SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/
FILED BY A PARTY OTHER THAN THE REGISTRANT / /
CHECK THE APPROPRIATE BOX:
/ / PRELIMINARY PROXY STATEMENT
/X/ DEFINITIVE PROXY STATEMENT
/ / DEFINITIVE ADDITIONAL MATERIALS
/ / SOLICITING MATERIAL PURSUANT TO RULE 14a-11(c) OR RULE 14a-12
Movado Group, Inc.
________________________________________________________________________________
(Name of Registrant as Specified in its Charter)
Movado Group, Inc.
________________________________________________________________________________
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / 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:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[TOPPS LOGO]
-------------------
THE TOPPS COMPANY, INC.
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 26, 1996
-------------------
To the Stockholders of
THE TOPPS COMPANY, INC.
You are cordially invited to attend the annual meeting of stockholders (the
"Annual Meeting") of The Topps Company, Inc., a Delaware corporation (the
"Company"), which will be held at Chase Manhattan Bank, 1 Chase Manhattan Plaza,
Street Floor Auditorium, New York, New York, on June 26, 1996 at 10:30 A.M., New
York time, for the following purposes:
1. To elect three directors to serve for three-year terms until the 1999
annual meeting of stockholders;
2. To ratify and approve the Company's 1996 Stock Option Plan;
3. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the Company for the fiscal year ending March 1, 1997;
4. To consider, if properly brought before the meeting, a stockholder
proposal, opposed by the Board of Directors and management, regarding
elimination of election of the Company's directors by classes;
5. To consider, if properly brought before the meeting, a stockholder
proposal, opposed by the Board of Directors and management, regarding
the form of compensation to be paid to directors of the Company; and
6. To transact such other business as may properly be brought before the
Annual Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on May 15, 1996 as
the record date for the determination of stockholders entitled to receive notice
of, and to vote at, the Annual Meeting and any adjournment or postponement
thereof.
By order of the Board of Directors,
Arthur T. Shorin
Chairman and
Chief Executive Officer
Dated: May 24, 1996
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IN
THE EVENT YOU ATTEND THE ANNUAL MEETING AND VOTE IN PERSON, THE PROXY WILL NOT
BE USED.
<PAGE>
THE TOPPS COMPANY, INC.
ONE WHITEHALL STREET
NEW YORK, NEW YORK 10004
-------------------
PROXY STATEMENT
-------------------
GENERAL
This proxy statement (the "Proxy Statement") is furnished in connection with
the solicitation of proxies by the Board of Directors of The Topps Company, Inc.
(the "Company") to be voted at the annual meeting of stockholders of the Company
(the "Annual Meeting") to be held at Chase Manhattan Bank, 1 Chase Manhattan
Plaza, Street Floor Auditorium, New York, New York, on June 26, 1996 at 10:30
A.M., New York time, and at any adjournment or postponement thereof. A copy of
the Company's Annual Report to Stockholders for the fiscal year ended March 2,
1996 is being mailed to all stockholders with this Proxy Statement. The
approximate mailing date of this Proxy Statement is May 24, 1996.
PROXY INFORMATION
All proxies received pursuant to this solicitation will be voted, except as
to matters where authority to vote is specifically withheld. Where a choice is
specified as to the proposals described in the foregoing notice, they will be
voted in accordance with such specification. If no instructions are given, the
persons named in the proxy solicited by the Company's Board of Directors (the
"Board of Directors") intend to vote (i) FOR the nominees for election as
directors of the Company listed herein, (ii) FOR the ratification and approval
of the Company's 1996 Stock Option Plan, (iii) FOR the ratification of the
appointment by the Board of Directors of Deloitte & Touche LLP as auditors for
the Company for the fiscal year ending March 1, 1997, but (iv) AGAINST both
stockholder proposals set forth in this Proxy Statement. If any other matter
should be presented at the Annual Meeting upon which a vote may properly be
taken, the shares represented by the proxy will be voted with respect thereto at
the discretion of the person or persons holding such proxy.
Stockholders who execute proxies may revoke them at any time before they are
voted by written notice to the Company, by submitting a new proxy or by personal
ballot at the Annual Meeting.
RECORD DATE AND VOTING
As of May 15, 1996, the Company had outstanding 47,047,510 shares of common
stock, par value $.01 per share ("Common Stock"), entitled to be voted at the
Annual Meeting, each share being entitled to one vote on each matter submitted
to a vote of stockholders. Only stockholders of record at the close of business
on May 15, 1996 will be entitled to vote at the Annual Meeting. The presence in
person or by proxy of holders of a majority of the issued and outstanding Common
Stock will constitute a quorum for the transaction of such business as may
properly come before the Annual Meeting. For purposes of determining whether a
proposal has received the required number of votes for approval, abstentions
will be included in the vote totals with the result that an abstention has the
same effect as a negative vote. In instances where nominee recordholders, such
as brokers, are prohibited from exercising discretionary authority for
beneficial owners who have not returned a proxy ("broker non-votes"), those
shares of Common Stock will not be included in the vote totals and, therefore,
will have no effect on the vote. If a quorum should not be present, the Annual
Meeting may be adjourned from time to time until a quorum is obtained.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information available to the Company as to
shares of Common Stock owned as of May 15, 1996 by (i) each person known to the
Company to be the beneficial owner of more than five percent of the outstanding
Common Stock, (ii) each director and nominee for election as a director, (iii)
each executive officer designated in the section of this Proxy Statement
captioned
<PAGE>
"Executive Compensation," and (iv) all directors and executive officers as a
group. Except as otherwise indicated, each person named below has sole
investment and voting power with respect to the shares of Common Stock shown.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE PERCENT OF SHARES
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OUTSTANDING
- --------------------------------------------------------- ----------------------- -----------------
<S> <C> <C>
Arthur T. Shorin(1)(2)(3)................................ 2,293,989 4.9%
Seymour P. Berger(1)(2).................................. 360,768 *
Ronald L. Boyum(3)....................................... 122,000 *
Allan A. Feder(2)(4)..................................... 55,000 *
Ira Friedman(3).......................................... 140,000 *
Stephen D. Greenberg(4).................................. 45,000 *
John J. Langdon(1)(3).................................... 847,500 1.8
Wm. Brian Little(4)(5)................................... 544,487 1.2
David M. Mauer........................................... 5,000 *
Jack H. Nusbaum(4)....................................... 47,000 *
Stanley Tulchin(4)....................................... 74,175 *
The Capital Group Companies, Inc.(6)
333 South Hope Street
Los Angeles, California 90071.......................... 6,159,300 13.1
State of Wisconsin Investment Board(7)
P.O. Box 7842
Madison, Wisconsin 53707............................... 4,654,500 9.9
Investors Group, Inc.(8)
One Canada Centre
447 Portage Avenue
Winnipeg, Manitoba R3C 3B6 Canada...................... 2,898,800 6.2
All directors and executive officers as a group
(21 persons)........................................... 5,433,336 11.1
</TABLE>
- ------------
* less than 1.0%
(1) Each of Messrs. Shorin, Berger and Langdon is a director and an executive
officer.
(2) Does not include 50,000, 100,000 and 603 shares of Common Stock owned by the
immediate family of each of Messrs. Shorin, Berger and Feder, respectively.
Messrs. Shorin, Berger and Feder disclaim beneficial ownership of such
shares.
(3) With respect to 100,000 shares of Common Stock beneficially owned by Mr.
Shorin, all of the shares of Common Stock beneficially owned by Mr. Boyum,
138,000 shares of Common Stock beneficially owned by Mr. Friedman and
837,500 shares of Common Stock beneficially owned by Mr. Langdon, each of
Messrs. Shorin, Boyum, Friedman and Langdon has the right to acquire such
shares upon the exercise of options.
(4) With respect to 45,000 shares of Common Stock beneficially owned by each of
Messrs. Feder, Little and Nusbaum, 35,000 shares of Common Stock
beneficially owned by Mr. Greenberg and 24,000 shares of Common Stock
beneficially owned by Mr. Tulchin, each of Messrs. Feder, Little, Nusbaum,
Greenberg and Tulchin has the right to acquire such shares upon the exercise
of options.
(5) Does not include 17,517 shares of Common Stock owned by Wm. Brian Little
1983 Trust f/b/o Gregory Little and 16,517 shares of Common Stock owned by
Wm. Brian Little 1983 Trust f/b/o Jacqueline Little, which trusts were
established by Mr. Little for the benefit of his children. Mr. Little
disclaims beneficial ownership of such shares.
(6) Based upon a Schedule 13G filed on February 19, 1996 with the Securities and
Exchange Commission (the "SEC") by The Capital Group Companies, Inc.
(7) Based upon a Schedule 13G filed on February 3, 1996 with the SEC by the
State of Wisconsin Investment Board.
(8) Based on a Schedule 13D, dated June 8, 1995, filed by Investors U.S. Growth
Fund, a Canadian unit trust mutual fund ("Growth Fund"), Investors Global
Fund, a Canadian unit trust mutual fund (Global Fund" and, together with
Growth Fund, the "Funds") and I.G. Investment Management, Ltd., a Canadian
investment advisory management company which provides Growth Fund's and
Global Fund's investment management ("Management Company"), as amended by
Amendment No. 1, dated November 15, 1995 (as amended, the "Investors
Schedule 13D"). The Investors
(Footnotes continued on following page)
2
<PAGE>
(Footnotes continued from preceding page)
Schedule 13D indicates that Growth Fund shares beneficial ownership of
2,283,700 of the shares and Global Fund shares beneficial ownership of
615,100 of the shares. According to the Investors Schedule 13D, 100% of the
issued and outstanding capital stock of Management Company is owned by
Investors Group Trustco Inc. ("Trustco"), and the Funds and Management
Company are ultimately controlled by Investors Group Inc. through its
ownership of 100% of the issued and outstanding capital stock of Trustco.
Management Company disclaims beneficial ownership of all shares held by the
Funds, and each Fund disclaims beneficial ownership of all shares held by
the other Fund.
ELECTION OF DIRECTORS
The Board of Directors presently consists of nine members divided into three
classes, each class serving for a period of three years. One-third of the
members of the Board of Directors are elected by the stockholders annually. This
year Messrs. Seymour P. Berger, Stephen D. Greenberg and Stanley Tulchin have
been nominated to stand for re-election for a term that expires at the annual
meeting of stockholders to be held in 1999. The vacancy in the Board of
Directors created by the resignation of Theodore J. Forstmann is not being
filled at the present time.
Directors will be elected by the plurality vote of the holders of Common
Stock entitled to vote at the Annual Meeting and present in person or by proxy.
It is the intention of the persons named in the enclosed proxy to vote, unless
otherwise indicated, for the election as directors of the persons nominated in
the table below.
Should any one or more of these nominees become unable to serve for any
reason or, for good cause, will not serve, which is not anticipated, the Board
of Directors may, unless the Board by resolution provides for a lesser number of
Directors, designate substitute nominees, in which event the persons named in
the enclosed proxy will vote for the election of such substitute nominee or
nominees.
The following table sets forth the name, age and principal business
experience during the past five years of each director of the Company.
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DIRECTOR OF THE
DURING PAST 5 YEARS, COMPANY OR ITS
NAME AGE AND OTHER INFORMATION PREDECESSORS SINCE
- ------------------------- ------------------------------------------------- ------------------
<S> <C> <C>
NOMINEES TO SERVE IN
OFFICE UNTIL 1999
Seymour P. Berger........ Vice President--Sports and Licensing of the 1991
Company since 1974. Mr. Berger is 72 years of
age.
Stephen D. Greenberg..... President of Classic Sports Network, Inc. (a 1993
cable television programming service) since
November 1993. President of Stephen D. Greenberg,
P.C. (an independent business consulting firm)
from April 1993 through October 1993. From 1990
to April 1993, Deputy Commissioner and Chief
Operating Officer of Major League Baseball. Mr.
Greenberg is 47 years of age.
Stanley Tulchin.......... Chairman of Stanley Tulchin Associates, Inc. (a 1987
commercial collection agency) since 1955. Mr.
Tulchin is also Chairman and Chief Executive
Officer of Reprise Capital Corporation (a venture
capital fund) and a Director of PCA
International, Inc. (commercial photographers),
in each case for more than the past five years.
Mr. Tulchin is 69 years of age.
DIRECTORS TO CONTINUE IN
OFFICE UNTIL 1997
Arthur T. Shorin......... Chairman of the Board and Chief Executive Officer 1960
of the Company and its predecessor since 1980.
Mr. Shorin is also a Director of Department 56,
Inc. Mr. Shorin is 60 years of age.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DIRECTOR OF THE
DURING PAST 5 YEARS, COMPANY OR ITS
NAME AGE AND OTHER INFORMATION PREDECESSORS SINCE
- ------------------------- ------------------------------------------------- ------------------
<S> <C> <C>
Wm. Brian Little......... Private Investor since January 1995. Special 1984
Limited Partner of FLC Partnership, the General
Partner of Forstmann Little & Co., January 1994
to December 1994. Mr. Little was a General
Partner of FLC Partnership from 1978, when he
co-founded Forstmann Little & Co., until January
1994. Mr. Little is also a Director of Aldila,
Inc.; Department 56, Inc.; and Normandy America,
Inc. Mr. Little is 54 years of age.
DIRECTORS TO CONTINUE IN
OFFICE UNTIL 1998
John J. Langdon.......... President and Chief Operating Officer of the 1989
Company since 1988. Mr. Langdon is 48 years of
age.
Allan A. Feder........... An independent business consultant for more than 1992
the past five years and President and Chief
Executive Officer of Vitarroz Corporation (a
proprietary brand food company) since 1988. Mr.
Feder is also a Director of Edward Don & Co.,
Inc. Mr. Feder is 64 years of age.
David M. Mauer........... Chief Executive Officer of Riddell Sports Inc. 1996
(manufacturer and reconditioner of football
equipment) since 1993. Mr. Mauer was President of
Mattel USA (toy company) from 1990 until 1993.
Mr. Mauer is 47 years of age.
Jack H. Nusbaum.......... Chairman of the New York law firm of Willkie Farr 1992
& Gallagher and a partner in that firm for the
past twenty-five years. Mr. Nusbaum is also a
Director of W. R. Berkley Corporation; Pioneer
Companies, Inc.; Prime Hospitality Corp.; and
Hirschl & Adler Galleries, Inc. Mr. Nusbaum is 55
years of age.
</TABLE>
The Board of Directors met four times during the fiscal year ended March 2,
1996. Each of the Directors who served during such period, except for Messrs.
Nicholas C. Forstmann and Theodore J. Forstmann, attended at least 75% of the
aggregate number of meetings of the Board of Directors and any committee of
which they were members during such period. Mr. Nicholas C. Forstmann did not
stand for re-election as a director in June 1995 and, due to severe time
constraints, Mr. Theodore J. Forstmann resigned as a director as of April 30,
1996.
The Company has a Compensation Committee responsible for recommending
officers' remuneration and administering The Topps Company, Inc. 1987 Stock
Option Plan, as amended (the "1987 Stock Option Plan"). The members of the
Compensation Committee for the fiscal year ended March 2, 1996 were Messrs. Wm.
Brian Little and Stanley Tulchin, neither of whom is an employee of the Company.
The Compensation Committee held ten meetings.
The Company has an Audit Committee which approves the appointment and
continued retention or discharge of independent certified public accountants,
monitors their performance, reviews all reports submitted by them and consults
with them with regard to the adequacy of internal controls. The members of such
committee for the fiscal year ended March 2, 1996 were Messrs. Allan A. Feder,
Nicholas C. Forstmann (until June 20, 1995), Stanley Tulchin (from June 21,
1995) and Stephen D. Greenberg. The members of the Audit Committee currently are
Messrs. Allan A. Feder, Stanley Tulchin, Stephen D. Greenberg and David M.
Mauer. During the fiscal year ended March 2, 1996, there were two meetings of
the Audit Committee. None of the members of the Audit Committee are employees of
the Company.
The Company does not have a nominating committee.
The Company's executive officers, directors and ten percent stockholders are
required under the Securities Exchange Act of 1934, as amended, to file reports
of ownership and changes in ownership with the SEC. Copies of these reports must
also be furnished to the Company. Based solely upon its
4
<PAGE>
review of the copies of such reports furnished to the Company through the date
hereof, or written representations that no reports were required to be filed,
the Company believes that all filing requirements applicable to its executive
officers, directors and ten percent stockholders were complied with during the
fiscal year ended March 2, 1996.
COMPENSATION OF DIRECTORS
Directors who are not also officers of the Company receive directors' fees
of $8,000 per year, plus $500 for each day on which the director attended in
person a meeting of the Board of Directors and/or any committee thereof.
Directors who are also officers of the Company are not compensated for their
duties as Directors.
Pursuant to the 1994 Non-Employee Director Stock Option Plan, on June 21,
1995 each of Messrs. Allan A. Feder, Theodore J. Forstmann, Stephen D.
Greenberg, Wm. Brian Little, Jack H. Nusbaum and Stanley Tulchin, none of whom
is an employee of the Company, received options to purchase 7,000 shares of
Common Stock at a price of $6.375 per share. The options are exercisable after
June 20, 1996 and have a term of five years from the date of grant.
EXECUTIVE COMPENSATION
The following table sets forth for each of the last three fiscal years
information regarding the compensation of the Company's Chief Executive Officer
and the four other most highly compensated executive officers for the fiscal
year ended March 2, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------- ------------------------
(A) (B) (C) (D) (E) (F) (G) (H)
<S> <C> <C> <C> <C> <C> <C> <C>
SECURITIES
<CAPTION>
FISCAL RESTRICTED UNDERLYING ALL OTHER
YEAR SALARY(1) BONUS OTHER ANNUAL STOCK OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION ENDED ($) ($) COMPENSATION($)(2) AWARD(S)($) SARS (#) ($)
- ---------------------------- ----- --------- -------- ------------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Arthur T. Shorin............ 1996 $ 838,082 400,000
Chairman and Chief 1995 822,269 500,000(3)
Executive Officer 1994 761,332 $395,809 500,000(3)
John J. Langdon............. 1996 409,889 20,000 14,115(4)
President and Chief 1995 554,981 175,000 14,115(4)
Operating Officer 1994 540,319 195,824 150,000 14,115(4)
Seymour P. Berger........... 1996 262,041
Vice President--Sports and 1995 257,097
Licensing 1994 247,566 128,707
Ronald L. Boyum............. 1996 222,643 13,500
Vice President--Marketing 1995 197,492 15,000
and Sales 1994 131,741 68,506 70,000
Ira Friedman................ 1996 189,932 15,000
Vice President--Publishing 1995 179,084 50,000
and New Product Development 1994 131,732 68,602
</TABLE>
- ------------
(1) The Company's fiscal year ended March 2, 1996 consisted of 53 weeks, while
the two prior fiscal years contained 52 weeks. Therefore, salary levels for
the fiscal year ended March 2, 1996 reflect an additional one week's salary.
(2) Perquisites and other personal benefits received by each named executive
officer (including, for certain of the named executive officers, medical
reimbursements, moving expenses and car use allowances) in each instance
aggregated less than the lesser of $50,000 or 10% of such officer's annual
salary and bonus.
(3) The initial installment of cash-only SARs granted in fiscal 1994 expired
with no payments becoming due. The remaining cash-only SARs granted in
fiscal 1994 and all cash-only SARs granted in fiscal 1995 were cancelled
without payment as of March 29, 1995. See Note 4 to "Option/SAR Grants in
Last Fiscal Year."
(4) This amount represents the payment of premiums on a life and disability
insurance policy maintained by the Company on behalf of Mr. Langdon. See
"Employment Agreements."
5
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding grants of stock options
and stock appreciation rights ("SARs") made during the fiscal year ended March
2, 1996 to each of the executive officers named in the Summary Compensation
Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (1)
- -------------------------------------------------------------------------------------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
(A) (B) (C) (D) (E) (F) (G)
<CAPTION>
% OF TOTAL
OPTIONS/SARS
NUMBER OF SECURITIES GRANTED TO
UNDERLYING EMPLOYEES IN
OPTIONS/SARS FISCAL EXERCISE OR EXPIRATION
NAME GRANTED (#)(2) YEAR(3) BASE PRICE ($/SH) DATE 5% 10%
- ---------------------------- -------------------- ------------ ----------------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Arthur T. Shorin............ 100,000(4) 11.574% $7.70 3/28/03 $80,000 $463,000
100,000(4) 11.574% 8.47 3/28/03 3,000 386,000
100,000(4) 11.574% 9.32 3/28/03 0 301,000
100,000(4) 11.574% 10.75 3/28/03 0 158,000
John J. Langdon............. 13,334(5) 1.543% $5.00 4/13/06 $43,088 $109,460
6,666(6) .772% 5.00 2/07/06 21,000 53,000
Seymour P. Berger........... -- -- -- -- -- --
Ronald L. Boyum............. 13,500(7) 1.563% $5.00 2/07/06 $42,625 $107,325
Ira Friedman................ -- -- -- -- -- --
</TABLE>
- ------------
(1) Grant date fair market value is based on the closing price of the Common
Stock on the immediately preceding date.
(2) All grants consisted of options that were granted under the 1987 Stock
Option Plan.
(3) This column does not include grants to non-employee directors of the
Company.
(4) On March 29, 1995 the Compensation Committee cancelled all 900,000 of Mr.
Shorin's unexpired cash-only SARs and granted him an option, covering the
period through Mr. Shorin's normal retirement date, to purchase 400,000
shares of Common Stock. This option has a maximum term of eight years and
vests in 100,000 share installments on the first through fourth
anniversaries of the date of grant. The installments retain the same
above-market exercise prices as the base prices of the second through fifth
installments of Mr. Shorin's March 30, 1994 cash-only SAR grant, and such
exercise prices are reflected in column (d) above. On the date of grant,
these exercise prices were greater than the fair market value of the Common
Stock.
(5) The options to acquire 13,334 shares of Common Stock were granted on
February 7, 1996 and are exercisable in two equal annual installments
beginning February 7, 1997.
(6) The options to acquire 6,666 shares of Common Stock were granted on February
7, 1996, and are exercisable as of February 7, 1999.
(7) The options to acquire 13,500 shares of Common Stock were granted on
February 7, 1996 and are exercisable in three equal annual installments
beginning February 7, 1997.
6
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table provides information regarding the exercise of
options/SARs during the fiscal year ended March 2, 1996 and the number and value
of unexercised options and SARs held at fiscal year end by each of the executive
officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Arthur T. Shorin................... 0 0 0 400,000 0 0
John J. Langdon.................... 0 0 787,500 220,000 $ 398,050 0
Seymour P. Berger.................. -- -- -- -- -- --
Ronald L. Boyum.................... 0 0 122,000 23,500 0 0
Ira Friedman....................... 0 0 138,000 10,000 3,794 0
</TABLE>
PENSION BENEFITS
The Company maintains a tax qualified non-contributory defined benefit
pension plan for its eligible employees (the "Retirement Plan"). The Summary
Compensation Table contained in this Proxy Statement does not include the
benefit accruals in respect of the named executive officers under the Retirement
Plan. The estimated annual pension benefits under the Retirement Plan, assuming
retirement at age 65, at various levels of compensation and years of credited
service are illustrated by the following table:
ANNUAL RETIREMENT BENEFIT FOR SPECIFIED
YEARS OF CREDITED SERVICE(1)(2)
<TABLE>
<CAPTION>
HIGHEST AVERAGE COMPENSATION(3) 15 20 25 30 35 40 50
- ---------------------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 125,000......................... $ 26,115 $ 35,656 $ 45,694 $ 55,811 $ 57,102 $ 58,635 $ 61,760
$ 150,000......................... $ 32,365 $ 43,989 $ 56,111 $ 68,312 $ 69,915 $ 71,760 $ 75,510
$ 175,000......................... $ 38,615 $ 52,323 $ 66,528 $ 80,812 $ 82,727 $ 84,885 $ 89,260
$ 200,000......................... $ 44,865 $ 60,656 $ 76,945 $ 93,312 $ 95,540 $ 98,010 $103,010
$ 225,000......................... $ 51,115 $ 68,990 $ 87,362 $105,812 $108,352 $111,135 $116,760
$ 250,000......................... $ 57,365 $ 77,323 $ 97,779 $118,313 $121,165 $124,260 $130,510
$ 300,000......................... $ 69,866 $ 93,990 $118,613 $143,313 $146,790 $150,510 $158,010
$ 400,000......................... $ 94,866 $127,324 $160,280 $193,314 $198,040 $203,010 $213,010
$ 450,000......................... $107,366 $143,991 $181,114 $218,315 $223,665 $229,260 $240,510
$ 500,000......................... $119,867 $160,658 $201,948 $243,315 $249,290 $255,510 $268,010
$ 600,000......................... $144,867 $193,992 $243,615 $293,316 $300,540 $308,010 $323,010
$ 800,000......................... $194,868 $260,660 $326,950 $393,318 $403,040 $413,010 $433,010
$1,000,000........................ $244,869 $327,328 $410,285 $493,320 $505,540 $518,010 $543,010
</TABLE>
- ------------
(1) These are hypothetical benefits based upon the Retirement Plan's normal
retirement benefit formula. The maximum annual benefit permitted under
Section 415 of the Internal Revenue Code of 1986, as amended (the "Code"),
is generally limited to $120,000 at present and will be adjusted to reflect
cost-of-living increases in 1997 and succeeding plan years.
(2) This table includes supplemental pension benefits payable to Mr. Shorin in
excess of the limitations on compensation and benefits under the Code and
other applicable laws, pursuant to an agreement entered into on May 19,
1986, and amended May 18, 1994 (the "Supplemental Pension Agreement"). These
benefits are computed in accordance with the same formula provided under the
(Footnotes continued on following page)
7
<PAGE>
(Footnotes continued from preceding page)
Retirement Plan without regard to the aforementioned limitations. However,
compensation attributable to stock appreciation rights and stock options is
not taken into account in determining highest average compensation for
purposes of the Supplemental Pension Agreement.
(3) The benefits shown corresponding to these compensation ranges are
hypothetical benefits based upon the Retirement Plan's normal retirement
benefit formula. Under Section 401(a)(17) of the Code, compensation in
excess of $150,000 (as adjusted to reflect cost-of-living increases) is
disregarded for purposes of determining highest average compensation of
participants in the Retirement Plan in plan years beginning after 1993.
Benefits accrued as of the last day of the plan year beginning in 1993 on
the basis of compensation in excess of $150,000 are preserved. The $150,000
limit will be adjusted for cost-of-living increases in 1997 and succeeding
plan years.
The normal retirement benefit under the Retirement Plan is payable in the
form of a "straight life" annuity and is equal to the greater of (i) 1.667% of a
participant's highest average W-2 compensation multiplied by the participant's
years of credited service not in excess of 30 years, plus .25% of the
participant's highest average compensation multiplied by the participant's years
of credited service in excess of 30 years, reduced by 50% of the participant's
estimated primary Social Security benefit determined on the basis of the
participant's earnings from the Company, or (ii) $204 multiplied by the
participant's years of credited service not in excess of 20 years, plus $144
multiplied by the participant's credited service in excess of 20 years (but not
to exceed 10 additional years). The "highest average compensation" for purposes
of determining the normal retirement benefit is equal to 1/5 of the total
compensation that is paid to a participant by the Company for the 60
consecutive-month period in which the participant's compensation was greatest
during the 120-month period prior to the participant's retirement or termination
of employment. Subject to the $150,000 compensation limit in the case of an
executive officer other than Mr. Shorin, such compensation includes all
compensation reflected in the Summary Compensation Table to the extent included
in gross income for the applicable base years, except for income attributable to
reimbursement of moving expenses.
As of March 2, 1996, the persons named in the Summary Compensation Table
were credited with the following years of service: Mr. Shorin--37; Mr.
Langdon--7; Mr. Berger--48; Mr. Boyum--6; and Mr. Friedman--7.
BONUS PLANS
For many years, designated key employees have participated in one of several
nondiscretionary, objective group incentive bonus arrangements (the "Bonus
Plans") which provide for the payment of bonuses based upon percentages of base
salaries if income before interest, taxes, depreciation and amortization,
achieves certain levels determined by the Compensation Committee at the
beginning of the fiscal year. No amounts were paid under the Bonus Plans for the
fiscal year ended March 2, 1996. Amounts paid to the five most highly
compensated executive officers of the Company under the Bonus Plans for the last
three fiscal years are included in the Summary Compensation Table.
For the fiscal year ended March 2, 1996, the Bonus Plans allowed for a
discretionary special bonus to be paid if approved by a committee composed of
Messrs. Shorin, Langdon, O'Connor and Perillo. Such bonuses may be awarded,
after the end of the fiscal year, to any Vice President who the committee
determines is deserving of special consideration. Bonuses under this plan were
limited to 20% of the recipient's base salary and each member of the committee
was precluded from participating in deliberations regarding his own award. For
fiscal year 1996, no discretionary bonuses were granted.
EMPLOYMENT AGREEMENTS
On October 28, 1991, the Company entered into employment agreements (the
"Agreements") with Arthur T. Shorin, Chairman of the Board and Chief Executive
Officer, and John J. Langdon, President and Chief Operating Officer. Each
Agreement provides for a three-year term subject to automatic extension. Each
Agreement will terminate three years from the date that either the executive or
the
8
<PAGE>
Company gives notice of his or its intention not to extend the Agreement, unless
terminated earlier as provided in the Agreement. Mr. Shorin's Agreement provides
for an annual base salary of $822,269, subject to annual 10% increases which
have been waived by Mr. Shorin for fiscal years 1996 and 1997 and limited to 4%
for fiscal years 1994 and 1995. Mr. Shorin's Agreement provides for an annual
target bonus opportunity of 50% of base salary. For fiscal years 1995 through
1997, Mr. Shorin has agreed to limit his target bonus opportunity to 20% of
annual base salary. Mr. Langdon's Agreement provides for an annual base salary
of $402,155 and for participation in the Company's bonus plans with target
bonuses and performance objectives set by the Company's Chief Executive Officer,
subject to the approval of the Compensation Committee.
If either executive is terminated without "Cause" or resigns for "Good
Reason" (as defined in the Agreements), a lump sum severance payment will be
made as liquidated damages based upon the executive's salary at the time of
termination and the average annual bonus for the three fiscal years ended prior
to the date of termination. In the case of Mr. Shorin, such payment will be
equal to three times his base salary (without giving effect to any waivers) and
bonus, and in the case of Mr. Langdon, such payment will be equal to 2.5 times
his base salary and bonus.
Each Agreement requires that, in the event any payments made upon
termination of employment are treated as "parachute payments" subject to excise
taxes under federal tax law, the Company will make an additional payment to the
executive so that his after-tax position is the same as if the payments were not
subject to an excise tax. During the term of Mr. Langdon's employment, the
Company is required to obtain and maintain life insurance coverage in the amount
of $4,000,000 and to obtain and maintain disability insurance policies in an
amount equal to 60% of salary and bonus.
Mr. Shorin's Agreement also requires the Company to make annual
contributions to an irrevocable Company trust account of assets equal to the
present value of the supplemental pension benefits which accrue during each
fiscal year for Mr. Shorin under his Supplemental Pension Agreement.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee approves compensation objectives and policies as
well as compensation plans and specific compensation levels for all executive
officers. Since February 26, 1995, the Compensation Committee has been
responsible for grants of stock options.
The Compensation Committee seeks to provide a competitive total compensation
package that will motivate and retain key employees. The Committee also seeks to
provide incentives to achieve short and long-term business objectives that will
enhance the value of the Common Stock. In establishing total compensation
packages, the Committee considers (1) the base salary levels of executives with
similar responsibilities in companies of similar size, business and complexity,
(2) each executive's experience in his position at the Company and his
performance over a sustained period of time and (3) the Company's financial
performance during the past year as reflected in the Company's achievement of
pre-established earnings objectives.
Compensation for the named executive officers for the fiscal year ended
March 2, 1996 was comprised of base compensation, potential annual incentive
compensation (the Bonus Plans) and long-term incentive compensation.
The base compensation for the Chief Executive Officer and the President is
determined through contracts which are discussed under the caption "Employment
Agreements." In view of the Company's performance, the stipulated minimum
increase in base compensation called for by the Chief Executive Officer's
employment agreement was consensually waived for the Company's fiscal year ended
March 2, 1996. Base compensation for executives not covered by employment
contracts takes into consideration the level of responsibility involved, the
knowledge and experience required, and competitive pay levels.
The Compensation Committee has based annual incentive compensation for
executive officers covered by the Bonus Plans (including the Chief Executive
Officer) on the attainment of financial
9
<PAGE>
targets relating to income earned by the Company. The Bonus Plans are discussed
in more detail under the caption "Bonus Plans." With the exception of the
Chairman's Award, which permits discretionary bonuses to be paid to
Vice-Presidents deserving of special recognition, administration of the Bonus
Plans is nondiscretionary-- if minimum financial targets are not met, no bonuses
are paid, regardless of individual achievement or departmental performance.
Although annual target bonus opportunities of 50% of base salary are required to
be provided under Mr. Shorin's employment agreement, Mr. Shorin's annual bonus
opportunity has been consensually limited to 20% of base salary for the
Company's 1995 through 1997 fiscal years. For the Company's 1996 fiscal year,
the Compensation Committee determined that no bonus would be paid to Mr. Shorin
unless Consolidated Operating Profit increased by a minimum amount that was
materially higher than that applicable to the Company's other executive
officers. For the fiscal year ended March 2, 1996, no bonuses were paid to any
named executive officer under any Company Bonus Plan.
Long-term incentive compensation opportunities are provided through grants
of stock options under the 1987 Stock Option Plan. If stockholder approval for
the 1996 Stock Option Plan is received, future grants of stock options will be
made under the 1996 Stock Option Plan and no further grants will be made under
the 1987 Plan. All grants are made at exercise prices which are at least equal
to the fair market value of the Common Stock on date of grants so executives can
gain only when stockholders gain. In making grants under the plan for fiscal
1996, the Compensation Committee considered an employee's position with the
Company, responsibilities, service, individual performance, and the anticipated
length of future service. In order to reinforce long-term performance objectives
established for the Chief Executive Officer, the Compensation Committee
determined that it was desirable to cancel all 900,000 of Mr. Shorin's cash-only
SARs, which had above-market exercise prices at date of grant but annual
expiration dates, and replace them with a grant of stock options covering
400,000 shares of Common Stock and having a maximum term of eight years from
date of grant. The new grant provides for vesting in four annual installments
covering 100,000 shares each. Each installment retains the same exercise price
as the base price of the corresponding installment of the second through fifth
installments of Mr. Shorin's March 30, 1994 cash-only SAR grant. In each case,
these exercise prices were greater than the fair market value of the Common
Stock on date of grant.
Section 162(m) of the Code generally disallows a tax deduction to public
companies for annual compensation over $1 million paid to each of the
corporation's Chief Executive Officer and four other most highly compensated
executive officers, except to the extent such compensation qualifies as
"performance-based." Based on information currently available, the Compensation
Committee believes that all compensation arrangements that could potentially
result in the compensation of any named executive officer exceeding $1 million
would qualify as performance-based and that all compensation paid to the
Company's named executive officers will be fully deductible. Provided that other
Company objectives are met, the Company intends to structure future incentive
compensation arrangements for its named executive officers in a manner that will
allow such compensation to be fully deductible for Federal income tax purposes.
The Compensation Committee:
Wm. Brian Little
Stanley Tulchin
CERTAIN RELATIONSHIPS
Jack H. Nusbaum, a director, is a partner in the law firm of Willkie Farr &
Gallagher, outside counsel to the Company. In July 1995, the Company acquired
Merlin Publishing International Limited ("Merlin") from its shareholders for
$46,244,700, which included a payment of $5,549,364 to Peter Warsop, currently
the Managing Director of Merlin, for his interest.
10
<PAGE>
PERFORMANCE GRAPH
The graph set forth below shows the yearly percentage change in the
Company's cumulative total stockholder return against each of the S & P MidCap
400 and a composite index (the "Composite Index"), in each case assuming an
investment of $100 on March 4, 1991 and the accumulation and reinvestment of
dividends paid thereafter through March 2, 1996.
COMPARISON OF CUMULATIVE TOTAL RETURN*
DOLLARS
200
180
160
140
120
100
80
60
40
20
1991 1992 1993 1994 1995 1996
YEARS
THE TOPPS COMPANY, INC.
S&P MIDCAP 400
COMPOSITE INDEX
<TABLE><CAPTION>
STARTING
BASIS
DESCRIPTION 1991 1992 1993 1994 1995 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TOPPS CO INC (%)
TOPPS CO INC ($) $100.00 $100.10 $ 49.57 $ 43.31 $42.27 $36.47
S & P Midcap 400 (%)
S & P Midcap 400 ($) $100.00 $127.46 $141.10 $149.77 $162.38 $208.64
PEER GROUP ONLY (%)
PEER GROUP ONLY ($) $100.00 $106.94 $135.40 $148.07 $150.60 $171.03
ASSUMES INITIAL INVESTMENT OF $100
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
NOTE: TOTAL RETURNS BASED ON MARKET CAPITALIZATION
The Composite Index is comprised of four industry groups reported in the
"Directory of Companies required to file Annual Reports with the Securities and
Exchange Commission," for the period ended September 30, 1993, and based upon
the Standard Industrial Classification ("SIC") codes developed by the Office of
Management and Budget, Executive Office of the President. The four industry
groups are Miscellaneous Publishing (SIC Code 2741), Sugar and Confectionery
Products (SIC Code 2060), Periodicals: Publishing or Publishing and Printing
(SIC Code 2721), and Wholesale--Miscellaneous Durable Goods (SIC Code 5090).
11
<PAGE>
PROPOSAL TO RATIFY AND APPROVE THE 1996 STOCK OPTION PLAN
The Compensation Committee and Board of Directors have unanimously approved
the adoption of the 1996 Stock Option Plan (the "Plan"), subject to the approval
of the stockholders of the Company at the Annual Meeting. The Board of Directors
recommends that the stockholders approve the adoption of the Plan. If approved,
the Plan will replace the 1987 Stock Option Plan, which would otherwise
terminate by its terms in 1997. As a result, no further grants may be made under
the 1987 Stock Option Plan following the date stockholder approval for the 1996
Stock Option Plan is received.
DESCRIPTION OF THE 1996 STOCK OPTION PLAN
PURPOSE
The purpose of the Plan is to enable the Company and its subsidiaries and
affiliates to attract and retain the best available personnel, to encourage them
to make substantial contributions to the Company's future success, and to ensure
that the Company can provide competitive compensation opportunities to its
personnel.
MATERIAL TERMS
The Plan provides for the grant of stock options and stock appreciation
rights ("SARs") to employees and non-employee directors of, and persons or
entities which provide significant services to, the Company, its subsidiaries,
and entities directly or indirectly controlled by or affiliated with the Company
and designated by the Compensation Committee (the "Committee"). Approximately
100 persons are currently eligible to participate in the Plan.
Options granted under the Plan may be "incentive stock options" ("ISOs"),
within the meaning of the Code, or nonqualified stock options ("NQSOs");
provided, however, that ISOs may only be granted to participants who are also
employees of the Company or a subsidiary corporation within the meaning of
Section 424 of the Code. The exercise price of the options or SARs will be
determined by the Committee when granted, but may not be less than the Fair
Market Value (as defined in the Plan) of the Common Stock on the date of grant.
The option exercise price may be paid (i) in cash or in shares of Common Stock
having a Fair Market Value equal to the option exercise price, or (ii) by
delivering to the Company a copy of irrevocable instructions to a stockbroker to
deliver promptly to the Company an amount of sale or loan proceeds sufficient to
pay the exercise price.
SARs may be granted as an alternative or a supplement to a related stock
option. SARs entitle its holder to be paid an amount equal to the Fair Market
Value of the Common Stock subject to the SAR on the date of exercise less the
exercise price of the SAR established at the time of grant.
The total number of shares of Common Stock which may be issued under the
Plan is limited to that number of shares of Common Stock which remain available
for grant of options under the 1987 Stock Option Plan on June 25, 1996, as
increased (i) annually on the last day of the Company's fiscal year, by an
amount equal to 0.70% of the aggregate of the total number of shares of Common
Stock outstanding on the last day of each fiscal year of the Company, commencing
with the fiscal year ending March 1, 1997 and ending with the fiscal year ending
February 25, 2001, and (ii) from time to time, by (A) that number of shares of
Common Stock which were or are reserved for issuance upon the exercise of
options granted under the Plan, or under the 1987 Stock Option Plan, which shall
have expired, been cancelled, or terminated for any reason without having been
exercised in full, and (B) that number of shares which are exchanged by an
optionee as full or partial payment to the Company of the purchase price of
shares being acquired through the exercise of a stock option granted under the
Plan or the 1987 Stock Option Plan. The objective of this limitation is to
restrict dilution attributable to the exercise of outstanding options granted
under the Plan and the 1987 Stock Option Plan to less than 10% of the issued and
outstanding Common Stock. In no event may a single optionee be granted options
or SARs covering more than 500,000 shares of Common Stock under the Plan during
any fiscal year of the Company.
12
<PAGE>
All grants under the Plan shall be nontransferable and may be exercised only
by the grantee or the grantee's heirs, legatees or personal representatives.
Each option or SAR granted under the Plan includes a limited right which will
allow the grantee to receive the value of the option or SAR automatically upon
the occurrence of a Change in Control, whether or not the option or SAR is then
vested. A Change in Control is generally limited to acquisitions of 50% or more
of the Common Stock or a change in more than 50% of the membership of the Board
of Directors, in either case, without the prior approval of the Board of
Directors. The Committee also has discretion to shorten the term of outstanding
options and SARs in connection with reorganization transactions which are
approved by the Board of Directors.
The Plan may be amended or terminated by the Board of Directors at any time,
provided that the maximum number of shares of Common Stock available for
issuance under the Plan may not be increased and the minimum exercise price of
options or SARs granted under the Plan may not be reduced, without the approval
of the Company's stockholders. The Plan terminates automatically five years from
the date the Plan is approved by the Company's stockholders and no options or
SARs may be granted under the Plan after that date.
ADMINISTRATION
The Plan is administered by the Committee. No member of the Committee is
eligible to participate in the Plan. The Committee may determine the terms and
conditions of options and SAR agreements, fix the number of options or SARs
granted and the number of shares subject to each option or SAR, set the
expiration date, vesting schedule and exercise price, and may accelerate the
vesting of outstanding options or SARs. Subject to the provisions of the Plan,
the Committee may construe the Plan, determine all questions thereunder and
adopt and amend such rules and regulations for the administration of the Plan as
it may deem desirable.
MARKET VALUE
The market value of the Common Stock at the close of trading on May 15, 1996
was $6.06 per share.
FEDERAL TAX CONSEQUENCES
Set forth below is a brief description of the federal income tax
consequences applicable to ISOs and NQSOs granted under the Plan.
ISOS
No taxable income is realized by the optionee upon the grant or exercise of
an ISO. If Common Stock is issued to an optionee pursuant to the exercise of an
ISO, and if no disqualifying disposition of such shares is made by such optionee
within two years after the date of grant or within one year after the transfer
of such shares to such optionee, then (1) upon sale of such shares, any amount
realized in excess of the option price will be taxed to such optionee as a
long-term capital gain and any loss sustained will be a long-term capital loss,
and (2) no deduction will be allowed to the optionee's employer for federal
income tax purposes.
If the Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of either holding period described above, generally (1)
the optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the fair market value of such shares at
exercise (or, if less, the amount realized on the disposition of such shares)
over the option price paid for such shares, and (2) the optionee's employer will
be entitled to deduct such amount for federal income tax purposes if the amount
represents an ordinary and necessary business expense. Any further gain (or
loss) realized by the optionee will be taxed as short-term or long-term capital
gain (or loss), as the case may be, and will not result in any deduction by the
employer.
13
<PAGE>
Subject to certain exceptions for disability or death, if an ISO is
exercised more than three months following termination of employment, the
exercise of the option will generally be taxed as the exercise of a NQSO.
For purposes of determining whether an optionee is subject to any
alternative minimum tax liability, an optionee who exercises an ISO generally
would be required to increase his alternative minimum taxable income, and
compute the tax basis in the stock so acquired, in the same manner as if the
optionee had exercised an NQSO. Each optionee is potentially subject to the
alternative minimum tax. In substance, a taxpayer is required to pay the higher
of his alternative minimum tax liability or his "regular" income tax liability.
As a result, a taxpayer has to determine his potential liability under the
alternative minimum tax.
In general, for purposes of the alternative minimum tax, the exercise of an
ISO will be treated essentially as if it were the exercise of a NQSO. As a
result, the rules of Section 83 of the Code relating to transfers of property,
including restricted property, will apply in determining the optionee's
alternative minimum taxable income. Consequently, an optionee exercising an ISO
with respect to unrestricted Common Stock will have income, for purposes of
determining the base for the application of the alternative minimum tax, in an
amount equal to the spread between the option price for the shares and the fair
market value of the shares on the date of exercise.
NQSOS
With respect to NQSOs: (1) no income is realized by the optionee at the time
the Option is granted; (2) generally, at exercise, ordinary income is realized
by the optionee in an amount equal to the difference between the option price
paid for the shares and the fair market value of the shares, if unrestricted, on
the date of exercise, and the optionee's employer is generally entitled to a tax
deduction in the same amount subject to applicable tax withholding requirements;
and (3) at sale, appreciation (or depreciation) after the date of exercise is
treated as either short-term or long-term capital gain (or loss) depending on
how long the shares have been held.
SPECIAL RULES APPLICABLE TO CORPORATE INSIDERS
As a result of the rules under Section 16(b) of the Securities Exchange Act
of 1934, "insiders" (as defined in the Exchange Act), as well as non-insiders,
generally will be taxed immediately upon the exercise of an NQSO as long as the
exercise occurs at least six months following the grant of the Option. In that
case, the general tax rules discussed above with respect to NQSOs will apply to
insiders as well as non-insiders. In the event that less than six months have
elapsed at the time of exercise of an NQSO, the insider will recognize ordinary
compensation income at the time such six month period elapses in an amount equal
to the excess, if any, of the fair market value of the shares on such date over
the exercise price.
NEW PLAN BENEFITS
Because the Plan is a discretionary plan, it is not possible to determine
what awards the Committee will grant under the Plan in the future. Options
granted to the Company's named executive officers under the 1987 Stock Option
Plan during the Company's fiscal year ended March 2, 1996 are set forth in the
"Option/SAR Grants in Last Fiscal Year" Table at page 6.
PROPOSED ACTION
Approval of the adoption of the Company's 1996 Stock Option Plan will
require the affirmative vote of the holders of a majority of the shares of
Common Stock present, in person or by proxy, at the Annual Meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION AND
APPROVAL OF THE 1996 STOCK OPTION PLAN.
14
<PAGE>
APPOINTMENT OF AUDITORS
The Company has selected Deloitte & Touche LLP as independent certified
public accountants to report on the consolidated financial statements of the
Company for the fiscal year ending March 1, 1997 and to perform such other
services as may be required of them. The Board of Directors has directed that
management submit the appointment of auditors for ratification by the
stockholders at the Annual Meeting. An affirmative vote of the holders of a
majority of the Common Stock, represented in person or by proxy and entitled to
vote at the Annual Meeting, is necessary for ratification. Representatives of
Deloitte & Touche LLP are expected to be present at the Annual Meeting, will
have the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate stockholder questions.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF
DELOITTE & TOUCHE LLP AS THE TOPPS COMPANY, INC. AUDITORS FOR FISCAL 1997
STOCKHOLDER PROPOSAL REGARDING A CLASSIFIED BOARD OF DIRECTORS
The Company has been informed that William Steiner intends to present a
proposal at the Annual Meeting. The proposal and supporting statement, for which
the Board of Directors and the Company accept no responsibility, are set forth
below. THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL FOR THE REASONS STATED AFTER
SUCH PROPOSAL AND SUPPORTING STATEMENT.
William Steiner, whose address is 4 Radcliff Drive, Great Neck, New York
11024 and who is a beneficial owner of 600 shares of Common Stock, submitted the
following resolution:
RESOLVED, that the stockholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to
declassify the Board of Directors so that all directors are elected
annually, such declassification to be effected in a manner that does not
affect the unexpired terms of directors previously elected.
The proponent has furnished the following statement setting forth the
reasons advanced by him in support of his proposal:
"At last year's annual meeting of stockholders a similar resolution was
approved by a significant number of the voting shares.
The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable
for its implementation of those policies. I believe that the classification
of the Board of Directors, which results in only a portion of the Board
being elected annually, is not in the best interests of the Company and its
stockholders.
The Board of Directors of the Company is divided into three classes
serving staggered three-year terms. I believe that the Company's classified
Board of Directors maintains the incumbency of the current Board and
therefore of current management, which in turn limits management's
accountability to stockholders.
The elimination of the Company's classified Board would require each new
director to stand for election annually and allow stockholders an
opportunity to register their views on the performance of the Board
collectively and each director individually. I believe this is the one of
the best methods available to stockholders to insure that the Company will
be managed in a manner that is in the best interests of the stockholders.
As a founding member of the Investors Rights Association of America I
believe that concerns expressed by companies with classified boards that the
annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by
15
<PAGE>
stockholders, are unfounded. In my view, in the unlikely event that
stockholders vote to replace all directors, this decision would express
stockholder dissatisfaction with the incumbent directors and reflect the
need for change."
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
BOARD OF DIRECTORS STATEMENT ON PROPOSAL
Under the Company's system of electing directors by classes, each director
serves a three-year term, each class is as nearly equal as possible and one of
the three classes is elected each year. This staggered election of directors is
a common practice which has been adopted by the stockholders of many major
corporations. It is specifically permitted by the laws of many states, including
the State of Delaware as well as the rules of the New York Stock Exchange.
The Board of Directors of the Company believes that a classified Board of
Directors promotes a continuity of policy and a stability of leadership by
assuring that experienced personnel familiar with the Company and its business
will be on the Board of Directors at all times. A classified Board of Directors
is intended to prevent precipitous changes in the composition of the Board of
Directors by preventing the election of an entire new Board of Directors in a
single year. Preventing such a precipitous change in control serves to moderate
changes in corporate policies, business strategies and operations because a
majority of the directors at all times will have had prior experience in the
management of the Company's business.
In addition, the Board of Directors believes that a classified Board serves
as an obstacle to any sudden and disruptive attempts to obtain control of the
Company. For example, throughout the 1980s there were a number of attempts by
various individuals and entities to acquire significant minority positions in
certain companies with the intent of obtaining actual control of the companies
by electing their own slate of directors, or of achieving some other goal, such
as the repurchase of their shares at a premium, by threatening to obtain such
control. The mere attempt to obtain control or to further some other personal
goal, even if unsuccessful, can seriously disrupt the conduct of the business of
a company and cause it to incur substantial expense. These insurgents often
threaten to elect a company's entire board of directors through a proxy contest
or otherwise, even though they do not own a majority of the company's
outstanding shares entitled to vote. The Company's classified Board of Directors
may discourage such purchases because its provisions operate to delay the
purchaser's ability to obtain control of the Board of Directors in a relatively
short period of time. The delay arises because, at a minimum, two successive
annual meetings are required in order to elect a majority of the Board of
Directors. For this reason, a person seeking to acquire control of the Company
also is encouraged to initiate such action through arm's length negotiations
with management and members of the Board of Directors, who are in a position to
negotiate a transaction that is fair to all of the Company's stockholders.
Under the corporation law of the State of Delaware, the state in which the
Company is incorporated the action recommended in the proposal could be taken
only if the Board of Directors recommended an amendment relating to Article
FIFTH of the Company's Restated Certificate of Incorporation and directed that
the amendment be submitted to a vote of the Company's stockholders. Under the
terms of the Company's Restated Certificate of Incorporation, an affirmative
vote of 66 2/3% of the outstanding shares of Common Stock entitled to vote would
be required at a future meeting of the Company's stockholders in order to amend
the staggered election of directors. The Board of Directors has not recommended,
and does not recommend, such an amendment. Therefore, a vote in favor of this
stockholder proposal is only an advisory recommendation to the Board of
Directors that it take steps to initiate such an amendment.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
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STOCKHOLDER PROPOSAL REGARDING COMPENSATION OF NON-EMPLOYEE DIRECTORS
The Company has been informed that Kenneth Steiner intends to present a
proposal at the Annual Meeting. The proposal and supporting statement, for which
the Board of Directors and the Company accept no responsibility, are set forth
below. THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL FOR THE REASONS STATED AFTER
SUCH PROPOSAL AND SUPPORTING STATEMENT.
Kenneth Steiner, whose address is 14 Stoner Avenue, Suite 2-M, Great Neck,
New York 11021 and who is a beneficial owner of 400 shares of Common Stock,
submitted the following resolution:
RESOLVED, that the shareholders recommend that the board of directors
take the necessary steps to ensure that from here forward all non-employee
directors should receive a minimum of fifty percent of their total
compensation in the form of company stock which cannot be sold for three
years.
The proponent has furnished the following statement setting forth the
reasons advanced by him in support of his proposal:
"A significant equity ownership by outside directors is probably the
best motivator for facilitating identification with shareholders.
Traditionally, outside directors, usually selected by management, were
routinely compensated with a fixed fee, regardless of corporate performance.
In today's competitive global economy, outside directors must exercise a
critical oversight of management's performance in furthering corporate
profitability. All too often, outside directors oversight has been marked by
complacency, cronyism, and inertia.
Corporate America has too many examples of management squandering
company assets on an extended series of strategic error. Meanwhile, Boards
of Directors stood by and passively allowed the ineptitude to continue, well
after disaster struck. They fiddled while Rome was burning.
When compensation is in company stock, there is a greater likelihood
that outside directors will be more vigilant in protecting their own, as
well as corporate, and shareholder interests.
What is being recommended in this proposal is neither novel nor untried.
A number of corporations have already established versions of such
practices, namely, Scott Paper, The Travelers, and Hartford Steam Boiler.
Robert B. Stobough, Professor of Business Administration at the Harvard
Business School, did a series of studies comparing highly successful to
poorly performing companies. He found that outside directors in the better
performing companies had significantly larger holdings of company stock than
outside directors in the mediocre performing companies.
It can be argued that awarding stock options to outside directors
accomplishes the same purpose of insuring director's allegiance to a
company's profitability, as paying them exclusively in stock. However, it is
our contention that stock options are rewarding on the upside, but offer no
penalties on the downside, where shareholders bear the full downside risks.
There are few strategies that are more likely to cement outside directors
with shareholder interests and company profitability than one which results
in their sharing the same bottom line."
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
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BOARD OF DIRECTORS STATEMENT ON PROPOSAL
The Company's Board of Directors shares the proponent's belief in the
importance of incentive-based compensation for directors. The Board also
believes that directors should have a financial stake in the Company. Indeed, as
indicated by the table on page 2, which sets forth the ownership of the
Company's Common Stock by management, all of the Company's non-employee
directors are beneficial owners of Common Stock.
The Company's 1994 Non-Employee Director Stock Option Plan encourages
ownership in the Company by providing for an initial option grant to
non-employee directors upon their being elected. The options do not become
exercisable until one year after grant, and then only for a period of five
years. In addition, the Company's proposed 1996 Stock Option Plan, which is
being put to a vote of the stockholders at this annual meeting, provides the
possibility of additional grants of stock options to non-employee directors on a
case-by-case basis. The options are not transferable and thus provide long-term
incentive, consistent with continuity in service on the Board. The only value
directors derive from these options is based on appreciation in the price of the
Company's Common Stock, a result all shareholders desire.
The Board believes that the existing director compensation structure offers
directors the flexibility to balance stock-related and cash compensation in a
manner compatible with their individual circumstances. The directors and the
Compensation Committee periodically review the compensation of the Company's
non-employee directors to ensure that it remains consistent with industry
standards and continues to be fair and appropriate in light of the obligations
and responsibilities of corporate directors. Mr. Steiner's proposal removes the
flexibility to determine the optimum form of compensation in order to attract
and retain the best directors possible. This can vary from time to time based on
general trends in directors' compensation. The proposed mandate that one-half of
non-employee director compensation be in common shares may result in
well-qualified individuals declining to serve as directors of the Company
because they consider a greater proportion of cash or other forms of
compensation offered by other corporations more desirable. The Board believes
that the directors' stock option plan already approved by the Company's
stockholders is a more appropriate means of accomplishing directors'
identification with shareholder interests than merely paying half of their
compensation in stock as suggested by Mr. Steiner.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
STOCKHOLDER PROPOSALS -- 1997 ANNUAL MEETING
Any proposals of stockholders of the Company intended to be included in the
Company's proxy statement and form of proxy relating to the Company's next
annual meeting of stockholders must be in writing and received by the Assistant
Treasurer of the Company at the Company's office at One Whitehall Street, New
York, New York 10004-2109 no later than January 24, 1997. In the event that the
next annual meeting of stockholders is called for a date that is not within 30
days before or after June 26, 1997, in order to be timely, notice by the
stockholder must be received not later than the close of business on the tenth
day following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs.
Any stockholder interested in making a proposal is referred to Article II,
Section 4 of the Company's Restated By-Laws.
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OTHER MATTERS
Management does not know of any matters other than the foregoing that will
be presented for consideration at the Annual Meeting. However, if other matters
properly come before the Annual Meeting, it is the intention of the persons
named in the enclosed proxy to vote thereon in accordance with their best
judgment.
SOLICITATION OF PROXIES
The entire cost of soliciting management proxies will be borne by the
Company. In addition to the use of the mails, proxies may be solicited
personally by directors, officers or regular employees of the Company, who will
not be compensated for their services. Management of the Company intends to
request banks, brokerage houses, custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of the Common Stock held of record
by such persons and entities.
The Company will provide to any stockholder of record at the close of
business on May 15, 1996, without charge upon written request to its Assistant
Treasurer at One Whitehall Street, New York, New York 10004, a copy of the
Company's Annual Report on Form 10-K for the fiscal year ended March 2, 1996.
By order of the Board of Directors,
Arthur T. Shorin
Chairman and Chief Executive Officer
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THE TOPPS COMPANY, INC.
1996 STOCK OPTION PLAN
1. PURPOSES.
The Topps Company, Inc. 1996 Stock Option Plan (the "Plan") is
intended to attract and retain the best available personnel, to encourage
participants to make substantial contributions to the future success of The
Topps Company, Inc., a Delaware corporation (the "Company") or to certain
entities directly or indirectly controlled by or affiliated with the Company,
and to ensure that the Company can provide competitive compensation
opportunities to its personnel. The above objectives will be effectuated through
the granting of certain options ("Options") to purchase shares of the Company's
common stock, par value $0.01 per share (the "Common Stock") and stock
appreciation rights ("SARs"). By meeting these objectives, the Plan is intended
to benefit the shareholders of the Company.
2. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a committee (the "Committee")
consisting of at least two persons, appointed by the Board of Directors of the
Company (the "Board of Directors"), each of whom shall be a "disinterested
person" within the meaning of and to the extent required by Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "1934 Act") and an "outside
director" for purposes of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). Within the limits of the express provisions of the
Plan, the Committee shall have the authority, in its discretion, to take the
following actions under the Plan:
(a) to make grants of "incentive stock options" ("ISOs") within
the meaning of Section 422 of the Code, Options which are not intended to be
ISOs ("Non-Qualified Options") and SARs and to determine the individuals to
whom, and the time or times at which, Options or SARs shall be granted, the
number of shares of Common Stock to be subject to each Option and whether such
Options shall be ISOs or Non-Qualified Options;
(b) to interpret the Plan;
(c) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(d) to determine the terms and provisions of the respective
Option or SAR agreements;
(e) to accelerate the vesting of any outstanding Options or
SARs;
<PAGE>
(f) to make grants to individuals who are foreign nationals or
who are employed outside the United States or both, on such terms and conditions
(which may be different than specified by the Plan) which the Committee deems
necessary or appropriate to assure the viability of such grants to meet the
purposes of the Plan and to comply with the laws or customs of the jurisdiction
in which such individual is a citizen or resident;
(g) to make all other determinations and take all other actions
necessary or advisable for the administration of the Plan.
In making such determinations, the Committee may take into account
the nature of the services rendered by such individuals, and such other factors
as the Committee, in its discretion, shall deem relevant. An individual to whom
an Option or SAR has been granted under the Plan is referred to herein as an
"Optionee". The Committee's determinations on the matters referred to in this
Section 2 shall be final, binding and conclusive for all purposes, upon all
persons, including without limitation, the Company, the stockholders, the
Committee and each member thereof, the directors, officers and employees of the
Company, and the Optionees and their respective successors in interest. The
Committee may designate persons other than members of the Committee or the Board
of Directors to carry out its responsibilities, subject to such limitations,
restrictions and conditions as it may prescribe, except that the Committee may
not delegate its authority with regard to the awarding of grants to persons
subject to Section 16 of the 1934 Act, unless otherwise permitted by Rule 16b-3
under the 1934 Act, or whose compensation may be subject to limitations on
deductibility under Section 162(m) of the Code. Further, the Committee may not
delegate its authority if such delegation would cause the Plan not to comply
with the requirements of Rule 16b-3 or any successor rule under the 1934 Act.
3. SHARES SUBJECT TO THE PLAN.
The Company shall at all times while the Plan is in force reserve
such number of shares of Common Stock as will be sufficient to satisfy the
requirements of outstanding Options and SARs which provide for settlement in
shares of Common Stock. Subject to adjustment as contemplated by Section 9
hereof, the total number of shares of Common Stock which may be issued under the
Plan shall not exceed that number of shares of Common Stock which remain
available for grant of options under The Topps Company, Inc. 1987 Stock Option
Plan, as amended (the "Prior Plan") on June 25, 1996, as increased (i) annually
on the last day of the Company's fiscal year, by an amount equal to 0.70% of the
aggregate of the total number of shares of Common Stock outstanding on the last
day of each fiscal year of the Company, commencing with the fiscal year ending
March 1, 1997 and ending with the fiscal year ending February 25, 2001, and (ii)
from time
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to time, by (A) that number of shares of Common Stock which were or
are reserved for issuance upon the exercise of Options granted under the Plan,
or under the Prior Plan, which shall have expired, been canceled, or terminated
for any reason without having been exercised in full, and (B) that number of
shares which are exchanged by an Optionee, either actually or by attestation, as
full or partial payment to the Company of the purchase price of shares being
acquired through the exercise of a stock option granted under the Plan or the
Prior Plan. The preceding sentence notwithstanding, the aggregate number of
shares for which ISOs may be granted under the Plan shall not exceed 1,500,000.
Shares available for issuance under the Plan which are not issued in a given
year shall be carried forward and continue to be available in the succeeding
year. Where an SAR is settled in cash or any form other than shares of Common
Stock, the shares in respect of which the SARs are settled shall not be deemed
issued and shall remain available for issuance under the Plan. The shares of
Common Stock to be issued under the Plan may be authorized but unissued shares
or shares of Common Stock that shall have been or may be reacquired by the
Company.
4. ELIGIBILITY.
(a) Incentive Stock Options ("ISOs") meeting the requirements of
Section 422 of the Code may be granted under the Plan only to employees of the
Company or a "subsidiary corporation" within the meaning of Section 424 of the
Code ("Subsidiary"). Non-Qualified Options and SARs may be granted under the
Plan only to employees and non-employee directors of, and persons or entities
which provide significant services to, (i) the Company, (ii) a Subsidiary, or
(iii) entities directly or indirectly controlled by or affiliated with the
Company and designated by the Committee ("Designated Entities"). The term
"Company," when used in the Plan, shall be deemed to include the Company,
Subsidiaries and Designated Entities.
(b) Nothing contained in the Plan shall be construed to limit the
right of the Company to adopt such other incentive arrangements as it may deem
advisable, including, without limitation, the right to grant stock options
otherwise than under the Plan for proper corporate purposes.
5. TERMS OF GRANTS.
Each Option or SAR granted under the Plan shall be evidenced by a
written agreement in such form and containing such terms and conditions (not
inconsistent with the Plan) as the Committee shall in its discretion adopt.
Option and SAR agreements need not contain identical terms and conditions and
may include, without limitation, expiration contingencies, forfeitability
contingencies based on continued employment with the Company, the meeting of
performance criteria, or any or all of the above.
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(a) The Committee shall fix the purchase price of the shares of
Common Stock subject to each Option and the exercise price of each SAR, at the
time such Option or SAR is granted; provided, that in no event shall the per
share purchase price of an Option or the exercise price of an SAR be less than
the Fair Market Value of a share of Common Stock on the date of grant, except
that in the case of an Option or SAR granted retroactively in tandem with or as
a substitution for another grant, the purchase price or exercise price may be
the same as the purchase price or exercise price of such other grant.
(b) The Committee shall fix the date or dates on which each
Option (or portion thereof) or SAR shall be exercisable at the time such Option
or SAR is granted.
(c) The Committee shall fix the expiration date of each Option or
SAR at the time such Option or SAR is granted. No Option or SAR shall be
exercisable after the expiration of ten (10) years from the date of its grant
and each Option and SAR shall be subject to earlier termination as determined by
the Committee.
(d) SARs and Options shall be exercised by the delivery to the
Company at its principal office or at such other address as may be established
by the Committee (Attention: Assistant Treasurer) of written notice of the
number of SARs or number of shares of Common Stock with respect to which the SAR
or Option is being exercised accompanied, in the case of an exercise of an
Option, by payment in full of the purchase price of such shares. Unless
otherwise determined by the Committee at the time of grant, payment may be made
(i) in cash, (ii) by certified check or bank cashier's check payable to the
order of the Company in the amount of such purchase price, (iii) by delivery to
the Company of shares of Common Stock having a Fair Market Value equal to such
purchase price, (iv) by irrevocable instructions to a broker to deliver promptly
to the Company the amount of sale or loan proceeds necessary to pay such
purchase price, to sell the shares of Common Stock to be issued upon exercise of
the Option and deliver the cash proceeds less commissions and brokerage fees to
the Optionee or to deliver the remaining shares of Common Stock to the Optionee,
or (v) by any combination of the methods of payment described in (i) through
(iv) above.
(e) An Optionee shall not have any of the rights of a holder of
the Common Stock with respect to the shares of Common Stock subject to an Option
until such shares are issued to such Optionee upon the exercise of such Option.
(f) Any grant under the Plan shall be non-transferable and,
accordingly, shall not be assignable, alienable, salable or otherwise
transferable by the Optionee except by will or the laws of descent and
distribution, and may be exercised, during the lifetime of an Optionee, only by
the Optionee. No Option or SAR
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granted under the Plan shall be subject to execution, attachment or other
process.
(g) For purposes of the Plan, as of any date when the Common
Stock is quoted on the National Association of Securities Dealers Automated
Quotation System National Market System ("NASDAQ-NMS") or listed on one or more
national securities exchanges, the "Fair Market Value" of the Common Stock as of
such date shall be deemed to be the closing price, on the day prior to the date
of grant, (or, in the case of an exercise by delivery of shares of Common Stock,
on the day prior to the delivery of shares to the Company) on the stock exchange
(including NASDAQ-NMS) with the largest volume of sales of Common Stock on such
day if sold on any exchange, or if not sold on any such exchange, the average of
the closing bid and asked prices of the Common Stock on the day prior to the
date of grant of the Option (or, in the case of an exercise by delivery of
shares of Common Stock, on the day prior to the delivery of shares to the
Company); or, if there are no such sales on that date, then on the last
preceding date on which such sales were reported. If the Common Stock is not
quoted on the NASDAQ-NMS or listed on an exchange, or representative quotes are
not otherwise available, the "Fair Market Value" of the Common Stock shall mean
the amount determined by the Committee to be the fair market value based upon a
good faith attempt to value the Common Stock accurately.
(h) In no event shall any single Optionee be granted Options or
SARs under the Plan covering more than 500,000 shares of Common Stock during any
partial or full fiscal year of the Company during which the Plan is in
existence, subject to adjustment as provided in Section 9 hereof.
6. SPECIAL PROVISIONS APPLICABLE TO ISOS.
The following special provisions shall be applicable to ISOs
granted under the Plan.
(a) No ISOs shall be granted under the Plan after ten (10) years
from the earlier of (i) the date the Plan is adopted, or (ii) the date the Plan
is approved by the Company's shareholders.
(b) ISOs may not be granted to a person who owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company, any Subsidiary, or any "parent corporation" (a "Parent") of the Company
within the meaning of Section 424(e) of the Code.
(c) If the aggregate Fair Market Value of the Common Stock with
respect to which ISOs are exercisable for the first time by any Optionee during
a calendar year (under all plans of the Company and its Parents and
Subsidiaries) exceeds $100,000, such ISOs shall be treated, to the extent of
such excess, as Non-Qualified Options. For purposes of the preceding sentence,
the
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Fair Market Value of the Common Stock shall be determined at the time the
ISOs covering such shares were granted.
7. STOCK APPRECIATION RIGHTS.
A SAR grant shall confer on an Optionee the right to receive in
shares of Common Stock, cash or a combination of both, up to the positive
difference, if any, between the Fair Market Value of a designated number of
shares of Common Stock on the date the SARs are exercised and the designated
exercise price of the SARs contained in the terms and conditions of the grant.
Shares issued in settlement of the exercise of an SAR shall be valued at their
Fair Market Value on the date of the exercise of the SAR.
8. LIMITED RIGHTS.
Each Option or SAR granted under the Plan shall include a limited
right ("Limited Right") which will allow the Optionee to receive the value of
the Option or SAR, as described below, upon a Change in Control as defined
below. Limited Rights shall provide for automatic exercise upon the occurrence
of a Change in Control, whether or not the related Option or SAR is then
exercisable in accordance with its terms, provided there is then a positive
difference between the Change in Control Price and the exercise price of the
Option or SAR.
Each Limited Right shall expire no later than the expiration of the
underlying Option or SAR and shall be transferable only when and to the extent
the underlying Option or SAR is transferable.
Except to the extent payment is due as a result of an automatic
exercise upon the occurrence of a Change in Control as provided in the preceding
paragraph, Limited Rights or the applicable portion thereof granted with respect
to a given Option or SAR shall terminate and cease to exist upon the expiration,
termination or forfeiture of the related Option or SAR. Upon the exercise of an
Option or SAR, the related Limited Right shall cease to exist to the extent of
the shares of Common Stock with respect to which such Option is exercised. Upon
the exercise of a Limited Right, the related Option or SAR shall expire. Limited
Rights shall be transferable only at such time or times and to the extent that
the underlying Option or SAR would be transferable.
Upon exercise of a Limited Right, the Optionee shall be entitled to
receive in cash, in lieu of exercising his Option or SAR, an amount in cash
equal in value to the excess of (i) the Change in Control Price, as defined
below, of a share of Common Stock over (ii) the purchase price or exercise price
specified in the related Option or SAR agreement, such excess to be multiplied
by the number of shares of Common Stock or SARs to which the Limited Right
relates.
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For purposes of this Section 8, the following definitions shall
apply:
Unless more limited definition is provided in the Option or SAR
agreement, a "Change in Control" shall be deemed to have occurred upon the first
to occur of the following:
(a) The acquisition by any person (including a group, within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act), other than the
Company, of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) of 50% or more of the combined voting power of the Company's
then outstanding voting securities, without the prior approval of the Board of
Directors;
(b) The first purchase under a tender offer or exchange offer,
other than an offer by the Company, pursuant to which shares of Common Stock
have been purchased, unless such tender offer or exchange offer was previously
approved by the Board of Directors; or
(c) During any period of 24 months or less, the persons who were
Continuing Directors immediately before the beginning of such period shall
cease, for any reason other than death, to constitute at least a majority of the
Board of Directors, provided that any director who was not a director at the
beginning of such period shall be deemed to be a Continuing Director if clause
(ii) of the definition of "Continuing Director" applies.
"Change in Control Price" shall mean the highest price per share of
Common Stock paid in any transaction in connection with a Change in Control of
the Company.
"Continuing Director" shall mean any member of the Board of
Directors of the Company who either (i) is a member of the Board of Directors on
the date this Plan is adopted, or (ii) was nominated for election to the Board
of Directors by, or on the recommendation of or with the approval of, at least
two-thirds of the directors who then qualified as Continuing Directors.
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event that the outstanding shares of Common Stock are
changed by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split, combination, exchange of shares, spin-off or
other distribution (other than normal cash dividends) of Company assets to
shareholders, a proportionate adjustment, if any, shall be made by the
Committee, as it deems appropriate to reflect such change, in the aggregate
number of shares of Common Stock available under the Plan, the maximum number of
shares covered by Options or SARs granted to any Optionee during any partial or
full calendar year,
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in the number of shares of Common Stock and price per share of Common Stock
subject to outstanding Options, and in the number and exercise price of
outstanding SAR grants. If the Company shall be sold, reorganized, consolidated,
or merged with another corporation (a "Corporate Event"), an Optionee shall be
entitled to receive upon the exercise of his Option or SAR the same number and
kind of shares of stock or the same amount of property, cash or securities as he
would have been entitled to receive upon the occurrence of any such Corporate
Event as if he had been, immediately prior to such event, the holder of the
number of shares of Common Stock covered by his Option; provided, however, that
the Committee may, in its discretion, unless it is intended that pooling of
interests accounting treatment apply, accelerate the exercisability of
outstanding Options and SARs to any date within 30 days prior to or concurrent
with the occurrence of such Corporate Event and, in connection therewith, may
shorten the term of outstanding Options and SARs to the date of the occurrence
of such Corporate Event.
(b) If fractions of a share would result from any such
adjustment, the adjustment shall be revised to the next lower whole number of
shares.
10. FURTHER CONDITIONS OF EXERCISE.
(a) Unless prior to the exercise of an Option the shares of
Common Stock issuable upon such exercise are the subject of a registration
statement filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), and there is then in
effect a prospectus filed as part of such registration statement meeting the
requirements of Section 10(a)(3) of the Securities Act, the notice of exercise
with respect to such Option shall be accompanied by a representation or
agreement of the Optionee to the Company to the effect that such shares are
being acquired for investment only and not with a view to the resale or
distribution thereof, or such other documentation as may be required by the
Company, unless, in the opinion of counsel to the Company, such representation,
agreement or documentation is not necessary to comply with the Securities Act.
(b) Anything in subparagraph (a) of this Section 10 to the
contrary notwithstanding, the Company shall not be obligated to issue or sell
any shares of Common Stock until they have been listed on each securities
exchange on which the shares of Common Stock may then be listed and until and
unless, in the opinion of counsel to the Company, the Company may issue such
shares pursuant to a qualification or an effective registration statement, or an
exemption from registration, under such state and federal laws, rules or
regulations as such counsel may deem applicable. The Company shall use
reasonable efforts to effect such listing, qualification and registration, as
the case may be.
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11. TERMINATION OF SERVICE.
Except as otherwise specifically provided by the Committee in the
Option or SAR agreement, Options and SARs may be exercised only within the
period set forth below. An Option or SAR held by a director shall be exercisable
only if the Optionee has maintained continuous status as a member of the Board
of Directors and an Option or SAR held by an employee shall be exercisable only
if the Optionee has maintained continuous status as an employee since the date
of grant. No Option or SAR shall be exercisable after termination of an
Optionee's membership on the Board of Directors or employment with the Company
unless such termination occurs by reason of retirement with the consent of the
Board of Directors, death or disability (as defined in Section 22(e)(3) of the
Code). In the event of termination of service by retirement with the consent of
the Board of Directors, or disability, the Options or SARs held by such
individual which were otherwise exercisable on the date of his termination shall
expire unless exercised by such individual within a period of three months after
the date of termination by retirement or one year after the date of termination
by disability. In the case of the death of an Optionee while employed by the
Company or within three months of termination of service by retirement with the
consent of the Board of Directors, his Options or SARs may be exercised by his
heirs, legatees or personal representatives, within a period of one year after
the date of death. In the event of the death of an Optionee within one year
after the termination of employment due to disability, his Options or SARs may
be exercised by his heirs, legatees or personal representatives within a period
of one year after the Optionee's date of death. Options or SARs granted under
the Plan shall not be affected by any change of employment so long as the
Optionee continues to be an employee of the Company, a Subsidiary or a
Designated Entity. Notwithstanding the foregoing, the Committee may provide in
an Option or SAR agreement for the continued exercisability of Options after
termination of employment for such other period or periods and on such other
terms and conditions as the Committee determines to be appropriate. In no event,
however, shall any Option or SAR be exercisable after 10 years from the date it
was granted.
12. TERMINATION, MODIFICATION AND AMENDMENT.
(a) The Plan (but not Options or SARs previously granted under
the Plan) shall terminate five (5) years from the date the Plan is approved by
the Company's stockholders and no Option or SAR shall be granted after
termination of the Plan.
(b) The Plan may at any time be terminated or, from time to time,
be suspended, modified or amended by the Board of Directors; provided, however,
that the Board of Directors shall not, without approval by the affirmative vote
of the holders of a majority of the voting securities of the Company present in
person or represented by proxy and entitled to vote at a meeting
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duly held in accordance with Delaware law, (i) increase (except as provided by
Section 7) the maximum number of shares of Common Stock as to which Options or
SARs may be granted under the Plan, or (ii) reduce the minimum purchase price or
exercise price at which Options or SARs may be granted under the Plan.
(c) No termination, modification or amendment of the Plan may
materially and adversely affect the rights conferred under the Plan or any
related grant agreement with respect to outstanding Options or SAR grants
without the written consent of the affected Optionee.
13. EFFECTIVENESS OF THE PLAN.
The Plan shall become effective upon adoption by the Board of
Directors, subject to approval by a proper vote of the stockholders of the
Company. Options may be granted under the Plan prior to receipt of such
approval, provided that, in the event such approval is not obtained, the Plan
and all Options and SARs granted under the Plan shall be null and void and of no
force or effect.
14. NOT A CONTRACT.
Nothing contained in the Plan or in any Option or SAR agreement
executed pursuant hereto shall be deemed to confer upon any Optionee any right
to continue as a member of the Board of Directors, or to remain in the employ or
service of the Company, any Subsidiary or any Designated Entity.
15. GOVERNING LAW.
The Plan shall be governed by the laws of the State of Delaware
without reference to principles of conflict of laws.
16. WITHHOLDING.
As a condition to the exercise of any Option or SAR, the Committee
may require that an Optionee satisfy, through deduction or withholding from any
payment of any kind otherwise due to the Optionee, or through such other
arrangements as are satisfactory to the Committee, the full amount of all
federal, state and local income and other taxes of any kind required or
permitted to be withheld in connection with such exercise. The Committee may
permit shares of Common Stock to be used to satisfy tax withholding requirements
and such shares shall be valued at their Fair Market Value as of the settlement
date of the Option or SAR being exercised.
17. OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS.
Unless otherwise determined by the Committee, compensation
recognized upon exercise of Options or SARs or upon settlement of rights under
the Plan shall not be deemed a part of
10
<PAGE>
the recipient's compensation for purposes of calculating payments or benefits
from any Company benefit or severance program (or severance pay law of any
country). The above notwithstanding, the Company may adopt other compensation
programs, plans or arrangements as it deems appropriate or necessary.
18. UNFUNDED PLAN.
Unless otherwise determined by the Committee, the Plan shall be
unfunded and shall not create (or be construed to create) a trust or a separate
fund or funds. The Plan shall not establish any fiduciary relationship between
the Company and any person. To the extent any person holds any rights by virtue
of a grant awarded under the Plan, such right shall be no greater than the right
of an unsecured general creditor of the Company.
19. SUCCESSORS AND ASSIGNS.
The Plan shall be binding on all successors and assigns of a
participant, including, without limitation, the estate of such participant and
the executor or administrator of such estate, or any receiver or trustee in
bankruptcy or representative of the participant's creditors.
11
<PAGE>
P R O X Y THE TOPPS COMPANY, INC.
The undersigned hereby appoints ARTHUR T. SHORIN, WM. BRIAN LITTLE AND JOHN
J. LANGDON, and each of them, the attorneys and proxies of the undersigned, with
full power of substitution, to vote on behalf of the undersigned all the shares
of stock of THE TOPPS COMPANY, INC., which the undersigned is entitled to vote
at the Annual Meeting of Stockholders of the Company to be held at Chase
Manhattan Bank, 1 Chase Manhattan Plaza, Street Floor Auditorium, New York, New
York on Wednesday, June 26, 1996 at 10:30 a.m. (local time) and at all
adjournments thereof, hereby revoking any proxy heretofore given with respect to
such stock. The undersigned authorizes and instructs said proxies to vote as
follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS / / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees listed
below) below
SEYMOUR P. BERGER, STEPHEN D. GREENBERG, STANLEY TULCHIN
<CAPTION>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
_______________________________________________________________________________________________________________________
2. To ratify and approve the 1996 Stock Option Plan.
<S> <C> <C> <C>
/ / FOR / / AGAINST / / ABSTAIN
<CAPTION>
3. To ratify the appointment of Deloitte & Touche LLP, as auditors for The Topps Company, Inc. for the fiscal
year ending March 1, 1997.
<S> <C> <C> <C>
/ / FOR / / AGAINST / / ABSTAIN
Directors recommend a vote FOR Items 1, 2 and 3
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
(CONTINUED FROM REVERSE SIDE, WHICH SHOULD BE READ BEFORE SIGNING)
<CAPTION>
4. Stockholder proposal regarding classification of the Board of Directors.
<S> <C> <C> <C>
/ / FOR / / AGAINST / / ABSTAIN
<CAPTION>
5. Stockholder proposal regarding compensation of non-employee Directors.
<S> <C> <C> <C>
/ / FOR / / AGAINST / / ABSTAIN
Directors recommend a vote AGAINST Items 4 and 5.
</TABLE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN AND IN THE DISCRETION OF THE AFORMENTIONED PROXIES ON ALL OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING. IF NO INSTRUCTION TO THE CONTRARY IS
INDICATED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AND AGAINST
PROPOSALS 4 AND 5.
Dated: _____________________, 1996
__________________________________
__________________________________
Please sign exactly as your name
or names appear at the left.
PLEASE RETURN THIS PROXY IN THE ACCOMPANYING BUSINESS REPLY ENVELOPE EVEN IF YOU
EXPECT TO ATTEND IN PERSON.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
