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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
(Rule 13d-101)
(Amendment No. 1)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13D-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13D-2(a)
TOPS APPLIANCE CITY, INC.
(Name of Issuer)
COMMON STOCK, no par value per share
(Title of Class of Securities)
890910AB
(CUSIP Number)
STEVEN A. VAN DYKE
TOWER INVESTMENT GROUP, INC.
BAY HARBOUR MANAGEMENT, L.C.
777 South Harbour Island Boulevard, Suite 270
Tampa, Florida 33602
(813) 272-1992
DOUGLAS P. TEITELBAUM
885 Third Avenue
34th Floor
New York, New York 10022
(212) 371-2211
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
July 16, 1998 - August 11, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box [ ].
Note. Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits. See
Rule 13d-7(b) for other parties to whom copies are to be sent.
(Continued on the following pages)
(Page 1 of 10 Pages)
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CUSIP No. 890910AB 13D Page 2 of 10 Pages
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1 NAME OF REPORTING PERSON Steven A. Van Dyke
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON N/A
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS OO, PF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION United States
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Number of 7 SOLE VOTING POWER -0-
Shares
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Beneficially 8 SHARED VOTING POWER 5,885,000
Owned by
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Each 9 SOLE DISPOSITIVE POWER -0-
Reporting
------------------------------------------------------------------
Person With 10 SHARED DISPOSITIVE POWER 5,885,000
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,885,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.2%
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14 TYPE OF REPORTING PERSON IN, HC
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CUSIP No. 890910AB 13D Page 3 of 10 Pages
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1 NAME OF REPORTING PERSON Douglas P. Teitelbaum
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON N/A
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS OO
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION United States
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Number of 7 SOLE VOTING POWER -0-
Shares
------------------------------------------------------------------
Beneficially 8 SHARED VOTING POWER 5,880,000
Owned by
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Each 9 SOLE DISPOSITIVE POWER -0-
Reporting
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Person With 10 SHARED DISPOSITIVE POWER 5,880,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,880,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.1%
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14 TYPE OF REPORTING PERSON IN, HC
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CUSIP No. 890910AB 13D Page 4 of 10 Pages
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1 NAME OF REPORTING PERSON Tower Investment Group, Inc.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 59-2924229
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS OO
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION Florida
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Number of 7 SOLE VOTING POWER 5,880,000
Shares
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Beneficially 8 SHARED VOTING POWER -0-
Owned by
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Each 9 SOLE DISPOSITIVE POWER 5,880,000
Reporting
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Person With 10 SHARED DISPOSITIVE POWER -0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,880,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.1%
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14 TYPE OF REPORTING PERSON HC
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CUSIP No. 890910AB 13D Page 5 of 10 Pages
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1 NAME OF REPORTING PERSON Bay Harbour Management, L.C.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 59-3418243
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS OO
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION Florida
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Number of 7 SOLE VOTING POWER 5,880,000
Shares
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Beneficially 8 SHARED VOTING POWER -0-
Owned by
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Each 9 SOLE DISPOSITIVE POWER 5,880,000
Reporting
------------------------------------------------------------------
Person With 10 SHARED DISPOSITIVE POWER -0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,880,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.1%
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14 TYPE OF REPORTING PERSON IA
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This Amendment No. 1 amends and supplements the Statement on
Schedule 13D, originally filed with the Securities and Exchange Commission on
July 6, 1998 (the "Schedule 13D"), by Bay Harbour Management, L.C. ("Bay
Harbour"), Tower Investment Group, Inc. ("Tower"), as the majority stockholder
of Bay Harbour, Steven A. Van Dyke ("Van Dyke"), in his capacity as a
stockholder and President of Tower, and Douglas P. Teitelbaum, in his capacity
as a stockholder of Tower (collectively, the "Reporting Persons"). Capitalized
terms contained herein but not otherwise defined have the meanings ascribed to
them in the Schedule 13D.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 of the Schedule 13D is hereby amended in its entirety as follows:
On June 25, 1998, Bay Harbour purchased for certain managed
accounts, in a secondary purchase, 6-1/2% Convertible Subordinated Debentures
Due 2003 of Tops in the aggregate principal amount of $6,090,000 (such
Debentures held by Bay Harbour, the "Debentures"), at a price of 93% of
principal plus accrued interest. The Debentures will be converted into shares of
Tops Common Stock at a conversion price of $1.75 per share (subject to certain
adjustments as set forth in the terms of the Debentures) pursuant to a
Conversion Letter Agreement, dated July 16, 1998, (the "Conversion Letter
Agreement"), between Tops and Bay Harbour. The obligation of Bay Harbour to
convert the Debentures is subject to shareholder approval (which the Company
has agreed to use its best efforts to obtain by September 30, 1998). The source
of the funds used by Bay Harbour to purchase the Debentures were the following
investment accounts managed on a discretionary basis by Bay Harbour:
<TABLE>
<S> <C>
Bay Harbour Partners, Ltd. $2,281,196.33
Lipstick, Ltd. $1,986,541.81
Bay Harbour 90-1, L.P. $1,520,797.56
</TABLE>
On July 20, 1998, Bay Harbour purchased from Tops for certain
managed accounts, 1,400,000 newly-issued shares of Tops Common Stock (the "New
Shares"), for an aggregate purchase price of $5,040,000. The source of the funds
used by Bay Harbour to purchase the New Shares were the following investment
accounts managed on a discretionary basis by Bay Harbour:
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<S> <C>
Bay Harbour Partners, Ltd. $1,986,120
Bay Harbour 90-1, L.P. $1,324,080
Trophy Hunter Investments, L.P. $1,729,800
</TABLE>
On July 22, 1998, Van Dyke purchased for a personal account,
jointly held with his wife, Ann Van Dyke, 5,000 shares of Tops Common Stock
(the "Van Dyke Shares"), for an aggregate purchase price of $15,625. The
source of the funds used by Van Dyke and Ann Van Dyke to purchase the Van Dyke
Shares were their personal funds.
On July 24, 1998, Bay Harbour purchased for certain managed
accounts, in a secondary purchase, 200,000 shares of Tops Common Stock (the
"Turchin Shares"), for an aggregate purchase price of $600,000. The source of
the funds used by Bay Harbour to purchase the Turchin Shares were the following
investment accounts managed on a discretionary basis by Bay Harbour:
<TABLE>
<S> <C>
Bay Harbour Partners, Ltd. $236,400
Bay Harbour 90-1, L.P. $157,800
Trophy Hunter Investments, L.P. $205,800
</TABLE>
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On August 11, 1998, Bay Harbour purchased for certain managed
accounts, in a secondary purchase, 300,000 shares of Tops Common Stock (the
"Westinghouse Shares"), for an aggregate purchase price of $900,000. The source
of the funds used by Bay Harbour to purchase the Westinghouse Shares were the
following investment accounts managed on a discretionary basis by Bay Harbour:
<TABLE>
<S> <C>
Bay Harbour Partners, Ltd. $354,666
Bay Harbour 90-1, L.P. $236,442
Trophy Hunter Investments, L.P. $308,892
</TABLE>
See Item 6 for a description of certain agreements under which
Bay Harbour has the right to purchase additional shares of Tops Common Stock
from certain shareholders.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Schedule 13D is hereby amended in its entirety as follows:
The Reporting Persons consider their beneficial ownership of
Tops Common Stock as an investment in the ordinary course of business. From
time to time, the Reporting Persons may acquire additional shares of Tops
Common Stock or dispose of all or some of the shares of Tops Common Stock which
they beneficially own. The Reporting Persons have no plans to acquire control
of Tops but intend to review the investment in Tops on a continuing basis and
may change their plans depending upon future developments.
Except as set forth in this Item 4 and in Item 5 (with respect
to Bay Harbour's rights to designate nominees to the Board of Directors of
Tops), the Reporting Persons presently have no plans or proposals that relate to
or would result in any of the actions specified in clauses (a) through (j) of
Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 of the Schedule 13D is hereby amended in its entirety as follows:
As of the filing date of this Statement, (i) Van Dyke
beneficially owns 5,885,000 shares of Tops Common Stock which, assuming the
conversion of the Debentures, represent approximately 45.2% of Tops Common Stock
outstanding, (ii) Teitelbaum beneficially owns 5,880,000 shares of Tops Common
Stock which, assuming the conversion of the Debentures, represent approximately
45.1% of Tops Common Stock outstanding, (iii) Tower beneficially owns 5,880,000
shares of Tops Common Stock which, assuming the conversion of the Debentures,
represent approximately 45.1% of Tops Common Stock outstanding and (iv) Bay
Harbour beneficially owns 5,880,000 shares of Tops Common Stock which, assuming
the conversion of the Debentures, represent approximately 45.1% of Tops Common
Stock outstanding, in each case, based upon 8,152,044 shares of Tops Common
Stock outstanding as of July 6, 1998 (determined based upon 7,294,901 shares
outstanding as set forth in a 10Q filed by Tops on June 15, 1998 with the U.S.
Securities and Exchange Commission plus 857,143 shares due to the conversion
of debentures issued by Tops as disclosed in Amendment No. 2 to a
Schedule 13D filed on July 6, 1998 by Robert D. Carl III). For purposes of
disclosing the number of shares beneficially owned by each of the Reporting
Persons, (A) Van Dyke and Teitelbaum are deemed to beneficially own all shares
of Tops Common Stock that are beneficially owned by Tower and Bay Harbour and
(B) Tower is deemed to beneficially own all shares of Tops Common Stock that are
beneficially owned by Bay Harbour.
Each Reporting Person has (i) the sole power to vote or direct
the vote of the 5,880,000 shares of Tops Common Stock held by Bay Harbour; and
(ii) the sole power to dispose of or to direct the disposition of such 5,880,000
Shares of Tops Common Stock; except that Van Dyke and Teitelbaum share with each
other their voting and disposition power. Van Dyke, together with his wife Ann
Van Dyke, has the sole power to vote and direct the vote of 5,000 shares of Tops
Common Stock held in a joint personal account.
Except for the purchase of the Debentures, the New Shares, the
Turchin Shares, the Westinghouse Shares, the Van Dyke Shares and the option
agreements described in Item 6, to the best knowledge and belief of the
undersigned, no transactions involving Tops Common Stock have been effected
during the past sixty (60) days by the Reporting Persons or by their directors,
executive officers or controlling persons.
The 5,880,000 shares of Tops Common Stock held by Bay Harbour,
assuming the conversion of the Debentures, reported in this Statement are
beneficially owned by Van Dyke, Teitelbaum, Tower and Bay Harbour for the
benefit of certain investment partnerships and managed
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accounts over which Van Dyke, Teitelbaum, Tower and Bay Harbour control the
power to (i) convert the Debentures into shares of Tops Common Stock, (ii)
direct the voting of such shares of Tops Common Stock and (iii) dispose of such
shares of Tops Common Stock. The limited partners of the investment partnerships
and the investors in the managed accounts for which Bay Harbour acts as an
investment adviser have the right to participate in the receipt of dividends
from, or proceeds from the sale of, securities held by their funds or accounts,
as the case may be. Other than Lipstick, Ltd., Bay Harbour 90-1, L.P., Trophy
Hunter Investments, L.P., Bay Harbour Partners, Ltd., John M. Templeton,
Gentleness, Limited and Templeton Religion Trust, no such fund, single limited
partner of any of such funds nor any investor in a managed account has the right
to receive or the power to direct the receipt of dividends from, or proceeds
from the sale of, shares of Tops Common Stock reported in this Schedule 13D
representing more than five percent of the outstanding Tops Common Stock.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
Item 6 of the Schedule 13D is hereby supplemented as follows:
On July 15, 1998, Bay Harbour agreed to convert the Debentures
into Common Stock pursuant to the Conversion Letter Agreement. Tops also
granted Bay Harbour a right of first refusal on issuances by Tops of certain
equity or debt securities by Tops. Pursuant to the Conversion Letter Agreement,
Issuer also agreed to use its best efforts to cause a registration statement on
Form S-3 filed by the Issuer with the Securities and Exchange Commission to
register the shares of Tops Common Stock issuable upon conversion thereof. The
Conversion Letter Agreement specifies that the Debentures shall be converted
into Common Stock immediately upon the approval of the conversion by the
shareholders of Tops. From the date of conversion and continuing for as long as
Bay Harbour continues to hold at least 15% of the Tops Common Stock, Bay Harbour
shall have the right to designate two nominees to Tops' Board of
Directors.
Pursuant to a Share Purchase Agreement, dated July 16, 1998,
between Tops and Bay Harbour, so long as Bay Harbour continues to own,
beneficially or otherwise, at least 15% of Tops Common Stock, Bay Harbour shall
have the right to designate (i) until all Debentures held by Bay Harbour on July
15, 1998 are converted into Tops Common Stock, three directors to the Board of
Directors of Tops and (ii) one director to the Board of Directors of Tops (in
addition to the two directors pursuant to the Conversion Letter Agreement) after
the Debentures have been converted. The Share Purchase Agreement also provides
for Tops to file a registration statement on Form S-3 to register the Tops
Shares within 60 days and for Tops to use its best efforts to cause the
registration statement to become effective.
Pursuant to an Option Agreement (the "Turchin Option
Agreement"), dated July 17, 1998, between the Turchin Family Limited Partnership
("Turchin") and Bay Harbour, Bay Harbour has the right to acquire 200,000 shares
of Tops Common Stock at a price of $3.50 a share for a 90 day period beginning
on July 17, 1998 (the "Initial Period") and at $4.00 per share from the Initial
Period to 270 days after the Initial Period.
Pursuant to an Option Agreement (the "Westinghouse Option
Agreement"), dated August 6, 1998, between Mellon Bank, N.A., as Trustee under
the Westinghouse Electric Corporation Master Trust Agreement for the
Westinghouse Pension Plan ("Westinghouse") and Bay Harbour, Bay Harbour has the
right to acquire 300,000 shares of Tops Common Stock at a price of $3.50 per
share for a 90 day period beginning from August 11, 1998 (the "First Period")
and at $4.00 per share from the Initial Period to 270 days after the First
Period.
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Bay Harbour is in discussions with Robert G. Gross ("Gross"),
chief executive officer of Tops, concerning Bay Harbour lending Gross $500,000
for the purposes of Gross acquiring 125,000 shares of Tops Common Stock.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 of the Schedule 13D is hereby amended in its entirety as follows:
EXHIBIT I Joint Filing Agreement, by and among Bay Harbour, Tower,
Van Dyke and Teitelbaum.(1)
EXHIBIT II Form of Debenture.(1)
EXHIBIT III Debenture Exchange Agreement dated August 20, 1997.(1)
EXHIBIT IV Conversion Agreement, dated July 16, 1998, between Tops
and Bay Harbour.
EXHIBIT V Share Purchase Agreement, dated July 16, 1998, between
Tops and Bay Harbour.
EXHIBIT VI Option Agreement, dated July 17, 1998, between Turchin
and Bay Harbour.
EXHIBIT VII Share Purchase Agreement, dated July 17, 1998, between
Turchin and Bay Harbour.
EXHIBIT VIII Share Purchase Agreement, dated August 6, 1998, between
Westinghouse and Bay Harbour.
EXHIBIT IX Option Agreement, dated August 6, 1998, between
Westinghouse and Bay Harbour.
(1) Previously filed with this Schedule 13D on July 6, 1998.
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SIGNATURES
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated as of: August 11, 1998 TOWER INVESTMENT GROUP, INC.
By: /s/ Steven A. Van Dyke
------------------------------------
Name: Steven A. Van Dyke
Title: President
BAY HARBOUR MANAGEMENT, L.C.
By: /s/ Steven A. Van Dyke
---------------------------------
Name: Steven A. Van Dyke
Title: President
/s/ STEVEN A. VAN DYKE
--------------------------------
STEVEN A. VAN DYKE
/s/ DOUGLAS P. TEITELBAUM
--------------------------------
DOUGLAS P. TEITELBAUM
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Exhibit Index
EXHIBIT I Joint Filing Agreement, by and among Bay Harbour, Tower,
Van Dyke and Teitelbaum. (1)
EXHIBIT II Form of Debenture. (1)
EXHIBIT III Debenture Exchange Agreement dated August 20, 1997. (1)
EXHIBIT IV Conversion Agreement, dated July 16, 1998, between Tops
and Bay Harbour.
EXHIBIT V Share Purchase Agreement, dated July 16, 1998, between
Tops and Bay Harbour.
EXHIBIT VI Option Agreement, dated July 17, 1998, between Turchin
and Bay Harbour.
EXHIBIT VII Share Purchase Agreement, dated July 17, 1998, between
Turchin and Bay Harbour.
EXHIBIT VIII Share Purchase Agreement, dated August 6, 1998, between
Westinghouse and Bay Harbour.
EXHIBIT IX Option Agreement, dated August 6, 1998, between
Westinghouse and Bay Harbour.
(1) Previously filed with this Schedule 13D on July 6, 1998.
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July 16, 1998
Mr. Doug Teitelbaum
Bay Harbour Management, L.C.
885 Third Avenue, 34th Floor
New York, NY 10022
Dear Mr. Teitelbaum:
We understand that Bay Harbour Management, L.C., acting for its managed
accounts ("Bay Harbour"), holds $6,090,000 aggregate principal amount of 6 1/2%
Convertible Subordinated Debentures due 2003 with a $1.75 conversion price (such
Debentures held by Bay Harbour being referred to herein as the "Debentures") of
Tops Appliance City, Inc., a New Jersey corporation (the "Company"). To induce
Bay Harbour to commit to convert the Debentures into common stock, no par value
per share, of the Company ("Common Stock"), the Company has agreed that Bay
Harbour may convert the Debentures upon the terms set forth in this letter. Bay
Harbour agrees to convert such Debentures upon such terms to the extent provided
herein.
1. The Debentures shall be convertible into shares of Common
Stock ("Conversion Stock") immediately upon approval of such conversion by the
shareholders of the Company. The Company shall present the matter for approval
by the shareholders on or before September 30, 1998, and shall use its best
efforts to obtain such approval. Concurrently herewith, The Turchin Family
Limited Partnership and The Westinghouse Pension Plan, who together hold greater
than 51% of the outstanding Common Stock, have delivered to Bay Harbour letters
in which they undertake to vote in favor of such approval. The conversion price
of the Conversion Stock shall be $1.75 per share (the "Conversion Price");
provided that if, at any time after the date of this Agreement, the number of
outstanding shares of Common Stock is (i) increased by a stock dividend or
distribution payable in shares of Common Stock or by a subdivision or split-up
of shares of Common Stock, or (ii) decreased by a combination or reverse split
of shares of Common Stock, then, following the record date fixed for the
determination of holders of Common Stock entitled to receive the benefits of
such stock dividend, distribution, subdivision, split-up, combination or reverse
split, the Conversion Price shall be adjusted to a new amount equal to the
product of (A) the Conversion Price in effect on such record date and (B) the
quotient obtained by dividing (x) the number of shares of Common Stock
outstanding on such record date (without giving effect to the event referred to
in the foregoing clause (i) or (ii)) by (y) the number of shares of Common Stock
which would be outstanding immediately after the event referred to in the
foregoing clause (i) or (ii), if such event had occurred immediately following
such record date.
2. Bay Harbour agrees that, promptly after the Debentures become
convertible under paragraph 1 and the other conditions set forth in this letter
are satisfied, it will
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Mr. Doug Teitelbaum
July 16, 1998
Page 2
convert all of the Debentures into 3,480,000 shares of Conversion Stock (subject
to any antidilution adjustments under the terms of the Debentures).
3. The Company shall pay to Bay Harbour in cash at the time of
conversion all accrued and unpaid interest on the Debentures being converted
through the date of conversion.
4. The Company shall pay Bay Harbour's reasonable out-of-pocket
expenses, including fees and disbursements of counsel, in connection with the
conversion of the Debentures and the preparation and consummation of this letter
(the "Legal Expenses"). The Company is paying, on the date hereof, a statement
of Bay Harbour's counsel for estimated fees and disbursements through the date
hereof.
5. From and after the date of conversion of the Debentures and
provided that Bay Harbour continues to hold at least 15% of the outstanding
Common Stock, Bay Harbour shall have the right to nominate two directors to the
Company's Board of Directors. The Board of Directors of the Company has duly
appointed Bay Harbour's initial nominees to fill two newly created Board
positions, effective upon the conversion of the Debentures as provided herein.
Subject to the provisions hereof, at the time any vacancy arises in the two
Board seats occupied by Bay Harbour nominees, the Company agrees to use its best
efforts promptly to cause such vacancy to be filled by a new person nominated by
Bay Harbour. Each individual nominated by Bay Harbour shall complete a
questionnaire in the same form as has been executed by all other directors of
the Company. The rights provided in this Paragraph shall be in addition to any
other rights held by Bay Harbour to designate one or more directors to the Board
of Directors of the Company.
6. (a) If the Company or any of its subsidiaries shall receive,
on or prior to the second anniversary of the date of this letter, a bona fide
written offer (the "Offer") from a third party or parties (the "Offerors") to
purchase or otherwise acquire any Designated Securities, then the Company shall,
prior to accepting the Offer, make an offer (a "First Refusal Offer") to issue
such Designated Securities to Bay Harbour upon the terms set forth in this
paragraph 6; provided, that this paragraph 6 shall not apply to (i) any Offer
received by the Company after Bay Harbour and its managed accounts no longer
hold at least 15% of the outstanding Common Stock, or (ii) debt securities or
equity securities having terms within a range which, not more than 60 days prior
to the Company's receipt of the Offer in question, the Company proposed in
writing for consideration by Bay Harbour and Bay Harbour stated in writing its
lack of interest in participating in a financing in such range. The First
Refusal Offer shall state that the Company proposes to issue such Designated
Securities, include a copy of the Offer, disclose the name and address of the
Offeror (or Offerors), and set forth such other information about the Offer and
the Offeror (or Offerors) as may be available to the Company and reasonably
necessary to understand the Offer.
(b) "Designated Securities" means all (x) securities (other than
convertible
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Mr. Doug Teitelbaum
July 16, 1998
Page 3
debt and other equity securities) evidencing indebtedness ("debt securities")
and (y) shares of capital stock, options, warrants, or other rights to acquire
such shares, and securities exchangeable or convertible into such shares or
rights ("equity securities"), proposed to be issued by the Company or any
subsidiary, other than:
(i) debt securities the proceeds of which are to
be used for working capital purposes and the maturity of which
does not exceed one year;
(ii) equity securities to be issued to any
employee of, or supplier of goods or services or licensor to, the
Company as full or partial consideration for employment services
or under any bona fide supply, license, or similar business
agreement or arrangement or under any Section 401(k) plan;
(iii) equity securities to be issued as full or
partial consideration in connection with any bona fide business
or asset acquisition;
(iv) equity securities issued as a stock dividend
or upon any stock split or other subdivision or combination of
shares of capital stock;
(v) debt securities issued under any revolving
credit facility secured by collateral having a fair market value
equal to at least 100% of the principal amount of such debt from
time to time outstanding;
(vi) debt securities evidencing a mortgage
financing secured by real estate having a fair market value equal
to at least 100% of the principal amount of such debt;
(vii) the issuance of equity securities of the
Company to Bay Harbour pursuant to that certain Share Purchase
Agreement between the Company and Bay Harbour, dated July 15,
1998; and
(viii) the issuance of not more than 1,400,000
shares of Common Stock to any third party in an arms-length
transaction.
(c) Within 20 days (the "Acceptance Period") after delivery of the First
Refusal Offer, Bay Harbour may deliver a notice (an "Acceptance Notice") to the
Company stating that it exercises its right to purchase or otherwise acquire,
upon the terms specified in the First Refusal Offer, (i) all of the Designated
Securities specified in the First Refusal Offer or (ii) if there are two or more
Offerors, the specific number of Designated Securities any single Offeror
offered to purchase or acquire, unless such Offerors are acting in concert and
the Offer by its terms is conditioned upon the issuance to the Offerors of all
Designated Securities specified in the Offer. The closing of the purchase or
other acquisition, upon the terms specified in the First
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<PAGE>
Mr. Doug Teitelbaum
July 16, 1998
Page 4
Refusal Offer, by Bay Harbour of any Designated Securities shall take place at
the offices of the Company within 10 days after the end of the Acceptance Period
or at such time as is set forth in the Offer; provided, however, that the
Acceptance Notice may state that the purchase or acquisition of the Designated
Securities specified in the Acceptance Notice (if less than all of the
Designated Securities specified in the First Refusal Offer) shall be conditioned
upon the issuance of any remaining Designated Securities to the Offeror, in
which case such purchase or acquisition shall be subject to, and shall take
place simultaneously with, such issuance to the Offeror or Offerors.
(d) If Bay Harbour does not exercise its rights as provided in this
Paragraph with respect to all of the Designated Securities specified in the
First Refusal Offer, then the remaining Designated Securities may be issued to
the Offeror or Offerors upon the terms set forth in the Offer, provided that
such issuance is bona fide and completed within 120 days after the end of the
Acceptance Period. If such issuance is not completed within such 120-day period,
the restrictions set forth in this Paragraph shall again become effective in
full.
7. The Company shall cause the Conversion Stock to be registered
under a shelf registration statement filed with the Securities and Exchange
Commission in accordance with the provisions of the attached Annex and shall
comply with its obligations set forth therein. The within registration right
shall also apply to all unregistered shares of Common Stock which Bay Harbour
acquires from Turchin and/or Westinghouse (collectively the "Unregistered
Shares"), provided, however, that Bay Harbour shall have the right to request
that the Company cause any or all of the Unregistered Shares to be registered in
accordance with Annex A only on one (1) occasion upon the delivery by Bay
Harbour of written notice of such request to the Company which notice shall
contain the number of shares of Common Stock to be registered and the date of
delivery of such notice shall be the date on which the Company's time to file
such registration statement shall begin.
8. The Company hereby represents and warrants that:
(a) This letter has been duly authorized, executed and delivered by the
Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms.
(b) The Conversion Stock has been duly authorized and, upon issuance
pursuant thereto, will be validly issued, fully paid and non-assessable with no
personal liability attaching to the ownership thereof, and is not and will not
be subject to preemptive or any other similar rights of the shareholders of the
Company or others; and the Conversion Stock has been duly reserved for issuance.
(c) The execution, delivery and performance of this letter and the
issuance and delivery of the Conversion Stock does not and will not violate or
conflict with (i) any applicable
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<PAGE>
Mr. Doug Teitelbaum
July 16, 1998
Page 5
provision of law, statute, rule or regulation, or, to the knowledge of the
Company, any order, judgment or decree applicable to the Company of any court,
arbitrator, governmental agency or the National Association of Securities
Dealers, Inc., or (ii) the Company's certificate of incorporation or bylaws.
(d) The Company's Form 10-K for the period ending December 30, 1997, and
Form 10-Q for the period ending March 31, 1998 are correct and complete and do
not, as of the date hereof, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
9. Concurrently herewith the Company is delivering to Bay
Harbour: (i) A certified resolution of the Company's Board of Directors
authorizing the execution, delivery and performance of this letter and the
issuance of the Conversion Stock in accordance herewith, reserving the
Conversion Stock for issuance, and appointing Bay Harbour's initial nominees to
the Board in accordance with Paragraph 5 above, (ii) certified copies of the
Company's certificate of incorporation and bylaws, (iii) a certificate stating
that the conditions specified in Paragraph 10 have been satisfied, (iv) an
opinion of the Company's legal counsel as to the matters set forth in Paragraph
8(a) and (c), (v) payment in full of all Legal Expenses, and (vi) such
additional certificates and other documents as Bay Harbour may reasonably
request.
10. Bay Harbour's obligation to convert the Debentures pursuant
to Paragraph 2 shall be subject to the following conditions precedent:
(a) The representations and warranties of the Company set forth
in Paragraph 8 shall be true and correct as if made as of the date of
conversion, as evidenced by a certificate of the Company's Chief Executive
Officer to such effect; and
(b) Such conversion shall have been duly approved by the
shareholders of the Company.
(c) The Company shall have performed or complied with all of the
covenants and agreements required to be performed or complied with by the
Company under this Agreement at or prior to the Closing.
(d) The Company shall have obtained all consents, approvals,
orders, authorizations of, and registrations and filings with, any Federal,
state, local or foreign government or any court of competent jurisdiction,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity") or NASDAQ, that
are required to be obtained or made by the Company, in connection with the
execution, delivery or performance of this Agreement by the Company or the
consummation by the Company of any of the transactions contemplated hereby.
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Mr. Doug Teitelbaum
July 16, 1998
Page 6
(e) No action or proceeding by or before any Governmental Entity,
or any other person shall be pending or to the Company's knowledge threatened
challenging or seeking to restrain or prohibit the conversion of the Debentures
or any of the other transactions contemplated by this Agreement or seeking to
obtain damages from Bay Harbour (or any of its affiliates) in connection with
the conversion of the Debentures or any of the other transactions contemplated
by this Agreement.
(f) No statute, rule, regulation, executive order, decree,
temporary restraining order, preliminary injunction, permanent injunction or
other order enacted, entered, promulgated, enforced or issued by any
Governmental Entity or other legal restraint or prohibition preventing the
conversion of the Debentures shall be in effect.
(g) Subsequent to March 31, 1998, there shall not have been any
development which, with respect to the Company constitutes a material adverse
effect upon the business, affairs, assets, operations, properties, financial
position, or results of operations of the Company.
(h) The Company shall have delivered to Bay Harbour all documents
set forth in Paragraph 9 hereof.
If all of the conditions set forth in this Paragraph 10 are not satisfied within
six months after the date of this letter, Bay Harbour shall have no further
obligation to convert the Debentures but the remaining provisions of this letter
shall remain in full force and effect.
11. The validity and interpretation of this letter shall be
governed by the laws of the State of New York. All covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant to this letter shall survive the conversion of the Debentures and
issuance of the Conversion Stock and shall bind the successors and assigns of
the parties hereto. This letter may not be changed orally, but only by an
agreement in writing signed by the Company and Bay Harbour.
Very truly yours,
TOPS APPLIANCE CITY, INC.
By: /s/ Robert G. Gross
------------------------------
Name: Robert G. Gross
Title: Chief Executive Officer
Confirmed:
BAY HARBOUR MANAGEMENT, L.C.
By: /s/ Douglas P. Teitelbaum
-------------------------------------
Name: Douglas P. Teitelbaum
Title: Principal & Portfolio Manager
<PAGE>
<PAGE>
ANNEX A
Registration of Conversion Stock
Capitalized terms not defined in this Annex shall have the meanings
assigned in the letter to which this Annex is attached (the "Letter").
(a) Mandatory Shelf Registration
(i) The Company shall prepare and, as promptly as practicable but
in no event more than 60 days after the date hereof, file with the Securities
and Exchange Commission (the "SEC") a Shelf Registration Statement (as defined
below) on Form S-3 which, at the time such shelf Registration Statement is
declared effective by the SEC, covers the offer and resale of the Conversion
Stock by a holder from time to time and the methods of distribution elected by
such holder of Conversion Stock and set forth in such Shelf Registration
Statement. As used herein, "register," "registered" and "registration" each
refer to a registration of Conversion Stock effected by filing with the SEC a
registration statement in compliance with the Securities Act and the declaration
or ordering by the SEC of effectiveness of such registration statement. "Shelf
Registration" means a registration effected pursuant to this Annex. "Shelf
Registration Statement" means a shelf registration statement of the Company
filed with the SEC pursuant to the provisions of this Annex which covers all of
the Conversion Stock, as applicable, on Form S-3 under Rule 415 under the
Securities Act of 1933 (the "Securities Act"), or any similar rule that may be
adopted by the SEC, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein. "Shelf Registration Statement may include an amendment to the
Company's existing amended registration statement no. 333-44229 filed with the
SEC on June 16, 1998.
(ii) The Company shall use its best efforts (x) to cause the
Shelf Registration Statement to become effective as promptly as possible but in
no event more than 120 days after the date hereof; provided, that if the Company
determines in the good faith judgment of the Company's general counsel that the
filing of a registration statement would require the disclosure of material
information which the Company has a good faith business purpose for preserving
as confidential and, without disclosure of such material information, the
Company is unable to comply with SEC requirements, the Company shall not be
required to effect a registration pursuant to this clause (ii) until the earlier
of (A) the date upon which such material information is disclosed to the public
or ceases to be material or (B) 60 days after the Company makes such good faith
determination, (y) to keep the Shelf Registration Statement continuously
effective in order to permit the prospectus forming part thereof to be usable by
the holders of Conversion Stock for a period equal to the longer of (1) five
years and (2) the period any holder of Conversion Stock is subject to any
limitations on the resale thereof under Rule 144, and (z) to cause all of the
Conversion Stock covered by the Shelf Registration Statement as of the effective
date thereof to be listed on the NASDAQ National Market or such other principal
securities
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market on which securities of the same class or series issued by the Company are
then listed or traded.
(b) Registration Procedures In connection with the Shelf
Registration Statement, the Company shall:
(i) prepare and file with the SEC a Shelf Registration Statement
on Form S-3 with respect to the Conversion Stock and use its best efforts to
cause such Shelf Registration Statement to become and remain effective as
provided in this Annex;
(ii) submit to the SEC, within five (5) business days after the
Company learns that no review of the Shelf Registration Statement will be made
by the staff of the SEC or that the staff of the SEC has no further comments on
the Shelf Registration Statement, as the case may be, a request for acceleration
of effectiveness of the Shelf Registration Statement to a time and date not
later than 48 hours after the submission of such request;
(iii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such Shelf Registration Statement
effective and current and to comply with the provisions of the Securities Act
with respect to the disposition of all shares covered by such Shelf Registration
Statement, including such amendments and supplements as may be necessary to
reflect the intended method of disposition from time to time of the prospective
seller or sellers of such Conversion Stock.
(iv) furnish (x) to Bay Harbour, and its legal counsel, (1)
promptly after the same is prepared and publicly distributed, filed with the SEC
or received by the Company, one copy of the Shelf Registration Statement and any
amendment thereto, each prospectus and each amendment or supplement thereto, (2)
each letter written by or on behalf of the Company to the SEC or the staff of
the SEC and each item of correspondence from the SEC or the staff of the SEC
relating to such Shelf Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment), and (y) to each selling holder of Conversion Stock such number of
copies of a prospectus in conformity with the requirements of the Securities
Act, and such other documents, as such holder may reasonably request in order to
facilitate the public sale or other disposition of the Conversion Stock owned by
such holder; and
(v) use its best efforts to register or qualify the shares of
Conversion Stock covered by such Shelf Registration Statement under such other
securities or blue sky or other applicable laws of such jurisdictions within the
United States as each prospective seller shall reasonably request, to enable
such seller to consummate the public sale or other disposition in such
jurisdictions of the shares of Conversion Stock owned by such seller.
(c) Designation of Underwriter In the case of any registration
effected pursuant to this Annex, a majority in interest of the holders of
Conversion Stock shall have the
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<PAGE>
right to designate the managing underwriter in any underwritten offering.
(d) Cooperation by Prospective Sellers
(i) Each prospective seller of Conversion Stock, and each
underwriter designated by each such seller, will furnish to the Company such
information as the Company may reasonably require from such seller or
underwriter in connection with the Shelf Registration Statement (and the
prospectus included therein).
(ii) The holders holding shares of the Conversion Stock included
in the registration will not (until further notice by the Company) effect sales
thereof (or deliver a prospectus to any purchaser) after receipt of telegraphic
or written notice from the Company to suspend sales to permit the Company to
correct or update a registration statement or prospectus. In connection with any
offering, each holder who is a prospective seller, will not use any offering
document, offering circular or other offering materials with respect to the
offer or sale of Conversion Stock, other than the prospectuses provided by the
Company and any documents incorporated by reference therein.
(e) Expenses All expenses incurred in complying with this Annex,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with NASDAQ), fees and expenses of complying with
securities and "blue sky" laws, printing expenses and fees and disbursements of
counsel for the Company and one counsel from the holders of Conversion Stock,
and the independent certified public accountants shall be paid by the Company;
provided, however, that all underwriting discounts and selling commissions
applicable to the Conversion Stock covered by registrations effected pursuant to
this Annex shall not be borne by the Company but shall be borne by the seller or
sellers of the Conversion Stock.
(f) Indemnification
(i) The Company shall indemnify and hold harmless the seller of
any shares of Conversion Stock registered under the Securities Act pursuant to
this Annex, each underwriter of such shares, if any, each broker or any other
person acting on behalf of such seller and each other person, if any, who
controls any of the foregoing persons, within the meaning of the Securities Act
or the Securities Exchange Act of 1934 (the "1934 Act"), against any losses,
claims, damages or liabilities, joint or several, to which any of the foregoing
persons may become subject under the Securities Act or the 1934 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration statement
under which such Conversion Stock was registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or any document prepared or furnished by the Company
incident to the registration or qualification of any Conversion Stock pursuant
to this Annex, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or, with respect to any
prospectus, necessary to make the statements therein in light of the
circumstances under which they were
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made, not misleading, or any violation by the Company of the Securities Act or
state securities or "blue sky" laws applicable to the Company and relating to
action or inaction required of the Company in connection with such registration
or qualification under such state securities or blue sky laws; and shall
reimburse such seller, such underwriter, broker or other person acting on behalf
of such seller and each such controlling person for any legal or any other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
the Company shall not be liable in such cases to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
registration statement under which such Conversion Stock was registered under
the Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by such seller or
underwriter expressly for use therein.
(ii) Each prospective seller of Conversion Stock and any
underwriter acting on its behalf shall indemnify and hold harmless (in the same
manner and to the same extent as set forth in (i) above) the Company, each
director of the Company, each officer of the Company who shall sign the Shelf
Registration Statement and any person who controls the Company within the
meaning of the Securities Act or the 1934 Act, with respect to any untrue
statement or omission from the Shelf Registration Statement, any preliminary
prospectus or prospectus contained therein, or any amendment or supplement
thereof, if such untrue statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller or such underwriter, as the case may be,
specifically for use in the preparation of the Shelf Registration Statement,
preliminary prospectus, prospectus or amendment or supplement; provided that the
maximum amount of liability in respect of such indemnification shall be limited,
in the case of each prospective seller of Conversion Stock, to an amount equal
to the net proceeds actually received by such prospective seller from the sale
of Conversion Stock effected pursuant to such registration.
(iii) Notwithstanding the foregoing provisions of this Annex, if
pursuant to an underwritten public offering of Common Stock, the Company, the
selling shareholders and the underwriters enter into an underwriting or purchase
agreement relating to such offering which contains provisions covering
indemnification among the parties thereto in connection with such offering, the
indemnification provisions of paragraph (d) of this Annex shall be deemed
inoperative for purposes of such offering to the extent inconsistent therewith.
(iv) If the indemnification provided for in this Annex is
unavailable or insufficient to hold harmless an indemnified party under
subparagraph (i) or (ii) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to in subparagraph (i) or (ii) above (x) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties on the one hand and the indemnified party on the other from the
issuance and conversion of the Debentures, or (y) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above
A-4
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but also the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or liabilities
(or actions in respect thereof) as well as any other relevant equitable
considerations. Notwithstanding the foregoing, no prospective seller of
Conversion Stock shall be liable for an amount exceeding that set forth in the
proviso to subparagraph (ii) above.
(v) Each party entitled to indemnification under paragraph (d) of
this Annex (the "indemnified party") shall give notice to the party required to
provide indemnification (the "indemnifying party") promptly after such
indemnified party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the indemnifying party (at its expense) to assume the
defense of any claim or any litigation resulting therefrom, provided that the
counsel who shall conduct the defense of such claim or litigation, shall be
reasonably satisfactory to the indemnified party and shall not without the
indemnified party's consent, be counsel to the indemnifying party, and the
indemnified party may participate in such defense, but only at such indemnified
party's expenses, and provided, further, that the omission by an indemnified
party to give notice as provided herein shall not relieve the indemnifying party
of its obligations under paragraph (d) of this Annex except to the extent that
the omission results in a failure of actual notice to the indemnifying party and
such indemnifying party is damaged solely as a result of the failure to give
notice. No indemnifying party, in the defense of any such claim or litigation,
shall, except with the consent of each indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(g) SEC Filings and S-3 Requirements. The Company will timely
file all reports required to be filed under the 1934 Act and any other material
reports or documents required to be filed in order for the Company to meet the
requirements for use of Form S-3 for registration of the resale of the
Conversion Stock.
A-5
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<PAGE>
[Execution Copy]
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made as of July 16, 1998 (the "Agreement"), by
and between TOPS APPLIANCE CITY, INC. ("Seller"), a New Jersey corporation
having an address at 45 Brunswick Avenue, Edison, New Jersey 08818, and BAY
HARBOUR MANAGEMENT, L.C. acting for its managed accounts ("Buyer"), a Florida
limited liability company having an address at 885 Third Avenue, 34th Floor, New
York, New York 10022.
W I T N E S S E T H:
WHEREAS, Buyer has agreed to purchase from Seller and Seller
has agreed to sell to Buyer One Million Four Hundred Thousand (1,400,000) shares
(the "Shares") of Seller's authorized and unissued shares of common stock, no
par value (the "Common Stock"), upon the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual promises herein
set forth, and intending to be legally bound hereby, the parties do hereby agree
as follows:
1. Sale and Purchase of Shares.
(a) Seller agrees to sell to Buyer, and Buyer agrees to
purchase from Seller, at the Closing (as such term is defined in Paragraph 2
below), the Shares free and clear of all liens and encumbrances of any kind for
the Purchase Price provided in Subparagraph (b) below.
(b) The purchase price (hereafter referred to as the
"Purchase Price") to be paid to Seller by Buyer for the Shares shall be Three
Dollars and Sixty Cents ($3.60) per share for an aggregate amount of Five
Million Forty Thousand ($5,040,000) Dollars, payable by wire transfer pursuant
to the wiring instructions set forth in Schedule I hereto.
2. The Closing. Subject to the conditions and provisions set
forth herein, the closing under this Agreement (the "Closing") shall be deemed
to occur as of July 20, 1998 (the "Closing Date"), at the offices of Greenbaum,
Rowe, Smith, Ravin, Davis & Himmel LLP, 99 Wood Avenue South, Iselin, New
Jersey.
3. Representations.
(a) Seller represents and warrants to Buyer as follows:
(i) the Shares are unissued shares of Seller's duly
authorized Common Stock and upon issuance hereto, will be validly issued, fully
paid and non-assessable shares of Common Stock with no personal liability
attaching to the ownership thereof, and such
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shares of Common Stock are not and will not be subject to preemptive or any
other similar rights of the shareholders of Seller or others.
(ii) in the event that Seller shall elect to issue
Adjustment Stock (as defined in Paragraph 5 below) as payment for any Adjustment
Amount (as defined in Paragraph 5 below), upon issuance pursuant hereto, any
such Adjustment Stock will be validly issued, fully paid and non-assessable with
no personal liability attaching to the ownership thereof, and such Adjustment
Stock is not and will not be subject to preemptive or any other similar rights
of the shareholders of Seller or others.
(iii) the Shares (and any Adjustment Shares issued
pursuant to Paragraph 5(c) hereof) shall be issued to Buyer free and clear of
all liens, claims, debts, charges, restrictions, or encumbrances of any kind.
(iv) Seller has full power and legal right to sell,
transfer and deliver the Shares (and any Adjustment Shares issued pursuant to
Paragraph 5(c) hereof) to Buyer in accordance with the terms of this Agreement,
and otherwise to execute and deliver this Agreement and to consummate and close
the transactions provided for in this Agreement in the manner and upon the terms
herein specified.
(v) this Agreement has been duly authorized, executed
and delivered by Seller and, assuming due authorization, execution and delivery
by Buyer, constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject, as to
validity, binding effect and enforcement remedies, to applicable bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights generally,
and to equitable principles.
(vi) there is not pending, nor to Seller's knowledge
is there threatened, any suit, action or administrative, arbitration or other
proceeding which could adversely affect or materially impair the ability of
Seller to perform any of its obligations under this Agreement.
(vii) the execution, delivery and performance of this
Agreement and the issuance and delivery of the Shares (and any Adjustment Shares
issued pursuant to Paragraph 5(c) hereof) does not and will not with the passage
of time violate or conflict with (x) any applicable provision of law, statute,
rule or regulation, or any order, judgment or decree of any court, arbitrator,
governmental agency or the National Association of Securities Dealers, Inc.
("NASD") of which the Seller has knowledge, (y) Seller's certificate of
incorporation or bylaws or (z) any material contract, agreement or instrument to
which Seller is a party or by which it or any of its properties or assets are
bound or affected.
(viii) Seller's Form 10-K for the period ending
December 30, 1997, and Form 10-Q for the period ending March 31, 1998 are
correct and complete and do not, as of the date hereof, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
2
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(ix) all clearances, approvals, authorizations and
consents, orders of, and designations by, any Governmental Entity (as defined
below) or NASD required under the laws of the United States or the regulations
of the NASD, for or in connection with the issuance and delivery of the Shares
(and any Adjustment Shares issued pursuant to Paragraph 5(c) hereof), and
compliance with the terms of this Agreement have been obtained and complied
with, or will be obtained prior to Closing, and are in full force and effect.
(x) Seller shall defend, indemnify and hold harmless
Buyer from and against any loss or liability arising from any breach of the
representations and warranties of Seller contained herein.
(b) Buyer represents and warrants to Seller as follows:
(i) Buyer, for itself and on behalf of its managed
accounts, has full power and legal right to purchase the Shares (and any
Adjustment Shares issued pursuant to Paragraph 5(c) hereof) from Seller in
accordance with the terms of this Agreement, and otherwise to execute and
deliver this Agreement and to consummate and close the transactions provided for
in this Agreement in the manner and upon the terms herein specified, and this
Agreement and the transactions contemplated hereby will not result in the
violation of any other agreement to which Buyer is a party or by which it is
bound or of Buyer's Articles of Organization.
(ii) Buyer understands that the law firm of
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP is counsel to Seller, and not
in any way counsel to Buyer, for the purpose of this Agreement.
(iii) This Agreement has been duly authorized,
executed and delivered by Buyer and, assuming due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject, as to validity,
binding effect and enforcement remedies, to applicable bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally, and to
equitable principles.
(iv) There is not pending, nor to Buyer's knowledge
is there threatened, any suit, action or administrative, arbitration or other
proceeding which could adversely affect or materially impair the ability of
Buyer to perform any of its obligations under this Agreement.
(v) Buyer is purchasing the Shares (and any
Adjustment Shares issued pursuant to Paragraph 5(c) hereof) for investment
purposes only and not with a view towards reselling or otherwise distributing
the Shares or the Adjustment Shares, as the case may be.
(vi) Buyer acknowledges that, at Closing, the Shares
(and any Adjustment Shares issued pursuant to Paragraph 5(c) hereof) are not
registered under the
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Securities Act of 1933, as amended or under any State securities laws and that
certain restrictions exist with regard to the resale of the Shares and the
Adjustment Shares, as the case may be.
(vii) Buyer agrees that it shall not during its
ownership, beneficially or otherwise, of the Shares sell any shares of common
stock of the Seller "short".
(viii) Buyer shall defend, indemnify and hold
harmless Seller from and against any loss or liability arising from any breach
of the representations and warranties of Buyer contained herein.
(c) The representations made by the parties in this Paragraph
3 shall survive the Closing for a period of two (2) years from the Closing Date.
4. Closing. At the Closing, the following transactions shall
occur, all of which shall be deemed to occur simultaneously:
(a) Seller will deliver or cause to be delivered to Buyer:
(i) this Agreement;
(ii) a share certificate or certificates for the Shares to
be sold by Seller to Buyer, which certificate shall have affixed thereto or
typed thereon the following legend:
The securities represented hereby have not been
registered under the Securities Act of 1933, as
amended (the "Securities Act"), or any State
securities laws. Neither this security nor any
interest or participation herein may be reoffered,
sold, assigned, transferred, pledged, encumbered or
otherwise disposed of in the absence of such
registration or unless such transaction is exempt
from, or not subject to, registration.
provided, however, that such legend shall be removed from the share certificate
or certificates respecting the Shares upon the registration of the Shares,
pursuant to Paragraph 10 hereof, becoming effective; and
(iii) all other documents set forth in Paragraph 6 hereof.
(b) Buyer will deliver or cause to be delivered to Seller:
(i) this Agreement;
(ii) the sum of Five Million Forty Thousand ($5,040,000)
Dollars in accordance with Paragraph 1(b); and
(iii) all other documents set forth in Paragraph 6 hereof.
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5. Adjustment to Purchase Price. In the event that at anytime
beginning on the thirtieth (30th) day next following the Closing Date the
closing price per share of the Seller's common stock as traded in the NASDAQ
National Market (the "Closing Price") is below the Adjustment Trigger Price (as
defined below) for ten (10) consecutive trading sessions, the Purchase Price
shall be adjusted as follows:
(a) Upon the first (1st) occurrence of any such ten (10)
consecutive trading session period, Seller shall pay to Buyer an amount (the
"Initial Adjustment Amount") equal to the product of (i) the number of Shares
then still owned, beneficially or otherwise, by Buyer, and (ii) the amount by
which the Adjustment Trigger Price exceeds the average Closing Price for such
ten (10) day period.
(b) Following the first (1st) occurrence of any such ten
(10) consecutive trading session period as provided in Paragraph 5(a) above, in
the event that the average Closing Price during a subsequent 10 day period (each
a "10 Day Period") is below the average Closing Price for the prior 10 Day
Period in which an Adjustment Amount has been paid by the Seller, the Seller
shall pay to the Buyer an amount (the "Additional Adjustment Amount" and
together with the Initial Adjustment Amount and any other Additional Adjustment
Amount, the "Adjustment Amounts") equal to the product of (i) the number of
Shares then still owned, beneficially or otherwise, by Buyer, and (ii) the
amount by which the last applicable average Closing Price used for calculating
an Adjustment Amount exceeds the average Closing Price for such current
applicable 10 Day Period.
(c) The Seller shall have the right, in its sole
discretion, to pay any Adjustment Amount to Buyer in cash or by issuing shares
of its common stock to Buyer having a market value equal to the Adjustment
Amount (the "Adjustment Stock"), which shall thereafter constitute Shares for
purposes of clauses (a) and (b) of this Paragraph 5.
(d) The Seller shall pay any applicable Adjustment Amount
to Buyer within thirty (30) days of the receipt by Seller of the written request
of Buyer for such payment.
(e) A 10 Day Period shall not include any day from any
prior 10 Day Period.
(f) The "Adjustment Trigger Price" shall be $3.60;
provided that if, at any time after the date of this letter, the number of
outstanding shares of Common Stock is (i) increased by a stock dividend or
distribution payable in shares of Common Stock or by a subdivision or split-up
of shares of Common Stock, or (ii) decreased by a combination or reverse split
of shares of Common Stock, then, following the record date fixed for the
determination of holders of Common Stock entitled to receive the benefits of
such stock dividend, distribution, subdivision, split-up, combination or reverse
split, the Adjustment Trigger Price shall be adjusted to a new amount equal to
the product of (A) the Adjustment Trigger Price in effect on such record date
and (B) the quotient obtained by dividing (x) the number of shares of Common
Stock outstanding on such record date (without giving effect to the event
referred to in the foregoing clause (i) or (ii)) by (y) the number of shares of
Common Stock which would be outstanding immediately after the event referred to
in the foregoing clause (i) or (ii), if such event had occurred immediately
following such record date.
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6. Conditions to Closing.
(a) The obligation of Buyer to purchase the Shares
pursuant to Paragraph 1 hereof is subject to the satisfaction (or waiver by
Buyer in writing) of each of the following conditions precedent at the Closing:
(i) the representations and warranties of Seller made
in this Agreement shall be true and correct in all respects, as of the date
hereof, and at and as of the Closing as though then made.
(ii) Seller shall have performed or complied with all
of the covenants and agreements required to be performed or complied with by
Seller under this Agreement at or prior to Closing.
(iii) Seller has obtained all consents, approvals,
orders, authorizations of, and registrations and filings with, any Federal,
state, local or foreign government or any court of component jurisdiction,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity") or NASD, that are
required to be obtained or made by Seller, in connection with the execution,
delivery or performance of this Agreement by Seller or the consummation by
Seller of any of the transactions contemplated hereby.
(iv) no action or proceeding by or before any
Governmental Entity, or any other person shall be pending or threatened
challenging or seeking to restrain or prohibit the purchase and sale of any of
the Shares or any of the other transactions contemplated by this Agreement or
seeking to obtain damages from Buyer (or any of its affiliates) in connection
with the purchase and sale of the Shares or any of the other transactions
contemplated by this Agreement.
(v) no statute, rule, regulation, executive order,
decree, temporary restraining order, preliminary injunction, permanent
injunction or other order, enacted, entered, promulgated, enforced or issued by
any Governmental Entity or other legal restraint or prohibition preventing the
purchase and sale of the Shares shall be in effect.
(vi) Subsequent to March 31, 1998, there shall not
have been any development which, with respect to Seller constitutes a material
adverse effect upon the business, affairs, assets, operations, properties,
financial position, or results of operations of Seller.
(vii) Seller shall have delivered to Buyer:
(A) a certificate dated the date of the Closing
(the "Closing Date") stating that the conditions set forth in Paragraph 6(a)(i)
through (vi) have been satisfied;
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(B) a certified resolution of Seller's Board of
Directors authorizing the execution, delivery and performance of this Agreement
and the issuance of the Shares in accordance herewith, and appointing the
Buyer's initial nominees to the Board of Directors in accordance with Paragraph
7 hereof, together with certified copies of Seller's certificate of
incorporation and bylaws.
(C) an opinion from Seller's legal counsel dated
the Closing Date, as to the matters set forth in Paragraph 3(a)(i), (iii)
through (vi), (vii) (other than as to the matters set forth in clause (z) of
Paragraph 3(a)(vii)) and (ix).
(D) payment in full of the Legal Expenses; and
(E) the delivery of such additional certificates
and documents as Buyer may reasonably request.
(b) The obligation of Seller to sell the Shares pursuant
to Paragraph 1 hereof is subject to the satisfaction (or waiver by Seller in
writing) of each of the following conditions precedent at the Closing:
(i) the representations and warranties of Buyer made
in this Agreement shall be true and correct in all respects, as of the date
hereof, and at and as of the Closing as though then made.
(ii) Buyer shall have performed or complied with all
of the covenants and agreements required to be performed or complied with by
Buyer under this Agreement at or prior to Closing.
(iii) Buyer shall have delivered to Seller a
certificate dated the Closing Date stating that the conditions set forth in
Paragraph 6(b)(i) - (ii) have been satisfied.
7. Board of Directors Seat. Provided that Buyer continues to own,
beneficially or otherwise at least 15% of the outstanding Common Stock,
following the Closing Buyer shall have the right to designate (x) until the date
upon which all 6 1/2% Convertible Subordinated Debentures due 2003 held by Buyer
on the Closing Date are converted into shares of Common Stock (the "Conversion
Date"), three (3) directors to the Board of Directors of the Seller, and (y)
after the Conversion Date, one (1) director to the Board of Directors of the
Seller. Each individual nominated by Buyer shall complete a questionnaire in the
same form as has been executed by all other directors of Seller. The rights
provided in this Paragraph shall be in addition to any other rights held by
Buyer, or that may be granted to Buyer, to designate one or more directors to
the Board of Directors of the Seller.
8. Attorney Fees. Seller agrees to pay all of the Buyer's
reasonable attorney fees and disbursements incurred in connection with Buyer's
investments in securities of Seller upon presentment at Closing of a statement
containing the estimated legal fees and disbursements of Buyer's counsel ("Legal
Expenses"). The Legal Expenses shall be due and payable upon the Closing of the
within transaction.
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9. Right of Refusal.
(a) If the Seller or any of its subsidiaries shall
receive, on or prior to the second anniversary of the date of this Agreement, a
bona fide written offer (the "Offer") from a third party or parties (the
"Offerors") to purchase or otherwise acquire any Designated Securities (as
hereinafter defined), then the Seller shall, prior to accepting the Offer, make
an offer (a "First Refusal Offer") to issue such Designated Securities to Buyer
upon the terms set forth in this Paragraph 9; provided, that this Paragraph 9
shall not apply to (i) any Offer received by the Seller after Buyer and its
managed accounts no longer hold at least 15% of the outstanding Common Stock, or
(ii) debt securities or equity securities having terms within a range which, not
more than 60 days prior to the Seller's receipt of the Offer in question, the
Seller proposed in writing for consideration by the Buyer and Buyer stated in
writing its lack of interest in participating in a financing in such range. The
First Refusal Offer shall state that the Seller proposes to issue such
Designated Securities, include a copy of the Offer, disclose the name and
address of the Offeror (or Offerors), and set forth such other information about
the Offer and the Offeror (or Offerors) as may be available to the Seller and
reasonably necessary to understand the Offer.
(b) "Designated Securities" means all (x) securities
(other than convertible debt and other equity securities) evidencing
indebtedness ("debt securities") and (y) shares of capital stock, options,
warrants, or other rights to acquire such shares, and securities exchangeable or
convertible into such shares or rights ("equity securities"), proposed to be
issued by the Seller or any subsidiary, other than:
(i) debt securities the proceeds of which are to be
used for working capital purposes and the maturity of which does not exceed one
year;
(ii) equity securities to be issued to any employee
of, or supplier of goods or services or licensor to, the Seller as full or
partial consideration for employment services or under any bona fide supply,
license, or similar business agreement or arrangement or under any Section
401(k) plan;
(iii) equity securities to be issued as full or
partial consideration in connection with any bona fide business or asset
acquisition;
(iv) equity securities issued as a stock dividend or
upon any stock split or other subdivision or combination of shares of capital
stock;
(v) debt securities issued under any revolving credit
facility secured by collateral having a fair market value equal to at least 100%
of the principal amount of such debt from time to time outstanding;
(vi) debt securities evidencing a mortgage financing
secured by real estate having a fair market value equal to at least 100% of the
principal amount of such debt; and
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(vii) the issuance of not more than 1,400,000 shares
of Common Stock to any third-party in an arms-length transaction.
(c) Within 20 days (the "Acceptance Period") after
delivery of the First Refusal Offer, Buyer may deliver a notice (an "Acceptance
Notice") to the Seller stating that it exercises its right to purchase or
otherwise acquire, upon the terms specified in the First Refusal Offer, (i) all
of the Designated Securities specified in the First Refusal Offer or (ii) if
there are two or more Offerors, the specific number of Designated Securities any
single Offeror offered to purchase or acquire, unless such Offerors are acting
in concert and the Offer by its terms is conditioned upon the issuance to the
Offerors of all Designated Securities specified in the Offer. The closing of the
purchase or other acquisition, upon the terms specified in the First Refusal
Offer, by Buyer of any Designated Securities shall take place at the offices of
the Seller within 10 days after the end of the Acceptance Period or at such time
as is set forth in the Offer; provided, however, that the Acceptance Notice may
state that the purchase or acquisition of the Designated Securities specified in
the Acceptance Notice (if less than all of the Designated Securities specified
in the First Refusal Offer) shall be conditioned upon the issuance of any
remaining Designated Securities to the Offeror, in which case such purchase or
acquisition shall be subject to, and shall take place simultaneously with, such
issuance to the Offeror or Offerors.
(d) If Buyer does not exercise its rights as provided in
this Paragraph with respect to all of the Designated Securities specified in the
First Refusal Offer, then the remaining Designated Securities may be issued to
the Offeror or Offerors upon the terms set forth in the Offer, provided that
such issuance is bona fide and completed within 120 days after the end of the
Acceptance Period. If such issuance is not completed within such 120-day period,
the restrictions set forth in this Paragraph shall again become effective in
full.
10. Indemnity Against Brokerage Commissions. Each of Seller and
Buyer hereby represent and warrant that there is no corporation, firm or person
entitled to receive from it a brokerage commission or finder's fee in connection
with this Agreement or the transactions provided for herein. Seller and Buyer
agree to indemnify and save the other party hereto harmless from and against any
claim for brokerage commission or finder's fee based on any retention or alleged
retention of a broker or finder by the other. This provision shall survive the
Closing.
11. Registration Rights. Seller shall register the Shares (and
any Adjustment Shares issued pursuant to Paragraph 5(c) hereof under a shelf
registration statement filed with the Securities and Exchange Commission upon
the terms set forth in Annex A, and shall comply with its other obligations set
forth therein.
12. Notices. All notices and other communications to be made
hereunder shall be in writing and shall be deemed to have been given when the
same are either (i) personally delivered or mailed, registered or certified
mail, first class postage prepaid return receipt requested, or (ii) delivered by
a reputable private overnight courier service utilizing a written receipt or
other written proof of delivery to the applicable party at the address set forth
above. The substance of any such notice shall be deemed to have been fully
acknowledged in the event of refusal of acceptance by the party to whom the
notice is addressed.
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13. Captions. All captions and headings of paragraphs,
subparagraphs and sections are not part of this Agreement and shall not be used
for the interpretation or determination of the validity of this Agreement or any
provision hereof.
14. Names and Entities. The masculine gender shall include the
neuter genders, and the word "person" shall include a corporation, firm,
partnership or other entity. Whenever the singular is used in this Agreement the
same shall include the plural when required by the context and vice versa.
15. Severability. In the event any one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect other provisions hereof, and this Agreement shall be construed
as if such invalid, illegal or unenforceable provision never had been contained
herein.
16. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York without giving effect to the
conflict of law principles thereof.
17. Assignment. No party may assign its rights or obligations
under this Agreement without the prior written consent of other party hereto.
18. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
19. Consent To Jurisdiction. Each of the parties hereto
irrevocably submits to the non-exclusive jurisdiction of (a) the Supreme Court
of the State of New York, New York County, and (b) the United States District
Court for the Southern District of New York, for the purposes of any suit,
action or other proceeding arising out of this Agreement or any transaction
contemplated hereby. Each of the parties hereto further agrees that service of
any process, summons, notice or documents by United States registered mail,
return receipt requested, to such party's respective address set forth in the
introduction of this Agreement, shall be effective service of process for any
action, suit or proceeding in New York with respect to any matters to which it
has submitted to jurisdiction in this Paragraph 18. Each of the parties hereto
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (x) the Supreme Court of the State of New York, New York
County, and (y) the United States District Court for the Southern District of
New York, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
20. Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties hereto with respect to the matters
contained herein, and may not be amended or supplemented at any time unless by a
writing executed by each of the said parties.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
collectively shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
SELLER:
ATTEST: TOPS APPLIANCE CITY, INC.
Signature illegible By: /s/ Robert G. Gross
- ---------------------- --------------------------
Robert G. Gross
Chief Executive Officer
BUYER:
ATTEST: BAY HARBOUR MANAGEMENT, L.C.,
for its managed accounts,
Signature illegible By: /s/ Douglas P. Teitelbaum
- ---------------------- ------------------------------
Douglas P. Teitelbaum
Principal & Portfolio Manager
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ANNEX A
Registration of Shares
Capitalized terms not defined in this Annex shall have the
meanings assigned in the Agreement to which this Annex is attached (the
"Agreement").
(a) Mandatory Shelf Registration
(i) The Seller shall prepare and, as promptly as
practicable but in no event more than 60 days after the date hereof, file with
the Securities and Exchange Commission (the "SEC") a Shelf Registration
Statement (as defined below) on Form S-3 which, at the time such shelf
Registration Statement is declared effective by the SEC, covers the offer and
resale of the Shares by a holder from time to time and the methods of
distribution elected by such holder of Shares and set forth in such Shelf
Registration Statement. As used herein, "register," "registered" and
"registration" each refer to a registration of Shares effected by filing with
the SEC a registration statement in compliance with the Securities Act and the
declaration or ordering by the SEC of effectiveness of such registration
statement. "Shelf Registration" means a registration effected pursuant to this
Annex. "Shelf Registration Statement" means a shelf registration statement of
the Seller filed with the SEC pursuant to the provisions of this Annex which
covers all of the Shares, as applicable, on Form S-3 under Rule 415 under the
Securities Act of 1933 (the "Securities Act"), or any similar rule that may be
adopted by the SEC, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein. Shelf Registration Statement may include an amendment to the
Company's existing amended registration statement no. 333-44229 filed with the
SEC on June 16, 1998.
(ii) The Seller shall use its best efforts (x) to cause
the Shelf Registration Statement to become effective as promptly as possible but
in no event more than 120 days after the date hereof; provided, that if Seller
determines in the good faith judgment of Seller's general counsel that the
filing of a registration statement would require the disclosure of material
information which Seller has a good faith business purpose for preserving as
confidential and, without disclosure of such material information, Seller is
unable to comply with SEC requirements, Seller shall not be required to effect a
registration pursuant to this clause (ii) until the earlier of (A) the date upon
which such material information is disclosed to the public or ceases to be
material or (B) 60 days after the Company makes such good faith determination,
(y) to keep the Shelf Registration Statement continuously effective in order to
permit the prospectus forming part thereof to be usable by the holders of Shares
for a period equal to the longer of (1) five years and (2) the period any holder
of Shares is subject to any limitations on the resale thereof under Rule 144,
and (z) to cause all of the Shares covered by the Shelf Registration Statement
as of the effective date thereof to be listed on the NASDAQ National Market or
such
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other principal securities market on which securities of the same class or
series issued by the Seller are then listed or traded.
(b) Registration Procedures In connection with the Shelf
Registration Statement, the Seller shall:
(i) prepare and file with the SEC a Shelf Registration
Statement on Form S-3 with respect to the Shares and use its best efforts to
cause such Shelf Registration Statement to become and remain effective as
provided in this Annex;
(ii) submit to the SEC, within five (5) business days after
the Seller learns that no review of the Shelf Registration Statement will be
made by the staff of the SEC or that the staff of the SEC has no further
comments on the Shelf Registration Statement, as the case may be, a request for
acceleration of effectiveness of the Shelf Registration Statement to a time and
date not later than 48 hours after the submission of such request;
(iii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such Shelf Registration Statement
effective and current and to comply with the provisions of the Securities Act
with respect to the disposition of all shares covered by such Shelf Registration
Statement, including such amendments and supplements as may be necessary to
reflect the intended method of disposition from time to time of the prospective
seller or sellers of such Shares.
(iv) furnish (x) to Buyer, and its legal counsel, (1)
promptly after the same is prepared and publicly distributed, filed with the SEC
or received by the Seller, one copy of the Shelf Registration Statement and any
amendment thereto, each prospectus and each amendment or supplement thereto, (2)
each letter written by or on behalf of the Seller to the SEC or the staff of the
SEC and each item of correspondence from the SEC or the staff of the SEC
relating to such Shelf Registration Statement (other than any portion of any
thereof which contains information for which the Seller has sought confidential
treatment), and (y) to each selling holder of Shares such number of copies of a
prospectus in conformity with the requirements of the Securities Act, and such
other documents, as such holder may reasonably request in order to facilitate
the public sale or other disposition of the Shares owned by such holder; and
(v) use its best efforts to register or qualify the shares of
Shares covered by such Shelf Registration Statement under such other securities
or blue sky or other applicable laws of such jurisdictions within the United
States as each prospective seller shall reasonably request, to enable such
seller to consummate the public sale or other disposition in such jurisdictions
of the shares of Shares owned by such seller.
(c) Designation of Underwriter In the case of any registration
effected pursuant to this Annex, a majority in interest of the holders of Shares
shall have the right to designate the managing underwriter in any underwritten
offering.
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(d) Cooperation by Prospective Sellers
(i) Each prospective seller of Shares, and each underwriter
designated by each such seller, will furnish to the Seller such information as
the Seller may reasonably require from such seller or underwriter in connection
with the Shelf Registration Statement (and the prospectus included therein).
(ii) The holders holding shares of the Shares included in the
registration will not (until further notice by the Seller) effect sales thereof
(or deliver a prospectus to any purchaser) after receipt of telegraphic or
written notice from the Seller to suspend sales to permit the Seller to correct
or update a registration statement or prospectus. In connection with any
offering, each holder who is a prospective seller, will not use any offering
document, offering circular or other offering materials with respect to the
offer or sale of Shares, other than the prospectuses provided by the Seller and
any documents incorporated by reference therein.
(e) Expenses All expenses incurred in complying with this Annex,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with NASD), fees and expenses of complying with
securities and "blue sky" laws, printing expenses and fees and disbursements of
counsel for the Seller and one counsel for the holders of Shares, and the
independent certified public accountants shall be paid by the Seller; provided,
however, that all underwriting discounts and selling commissions applicable to
the Shares covered by registrations effected pursuant to this Annex shall not be
borne by the Seller but shall be borne by the seller or sellers of the Shares.
(f) Indemnification
(i) The Seller shall indemnify and hold harmless the seller
of any shares of Shares registered under the Securities Act pursuant to this
Annex, each underwriter of such shares, if any, each broker or any other person
acting on behalf of such seller and each other person, if any, who controls any
of the foregoing persons, within the meaning of the Securities Act or the
Securities Exchange Act of 1934 (the "1934 Act"), against any losses, claims,
damages or liabilities, joint or several, to which any of the foregoing persons
may become subject under the Securities Act or the 1934 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any registration statement under which
such Shares was registered under the Securities Act, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereto,
or any document prepared or furnished by the Seller incident to the registration
or qualification of any Shares pursuant to this Annex, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or, with respect to any prospectus, necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading, or any violation by the Seller of the Securities Act or state
securities or "blue sky" laws applicable to the Seller and relating to action or
inaction required of the Seller in connection with such registration or
qualification under such state securities or blue sky laws; and shall reimburse
such seller, such
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underwriter, broker or other person acting on behalf of such seller and each
such controlling person for any legal or any other expenses reasonably incurred
by any of them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, the Seller shall not be
liable in such cases to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any registration statement
under which such Shares was registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Seller by such seller or underwriter expressly for use therein.
(ii) Each prospective seller of Shares and any underwriter
acting on its behalf shall indemnify and hold harmless (in the same manner and
to the same extent as set forth in (i) above) the Seller, each director of the
Seller, each officer of the Seller who shall sign the Shelf Registration
Statement and any person who controls the Seller within the meaning of the
Securities Act or the 1934 Act, with respect to any untrue statement or omission
from the Shelf Registration Statement, any preliminary prospectus or prospectus
contained therein, or any amendment or supplement thereof, if such untrue
statement or omission was made in reliance upon and in conformity with written
information furnished to the Seller through an instrument duly executed by such
seller or such underwriter, as the case may be, specifically for use in the
preparation of the Shelf Registration Statement, preliminary prospectus,
prospectus or amendment or supplement; provided that the maximum amount of
liability in respect of such indemnification shall be limited, in the case of
each prospective seller of Shares, to an amount equal to the net proceeds
actually received by such prospective seller from the sale of Shares effected
pursuant to such registration.
(iii) Notwithstanding the foregoing provisions of this Annex,
if pursuant to an underwritten public offering of Common Stock, the Seller, the
selling shareholders and the underwriters enter into an underwriting or purchase
agreement relating to such offering which contains provisions covering
indemnification among the parties thereto in connection with such offering, the
indemnification provisions of paragraph (d) of this Annex shall be deemed
inoperative for purposes of such offering to the extent inconsistent therewith.
(iv) If the indemnification provided for in this Annex is
unavailable or insufficient to hold harmless an indemnified party under
subparagraph (i) or (ii) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to in subparagraph (i) or (ii) above (x) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties on the one hand and the indemnified party on the other from the
issuance of the Shares, or (y) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party or parties on the
one hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages, expenses
or liabilities (or actions in respect thereof) as well as any other relevant
equitable
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considerations. Notwithstanding the foregoing, no prospective seller of Shares
shall be liable for an amount exceeding that set forth in the proviso to
subparagraph (ii) above.
(v) Each party entitled to indemnification under paragraph
(d) of this Annex (the "indemnified party") shall give notice to the party
required to provide indemnification (the "indemnifying party") promptly after
such indemnified party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the indemnifying party (at its expense) to
assume the defense of any claim or any litigation resulting therefrom, provided
that the counsel who shall conduct the defense of such claim or litigation,
shall be reasonably satisfactory to the indemnified party and shall not without
the indemnified party's consent, be counsel to the indemnifying party, and the
indemnified party may participate in such defense, but only at such indemnified
party's expenses, and provided, further, that the omission by an indemnified
party to give notice as provided herein shall not relieve the indemnifying party
of its obligations under paragraph (d) of this Annex except to the extent that
the omission results in a failure of actual notice to the indemnifying party and
such indemnifying party is damaged solely as a result of the failure to give
notice. No indemnifying party, in the defense of any such claim or litigation,
shall, except with the consent of each indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(g) SEC Filings and S-3 Requirements. The Seller will timely file all
reports required to be filed under the 1934 Act and any other material
reports or documents required to be filed in order for the Seller to meet the
requirements for use of Form S-3 for registration of the resale of the Shares.
A-5
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[Execution Copy]
SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT made as of July 17, 1998 (the
"Agreement") by and between THE TURCHIN FAMILY LIMITED PARTNERSHIP ("Seller"),
having an address at c/o Leslie Turchin, 536 Coconut Isle Drive, Ft. Lauderdale,
Florida 33301, and BAY HARBOUR MANAGEMENT, L.C. acting for its managed accounts
("Buyer"), a Florida limited liability company having an address at 885 Third
Avenue, 34th Floor, New York, New York 10022.
W I T N E S S E T H:
WHEREAS, Buyer has agreed to purchase from Seller and Seller
has agreed to sell to Buyer Two Hundred Thousand (200,000) shares (the "Shares")
of common stock, no par value (the "Common Stock") of Tops Appliance City, Inc.
(the "Corporation"), upon the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual promises herein
set forth, and intending to be legally bound hereby, the parties do hereby agree
as follows:
1. Sale and Purchase of Shares.
(a) Seller agrees to sell to Buyer, and Buyer agrees to
purchase from Seller, at the Closing (as such term is defined in Paragraph 2
below), the Shares free and clear of all liens and encumbrances of any kind for
the Purchase Price provided in Subparagraph (b) below.
(b) The purchase price (hereafter referred to as the
"Purchase Price") to be paid to Seller by Buyer for the Shares shall be Three
Dollars ($3.00) per share for an aggregate amount of Six Hundred Thousand
($600,000) Dollars, payable by wire transfer pursuant to the wiring instructions
set forth in Schedule I hereto.
2. The Closing. Subject to the conditions
and provisions set forth herein, the closing under this Agreement (the
"Closing") shall be deemed to occur as of July 20, 1998 (the "Closing Date"), at
the offices of Howard, Smith & Levin LLP, 1330 Avenue of the Americas, New York,
New York.
3. Representations.
(a) Seller represents and warrants as follows:
(i) the Shares shall be transferred to Buyer free and
clear of all liens, claims, debts, charges, restrictions, or encumbrances of any
kind.
(ii) the Shares are validly issued, fully paid and
non-assessable shares of Common Stock with no personal liability attaching to
the ownership thereof.
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(iii) Seller has full power and legal right to sell,
transfer and deliver the Shares to Buyer in accordance with the terms of this
Agreement, and otherwise to execute and deliver this Agreement and to consummate
and close the transactions provided for in this Agreement in the manner and upon
the terms herein specified.
(iv) this Agreement has been duly authorized,
executed and delivered by Seller and, assuming due authorization, execution and
delivery by Buyer, constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject, as to
validity, binding effect and enforcement remedies, to applicable bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights generally,
and to equitable principles.
(v) there is not pending, nor to Seller's knowledge
is there threatened, any suit, action or administrative, arbitration or other
proceeding which could adversely affect or materially impair the ability of
Seller to perform any of its obligations under this Agreement.
(vi) Seller understands that the law firm of
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP is counsel to the Corporation,
and not in any way counsel to Seller, for the purpose of this Agreement, and
that Seller has retained its own counsel in connection with this transaction.
(vii) the execution, delivery and performance of this
Agreement by Seller and the sale and delivery of the Shares does not and will
not with the passage of time violate or conflict with (x) any applicable
provision of law, statute, rule or regulation, or any order, judgment or decree
of any court, arbitrator, governmental agency or the National Association of
Securities Dealers, Inc. ("NASD") applicable to Seller of which the Seller has
knowledge, or (y) any material contract, agreement or instrument to which Seller
is a party or by which it or any of its properties or assets are bound or
affected.
(viii) all clearances, approvals, authorizations and
consents, orders of, and designations by, any Governmental Entity (as defined
below) or NASD, required under the laws of the United States or the regulation
of NASD to be obtained by Seller for or in connection with the sale and delivery
of the Shares, and compliance with the terms of this Agreement have been
obtained and complied with, or will be obtained prior to Closing, and are in
full force and effect.
(ix) Seller shall defend, indemnify and hold harmless
Buyer from and against any loss or liability arising from any breach of the
representations and warranties of Seller contained herein.
(b) Buyer represents and warrants as follows:
(i) Buyer for itself and on behalf of its managed
accounts has full power and legal right to purchase the Shares from Seller in
accordance with the terms of this Agreement, and otherwise to execute and
deliver this Agreement and to consummate and close
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the transactions provided for in this Agreement in the manner and upon the terms
herein specified, and this Agreement and the transactions contemplated hereby
will not result in the violation of any other agreement to which Buyer is a
party or by which it is bound.
(ii) In purchasing the Shares, Buyer is not relying
on any representation or warranty made by Seller or the Corporation (other than
those made herein by Seller), but is relying on its own knowledge of the
financial outlook and affairs of the Corporation, and is satisfied that the
consideration Buyer is paying for the Shares is fair and just.
(iii) Buyer understands that the law firm of
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP is counsel to the Corporation,
and not in any way counsel to Buyer, for the purpose of this Agreement, and that
Buyer has retained its own counsel in connection with this transaction.
(iv) this Agreement has been duly authorized,
executed and delivered by Buyer and, assuming due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject, as to validity,
binding effect and enforcement remedies, to applicable bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally, and to
equitable principles.
(v) there is not pending, nor to Buyer's knowledge is
there threatened, any suit, action or administrative, arbitration or other
proceeding which could adversely affect or materially impair the ability of
Buyer to perform any of its obligations under this Agreement.
(vi) Buyer is purchasing the Shares for investment
purposes only and not with a view towards reselling or otherwise distributing
the Shares.
(vii) Buyer acknowledges that, at Closing, the Shares
are not registered under the Securities Act of 1933, as amended or under any
State securities laws and that certain restrictions exist with regard to the
resale of the Shares.
(viii) Buyer shall defend, indemnify and hold
harmless Seller from and against any loss or liability arising from any breach
of the representations and warranties of Buyer contained herein.
(c) The representations made by the parties in this
Paragraph 3 shall survive the Closing for a period of two (2) years from the
Closing Date.
4. Closing. At the Closing, the following transactions shall occur,
all of which shall be deemed to occur simultaneously:
(a) Seller will deliver or cause to be delivered to
Buyer:
(i) this Agreement;
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(ii) a share certificate or certificates for the
Shares to be sold by Seller to Buyer, duly endorsed for transfer with stock
powers affixed thereto, which certificate(s) shall have affixed thereto or typed
thereon the following legend:
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any
State securities laws. Neither this security nor any interest or
participation herein may be reoffered, sold, assigned, transferred,
pledged, encumbered or otherwise disposed of in the absence of such
registration or unless such transaction is exempt from, or not
subject to, registration.
and
(iii) all other documents set forth in Paragraph 6
hereof.
(b) Buyer will deliver or cause to be delivered to
Seller:
(i) this Agreement;
(ii) the sum of Six Hundred Thousand ($600,000)
Dollars in accordance with Paragraph 1(b); and
(iii) all other documents set forth in Paragraph 6
hereof.
5. Conditions to Closing.
(a) The obligation of Buyer to purchase the Shares
pursuant to Paragraph 1 hereof is subject to the satisfaction (or waiver by
Buyer in writing) of each of the following conditions precedent at the Closing:
(i) the representations and warranties of Seller made
in this Agreement shall be true and correct in all respects, as of the date
hereof, and at and as of the Closing as though then made.
(ii) Seller shall have performed or complied with all
of the covenants and agreements required to be performed or complied with by
Seller under this Agreement at or prior to Closing.
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(iii) Seller has obtained all consents, approvals,
orders, authorizations of, and registrations and filings with, any Federal,
state, local or foreign government or any court of component jurisdiction,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity") or NASD, that are
required to be obtained or made by Seller, in connection with the execution,
delivery or performance of this Agreement by Seller or the consummation by
Seller of any of the transactions contemplated hereby.
(iv) no action or proceeding by or before any
Governmental Entity, or any other person shall be pending or to the Seller's
knowledge threatened challenging or seeking to restrain or prohibit the purchase
and sale of any of the Shares or any of the other transactions contemplated by
this Agreement or seeking to obtain damages from Buyer (or any of its
affiliates) in connection with the purchase and sale of the Shares or any of the
other transactions contemplated by this Agreement.
(v) no statute, rule, regulation, executive order,
decree, or temporary restraining order, preliminary injunction, permanent
injunction or other order of which Seller has knowledge, enacted, entered,
promulgated, enforced or issued by any Governmental Entity or other legal
restraint or prohibition preventing the purchase and sale of the Shares shall be
in effect.
(vi) Seller shall have delivered to Buyer:
(A) a certificate dated the Closing Date stating
that the conditions set forth in Paragraph 6(a)(i) through (v) have been
satisfied;
(B) the delivery of such additional certificates
and documents as Buyer may reasonably request.
(b) The obligation of Seller to sell the Shares pursuant
to Paragraph 1 hereof is subject to the satisfaction (or waiver by Seller in
writing) of each of the following conditions precedent at the Closing:
(i) the representations and warranties of Buyer made
in this Agreement shall be true and correct in all respects, as of the date
hereof, and at and as of the Closing as though then made.
(ii) Buyer shall have performed or complied with all
of the covenants and agreements required to be performed or complied with by
Buyer under this Agreement at or prior to Closing.
(iii) Buyer shall have delivered to Seller a
certificate dated the Closing Date stating that the conditions set forth in
Paragraph 6(b)(i) - (ii) have been satisfied.
6. Indemnity Against Brokerage Commissions. Each of Seller and Buyer
hereby represent and warrant that there is no corporation, firm or person
entitled to receive from
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it a brokerage commission or finder's fee in connection with this Agreement or
the transactions provided for herein. Seller and Buyer agree to indemnify and
save the other party hereto harmless from and against any claim for brokerage
commission or finder's fee based on any retention or alleged retention of a
broker or finder by the other. This provision shall survive the Closing.
7. Notices. All notices and other communications to be made hereunder
shall be in writing and shall be deemed to have been given when the same are
either (i) personally delivered or mailed, registered or certified mail, first
class postage prepaid return receipt requested, or (ii) delivered by a reputable
private overnight courier service utilizing a written receipt or other written
proof of delivery to the applicable party at the address set forth above. The
substance of any such notice shall be deemed to have been fully acknowledged in
the event of refusal of acceptance by the party to whom the notice is addressed.
8. Captions. All captions and headings of paragraphs, subparagraphs
and sections are not part of this Agreement and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
9. Names and Entities. The masculine gender shall include the neuter
genders, and the word "person" shall include a corporation, firm, partnership or
other entity. Whenever the singular is used in this Agreement the same shall
include the plural when required by the context and vice versa.
10. Severability. In the event any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect other
provisions hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision never had been contained herein.
11. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of New York without giving effect to the conflict of
law principles thereof.
12. Assignment. No party may assign its rights or obligations under
this Agreement without the prior written consent of other party hereto.
13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
14. Consent To Jurisdiction. Each of the parties hereto irrevocably
submits to the non-exclusive jurisdiction of (a) the Supreme Court of the State
of New York, New York County, and (b) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each of the parties hereto further agrees that service of any process, summons,
notice or documents by United States registered mail, return receipt requested,
to such party's respective address set forth in the introduction of this
Agreement, shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction in this Paragraph 18. Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding
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arising out of this Agreement or the transactions contemplated hereby in (x) the
Supreme Court of the State of New York, New York County, and (y) the United
States District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
15. Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties hereto with respect to the matters
contained herein, and may not be amended or supplemented at any time unless by a
writing executed by each of the said parties.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
collectively shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
SELLER:
WITNESS: THE TURCHIN FAMILY LIMITED
PARTNERSHIP
/s/ Gaia Schettino By: /s/ Leslie Turchin
- -------------------------------- ---------------------------------
Gaia Schettino Leslie Turchin
BUYER:
ATTEST: BAY HARBOUR MANAGEMENT, L.C.,
for its managed accounts,
Signature illegible By: /s/ Douglas P. Teitelbaum
- -------------------------------- --------------------------------
Douglas P. Teitelbaum
Principal & Portfolio Manager
8
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[Execution Copy]
OPTION AGREEMENT
OPTION AGREEMENT, dated July 17, 1998, by and between THE
TURCHIN FAMILY LIMITED PARTNERSHIP ("Grantor"), having an address at c/o Leslie
Turchin, 536 Coconut Isle Drive, Ft. Lauderdale, Florida 33301, and BAY HARBOUR
MANAGEMENT, L.C. acting for its managed accounts, ("Grantee"), a Florida limited
liability company having an address at 885 Third Avenue, 34th Floor, New York,
New York 10022.
In exchange for good and valuable consideration, Grantor
hereby grants to Grantee options to purchase shares of common stock (the
"Stock") of Tops Appliance City, Inc. (the "Corporation"), a New Jersey
corporation, from Grantor on the terms contained herein.
1. Grantor hereby grants to Grantee the right to purchase from
Grantor Two Hundred Thousand (200,000) shares of Stock by written notice given
during the period beginning the date hereof and expiring on the date which is
ninety (90) days next following the date hereof (the "Ninetieth Day") for an
exercise price per share of Stock of Three Dollars and Fifty Cents ($3.50).
2. Grantor hereby grants to Grantee the right to purchase from
Grantor Two Hundred Thousand (200,000) shares of Stock by written notice during
the period beginning the day next following the Ninetieth Day and expiring on
the date which is two hundred seventy (270) days next following the Ninetieth
Day for an exercise price per share of Stock of Four ($4.00) Dollars; provided,
however, that the option provided in this Paragraph 2 shall be null, void and of
no force or effect in the event that the Grantee exercises any option pursuant
to Paragraph 1 hereof.
3. In the event that the Grantee desires to exercise any of the
within options, it must provide written notice to the Grantor which notice must
state the number of shares of Stock to be acquired. Any such notice must be
delivered prior to the date on which the options set forth in Paragraph 1 and 2,
respectively, expire. The purchase of the shares shall take place ten (10)
business days after such notice is given.
4. Grantor represents and warrants to Grantee as follows:
(a) Grantor shall transfer to Grantee good and
marketable title to any shares of Stock to be
transferred hereunder, free and clear of all
liens, claims, debts, charges, restrictions, or
encumbrances of any kind.
(b) Grantor has full power and legal right to sell,
transfer and deliver the Stock to Grantee in
accordance with the terms of this Agreement, and
otherwise to execute and deliver this Agreement
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and to consummate and close the transactions
provided for in this Agreement in the manner and
upon the terms herein specified.
(c) This Agreement has been duly executed and
delivered by Grantor and, assuming due
authorization, execution and delivery by Grantee,
constitutes a legal, valid and binding obligation
of Grantor, enforceable against Grantor in
accordance with its terms, subject, as to
validity, binding effect and enforcement remedies,
to applicable bankruptcy, insolvency,
reorganization and other laws affecting creditors'
rights generally, and to equitable principles.
(d) There is not pending, nor to Grantor's knowledge
is there threatened, any suit, action or
administrative, arbitration or other proceeding
which could adversely affect the ability of
Grantor to perform any of his obligations under
this Agreement.
(e) Grantor understands that the law firm of
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP
is counsel to the Corporation, and not in any way
counsel to Grantor, for the purpose of this
Agreement, and that Grantor has retained his own
counsel in connection with this transaction.
(f) The execution, delivery, and performance of
this Agreement by Grantor, the granting of the
options set forth in Paragraphs 1 and 2 and
delivery of the Stock does not and will not
violate or conflict with (i) any applicable
provision of law, statute, rule or regulation, or
any order, judgment or decree of any court,
arbitrator, governmental agency or the National
Association of Securities Dealers, Inc. ("NASD")
applicable to Grantor, or (ii) any contract,
agreement or instrument to which Grantor is a
party.
(g) All clearances, approvals, authorizations and
consents, orders of, and designations by, any
Governmental Entity (as defined below) or NASD,
required under the laws of the United States or
the regulations of NASD to be obtained by Grantor
for or in connection with the issue and delivery
of the Stock, and compliance with the terms of
this Agreement have been obtained and complied
with and are in full force and effect.
(h) Grantor shall defend, indemnify and hold harmless
Grantee from and against any loss or liability
arising from any breach of the representations and
warranties with respect to Grantor contained in
this Agreement.
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5. Grantee represents and warrants to Grantor as follows:
(a) Grantee has the full power and legal right to
purchase the shares of Stock from Grantor in
accordance with the terms of this Agreement,
and otherwise to execute and deliver this
Agreement and to consummate and close the
transactions provided for in this Agreement in
the manner and upon the terms herein specified,
and this Agreement and the transactions
contemplated hereby will not result in the
violation of any other agreement to which Grantee
is a party or by which it is bound.
(b) In purchasing the shares of Stock hereunder and in
acquiring the within options, Grantee is not
relying on any information provided by or any
representation or warranty made by Grantor (other
than those made herein by Grantor).
(c) Grantee understands that the law firm of
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP
is counsel to the Corporation, and not in any way
counsel to Grantee, for the purpose of this
Agreement and that Grantee has retained its own
counsel in connection with this transaction.
(d) This Agreement has been duly executed and
delivered by Grantee and, assuming due
authorization, execution and delivery by Grantor,
constitutes a legal, valid and binding obligation
of Grantee, enforceable against Grantee in
accordance with its terms, subject, as to
validity, binding effect and enforcement remedies,
to applicable bankruptcy, insolvency,
reorganization and other laws affecting creditors'
rights generally, and to equitable principles.
(e) There is not pending, nor to Grantee's knowledge
is there threatened, any suit, action or
administrative, arbitration or other proceeding
which could adversely affect the ability of
Grantee to perform any of its obligations under
this Agreement.
(f) To the extent that Grantee exercises any of the
within options, Grantee represents that it is
purchasing the shares of Stock for investment
purposes only and not with a view towards
reselling or otherwise distributing the shares of
Stock.
(g) Grantee acknowledges that, as of the date hereof,
any shares of Stock which it receives hereunder
are not registered under the Securities Act of
1933, as amended, or under any State securities
laws and that certain restrictions exist with
regard to the resale of such shares of Stock.
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6. The representations made by the parties in Paragraphs 4 and 5
shall survive the exercise of any option hereunder for a period of two (2) years
from the date on which Grantee becomes the record holder of such shares of
Stock.
7. At the time of the closing of an exercise hereunder, the
following transactions shall occur, all of which shall be deemed to occur
simultaneously:
(a) Grantor will deliver or cause to be delivered to
Grantee a share certificate or certificates for
the shares of Stock subject to such exercise, duly
endorsed for transfer with stock powers affixed
thereto, which certificate(s) shall have affixed
thereto or typed thereon the following legend:
The securities represented hereby have not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any State securities laws. Neither this security nor
any interest or participation herein may be reoffered, sold,
assigned, transferred, pledged, encumbered or otherwise
disposed of in the absence of such registration or unless such
transaction is exempt from, or not subject to, registration
(b) Grantee will deliver or cause to be delivered to
Grantor an amount equal to the exercise price in
respect of the shares of Stock being acquired by
Grantor.
8. All notices and other communications to be made hereunder
shall be in writing and shall be deemed to have been given when the same are
either (i) personally delivered or mailed, registered or certified mail, first
class postage prepaid return receipt requested, or (ii) delivered by a reputable
private overnight courier service utilizing a written receipt or other written
proof of delivery to the applicable party at the address set forth above. The
substance of any such notice shall be deemed to have been fully acknowledged in
the event of refusal of acceptance by the party to whom the notice is addressed.
9. In the event any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect other
provisions hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision never had been contained herein.
10. This Agreement shall be construed in accordance with the laws
of the State of New York without giving effect to the conflict of law principles
thereof.
11. No party may assign its rights or obligations under this
Agreement without the prior written consent of other party hereto.
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12. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
13. Each of the parties hereto irrevocably submits to the
non-exclusive jurisdiction of (a) the Supreme Court of the State of New York,
New York County, and (b) the United States District Court for the Southern
District of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties hereto further agrees that service of any process, summons, notice
or documents by United States registered mail, return receipt requested, to such
party's respective address set forth in the introduction of this Agreement,
shall be effective service of process for any action, suit or proceeding in New
York with respect to any matters to which it has submitted to jurisdiction in
this Paragraph 13. Each of the parties hereto irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in (x) the
Supreme Court of the State of New York, New York County, and (y) the United
States District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
14. This Agreement contains the entire understanding and
agreement of the parties hereto with respect to the matters contained herein,
and may not be amended or supplemented at any time unless by a writing executed
by each of the said parties.
15. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which collectively shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
GRANTOR:
WITNESS: THE TURCHIN FAMILY LIMITED
PARTNERSHIP
/s/ Gaia Schettino By: /s/ Leslie Turchin
- ------------------------------ ---------------------------------
Leslie Turchin
GRANTEE:
ATTEST: BAY HARBOUR MANAGEMENT, L.C.,
for its managed accounts,
Signature illegible By: /s/ Douglas P. Teitelbaum
- ------------------------------ ---------------------------------
Douglas P. Teitelbaum
Principal & Portfolio Manager
<PAGE>
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[Execution Copy]
SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT, dated as August 6, 1998 (the
"Agreement") by and between MELLON BANK, N.A., AS TRUSTEE UNDER THE WESTINGHOUSE
ELECTRIC CORPORATION MASTER TRUST AGREEMENT FOR THE WESTINGHOUSE PENSION PLAN
("Seller"), having an address at 3700 One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258, and BAY HARBOUR MANAGEMENT, L.C. acting for its managed
accounts ("Buyer"), a Florida limited liability company, having an address at
885 Third Avenue, 34th Floor, New York, New York 10022.
W I T N E S S E T H:
WHEREAS, Buyer has agreed to purchase from Seller and Seller has
agreed to sell to Buyer Three Hundred Thousand (300,000) shares (the "Shares")
of common stock, no par value (the "Common Stock") of Tops Appliance City, Inc.
(the "Corporation"), upon the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual promises herein
set forth, and intending to be legally bound hereby, the parties do hereby agree
as follows:
1. Sale and Purchase of Shares.
(a) Seller agrees to sell to Buyer, and Buyer agrees to
purchase from Seller, at the Closing (as such term is defined in Paragraph 2
below), with Buyer acquiring the Shares free and clear of all liens and
encumbrances of any kind for the Purchase Price provided in Subparagraph (b)
below.
(b) The purchase price (hereafter referred to as the
"Purchase Price") to be paid to Seller by Buyer for the Shares shall be Three
Dollars ($3.00) per share for an aggregate amount of Nine Hundred Thousand
($900,000) Dollars, payable by wire transfer pursuant to the wiring instructions
set forth in Schedule I hereto.
2. The Closing. Subject to the conditions and provisions set forth
herein, the closing under this Agreement (the "Closing") shall be deemed to
occur as of July 6, 1998 (the "Closing Date"), at the offices of Howard, Smith &
Levin LLP, 1330 Avenue of the Americas, New York, New York.
3. Representations.
(a) Seller represents and warrants as follows:
(i) Buyer will acquire the Shares free and clear of
all liens, claims, debts, charges, restrictions, or encumbrances of any kind
other than such as may be created by Buyer and other than the restrictions
contemplated by paragraphs 3(b)(iv) and 3(b)(v) hereof.
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(ii) Seller has full power and legal right to sell,
transfer and deliver the Shares to Buyer in accordance with the terms of this
Agreement, and otherwise to execute and deliver this Agreement and to consummate
and close the transactions provided for in this Agreement in the manner and upon
the terms herein specified.
(iii) this Agreement has been duly authorized,
executed and delivered by Seller and, assuming due authorization, execution and
delivery by Buyer, constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject, as to
validity, binding effect and enforcement remedies, to applicable bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights generally,
and to equitable principles.
(iv) there is not pending, nor to Seller's knowledge
is there threatened, any suit, action or administrative, arbitration or other
proceeding which could adversely affect or materially impair the ability of
Seller to perform any of its obligations under this Agreement.
(v) the execution, delivery and performance of this
Agreement and the sale and delivery of the Shares does not and will not with the
passage of time violate or conflict with (x) any applicable provision of law,
statute, rule or regulation, or any order, judgment or decree of any court,
arbitrator, governmental agency or the National Association of Securities
Dealers, Inc. ("NASD") of which the Seller has knowledge, or (y) any material
contract, agreement or instrument to which Seller is a party or by which it or
any of its properties or assets are bound or affected.
(vi) all clearances, approvals, authorizations and
consents, orders of, and designations by, any Governmental Entity (as defined
below) or NASD, for or in connection with the sale and delivery of the Shares,
and compliance with the terms of this Agreement have been obtained and complied
with, or will be obtained prior to Closing, and are in full force and effect.
(vii) Seller shall defend, indemnify and hold
harmless Buyer from and against any loss or liability arising from any breach of
the representations and warranties of Seller contained herein.
(b) Buyer represents and warrants as follows:
(i) Buyer for itself and on behalf of its managed
accounts has full power and legal right to purchase the Shares from Seller in
accordance with the terms of this Agreement, and otherwise to execute and
deliver this Agreement and to consummate and close the transactions provided for
in this Agreement in the manner and upon the terms herein specified, and this
Agreement and the transactions contemplated hereby will not result in the
violation of any other agreement to which Buyer is a party or by which it is
bound.
(ii) this Agreement has been duly authorized,
executed and delivered by Buyer and, assuming due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject, as to validity,
binding effect and enforcement remedies, to
2
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applicable bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally, and to equitable principles.
(iii) there is not pending, nor to Buyer's knowledge
is there threatened, any suit, action or administrative, arbitration or other
proceeding which could adversely affect or materially impair the ability of
Buyer to perform any of its obligations under this Agreement.
(iv) Buyer has extensive experience in investing in
equity securities and possesses the financial sophistication to evaluate an
investment in the Shares. Buyer has had access to all information deemed by it
to be necessary or appropriate to make a decision to purchase the Shares. Buyer
is purchasing the Shares for investment purposes only and not with a view
towards reselling or otherwise distributing the Shares.
(v) Buyer acknowledges that, at Closing, the Shares
are not registered under the Securities Act of 1933, as amended or under any
State securities laws and that certain restrictions exist with regard to the
resale of the Shares. Buyer agrees that the certificates representing the
Shares, to be issued to Buyer upon transfer of the Shares will the following
legend:
The securities represented hereby have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or
any State securities laws. Neither this security nor any interest
or participation herein may be reoffered, sold, assigned,
transferred, pledged, encumbered or otherwise disposed of in the
absence of such registration or unless such transaction is exempt
from, or not subject to, registration.
(vi) Buyer shall defend, indemnify and hold harmless
Seller from and against any loss or liability arising from any breach of the
representations and warranties of Buyer contained herein.
(vii) Buyer has no notice of any liens, claims,
debts, charges, restrictions or encumbrances of any kind affecting the Shares,
other than (x) the restrictions contemplated by paragraphs 3(b)(iv), 3(b)(v) and
4(a)(ii) hereof and (y) restrictions applicable to restricted securities imposed
under the federal and state securities laws.
(c) The representations or warranties made by the parties
in this Paragraph 3 shall survive the Closing for a period of two (2) years from
the Closing Date. The obligations to defend, indemnify and hold harmless any
person pursuant to Paragraph 3 shall terminate when the applicable
representation or warranty terminates pursuant to this clause (c); provided,
however, that such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the person to be indemnified or
the related party thereto shall have, before the expiration of the applicable
period, previously made a claim by delivering a notice of such claim (stating in
reasonable detail the basis of such claim) to the indemnifying party.
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4. Closing. At the Closing, the following transactions shall occur,
all of which shall be deemed to occur simultaneously:
(a) Seller will deliver or cause to be delivered to
Buyer:
(i) this Agreement; and
(ii) a share certificate or certificates for the
Shares to be sold by Seller to Buyer, duly endorsed for transfer with stock
powers affixed thereto and evidence of the authority of the signatory of the
stock power.
(b) Buyer will deliver or cause to be delivered to
Seller:
(i) this Agreement; and
(ii) the sum of Nine Hundred Thousand ($900,000)
Dollars in accordance with Paragraph 1(b).
5. Conditions to Closing.
(a) The obligation of Buyer to purchase the Shares
pursuant to Paragraph 1 hereof is subject to the satisfaction (or waiver by
Buyer in writing) of each of the following conditions precedent at the Closing:
(i) the representations and warranties of Seller
made in this Agreement shall be true and correct in all respects, as of the date
hereof, and at and as of the Closing as though then made.
(ii) Seller shall have performed or complied with
all of the covenants and agreements required to be performed or complied with by
Seller under this Agreement at or prior to Closing.
(iii) Seller has obtained all consents, approvals,
orders, authorizations of, and registrations and filings with, any Federal,
state, local or foreign government or any court of component jurisdiction,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity") or NASD, that are
required to be obtained or made by Seller, in connection with the execution,
delivery or performance of this Agreement by Seller or the consummation by
Seller of any of the transactions contemplated hereby.
(iv) no action or proceeding by or before any
Governmental Entity, or any other person shall be pending or to the Seller's
knowledge threatened challenging or seeking to restrain or prohibit the purchase
and sale of any of the Shares or any of the other transactions contemplated by
this Agreement or seeking to obtain damages from Buyer (or any of its
affiliates) in connection with the purchase and sale of the Shares or any of the
other transactions contemplated by this Agreement.
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(v) no statute, rule, regulation, executive order,
decree, or temporary restraining order, preliminary injunction, permanent
injunction or other order of which Seller has knowledge, enacted, entered,
promulgated, enforced or issued by any Governmental Entity or other legal
restraint or prohibition preventing the purchase and sale of the Shares shall be
in effect.
(b) The obligation of Seller to sell the Shares pursuant
to Paragraph 1 hereof is subject to the satisfaction (or waiver by Seller in
writing) of each of the following conditions precedent at the Closing:
(i) the representations and warranties of Buyer
made in this Agreement shall be true and correct in all respects, as of the date
hereof, and at and as of the Closing as though then made.
(ii) Buyer shall have performed or complied with
all of the covenants and agreements required to be performed or complied with by
Buyer under this Agreement at or prior to Closing.
6. Indemnity Against Brokerage Commissions. Each of Seller and Buyer
hereby represents and warrants that there is no corporation, firm or person
entitled to receive from it a brokerage commission or finder's fee in connection
with this Agreement or the transactions provided for herein. Each of Seller and
Buyer agree to indemnify and save the other party hereto harmless from and
against any claim for brokerage commission or finder's fee based on any
retention or alleged retention of a broker or finder by it. This provision
shall survive the Closing.
7. Notices. All notices and other communications to be made hereunder
shall be in writing and shall be deemed to have been given when the same are
either (i) personally delivered or mailed, registered or certified mail, first
class postage prepaid return receipt requested, or (ii) delivered by a reputable
private overnight courier service utilizing a written receipt or other written
proof of delivery to the applicable party at the address set forth above. The
substance of any such notice shall be deemed to have been fully acknowledged
in the event of refusal of acceptance by the party to whom the notice
is addressed.
8. Captions. All captions and headings of paragraphs, subparagraphs
and sections are not part of this Agreement and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
9. Names and Entities. The masculine gender shall include the
feminine, neuter genders, and the word "person" shall include a corporation,
firm, partnership or other entity. Whenever the singular is used in this
Agreement the same shall include the plural when required by the context and
vice versa.
10. Severability. In the event any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect
other provisions hereof, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision never had been contained herein.
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11. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of New York without giving effect to the conflict of
law principles thereof.
12. Assignment. No party may assign its rights or obligations under
this Agreement without the prior written consent of other party hereto.
13. Successors and Assigns. This Agreement hall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
14. Entire Agreement. This Agreement contains the entire understanding
and agreement of the parties hereto with respect to the matters contained
herein, and may not be amended or supplemented at any time unless by a writing
executed by each of the said parties.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
collectively shall constitute one and the same instrument.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
SELLER:
MELLON BANK, N.A., as Trustee under
the Westinghouse Electric Corporation
Master Trust Agreement for the
Westinghouse Pension Plan
By: /s/ William P. Redell
----------------------------------
Name: William P. Redell
Title: Vice President
By: /s/ Steven A. Falci
----------------------------------
Name: Steven A. Falci
Title: Vice President
BUYER:
BAY HARBOUR MANAGEMENT, L.C.,
for its managed accounts,
By: /s/ Douglas P. Teitelbaum
-------------------------------------
Name: Douglas P. Teitelbaum
Title: Principal & Portfolio Manager
<PAGE>
<PAGE>
[Execution Copy]
OPTION AGREEMENT
OPTION AGREEMENT, dated as of August 6, 1998, by and between
MELLON BANK, N.A., AS TRUSTEE UNDER THE WESTINGHOUSE ELECTRIC CORPORATION MASTER
TRUST AGREEMENT FOR THE WESTINGHOUSE PENSION PLAN ("Grantor"), having an address
at 3700 One Mellon Bank Center, Pittsburgh, Pennsylvania 15258 and BAY HARBOUR
MANAGEMENT, L.C. acting for its managed accounts, ("Grantee"), a Florida limited
liability company having an address at 885 Third Avenue, 34th Floor, New York,
New York 10022.
In exchange for good and valuable consideration, Grantor
hereby grants to Grantee options to purchase shares of common stock (the
"Stock") of Tops Appliance City, Inc. (the "Corporation"), a New Jersey
corporation, from Grantor on the terms contained herein.
1. Grantor hereby grants to Grantee the right to purchase from
Grantor Three Hundred Thousand (300,000) shares of Stock by written notice given
during the period beginning the date hereof and expiring on the date which is
three hundred sixty (360) days next following the date hereof.
2. If and to the extent that the foregoing Option is exercised on
or before a date which is ninety (90) days next following the date hereof (the
"Ninetieth Day") the exercise price per share of Stock shall be Three Dollars
and Fifty Cents ($3.50). If and to the extent that the foregoing Option is
exercised after the Ninetieth Day, but before the expiration of the Option, the
exercise price per share of Stock shall be Four Dollars ($4.00).
3. In the event that the Grantee desires to exercise the option,
it must provide written notice to the Grantor which notice must specify the
desired exercise date and must state the number of shares of Stock to be
acquired. The purchase of the shares shall take place ten (10) business days
after such notice is given. The notice must specify an exercise date prior to
the expiration of the option; for the purpose of determining the exercise price
under paragraph (1) the date of exercise shall be the exercise date specified in
the notice.
4. Grantor represents and warrants to Grantee as follows:
(a) Grantor shall transfer to Grantee good and marketable
title to any shares of Stock to be acquired by Grantee free and clear of all
liens, claims, debts, charges, restrictions, or encumbrances of any kind, other
than such as may cause any, through or under Buyer and other than the
restrictions contemplated by paragraph 5(e) and 5(f) hereof.
(b) Grantor has full power and legal right to sell,
transfer and deliver the Stock to Grantee in accordance with the terms of this
Agreement, and otherwise to execute and deliver this Agreement and to consummate
and close the transactions provided for in this Agreement in the manner and upon
the terms herein specified.
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(c) This Agreement has been duly executed and delivered
by Grantor and, assuming due authorization, execution and delivery by Grantee,
constitutes a legal, valid and binding obligation of Grantor, enforceable
against Grantor in accordance with its terms, subject, as to validity, binding
effect and enforcement remedies, to applicable bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally, and to
equitable principles.
(d) There is not pending, nor to Grantor's knowledge is
there threatened, any suit, action or administrative, arbitration or other
proceeding which could adversely affect the ability of Grantor to perform any of
its obligations under this Agreement.
(e) The execution, delivery, and performance of this
Agreement, the granting of the options set forth in Paragraphs 1 and 2 and
delivery of the Stock does not and will not violate or conflict with (i) any
applicable provision of law, statute, rule or regulation, or any order, judgment
or decree of any court, arbitrator, governmental agency or the National
Association of Securities Dealers, Inc. ("NASD"), or (ii) any contract,
agreement or instrument to which Grantor is a party.
(f) All clearances, approvals, authorizations and
consents, orders of, and designations by, any Governmental Entity (as defined
below) or NASD, required under the laws of the United States or the regulations
of NASD for or in connection with the issue and delivery of the Stock, and
compliance with the terms of this Agreement have been obtained and complied with
and are in full force and effect.
(g) Grantor shall defend, indemnify and hold harmless
Grantee from and against any loss or liability arising from any breach of the
representations and warranties with respect to Grantor contained in this
Agreement.
5. Grantee represents and warrants to Grantor as follows:
(a) Grantee has the full power and legal right to
purchase the shares of Stock from Grantor in accordance with the terms of this
Agreement, and otherwise to execute and deliver this Agreement and to consummate
and close the transactions provided for in this Agreement in the manner and upon
the terms herein specified, and this Agreement and the transactions contemplated
hereby will not result in the violation of any other agreement to which Grantee
is a party or by which it is bound.
(b) In purchasing the shares of Stock hereunder and in
acquiring the within options, Grantee is not relying on any representation or
warranty made by Grantor (other than those made herein by Grantor).
(c) This Agreement has been duly executed and delivered
by Grantee and, assuming due authorization, execution and delivery by Grantor,
constitutes a legal, valid and binding obligation of Grantee, enforceable
against Grantee in accordance with its terms, subject, as to validity, binding
effect and enforcement remedies, to applicable bankruptcy, insolvency,
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reorganization and other laws affecting creditors' rights generally, and to
equitable principles.
(d) There is not pending, nor to Grantee's knowledge is
there threatened, any suit, action or administrative, arbitration or other
proceeding which could adversely affect the ability of Grantee to perform any of
its obligations under this Agreement.
(e) Grantee has extensive experience in investing in
equity securities and possesses the financial sophistication to evaluate an
investment in the shares of Stock. Grantee has had access to all information
deemed by it to be necessary or appropriate to make a decision to purchase the
shares of Stock. To the extent that Grantee exercises any of the within options,
Grantee represents that it is purchasing the shares of Stock for investment
purposes only and not with a view towards reselling or otherwise distributing
the shares of Stock.
(f) Grantee acknowledges that, as of the date hereof, any
shares of Stock which it receives hereunder are not registered under the
Securities Act of 1933, as amended, or under any State securities laws and that
certain restrictions exist with regard to the resale of such shares of Stock.
Grantee agrees that the certificates representing the shares of Stock, to be
issued to Grantee upon transfer of such shares, will bear the following legend:
The securities represented hereby have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or
any State securities laws. Neither this security nor any interest
or participation herein may be reoffered, sold, assigned,
transferred, pledged, encumbered or otherwise disposed of in the
absence of such registration or unless such transaction is exempt
from, or not subject to, registration.
(g) Grantee shall defend, indemnify and hold harmless
Grantor from and against any loss or liability arising from any breach of the
representations and warranties with respect to Grantee contained in this
Agreement.
(h) Grantee has no notice of any liens, claims, debts,
charges, restrictions or encumbrances of any kind affecting the Stock, other
than (x) the restrictions contemplated by paragraphs 5(e), 5(f) and 4(a) hereof
and (y) restrictions applicable to restricted securities imposed under the
federal and state securities laws.
6. The representations made by the parties in Paragraphs 4 and 5
shall survive the exercise of any option hereunder for a period of two (2) years
from the date on which Grantee becomes the record holder of such shares of
Stock. The obligations to defend, indemnify and hold harmless any person
pursuant to Paragraphs 4 and 5 shall terminate when the applicable
representation or warranty terminates pursuant to this Paragraph 6; provided,
however, that such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the person to be indemnified or
the related party thereto shall have, before the expiration of the applicable
period, previously made a claim by delivering a notice of such claim (stating in
reasonable detail the basis of such claim) to the indemnifying party.
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7. At the time of the closing of an exercise hereunder, the
following transactions shall occur, all of which shall be deemed to occur
simultaneously:
(a) Grantor will deliver or cause to be delivered to
Grantee a share certificate or certificates for the shares of Stock subject to
such exercise, duly endorsed for transfer with stock powers affixed thereto and
evidence of the authority of the signatory of the stock power; and
(b) Grantee will deliver or cause to be delivered to
Grantor an amount equal to the exercise price in respect of the shares of Stock
being acquired by Grantor.
8. Each of Grantor and Grantee hereby represents and warrants
that there is no corporation, firm or persons entitled to receive from it a
brokerage commission or finder's fee in connection with this Agreement or the
transactions provided for herein. Each of Grantor and Grantee agrees to
indemnify and save the other party hereto harmless from and against any claim
for brokerage commission or finder's fee based on any retention or alleged
retention of a broker or finder by it. This provision shall survive the exercise
of the option hereunder.
9. All notices and other communications to be made hereunder
shall be in writing and shall be deemed to have been given when the same are
either (i) personally delivered or mailed, registered or certified mail, first
class postage prepaid return receipt requested, or (ii) delivered by a reputable
private overnight courier service utilizing a written receipt or other written
proof of delivery to the applicable party at the address set forth above. The
substance of any such notice shall be deemed to have been fully acknowledged in
the event of refusal of acceptance by the party to whom the notice is addressed.
10. In the event any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect other
provisions hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision never had been contained herein.
11. This Agreement shall be construed in accordance with the laws
of the State of New York without giving effect to the conflict of law principles
thereof.
12. No party may assign its rights or obligations under this
Agreement without the prior written consent of other party hereto.
13. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
14. This Agreement contains the entire understanding and
agreement of the parties hereto with respect to the matters contained herein,
and may not be amended or supplemented at any time unless by a writing executed
by each of the said parties.
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15. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which collectively shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
GRANTOR:
MELLON BANK, N.A., as Trustee under
the Westinghouse Electric Corporation
Master Trust Agreement for the
Westinghouse Pension Plan
By: /s/ William P. Redell
----------------------------------
Name: William P. Redell
Title: Vice President
By: /s/ Steven A. Falci
----------------------------------
Name: Steven A. Falci
Title: Vice President
GRANTEE:
BAY HARBOUR MANAGEMENT, L.C.,
for its managed accounts,
By: /s/ Douglas P. Teitelbaum
-------------------------------------
Name: Douglas P. Teitelbaum
Title: Principal & Portfolio Manager
<PAGE>
