE GOVERNANCE
- ---- ----- ---------------- --------- --------------
Leonard A. Campanaro............................ * x x
George R. Ditomassi............................. x x x
Judith R. Haberkorn............................. x x *
Donna Brooks Lucas.............................. x x x
Cynthia Passmore-McLaughlin..................... x
Hector J. Orci.................................. x x
Thane A. Pressman............................... x * x
Anne-Lee Verville............................... x x * x
</Table>
Committees
The Audit Committee held five meetings during 2004. The Audit Committee
provides oversight of the Enesco audit, accounting, reporting and control
practices. The Audit Committee operates pursuant to an Audit Committee Charter
which complies with Rule 303A.06 of the NYSE Listed Company Manual relating to
Audit Committee standards, a copy of which is attached as Annex A and is also
posted on the Investor Relations -- Governance section of Enesco's website at
www.enesco.com.
All members of the Audit Committee were determined to be "independent" as
defined in Rule 303A of the NYSE Listing Rules as of January 15, 2005. Mr.
Ditomassi did not serve on the Audit Committee while he was serving as Interim
CEO of Enesco from August 16, 2004 until January 15, 2005. The criteria used by
the Board to determine independence are that the Audit Committee member (i) must
be free of any relationship with the Company that would interfere with his or
her exercise of independent judgment; (ii) cannot have received any compensation
from Enesco, other than director and committee fees; (iii) cannot have been an
Enesco employee within a three-year period prior to his/her appointment; (iv)
cannot be affiliated with or employed by, or have an immediate family member who
is affiliated with or employed in a professional capacity by KPMG; and (v)
cannot be employed by, or have an immediate family member who is employed by,
another company where any of Enesco's executive officers serve on that company's
compensation committee. Leonard Campanaro, Chairman of the Audit Committee, has
been designated as an "audit committee financial expert" under SEC regulations
and meets the financial expert requirements under the NYSE rules.
The Human Resources and Compensation Committee held three meetings during
2004. This Committee, which also consists entirely of non-employee, independent
directors (who meet the independence requirements under the NYSE rules),
determines compensation policy for Enesco, approves or recommends to the Board
compensation of the directors and officers of Enesco, and reviews and acts on
recommendations from the Chief Executive Officer regarding long-term incentive
awards and administration of the Amended and Restated 1996 Long-Term Incentive
Plan of Enesco and the 1999 Non-employee Director Stock Plan. A copy of the
Human Resources and Compensation Committee Charter is posted on the Investor
Relations -- Governance section of Enesco's website at www.enesco.com.
11
The Executive Committee did not hold a meeting during 2004. This Committee,
which consists of five directors, four of whom are non-employee, independent
directors, acts on behalf of the Board on important matters that arise between
meetings of the Board and performs other tasks as delegated by the Board.
The Nominating and Governance Committee held two meetings during 2004. This
Committee, which consists entirely of non-employee, independent directors (who
meet the independence requirements under the NYSE rules), provides the Board
with director and corporate officer recommendations, proposes to the Board each
year a slate of directors for recommendation and submission to the stockholders
at the next annual meeting of stockholders and deals with all aspects of the
director selection process, reviewing prospective director candidates in the
light of anticipated resignations and retirements and Board composition. The
criteria used by the Nominating and Governance Committee in selecting new
directors, which criteria have been approved by the Board, include, but are not
limited to, integrity, sound judgment, record of proven accomplishments as at
least a general manager with responsibility for business profit and loss,
willingness to take the time necessary to gain a strong understanding of
Enesco's business, and compatibility with Enesco's business and other directors.
A copy of the Nominating and Governance Committee Charter is posted on the
Investor Relations -- Governance section of Enesco's website at www.enesco.com.
In addition to the Committee meetings referred to above, the full Board
held thirteen meetings during 2004. Except for Mr. Orci, each director attended
at least 75% of the total number of meetings of the Board and Committees on
which he or she served. Mr. Orci attended three meetings during 2004 and took a
personal leave of absence from July 2004 until December 2004. Each director is
invited to attend the Annual Meeting of Stockholders and last year all members
of the Board attended the Annual Meeting.
The non-employee, independent directors meet in executive session at each
meeting of the Board. Anne-Lee Verville, the Chairman of the Board, presides at
the executive sessions. You may communicate with the independent directors by
writing a letter to the Chairman of the Board, the Chairman of the Nominating
and Governance Committee or to any independent director c/o Enesco Group, Inc.,
225 Windsor Drive, Itasca, Illinois 60143 Attn: Corporate Secretary. The
Corporate Secretary will regularly forward to the addressee all letters relevant
to the running of the business. In that regard, the Enesco Board of Directors
has requested that certain items unrelated to the duties and responsibilities of
the Board not be forwarded, such as: spam, junk mail and mass mailing, product
complaints, product inquiries, new product suggestions, resumes and other forms
of job inquiries, surveys and business solicitations or advertisements. In
addition, any material that is unduly hostile, threatening, illegal or similarly
unsuitable will be excluded, with the provision that any material that is not
forwarded will be made available to any outside director upon request.
In accordance with Enesco's Articles of Incorporation, nominations for the
election of directors at an Annual Meeting of Stockholders may be made by the
Board, the Nominating and Governance Committee or any stockholder entitled to
vote generally in the election of directors. However, a stockholder may nominate
one or more persons for election as a director at an annual meeting of
stockholders only if the stockholder gives notice in writing to the Secretary of
Enesco at least 45 days in advance of the anniversary of the date of the
previous Annual Meeting of Stockholders, which notice includes:
(a) The name and address of the stockholder who intends to make the
nomination and the name and address of each person to be nominated;
(b) A representation that the stockholder is a holder of record of
common stock and intends to appear in person or by proxy at the next Annual
Meeting of Stockholders to nominate the person or persons identified in the
notice;
12
(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 SEC; and
(e) The consent of each nominee to serve as a director if so elected.
13
EXECUTIVE COMPENSATION
The following table sets forth, for the years ended December 31, 2004, 2003
and 2002, the compensation of all persons who served as the Company's Chief
Executive Officer during the year ended December 31, 2004, and the four other
most highly compensated executive officers in office at December 31, 2004 (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS(2)
---------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(3) ($) ($) (#) ($)
- --------------------------- ---- -------- -------- ------------ ------------ ------------
D. DalleMolle,(4)................... 2004 $171,300 $465,041 $ -- -- $ 18,858
President and CEO 2003 480,000 457,169 -- 100,000 32,538
(through April 20, 2004) 2002 500,308 472,914 100,000 --
T.F. Bradley,(5).................... 2004 $245,544 $ -- -- 30,000 $138,080
CFO and Treasurer and Interim CEO 2003 240,000 161,489 -- 43,708 37,513
(from April 20 until August 16,
2004) 2002 -- -- -- -- --
G.R. Ditomassi,(6).................. 2004 $ -- -- -- 2,000 $205,800
Interim CEO (from August 16, 2004 2003 -- -- -- 1,500 43,406
until January 15, 2005) 2002 -- -- -- 1,500 33,700
C. Passmore-McLaughlin,(7).......... 2004 $101,673 $3,600 100,000 $362,019
President (became CEO on 2003 -- -- -- -- --
January 15, 2005) 2002 -- -- -- -- --
J.S. Smith,(8)...................... 2004 $253,041 $ -- 30,000 $ 8,383
Chief Operating Officer 2003 240,000 163,270 -- 30,762 15,071
2002 234,519 158,342 -- 20,000 2,723
J.V. Goldberg,(9)................... 2004 $242,915 $ -- 30,000 $ 14,353
Senior Vice President, 2003 232,000 157,832 -- 30,000 16,767
Human Resources and Administration 2002 241,815 163,268 -- 20,000 1,464
M.F. Durden,(10).................... 2004 $191,415 $ -- -- 30,000 $ 6,483
Vice President, Secretary 2003 180,000 67,069 -- 30,000 6,944
and General Counsel 2002 170,000 59,435 -- 20,000 --
</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 (a) 2002 for Mr. Bradley is not provided because he was not
employed at Enesco during that year and (b) 2003 and 2002 for Ms.
Passmore-McLaughlin is not provided because she was not employed at Enesco
during those years.
(2) All Long-Term Compensation Awards to the Named Executive Officers during
the three-year period were made in the form of (a) non-qualified stock
options granted under Enesco's 1996 Long-Term Incentive Plan, or in the
case of Mr. Smith in 2001, non-qualified stock options from treasury stock
as an additional incentive to accept employment with Enesco or (b)
restricted stock awards under the 1996
14
Long-Term Incentive Plan. No stock appreciation rights ("SARs") were
awarded either singly or in tandem with the granted options.
(3) In 2002, Enesco changed from a bi-weekly to semi-monthly payroll, causing
each employee to receive six (6) additional days pay and an adjustment for
a 24 versus 26 pay-period calculation.
(4) Mr. DalleMolle passed away on April 20, 2004. Pursuant to the terms of his
employment agreement with Enesco, the Company will continue to pay his
salary through April 21, 2005 and paid his estate a bonus for 2004 of
$465,041 (the average of the bonuses paid to Mr. DalleMolle during 2002 and
2003). All other compensation are the amounts of the cash matching payments
made to Mr. DalleMolle's supplemental retirement account.
(5) Mr. Bradley resigned from Enesco on August 16, 2004. Mr. Bradley received
severance of $31,250 and was paid a retention bonus of $125,000. The
Company also paid a cash match of $13,080 to Mr. Bradley's supplemental
retirement account in 2004. He commenced his employment at Enesco on
January 6, 2003. Mr. Bradley received a non-qualified stock option grant
under the 1996 Stock Option Plan to purchase 33,708 shares as an incentive
to accept employment with Enesco. He also received a non-qualified stock
option grant under the 1996 Stock Option Plan to purchase 10,000 shares at
an exercise price of $7.94 on April 25, 2003. All other compensation for
2003 is comprised of a $10,000 starting bonus and relocation expense
reimbursement of $27,513.
(6) Mr. Ditomassi, a member of the Board of Directors, served as Interim CEO
from August 16, 2004 until January 15, 2005. He received compensation of
$205,800 in 2004, which includes his fees for serving as a director and his
compensation for serving as Interim CEO. His compensation in 2002 and 2003
is comprised of the director fees paid to him.
(7) Ms. Passmore-McLaughlin commenced her employment at Enesco on October 1,
2004. She receives a car allowance under other annual compensation. All
other compensation for 2004 is comprised of a starting bonus of $65,133 and
relocation expense reimbursement of $296,886.
(8) Mr. Smith received a non-qualified stock option grant under the 1996 Stock
Option Plan to purchase 762 shares at an exercise price of $6.56 as an
Achievement Award winner in 2003. He also received a non-qualified stock
option grant under the 1996 Stock Option Plan to purchase 30,000 shares at
an exercise price of $7.94 on April 25, 2003. All other compensation are
the amounts of the cash matching payments made to Mr. Smith's supplemental
retirement account.
(9) All other compensation are the amounts of the cash matching payments made
to Ms. Goldberg's supplemental retirement account.
(10) Ms. Durden's employment at the Company ended on April 1, 2005. All other
compensation are the amounts of the cash matching payments made to Ms.
Durden's supplemental retirement account.
15
Option Grants
The following table contains information concerning individual grants of
stock options made to each of the Named Executive Officers during the year ended
December 31, 2004:
OPTION GRANTS IN 2004
<Table>
<Caption>
GRANT DATE
INDIVIDUAL GRANTS(1) VALUE
---------------------------------------------------- ----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE GRANT DATE
GRANTED IN FISCAL PRICE PRESENT
NAME (#)(2) YEAR ($/SH) EXPIRATION DATE VALUE $(5)
- ---- ---------- ---------- -------- --------------- ----------
D. DalleMolle...................... -- -- $ -- -- --
T.F. Bradley....................... 30,000 5.8% $8.95 August 17, 2004 151,200
G.R. Ditomassi..................... 2,000(3) 0.4% $8.95 May 20, 2014 10,080
C. Passmore-McLaughlin............. 100,000(4) 19.4% $6.85 Oct. 1, 2014 378,000
J.S. Smith......................... 30,000 5.8% $8.95 May 20, 2014 151,200
J.V. Goldberg...................... 30,000 5.8% $8.95 May 20, 2014 151,200
M.F. Durden........................ 30,000 5.8% $8.95 May 20, 2014 151,200
</Table>
- ---------------
(1) Except for Mr. Ditomassi, the individual grants described were all made in
the form of non-qualified stock options under Enesco's 1996 Amended and
Restated Long-Term Incentive Plan (the "Long-Term Incentive Plan"). See
footnote (3) for a description of Mr. Ditomassi's option grant. No SARs were
granted during 2004.
(2) All options granted under the Long-Term Incentive Plan in 2004 have a
ten-year term and become exercisable only (a) after six months from date of
grant and (b) either upon the achievement of certain performance criteria or
as to 25% of the shares underlying the option on the anniversary of the
grant.
(3) Mr. Ditomassi, a member of the Board of Directors, served as Interim CEO
from August 15, 2004 until January 15, 2005. As a director, Mr. Ditomassi
received a grant of 2,000 options on May 20, 2004 under the Amended and
Restated 1999 Non-employee Director Stock Plan.
(4) Ms. Passmore-McLaughlin commenced her employment at Enesco on October 1,
2004. In connection with her employment, she received a grant of 100,000
options to purchase common stock.
(5) Enesco used the Black-Scholes option pricing model to determine the present
value of each option granted as of its date of grant. The assumptions used
relating to the expected volatility, risk-free rate of return, dividend
yield and time of exercise were as follows: (i) volatility was calculated
based on the daily 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.
16
Option Exercises and Year End Value
The following table sets forth information concerning the exercise of stock
options by each of the Named Executive Officers during year ended December 31,
2004 and the value of unexercised stock options held by each of them as of the
end of the year ended December 31, 2004:
AGGREGATED OPTION EXERCISES IN 2004
AND 2004 YEAR END OPTION VALUES
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- -------- ------------------------- -------------------------
D. DalleMolle............... 190,000(1) $357,784 210,000/ -- $309,800/$ --
T.F. Bradley................ -- -- 36,208/ -- 32,710/ --
G.R. Ditomassi.............. -- -- 3,956/ 3,707 4,462/ 159
C. Passmore-McLaughlin...... -- -- 0/100,000 0/123,000
J.S. Smith.................. -- -- 78,262/ 52,500 146,808/ 3,150
J.V. Goldberg............... -- -- 63,500/ 70,000 113,948/ 21,962
M.F. Durden................. -- -- 35,375/ 55,125 41,589/ 6,536
</Table>
- ---------------
(1) The estate of Mr. DalleMolle has exercised 190,000 stock options during the
period of May-December 2004. The estate has recognized an aggregate value of
$357,784 from these exercises.
Employment Contracts and Change in Control Arrangements
Ms. Passmore-McLaughlin, President and Chief Executive Officer, has an
employment agreement through December 31, 2005. Under the terms of the
agreement, Ms. Passmore-McLaughlin receives an annual base salary of $400,000.
For 2004, Ms. Passmore-McLaughlin received $101,673 as base salary from October
1 - December 31, 2004, and a signing bonus payment of $65,133. In addition, Ms.
Passmore-McLaughlin received certain executive officer fringe benefits,
including a car allowance and one-time relocation expense reimbursement of
$296,886. The employment agreement also contains confidentiality, non-compete
and non-solicitation covenants.
Mr. DalleMolle, President and Chief Executive Officer until April 20, 2004,
had an employment agreement through March 31, 2006. The agreement ended upon Mr.
DalleMolle's death on April 20, 2004, except for certain obligations that
survive the termination of the agreement. Under the terms of his employment
agreement, Mr. DalleMolle's annual base salary rate in 2004 was $504,000. During
the period of January 1 - April 20, 2004, Mr. DalleMolle received $171,300 as
base salary. Pursuant to the terms of his employment agreement, Enesco paid his
estate a bonus for 2004 of $465,041 (the average of the bonuses paid to Mr.
DalleMolle during 2002 and 2003). The Company also paid severance in 2004 to his
estate of $336,000.
Enesco has separate change in control agreements or commitments with Ms.
Passmore-McLaughlin, Ms. Goldberg and Mr. Smith 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 Smith and Goldberg) times the annual base salary rate plus
bonus and (ii) certain fringe benefits for up to a three-year term. In
accordance with her change in
17
control agreement and severance agreement, Ms. Passmore-McLaughlin also will be
reimbursed for any excise tax and other taxes incurred as a result of such
reimbursement. The types of events constituting a change in control under these
agreements include those that require reporting under Item 6(e) of Schedule 14A
of Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and certain other events specified in the change in control
agreements.
Any terminations of the remaining Named Executive Officers absent a change
in control of Enesco will be governed by the employee severance policy of Enesco
under which each of them may (subject to certain conditions) be entitled to a
severance benefit of up to 26 weeks of base salary depending on designated
criteria and to certain other continuing group medical, life and accidental
death and dismemberment insurance coverage.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 2004, Ms. Brooks Lucas, Ms. Haberkorn,
Mr. Ditomassi, Mr. Pressman and Ms. Verville served on the Board's Human
Resources and Compensation Committee. From August 16, 2004 until January 15,
2005, Mr. Ditomassi served as Interim Chief Executive Officer and was not a
member of the Committee. None of the other members were officers or employees of
Enesco or any of its subsidiaries. There were no Compensation Committee
interlocking relationships during the year ended December 31, 2004.
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
reporting persons with respect to the year ended December 31, 2004 were
satisfied.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no transactions to be reported under this item.
HUMAN RESOURCES AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
This report of the Human Resources and Compensation Committee shall not be
deemed incorporated by reference by any general statement incorporating this
Proxy Statement by reference into any filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934 (the "Acts"), except to the extent that
Enesco specifically incorporates this information by reference and shall not
otherwise be deemed filed under such Acts.
Enesco's executive compensation program is administered by the Human
Resources and Compensation Committee of the Board. The Committee is comprised of
non-employee directors who approve or recommend to the Board salary and bonus
amounts and other annual compensation and long-term compensation awards for the
executive officers. The Committee conducts an annual performance evaluation of
the Chief Executive Officer.
18
Enesco's executive compensation program during 2004 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 2004, merit raises
were given to five executive officers. Pay for performance bonuses for all
Enesco employees were determined under Enesco's 2004 ROA Incentive Bonus Plan
based on achieving certain specified targets for operating profit and return on
assets. No executive officers received bonus payments under the 2004 ROA
Incentive Bonus Plan. Options to purchase shares of common stock are granted in
amounts that are competitive with long-term incentive award practices of
comparable U.S. companies, considering the number of options that have been
previously granted to each of the executive officers. The 2004 options were
granted at the then market value of common stock and have a ten-year term, thus
providing a direct relationship between the executive officers' potentially
realizable long-term compensation amounts and actually recognizable increases in
stockholder value. The options become exercisable as to 25% of the shares
underlying the grant on the anniversary date of the grant and each anniversary
date thereafter until fully exercisable. The shareholder approved Long-Term
Incentive Plan also gives the directors discretion to award shares. In 2005, the
annual equity stock grant to executive officers will have performance based
restrictions in addition to a time based vesting requirement. Executive officer
and Director stock ownership guidelines have been adopted with the objective of
further aligning the executive officers', 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 2004 to Mr. DalleMolle, President and Chief Executive
Officer until April 20, 2004, consisted of $171,299 of his $504,000 annual base
salary. Payments subsequent to Mr. DalleMolle's death were governed by the terms
of his employment agreement which provided that his base salary would continue
for a period of one year and his estate would be paid a bonus for 2004 of
$465,041, the average of the bonus payments made to Mr. DalleMolle in 2002 and
2003. No stock options or other long-term incentive awards were granted to Mr.
DalleMolle in 2004.
Mr. Bradley, Chief Financial Officer and Treasurer, was elected Interim
Chief Executive Officer on April 20, 2004. His annual base salary was increased
to $300,000 effective June 1, 2004, and he was awarded a retention bonus of
$125,000, subject to his continued employment at the Company for a specified
period of time. Mr. Bradley received a grant of 30,000 non-qualified stock
options to purchase common stock under the Long-Term Incentive Plan, which were
forfeited at the time of his resignation. When Mr. Bradley resigned on August
16, 2004, he received severance for a period of six months and the retention
bonus of $125,000.
19
Mr. Ditomassi, a member of the Board of Directors, served as Interim Chief
Executive Officer from August 16, 2004 until January 15, 2005. Mr. Ditomassi
received a total of $205,800 as (1) compensation for his services as Interim
Chief Executive Officer and (2) fees for his services as a director.
The Human Resources and Compensation Committee:
T.A. Pressman (Chair)
L.A. Campanaro
G.R. Ditomassi
J.R. Haberkorn
D. Brooks Lucas
A.L. Verville
20
REPORT OF THE AUDIT COMMITTEE
March 22, 2005
To the Board of Directors of Enesco Group, Inc.:
This report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating the Proxy Statement by
reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934 (the "Acts"), except to the extent that Enesco specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
We have reviewed and discussed with management Enesco's audited financial
statements as of and for the fiscal years ended December 31, 2004 and 2003, and
for the three years in the period ended December 31, 2004.
We have discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees, as amended.
We have received and reviewed the written disclosures and the letter from
the independent auditors required by Independence Standard No. 1, Independence
Discussions with Audit Committees, and have discussed with the auditors the
auditors' independence.
Based on the reviews and discussions referred to above, we recommend to the
Board of Directors that the financial statements referred to above be included
in Enesco's Annual Report on Form 10-K for the year ended December 31, 2004.
L.A. Campanaro, Chair
D. Brooks Lucas
G.R. Ditomassi
J.R. Haberkorn
H.J. Orci
T.A. Pressman
A.L. Verville
21
PERFORMANCE GRAPH
The performance graph below shall not be deemed incorporated by reference
by any general statement incorporating the Proxy Statement by reference into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934
(the "Acts"), except to the extent that Enesco specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
During the year ended December 31, 2004, Enesco common stock was included
in the Standard & Poor's SmallCap 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") SMALLCAP 600 INDEX AND
THE COMPANY'S PEER GROUP INDEX(1)
COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN
(PERFORMANCE GRAPH)
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------
12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
- ------------------------------------------------------------------------------------------------------------------
Enesco Group, Inc. $100.00 44.05 59.21 66.54 96.99 75.94
- ------------------------------------------------------------------------------------------------------------------
S&P SmallCap 600 $100.00 111.80 119.11 101.68 141.13 173.09
- ------------------------------------------------------------------------------------------------------------------
Company's Peer Group $100.00 82.98 97.81 102.32 113.97 110.92
- ------------------------------------------------------------------------------------------------------------------
</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 1999 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 which dividends were paid on such securities during the applicable
fiscal years. Enesco has chosen to present a
22
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 five companies:
<Table>
S&P Consumer (Housewares and Specialties) -- SmallCap 600
Department 56, Inc.
Enesco Group, Inc.
Libbey Inc.
Russ Berrie & Co. Inc.
National Presto Industries, Inc.
</Table>
PROPOSAL 2: INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP (KPMG) has been engaged by Enesco as independent public
accountants since June 2002. Enesco has had no disagreements with KPMG on
accounting and financial disclosures. The Audit Committee has appointed KPMG as
Enesco's independent public accountants for 2005, 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 are expected to attend the Annual Meeting and be
available to respond to appropriate questions and to make a statement if they so
desire.
The Audit Committee has established policies and procedures to pre-approve
all audit and permissible non-audit services performed by KPMG after January 1,
2004. To minimize relationships that could appear to impair the objectivity of
KPMG, our Audit Committee has restricted the non-audit services that KPMG may
provide to Enesco primarily to tax consulting and has determined that even these
non-audit services will be obtained from KPMG only when the services offered by
KPMG are more effective or economical than services available from other service
providers.
Prior to commencement of the 2005 audit, management will submit a schedule
of all proposed services expected to be rendered during that year for each of
four categories of services to the Audit Committee for approval.
Prior to engagement, the Audit Committee pre-approves these services by
category of service. The fees are budgeted and the Audit Committee requires the
independent auditor and management to report on the actual fees versus the
budget periodically. During the year, circumstances may arise when it may become
necessary to engage the independent auditor for additional services not
contemplated in the original pre-approval. In those instances, the Audit
Committee requires specific pre-approval before engaging the independent
auditor.
The Audit Committee has delegated pre-approval authority to its Chair for
the purpose of handling emergency requirements, not to exceed 5% of total audit
fees for the year. Any such pre-approval by the Chair must be reported at the
Audit Committee at its next scheduled meeting.
23
The aggregate fees for professional services by KPMG in 2004 and 2003 are
as follows:
2004 AND 2003 AUDIT FIRM FEE SUMMARY
<Table>
<Caption>
2004 2003
---------- --------
Audit Fees.......................................... $1,393,616 $451,513
Audit Related Fees.................................. -- 7,144
Tax Fees............................................ 84,540 86,412
All Other Fees...................................... 64,100 27,864
---------- --------
Total............................................. $1,542,256 $572,933
========== ========
</Table>
Audit fees include fees related to the annual audit of Enesco's
consolidated financial statements and the audit of internal control over
financial reporting. Fees presented are as of March 31, 2005. Additional fees
may be incurred as Enesco completes its assessment of the effectiveness of its
internal controls over financial reporting as of December 31, 2004, which
assessment will be completed no later than May 2, 2005. Tax fees were related to
the review of Federal, State and International tax reporting and compliance. All
other fees were primarily related to pension and profit sharing plan audits.
Our Audit Committee has adopted restrictions on Enesco employing any KPMG
partner, director, manager, staff, advising member of the department of
professional practice, reviewing actuary, reviewing tax professional and any
other persons having responsibility for providing audit services related to
Enesco's financial statements. The Audit Committee also requires key KPMG
partners assigned to our audit to be rotated at least every five years.
STOCKHOLDER PROPOSALS
The Annual Meeting is called for the purposes set forth in the Notice.
Although Enesco knows of no items of business which will be presented at the
Annual Meeting other than those described, proxies in the accompanying form will
confer discretionary authority to Enesco's management proxy holders to use in
accordance with their best judgment with respect to any such items which may
come before the Annual Meeting to the extent permitted by the applicable rules
of the SEC. In order to be considered under Rule 14a-8 for inclusion in Enesco's
proxy materials to be distributed in connection with the Annual Meeting of
Stockholders in 2006, stockholder proposals for that meeting must be received by
Enesco on or before December 17, 2005. In order for a stockholder proposal
submitted outside of Rule 14a-8 to be considered "timely" within the meaning of
Rule 14a-4(c) for possible presentation at the meeting (other than a proposal
with respect to the nomination for election of one or more directors, for which
procedures are set forth above under the caption "Committees of the Board"),
such a proposal must be received by the Secretary of Enesco on or before March
2, 2006. 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.
24
HOUSEHOLDING OF PROXY MATERIALS
Some brokers and other nominee record holders may be participating in the
practice of "householding" corporate communications to stockholders, such as
proxy statements and annual reports. This means that only one copy of this Proxy
Statement may have been sent to multiple stockholders in your household. Enesco
will promptly deliver a separate copy of this Proxy Statement to you if you
write us at the following address: Enesco Group, Inc. 225 Windsor Drive, Itasca,
Illinois 60143 Attn: Treasury Dept. If you want to receive separate copies of
our corporate communications to stockholders, such as proxy statements and
annual reports in the future, or if you are receiving copies and would like to
receive only one copy for your household, you should contact your broker or
other nominee record holders, or you may contact Enesco at the above address.
Also posted on Enesco's website is the Corporate Governance Guidelines; the
Charters of the Audit Committee, Human Resources and Compensation Committee, and
Nominating and Governance Committee; and the Code of Business Conduct and
Ethics. Copies of these documents are also available, free of charge, by writing
to: Enesco Group, Inc., 225 Windsor Drive, Itasca, Illinois 60143, Attn:
Treasury Dept.
By order of the Board of Directors,
/s/ CHARLES E. SANDERS
ENESCO GROUP, INC.
CHARLES E. SANDERS
Secretary
April 15, 2005
25
ANNEX A
ENESCO GROUP, INC.
AUDIT COMMITTEE CHARTER
AS OF FEBRUARY 16, 2005
ROLE AND INDEPENDENCE
The Audit Committee of the Board of Directors (the 'Committee') assists the
Board in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing and reporting practices of the Company and
such other duties as are directed by the Board. The Committee shall consist of
at least three directors who are financially literate and generally
knowledgeable in auditing matters. At least one member shall have accounting or
related financial management expertise and other qualifications, as defined by
the Sarbanes-Oxley Act and the SEC, to be considered "an audit committee
financial expert," whose name and relationship with the issuer shall be
disclosed. Each member shall be free of any relationship that, in the opinion of
the Board, would interfere with his or her individual exercise of independent
judgement, and shall meet the director's independence requirements for serving
on audit committees as set forth in the corporate governance standards of the
New York Stock Exchange.
Regarding Committee members who serve on the Audit Committee of more than
three public companies, the Board will determine if such service does not impair
the individual's ability to effectively serve the committee, and will disclose
such determination in its annual proxy statement.
The Committee is expected to maintain free and open communication
(including private executive sessions) with the independent accountants and the
internal auditors.
The Board of Directors shall appoint one member of the Committee as
chairperson. He or she shall be responsible for leadership of the Committee,
including approving the agenda, presiding over the meetings, making Committee
assignments and reporting to the Board of Directors. The chairperson will also
maintain regular liaison with the CEO, CFO, the lead independent audit partner
and the director of internal audit.
The Committee shall meet at least quarterly and with such frequency and at
such intervals, as it shall determine is necessary to carry out its duties and
responsibilities. The Secretary of the Corporation shall serve as the Secretary
of the Committee except for the private executive sessions.
A. RESPONSIBILITIES REGARDING THE ENGAGEMENT OF THE INDEPENDENT ACCOUNTANTS AND
THE APPOINTMENT OF THE INTERNAL AUDITOR
1. Review and recommend to the Board of Directors the independent
accountants to be selected to audit the annual financial statements and
review the quarterly financial statements of the Company. The Committee
shall have the authority and responsibility to appoint, evaluate and
replace the independent auditor, as well as determine their
qualifications, independence and adequacy. The independent auditor shall
be accountable to the Board of Directors and the Audit Committee. The
Committee will also review and approve fees paid to the independent
accountants.
2. Oversee the independent auditor relationship by initially reviewing and
approving the scope of the audit and subsequently discussing with the
auditor the nature and rigor of the audit process, changes
A-1
in scope, receiving and reviewing audit reports, and providing the
auditor full access to the Committee (and the Board of Directors) to
report on any and all appropriate matters.
3. Review and approve requests for any services to be performed by any
public accounting firm.
4. Review and concur in the appointment, replacement, or dismissal of the
Director of Internal Audit or Internal Audit firm, if service is
outsourced, and determine the reporting structure appropriate for
internal audit independence.
5. Ensure that the independent accountants deliver to the Committee
annually a formal written statement delineating all relationships
between the independent accountants and the Company and addressing at
least the matters set forth in Independence Standards Board Standard No.
1; discuss with the independent accountants any relationships or
services disclosed in such statement that may impact the objectivity and
recommend that the Board of Directors take appropriate action in
response to this statement to satisfy itself of the independent
accountants' independence.
6. Review on an annual basis other services performed by the external
auditors and related fees, and inquire as to the extent to which
independent public accountants other than the principal independent
auditor are to be used and understand the rationale for using them. The
Committee should request that the work of other independent public
accountants be coordinated and that an appropriate review of their work
be performed by, the principal independent auditor.
7. Perform an annual assessment of the Company's internal audit function
and independent auditors, including a review and evaluation of the lead
partner of the independent auditor. In addition to assuring the regular
rotation of the lead audit partner, the Committee will also consider
whether there should be regular rotation of the audit firm itself. The
Committee will present its conclusions with respect to the independent
auditor to the full Board.
8. At least annually, the Committee will obtain and review a report by the
independent auditor describing:
- The firm's internal quality-control procedures;
- Any material issues raised by the most recent internal quality-control
review or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more independent
audits carried out by the firm, including any steps taken to deal with
any such issues; and
- All relationships between the independent auditor and the Company.
B. RESPONSIBILITIES FOR REVIEWING INTERNAL AUDITS, THE ANNUAL INDEPENDENT AUDIT
AND THE REVIEW OF FINANCIAL STATEMENTS
The Committee will:
1. Request the independent accountants to confirm that they are
accountable to the Board of Directors and the Committee and that they
will provide the Committee with timely analyses of significant
financial reporting and internal control issues.
2. Review with management significant risks and exposures identified by
management and steps undertaken by management to minimize such risks.
A-2
3. Review the scope of the internal and independent audits with the
Director of Internal Audit and the independent accountants.
4. Provide guidance and oversight to the internal audit activities of the
Company including reviewing the organization, plans and results of such
activity. This includes oversight of the annual internal controls
report to be certified by management and filed with the Company's Form
10-K annual report.
5. Review with management, the independent accountants and the Director of
Internal Audit:
- The Company's internal controls, including computerized information
system controls and security.
- Any findings and recommendations made by the independent accountants
or internal audit staff.
6. Review the audited financial statements, proxy and Form 10-K (including
year-end management certification letter and Management's Discussion
and Analysis of Financial Condition and Results of Operation) and
discuss them with management and the independent auditor. These
discussions shall include consideration of the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting, including review of estimates, reserves and
accruals, review of judgmental areas, review of audit adjustments
whether or not recorded and such other inquiries as may be appropriate.
Based on the review, the Committee shall make its recommendation to the
Board of Directors as to the inclusion of the Company's audited
financial statements in the Company's annual report on Form 10-K.
7. Review the Company's earnings press releases, as well as financial
information and earnings guidance provided to analysts and rating
agencies prior to issuance.
8. Review with management and the independent accountants the quarterly
financial information prior to the Company's filing of Form 10-Q and
related quarterly management certification letter.
9. Review the Company's policies with respect to financial risk assessment
and risk management.
10. At least quarterly in executive session meet separately with
representatives of the internal auditor and the independent auditors,
and with the CFO.
11. Review with the independent auditor any audit issues and management's
response, including any restrictions on the scope of the independent
auditor's activities or access to requested information, and any
significant disagreements with management.
C. OTHER RESPONSIBILITIES:
1. Review recent and prospective opinions of the FASB and similar
organizations and their impact upon the Company's accounting and
financial statements.
2. Review on an annual basis, policies and procedures covering officers'
expense accounts and perquisites, including the use of corporate
assets, and consider the results of any review of those areas by the
Director of Internal Audit or the independent accountants.
3. Review at least quarterly with the General Counsel any legal and
regulatory matters that may have a material effect on the Company's
financial statements, operations, compliance policies and programs.
A-3
4. Review on an annual basis with the General Counsel the monitoring of
CEO and CFO compliance with the Company's Code of Conduct.
5. Report Audit Committee activities to the full Board of Directors and
issue annually a report to be included in the proxy statement
(including appropriate oversight conclusions) for submission to the
shareholders. In addition, the Committee will report regularly to the
Board regarding any issues that arise with respect to:
- The quality or integrity of the company's financial statements,
- The company's compliance with legal or regulatory requirements,
- The performance and independence of the company's independent auditors
and internal audit function.
6. Review and reassess the adequacy of its charter on an annual basis,
provide the New York Stock Exchange with an annual written affirmation
regarding the annual review and reassessment of the adequacy of the
charter, and affirm the independence and other qualifications of the
Audit Committee members. If revised, the Charter will be published in
the next proxy. Otherwise the Charter will be published every third
year in the proxy.
7. Set guidelines for committee education and orientation to assure
understanding of the business and the environment in which the company
operates.
8. Set guidelines for development of an annual audit committee plan that
is responsive to the primary audit committee responsibilities, and for
the review and approval of the plan by the full Board.
9. Communicate committee expectations and the nature, timing, and extent
of committee information needs to management, internal and external
auditors, and others.
10. Approve hiring policies for employees or former employees of the
independent auditors, which policies shall as a minimum meet the
requirements of the SEC and NYSE.
11. Annually evaluate the Committee's performance of its responsibilities
and provide the Board and management the opportunity to perform an
annual performance evaluation of the Committee and their performance.
12. Regularly review the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting
controls, or auditing matters, including the services of the
"whistleblower" hotline service provider.
13. Regularly review from General Counsel any report of evidence of a
material violation of securities law or breach of fiduciary duty or
similar violation by the Company or any agent thereof.
D. OTHER AUTHORITY
The Committee is authorized to confer with Company management and other
employees to the extent it may deem necessary or appropriate to fulfill its
duties. The Committee is authorized to conduct or authorize investigations or
special audits into any matters within the Committee's scope of
responsibilities. The Committee also is authorized to seek outside legal or
other advice to the extent it deems necessary or appropriate, provided it shall
keep the Board advised as to the nature and extent of such outside advice. The
Committee will perform such other functions as are authorized for this Committee
by the Board of Directors.
A-4
<Table>
THIS PROXY WILL BE VOTED AS DIRECTED BUT IN THE ABSENCE OF SUCH DIRECTION, IT Please Mark [ ]
WILL BE VOTED FOR ITEMS 1, 2 AND 3 BELOW. THIS PROXY REVOKES ANY PROXY Here for
PREVIOUSLY GIVEN. Address Change
or Comments
SEE REVERSE SIDE
FOR all nominees WITHHOLD AUTHORITY to
1. To elect listed to the left (except as vote for all nominees
marked to the contrary) listed to the left
01 Judith R. Haberkorn
02 Thane A. Pressman [ ] [ ]
</Table>
as Class I Directors for a three-year term. If any of such nominees should be
unavailable, the proxies or any of them may vote for substitute nominee(s) at
their discretion.
(INSTRUCTION: To withhold authority to vote for one or more individual nominees,
write the nominee's name in the space provided below.)
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FOR AGAINST ABSTAIN
2. To ratify the appointment by the Audit Committee
of the Board of Directors of KPMG LLP as Enesco's [ ] [ ] [ ]
independent accountants for 2005.
3. To transact such other business as may properly come before the meeting and
any postponement or adjournment thereof.
I PLAN TO ATTEND [ ] PLEASE SIGN, DATE AND RETURN THE PROXY
THE MEETING CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
SIGNATURE SIGNATURE DATE , 2005
-------------------- ----------------- -------------
PLEASE SIGN ABOVE EXACTLY AS NAME(S) APPEAR(S) HEREON. (WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC., GIVE TITLE AS SUCH.
IF JOINT ACCOUNT, EACH JOINT OWNER SHOULD SIGN.)
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o FOLD AND DETACH HERE o
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EASTERN
TIME THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND
RETURNED YOUR PROXY CARD.
<Table>
INTERNET TELEPHONE Mail
http://www.proxyvoting.com/enc 1-866-540-5760 Mark, sign and date
Use the internet to vote your proxy. OR Use any touch-tone telephone to OR your proxy card and
Have your proxy card in hand when vote your proxy. Have your proxy return it in the
you access the web site. card in hand when you call. enclosed postage-paid
envelope.
</Table>
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
PROXY ENESCO GROUP, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having read the Notice of Annual Meeting of Stockholders
and Proxy Statement dated April 15, 2005, receipt of which is hereby
acknowledged, does hereby appoint and constitute Cynthia Passmore-McLaughlin,
Paula E. Manley and Charles E. Sanders, and each of any of them, the attorneys
and proxies of the undersigned, with power of substitution to each, for and in
the name of the undersigned to vote and act at the Annual Meeting of
Stockholders of Enesco Group, Inc. to be held at the Enesco Showroom Theater,
One Enesco Plaza (corner of Busse and Devon), Elk Grove Village, Illinois, on
Wednesday, May 18, 2005 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)
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ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
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o FOLD AND DETACH HERE o
ENESCO GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, MAY 18, 2005
9:30 A.M.
Enesco Showroom Theater
One Enesco Plaza (corner of Busse and Devon)
Elk Grove Village, Illinois 60007