SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant _X_
Filed by a Party other than the Registrant
Check the appropriate box:
___ Preliminary Proxy Statement
___ Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
___ Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
________________________________________________________________________________
THE TOPPS COMPANY, INC.
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(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
_X_ No fee required.
___ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
____________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
____________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
____________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
____________________________________________________________________
(5) Total fee paid:
____________________________________________________________________
___ Fee paid previously with preliminary materials.
___ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
___________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
___________________________________________________________________
(3) Filing Party:
___________________________________________________________________
(4) Date Filed:
___________________________________________________________________
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site and follow the instructions to obtain your records and to create an
electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instruction up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call.
VOTE BY MAIL -
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to the The Topps Company, Inc., c/o ADP, 51
Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK IN AS FOLLOWS:
TOPPS1 KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
________________________________________________________________________________
THE TOPPS COMPANY, INC.
(Please read both sides before signing)
The Board of Directos recommends a vote FOR
all nominees for director and FOR Item 2. For Withhold For All
All All Except
The undersigned authorizes and instructs
said proxies to vote as follows: ___ ___ ___
To withold authority to vote, mark "For All Except"
and write the nominee's number on the line below
___________________________________________________
ELECTION OF DIRECTORS
1. 01) Allan A. Feder, 02) David M. Mauer
and 03) Jack H. Nusbaum
VOTE ON PROPOSAL For Against Abstain
2. To ratify the appointment of Deloitte
& Touche LLP as independent auditors for
The Topps Company, Inc. for the fiscal ___ ___ ___
year ending FEBRUARY 26, 2005 /__/ /__/ /__/
For comments, please check this box and write them ___
on the back where indicated /__/
Please sign exactly as your name appears above.
_______________________________________ ________________________________
/______________________________/_______/ /________________________/______/
Signature(PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date
PROXY
THE TOPPS COMPANY, INC.
The undersigned hereby appoints Warren E. Friss and Scott A.Silverstein,
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 J.P. Morgan Chase &
Co., 270 Park Avenue, New York, NY on July 1, 2004 at 10:30 a.m.(local time) and
at any adjournments thereof, hereby revoking any proxy hereto- fore given with
respect to such stock.
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 instructions to the contrary
is indicated, this Proxy will be voted FOR all nominees for director and FOR
Item 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.
COMMENTS: ___________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(If you noted comments above, please mark corresponding box on reverse side.)
THE TOPPS COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 1, 2004
_______
To the Stockholders of THE TOPPS COMPANY, INC.
I am pleased to invite you 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 J.P. Morgan Chase & Co., 270 Park Avenue, New
York, New York, on July 1, 2004 at 10:30 A.M., Eastern Standard 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 2007;
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, 2005; 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 14, 2004 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, 2004
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.
THE TOPPS COMPANY, INC.
One Whitehall Street
New York, New York 10004
_______
PROXY STATEMENT
_______
GENERAL
The Board of Directors of The Topps Company, Inc. (the "Company") is
furnishing this proxy statement (the "Proxy Statement") to all stockholders of
record so that they will submit their proxies to be voted at the Annual Meeting
of stockholders of the Company (the "Annual Meeting") and at any adjournment or
postponement of the Annual Meeting. The Annual Meeting will be held at J.P.
Morgan Chase & Co., 270 Park Avenue, New York, New York, on July 1, 2004 at
10:30 A.M., Eastern Standard time. A copy of the Company's Annual Report to
Stockholders for the fiscal year ended February 28, 2004 is being mailed to all
stockholders with this Proxy Statement. The annual report is also available on
the internet at www.topps.com. The approximate mailing date of this Proxy
Statement is May 27, 2004.
Proxy Information
-----------------
Proxies in the form enclosed are being solicited by, or on behalf of, the
Company's Board of Directors (the "Board of Directors" or the "Board"). The
persons named in the accompanying form of proxy have been designated as proxies
by the Board of Directors.
All proxies received as a result of this request will be voted (except as
to matters where authority to vote is specifically withheld). Where the proxy
asks that a stockholder choose for or against a proposal, the proxy will be
voted in accordance with the stockholder's choice. If no choice is indicated on
the proposals, the Board of Directors will vote on behalf of the persons named
in the proxy: (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, 2005. 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 at the discretion of the proxies.
Stockholders who submit proxies may revoke them at any time before they are
voted by written notice to the Company by either submitting a new proxy or by
personal ballot at the Annual Meeting.
Record Date and Voting
----------------------
As of May 14, 2004, the Company had outstanding 40,613,981 shares of common
stock, par value $.01 per share ("Common Stock"), entitled to be voted at the
Annual Meeting. Each share is entitled to one vote on each matter submitted to a
vote of stockholders. Only stockholders of record at the close of business on
May 14, 2004 will be entitled to vote at the Annual Meeting. If your shares are
registered directly in your name with the Company's transfer agent, American
Stock Transfer & Trust Company, you are considered with respect to those shares
the stockholder of record, and these proxy materials are being sent directly to
you. As the stockholder of record, you have the right to submit your voting
proxy directly to the Company using the enclosed proxy card or to vote in person
at the Annual Meeting.
If your shares are held in a stock brokerage account or by a bank or other
nominee, you are considered the beneficial owner of shares held in "street
name". These proxy materials are being forwarded to you by your broker who is
considered, with respect to those shares, the stockholder of record. As the
beneficial owner, you have the right to direct your broker to vote your shares,
and your broker or nominee has enclosed a voting instruction card for you to
use. You are also invited to attend the Annual Meeting; however, since you are
not the stockholder of record, you may not vote these shares in person at the
meeting.
Under Delaware law and the Company's bylaws, the presence of a quorum is
required to transact business at the Annual Meeting. A quorum is defined as the
presence, either in person or by proxy, of a majority of the shares entitled to
vote. Proxies marked "abstain" will be included in determining a quorum. On
routine matters, brokers who hold customer shares in "street name" but have not
timely received voting instructions from their customers have discretion to vote
such shares. Since all of the matters to be voted upon at the Annual Meeting are
routine, the presence of such shares will be included in determining whether a
quorum is present.
Under Delaware law and the Company's bylaws, proposals must be approved by
the affirmative vote of a majority or, in the case of the election of directors,
a plurality, of the shares present, either in person or by proxy, at the Annual
Meeting and entitled to vote. Accordingly, abstentions will have the same effect
as votes "against" a proposal, whereas instructions to withhold voting on the
election of any nominee for director will have no effect on the outcome of the
vote.
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 14, 2004 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.
Name of Amount and Nature Percentage of Shares
Beneficial Owner of Beneficial Ownership(1) Outstanding
---------------- -------------------------- -----------
Arthur T. Shorin (2) (3) ............. 2,855,489 7.0%
Ronald L. Boyum (4) .................. 54,602 *
Allan A. Feder (2) (5) ............... 93,400 *
Ira Friedman (6) ..................... 86,200 *
Stephen D. Greenberg (7).............. 131,400 *
Ann Kirschner (8) .................... 70,400 *
David M. Mauer (9) ................... 167,400 *
Edward D. Miller (10) ................ 36,400 *
Jack H. Nusbaum (11) ................. 152,400 *
John Perillo (12)..................... 74,000 *
Scott A. Silverstein (2) (13)......... 276,000 *
Richard Tarlow (14) .................. 70,400 *
Stanley Tulchin (15) ................. 162,575 *
Private Capital Management, Inc. (16) 11,177,024 27.6%
8889 Pelican Bay Blvd.
Naples, Florida 34108
Merrill Lynch & Co., Inc. (17) 5,307,925 13.1%
Merrill Lynch Investment Mangers(MLIM)
World Financial Center
250 Vesey Street
New York, New York 10381
Royce & Associates, LLC (18) 4,482,100 11.1%
1414 Avenue of the Americas
New York, New York 10019
All directors and executive officers
as a group (19 persons) (2) 5,332,392 12.5%
_____________________
* less than 1.0%
(1) Pursuant to regulations of the Securities and Exchange Commission (the
"Commission"), shares are deemed to be "beneficially owned" by a person if
such person directly or indirectly has or shares the power to vote or
dispose of such shares, or has the right to acquire the power to vote or
dispose of such shares within 60 days, including any right to acquire
through the exercise of any option, warrant or right.
(2) Does not include 50,000, 1,378 and 20,702 shares of Common Stock owned by
immediate family members of each of Messrs. Shorin, Feder and Silverstein,
respectively. Messrs. Shorin, Feder and Silverstein disclaim beneficial
ownership of such shares.
(3) Includes 557,500 shares of Common Stock issuable upon exercise of options.
(4) Includes 44,602 shares of Common Stock issuable upon exercise of options.
(5) Includes 68,000 shares of Common Stock issuable upon exercise of options.
(6) Includes 84,500 shares of Common Stock issuable upon exercise of options.
(7) Includes 85,000 shares of Common Stock issuable upon exercise of options.
(8) Includes 68,000 shares of Common Stock issuable upon exercise of options.
(9) Includes 136,000 shares of Common Stock issuable upon exercise of options.
(10) Includes 34,000 shares of Common Stock issuable upon exercise of options.
(11) Includes 85,000 shares of Common Stock issuable upon exercise of options.
(12) Includes 68,000 shares of Common Stock issuable upon exercise of options.
(13) Includes 266,000 shares of Common Stock issuable upon exercise of options.
(14) Includes 68,000 shares of Common Stock issuable upon exercise of options.
(15) Includes 85,000 shares of Common Stock issuable upon exercise of options.
(16) Based upon a Schedule 13G filed on February 13, 2004 with the Commission by
Private Capital Management, Inc.
(17) Based upon a Schedule 13G/A filed on January 27, 2004 with the Commission
by Merrill Lynch and Co., Inc.
(18) Based upon a Schedule 13G/A filed on February 9, 2004 with the Commission
by Royce & Associates, LLC.
BOARD OF DIRECTORS
Election of Directors
There are currently nine members of the Board of Directors, which is
divided into three classes (each with three 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 2007.
Should any one or more of these nominees become unable to serve for any
reason or, for good cause, will not serve, which is not anticipated, the Board
of Directors may designate substitute nominees, unless the Board of Directors by
resolution provides for a lesser number of directors. In this event, the proxy
holders 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.
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 2007
Allan A. Feder ............ An independent business consultant for more 1992
than the past five years and Chief Executive
Officer of Vitarroz Corporation (a proprietary
brand food company) from 1988 to 2000. Mr.
Feder is 72 years of age.
David M. Mauer ............ Chief Executive Officer of E&B Giftware, LLC 1996
since January 2003. An independent business
consultant from July 2001 to December 2002.
Served as President and Chief Executive
Officer of Riddell Sports Inc. from 1993 until
June 2001. Mr. Mauer is 55 years of age.
Jack H. Nusbaum ........... Chairman of the New York law firm of Willkie 1992
Farr & Gallagher LLP and a partner in that
firm for more than thirty years. Mr. Nusbaum
is also a director of W. R. Berkley
Corporation and Strategic Distribution, Inc.
Mr. Nusbaum is 63 years of age.
Business Experience Director of the
During Past 5 Years, Company or its
Name Age and Other Information Predecessors Since
---- ------------------------- ------------------
Directors to Continue in
Office Until 2006
Arthur T. Shorin .......... Chairman of the Board and Chief Executive 1960
Officer of the Company and its predecessor
since 1980. Mr. Shorin was appointed the
President of the Company in November 1997.
Mr. Shorin is the father-in-law of Scott A.
Silverstein, an executive officer of the
Company. Mr. Shorin is 68 years of age.
Edward D. Miller........... Member of the Supervisory Board and Senior 2001
Advisor to the Chief Executive Officer of AXA
Group since July 2001. Mr. Miller served as
President and Chief Executive Officer of AXA
Financial, Inc. from August 1997 through June
2001. Mr. Miller was Senior Vice Chairman of
the Chase Manhattan Corporation from 1996
through July 1997. Mr. Miller is also a
director of Keyspan Corp. and Chairman of the
Board of Directors of Phoenix House. Mr.
Miller is 63 years of age.
Stanley Tulchin ........... Chairman of STA International, 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 77 years of age.
Directors to Continue in
Office Until 2005
Stephen D. Greenberg....... Managing Director, Allen & Co., LLC since 1993
January 2002. Chairman of Fusient Media
Ventures, Inc. from January 2000 through
December 2001. Private Investor from
November 1998 to December 1999. President
of Classic Sports Network, Inc. from
November 1993 through October 1998. Mr.
Greenberg is 55 years of age.
Ann Kirschner ............. President, Comma International (management 1999
consulting company, specializing in
education, media and technology) since
February 2003. Chief Executive Officer and
President of FATHOM (the first interactive
knowledge network) from 1999 through January
2003. Dr. Kirschner was Vice President of
Programming and Media Development for the
National Football League from November 1994
through January 1999. Dr. Kirschner is also
on the Board of Directors of New York New
Media Association. Dr. Kirschner is 53
years of age.
Richard Tarlow............. Chairman of Carlson & Partners (an 1999
advertising agency) since 1988. Mr. Tarlow
was President of Tarlow Advertising, a
division of Revlon Inc., from 1987 to 2000
and Executive Vice President of Revlon Inc.
from 1988 to 2000. Mr. Tarlow is 62 years
of age.
Board Attendance
----------------
The Board of Directors met four times during the fiscal year ended February
28, 2004. 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 does not have a formal policy with regard to Board member
attendance at the Annual Meeting. All directors are encouraged to attend the
Annual Meeting and eight of the nine directors attended the annual meeting of
stockholders held on June 26, 2003.
Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
The Company's executive officers, directors and ten percent stockholders
are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to file reports of ownership and changes in ownership with the
Commission. 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, except as stated below, 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, 2004.
Ronald L. Boyum, an executive officer of the Company, failed to timely
report on Form 4 the exercise and sale of 9,899 options during the period
January 14 to January 16, 2004. Mr. Boyum filed a Form 4 disclosing those
transactions on January 21, 2004.
Compensation of Directors
-------------------------
For the fiscal year ended February 28, 2004, directors who were not also
officers of the Company received directors' fees of $20,000 per year in cash and
$20,000 in shares of the common stock of the Company which will vest one year
from grant date.
In addition, members of the Audit and Compensation Committees received the
following annual fees: the chairperson of the Audit Committee received $6,000
while each member received $3,000; the chairperson of the Compensation Committee
received $4,000 and each member received $2,000.
Directors who are also officers of the Company are not compensated for
their duties as a director.
APPOINTMENT OF AUDITORS
The Board of Directors has retained Deloitte & Touche LLP as independent
auditors to report on the consolidated financial statements of the Company for
the fiscal year ending February 26, 2005 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. 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.
OTHER VOTING 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, the proxy holders should vote upon them
in accordance with their best judgment.
BOARD COMMITTEES
COMPENSATION COMMITTEE
The Company has a Compensation Committee responsible for recommending
officers' remuneration and administering The Topps Company, Inc. 2001 Stock
Incentive Plan (the "Stock Incentive Plan"), the 1996 Stock Option Plan and the
1987 Stock Option Plan. The members of the Compensation Committee for the fiscal
year ended February 28, 2004 were Messrs. Richard Tarlow, Stanley Tulchin and
Dr. Ann Kirschner (effective June 26, 2003), all of whom are independent under
the applicable listing standards of the National Association of Securities
Dealers, Inc. (the "NASD") and none of whom is an employee of the Company. The
Compensation Committee held four meetings during the fiscal year ended February
28, 2004.
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 stock option plans 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 2004, 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
------------
The Company's Bonus Plan for fiscal 2004 was structured to reward executive
officers for performance on the achievement of certain strategic goals and
earnings targets. Bonus achievement levels and performance targets for fiscal
2004 were set by the Compensation Committee at the beginning of the year after
consideration of bonus levels for executives with similar responsibilities in
companies of similar size, business and complexity and the Company's strategic
and financial plan for fiscal 2004. Bonus payments for fiscal 2004 reflected the
attainment of one-third of the maximum objectives for executive officers.
Stock Option Awards
-------------------
Long-term incentive compensation opportunities are provided through grants
of stock options under the 2001 Stock Incentive Plan. The Compensation Committee
continues to believe that option awards are essential to the long term success
of the Company because they provide financial incentives to those key employees
directly responsible for the Company's success which are tied to increases in
stockholder value and serve to align the interests of such key employees with
those of the Company's stockholders. Because there have been no option grants
since fiscal 2001 and in keeping with the Company's long-term incentive goal to
provide key employees with a financial stake in the Company's future and align
their interests with those of the Company's stockholders, the Compensation
Committee granted options to certain key employees in fiscal 2004, including the
executive officers named in the Summary Compensation Table herein. The
individual award amounts were determined based on a subjective determination of
the employee's position, seniority, prior option grants and ability to affect
the Company's future success. All options granted have exercise prices which are
equal to the fair market value of the Common Stock on the date of grant.
Chief Executive Officer
-----------------------
Effective June 1, 2003, the Compensation Committee agreed to extend the
term of Mr. Shorin's Amended and Restated Employment Agreement (the "Employment
Agreement") for an additional two years in order to secure Mr. Shorin's services
through May 31, 2005. Mr. Shorin's base salary is set under the terms of his
Employment Agreement and has remained unchanged since June 1, 2001. Mr. Shorin
agreed to waive the automatic increase in his base salary to which he was
entitled upon the extension of the terms of his Employment Agreement. Mr.
Shorin's annual performance bonus for fiscal 2004 was determined entirely by
reference to uniform, pre-established earnings and strategic targets that were
developed for all senior executives at the beginning of the fiscal year. The
bonus paid on the achievement of these targets reflected attainment of one-third
of the maximum bonus potential. In addition, Mr. Shorin received an extension
bonus of $500,000 upon the extension of the term of his Employment Agreement as
required under the Employment Agreement.
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." Only Mr. Shorin has received compensation in excess of the
Section 162(m) limits and all other 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 (as
defined below), 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). In light of the competitive market for highly qualified
executives, the Company has exercised that flexibility with respect to Mr.
Shorin.
May 14, 2004
Richard Tarlow
Stanley Tulchin
Ann Kirschner
AUDIT COMMITTEE
The Audit Committee is responsible for overseeing the Company's accounting
functions and internal controls and for recommending to the Board of Directors,
subject to stockholder ratification, the selection of the Company's independent
auditors. The Audit Committee is composed of independent directors of the
Company, as defined by the applicable listing standards of the NASD and the
standards set forth by the Commission, and acts pursuant to a written charter
adopted by the Board of Directors, a copy of which is attached as Appendix A to
this Proxy Statement. The members of such committee for the fiscal year ended
February 28, 2004 were Messrs. Allan A. Feder, Stephen D. Greenberg, Edward D.
Miller and Stanley Tulchin. During the fiscal year ended February 28, 2004,
there were eight meetings of the Audit Committee. At the present time, the
Company does not have an "audit committee financial expert" as defined in the
rules of the Commission serving on the Audit Committee. However, the Board
believes that each of the current members of the Audit Committee is able to read
and understand fundamental financial statements and is "financially
sophisticated" pursuant to applicable NASD rules. Therefore, our Board of
Directors has concluded that the appointment of an additional director to the
Audit Committee is not necessary at this time. None of the members of the Audit
Committee are employees of the Company.
Pre-Approval Policies and Procedures
------------------------------------
Pursuant to its charter, the Audit Committee is responsible for reviewing
and pre-approving all audit and non-audit services provided by Deloitte & Touche
LLP and shall not engage Deloitte & Touche LLP to perform the specific non-audit
services proscribed by law or regulation. The Committee may delegate
pre-approval authority to the Chairman of the Audit Committee, in which case
such approval must be presented to the full Audit Committee at its next
scheduled meeting. The Audit Committee pre-approved all audit, audit-related,
tax and other services provided by Deloitte & Touche LLP for the recently
completed fiscal year.
Auditors Service Fees
---------------------
The following is the breakdown of aggregate fees billed by the auditors to
the Company for professional services in the last two fiscal years.
Description 2004 2003
----------- ---- ----
Audit Fees $409,000 $319,800
Audit-Related Fees (1) 186,000 18,500
Tax Fees (2) 265,100 124,000
All Other Fees -- --
-------- --------
Total $860,100 $462,300
======== ========
(1) Consists of acquisition due diligence and benefit plan audits.
(2) Consists primarily of U.S. and international tax compliance and planning.
Report of The Audit Committee of The Board of Directors
-------------------------------------------------------
The Audit Committee has reviewed and discussed with management and the
independent auditors the audited financial statements for the fiscal year ended
February 28, 2004. In addition, the Audit Committee has discussed with the
independent auditors the matters required to be discussed by the Statement on
Auditing Standards No. 61, Communications with Audit Committees, as amended, by
the Auditing Standards Board of the American Institute of Certified Public
Accountants.
The independent auditors provided to the Audit Committee the written
disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, as amended. The Audit Committee has reviewed and discussed with the
independent auditors the firm's independence and has considered the
compatibility of any non-audit services with the auditors' independence.
Based on its review of the audited financial statements and the various
discussions referred to above, the Audit Committee has recommended to the Board
of Directors that the audited financial statements be included in the Company's
annual report on Form 10-K for the fiscal year ended February 28, 2004.
April 30, 2004
Allan A. Feder
Stephen D. Greenberg
Edward D. Miller
Stanley Tulchin
NOMINATING COMMITTEE
The Company does not currently have a nominating committee. The functions
typical of a nominating committee, including the identification, recruitment and
selection of nominees for election as a director of the Company, are performed
by the Board as a whole. Seven of the nine members of the Board (Messrs. Allan
A. Feder, Stephen D. Greenberg, Edward D. Miller, Jack H. Nusbaum, Richard
Tarlow, Stanley Tulchin and Dr. Ann Kirschner) are "independent" as that term is
defined under applicable NASD listing standards. The nominees for re-election as
a director at this Annual Meeting were unanimously recommended by the Board. The
Board believes that a nominating committee separate from the whole Board is not
necessary at this time to ensure that candidates are appropriately evaluated and
selected, given the size of the Company and its Board. The Board also believes
that an additional committee of the Board would not add to the effectiveness of
the evaluation and nomination process.
The Board's process for recruiting and selecting nominees is for Board
members to identify individuals who are thought to have the business background
and experience, industry-specific knowledge and general reputation and expertise
that would allow them to contribute as an effective director to the Company's
governance. To date, the Company has not engaged any third party to assist in
identifying or evaluating potential nominees. After a possible candidate is
identified, the individual meets with various members of the Board and is
sounded out concerning his or her possible interest and willingness to serve,
and Board members discuss amongst themselves the individual's potential to be an
effective Board member. If the discussions and evaluation are positive, the
individual is invited to serve on the Board.
To date, no stockholder has presented any candidate for Board membership to
the Company for consideration, and the Company does not have a specific policy
on stockholder-recommended director candidates. However, the Board believes its
process for evaluation of nominees proposed by stockholders would be no
different from the process of evaluating any other candidate. In evaluating
candidates, the Board will require that candidates possess, at a minimum, an
ability to contribute to the effectiveness of the Board, an understanding of the
function of the Board of a public company and relevant industry knowledge and
experience. In addition, while not required of any one candidate, the Board
would consider favorably experience, education, training or other expertise in
business or financial matters and prior experience serving on boards of public
companies.
Collectively, the composition of the Board must meet the applicable NASD
listing requirements. In evaluating any candidate for director nominee, the
Board will also evaluate the contribution of the proposed nominee toward
compliance with the applicable NASD listing standards.
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, 2004 and (iii) any
other person who would have been among the four other most highly compensated
persons but was not an executive officer at the end of the last fiscal year
(each, a "Named Executive Officer").
Summary Compensation Table (1)
Long Term
Annual Compensation Compensation Awards
Fiscal Securities Underlying
Year Salary Bonus Options/
Name and Principal Position Ended ($) ($) SARs (#)
----------------------------------- ----------- -------------- --------------- --------------------------
Arthur T. Shorin............... 2004 985,000 697,000 (2) 50,000
Chairman, President and 2003 985,000 450,145 --
Chief Executive Officer 2002 960,130 1,076,078 (2) --
Scott A. Silverstein(3)........ 2004 310,692 62,138 75,000
Executive Vice President 2003 305,706 137,364 --
2002 260,442 156,265 --
Ronald L. Boyum................ 2004 293,000 58,600 50,000
Vice President - Marketing and 2003 289,000 131,932 --
Sales and General Manager - 2002 286,020 171,612 --
Confectionery
John Perillo.................. 2004 260,038 52,008 40,000
Vice President - Operations 2003 255,836 126,932 --
2002 248,471 149,083 --
Ira 2004 250,692 50,138 60,000
Friedman............................. 2003 246,864 110,418 --
Vice President - Publishing 2002 236,028 141,617 --
and New Product Development
---------------------
(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, the columns entitled "Other Annual Compensation,"
"Restricted Stock Awards," "LTIP Payouts" and "All Other Compensation" are
inapplicable and have therefore been omitted from the table.
(2) Includes payment of $500,000 under the Employment Agreement.
(3) Mr. Silverstein is the son-in-law of Mr. Shorin.
Option/SAR Grants in Last Fiscal Year
-------------------------------------
The following table provides information regarding the grants of options
during the fiscal year ended February 28, 2004.
Potential Realized Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants For Option Term ($)
_______________________________________________________________________________________________ ___________________________
(a) (b) (c) (d) (e) (f) (g)
--- --- --- --- --- --- ---
% of Total
Options
Number of Securities Granted to Exercise or
Underlying Employees in Base Price Expiration
Name Options Granted (1) Fiscal Year ($/Sh) Date 5% 10%
---- -------------------- ----------- ------ ---- -- ---
Arthur T. Shorin 50,000 (2) 5.62 8.52 7/29/2013 273,610 688,012
Scott A. Silverstein 75,000 (3) 8.43 8.52 7/29/2013 410,415 1,032,019
Ronald L. Boyum 50,000 (3) 5.62 8.52 7/29/2013 273,610 688,012
John Perillo 40,000 (3) 4.49 8.52 7/29/2013 218,888 550,410
Ira Friedman 60,000 (3) 6.74 8.52 7/29/2013 328,332 825,615
---------------------
(1) All options were granted under the 2001 Stock Incentive Plan.
(2) The options to acquire shares of Common Stock were granted on July 29,
2003. Half will become exercisable on July 29, 2004 and the remainder will
become exercisable on July 29, 2005.
(3) The options to acquire shares of Common Stock were granted on July 29,
2003. One-third will become exercisable on July 29, 2004, an additional
one-third will become exercisable on July 29, 2005 and the remainder will
become exercisable on July 29, 2006.
Aggregate Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
-------------------------------------------------------------------------------
The following table provides information regarding the exercise of options
during the fiscal year ended February 28, 2004 and the number and value of
unexercised options held at fiscal year-end by each of the Named Executive
Officers.
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARS at FY-End (#) Options/SARS at FY-End ($)
___________________________ ___________________________
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ----------- ------------- ----------- -------------
Arthur T. Shorin......... -- -- 532,500 50,000 3,140,062 33,500
Scott A. Silverstein..... -- -- 241,000 75,000 1,092,793 50,000
Ronald L. Boyum.......... 46,564 206,359 27,936 50,000 178,070 33,500
John Perillo ............ -- -- 104,500 40,000 434,291 26,800
Ira Friedman ............ 6,000 27,583 64,500 60,000 244,487 40,200
Equity Compensation Plan Information
------------------------------------
(a) (b) (c)
Number of Securities
Number of Securities To Weighted-Average Remaining Available for Future
Be Issued Upon Exercise Exercise Price of Issuance Under Equity
of Outstanding Options, Outstanding Options, Compensation Plans (Excluding
Plan Category Warrants and Rights Warrants and Rights Securities Reflected in Column (a))
------------- ------------------- ------------------- -----------------------------------
Equity compensation plans 3,800,407 $6.90 2,030,402
approved by security holders
Equity compensation plans not
approved by security holders -- -- --
--------------------- ------------------- ------------------------------------
TOTAL 3,800,407 $6.90 2,030,402
Pension Benefits
----------------
The Company maintains a tax qualified non-contributory defined benefit
pension plan for its eligible employees (the "Retirement Plan"). The Summary
Compensation Table contained in this Proxy Statement does not include the
benefit accruals in respect of the Named Executive Officers under the Retirement
Plan. The estimated annual pension benefits under the Retirement Plan, assuming
retirement at age 65, at various levels of compensation and years of credited
service are illustrated by the following table:
Annual Retirement Benefit for Specified
Years of Credited Service (1)(2)
Highest Average
Compensation(3) 15 20 25 30 35 40 50
-------- -------- -------- -------- -------- -------- --------
$ 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
$1,500,000......... $365,040 $490,040 $615,040 $740,040 $758,790 $777,540 $815,040
-------------------
(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 $165,000 at present and will be adjusted to reflect
cost-of-living increases in 2005 and succeeding plan years.
(2) 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 $205,000 (as adjusted to reflect cost-of-living increases) is
disregarded for purposes of determining highest average compensation of
participants in the Retirement Plan for 2004. Benefits accrued as of the
last day of the plan year beginning in 1993 on the basis of compensation in
excess of the applicable dollar limit are preserved. The $205,000 limit
will be adjusted for cost-of-living increases in 2005 and succeeding plan
years.
(3) 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 amended and restated supplemental
pension agreement entered into as of June 1, 2001 (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.
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 one-fifth 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 $205,000 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.
As of February 28, 2004, the persons named in the Summary Compensation
Table were credited with the following years of service: Mr. Shorin - 46, Mr.
Silverstein - 12, Mr. Boyum - 15, Mr. Perillo - 27, Mr. Friedman - 16.
EMPLOYMENT AGREEMENT
Effective June 1, 2003, the Compensation Committee agreed to extend the
term of Arthur T. Shorin's Amended and Restated Employment Agreement for an
additional two years in order to secure Mr. Shorin's services through May 31,
2005. As a result, the Company entered into an amended and restated employment
agreement (the "Employment Agreement") with Mr. Shorin to reflect the term
extension, and Mr. Shorin was paid an extension bonus of $500,000. The
Employment Agreement provides for an annual base salary of $985,000 subject to
increase at the discretion of the Compensation Committee. Mr. Shorin's
Employment agreement provides for an annual target bonus opportunity which is
not less favorable than that provided for other executive officers of the
Company.
If Mr. Shorin is terminated without "Cause" or resigns for "Good Reason"
(as defined in the Employment Agreement), he will receive a full or prorated
bonus for the year of termination (based on the time within the fiscal year that
the termination occurs) and 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, and he will continue to participate in all of the Company's benefit
plans for a period of three years following such termination. In addition, all
of his unvested stock options vest and remain exercisable in accordance with
their terms.
The Employment Agreement also requires that, in the event any payments made
upon his 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 Employment 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 his termination without Cause or resignation for Good Reason, the
Employment Agreement 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.
At the end of the two-year term, Mr. Shorin may request a two-year
extension on equivalent terms with a minimum base salary adjustment for
increases in the cost of living since June 1, 2003 and a $500,000 extension
bonus. If the Company determines not to extend the term, Mr. Shorin's employment
will terminate on May 31, 2005, and he will be entitled to the severance
compensation outlined above for a termination without cause for two years
instead of three. If Mr. Shorin elects to retire at the end of the two-year term
rather than seek an extension of the term, Mr. Shorin will be entitled to the
severance compensation outlined above for one year instead of three. In
addition, the Employment Agreement provides that if the term of the Employment
Agreement is not extended by the Company or if Mr. Shorin retires at the end of
the term, the Company will offer Mr. Shorin a three-year post-employment
consulting agreement providing for a $350,000 annual consulting fee in return
for Mr. Shorin's continued part-time services.
CERTAIN RELATIONSHIPS
Jack H. Nusbaum, a director, is a partner in the law firm of Willkie Farr &
Gallagher LLP, outside counsel to the Company.
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, 1999 and the accumulation and reinvestment of
dividends paid thereafter through February 28, 2004.
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
Topps Co Inc Return% 71.43 30.00 -1.64 -15.85 -15.34
Cum$ $100.00 $171.43 $222.86 $219.20 $184.46 $212.76
S & P 500 Return% 11.73 -8.20 -9.51 -22.68 38.53
Cum$ $100.00 $111.73 $102.57 $ 92.82 $ 71.76 $ 99.42
S&P Midcap 400 Return% 30.99 8.93 2.70 -18.67 49.74
Cum$ $100.00 $130.99 $142.68 $146.54 $119.18 $178.45
Peer Group Only Return% -21.07 27.74 10.47 -11.66 22.01
Cum$ $100.00 $ 78.93 $100.83 $111.38 $ 98.39 $120.04
Peer Group + Topps Return% -20.41 27.78 10.27 -11.72 21.93
Cum$ $100.00 $ 79.59 $101.70 $112.14 $ 99.00 $120.72
Note: Data complete through last fiscal year.
Note: Corporate Performance Graph with peer group uses peer group only
performance (excludes only company).
Note: Peer grou indices use beginning of period market capitalization weighting.
Note: S&P index returns are calculated by Zacks.
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).
CODE OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a Code of Business Conduct and Ethics that applies
to its directors and executive officers as well as to all employees of the
Company. The Code of Business Conduct and Ethics is available free of charge on
our website. Amendments to the Code of Business Conduct and Ethics or any grant
of a waiver from a provision of the Code of Business Conduct and Ethics
requiring disclosure under applicable rules of the Commission will also be
disclosed on the Company's website.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD
To date, the Board has not developed formal processes by which stockholders
may communicate directly with directors because it believes that the existing
informal process, in which any communication sent to the Board either generally
or in care of the Chief Executive Officer, Corporate Secretary, or another
corporate officer is forwarded to all members of the Board, has served the
stockholders' needs. In view of recently adopted disclosure requirements by the
Commission related to this issue, the Company may consider development of more
specific procedures. Until any other procedures are developed and posted on the
Company's corporate website, any communication to the Board should be mailed to
the Board, in care of the Company's Corporate Secretary, at the Company's
headquarters in New York, New York. The mailing envelope must contain a clear
notation indicating the enclosed letter is a "Stockholder-Board Communication"
or "Stockholder-Director Communication." All such letters must identify the
author as a stockholder and clearly state whether the intended recipients
include all members of the Board or just certain specified individual directors.
The Corporate Secretary will forward such communications to the Board of
Directors or the specified individual directors to whom the communication is
directed unless such communication is unduly hostile, threatening, illegal or
similarly inappropriate, in which case the Corporate Secretary has the authority
to discard the communication or to take appropriate legal action regarding such
communication.
STOCKHOLDER PROPOSALS -- 2005 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, 2005. 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, 2005, 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.
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's Annual Report on Form 10-K for the fiscal year ended February
28, 2004 and the Proxy Statement are available to all investors on the internet
at www.topps.com and will be provided to any stockholder of record at the close
of business on May 14, 2004 without charge upon written request to Investor
Relations at One Whitehall Street, New York, New York 10004-2109.
By order of the Board of Directors,
Arthur T. Shorin
Chairman, President and
Chief Executive Officer
THE TOPPS COMPANY, INC.
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
February 10, 2004
Board of Directors
The Board of Directors (the "Board") of The Topps Company, Inc. (the
"Company") hereby amends and restates the charter of the Board's Audit Committee
(the "Committee"), providing the Committee with authority, responsibility and
specific powers as described below.
Purpose
The purpose of the Committee is to oversee the broad range of issues
surrounding the accounting and financial reporting processes of the Company and
its subsidiaries and audits of the financial statements of the Company and its
subsidiaries. The purpose of this charter (the "Charter")is to specify the scope
of the Committee's responsibilities, and how it carries out those
responsibilities, including structure, processes and membership requirements.
The Committee's primary focus will be (1) to assist the Board in monitoring (a)
the integrity of the financial statements of the Company and its subsidiaries,
(b) the compliance by the Company and its subsidiaries with legal and regulatory
requirements, (c) the independent auditor's qualifications and independence, and
(d) the performance of the Company's independent auditors, and (2) to prepare
any report that the United States Securities and Exchange Commission (the "SEC")
rules require be included in the Company's annual proxy statement.
Organization
The Company's By-Laws (the "By-Laws") and this Charter (the "Charter")
govern the operation of the Committee; in the event of a conflict, the terms of
the By-Laws shall govern. The Committee shall provide a medium within the
Company for consideration of matters relating to any audit issues. The Committee
shall be directly responsible for the appointment, compensation and oversight of
the work of any registered public accounting firm employed by the Company
(including resolution of disagreements between management and the auditor
regarding financial reporting) for the purpose of preparing or issuing an audit
report or related work, and each such registered public accounting firm shall
report directly to the Committee. At its sole discretion, the Committee has the
power to retain and determine funding for outside legal, accounting and
financial consultants or other advisors or to delegate to subcommittees to
assist it in its activities to the extent permitted by the SEC and the National
Association of Securities Dealers, Inc. ("NASD"). The outside accounting firm
shall report directly to the Committee. The fees and expenses of such
consultants and advisors shall be borne by the Company.
Membership
The members of the Committee shall be appointed by the Board and shall
consist of three (3) or more independent directors, as the Board may determine
from time to time, of the Company's Board and shall serve until their successors
are duly elected and qualified. Each Committee member may be removed by the
Board at its discretion. In order to be independent, a member of the Committee
may not, other than in his or her capacity as a member of the Committee, the
Board, or any other Board committee accept any consulting, advisory, or other
compensatory fee from the Company or be an affiliated person, as defined by the
SEC, of the Company or any of its subsidiaries. This includes payments to any
firm of which a Committee member is an executive officer, partner, member,
principal or designee (but does not include the receipt of fixed amounts of
compensation under a retirement plan (including deferred compensation) for prior
service with the Company (provided that such compensation is not contingent in
any way on continued service). Each Committee member shall meet the applicable
independence requirements of the Sarbanes-Oxley Act of 2002, the SEC and the
NASD.
Composition
All members of the Committee must be able to read and understand
fundamental financial statements, including the Company's balance sheet, income
statement, and cash flow statement at the time of his or her appointment to the
Committee.
At least one member of the Committee shall have past employment experience
in finance or accounting, requisite professional certification in accounting, or
any other comparable experience or background which results in the individual's
financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities. Financial sophistication will be presumed if a
member satisfies the SEC definition of "financial expert."
Minutes
The Committee shall maintain and submit to the Board copies of minutes of
each meeting of the Committee, and each written consent to action taken without
a meeting, reflecting the actions so authorized or taken by the Committee since
the preceding meeting of the Board. A copy of the minutes of each meeting shall
be placed in the Corporation's minute book.
Charter Amendment
Any member of the Committee may submit proposed Charter amendments to the
Board. The Board shall circulate any proposed Charter amendment(s) to members of
the Committee immediately upon receipt. By a majority vote, the Board may
approve the amendments to the Charter.
Meetings
The Committee shall hold such regular meetings as may be necessary or
advisable, but no less frequently than quarterly, and special meetings as may be
called by the Committee's chairperson. The presence in person or by telephone of
a majority of the Committee's members shall constitute a quorum for any meeting
of the Committee. All actions of the Committee will require the vote of a
majority of its members present at a meeting of the Committee at which a quorum
is present.
The Committee chairperson should consult with management in the process of
establishing agendas for Committee meetings.
Duties and Responsibilities
The Committee's policies and procedures shall remain flexible in order to
best react to changing conditions and to help ensure that the Company's
accounting and reporting practices are consistent with applicable legal
requirements and are of the highest quality. The Committee shall:
(1) Appoint, terminate when appropriate, determine funding for and
directly oversee the Company's independent auditors (including resolving
disagreements between the independent accountants and management regarding
financial reporting). The independent accountants shall report directly to
the Committee;
(2) Pre-approve all auditing services by the independent auditor and
all non-audit services, other than non-audit services prohibited by the
SEC;
(3) Pre-approve appropriate funding for payment of (a) compensation to
the Company's independent auditors for the purpose of rendering audit and
non-audit services, (b) compensation to any advisors employed by the
Committee, (c) ordinary administrative expenses of the audit committee that
are necessary or appropriate in carrying out its duties. The Committee may
delegate to one or more designated members of the Committee who are
independent directors of the Board, the authority to grant pre-approvals.
The decisions of any member to whom authority is delegated to pre-approve
activity must be presented to the full Committee at each of its scheduled
meetings;
(4) Approve all related party transactions entered into by the Company
with any of the Company's directors or executive officers;
(5) Prohibit the independent auditor from performing any audit service
for the Company, if a chief executive officer, controller, chief financial
officer, chief accounting officer, or any person serving in an equivalent
position for the Company, was employed by the independent auditor and
participated in any capacity in the audit of the Company during the
one-year period preceding the date of the initiation of the audit;
(6) Ensure audit partner rotation if the lead (or coordinating) audit
partner (having primary responsibility for the audit), or the audit partner
responsible for reviewing the audit, has performed audit services for the
Company in each of the Company's five previous fiscal years;
(7) Review and reassess the adequacy of the Charter annually and
recommend any proposed changes to the Board for approval;
(8) Review the Company's annual audited financial statements and
quarterly unaudited financial statements with the Company's management and
independent auditors;
(9) Review any major changes to the Company's auditing and accounting
principles and practices as suggested by the Company's management or
independent auditors;
(10) At least annually, obtain and review a report by the Company's
independent auditors describing:
(a) the auditors' internal quality-control procedures;
(b) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry
or investigation by governmental or professional authorities, within
the preceding five years, respecting one or more independent audits
carried out by the independent auditor, and any steps taken to deal
with any such issues; and
(c) all relationships between the independent auditor and the
Company (to assess the auditor's independence);
(11) Ensure receipt from the independent auditors of a formal written
statement delineating all relationships between the auditor and the
Company, consistent with Independence Standards Board Standard 1. It is
also the Committee's responsibility to actively engage in a dialogue with
the auditor with respect to any disclosed relationships or services that
may impact the objectivity and independence of the auditor and for taking,
or recommending that the Board take, appropriate action to oversee the
independence of the independent auditor;
(12) Meet regularly with the Board and review with the Company's
management any legal matters that may have a material impact on the
financial statements, the Company's compliance policies and any material
reports or inquiries received from regulators or governmental agencies;
(13) Review with the Company's independent auditors any problems or
difficulties the auditor may have encountered and any management letter
provided by the auditor and the Company's response to that letter,
including:
(a) any difficulties encountered in the course of the audit work,
including any restrictions on the scope of the activities or access to
required information;
(b) any changes required in the planned scope of the external
audit;
(c) any disagreements with management;
(d) any material written communications between the independent
auditors and the Company's management, such as any management letter
or schedule of unadjusted differences; and
(e) Any accounting adjustments that were proposed by the
Company's independent auditors but were "passed" (as immaterial or
otherwise), any material communications between the audit team and the
independent auditors' national office respecting auditing or
accounting issues presented by the engagement;
(14) Review annually with the Company's management and independent
auditors:
(a) analyses prepared by the Company's management and/or
independent auditors setting forth significant financial reporting
issues and judgments made in connection with the preparation of the
financial statements, including analyses of the effects of alternative
generally accepted accounting period methods on financial statements;
and
(b) the effect of regulatory and accounting initiatives, as well
as review and approve any off-balance sheet structures on the
Company's financial statements;
(15) Review annually major issues regarding accounting principles and
financial statement presentations, including any significant changes in the
Company's selection or application of accounting principles, and major
issues as to the adequacy of the Company's internal controls, and any
special audit steps adopted in light of control deficiencies;
(16) Review and discuss major issues as to the adequacy of the
Company's disclosure and internal controls;
(17) Review and discuss any special audit steps adopted in light of
disclosure and control deficiencies;
(18) Review the audit report provided by the Company's independent
auditors, which should include:
(a) all critical accounting policies and practices used; and (b)
all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management officials of the issuer, ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred by
the independent auditors;
(19) Review any failures of the Company's financial reporting
controls;
(20) Meet periodically with the Company's management and independent
auditors in separate sessions to review the Company's policies with respect
to major risk exposures and the steps management has taken to monitor and
control such exposures;
(21) Meet periodically with the Company's management and independent
auditors in separate sessions to encourage entirely frank discussions with
the Committee, including without limitation discussions regarding the
Company's financial reporting control procedures, the quality of the
Company's financial reporting and the adequacy and competency of the
Company's financial management;
(22) Meet and discuss with the independent auditor the matters
required to be discussed by Statement on Auditing Standards No. 61 relating
to the conduct of the audit of the Company's annual financial statements
and the matters required to be discussed relating to the review of the
Company's quarterly financial statements;
(23) Meet and discuss with the internal auditors (or other personnel
or independent third party responsible for the internal audit function) the
Company's risk management processes and systems of internal control;
(24) Establish procedures for:
(a) the receipt, retention, and treatment of complaints received
by the Company regarding accounting, internal accounting controls, or
auditing matters; and
(b) the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or auditing
matters.
(25) Obtain assurance from the Company's independent auditor that it
has notified the Committee of any failure of which the independent auditor
is aware of the Company to comply with applicable legal requirements;
(26) Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and regulations and
with any code of business conduct adopted by the Board from time to time;
(27) Ensure compliance with rules and regulations set forth by the SEC
and the NASD regarding the hiring of employees or former employees of the
independent auditors;
(28) Ensure the outside auditor's ultimate accountability is to the
Board and the Committee, as representatives of shareholders, and these
shareholder representatives' ultimate authority and responsibility to
select, evaluate and where appropriate, replace the outside auditor (or to
nominate the outside auditor to be proposed for shareholder approval in any
proxy statement); and
(29) Do every other act incidental to, arising out of or in connection
with, or otherwise related to, the authority granted to the Committee
hereby or the carrying out of the Committee's duties and responsibilities
hereunder.
Limitation of Committee's Role
While the Committee has the authority, powers, and responsibilities set
forth in this Charter, it is not the duty of the Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with GAAP and applicable legal,
accounting, and other requirements. These are the responsibilities of the
Company's management and the independent auditor.