[TOPS LETTERHEAD]
August 25, 1998
Dear Shareholders:
Enclosed for your information is an Information Statement
respecting action taken by a majority of Tops Appliance City, Inc.'s (the
"Company") shareholders, as of July 21, 1998, by consent pursuant to N.J.S.A.
14A:5-6(2) to issue 3,480,000 shares of the Company's authorized and unissued
common stock, no par value, to Bay Harbour Management, L.C. or its managed
accounts. The Board of Directors of the Company unanimously approved the
issuance of such shares of common stock. The issuance of such shares of common
stock is more fully described in the accompanying Information Statement. No vote
is being requested of the Company's shareholders by this Information Statement
and no special meeting of shareholders is being called.
Sincerely,
/s/ Robert G. Gross
Robert G. Gross
Chairman of the Board
<PAGE>
TOPS APPLIANCE CITY, INC.
45 Brunswick Avenue, CN-14
Edison, New Jersey 08818
INFORMATION STATEMENT
Accompanying this Information Statement is a Consent executed
by Leslie S. Turchin, individually, The Turchin Family Limited Partnership, and
The Westinghouse Electric Corporation Master Trust, all shareholders of the
Company (the "Shareholders"), who as of July 21, 1998 (the "Record Date") owned
in the aggregate 4,974,625 shares of the Company's issued and outstanding shares
of common stock, no par value (the "Common Stock"), being fifty-one and
nine-tenths (51.9%) percent of the issued and outstanding shares of Common
Stock. The Common Stock has no preemptive rights attaching thereto. The Board of
Directors of the Company fixed the close of business on July 21, 1998, as the
record date for the determination of shareholders who are entitled to receive
this Information Statement. As of the Record Date, the Company had 9,571,931
outstanding shares of Common Stock the holders of which are entitled to one vote
per share. In the absence of a meeting of the shareholders of the Company, the
affirmative vote of a majority of the Company's outstanding shares of common
stock is required to approve the matters set forth in this Information
Statement. This Information Statement and the enclosed Consent are being sent to
the shareholders of the Company on or about August 31, 1998. The action to be
effected as set forth in the Consent and more fully described in this
Information Statement shall take effect on or about September 23, 1998. Under
New Jersey law, the shareholders of the Company have no appraisal or similar
rights of dissent from the actions taken or to be taken by the Company as
described in this Information Statement.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
<PAGE>
ISSUANCE OF SECURITIES
The Company issued 1,400,000 shares of Common Stock to Bay
Harbour Management, L.C. or its managed accounts ("Bay Harbour") for $5,040,000
pursuant to the terms of a Share Purchase Agreement (the "Share Agreement"),
dated as of July 16, 1998, between the Company and Bay Harbour (the "Private
Placement"). The Company used the net proceeds from the Private Placement for
working capital and capital expenditures for new stores . The shares of Common
Stock issued in connection with the Private Placement have not been registered
pursuant to the Securities Act of 1933 (the "Act") nor under any State
securities laws, but the Company has agreed to use its best efforts to cause
such shares of Common Stock to be registered under the Act.
In addition, pursuant to a letter agreement (the "Letter
Agreement"), dated July 16, 1998, the Company agreed to permit Bay Harbour to
convert $6,090,000 principal amount of the Company 6-1/2% Convertible
Subordinated Debentures due 2003 (the "Debentures") into 3,480,000 shares of
Common Stock at a conversion price of $1.75 per share (the "Conversion") in
order that the Company may reduce its long-term debt and debt service
obligations. The Company shall pay interest on the Debentures through the date
of the Conversion. The Debentures were issued pursuant to that certain Debenture
Exchange Agreement, dated August 20, 1997, between the Company and BEA
Associates, a New York partnership. The Conversion shall occur on or about
September 23, 1998. The Company shall not receive any proceeds from the
Conversion, but shall reduce its long-term debt and its debt service obligations
as a result of the Conversion. The Conversion shall have no effect on the rights
of any other holders of any of the Company's securities. The shares of Common
Stock issued in connection with the Conversion have not been registered pursuant
to the Act nor under any State securities laws, but the Company has agreed to
use its best efforts to cause such shares of Common Stock to be registered under
the Act.
Pursuant to the Share Agreement and the Letter Agreement,
the Company agreed that provided that Bay Harbour held not less than 15% of the
issued and outstanding shares of Common Stock, Bay Harbour could, in the
aggregate, nominate three individuals for election to the Company's Board of
Directors.
The Board of Directors of the Company approved each of the
Private Placement and the Conversion by Unanimous Consents. The Company obtained
the approval of the Shareholders with regard to the Conversion to satisfy
National Association of Securities Dealers, Inc. ("NASD") Rule 4460 (the "Rule")
which requires, among other things, that shareholder approval is required if an
issuer subject to NASD rules increases the number of issued and outstanding
shares of stock by twenty (20%) percent or more where the consideration received
by the issuer upon such issuance is less than the greater of the book value and
market value in respect of such newly issued shares of stock. The Company will
receive the equivalent of $1.75 per share as a result of the Conversion which
amount is less than the greater of the book value and market value of one share
of the Company's Common Stock. The Conversion will increase the number of issued
and outstanding shares of Common Stock by approximately thirty-six (36%)
percent. Shareholder approval was not obtained with regard to the Private
Placement because the Private Placement only increased the number of issued and
outstanding shares of Common Stock by approximately seventeen (17%) percent as
of July 21, 1998 and the Private Placement and the Conversion are unrelated
transactions which were not contingent upon each other.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of July 21, 1998, the name
and number of shares of Common Stock held by each person known to the Company to
own beneficially more than five percent (5%) of the Company's Common Stock and
the number of shares owned by each director of the Company, the Company's Chief
Executive Officer and its other two most highly compensated executive officers,
and all directors and executive officers as a group. Each of the following has
an address c/o Tops Appliance City, Inc., 45 Brunswick Avenue, CN-14, Edison,
New Jersey 08818, except for The Westinghouse Electric Corporation Master Trust,
whose address is 11 Stanwix Street, Pittsburgh, Pennsylvania 15222, Bay Harbour
Management, L.C. whose address is 885 Third Avenue, 34th Floor, New York, New
York 10022, and Robert D. Carl, III whose address is 8300 Dunwoody Place, Suite
209, Atlanta, Georgia 30350. All shares are owned directly by the named person,
except that Mr. Holland's shares are owned by his wife.
<TABLE>
<CAPTION>
Number of Percent
Name Shares Owned of Class
<S> <C> <C>
Robert G. Gross ................................ 217,879(a) 2.2%
Richard L. Jones ............................... 80,000(b) 0.83%
Thomas L. Zambelli ............................. 40,000(c)
0.42%
Leslie S. Turchin .............................. 2,051,187(d) 25.6%
Anthony L. Formica ............................. 3,667(e) --
John H. Hollands ............................... 4,167(e) --
The Westinghouse Electric Corporation .......... 2,523,438 26.4%
Master Trust
Bay Harbour Management, L.C .................... 1,400,000(f) 14.6%
Robert D. Carl, III ............................ 857,143 8.9%
All Officers and
Directors as a
Group (12 persons) ........................... 2,396,900 25.0%
</TABLE>
(a) Includes 183,333 shares which can be acquired pursuant to the exercise
of vested stock options.
(b) Includes 60,000 shares which can be acquired pursuant to the exercise
of vested stock options.
(c) Includes 40,000 shares which can be acquired pursuant to the exercise
of vested stock options.
(d) Does not include 400,000 shares held by a family partnership in which
Mr. Turchin has a 10% equity interest and over which he has shared voting power.
(e) Includes 1,667 shares which can be acquired pursuant to the exercise of
vested stock options.
(f) The Bay Harbour shares are actually owned beneficially by funds
controlled by Bay Harbour. In addition, on July 17, 1998 Bay Harbour acquired
options from The Turchin Family Limited Partnership ("TFLP") to acquire 200,000
shares of Common Stock from TFLP, and pursuant to a Share Purchase Agreement,
dated as of July 17, 1998, between Bay Harbour and TFLP, Bay Harbour agreed to
acquire from TFLP 200,000 shares of Common Stock which acquisition had not
closed as of July 21, 1998
<PAGE>
GENERAL
The expense of this Information Statement is to be borne by the
Company.
<PAGE>
By Order of the Board of Directors
TOPS APPLIANCE CITY, INC.
/s/ Robert G. Gross
ROBERT G. GROSS,
Chairman of the Board
Edison, New Jersey
August 25, 1998
