THE TOPPS COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 30, 1998
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 30, 1998 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 annual
meeting of stockholders to be held in the year 2001;
2. To ratify and approve the Amendment and Restatement of the Company's
1994 Non-Employee Director Stock Option Plan;
3. 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 27, 1999;
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, urging the
Board of Directors to attempt to sell 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, 1998 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, President and
Chief Executive Officer
Dated: May 27, 1998
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 30, 1998
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
February 28, 1998 is being mailed to all stockholders with this Proxy Statement.
The approximate mailing date of this Proxy Statement is May 27, 1998.
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 Amendment and Restatement of the Company's 1994 Non-Employee Director
Stock Option Plan (the "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 February 27,1999, and (iv) 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, 1998, 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, 1998 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, 1998 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 person designated in the section of this Proxy Statement captioned
"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.
<PAGE>
<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)........................... 2,523,989 5.4%
Seymour P. Berger(1)(2)................................ 360,768 *
Ronald L. Boyum(3)..................................... 162,666 *
Michael J. Drewniak (3)................................ 116,332 *
Allan A. Feder(2)(4)................................... 99,000 *
Ira Friedman (3)....................................... 153,333 *
Stephen D. Greenberg(4)................................ 59,000 *
John J. Langdon........................................ 10,000 *
Wm. Brian Little(4).................................... 585,914 1.3
David M. Mauer (4)..................................... 33,000 *
John Perillo (3)....................................... 109,166 *
Jack H. Nusbaum(4)..................................... 86,000 *
Stanley Tulchin(4)..................................... 108,175 *
The Capital Group Companies, Inc.(6)
333 South Hope Street
Los Angeles, California 90071..................... 6,165,300 13.3
Royce & Associates, Inc.(7)
1414 Avenue of the Americas
New York, New York 10019.......................... 3,002,400 6.5
Merrill Lynch & Co. Inc.(8)
Merrill Lynch Asset Management
800 Scudders Mill Road
Plainsboro, New Jersey 08536...................... 2,850,000 6.1
All directors and executive officers as a group
(18 persons)...................................... 5,123,350 10.7
</TABLE>
___________________
* less than 1.0%
(1) Mr. Shorin is a director and an executive officer. Mr. Berger is a director
and was an executive officer until December 31, 1997.
(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 300,000 shares of Common Stock beneficially owned by Mr.
Shorin, 152,666 shares of Common Stock beneficially owned by Mr. Boyum,
151,333 shares of Common Stock beneficially owned by Mr. Friedman and all
of the shares of Common Stock beneficially owned by Messrs. Drewniak and
Perillo, each of Messrs. Shorin, Boyum, Drewniak, Friedman and Perillo has
the right to acquire such shares upon the exercise of options.
(4) With respect to 59,000 shares of Common Stock beneficially owned by each of
Messrs. Feder, Little and Nusbaum, 49,000 shares of Common Stock
beneficially owned by Mr. Greenberg, 38,000 shares of Common Stock
beneficially owned by Mr. Tulchin and 28,000 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) Mr. Langdon resigned as a director and executive officer effective November
14, 1997.
(6) Based upon a Schedule 13G filed on February 10,1998 with the Securities and
Exchange Commission (the "SEC") by The Capital Group Companies, Inc.
(7) Based upon a Schedule 13G filed on February 5, 1998 with the SEC by Royce
& Associates, Inc.
(8) Based upon a Schedule 13G filed on January 26, 1998 with the SEC by Merrill
Lynch and Co. Inc.
<PAGE>
ELECTION OF DIRECTORS
There are currently eight members of the Board of Directors which is
divided into three classes (currently three, 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. Allan A. Feder, David M. Mauer and
Jack H. Nusbaum 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 2001.
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 of Directors 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
Nominees to Serve in Office
Until 2001
<S> <C>
Allan A. Feder....................... An independent business consultant for more than 1992
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
66 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 49 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.; Strategic Distribution, Inc.
and Hirschl & Adler Galleries, Inc. Mr. Nusbaum
is 57 years of age.
<PAGE>
Directors to Continue in Office
Until 1999
Seymour P. Berger.................... Business consultant and senior advisor to the 1991
Company since January 1998. Vice President -
Sports and Licensing of the Company from 1974
through 1997. Mr. Berger is 74 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 49 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 71 years of age.
Directors to Continue in Office
Until 2000
Arthur T. Shorin..................... Chairman of the Board and Chief Executive Officer 1960
of the Company and its predecessor since 1980.
Mr. Shorin was appointed the President of the
Company in November 1997. Mr. Shorin is 62
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 56
years of age.
</TABLE>
<PAGE>
The Board of Directors met five times during the fiscal year ended February
28, 1998. Each of the directors who served during such period 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.
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 the 1987 Stock Option Plan. The
members of the Compensation Committee for the fiscal year ended February 28,
1998 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 February 28, 1998.
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 February 28, 1998 were Messrs. Allan A. Feder, Stanley
Tulchin, Stephen D. Greenberg and David M. Mauer. During the fiscal year ended
February 28, 1998, there were two meetings of the Audit Committee. None of the
members of the Audit Committee are employees of the Company.
On October 6, 1997, the Board of Directors appointed a Special Committee to
consider declassification of the Board of Directors. The Special Committee,
which consists of Messrs. Allan A. Feder, Wm. Brian Little and Jack H. Nusbaum,
met three times during the fiscal year ended February 28, 1998.
The Company does not have a nominating committee.
Section 16(a) Beneficial Ownership 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 February 28, 1998, except that Mr. Tulchin's Form 4 in
connection with a purchase of 10,000 shares of Common Stock was filed after the
due date.
Compensation of Directors
For the fiscal year ended February 28, 1998, directors who were not also
officers of the Company received 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. If the Amendment and Restatement of the
Company's 1994 Non-Employee Director Stock Option Plan is approved by the
stockholders at the Annual Meeting, for fiscal 1999, non-employee directors will
not receive annual cash compensation or meeting fees. In lieu of such cash
compensation and meeting fees, non-employee directors will receive options to
purchase 10,000 shares of Common Stock (in addition to the 7,000 options they
currently receive under the 1994 Non-Employee Director Stock Option Plan). See
"Proposal to Approve the Amendment and Restatement of the 1994 Non-Employee
Director Stock Option Plan."
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 25,
1997 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 $3.625 per share. These options become exercisable on June 24, 1998 and
have a term of five years from the date of grant.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth for each of the last three fiscal years
information regarding the compensation of (i) the Company's Chief Executive
Officer, (ii) the four other most highly compensated persons who were executive
officers at the end of the fiscal year ended February 28, 1998 and (iii) any
other person who would have been among the four other most highly compensated
but were not executive officers at the end of the last fiscal year (each, a
"Named Executive Officer").
Summary Compensation Table(1)
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Fiscal Securities All Other
Year Salary(2) Bonus Underlying Options/ Compensation
Name and Principal Ended ($) ($) SARs (#) ($)
.................. ..... ........ ..... ................... ............
Position
<S> <C> <C> <C> <C>
Arthur T. Shorin....... 1998 $784,423(4) 246,000(5)
Chairman, President 1997 822,269
and Chief Executive 1996 838,082 400,000
Officer(3)
Ronald L. Boyum........... 1998 249,159 35,000
Vice President - 1997 234,511 40,000
Marketing and Sales 1996 222,643 13,500
John Perillo.............. 1998 199,843(4) 95,000(5)
Vice President-Operations 1997 196,954 33,000
1996 187,375 7,500
Michael J. Drewniak....... 1998 198,461(4) 80,000(5)
Vice President - 1997 191,539 30,000
Manufacturing 1996 186,939 7,000
Ira Friedman.............. 1998 185,699(4) 38,500(5)
Vice President-Publishing 1997 190,084 17,108
and New Product Development 1996 189,932
John J. Langdon........... 1998 343,270 1,076,615(7)
President and Chief 1997 402,155 14,115
Operating Officer (until 1996 409,889 20,000 14,115
November 14, 1997)(6)
Seymour P. Berger......... 1998 232,376 30,194(9)
Vice President - Sports 1997 257,097
and Licensing (until 1996 262,041
December 31, 1997)(8)
</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", "Restricted Stock Awards" and "LTIP Payouts" is inapplicable
and has therefore been omitted from the table.
<PAGE>
(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) Mr. Shorin assumed the title of President on November 14, 1997.
(4) As part of the Company's initiatives to reduce costs, all officers of the
Company were given the right to elect to receive stock options in lieu of
up to 30% of their base salary for the calendar year 1998, at the rate of
one stock option to purchase one share of Common Stock for every dollar of
salary waived. These options were issued pursuant to the Company's 1996
Stock Option Plan. In accordance with the 1996 Stock Option Plan, the
exercise price of each stock option granted was equal to the closing price
of the Common Stock on the date prior to the date of the grant, which was
$2.2187 per share. Messrs. Shorin, Perillo, Drewniak and Friedman, among
others, elected to waive a portion of their salary in exchange for these
stock options.
(5) All of the options granted to Mr. Shorin, 60,000 of the options granted to
Messrs. Perillo and Drewniak and 28,500 of the options granted to Mr.
Friedman were granted in exchange for a waiver of salary. See footnote 4
above.
(6) Mr. Langdon served as President and Chief Operating Officer until November
14, 1997. Pursuant to his employment agreement, Mr. Langdon's employment
with the Company terminated effective 30 days thereafter(December 14,1997).
(7) Includes a severance payment of $1,062,500 made to Mr. Langdon as required
by his Employment Agreement and payment of $14,115 for premiums on a life
and disability insurance policy maintained by the Company on behalf of Mr.
Langdon. See "Employment Agreements."
(8) Mr. Berger retired as an executive officer and became a senior advisor to
the Company as of January 1, 1998.
(9) Represents consulting fees paid to Mr. Berger pursuant to the terms of a
Consulting Agreement effective as of January 1, 1998, plus a director's fee
paid in January 1998. See "Employment Agreements."
<PAGE>
Option/SAR Grants in Last Fiscal Year
The following table sets forth information regarding grants of stock
options made during the fiscal year ended February 28,1998 to each of the Named
Executive Officers. There were no stock appreciation rights granted in the last
fiscal year.
<TABLE>
<CAPTION>
Potential Realized Value
at Assumed Annual Rates of
Stock Price Appreciation
for Option Term (1)
Individual Grants
- -------------------- -------------------- ---------------- ------------------ -----------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Number of Options
Securities Granted to
Underlying Options Employees in Exercise or Base
Name Granted (2) Fiscal Year Price ($/Sh) Expiration Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Arthur T. Shorin... 246,000(3)(4) 17.4 2.2187 12/31/07 300,913(6) 741,167(6)
Ronald L. Boyum.... 35,000(5) 2.5 3.4375 04/28/07 93,479 220,115
John Perillo....... 35,000(5) 2.5 3.4375 04/28/07 93,479 220,115
60,000(3)(4) 4.2 2.2187 12/31/07 73,393(6) 180,772(6)
Michael J. Drewniak 20,000(5) 1.4 3.4375 04/28/07 53,416 135,780
60,000(3)(4) 4.2 2.2187 12/31/07 73,393(6) 180,772(6)
Ira Friedman....... 10,000(5) 0.7 3.4375 04/28/07 26,708 62,890
28,500(3)(4) 2.0 2.2187 12/31/07 34,861(6) 85,866(6)
John J. Langdon.... - - - - - -
Seymour P. Berger.. - - - - - -
_____________________
</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 1996 Stock
Option Plan.
(3) Granted in consideration of a salary reduction at the rate of one option to
purchase one share of Common Stock for each dollar of salary waived. See
"Executive Compensation" footnote 4.
(4) The options to acquire shares of Common Stock were granted on January 1,
1998 and become exercisable in two equal installments on January 1, 1999
and January 1, 2000.
(5) The options to acquire shares of Common Stock were granted on April 28,1997
and become exercisable in three equal installments on April 28, 1998, April
28, 1999 and April 28, 2000.
(6) Assumed rates of stock price appreciation do not reflect the exchange of
salary during the calendar year 1998, at the rate of one option to purchase
one share of Common Stock for each dollar of salary reduction.Giving effect
to the salary reduction would reduce the potential realized value.
<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 February 28, 1998 and the number and
value of unexercised options and SARs held at fiscal year end by each of the
Named Executive Officers.
<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 0 200,000 446,000 0 $130,699*
Ronald L. Boyum....... 0 0 141,000 39,500 0 0
John Perillo.......... 0 0 97,500 97,500 0 $ 31,878*
Michael J. Drewniak... 0 0 109,666 82,334 0 $ 31,878*
Ira Friedman.......... 0 0 148,000 38,500 0 $ 15,142*
John J. Langdon....... 0 0 0 0 0 0
Seymour P. Berger..... 0 0 0 0 0 0
*The value does not reflect the exchange of salary during the calendar year 1998
at the rate of one option to purchase one share of Common Stock for each dollar
of salary reduction. Giving effect to the salary reduction would reduce the
value of unexercised in-the-money options.
___________________
</TABLE>
<PAGE>
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
..................... ........ ........ ........ ........ ........ ........ .......
<S> <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.
(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.
<PAGE>
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, 1998, the persons named in the Summary Compensation Table
were credited with the following years of service: Mr. Shorin - 39, Mr. Boyum -
8, Mr. Perillo - 20, Mr. Drewniak - 26, Mr. Friedman - 9, Mr. Langdon - 9 and
Mr. Berger - 50.
Employment Agreements
On October 28, 1991, the Company entered into an employment agreement (the
"Agreement") with Arthur T. Shorin, Chairman of the Board and Chief Executive
Officer. The Agreement provides for a three-year term subject to automatic
extension. The Agreement will terminate three years from the date that either
Mr. Shorin or the Company gives notice of his or its intention not to extend the
Agreement, unless terminated earlier as provided in the Agreement. The 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 agreed to limit his target bonus opportunity to
20% of annual base salary. For calendar 1998, Mr. Shorin agreed to waive
$246,000 of salary in exchange for options to purchase 246,000 shares of common
stock. See "Executive Compensation."
If Mr. Shorin is terminated without "Cause" or resigns for "Good Reason"
(as defined in the Agreement), a lump sum severance payment will be made as
liquidated damages equal to three times Mr. Shorin's base salary plus his
average annual bonus for the three fiscal years ended prior to the date of
termination.
The Agreement also 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 Mr.
Shorin so that his after-tax position is the same as if the payments were not
subject to an excise tax.
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.
The Company also entered into an Employment Agreement, on October 28, 1991,
with its then President and Chief Operating Officer, John J. Langdon. Mr.
Langdon's Agreement was terminated effective as of December 14, 1997. As a
result of the termination, and as required by the Agreement, Mr. Langdon was
paid a lump sum made as liquidated damages of $1,062,500, which was equal to 2.5
times his annual base salary plus his average annual bonus for the three years
prior to termination. Under Mr. Langdon's Agreement, the Company is also
required to continue to maintain life insurance in the amount of $4,000,000 and
disability insurance policies in the amount of 60% of his former salary for a
period of three years after the termination of the Agreement.
Effective as of January 1, 1998, the Company entered into a three-year
Consulting Agreement with Seymour P. Berger, its former Vice President - Sports
and Licensing. Pursuant to the terms of the Consulting Agreement, Mr. Berger
will be paid annual consulting fees of $115,000, $100,000 and $75,000, for
calendar years 1998, 1999 and 2000, respectively.
<PAGE>
Report of the Compensation Committee
on Executive Compensation
The Compensation Committee is responsible for setting the Company's
compensation objectives and policies. It regularly approves compensation plans
and sets specific compensation levels for all executive officers. In addition,
the Compensation Committee administers the Company's 1996 Stock Option Plan (the
"Option Plan") and determines the degree and extent of awards granted
thereunder.
Compensation Policy
The Compensation Committee seeks to provide a total compensation package
that is competitive and intended to retain and motivate the Company's executive
officers. In structuring the compensation package for executive officers, the
Committee seeks to provide financial incentives tied to the achievement of the
Company's short-term and long-term business objectives and intended to enhance
stockholder value.
Base Salary
In setting base salary for the executive officers for fiscal 1998, the
Compensation Committee considered the base salary levels of executives with
similar responsibilities in companies of similar size, business and complexity.
The Committee also considered each executive officer's experience in his
position at the Company and his actual performance over the prior fiscal year.
Based on the above criteria, the Compensation Committee made subjective
determinations with respect to the compensation of all of the Company's
executive officers other than Mr. Shorin.
Bonus Awards
For fiscal 1998, bonuses were intended to reward significant achievements
by the executive officers and were contingent upon the Company's financial
performance during the year. Bonus awards reflect the achievement of
pre-established earnings objectives. Bonus levels for fiscal 1998 were set by
the Compensation Committee after consideration of bonus levels for executives
with similar responsibilities in companies of similar size, business and
complexity. Earnings targets were not attained for fiscal 1998 and no bonus was
paid to any of the executive officers.
Stock Option Awards
Long-term incentive compensation opportunities are provided through grants
of stock options under the Option Plan. All options granted under the Option
Plan have exercise prices which are at least equal to the fair market value of
the Common Stock on the date of grant so as to directly align such incentive
compensation with an increase in stockholder value. In continuing its practice
of making discretionary grants of stock options to the Company's executive
officers and taking into consideration each executive officer's experience and
seniority within the Company, the Compensation Committee made grants of stock
options to certain executive officers of the Company on a subjective basis
during fiscal 1998.
In addition to the discretionary option grants for fiscal 1998 described
above, effective January 1, 1998, as part of the Company's initiative to reduce
costs, the Compensation Committee instituted a voluntary salary reduction/option
grant program whereby executive officers could choose to have their base salary
reduced for the 1998 calendar year in return for a grant of stock options. For
every dollar of reduced salary, the executive officers were granted an option to
purchase one share of Common Stock with an exercise price equal to the fair
market value of the Common Stock on date of grant.
Chief Executive Officer
The base salary for Mr. Shorin is determined through his Employment
Agreement (discussed under the caption "Employment Agreements"). In view of the
Company's performance, as in prior years, the stipulated minimum increase in
base salary called for by the Mr. Shorin's Employment Agreement was waived by
Mr. Shorin for fiscal year 1998.
Although Mr. Shorin's Employment Agreement requires that his annual target
bonus opportunity equal 50% of his base salary, in light of the Company's
performance, as in prior years, Mr. Shorin agreed to limit his annual bonus
opportunity for fiscal 1998 to 20% of base salary. Because earnings targets were
not attained for fiscal 1998, no bonus was paid to Mr. Shorin.
<PAGE>
Section 162(m)
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 Company's
Chief Executive Officer and four other most highly compensated executive
officers, except to the extent such compensation qualifies as
"performance-based." To date, none of the Named Executive Officers has received
compensation in excess of the Section 162(m) limits and all such compensation
has been fully deductible by the Company. While the Committee's policy has
always been to pursue a strategy of maximizing deductibility of compensation for
the Named Executive Officers, it also believes it is important to maintain the
flexibility to take actions it considers in the best interests of the Company
and its stockholders, which are necessarily based on considerations in addition
to Section 162(m).
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. Seymour P. Berger, a director, became
a consultant to the Company effective January 1, 1998.
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 February 28, 1993 and the accumulation and reinvestment of
dividends paid thereafter through February 28, 1998.
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).
<PAGE>
PROPOSAL TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(Amended and Restated as of May 18, 1998)
Description of the Amendment and Restatement of the 1994 Non-Employee Director
Stock Option Plan
In 1994, the Board of Directors unanimously adopted the 1994 Non-Employee
Director Stock Option Plan (the "Original Directors Plan") and the stockholders
of the Company subsequently approved the Original Directors Plan. On May 18,
1998, the Board of Directors decided to discontinue the practice of giving
directors who are not employees of the Company cash compensation for their
director services and to replace such cash compensation with additional options.
In connection therewith, the Board of Directors approved the amendment and
restatement of the Original Directors Plan (as amended and restated, the
"Amended Directors Plan") to provide for the increase in the number of shares of
Common Stock subject to annual grants of options thereunder. In addition, the
Amended Directors Plan was amended to (i) increase the number of shares of
Common Stock available for issuance thereunder, (ii) permit administration of
the Plan by the full Board of Directors, (iii) extend the term of options
granted after the Amended Directors Plan is approved, (iv) allow for the
transferability of options, (v) adjust the forfeiture provisions with respect to
options held by directors who cease to be members of the Board of Directors,
(vi) provide for automatic acceleration of vesting of unexercised options upon a
Change in Control of the Company and (vii) modify the amendment provisions. The
Amended Directors Plan and any options granted thereunder are subject to the
approval of the stockholders of the Company at the Annual Meeting. In the event
that the Amended Directors Plan is not so approved, the Original Directors Plan
shall continue in full force and options will continue to be issued thereunder.
The Amended Director Plan is intended to more closely align the interests
of directors with those of the Company's stockholders and to provide an
inducement to obtain and retain of qualified persons who are neither employees
nor officers of the Company to serve as members of the Board of Directors by
providing them with an equity interest in the Company and with fair and
reasonable compensation.
The following is a summary of the material features of the Amended
Directors Plan, the complete text of which was filed with the SEC along with the
Proxy Statement.
Administration
The Original Directors Plan was administered by the Compensation Committee
of the Board of Directors. The Amended Directors Plan can be administered by
either the Board of Directors or the Compensation Committee (the entity
administering the Amended Directors Plan hereafter called the "Committee"). The
current members of the Compensation Committee are Messrs. Little and Tulchin.
Members of the Compensation Committee are appointed by the Board of Directors.
The Committee, subject to the provisions of the Amended Directors Plan, has the
power to construe the Amended Directors Plan, to determine all questions
thereunder and to adopt and amend such rules and regulations for the
administration of the Amended Directors Plan as it may deem desirable.
Shares Subject to the Amended Directors Plan
The Amended Directors Plan increases the number of shares of Common Stock
which can be issued pursuant to options granted to non-employee directors from
490,000 to 754,000. The number of shares that currently remain available for
grant under the Original Directors Plan is 336,000. After approval of the
Amended Directors Plan, 600,000 shares will be available for issuance. Options
under the Amended Directors Plan are subject to adjustment as described below
under "Changes in Stock; Recapitalization and Reorganization." If any options
granted under the Amended Directors Plan are surrendered before exercise or
lapse without exercise, in whole or in part, the shares reserved therefor shall
revert to the status of available shares under the Amended Directors Plan.
<PAGE>
Eligibility; Automatic Grant of Options under the Amended Directors Plan
Options are granted pursuant to the Amended Directors Plan only to
non-employee members of the Board of Directors. Seven persons would be currently
eligible to participate in the Amended Directors Plan.
Unless action is taken by the Committee to reduce such number, each
non-employee member of the Board of Directors will automatically be granted each
year on the date of the Company's Annual Meeting of Stockholders, without
further action by the Board of Directors, options to purchase 17,000 shares of
Common Stock. The Original Directors Plan provided for the automatic annual
grant to each non-employee director of options to purchase 7,000 shares of
Common Stock. As discussed above under the caption "Compensation of Directors,"
if the Amended Directors Plan is approved, non-employee directors will no longer
receive cash compensation. None of the options granted under the Amended
Directors Plan is intended to be an "Incentive Stock Option" within the meaning
of Section 422 of the Code.
Option Price
The exercise price per share of options granted under the Amended Directors
Plan is 100% of the fair market value of the Common Stock on the day prior to
the date the option is granted.
Market Value
As of May 21, 1998, the closing price for the Common Stock on the Nasdaq
National Market was $3.13.
Option Duration
The Original Directors Plan required that options granted thereunder expire
five (5) years from the date of option grant. The Amended Directors Plan extends
the term of options granted, on or after the date the stockholders approve the
Amended Directors Plan, to ten (10) years. Options previously granted under the
Original Directors Plan will still expire five (5) years from the date of the
option grant.
Vesting
All of the shares covered by each option granted under the Amended
Directors Plan become exercisable on the day preceding the date of the Company's
next Annual Meeting of Stockholders following the Annual Meeting on which the
options were granted.
Exercise of Options and Payment for Stock
Each option granted under the Amended Directors Plan is exercisable as
provided in such option. Exercise of an option under the Amended Directors Plan
is effected by a written notice of exercise, delivered to the Company together
with payment for the shares in full, which payment may be made in part or in
full (i) in cash, (ii) by certified or cashier's check, (iii) by tendering
mature shares of Common Stock of the Company valued at fair market value, (iv)
through a brokered exercise transaction, or (v) through any combination of
payment described in (i) through (iv) above.
Effect of Termination as a Director or of Death or Disability
Under the Original Directors Plan, in the event an optionee ceased to be a
member of the Board of Directors for any reason other than death or disability,
any options granted to such optionee which were exercisable at the time the
optionee ceased to be a member of the Board of Directors and which were not
exercised at such time could be exercised by the optionee within a period of
thirty (30) days following such time the optionee so ceased to be a member of
the Board of Directors, but in no event later than the expiration date of the
option.
Similarly, under the Original Directors Plan, in the event an optionee
ceased to be a member of the Board of Directors by reason of his disability or
death, all unexercised options which were exercisable at the time the optionee
ceased to be a member of the Board of Directors were exercisable (by the
optionee's personal representative, heir or legatee, in the event of death)
during the period ending one year after the date the optionee so ceased to be a
member of the Board of Directors, but in no event later than the expiration date
of the option.
<PAGE>
Options granted under the Amended Directors Plan will remain exercisable by
the optionees following their cessation of service with the Board of Directors
until the expiration of the full ten-year term, but only to the degree that such
options were exercisable at the time of such cessation.
Non-Assignability of Options
Options granted pursuant to the Amended Directors Plan are generally not
assignable or transferable other than by will or the laws of descent and
distribution and are exercisable during an optionee's lifetime only by the
optionee. The Committee may, either at the time of grant or thereafter, allow
for the transfer of options. Transferability of options under the Original
Directors Plan was not permitted.
Changes in Stock; Recapitalization and Reorganization
In the event that the outstanding shares of Common Stock are changed into
or exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any reorganization, merger,
consolidation, recapitalization, reclassification, or in the event of a stock
split, combination of shares or dividends payable in capital stock, automatic
adjustment is made in the number and kind of shares as to which outstanding
options or portions thereof then unexercised are exercisable and in the
available shares set forth in the Amended Directors Plan, so that the
proportionate interest of the optionee after the occurrence of such event is the
same as before the occurrence of such event. Such adjustment in outstanding
options is made without change in the total price applicable to the unexercised
portion of such options and with a corresponding adjustment in the option price
per share.
If the Company is reorganized, consolidated, or merged with another
corporation, or if all or substantially all of the assets of the Company are
sold or exchanged, the optionee will, after the occurrence of such a corporate
event, be entitled to receive upon the exercise of his option 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 happening of any such
corporate event as if he had exercised such option and had been, immediately
prior to such event, the holder of the number of shares covered by such option.
Any adjustment in the number of shares shall apply proportionately to only
the unexercised portion of any option granted under the Amended Directors Plan.
If fractions of a share would result from any such adjustment, the adjustment
will be revised to the next higher whole number of shares.
Change in Control
Notwithstanding any vesting provisions set forth in the Amended Directors
Plan or in any option agreement issued under the Amended Directors Plan, upon a
Change in Control of the Company, as defined in the Amended Directors Plan, all
outstanding unexercised options will become fully vested and immediately
exercisable. The Original Directors Plan did not contain any acceleration of
vesting upon a Change in Control.
Termination and Amendment
The Board of Directors may at any time terminate the Amended Directors Plan
or make such modification or amendment thereof as it may deem advisable,
provided, however, that the Board of Directors may not, without approval by the
affirmative vote of the holders of a majority of the shares present in person or
by proxy and entitled to vote at a stockholders meeting, (a) increase the
maximum number of shares for which options may be granted under the Amended
Directors Plan, except as previously described under "Changes in Stock;
Recapitalization and Reorganization", or (b) change the price at which options
are to be granted. Stockholder approval was needed for amendments under the
Original Directors Plan to (a) change the provisions regarding termination of
options or the times when they could be exercised, (b) change the period during
which options could be granted or remain outstanding or the date on which the
Original Directors Plan would terminate, (c) change the class of persons
eligible to receive options, or (d) materially increase benefits accruing to
optionees. In addition, the Original Directors Plan could not be amended more
than once every six months other than to comport with changes to the Code. This
restriction has been deleted from the Amended Directors Plan. Termination or any
modification or amendment of the Amended Directors Plan shall not, without
consent of a participant, affect his rights under an option previously granted
to him.
<PAGE>
Federal Income Tax Consequences
An option granted under the Amended Directors Plan is taxed for United
States federal income tax purposes in accordance with the Code and regulations
issued thereunder. For such purposes, the following general rules are applicable
under existing law to directors who receive and exercise options pursuant to the
Amended Directors Plan and to the Company, based upon the assumption that the
options do not have a readily ascertainable value at the date of grant:
1. The director does not recognize any income upon the grant of
an option, and the Company is not allowed a business expense
deduction by reason of such grant.
2. The director will recognize ordinary compensation income at
the time of exercise of the option in an amount equal to the
excess, if any, of the fair market value of the shares on the
date of exercise over the exercise price.
3. When the director sells the shares acquired by exercise of
the option, he will recognize a capital gain or loss in an
amount equal to the difference between the amount realized
upon the sale of the shares and his basis in the shares (i.e.,
the exercise price plus the amount taxed to the director as
compensation income as a result of his exercise of the
option). If the director holds the shares for longer than one
year, this gain or loss will be a long-term capital gain or
loss. The capital gain tax rates may vary depending on the
length of time the shares are held.
4. In general, the Company will be entitled to a tax deduction
in the year in which compensation income is recognized by the
director in the amount of such compensation income.
5. As a result of the rules under Section 16(b) of the Exchange
Act and depending upon the particular exemption from the
provisions of Section 16(b) utilized, directors may not
receive the same tax treatment as set forth above with respect
to the grant and/or exercise of options. Generally, directors
will not be subject to taxation until the expiration of any
period during which they are subject to the liability
provisions of Section 16(b) of the Exchange Act with respect
to any particular option.
New Plan Benefits
The following table sets forth the benefits to be allocated to each
non-employee member of the Board of Directors for fiscal 1999, if the Amended
Directors Plan is approved by the stockholders.
<TABLE>
<CAPTION>
Name Dollar Value Number of Units
<S> <C> <C>
Seymour P. Berger (1) 17,000
Allan A. Feder (1) 17,000
Stephen D. Greenberg (1) 17,000
Wm. Brian Little (1) 17,000
David M. Mauer (1) 17,000
Jack H. Nusbaum (1) 17,000
Stanley Tulchin (1) 17,000
Non-Employee Directors, as a group (1) 119,000
</TABLE>
(1) Because the market value of the Common Stock as of the date of grant is
currently unknown, the dollar value is not determinable.
Proposed Action
Approval of the adoption of the Amended Directors 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 UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE AMENDED DIRECTORS PLAN.
<PAGE>
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 27, 1999 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 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 2,200 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.
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
stockholders to insure that the Company will be managed in a manner that is in
the best interests of the stockholders.
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 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.
<PAGE>
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
In 1997, the Board of Directors of the Company (the "Board of Directors")
established a special committee (the "Special Committee") to evaluate the
declassification of the Board of Directors. The Special Committee consists of
Messrs. Allan A. Feder, Wm. Brian Little and Jack H. Nusbaum. As part of its
deliberations, the Special Committee, among other things, (i) reviewed the
Company's results of operations for fiscal year 1998, (ii) reviewed the
Company's Business Plan for fiscal year 1999, and discussed pertinent portions
of such Business Plan with members of management, (iii) considered the advice of
the Company's counsel relating to the declassification of the Board of
Directors, (iv) reviewed the previous proposals and supporting statements, (v)
reviewed the results of the stockholder votes on those proposals (including the
fact that the proposal submitted at the 1997 Annual Meeting received the support
of 67.8% of the shares voted thereon), (vi) reviewed the trading prices for the
Common Stock over the last three years and (vii) considered changes in
management that occurred during fiscal year 1998, including the increased
management role of Arthur T. Shorin.
Given the Company's prospects as outlined in the Business Plan and the
Company's depressed stock price, among other factors, the Special Committee
recommended to the Board of Directors that no action be taken to declassify the
Board of Directors. Based on the recommendation of the Special Committee, the
Board of Directors concluded that, notwithstanding the strong support by the
Company's stockholders for declassification at the 1997 Annual Meeting,
declassification of the Board of Directors is not in the best long-term interest
of stockholders.
The Board of Directors continues to believe 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 of Directors 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 of Directors and
from sudden and disruptive attempts to obtain control of the Company. 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 of Directors. Through such negotiations, the Board of Directors will be in
the best position to act in the best interests of all stockholders.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "AGAINST"
THIS PROPOSAL.
<PAGE>
STOCKHOLDER PROPOSAL REGARDING THE PROMPT SALE OF THE COMPANY
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 1,500 shares of Common Stock, submitted
the following resolution:
"Resolved: that the shareholders of The Topps Company, Inc. Corporation
urge The Topps Company, Inc. Board of Directors to arrange for the prompt sale
of The Topps Company, Inc. to the highest bidder."
The proponent has furnished the following statement setting forth the
reasons advanced by him in support of his proposal:
"The purpose of the Maximize Value Resolution is to give all The Topps
Company, Inc. shareholders the opportunity to send a message to The Topps
Company, Inc. Board that they support the prompt sale of The Topps Company, Inc.
to the highest bidder. A strong and or majority vote by the shareholders would
indicate to the board the displeasure felt by the shareholders of the
shareholder returns over many years and the drastic action that should be taken.
Even if it is approved by the majority of The Topps Company, Inc. shares
represented and entitled to vote at the annual meeting, the Maximize Value
Resolution will not be binding on The Topps Company, Inc. Board. The proponent
however believes that if this resolution receives substantial support from the
shareholders, the board may choose to carry out the request set forth in the
resolution:
The prompt auction of The Topps Company, Inc. should be accomplished by any
appropriate process the board chooses to adopt including a sale to the highest
bidder whether in cash, stock, or a combination of both. It is expected that the
board will uphold its fiduciary duties to the utmost during the process.
The proponent further believes that if the resolution is adopted, the
management and the board will interpret such adoption as a message from the
company's stockholders that it is no longer acceptable for the board to continue
with its current management plan and strategies.
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION."
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "AGAINST"
THIS PROPOSAL.
<PAGE>
Board of Directors' Statement in Opposition to the Stockholder Proposal
Your Board of Directors and the Company's officers are dedicated to
maximizing stockholder value. Accordingly, the Company maintains close relations
with a nationally known investment bank that is keenly interested in helping the
Company achieve that business objective.
As important as the advice of prominent investment bankers, the Board of
Directors consists of individuals familiar with the Company's businesses and
with the industries in which the Company operates. In addition, the Board of
Directors periodically reviews from a strategic perspective the long-term
outlook for the Company. As part of such review, the Board of Directors
continually evaluates acquisition prospects as well as the benefits that may be
derived from selling existing businesses and reinvesting the proceeds thereof in
new businesses.
The Board of Directors believes that, at the current time, the
stockholders' interests are best served by the Company focusing primarily on
generating increasing operating earnings. Therefore, the Company will attempt to
improve its long-term prospects by continuing the steps taken recently, such as
disposing of assets and operations that did not meet our objectives for return
on investment; restructuring our sales force; reducing expenses through more
efficient operations; and attempting to develop new confectionery brands.
The Board of Directors believes that the foundation for earnings growth is
now largely in place and, thus, taking the action recommended in this
stockholder proposal requesting a "prompt sale of [the Company] to the highest
bidder" will not serve the Company's best interests and will not result in the
greatest value to stockholders.
Regardless of the outcome of the vote on this stockholder proposal,
however, the Board of Directors has and will continue to consider all reasonable
avenues to increase stockholder value.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "AGAINST"
THIS PROPOSAL.
<PAGE>
STOCKHOLDER PROPOSALS - 1999 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, 1999. 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 30, 1999, in order to be timely, notice by the
stockholder must be received no 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.
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, 1998, 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 February 28,
1998.
By order of the Board of Directors,
Arthur T. Shorin
Chairman, President and
Chief Executive Officer
<PAGE>
PROXY
THE TOPPS COMPANY, INC.
The undersigned hereby appoints ARTHUR T. SHORIN AND WM. BRIAN LITTLE, 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 Tuesday,
June 30, 1998 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>
<CAPTION>
<S> <C> <C>
1. ELECTION OF DIRECTORS ______ FOR all nominees listed below _____ WITHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
Allan A. Feder, David M. Mauer, Jack H. Nusbaum.
(INSTRUCTIONS: 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 Amended and Restated 1994 Non-Employee Director
Stock Option Plan
______ FOR ______ AGAINST ______ ABSTAIN
3. To ratify the appointment of Deloitte & Touche LLP, as auditors for The
Topps Company, Inc. for the fiscal year ending February 27, 1999.
______ FOR ______ AGAINST ______ ABSTAIN
The Board of Directors recommends 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)
4. Stockholder proposal regarding declassification of the Board of Directors.
______ FOR ______ AGAINST ______ ABSTAIN
5. Stockholder proposal regarding the sale of the Company.
______ FOR ______ AGAINST ______ ABSTAIN
The Board of Directors recommends a vote AGAINST Items 4 and 5.
This Proxy when properly executed will be voted in the manner directed
herein and in the discretion of the aforementioned 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:____________________________, 1998
________________________________________
________________________________________
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.
THE TOPPS COMPANY, INC.
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(Amended and Restated as of May 18, 1998)
1. Purpose. The 1994 Non-Employee Director Stock Option Plan (Amended
and Restated as of May 18, 1998) (the "Plan") is intended to promote the
interests of The Topps Company, Inc. (the "Company") by providing equity-based
compensation as an inducement to obtain and retain the services of qualified
persons who are neither employees nor officers of the Company to serve as
members of the Board of Directors of the Company (the "Board") which
compensation is tied directly to shareholder return.
2. Rights to be Granted. Under the Plan, options are granted that give
an optionee the right for a specified time period to purchase a specified number
of shares of common stock, par value $0.01, of the Company (the "Common Stock").
The option price is determined in each instance in accordance with the terms of
the Plan. Options granted under the Plan are not intended to be "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
3. Available Shares. The total number of shares of Common Stock for
which options may be granted on or after the date of stockholder approval of the
Plan, as amended, shall not exceed 754,000, subject to adjustment in accordance
with Section 13 hereof. Shares subject to the Plan are authorized but unissued
shares or shares that were once issued and subsequently reacquired by the
Company. If any options granted under the Plan are surrendered before exercise
or lapse without exercise, in whole or in part, the shares reserved therefor
revert to the option pool and continue to be available for grant under the Plan.
4. Administration. The Plan shall be administered by the Board or the
Compensation Committee of the Board (the entity administering the plan from time
to time is hereafter referred to as the "Committee"). The Committee shall,
subject to the provisions of the Plan, have the power, in its discretion, to
reduce the number of options granted under the Plan and to determine the terms
of such options and the time at which and the eligible individuals to whom such
options will be granted. The Committee shall also have the power to construe the
Plan, to determine all questions thereunder, and to adopt and amend such rules
and regulations for the administration of the Plan as it may deem desirable.
<PAGE>
5. Option Agreement. Each option granted under the provisions of the
Plan shall be evidenced by an Option Agreement, in such form as may be approved
by the Committee, which Agreement shall be duly executed and delivered on behalf
of the Company and by the individual to whom such option is granted. The
Agreement shall contain such terms, provisions, and conditions not inconsistent
with the Plan as may be determined by the Committee.
6. Eligibility and Limitations. Options may be granted pursuant to the
Plan only to non-employee members of the Board.
7. Option Price. The purchase price of the Common Stock under each
option shall not be less than the "Fair Market Value" of the Common Stock on the
date of grant. For purposes of the Plan, the Fair Market Value of the Common
Stock as of any date means the closing price of the Common Stock, on the day
prior to such date, on the stock exchange (including NASDAQ National Market
System) with the largest volume of sales of Common Stock on such date, 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 such date, or, if
the stock is not traded, such other price as the Committee determines is the
Fair Market Value of the Common Stock on such date. No option may be granted at
a price per share which is less than the par value of the Common Stock.
8. Automatic Grant of Options. Unless action is taken by the Committee
to reduce such number, each year, on the date of the Company's Annual Meeting of
Stockholders, each member of the Board who is neither an employee nor an officer
of the Company shall be automatically granted on such date without further
action by the Board an option to purchase 17,000 shares of Common Stock.
Anything in the Plan to the contrary notwithstanding, the effectiveness of the
Plan, as amended and restated, and of the grant of additional options hereunder
is in all respects subject to, and the Plan and options granted under it shall
be of no force and effect unless and until, and no option granted hereunder
shall in any way vest or become exercisable in any respect unless and until the
approval of the Plan by the affirmative vote of a majority of the Company's
shares present in person or by proxy and entitled to vote at a meeting of
shareholders at which the Plan is presented for approval.
9. Period of Option. The options granted hereunder after 1997 shall
expire on a date which is ten (10) years after the date of grant of the options
and the Plan shall terminate when all options granted hereunder have terminated.
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<PAGE>
10. Exercise of Option. 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 shares of Common Stock with respect to which the option is
being exercised accompanied by payment in full of the purchase price of such
shares. Unless otherwise determined by the Committee at the time of grant,
payment for such shares 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 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 and to sell the 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; provided, however, that Common Stock may
not be used in payment for the exercise of an option unless the shares so used
are considered "mature" for purposes of generally accepted accounting
principles. Shares of Common Stock are considered mature if they (i) have been
held by the optionee for at least six months prior to the use thereof to pay the
option exercise price, (ii) have been purchased by the optionee on the open
market or (iii) meet any other requirement for mature shares as may exist on the
date of exercise. An option holder shall have none of the rights of a
stockholder with respect to the Common Stock subject to the option until such
Common Stock shall be transferred to the holder upon the exercise of his option.
11. Vesting of Shares and Non-Transferability of Options.
(a) Vesting. Options granted under the Plan shall be fully vested and
exercisable on the day immediately preceding the date of the Company's next
regular Annual Meeting of Stockholders which follows the date of the Annual
Meeting on which the options were granted, provided the director's service as a
director continues until such immediately preceding date.
(b) Legend on Certificates. The certificates representing shares of
Common Stock acquired under the Plan shall carry such appropriate legend, and
such written instructions shall be given to the Company's transfer agent, as may
be deemed necessary or advisable by counsel to the Company in order to comply
with the requirements of the Securities Act of 1933 or any state securities
laws.
3
<PAGE>
(c) Non-Transferability. Unless otherwise determined by the Committee,
either at the time of grant or prior to the time of transfer, options granted
pursuant to the Plan shall not be assignable or transferable other than by will
or the laws of descent and distribution, and shall be exercisable during an
optionee's lifetime only by him.
12. Termination of Option Rights.
In the event an optionee ceases to be a member of the Board for any
reason, all unvested options shall be forfeited back to the Company and any then
unexercised options granted to such optionee which were exercisable at the time
the optionee ceased to be a member of the Board may be exercised until the
expiration of the option term.
13. Adjustments Upon Changes in Capitalization and other Matters. In
the event that the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any reorganization, merger,
consolidation, recapitalization or reclassification, or in the event of a stock
split, combination of shares or dividends payable in capital stock, automatic
adjustment shall be made in the number and kind of shares as to which
outstanding options or portions thereof then unexercised shall be exercisable
and in the available shares set forth in Section 3 hereof, to the end that the
proportionate interest of the optionee shall be maintained as before the
occurrence of such event. Such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised portion of such
options and with a corresponding adjustment in the option price per share.
If the Company shall be reorganized, consolidated, or merged with
another corporation, or if all or substantially all of the assets of the Company
shall be sold or exchanged, the optionee shall, after the occurrence of such a
corporate event, be entitled to receive upon the exercise of his option 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 happening of any
such corporate event as if he had exercised such option and had been,
immediately prior to such event, the holder of the number of shares covered by
such option.
Any adjustment in the number of shares shall apply proportionately to
only the unexercised portion of any option granted hereunder. If fractions of a
share would result from any such adjustment, the adjustment shall be revised to
the next higher whole number of shares.
4
<PAGE>
14. Change in Control.
(a) Notwithstanding the vesting period set forth in Section 11(a)
herein or any vesting schedule set forth in any option agreement issued pursuant
hereto, all unexercised outstanding options shall become fully vested and
immediately exercisable upon a Change in Control, as defined below.
(b) Unless more limited definition is provided in the option
agreement, a "Change in Control" shall be deemed to have occurred upon the first
to occur of the following:
(i) The acquisition by any person (including a group, within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Act")), other than the
Company, of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the 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;
(ii) 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; or
(iii) During any period of 24 months or less, the persons who
were Continuing Directors, as defined below, immediately before
the beginning of such period shall cease, for any reason other
than death, to constitute at least a majority of the Board,
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.
(c) "Continuing Director" shall mean any member of the Board who
either (i) is a member of the Board on May 1, 1998, or (ii) was nominated for
election to the Board by, or on the recommendation of or with the approval of,
at least two-thirds of the directors who then qualified as Continuing Directors.
15. Restrictions on Issuance of Shares. Notwithstanding the provisions
of Section 10 hereof, the Company shall have no obligation to deliver any
5
<PAGE>
certificate or certificates upon exercise of an option until the following
conditions shall be satisfied:
(i) The shares with respect to which the option has been exercised are
at the time of the issue of such shares effectively registered under
applicable federal and state securities acts as now in force or hereafter
amended; or
(ii) Counsel for the Company shall have given an opinion that such
shares are exempt from registration under federal and state securities acts
as now in force or hereafter amended;
and the Company has complied with all applicable laws and regulations, including
without limitation all regulations required by any stock exchange upon which the
Common Shares are then listed.
The Company shall use its best efforts to bring about compliance with
the above conditions within a reasonable time, except that the Company shall be
under no obligation to cause a registration statement or a post-effective
amendment to any registration statement to be prepared at its expense solely for
the purpose of covering the issue of shares in respect of which any option may
be exercised.
16. Representation of Optionee. The Company may require the optionee
to deliver written warranties and representations upon exercise of the option
that are necessary to show compliance with federal and state securities laws
including to the effect that a purchase of shares under the option is made for
investment and not with a view to their distribution (as that term is used in
the Securities Act of 1933).
17. Approval of Stockholders. The effectiveness of this Plan, as
amended and restated, and of the grant of all options hereunder is in all
respects subject to approval by the Company's shareholders as more fully set
forth in Section 8 hereof.
18. Termination and Amendment of Plan. The Committee may at any time
terminate the Plan or make such modification or amendment thereof as it deems
advisable, provided, however, that (i) the Committee may not, without approval
by the affirmative vote of the holders of a majority of the shares present in
person or by proxy and entitled to vote at a meeting of stockholders, (a)
increase the maximum number of shares for which options may be granted under the
Plan; or (b) change the price at which options are to be granted. Termination or
any modification or amendment of the Plan shall not, without consent of a
6
<PAGE>
participant, affect his rights under an option previously granted to him.
7
<PAGE>
