<PAGE>
[TOPPS LOGO]
THE TOPPS COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 25, 1997
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 25, 1997 at
10:30 A.M., New York time, for the following purposes:
1. To elect two directors to serve for three-year terms until the
annual meeting of stockholders to be held in the year 2000;
2. To ratify the appointment by the Board of Directors of Deloitte &
Touche LLP as independent auditors for the Company for the fiscal
year ending February 28, 1998;
3. 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;
4. 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 non-employee directors of the
Company;
5. To consider, if properly brought before the meeting, a stockholder
proposal, opposed by the Board of Directors and management, regarding
the retention of an investment bank to explore alternatives to
enhance the value 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, 1997
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 23, 1997
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 25, 1997
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 1, 1997 is being mailed to all stockholders with this Proxy Statement. The
approximate mailing date of this Proxy Statement is May 23, 1997.
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 of the
appointment by the Board of Directors of Deloitte & Touche LLP as auditors for
the Company for the fiscal year ending February 28,1998, and (iii) against all
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, 1997, the Company had outstanding 46,400,010 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, 1997 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, 1997 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 "Executive
<PAGE>
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)........................... 2,393,989 5.1%
Seymour P. Berger(1)(2)............................. 360,768 *
Ronald L. Boyum(3).................................. 131,500 *
Allan A. Feder(2)(4)................................ 67,000 *
Stephen D. Greenberg(4)............................. 52,000 *
John J. Langdon(1)(3)............................... 900,033 1.9
Wm. Brian Little(4)(5).............................. 551,487 1.2
David M. Mauer.(4).................................. 19,000 *
John Perillo(3)..................................... 90,000 *
Jack H. Nusbaum(4).................................. 54,000 *
Stanley Tulchin(4).................................. 81,175 *
The Capital Group Companies, Inc.(6)
333 South Hope Street
Los Angeles, California 90071.................. 6,016,300 13.0
Investors Group, Inc.(7)
One Canada Centre
447 Portage Avenue
Winnipeg, Manitoba R3C 3B6 Canada.............. 2,864,800 6.2
All directors and executive officers as a group
(22 persons)................................... 5,848,200 12.0
</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 200,000 shares of Common Stock beneficially owned by Mr.
Shorin, all of the shares of Common Stock beneficially owned by Messrs.
Boyum, and Perillo and 890,033 shares of Common Stock beneficially owned
by Mr. Langdon, each of Messrs. Shorin, Boyum, Perillo and Langdon has
the right to acquire such shares upon the exercise of options.
(4) With respect to 52,000 shares of Common Stock beneficially owned by
each of Messrs. Feder, Little and Nusbaum, 45,000 shares of Common Stock
beneficially owned by Mr. Greenberg, 31,000 shares of Common Stock
beneficially owned by Mr. Tulchin, and 14,000 shares of common stock
beneficially owned by Mr. Mauer each of Messrs. Feder, Little, Nusbaum,
Greenberg, Tulchin and Mauer has the right to acquire such shares upon
the exercise of options.
(5) Does not include 17,517 hares 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 12, 1997 with the Securities
and Exchange Commission (the "SEC") by The Capital Group Companies, Inc.
(7) Based upon information provided to the Company by Investor Group Financial
Services Inc., a Canadian investment management company ("Management
Company"), which provides investment management for Investors U.S. Growth
Fund, a Canadian unit trust mutual fund ("Growth Fund"),
2
<PAGE>
and Investors Global Fund, a Canadian unit trust mutual fund (Global fund
and, together with Growth Fund, the "Funds") Growth Fund and Global
Fund beneficially own 2,238,800 and 626,000 shares of Common Stock,
respectively. According to a Schedule 13D, dated June 8, 1995 filed by
Management Company and the Funds, as amended, 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
There are currently nine members of the Board of Directors which is
divided into three classes (currently four, three and two members), with each
class serving for a period of three years. One class of Directors is elected
by the stockholders annually. This year Messrs. Arthur T. Shorin, and Wm.
Brian Little have been nominated to stand for re-election for a term that
expires at the annual meeting of stockholders to be held in the year 2000.
There is one vacancy on the Board of Directors, which 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 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
- ------ ------------------------------------------------ --------------------
Nominees to Serve in Office Until
2000
<S> <C>
Arthur T. Shorin................... Chairman of the Board and Chief Executive Officer 1960
of the Company and its predecessor since 1980.
Mr. Shorin is 61 years of age.
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. and Department 56, Inc. Mr. Little is 55
years of age.
3
<PAGE>
Business Experience Director of the
During Past 5 Years, Company or its
Name Age and Other Information Predecessors Since
- ------ ------------------------------------------------ --------------------
Directors to Continue in Office
Until 1998
John J. President and Chief Operating Officer of the 1989
Langdon....................... Company since 1988. Mr. Langdon is 49 years of
age.
Allan A. An independent business consultant for more than 1992
Feder........................ the past five years 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
65 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 48 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 more
than twenty-five years. Mr. Nusbaum is also a
Director of W. R. Berkley Corporation; Fine Host
Corporation; Pioneer Companies, Inc.; Prime
Hospitality Corp.; and Hirschl & Adler
Galleries, Inc. Mr. Nusbaum is 56 years of age.
Directors to Continue in Office
Until 1999
Seymour P. Berger.................. Vice President - Sports and Licensing of the 1991
Company since 1974. Mr. Berger is 73 years of
age.
Stephen D. Greenberg............... President of Classic Sports Network, Inc. (a cable 1993
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 48 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 70 years of age.
</TABLE>
4
<PAGE>
The Board of Directors met five times during the fiscal year ended
March 1, 1997. Each of the Directors who served during such period, except for
Mr. 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. Theodore J. Forstmann resigned
as a director as of April 30, 1996 due to severe time constraints.
The Company has a Compensation Committee responsible for recommending
officers' remuneration and administering The Topps Company, Inc. 1996 Stock
Option Plan (as ratified on June 26, 1996), and with respect to options granted
prior to June 26, 1996, the 1987 Stock Option Plan. The members of the
Compensation Committee for the fiscal year ended March 1, 1997 were Messrs.
Wm. Brian Little and Stanley Tulchin, neither of whom is an employee of the
Company. The Compensation Committee held nine meetings during the fiscal year
ended March 1, 1997.
The Company has an Audit Committee which makes recommendations
regarding the appointment 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 1, 1997 were Messrs. Allan A. Feder,
Stanley Tulchin, Stephen D. Greenberg and David M. Mauer (from April 2, 1996).
During the fiscal year ended March 1, 1997, 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.
Section 16(a) Reporting Compliance
The Company's executive officers, directors and ten percent stockholders
are required under the Securities and Exchange Act of 1934, as amended, to file
reports of ownership and changes in ownership with the SEC. Based solely upon
its review of the copies of 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 1, 1997.
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 Directors Stock Option Plan, on
June 26, 1996 each of Messrs. Allan A. Feder, Stephen D. Greenberg, Wm. Brian
Little, David M. Mauer, 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 $5.25 per share. The options are exercisable after
June 25, 1997 and have a term of five years from the date of grant.
Pursuant to the 1987 Stock Option Plan, on March 5, 1996 Mr. David M.
Mauer, received options to purchase 21,000 shares of Common Stock at a price of
$4.75 per share. The options vest over a three-year term beginning
March 4, 1997 and have a term of ten years from the date of grant.
5
<PAGE>
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 1, 1997.
Summary Compensation Table(1)
<TABLE>
<CAPTION>
Annual Compensation Awards Long-Term Compensation
---------------------------------- --------------------------------------
Fiscal Securities All Other
Year Salary(2) Bonus Underlying Options/ Compensation
Name and Principal Ended ( $) ($) SARs (#) ($)
- ------------------- ------ --------- ------ ------------------- -------------
Position
<S> <C> <C> <C> <C>
Arthur T. Shorin....... 1997 $822,269
Chairman and Chief 1996 838,082 400,000
Executive Officer 1995 822,269 500,000(3)
John J. Langdon........ 1997 402,155 14,115(4)
President and Chief 1996 409,889 20,000 14,115(4)
Operating Officer 1995 554,981 175,000 14,115(4)
Seymour P. Berger...... 1997 257,097
Vice President - 1996 262,041
Sports and Licensing 1995 257,097
Ronald L. Boyum........ 1997 234,511 40,000
Vice President - 1996 222,643 13,500
Marketing and Sales 1995 197,492 15,000
John Perillo..............1997 196,954 33,000
Vice President - 1996 187,375 7,500
Operations 1995 172,210 15,000
</TABLE>
- ---------------------
(1) Because none of the named executive officers received (a) perquisites and
other personal benefits (including, for certain of the named executive
officers, medical reimbursements, moving expenses and car use allowances
in excess of the lesser of $50,000 or 10% of such officer's annual salary
and bonus, (b) any other compensation required to be reported or (c) any
restricted stock awards, information relating to "Other Annual
Compensation" and "Restricted Stock Awards" is inapplicable and has
therefore been omitted from the table.
(2) The Company's fiscal year ended March 2, 1996 consisted of 53 weeks,
while the two other fiscal years in the table contained 52 weeks.
Therefore, salary levels for the fiscal year ended March 2, 1996 reflect
an additional one week's salary.
(3) All cash-only SARs granted in fiscal 1995 were cancelled without payment
as of March 29, 1995.
(4) This amount represents the payment of premiums on a life and disability
insurance policy maintained by the Company on behalf of Mr. Langdon.
See "Employment Agreements."
6
<PAGE>
Option/SAR Grants in Last Fiscal Year
There were no grants of stock options or stock appreciation rights
("SARs") made during the fiscal year ended March 1, 1997 to any of the executive
officers named in the Summary Compensation Table.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
The following table provides information regarding the exercise of
options/SARs during the fiscal year ended March 1, 1997 and the number and value
of unexercised options and SARs held at fiscal year end by each of the executive
officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
Shares Acquired Value ---------------------------- -----------------------------
Name on Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Arthur T. Shorin...... 0 0 200,000 200,000 0 0
John J. Langdon....... 0 0 890,033 17,467 $101,175 0
Seymour P. Berger..... 0 0 0 0 0 0
Ronald L. Boyum....... 0 0 131,500 14,000 0 0
John Perillo.......... 0 0 90,000 10,000 0 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:
<TABLE>
<CAPTION>
Annual Retirement Benefit for Specified
Years of Credited Service(1)(2)
Highest Average
Compensation(3) 15 20 25 30 35 40 50
- --------------------- -------- -------- -------- --------- -------- -------- --------
<C> <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 $125,000 at present and will be
adjusted to reflect cost-of-living increases in 1998 and succeeding plan
years.
7
<PAGE>
(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 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 $160,000 (as adjusted to reflect cost-of-living increases) is
disregarded for purposes of determining highest average compensation of
participants in the Retirement Plan for 1997. Benefits accrued as of
the last day of the plan year beginning in 1993 on the basis of
compensation in excess of $160,000 are preserved. The $160,000 limit
will be adjusted for cost-of-living increases in 1998 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 $160,000 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 1, 1997, the persons named in the Summary Compensation Table
were credited with the following years of service: Mr. Shorin - 38; Mr.
Langdon - 8; Mr. Berger - 49; Mr. Boyum - 7; and Mr. Perillo- 20.
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 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 through
1998 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 1998, Mr. Shorin has agreed to limit his target bonus
opportunity to 20% of annual base salary. Mr. Langdon's Agreement provides for
a current annual base salary of $425,000 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
8
<PAGE>
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 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 and
grants of stock options for all executive officers.
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 for the executives named in the Summary Compensation
Table, the Committee considers the competitive compensation analysis of outside
consultants and their recommendations regarding the base salary and bonus levels
of executives with similar responsibilities in companies of similar size,
business and complexity. The Committee also considers each executive's
experience in his position at the Company and his performance over a sustained
period of time.
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 limited to 4% for fiscal years 1994 and 1995
and was waived for fiscal years 1996 and 1997. 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.
Bonuses are awarded to reward and retain key executives and are
generally contingent upon the Company's financial performance during the past
year as reflected in the Company's achievement of pre-established earnings
objectives. 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 was consensually limited to 20% of base
salary for the Company's 1995 through 1997 fiscal years. Bonus targets were
not attained for fiscal 1997 and no bonus was paid to Mr. Shorin for this
period.
Long-term incentive compensation opportunities are provided through
grants of stock options under the 1996 Stock Option 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. No grants were made during the 1997 fiscal year to any of the executive
officers named in the Summary Compensation Table.
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
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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
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 2, 1992 and the accumulation and reinvestment of
dividends paid thereafter through March 1, 1997.
[Graph]
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).
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CERTAIN RELATIONSHIPS
Jack H. Nusbaum, a director, is a partner in the law firm of Willkie
Farr & Gallagher, outside counsel to the Company.
APPOINTMENT OF AUDITORS
The Board of Directors has retained Deloitte & Touche LLP as independent
certified public accountants to report on the consolidated financial statements
of the Company for the fiscal year ending February 28, 1998 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 UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE TOPPS COMPANY, INC. AUDITORS
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
set forth below in the Board of Directors Statement in Opposition .
William Steiner, whose address is 4 Radcliff Drive, Great Neck, New
York 11024 and who is a beneficial owner of 1500 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:
"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 one of the best methods
available to the stockholder to insure that the Company will be
managed in a manner that is in the best interests of the
stockholders.
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A classified board might also be seen as an impediment
to a potential takeover of the Company's stock at a premium
price. With the inability to replace the majority of the
Board at one annual meeting, an outside suitor might be
reluctant to make an offer in the first place.
I am a founding member of the Investors Rights
Association of America and I believe the 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
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 UNANIMOUSLY RECOMMENDS VOTING "AGAINST"
THIS PROPOSAL.
Board of Directors' Statement in Opposition to the Stockholder Proposal
This proposal has been introduced by the same proponent and rejected by
the stockholders at both the 1995 and 1996 Annual Meetings.
As explained previously, 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 class 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 the rules of the
New York Stock Exchange.
The Board of Directors of the Company believes that a classified Board
of Directors promotes continuity of policy and 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. It is through such continuity
that the Board can devise and implement policies to enhance stockholder value.
In addition, the Board of Directors believes that a classified Board
protects stockholders from precipitous changes in the Board and from 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 forcing the company to
repurchase its shares at a premium, by threatening to obtain such control. A
proxy fight, regardless of whether successful, can seriously distract a
company's management and board of directors and impose substantial costs on the
company. A classified board is not intended to prevent takeovers but rather to
force potential acquirers to negotiate at arm's length and in good faith with
the Board. Through such negotiations, the Board will be in the best position to
act in the best interests of all 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 UNANIMOUSLY RECOMMENDS VOTING "AGAINST"
THIS PROPOSAL.
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STOCKHOLDER PROPOSAL REGARDING COMPENSATION OF NON-EMPLOYEE DIRECTORS
The Company has been informed that Glenn Freedman 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
set forth below in the Board of Directors Statement in Opposition.
Glenn Freedman, whose address is 2 Spruce Street, Great Neck, New York
11021 and who is a beneficial owner of 460 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 (50%) 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 non-employee directors
is probably the best motivator for enhancing shareholder value
and facilitating identification with shareholders.
Traditionally, non-employee directors, 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 fostering corporate profitability and
shareholder value. All too often, outside directors'
oversight has been too lax, and their actions were too late
to effect any meaningful change.
The history of public corporations in America has too
many examples of directors passively allowing strategic
management errors to occur. This results in eroding
corporate and shareholder value.
When compensation takes the form of company stock,
there is a greater likelihood that outside directors will
exercise greater diligence 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, Alexander &
Alexander, Baxter International, Hartford Steam Boiler, James
River, McGraw Hill, NYNEX, RJR Nabisco, Sunbeam Corporation,
The Travelers, Westinghouse, Woolworth and Zurn Industries.
In June, 1995, the National Association of Corporate
Directors' (NACD) Blue Ribbon Commission on Director
Compensation issued a report urging that public company
directors be paid their annual fees primarily in company
stock to more closely align their interests with those of
shareholders. Several widely-reported empirical studies
have confirmed the potential efficacy of this approach.
Albert J. Dunlap, a Commission member and Chairman and
Chief Executive Officer of Sunbeam Corporation has stated:
'What kind of contribution will the directors ever
make if they don't have a vested interest in the
company's financial success. They've got to show
that they believe in the company, that they're
willing to stand behind their choices......Any
director who isn't willing to be paid [one hundred]
percent in stock doesn't believe in the company.'
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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 in
stock. However, it is my contention that stock options
entail no downside risk, i.e., while stock options offer
rewards should the stock increase, if the stock price
decreases, no penalties ensue. There are few strategies
that are more likely to align the interests of outside
directors with those of shareholders than one which
results in their sharing of the same bottom line.
I URGE YOUR SUPPORT. VOTE FOR THIS RESOLUTION."
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "AGAINST" THIS
PROPOSAL.
Board of Directors' Statement in Opposition to the Stockholder Proposal
At the 1996 Annual Meeting a similar proposal was introduced and was
rejected by the stockholders.
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 they are granted, and then only for a period of
five years. In addition, the Company's 1996 Stock Option Plan provides for
additional grants of stock options to non-employee directors on a case-by-case
basis. The options are not transferable and thus act as a long-term incentive,
consistent with continuity of 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 stockholders 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. Freedman's proposal removes
the Company's flexibility to determine the optimum form of compensation to
attract and retain the best directors possible. In that regard, it is important
to note that the cash compensation paid to non-employee directors has not been
increased in the past ten years.
The Board believes that the directors' stock option plans already
approved by the Company's stockholders is a more appropriate means of aligning
directors' and stockholder interests. In addition, the Board believes it is
critical to retain the flexibility to alter director compensation as industry
practice changes. In sum, the Board believes that its current system of
compensating non-employee directors is fair, appropriate and in the best
interest of stockholders.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "AGAINST" THIS
PROPOSAL.
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STOCKHOLDER PROPOSAL REGARDING THE RETENTION OF AN INVESTMENT BANK TO
EXPLORE ALTERNATIVES TO ENHANCE THE VALUE OF THE COMPANY
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
set forth below in the Board of Directors Statement in Opposition.
Kenneth Steiner, whose address is 14 Stoner Avenue, Suite 2-M, Great
Neck, New York 11021 and who is a beneficial owner of 1400 shares of Common
Stock, submitted the following resolution:
"Resolved: that the shareholders of the Company
recommend and deem it desirable and in their best interest
that the Board of Directors immediately engage the services
of a nationally recognized investment banker to explore all
alternatives to enhance the value of the Company. These
alternatives should include, but not be limited to, the
possible sale, merger or other transaction involving
the Company."
The Proponent has furnished the following statement setting forth the
reasons advanced by him in support of his proposal:
"In support of the above resolution, the proponent believes
that in view of the unacceptable performance of the Company
over the past five years, the deplorable stock price, and in
my opinion, ineffective management, the Board of Directors
should take immediate action to engage the services of an
investment banker to explore all alternatives to enhance the
value of the Company.
I am co-founder of the Investors Rights Association
of America and it is my opinion that the value of the Company
can be enhanced if the above resolution is carried out and the
shareholders would at long last be able to salvage meaningful
monetary rewards for their patience and long suffering.
Nell Minow, a highly acclaimed corporate governance
specialist, and principal of the LENS Fund, which specializes
in increasing the value of under-performing companies, has
stated:
'Companies can only justify asking investors to take
the risk of investing in equities by delivering a competitive
rate of return on the invested capital. When a company's
management and board cannot meet that goal, they owe it to
their investors to submit themselves to an independent
evaluation by an outside firm, to insure that all options
are objectively evaluated.
If a company's performance lags over a sustained
period, it is time for the shareholders to send a message
of no confidence to the board, reminding them that they
have to hold management - and themselves- to a higher
standard'.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION."
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING AGAINST THIS
PROPOSAL.
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Board of Directors Statement in Opposition to the Stockholder Proposal
Your Board and the Company's officers are dedicated to maximizing
stockholder value. Accordingly, the Company already maintains close relations
with a nationally known investment bank that is keenly interested in helping the
Company achieve that business objective. Under appropriate circumstances, the
Company avails itself of the expertise provided by outside advisors, including
other investment banks, lawyers, accountants and consultants. The Board
considers the costs and benefits of hiring investment banks as well as other
professional advisors in connection with various matters undertaken by the
Company. At this time, the Board does not believe that hiring an investment bank
for the purpose outlined in the proposal would serve the Company's interests in
maximizing stockholder value in a meaningful respect.
The Board and management are continuously considering various measures
designed to increase stockholder value. Among the steps taken by the Company
during 1996 were the closure of the Company's plant in Duryea, Pennsylvania, the
outsourcing of certain production requirements, the reorganization of the
Company's sales force and the expansion of the Company's international
operations.
In conclusion, the Board of Directors does not believe that hiring a
new investment bank would be in the best interests of the Company and its
stockholders at this time.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING AGAINST THIS
PROPOSAL.
STOCKHOLDER PROPOSALS -- 1998 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, 1998. 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 25, 1998, 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.
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.
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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, 1997, 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 1, 1997.
By order of the Board of Directors,
Arthur T. Shorin
Chairman and
Chief Executive Officer
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