The Topps Company, Inc. (NDAQ:TOPP) may face some strong shareholder opposition after it ousted two hedge fund managers from a committee built to evaluate possible rival bids to the company's standing $385.4 million buyout agreement with Michael Eisner's Tornate Co. The committee - which included Arnaud Ajdler from Crescendo Partners and Timothy Brog from Pembridge Capital Management - was initially setup by the company to seek better offers during the next 40 days after Topps was sued by a shareholder on March 8th who sought a higher sale price. Ajder and Brog, who collectively own 6.6% of the company, contend that the $9.75 per share offer was too low and expressed concern that the company did not show the company to all possible buyers (notably, director John Jones also opposed the bid).

Ajder fired back at management today in a letter attached to his Schedule 13D/A filing with the SEC. In the letter, he said that the company set a new low in corporate governance that would be taught in business schools as a clear illustration of poor corporate governance. Ajdler went on to note five concerns:

1. The board appointed two new people (who support the existing merger agreement!) with the power to monitor the day-to-day developments during the "go-shop" period and made it clear that the Ad Hoc Committee (of which Brog and Ajder were members) no longer had such authority. Why? The board reasoned that the two hedge fund managers could not adequately reprensent the best interest of shareholders!
2. The board created an Executive Committee consisting of all board members except Brog and Ajder. Instead of allowing them to voice their opinions in the company's board room, the company simply created a new committee to silence opposing views. Clearly this isn't in the best interest of shareholders.
3. The company failed to correct a statement that it made on March 7th to the WSJ in which it said, "'Over the past two years, we have been working with Lehman Brothers to examine all opportunities to deliver value, and no other superior proposals emerged in that time frame,' said a spokeswoman to the company." This statement gives the false impression that Topps was shopped or that alternative proposals were solicited before entering into a merger agreement at $9.75, which isn't true.
4. The board held a telephonic meeting in which none of the three directors who voted against the merger agreement were provided with an agenda. When a motion to have Topps issue corrective disclosure was duly made and seconded at the meeting, it was ruled out of order by the chairman because he said it wasn't on the agenda.
5. The company mischaracterized Ajder's comments opposing the deal as stemming solely from the fact that the process that led to the merger agreement was flawed because the board did not shop the company; however, the main reason was the inadequate offer price.

In the end, Ajder strongly urged the comapny to reconstitute the Ad Hoc Committee, to disband the Executive Committee and to make corrective disclosure. Topps continues to ignore the will of its shareholders and continues to be run as a private club, and according to the hedge fund, this must stop. If the company takes such corrective actions and additional bids are solicited, it could mean significantly higher offers for the company. This makes TOPP a stock worth watching!

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Metro One Telecommunications (NDAQ:INFO) shares moved up $0.12, or 5.91%, to $2.15 after Strategic Turnaround Partners LP (STEP) disclosed a 9.17% stake and expressed their concern over the current management and direction of the company in a Schedule 13D filing with the SEC. The hedge fund said that it has been supportive of the company's management and efforts to lower operating cost structure and respond to the loss of significant contracts; however, they now believe that the company's board and management develop an efficient and effective plan to realize the company's growth potential over the next year. Moreover, STEP said they read the 13D filing by Everest Special Situation Fund LP and agreed with the demands made to the company's board to maximize shareholder value, including bringing in an executive experienced in coporate restructurings. Finally, they asked that the company install one of its own nominees to the board of directors to help the company implement these changes.

Everest Special Situations Fund, an 8.1% holder, obtained board representation in April 2006, and has since been lobbying the board from within to take immediate action to restructure the company's operations and lower the company's cost structure in response to the loss of the company's largest customers and heavy operating losses. However, despite their efforts, the company has failed to take the immediate and aggressive measures necessary to make the company profitable. The hedge fund said that the company's chairman of the board, William Rutherford, has been slow to make important decisions and has not provided the leadership that the company needs to counteract these losses. As a result, Everest made three demands in a Schedule 13D/A filing that STEP now supports:

1. Call for the resignation of the company's chairman of the board, William Rutherford.
2. Elect a representative of one of the company's largest stockholders as a chairman of the board.
3. Hire a chief restructuring officer or similar executive who specializes in corporate turnarounds.

Finally, Everest said that it may seek to replace members of the company's board through a proxy contest at the next shareholders meeting if necessary. This is all good news for shareholders who have dealt with significant losses now for several years. The company's stock has dropped more than 98% since its highs in mid-2001, and the only way it is going to turn itself around is with a good turnaround team and confident leadership. Combined, these factors make INFO a stock worth watching!

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