[TOPS LETTERHEAD]
April 30, 1999
Dear Shareholders:
We cordially invite you to attend the Annual Meeting of the
Shareholders of Tops Appliance City, Inc. (the "Company") to be held at 11:00
A.M. on Friday, May 21, 1999, at the Company's store at 410 Route 10, East
Hanover, New Jersey.
The purposes of this meeting are (i) to elect four (4)
directors, and (ii) to ratify the appointment of auditors and to transact such
other business as may properly come before the Meeting or any adjournment
thereof. These matters are described in the accompanying Notice of Meeting and
Proxy Statement.
The Board of Directors recommends that Shareholders vote in
favor of each proposal. We encourage all Shareholders to participate by voting
their shares by Proxy whether or not they plan to attend the meeting. Please
sign, date and mail the enclosed Proxy as soon as possible. If you do attend the
Annual Meeting, you may still vote in person.
Sincerely,
-----------------------------------
Richard L. Jones
Co-Chairman of the Board
-----------------------------------
Douglas P. Teitelbaum
Co-Chairman of the Board
<PAGE>
TOPS APPLIANCE CITY, INC.
45 BRUNSWICK AVENUE, CN-14
EDISON, NEW JERSEY 08818
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on May 21, 1999
Notice is hereby given that the Annual Meeting of Shareholders
(the "Meeting") of Tops Appliance City, Inc. (the "Company") will be held at the
Company's store at 410 Route 10, East Hanover, New Jersey on May 21, 1999 at
11:00 a.m. Eastern Daylight Time, for the following purposes:
1. To elect four (4) members of the Board of Directors, two
(2) to serve until the 2002 Annual Meeting of Shareholders, one (1) to serve
until the 2001 Annual Meeting of Shareholders and one (1) to serve until the
2000 Annual Meeting of Shareholders, and, in each case, until a successor is
duly elected and qualified.
2. To approve the appointment of Arthur Andersen LLP as the
Company's independent auditors, for the fiscal year ending December 28, 1999.
3. To transact such other business as may properly come before
the Meeting or any adjournment thereof.
Only shareholders of record at the close of business on April
28, 1999 will be entitled to notice of and to vote at the Meeting.
Whether or not you intend to attend the Meeting, please
complete, date and sign the enclosed Proxy. Your Proxy will be revokable, either
in writing or by voting in person at the Meeting, at any time prior to its
exercise.
By Order of the Board of Directors
----------------------------------
THOMAS L. ZAMBELLI
Secretary
Edison, New Jersey
April 30, 1999
<PAGE>
TOPS APPLIANCE CITY, INC.
45 Brunswick Avenue, CN-14
Edison, New Jersey 08818
PROXY STATEMENT
Accompanying this Proxy Statement is a Notice of Annual
Meeting of Shareholders and a form of Proxy for such meeting solicited by the
Board of Directors. The Board of Directors has fixed the close of business on
April 28, 1999, as the record date for the determination of shareholders who are
entitled to notice of and to vote at the meeting or any adjournment thereof. The
holders of a majority of the outstanding shares of Common Stock present in
person, or represented by Proxy, shall constitute a quorum at the meeting.
As of the record date, the Company had 15,325,537 outstanding
shares of common stock, no par value (the "Common Stock"), the holders of which
are entitled to one vote per share.
A Proxy that is properly submitted to the Company may be
revoked at any time before it is exercised by written notice to the Secretary of
the Company, and any Shareholder attending the meeting may vote in person and by
doing so revokes any Proxy previously submitted by him. Where a Shareholder has
specified a choice on his Proxy with respect to Proposals 1 and 2, it will be
complied with. If no direction is given, all the shares represented by the Proxy
will be voted in favor of such Proposals.
The cost of soliciting Proxies will be paid by the Company,
which will reimburse brokerage firms, custodians, nominees and fiduciaries for
their expenses in forwarding proxy material to the beneficial owners of the
Company's stock. Officers and regular employees of the Company may solicit
Proxies personally and by telephone. The Annual Report of the Company for the
year ended December 29, 1998, containing audited financial statements for such
year, is enclosed with this Proxy Statement. This Proxy Statement and the
enclosed Proxy are being sent to the shareholders of the Company on or about
April 30, 1999.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THIS MEETING, YOU ARE
REQUESTED TO PLEASE SIGN, DATE AND MAIL THE PROXY PROMPTLY.
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
According to the Company's By-Laws, the Board of Directors is
divided into three classes, each of which is composed as nearly as possible of
one-third of the directors. At the 1999 Annual Meeting, two directors will be
elected to serve for three years expiring on the date of the Annual Meeting of
Shareholders in 2002, one director will be elected to serve for two years
expiring on the date of the Annual Meeting of Shareholders in 2001, and one
director will be elected to serve for one year expiring on the date of the
Annual Meeting of Shareholders in 2000. Each director elected will continue in
office until a successor has been elected or until resignation or removal in the
manner provided by the Company's By-Laws. The names of the nominees for the
Board of Directors and the names of the directors whose terms will continue
after the Annual Meeting are listed below. Shares represented by a properly
executed proxy in the accompanying form will be voted for such nominees.
However, discretionary authority is reserved to vote such shares in the best
judgment of the persons named in the event that any person or persons other than
the nominees listed below are to be voted on at the meeting due to the
unavailability of any nominee so listed.
All persons named below are directors of the Company at the
present time. No family relationships exist between any nominee, director or
executive officer of the Company.
NOMINEES FOR THREE-YEAR TERM
DOUGLAS P. TEITELBAUM, 33, has been a Principal and Co-Portfolio Manager of
Bay Harbour Management, L.C., a registered investment advisor based in New York
and Tampa, since April 1996. Previously, Mr. Teitelbaum was a Managing Director
in the high yield and distressed securities department of Bear, Stearns & Co.,
Inc. Prior to June 1994, he was a Senior Vice President at Dabney Resnick & Co.,
Inc., an investment banking firm. Mr. Teitelbaum also serves on the board of
directors of Barney's Inc., as Co-Chairman, and Swifty Serve Corp. Mr.
Teitelbaum became the Co-Chairman and a Director of the Company in January 1999.
He is a member of the Company's Compensation Committee.
STEVEN A. VAN DYKE, 39, has been the President and Chief Investment Officer
of Bay Harbour Management, L.C., a registered investment advisor based in New
York and Tampa, since it was founded in 1987. Mr. Van Dyke also serves on the
board of directors of Barney's, Inc., Buckhead America Corporation and Swifty
Serve Corp. Mr. Van Dyke became a Director of the Company in January 1999.
NOMINEE FOR TWO-YEAR TERM
ROBERT G. GROSS, 41, is presently the Chief Executive Officer of Monro
Muffler Brake, Inc., effective January 1999. He has served as a Director and
Vice Chairman of the Company since June 1995, and Chief Executive Officer of the
Company from June 1995 to December 1998. In January 1997, he was elected
Chairman of the Board. Previously, Mr. Gross was President and Chief Operating
Officer of Eye Care Centers of America, Inc. from 1990 to 1994. Prior to that,
he served as a management consultant to Sears Speciality Merchandising Group. He
is a member of the Company's Compensation Committee.
NOMINEE FOR ONE-YEAR TERM
WALTER A. JONES, 45, has been a Principal of GDL Management Services, a
division of Mahoney Cohen & Company, CPA, P.C., since 1996. Previously, he was
Co-President of the GDL Group, Inc., a turn-around management firm he joined in
1988. Prior to that, he was Vice President of Finance for Smith Management and
previously a general management consultant with Touche Ross & Company. He is a
member of the Company's Audit Committee.
DIRECTORS CONTINUING IN OFFICE
RICHARD L. JONES, 49, was named Chief Executive Officer of Tops upon the
December 1998 resignation of Mr. Robert G. Gross, and was appointed Co-Chairman
in January 1999. Previously, Mr. Jones was the President and Chief Operating
Officer of the Company from April 1998 until December 1998. From January 1997
until April 1998, Mr. Jones was Senior Vice President, Chief Operating Officer
and General Merchandise Manager. From August 1995 until January 1997, Mr. Jones
held the position of Senior Vice President and General Merchandise Manager.
Prior to joining Tops, Mr. Jones served as Vice President and General
Merchandise Manager at SAM's Club, a division of Wal-Mart, from October 1993
until August 1995. Prior to that, Mr. Jones served in various senior management
positions at Silo, Inc. and Stereo Equipment Sales, Inc. His term as Co-Chairman
expires at the annual meeting in 2001. He is a member of the Company's Executive
Committee.
THOMAS L. ZAMBELLI, 48, has been Executive Vice President and Chief
Financial Officer of the Company since April 1998. From September 1996 until
April 1998, Mr. Zambelli held the position of Senior Vice President and Chief
Financial Officer. Prior to joining Tops, Mr. Zambelli served in senior
financial positions at Giant Carpet, Canadians and Pergament Home Centers. Mr.
Zambelli became a Director in December 1997 and is a member of the Company's
Executive Committee. His term as a Director expires at the annual meeting in
2000.
<PAGE>
ANTHONY L. FORMICA, 58, recently retired as the Chief Operating Officer of
the Kessler Institute for Rehabilitation which he has served since 1972. He is a
member of the Audit and Compensation Committees of the Company. Mr. Formica
became a Director of the Company in September 1992. His term as a Director
expires at the annual meeting in 2001.
JOHN L. HOLLANDS, 70, has served as President of Hollands Associates, a
management consulting firm, since July 1991. Prior thereto, he served as
Executive Vice President of SONY Corporation of America from July 1989 through
July 1991 and as President of Sony Magnetic Products from July 1982 through July
1989. Mr. Hollands is Executive Director of the Vision Fund of America which
supports the Lighthouse National Center for Vision and Aging. He is a member of
the Company's Audit Committee. Mr. Hollands became a Director of the Company in
September 1992. His term as a Director expires at the annual meeting in 2000.
INFORMATION CONCERNING BOARD
The Board of Directors met five times in 1998. In addition, the Board acted
by unanimous consent nine times during 1998.
The Board of Directors has an Audit Committee, a Compensation Committee and
an Executive Committee. The Audit Committee is responsible for reviewing the
Company's audited financial statements, meeting with the Company's independent
accountants to review the Company's internal controls and financial management
practices and examining all agreements or other transactions between the Company
and its directors and officers (other than those compensation functions assigned
to the Compensation Committee) to determine whether such agreements or
transactions are fair to the Company's shareholders. Messrs. Formica, Hollands
and W. Jones serve on the Audit Committee. The Audit Committee met once in 1998.
The Compensation Committee is responsible for reviewing the compensation
and benefits of the Company's executive officers, making recommendations to the
Board of Directors concerning compensation and benefits for such executive
officers and administering the Company's stock option plans. Messrs. Teitelbaum,
Gross and Formica serve on the Compensation Committee. The Compensation
Committee met once in 1998.
The Company's Executive Committee has the authority to act, between
meetings of the full Board of Directors, on any matter that might properly be
brought before the Board of Directors, subject to exceptions for certain major
matters. Messrs. R. Jones and Zambelli serve on the Executive Committee.
Directors who are not employees of the Company receive an annual fee of
$5,000 and $500 per meeting for serving as directors. Directors who are
employees of the Company do not receive any additional compensation for such
services.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1999, 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 those noted separately in the following table. All
shares are owned directly by the named person, unless otherwise noted.
<PAGE>
<TABLE>
<CAPTION>
Number of Percent
Name Shares Owned of Class
- ----- ------------ --------
<S> <C> <C>
Richard L. Jones .................................... 110,000 (a) 0.7%
Thomas L. Zambelli .................................. 69,000 (b) 0.4%
Michael J. Straub ................................... 15,303 (c) 0.1%
Robert G. Gross ..................................... 303,079 (d) 1.9%
Anthony L. Formica .................................. 5,334 (e) --
John H. Hollands .................................... 5,834 (e)(f) --
Douglas P. Teitelbaum ............................... 7,620,764 (g) 49.8%
c/o Bay Harbour Management, L.C.
885 Third Avenue
New York, NY 10022
Steven A. Van Dyke .................................. 7,625,764 (g)(h) 49.8%
c/o Bay Harbour Management, L.C.
885 Third Avenue
New York, NY 10022
Walter A. Jones ..................................... -- --
c/o Mahoney Cohen & Company, P.C.
111 West 40th Street
New York, NY 10018
Bay Harbour Management, L.C ......................... 7,620,764 (i) 49.8%
885 Third Avenue
New York, NY 10022
Westinghouse Pension Plan ........................... 2,223,438 14.5%
11 Stanwix Street
Pittsburgh, PA 15222
Leslie S. Turchin ................................... 2,059,387 13.5%
536 Coconut Isle
Fort Lauderdale, FL 33301
Robert Carl III ..................................... 914,999 6.0%
83 Dunwoody Place, Suite 209
Atlanta, GA 30350
All Officers and Directors as a Group (14 persons) .. 553,396 3.5%
</TABLE>
(a) Includes 90,000 shares which can be acquired pursuant to the exercise
of vested stock options.
(b) Includes 65,000 shares which can be acquired pursuant to the exercise
of vested stock options.
(c) Includes 11,468 shares which can be acquired pursuant to the exercise
of vested stock options.
(d) Includes 283,333 shares which can be acquired pursuant to the exercise
of vested stock options.
(e) Includes 3,334 shares which can be acquired pursuant to the exercise of
vested stock options.
(f) Includes 2,500 shares owned by Helen Hollands, John H. Hollands' wife.
(g) Includes 7,620,764 shares beneficially owned through Bay Harbour
Management, L.C., voting power of such shares is reported as being shared by
Messrs. Teitelbaum and Van Dyke.
(h) Includes 5,000 shares owned jointly by Mr. and Mrs. Van Dyke.
(i) Voting power of these shares is reported as being shared by Messrs.
Teitelbaum and Van Dyke.
CERTAIN TRANSACTIONS
The Company leases a portion of its warehouse and distribution center,
including office space, and its retail store in Edison, New Jersey from Leslie
S. Turchin, a principal stockholder and a former Director and Chairman of the
Board of the Company.
The Edison retail store lease commenced March 3, 1984 for a five-year term
covering approximately 47,000 square feet in a shopping center at a base rent of
$20,579 per month. The lease was amended on January 1, 1987 to reduce the leased
premises to 45,209 square feet, to increase the base rent to $28,872 per month
through December 1991 and $54,250 per month thereafter until December 1996, and
to grant three additional five-year options to renew, the terms of which will
expire December 31, 2011. The Company has exercised its first option to renew
the lease through December 31, 2001 at a base rent of $59,412 per month. Further
amendments to the lease require that the rental payment for the second renewal
term would be agreed upon by the parties at the time of the renewal but would be
no less than $61,354 per month, and $79,400 per month during the third renewal
term. The Company is also responsible for its proportionate share of real estate
taxes and common area maintenance costs of the shopping center calculated as a
percentage of the total square footage of rentable floor area of the buildings
comprising the shopping center. The Company is also responsible for its own
utilities and insurance expenses with respect to the leased premises.
The lease for the office space and warehouse and distribution center in
Edison, New Jersey commenced on November 1, 1985 for a term of five years,
covered approximately fifteen acres, including a 318,000 square foot building,
of which 28,000 square feet is office space, at a base rent of $97,517 per
month. The lease includes two renewal options, each for a term of five years.
Rental payments for the first renewal term, which ended December 31, 1996, were
$111,337 per month. The second renewal term, which was exercised in 1996 and
expires December 31, 2001, requires a base rent of $105,577 per month. The lease
was further extended in 1998 for a period of seven (7) years, commencing on
January 1, 2002 and ending on December 31, 2008. The base rent during the first
year of the extension will be $108,622 per month, and annual increases shall be
calculated equivalent to one-half of the percentage change in the CPI. The
Company is responsible for paying all real estate taxes, utilities, insurance,
and maintenance costs associated with these premises.
The Company believes that the terms and conditions of the leases with Mr.
Turchin are no less favorable to the Company than could have been obtained for
comparable premises in arms' length transactions with unaffiliated third
parties. The Company's independent directors must approve any future leases or
other transactions with related parties.
EXECUTIVE COMPENSATION
The following table sets forth, for each of the last three fiscal years,
cash and certain other compensation paid or accrued by the Company for the Chief
Executive Officer and for each of the two other most highly compensated
executive officers (the "Named Officers") of the Company in all capacities in
which they served:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
Awards
Name and Other Restricted Other
Principal Annual Stock Options LTIP Compen-
Position Year Salary Bonus Compensation Awards SAR's (#) Payouts sation
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard L. Jones 1998 $ 225,000 $ 75,000 $ 11,975 30,000 - -
President and 1997 225,000 - 11,830 30,000 - -
Chief Executive 1996 225,000 - 65,612(d) 90,000 - -
Officer (a)
Thomas L. Zambelli 1998 $ 175,000 $ 53,333 $ 13,125 20,000 - -
Executive Vice 1997 160,000 - 12,942 50,000 - -
President and Chief 1996 46,154 - 4,399 40,000 - -
Financial Officer (b)
Michael J. Straub
Vice President 1998 $ 133,500 $ 30,000 $ - 10,000 - -
Of Stores (c) 1997 111,807 - - 10,000 - -
1996 86,912 12,397 - 12,200 - -
</TABLE>
(a) Mr. Jones succeeded Mr. Gross to the position of Chief Executive
Officer of the Company effective December 1998, and was appointed Co-Chairman of
the Board in January 1999. From April 1998 until December 1998, Mr. Jones was
President, Chief Operating Officer and General Merchandise Manager. From January
1997 until April 1998, he was Senior Vice President, Chief Operating Officer and
General Merchandise Manager. From August 1995 until January 1997, Mr. Jones held
the position of Senior Vice President and General Merchandise Manager.
(b) Mr. Zambelli has been Executive Vice President and Chief Financial
Officer of the Company since April, 1998. From September 1996 until April 1998,
Mr. Zambelli held the position of Senior Vice President and Chief Financial
Officer.
(c) Mr. Straub has been Vice President of Stores since September 1997. From
January 1997 until September 1997, he held the position of General Sales
Manager. From September 1995 to January 1997, Mr. Straub was a buyer for
television and video. Prior thereto, he held various positions in sales,
merchandising and operations for the Company.
(d) $58,078 of this amount represents relocation expenses reimbursed in
1996.
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
% of Total Value at Assumed
Options/SARs Annual Rates of Stock
Granted to Exercise or Appreciation for
Options/SARs Employees in Base Price Expiration Option Term
Name Granted (#) Fiscal Year ($ / Share) Date 5% 10%
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Jones 30,000 11.2% 3.00 12/1/08 $ 47,400 $ 129,000
Thomas L. Zambelli 20,000 7.4% 3.00 12/1/08 $ 31,600 $ 86,000
Michael J. Straub 10,000 3.7% 4.13 6/12/08 $ 4,500 $ 31,750
All Officers as a Group 97,500 36.3% _ _ _ _
(9 Persons)
</TABLE>
During 1998, stock options totaling 268,500 shares were issued at exercise
prices ranging from $1.00 to $4.13. Options generally vest over a 3 year period
and are exerciseable over the 10 year period commencing on the date of issuance.
The assumed annual rates of appreciation of 5% and 10% for a ten (10) year
period would result in the price of the Company's stock increasing from $2.81
(closing price at 12/31/98) to approximately $4.58 and $7.29 respectively.
Option Exercises in 1998 and Year-End Option Values
The following table provides information on options exercised by the
officers named in the Summary Compensation Table during 1998 and unexercised
options held by such persons at December 31, 1998.
<TABLE>
<CAPTION>
Option Exercises
During 1998 Unexercised Options Held at December 31, 1998
---------------- ---------------------------------------------
Vested Unvested
------------------------- --------------------------------------
Shares
Acquired on Value Number Value at Year of Number Value at
Name Exercise (#) Realized ($) of Shares 12/31/98($)(1) Vesting of Shares 12/31/98($)(1)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard L. Jones - - 90,000 $ 39,420 1999 30,000 $ 52,500
2000 30,000 $ -
Thomas L. Zambelli - - 65,000 $ 98,670 1999 25,000 $ 43,750
2000 20,000 $ -
Michael J. Straub - - 11,468 $ 8,574 1999 10,733 $ 6,790
2000 6,666 $ 5,009
2001 3,333 -
</TABLE>
(1) Represents the spread between the aggregate exercise price and assumed
aggregate market value using the closing price ($2.81) of the Company's Common
Stock on the NASDAQ exchange at December 31, 1998.
Employment Agreements
The Company entered into management agreements with Richard L. Jones,
its Chief Executive Officer, effective August 1, 1995 for a term expiring August
1, 1998, with Thomas L. Zambelli, its Executive Vice President and Chief
Financial Officer effective September 3, 1996 for a term expiring December 31,
1997, and with Michael J. Straub, its Vice-President of Stores, effective June
12, 1998 expiring December 31, 1999. Mr. Jones's and Mr. Zambelli's contracts
were extended in December 1998 to expire on December 31, 2000.
Each of the existing agreements provide for a base salary subject to
increases as approved by the Board of Directors. Currently, the base salaries of
Messrs. Jones, Zambelli and Straub are $275,000, $175,000, and $145,000,
respectively. The Board of Directors, in its discretion, may award annual
bonuses to these officers.
Messrs. Jones and Zambelli each receive additional non-cash
compensation in the form of reimbursed automobile expenses, use of automobiles
owned or leased by the Company (or an allowance for such leasing or purchase by
the executive subject to a dollar limitation), health, medical, hospitalization
and other insurance benefits, and other benefits provided by the Company to all
employees.
Pursuant to the terms of their respective management agreements, Mr.
Jones, Mr. Zambelli and Mr. Straub have each agreed not to compete, directly or
indirectly, with the Company in any state or geographic area in which the
Company conducts or proposes to conduct business during the terms of their
respective agreements and for a period of up to two years after termination of
employment by expiration of the term of the agreement with cause. Should either
Mr. Jones or Mr. Zambelli become disabled, as defined in their respective
management agreements, the Company has the right to reduce such executive's
compensation by fifty percent for the duration of the contract term.
Each of the agreements not to compete restrict Messrs. Jones, Zambelli
and Straub from soliciting customers, suppliers, employees or sales agents of
the Company during the effective period of such agreements. Each executive is
further restricted from disclosing any confidential information, trade secrets
or customer lists to anyone for the same restricted period of time.
Pursuant to the terms of the respective management agreements, if there
were a transfer of more than fifty percent of the voting securities of the
Company (in one transaction or a series of transactions), or a sale of
substantially all of the Company's assets, Messrs. Jones and Zambelli would each
receive one and one-half times their annual base salaries, paid within sixty
days of the transfer of securities or sale of the company's assets.
Salary Savings Plan & Trust
The Company maintains a Salary Savings Plan & Trust ("401(k) Plan") for
its employees who have reached the age of 21 and completed one "Year of Service"
as that term is defined in the 401(k) Plan. The Plan is intended to be qualified
under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as
amended (the "Code"). Under the Plan, a participant may contribute up to 15% of
his or her compensation, not to exceed an amount which would cause the 401(k)
Plan to violate Section 401(k) and other applicable sections of the Code. In
addition, the Company makes annual contributions of 25% of the participant's
contribution up to 10% of that participant's annual compensation. The Company
may also make additional discretionary contributions.
All participants are 100% vested in their own contributions and in the
earnings attributable to their contributions. Vesting in the remainder of a
participant's account is based upon years of service with the Company. After
three years of service, a participant will be 20% vested, and will be vested by
an additional 20% for each of the following years of service, up to 7 years,
when the participant will be 100% vested. Each participant is entitled to the
benefit that can be provided from his or her vested account.
The 401(k) Plan permits withdrawals in the event of termination of
employment, retirement, disability, death or proven financial hardship.
Distributions from the 401(k) Plan are payable in a lump sum or in installments
over a period not to exceed the assumed life expectancy of the participant or
the assumed joint life expectancy of the participant and his or her spouse.
Participants are offered a choice of seven investment funds in which to
direct their contributions. The Company's contributions under the 401(k) Plan
are invested in the manner designated by the Company, in its sole discretion.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is comprised of Messrs. Gross, Teitelbaum
and Formica. The Compensation Committee reviews, recommends and approves changes
to the Company's compensation policies and programs and is responsible for
reviewing and approving the compensation of the Chief Executive Officer and
other senior officers of the Company.
The following report shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
Compensation Philosophy
The Company believes that executive compensation should be based upon
value returned to shareholders. The Company has developed and is developing
compensation programs designed to reflect Company performance and to be
competitive in the marketplace. In designing compensation programs, the Company
attempts to reflect both value created for shareholders while supporting the
Company's strategic goals. The Company's compensation programs reflect the
following themes:
. Compensation should be meaningfully related to the value created for
shareholders.
. Compensation programs should support the Company's short-term and
long-term strategic goals and objectives.
. Compensation programs should promote the Company's value and reward
individuals for outstanding contributions to the Company's success.
. Short-term and long-term compensation should be designed to attract and
retain superior executives.
The Company's executive compensation is based upon three components,
base salary, annual incentive bonuses and long-term incentives, which are
intended to serve the overall compensation philosophy.
Base Salary
The base salary of each executive officer is determined as a function
of three principal factors: the individual's performance, the relationship of
the individual's salary to similar executives in comparable companies, and
increases in the individual's responsibilities, whether through promotions or
otherwise. Effective August 1, 1998, Mr. Straub's base salary was increased to
$145,000 and effective January 1, 1999, Mr. Jones' base salary was increased to
$275,000.
<PAGE>
Annual Incentive Bonus
The Company's annual incentive bonuses are designed to reflect the
individual officer's contribution to the profitability of the Company and any
special achievements by the respective officers. Each officer's bonus is based
upon the Company's performance in various areas, such as sales, profit margins,
operating expenses and earnings before interest and taxes as compared to a
pre-determined plan for each officer for each year. The following bonuses were
paid to the Named Officers in 1999 based on 1998 performance:
Name Bonus
Richard L. Jones............................................. $84,375
Thomas L. Zambelli........................................... 43,750
Michael J. Straub............................................ 27,300
Long-Term Incentives
The Company believes that shareholder value is enhanced by providing senior
management as well as all employees with the opportunity to participate in the
growth in the value of the Company's stock. The Board of Directors, including
each member of the Compensation Committee, therefore adopted the Employee Stock
Purchase Plan and the 1993 Senior Management Incentive and Non-Qualified Stock
Option Plan, as amended, and the 1995 Incentive and Non-Qualified Stock Option
Plan.
Each member of management is eligible for participation in the stock option
plan. No member of management with the rank of vice president or higher is
eligible to participate in the stock purchase plan, which is open to all other
employees of the Company.
Stock options will be granted at the prevailing market value and will have
value only if the price of the Company's stock increases. Grants that are made
will generally vest over three years. Executives must be employed by the Company
at the time of vesting in order to exercise the options.
The Compensation Committee
Robert G. Gross Douglas P. Teitelbaum Anthony L. Formica
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholders return
on the Company's common stock with that of the S&P 500 Stock Index, a broad
market index published by Standard & Poor's Corporation, and an industry index
of radio, television and consumer electronic stores. The comparison assumes that
$100 was invested in each of the Company's common stock, the stocks included in
the S&P 500 Stock Index and the stocks included in the industry index on January
1, 1994. The indices reflect formulas for dividend reinvestment and weighting of
individual stocks. This data was furnished by Media General Financial Services,
Inc.
This graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934, except
to the extent that the Company specifically incorporates this graph by
reference, and shall not otherwise be deemed filed under such Acts.
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES, PEER GROUPS, INDUSTRY INDICES AND/OR BROAD MARKETS
Fiscal Year Ending
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
COMPANY/INDEX/MARKET
Tops Appliance City 100.00 28.57 12.99 6.82 5.52 14.61
Radio, TV &
Electronic Stores 100.00 93.39 81.50 80.54 137.01 185.36
S&P Composite 100.00 101.32 139.40 171.41 228.59 293.92
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE TO ELECT THE
AFOREMENTIONED NOMINEES TO SERVE ON THE BOARD OF DIRECTORS.
<PAGE>
PROPOSAL 2
RATIFICATION OF THE
SELECTION OF INDEPENDENT AUDITORS
The selection of independent auditors to examine the financial
statements of the Company for the year ending December 28, 1999 to be
transmitted or made available to shareholders and filed with the Securities and
Exchange Commission is to be submitted to the meeting for ratification. Arthur
Andersen LLP has been selected by the Company's Board of Directors to examine
such financial statements. A member of Arthur Andersen LLP will be present at
the Annual Meeting and will be available to respond to appropriate questions and
will have the opportunity to make a statement.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
GENERAL
The expense of this solicitation is to be borne by the Company. The
Company may also reimburse persons holding shares in their names or in the names
of their nominees for their expenses in sending proxies and proxy material to
their principals.
Unless otherwise directed, the persons named in the accompanying form
of proxy intend to vote all proxies received by them in favor of the election of
nominees to the Board herein, and the ratification of selected independent
auditors. All proxies will be voted as specified.
Management does not intend to present any business at the meeting other
than that set forth in the accompanying Notice of Annual Meeting, and it has no
information that others will do so. If other matters requiring the vote of the
shareholders properly come before the meeting and any adjournments thereof, it
is the intention of the persons named in the accompanying form of proxy to vote
the proxies held by them in accordance with their judgment on such matters.
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Shareholder proposals for inclusion in the proxy materials related to
the 2000 Annual Meeting of Shareholders must be received by the Company no later
than December 1, 1999. A Shareholder must have been a record or beneficial owner
of the Company's common stock for at least one year prior to December 1, 1999,
and the shareholder must continue to own such shares, worth at least $1,000,
through the date on which the Meeting is held.
The Company's by-laws outline procedures, including minimum notice
provisions, for shareholder nominations of directors and other shareholder
business to be brought before shareholders at the Annual Meeting. A copy of the
pertinent by-law provisions is available upon request to Thomas L. Zambelli,
Secretary, Tops Appliance City, Inc., 45 Brunswick Avenue, CN-14, Edison, New
Jersey 08818.
<PAGE>
FORM 10-K ANNUAL REPORT
Upon written request by any shareholder entitled to vote at the 1999
Annual Meeting, the Company will furnish that person without charge a copy of
the Form 10-K Annual Report which it filed with the Securities and Exchange
Commission for 1998, including financial statements and schedules. If the person
requesting the report was not a shareholder of record on April 28, 1999, the
request must contain a good faith representation that the person making the
request was a beneficial owner of the Company's common stock at the close of
business on that date. Requests should be addressed to Thomas L. Zambelli, Chief
Financial Officer, Tops Appliance City, Inc., 45 Brunswick Avenue, CN-14,
Edison, New Jersey 08818.
By Order of the Board of Directors
TOPS APPLIANCE CITY, INC.
----------------------------------
RICHARD L. JONES
Co-Chairman of the Board
----------------------------------
DOUGLAS P. TEITELBAUM
Co-Chairman of the Board
Edison, New Jersey
April 30, 1999
