sec document
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
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
/X/ Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
THE TOPPS COMPANY, INC.
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(Name of Registrant as Specified in Its Charter)
PEMBRIDGE VALUE OPPORTUNITY FUND LP
PEMBRIDGE CAPITAL MANAGEMENT LLC
CRESCENDO PARTNERS II L.P. SERIES Y
CRESCENDO INVESTMENTS II, LLC
CRESCENDO ADVISORS LLC
ERIC ROSENFELD
TIMOTHY E. BROG
ARNAUD AJDLER
JOHN J. JONES
TOPPS FULL VALUE COMMITTEE
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(Name of Persons(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.
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previously. Identify the previous filing by registration statement number, or
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On June 23, 2006, the Topps Full Value Committee (the "Committee"),
together with the other participants (as defined below), made a definitive
filing with the Securities and Exchange Commission ("SEC") of a proxy statement
and accompanying GOLD proxy card to be used to solicit votes for the election of
its slate of director nominees and certain business proposals at the 2006 annual
meeting of stockholders scheduled to be held July 28, 2006 (the "2006 Annual
Meeting") of The Topps Company, Inc., a Delaware corporation (the "Company").
Item 1: The Committee delivered the following letter to the stockholders of
the Company:
TOPPS FULL VALUE COMMITTEE
708 THIRD AVENUE, 22ND FLOOR
NEW YORK, NEW YORK 10017
(212) 557-6150
June 26, 2006
Fellow Topps Stockholders:
IT IS TIME FOR A CHANGE AT TOPPS
We are the Topps Full Value Committee and own 7.4% of the Company's common
stock. Topps' Board and management are responsible, in our opinion, for the
Company's poor operating performance over the past five years and the dismal
stock performance (the stock price is near a five year low). If you share our
dissatisfaction with the status quo, please join with us to send a clear message
to the Topps Board and elect our director-nominees at the Company's Annual
Meeting on July 28, 2006. The Topps Full Value Committee believes that it is
time for stockholders to have representatives in the boardroom who will focus on
increasing stockholder value. Our director nominees are committed to:
1. Improve Profitability of Topps
2. Explore ALL Strategic Alternatives to Maximize Stockholder Value
3. Advocate Corporate Governance Improvements
4. Optimize Capital Allocation, and
5. Align Compensation of Management with Topps' Financial Performance
THE TOPPS FULL VALUE COMMITTEE IS COMMITTED
TO MAXIMIZING VALUE FOR ALL STOCKHOLDERS
Pembridge Value Opportunity Fund and Crescendo Partners II L.P., Series Y
are significant stockholders of the Company. Our interests are clearly aligned
with yours. We are not interested in the perks of directorships; rather we want
to maximize the value of Topps' Shares for the benefit of all stockholders.
If stockholders do not act now to demand that the Board improve the
profitability of Topps and explore strategic alternatives to enhance stockholder
value, we will be engaged in this debate again at this time next year. In the
meantime, our Company's significant intrinsic worth may continue to erode.
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THE BOARD OF DIRECTORS HAS OVERSEEN A DETERIORATION
OF THE OPERATING RESULTS OF THE COMPANY
IN FACT, THE COMPANY HAS BEEN SO POORLY MANAGED
THAT GROSS MARGIN IS AT A TEN-YEAR LOW WHILE SG&A EXPENSES
AS A PERCENTAGE OF SALES ARE AT A TEN-YEAR HIGH.
Over the last five years, Income from Operations fell significantly from
$36.6 million in fiscal year 2002 to a LOSS of $2.3 million in fiscal year 2006.
This was due to a severe decline in gross margin, a substantial increase in
selling, general and administrative ("SG&A") expenses and a decline in sales.
Gross margin declined from 37.9% in 2002 to 32.6% in 2006 resulting in a $18
million decline in gross profits over the period. SG&A expenses increased by
approximately $23 million from $77 million in 2002 to $100 million in 2006, a
30% increase. As a percentage of sales, SG&A expenses increased from 25.7% in
2002 to 34.1% in 2006. Finally, sales declined from $300 million in 2002 to $294
million in 2006, a decline of 2%.
Because of the Company's financial performance over the past year and the
trend in declining operating margin, the Committee has concerns about Topps'
ability to implement a business plan that will create significant profitability
for the Company. THIS PERFORMANCE IS NOT ACCEPTABLE. IT IS TIME FOR A CHANGE AT
TOPPS. NOW IS THE TIME TO ACT BEFORE MANAGEMENT'S FAILED STRATEGIES ERODE
STOCKHOLDER VALUE FURTHER!
EXCESSIVE SALARY TO MANAGEMENT
We believe that the salaries of management should be more closely aligned
with the Company's financial performance. We believe that the salaries
authorized by the Topps' Board are outrageous given the size and the financial
performance of the Company.
Over the last three years, Arthur T. Shorin has received an average salary
of approximately $980,000. Over the past five years, as revenues have declined
and operating profit has vanished, the Topps Board has continued to reward the
executive management team with generous bonuses. During a recent conference call
with investors, Mr. Shorin was asked whether bonuses were paid to management
given the Company's poor fiscal year 2006 results. Mr. Shorin responded that no
bonuses were paid in 2006. After reviewing the Executive Compensation section of
the Company's Proxy Statement, the Committee was disappointed to see that in
fact Mr. Shorin received a $500,000 bonus for fiscal year 2006. Since Mr. Shorin
received compensation in excess of $1 million that is not performance-based, the
Company cannot even fully deduct his compensation for tax purposes.
In addition, Mr. Shorin's son-in-law, Scott A. Silverstein, received
another increase in salary despite the Company's poor operating performance. In
fact since fiscal year 2004, his salary has increased by 35%. In the same
two-year period, the Company's Income from Operations dropped by more than 100%.
We ask you how can these increases be justified and why is compensation not tied
to the Company's performance?
WE BELIEVE THE BOARD OF DIRECTORS HAS FAILED
TO ALLOCATE THE CAPITAL OF TOPPS IN AN EFFECTIVE MANNER
Over the past five years, the Company has kept an average of Cash & Short
Term Investments of $103 million, representing on average 35% of sales during
this period. We believe that Topps does not require this amount of cash to
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conduct its operations. One of the main responsibilities of a board of directors
of any company is to allocate capital properly. Keeping such a large balance of
cash yielding an average of 2.8% during the past three years is an example, in
our opinion, of poor capital allocation.
OUR NOMINEES ARE COMMITTED TOEXPLORE ALL STRATEGICALTERNATIVES TO
MAXIMIZE STOCKHOLDER VALUE, WHICH INCLUDE THE FOLLOWING:
o Explore the sale of all or part of the Company in a tax efficient manner.
o Significantly reduce the Company's cost structure.
o Reduce executive compensation and bonus packages.
o Improve corporate governance practices.
o Significant repurchase of Topps' common stock either in the open market
or as part of a self-tender offer.
o Distribute a large special dividend.
o Allocate capital in a more efficient manner.
TO PROTECT YOUR INVESTMENT, PLEASE SIGN, DATE,
AND RETURN THE ENCLOSED GOLD PROXY CARD TODAY!
If you have any questions or need assistance voting your shares, please
call D.F. King & Co., Inc. who is assisting us in this solicitation, TOLL FREE,
at (800) 628-8532.
Thank you for your support.
Timothy Brog and Eric Rosenfeld
Topps Full Value Committee
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
THE TOPPS FULL VALUE COMMITTEE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
("SEC") ON JUNE 23, 2006 A DEFINITIVE PROXY STATEMENT AND ACCOMPANYING GOLD
PROXY CARD, TO BE USED TO SOLICIT VOTES FOR THE ELECTION OF ITS SLATE OF
DIRECTOR NOMINEES AND CERTAIN BUSINESS PROPOSALS FOR USE AT THE 2006 ANNUAL
MEETING. THE COMMITTEE STRONGLY ADVISES ALL TOPPS STOCKHOLDERS TO READ THE PROXY
STATEMENTS AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY
CONTAIN IMPORTANT INFORMATION.
STOCKHOLDERS ARE ABLE TO OBTAIN FREE COPIES OF THE PROXY STATEMENT FILED WITH
THE SEC BY THE TOPPS FULL VALUE COMMITTEE THROUGH THE WEBSITE MAINTAINED BY THE
SEC AT WWW.SEC.GOV. IN ADDITION, INVESTORS WILL BE ABLE TO OBTAIN FREE COPIES OF
THE PROXY STATEMENT FROM THE TOPPS FULL VALUE COMMITTEE BY CONTACTING TIMOTHY
BROG, PEMBRIDGE CAPITAL, 708 THIRD AVENUE, NEW YORK, NY 10017 OR BY CALLING D.F.
KING & CO., INC. AT (800) 628-8532.
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THE PARTICIPANTS IN THE PROXY SOLICITATION ARE PEMBRIDGE VALUE OPPORTUNITY FUND
LP, A DELAWARE LIMITED PARTNERSHIP, PEMBRIDGE CAPITAL MANAGEMENT LLC, A DELAWARE
LIMITED LIABILITY COMPANY, TIMOTHY E. BROG, CRESCENDO PARTNERS II, L.P., SERIES
Y, A DELAWARE LIMITED PARTNERSHIP, CRESCENDO INVESTMENTS II, LLC, A DELAWARE
LIMITED LIABILITY COMPANY, CRESCENDO ADVISORS LLC, A DELAWARE LIMITED LIABILITY
COMPANY, ERIC ROSENFELD, ARNAUD AJDLER AND JOHN J. JONES.
INFORMATION CONCERNING THE PARTICIPANTS AND THEIR INTERESTS IN THE SOLICITATION
IS SET FORTH IN THE PROXY STATEMENT FILED WITH THE SEC.
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Contacts:
Timothy Brog Eric Rosenfeld
Pembridge Value Opportunity fund LP Crescendo Partners II L.P, Series Y
(212) 557-6150 (212) 319-7676
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