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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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: On July 10, 2006, 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
July 10, 2006
Fellow Topps Stockholders:
IT IS TIME FOR A CHANGE
Over the last five years, Topps' Board of Directors has overseen a
dramatic deterioration of the operations of the business and a lagging stock
price. During that time period, the Topps Board, in our opinion, failed to take
action to overhaul management and to reduce the Company's cost structure.
Instead, the very Board that was elected to represent our best interests has
doled out excessive salary and bonuses to the Chairman and Chief Executive
Officer, Arthur Shorin.
FAILURE TO MAXIMIZE FULL VALUE OF THE BAZOOKA BRAND
A perfect example of such deterioration under the Board's watch is the
failure to maximize the full value of the iconic Bazooka brand over the past 20
years. Bazooka and other gum products sales were $26.2 million in fiscal year
1985. Twenty-one years later, gum sales were down more than 60% to $10 million
in fiscal year 2006. But don't just take it from us. Paul Cherrie, a Topps
Managing Director stated publicly that "We've almost missed an entire
generation." Scott Silverstein, the President and Chief Operating Officer of the
Company and the son-in-law of Arthur Shorin, admitted on a January 2006 earnings
conference call that the reason why Topps does not currently sell its Bazooka
gum to warehouse shopping clubs, such as Costco and Sam's Club, is that the
clubs' retail price for bubble gum was LESS than the cost for Topps to
manufacture its gum. AdvertisingAge reported recently that "Bazooka disappeared
from the airwaves and virtually all other forms of communication over the last
decade." It seems to us that the Bazooka brand is not the only thing that
disappeared during this time. Where was the Board and management when Topps'
manufacturing costs made Bazooka so uncompetitive?
ACQUISITION OF WIZKIDS
Another example of poor management and capital allocation is the
purchase of WizKids for approximately $29 million in July 2003. During the
recent first quarter conference call, Topps' CFO stated that "the sales softness
at WizKids was a key factor in the decline in the entertainment segment's
margins" and "as for WizKids, the market remains a difficult one and we are
responding appropriately by focusing in on smaller core product lines and
downsizing accordingly." Mr. Weisman, the co-founder and CEO of WizKids, was
terminated in June 2006.
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PROMISES, PROMISES AND MORE PROMISES - WE HAVE HEARD THEM ALL BEFORE
The Company is now asking you to trust its "strategic plan." After
years of dismal operating performance and poor corporate governance, can you
afford to believe what the Topps Board and management are now telling you? Given
Topps' recent track record, we have no confidence that this Board can create or
enhance stockholder value. Here are some quotes from prior annual reports,
illustrating management's unfulfilled promises:
TOPPS ANNUAL REPORT PUBLISHED MAY 2002
"Fiscal 2003 is going to be a year of strategic investment...for future growth
and profitability."
TOPPS ANNUAL REPORT PUBLISHED MAY 2003
"We took the steps necessary to bring staffing, costs and marketing plans more
in line with reality."
TOPPS ANNUAL REPORT PUBLISHED MAY 2004
"In the U.S., we restructured our sports business early in the year, paring down
the product line to focus on the more profitable releases and reducing overhead
costs by over $1.5 million on an annualized basis."
LET'S LOOK AT THE FACTS - THE TOPPS BOARD HAS OVERSEEN
SIGNIFICANT EROSION TO STOCKHOLDER VALUE
o Over the last five years, Income from Operations fell significantly
from approximately $36.6 million in fiscal year 2002 to a LOSS of
approximately $2.3 million in fiscal year 2006. However, this did not
stop the Board from authorizing increases in salaries and bonuses for
management during these five years.
o 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.
OUR NOMINEES CAN MAKE A DIFFERENCE AND THEY DO HAVE A PLAN
The Topps Board is telling you that the Committee does not have a plan
to enhance stockholder value. We believe the real story is the Topps directors
simply do not want three independent directors on their board who will press
them to align compensation with stockholders' interests, to eliminate related
party dealings, to allocate capital more efficiently and to hire an investment
bank to explore strategic alternatives, all with the objective of enhancing
operating performance and enhancing the value of the Company for all of its
stockholders. The Committee believes that its nominees will be able to make a
tremendous difference because their election will send a very strong message to
the existing Board and management that stockholders want change and the status
quo is not acceptable. Our nominees - Timothy Brog, Arnaud Ajdler and John Jones
have complementary skills and business experience to contribute to this Board.
They have relevant M&A, business development and corporate governance
experience that will benefit the current Board. Our plan contains a two-pronged
approach, one of which is Strategic and the other Operational:
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EXPLORE ALL STRATEGIC ALTERNATIVES
o Hire an investment bank to explore the sale of all or part of the
Company in a tax efficient manner
o Allocate capital in a more efficient manner
o Significant repurchase of Topps' stock either in the open market or as
part of a self-tender offer
o Distribute a large special dividend
OPERATIONAL IMPROVEMENTS
o Significantly reduce the Company's cost structure
o Reduce executive compensation and tie bonuses to significant
improvements in operations
IT IS TIME FOR A CHANGE
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
Item 2: On July 10, 2006, the Committee issued the following press
release:
FOR IMMEDIATE RELEASE
Monday, July 10, 2006
TOPPS FULL VALUE COMMITTEE CRITICAL OF TOPPS BOARD
TAKING ACTIONS INCONSISTENT WITH TOPPS STATED GOAL TO ADOPT PROPOSALS
QUESTIONS BOARD'S COMMITMENT TO OBTAINING THE SUPERMAJORITY VOTE REQUIRED FOR
APPROVAL OF THE COMMITTEE'S MODIFIED CORPORATE GOVERNANCE REFORMS
NEW YORK, NEW YOK, July 10, 2006 -- The Topps Full Value Committee believes that
while The Topps Company, Inc. (Nasdaq: TOPP) Board is on the one hand
recommending that stockholders vote in favor of its modified versions of the
Committee's original proposals to declassify the Board and to allow stockholders
to call a special meeting, it is simultaneously refusing to take actions or
steps that would make the adoption of the proposals more likely.
The Board is publicly stating that it "supports sound corporate governance," yet
its actions are demonstrating that the Board may in fact not be fully supporting
either its proposals or sound corporate governance. Over two weeks ago, we
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publicly urged the Board to agree that the amendments to the Certificate of
Incorporation and By-laws be treated as non-contested proposals allowing broker
non-votes to be counted in favor of these proposals, making their adoption more
likely. The Committee has since made this request in two separate conversations
with management and Topps' proxy solicitation firm. We have been informed on
both occasions that they will NOT agree to make the vote on the proposals
non-contested, thereby making it more difficult for the proposals to be adopted.
In addition, the Board has still not publicly stated that the members of the
Board will vote their shares in favor of these amendments.
Making the vote on the proposals non-contested is very important because of the
Company's onerous supermajority voting provisions that require holders of at
least 66-2/3% of the outstanding shares of common stock to approve these
proposals. In other words, if only 80% of the outstanding shares are voted at
the 2006 Annual Meeting, 83% of the votes cast would be required to adopt the
proposals.
"While the outside observer might conclude that the Topps Board is taking steps
to improve corporate governance, I believe the Board is behind the scenes taking
steps to hinder the adoption of its very own proposals," said Timothy Brog,
President of Pembridge.
"We are once again urging Topps to make these proposals non-contested, making
them more likely to be adopted. If Topps does not do so, it is clear to us that
this is another attempt by the Board to entrench itself and management," said
Eric Rosenfeld, President of Crescendo Partners.
IT IS TIME FOR A CHANGE!
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 WILL BE 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.
THE PARTICIPANTS IN THE PROXY SOLICITATION ARE PEMBRIDGE VALUE OPPORTUNITY FUND
LP, A DELAWARE LIMITED PARTNERSHIP, PEMBRIDGE CAPITAL MANAGEMENT LLC, A DELAWARE
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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.
Contacts:
Timothy Brog
Pembridge Value Opportunity fund LP
(212) 557-6150
Eric Rosenfeld
Crescendo Partners II L.P, Series Y
(212) 319-7676