[TOPS LETTERHEAD]
August __, 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,
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 Pension Plan, all shareholders of the Company (the "Shareholders"),
who as of July 21, 1998 (the "Record Date") owned in the aggregate _____________
shares of the Company's issued and outstanding shares of common stock, no par
value (the "Common Stock"), being ______ (___%) 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 _________ 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 __, 1998. The action to be effected as set forth in the Consent and more
fully described in this Information Statement shall take effect on
______________, 1998 [at least 20 days after date of mailing] 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 __________, 1998 [at least 20 days after mailing]. 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 The Westinghouse Pension Plan, 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.
Number of Percent
Shares Owned of Class
Robert G. Gross 217,879(a) __%
Richard L. Jones 80,000(b) __%
Thomas L. Zambelli 40,000(c) __%
Leslie S. Turchin 2,217,559(d) __%
Anthony L. Formica 3,667(e) -
John H. Hollands 4,167(e) -
The Westinghouse Pension Plan 2,536,638 __%
Bay Harbour Management, L.C. 1,400,000(f) __%
Robert D. Carl, III 857,143 __%
All Officers and
Directors as a
Group (12 persons) 2,597,117 __%
(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 15, 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 15, 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.
ROBERT G. GROSS,
Chairman of the Board
Edison, New Jersey
August __, 1998
