THE TOPPS COMPANY, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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JUNE 29, 1999
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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, 270 Park Avenue, New
York, New York, on June 29, 1999 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 2002;
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 26, 2000; and
3. 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, 1999 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 28, 1999
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
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PROXY STATEMENT
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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, 270 Park
Avenue, New York, New York, on June 29, 1999 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 27, 1999 is being
mailed to all stockholders with this Proxy Statement. The approximate mailing
date of this Proxy Statement is May 28, 1999.
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 and (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 26, 2000. 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 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, 1999, the Company had outstanding 46,441,801 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, 1999 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, 1999 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)............................. 2,891,072 6.1%
Seymour P. Berger(2)(4).............................. 247,384 *
Ronald L. Boyum(3)................................... 191,333 *
Allan A. Feder(2)(4)................................. 126,000 *
Ira Friedman(3)...................................... 159,166 *
Stephen D. Greenberg(4).............................. 76,000 *
Catherine K.Jessup(3)................................ 99,916 *
Wm. Brian Little(4).................................. 802,914 1.7
David M. Mauer(4).................................... 57,000 *
Jack H. Nusbaum(4)................................... 103,000 *
John Perillo (3)..................................... 203,333 *
Stanley Tulchin(4)................................... 125,175 *
The Capital Group Companies, Inc.(5)
333 South Hope Street
Los Angeles, California 90071................... 5,656,200 12.2
Private Capital Management, Inc.(6)
3003 Tamiami Trail North
Naples, Florida 34103 .......................... 2,898,500 6.2
Merrill Lynch & Co. Inc.(7)
Merrill Lynch Asset Management
800 Scudders Mill Road
Plainsboro, New Jersey 08536.................... 2,850,000 6.1
Royce & Associates, Inc.(8)
1414 Avenue of the Americas
New York, New York 10019........................ 2,712,200 5.8
All directors and executive officers as a group
(17 persons)................................... 6,114,134 12.6
</TABLE>
__________________
* less than 1.0%
(1) Mr. Shorin is a director and an executive officer.
(2) Does not include 50,000, 230,384 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 624,583 shares of Common Stock beneficially owned by Mr.
Shorin, 181,333 shares of Common Stock beneficially owned by Mr. Boyum,
157,166 shares of Common Stock beneficially owned by Mr. Friedman, 99,916
shares of common stock beneficially owned by Ms. Jessup and 163,333 shares
of Common Stock beneficially owned by Mr. Perillo, each of Messrs. Shorin,
Boyum, Friedman, Perillo and Ms. Jessup has the right to acquire such
shares upon the exercise of options.
(4) With respect to 17,000 shares of Common Stock beneficially owned by Mr.
Berger, 76,000 shares of Common Stock beneficially owned by each of Messrs.
Feder, Little and Nusbaum, 66,000 shares of Common Stock beneficially owned
by Mr. Greenberg, 55,000 shares of Common Stock beneficially owned by Mr.
Tulchin and 52,000 shares of Common Stock beneficially owned by Mr. Mauer,
each of Messrs. Berger, Feder, Little, Nusbaum, Greenberg, Tulchin and
Mauer has the right to acquire such shares upon the exercise of options.
(5) Based upon a Schedule 13G filed on February 8, 1999 with the Securities and
Exchange Commission (the "SEC") by The Capital Group Companies, Inc.
(6) Based upon a Schedule 13G filed on February 12, 1999 with the SEC by Private
Capital Management, Inc.
(7) Based upon a Schedule 13G filed on January 29, 1999 with the SEC by Merrill
Lynch and Co. Inc.
(8) Based upon a Schedule 13G filed on February 5, 1999 with the SEC by Royce &
Associates, Inc.
2
<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. Stephen D. Greenberg and Stanley
Tulchin have been nominated to stand for re-election for a term that expires at
the annual meeting of stockholders to be held in the year 2002. Mr. Seymour P.
Berger will retire from the Board of Directors as of the Annual Meeting. The
vacancy in the Board created by the retirement of Mr. Berger is not being filled
at this time.
Directors will be elected by the plurality vote of the holders of Common
Stock entitled to vote at the Annual Meeting and present in person or by proxy.
It is the intention of the persons named in the enclosed proxy to vote, unless
otherwise indicated, for the election as directors of the persons nominated in
the table below.
Should any one or more of these nominees become unable to serve for any
reason or, for good cause, will not serve, which is not anticipated, the Board
of Directors may, unless the Board 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
<S> <C> <C>
Nominees to Serve in Office Until
2002
Stephen D. Greenberg............... Private Investor since January 1999. President of 1993
Classic Sports Network, Inc. from November 1993
through December 1998. Mr. Greenberg is 50 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) for more than the past
five years. Mr. Tulchin is 72 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 63
years of age.
3
<PAGE>
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 57
years of age.
Directors to Continue in Office
Until 2001
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
67 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 50 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 58 years of age.
</TABLE>
The Board of Directors met five times during the fiscal year ended February
27, 1999. Each of the The Board of Directors met five times during the fiscal
year ended February 27, 1999. Each of the directors who served during such
period, except for Mr. Feder, 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 and the 1987 Stock Option Plan. The members of the Compensation
Committee for the fiscal year ended February 27, 1999 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
27, 1999.
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
4
<PAGE>
the fiscal year ended February 27, 1999 were Messrs. Allan A. Feder, Stanley
Tulchin, Stephen D. Greenberg and David M. Mauer. During the fiscal year ended
February 27, 1999, 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) 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 27, 1999.
Compensation of Directors
For the fiscal year ended February 27, 1999, pursuant to the Amended and
Restated 1994 Non-Employee Director Stock Option Plan, each of Messrs. Seymour
P. Berger, 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 17,000 shares of Common Stock at a price
of $3.125 per share. These options become exercisable on June 29, 1999 and have
a term of ten years from the date of grant.
Directors who are also officers of the Company are not compensated for
their duties as a director.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth for each of the last three fiscal years
information regarding the compensation of (i) the Company's Chief Executive
Officer, (ii) the four other most highly compensated persons who were executive
officers at the end of the fiscal year ended February 27, 1999 and (iii) any
other person who would have been among the four other most highly compensated
but was not an executive officer at the end of the last fiscal year (each, a
"Named Executive Officer").
<TABLE>
<CAPTION>
Summary Compensation Table(1)
Annual Compensation Long Term
Fiscal Securities Underlying
Year Salary Bonus Options/
Name and Principal Ended ($) ($) SARs (#)
Position
<S> <C> <C> <C> <C>
Arthur T. Shorin....... 1999 $614,115(3) $493,361 36,500
Chairman, President 1998 784,423(3) 246,000(4)
and Chief Executive 1997 822,269
Officer (2)
Ronald L. Boyum........ 1999 253,846 152,307 25,000
Vice President - 1998 249,159 35,000
Marketing and Sales 1997 234,511 40,000
Catherine K. Jessup ... 1999 180,847(3) 118,408 30,000
Vice President-Chief 1998 185,308(3) 44,500(4)
Financial Officer 1997 176,154 23,000
John Perillo............ 1999 163,077(3) 128,308 20,000
Vice President - 1998 199,843(3) 95,000(4)
Operations 1997 196,954 33,000
Ira Friedman............ 1999 172,123(3) 118,574 17,500
Vice President - 1998 185,699(3) 38,500(4)
Publishing and New Product 1997 190,084 17,108
Development
</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.
(2) Mr. Shorin assumed the title of President on November 14, 1997.
(3) For calendar year 1998, as part of the Company's initiative 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, 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. The options have a term of ten years and become
exercisable in equal annual installments over two years from date of grant.
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 $2.2187 per share.
Messrs. Shorin, Perillo, Friedman and Ms. Jessup, among others, elected to
waive a portion of their salary in exchange for these stock options.
(4) During the 1998 fiscal year, all of the options granted to Mr. Shorin,
19,500 of the options granted to Ms. Jessup, 60,000 of the options granted
to Mr. Perillo and 28,500 of the options granted to Mr. Friedman were
granted in exchange for a waiver of salary. See footnote 3 above.
6
<PAGE>
Option/SAR Grants in Last Fiscal Year
The following table sets forth information regarding grants of stock
options made during the fiscal year ended February 27, 1999 to each of the Named
Executive Officers. There were no stock appreciation rights granted in the last
fiscal year to the Named Executive Officers.
<TABLE>
<CAPTION>
Potential Realized Value
at Assumed Annual Rates of
Stock Price Appreciation
for Option Term (1)
Individual Grants
- -------------------- -------------------- ---------------- ------------------ -----------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Number of Options
Securities Granted to
Underlying Options Employees in Exercise or Base
Name Granted (2)(3) Fiscal Year Price ($/Sh) Expiration Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Arthur T. Shorin... 36,500 14.69% $3.1250 7/19/2008 $73,593 $184,749
Ronald L. Boyum.... 25,000 10.06 3.1250 7/19/2008 50,406 126,539
Catherine K.Jessup. 30,000 12.07 3.1250 7/19/2008 60,488 151,848
John Perillo....... 20,000 8.05 3.1250 7/19/2008 40,325 101,232
Ira Friedman....... 17,500 7.04 3.1250 7/19/2008 35,284 88,578
_____________________
</TABLE>
(1) Grant date fair market value is based on the closing price of the Common
Stock on the immediately preceding date.
(2) All grants consisted of options that were granted under the 1996 Stock
Option Plan.
(3) The options to acquire shares of Common Stock were granted on July 20, 1998
and become exercisable in two equal installments on July 20, 1999 and July
20, 2000.
Aggregate Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
The following table provides information regarding the exercise of
options/SARs during the fiscal year ended February 27, 1999 and the number and
value of unexercised options and SARs held at fiscal year end by each of the
Named Executive Officers.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End at FY-End ($)
Acquired Shares Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Arthur T. Shorin...... 0 0 423,000 259,500 $265,225* $310,850*
Ronald L. Boyum....... 0 0 157,166 48,334 10,937 53,126
Catherine K. Jessup... 0 0 76,583 56,417 28,836* 74,149*
John Perillo.......... 0 0 141,666 73,334 75,626* 111,565*
Ira Friedman.......... 0 0 145,083 38,417 33,852* 58,853*
</TABLE>
___________________
* The value does not reflect the fact that certain of these options were
granted, during calendar year 1998, in exchange for a salary waiver, at the
rate of one option for each dollar of salary waived. Giving effect to this
salary waiver would reduce the value of unexercised in-the-money options.
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
7
<PAGE>
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> <C>
$ 125,000........... $ 26,115 $ 35,656 $ 45,694 $ 55,811 $ 57,102 $ 58,635 $61,760
$ 160,000........... $ 34,865 $ 47,322 $ 60,278 $ 73,312 $ 75,010 $ 77,010 $81,010
$ 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 $130,000 at present and will be adjusted to reflect
cost-of-living increases in 1999 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 1998. 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 1999 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
8
<PAGE>
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, 1999, the persons named in the Summary Compensation Table
were credited with the following years of service: Mr. Shorin - 40, Mr. Boyum -
9, Ms. Jessup - 4, Mr. Perillo - 21, Mr. Friedman - 10.
Employment Agreements
Effective March 1, 1999, the Company entered into an amended and restated
employment agreement (the "Agreement") with Arthur T. Shorin, Chairman of the
Board, President and Chief Executive Officer. The Agreement provides for a
three-year term ending on March 2, 2002. The Agreement continues the same annual
base salary of $822,269 subject to an increase at the discretion of the
Compensation Committee. Mr. Shorin's agreement provides for an annual target
bonus opportunity which is not less favorable than that provided for other
executive officers of the Company. During calendar year 1998, Mr. Shorin agreed
to waive $246,000 of salary in exchange for options to purchase 246,000 shares
of common stock. See "Summary Compensation Table".
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
highest annual bonus paid for the three fiscal years ended prior to the date of
termination. Unvested stock options vest and remain exercisable in accordance
with their terms.
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 the
applicable tax authorities on behalf of 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. In the
event of a termination without Cause or for Good Reason, the Agreement also
counts severance compensation paid to Mr. Shorin in determining highest average
compensation and credits Mr. Shorin with three additional years of service for
pension purposes.
If Mr. Shorin works until the end of the term and is not offered a two-year
extension on equivalent terms with a minimum base salary adjustment for
increases in the cost of living since March 1, 1999 and a $500,000 signing bonus
(in lieu of an option grant), he will receive, for two years from March 2, 2002,
continued base salary and annual bonus equal to the highest annual bonus paid
with respect to the three fiscal years prior to termination, at the same time as
such compensation would otherwise have been paid. If an offer meeting the
foregoing terms is made and Mr. Shorin elects to retire at the end of the term,
Mr. Shorin will receive the severance compensation outlined above for one year
instead of two.
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. All
required severance benefits under Mr. Langdon's Agreement have been paid except
that 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, until December 13, 2000.
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 was
paid $115,000 for calendar 1998 and is being paid annual consulting fees of
$100,000 and $75,000, for calendar years 1999 and 2000, respectively.
9
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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 1999, 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 (whose compensation was governed by an
Employment Agreement).
Bonus Awards
For fiscal 1999, bonuses were intended to reward achievements by the
executive officers and were contingent upon the Company's financial performance
during the year. Bonus levels for fiscal 1999 were set by the Compensation
Committee after consideration of bonus levels for executives with similar
responsibilities in companies of similar size, business and complexity. Bonus
payments for fiscal 1999 reflected attainment of the maximum earnings objectives
for all executive officers and payments were calculated as a percentage of the
executive officers' base salary without giving effect to the exchange of salary
for options.
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 1999.
Chief Executive Officer
The base salary for Mr. Shorin is determined through his Employment
Agreement (discussed under the caption "Employment Agreements").
Mr. Shorin's bonus was determined entirely by reference to uniform,
preestablished earnings targets that were developed for all senior executives at
the beginning of the fiscal year. These targets were fully attained.
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
10
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officers, except to the extent such compensation qualifies as
"performance-based." With one limited exception, 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
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 27, 1994 and the accumulation and reinvestment of
dividends paid thereafter through February 27, 1999.
GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
Assumes Initial Investment of $100 and Reinvestment of Dividends
<TABLE>
<CAPTION>
STARTING
BASIS
DESCRIPTION 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
TOPPS CO, INC (%) -12.69 -20.41 -12.82 -35.29 59.09
TOPPS CO, INC ($) $100.00 $87.31 $69.49 $60.58 $39.20 $62.36
S&P MIDCAP 400 (%) 1.64 29.17 16.93 36.52 -1.89
S&P MIDCAP 400 ($) $100.00 $101.64 $131.28 $153.51 $209.58 $205.62
COMPOSITE INDEX (%) 2.32 19.78 1.65 49.17 56.99
COMPOSITE INDEX ($) $100.00 $102.32 $122.56 $124.58 $185.84 $291.75
</TABLE>
The Composite Index is comprised of four industry groups reported in the
"Directory of Companies required to file Annual Reports with the Securities and
Exchange Commission," for the period ended September 30, 1993, and based upon
the Standard Industrial Classification ("SIC") codes developed by the Office of
Management and Budget, Executive Office of the President. The four industry
groups are Miscellaneous Publishing (SIC Code 2741), Sugar and Confectionery
Products (SIC Code 2060), Periodicals: Publishing or Publishing and Printing
(SIC Code 2721), and Wholesale - Miscellaneous Durable Goods (SIC Code 5090).
11
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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. Seymour P. Berger, a director, is a
consultant 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 26, 2000 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 PROPOSALS - 2000 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, 2000. 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 29, 2000, 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, 1999, 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 27,
1999.
By order of the Board of Directors,
Arthur T. Shorin
Chairman, President and
Chief Executive Officer
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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, 270
Park Avenue, 3rd Floor Auditorium, New York, New York on Tuesday, June 29, 1999
at 10:30 a.m. (local time) and at any adjournments or postponement thereof,
hereby revoking any proxy heretofore given with respect to such stock. The
undersigned authorizes and instructs said proxies to vote as follows:
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 and 2.
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
The Board of Directors recommends a vote FOR Items 1 and 2.
The undersigned authorizes and instructs said proxies to vote as follows:
<TABLE>
<CAPTION>
For Withold For All To withhold authority to vote, mark "For All Except"
Election of Directors All All Except: and write the nominee's number on the line below.
<S> <C> <C> <C> <C> <C> <C> <C>
1. 01) Stephen D. Greenberg, ___ ___ ___ _________________________
02) Stanley Tulchin
Vote on Proposal
For Against Abstain
2. To ratify the appointment of Deloitte & Touche LLP, as auditors for The Topps
Company, Inc. for the fiscal year ending February 26, 2000. ___ ___ ___
Please sign exactly as your name appears below.
____________________________________________ ___________________________________
/___________________________________/_______/ /__________________________/_______/
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date
</TABLE>
