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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
(Rule13d-101)
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
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
June 25, 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 9 Pages)
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<PAGE>
- -------------------------------- -------------------------------
CUSIP No. 890910AB 13D Page 2 of 9 Pages
- -------------------------------- -------------------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON Steven A. Van Dyke
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON N/A
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS OO
- -------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION United States
- -------------------------------------------------------------------------------
Number of 7 SOLE VOTING POWER -0-
Shares
-----------------------------------------------------------
Beneficially 8 SHARED VOTING POWER 3,480,000
Owned by
-----------------------------------------------------------
Each Reporting 9 SOLE DISPOSITIVE POWER -0-
-----------------------------------------------------------
Person With 10 SHARED DISPOSITIVE POWER 3,480,000
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,480,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
32.3%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON IN, HC
- -------------------------------------------------------------------------------
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- -------------------------------- -------------------------------
CUSIP No. 890910AB 13D Page 3 of 9 Pages
- -------------------------------- -------------------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON Douglas P. Teitelbaum
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON N/A
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS OO
- -------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) OR 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION United States
- -------------------------------------------------------------------------------
Number of 7 SOLE VOTING POWER -0-
Shares
-----------------------------------------------------------
Beneficially 8 SHARED VOTING POWER 3,480,000
Owned by
-----------------------------------------------------------
Each Reporting 9 SOLE DISPOSITIVE POWER -0-
-----------------------------------------------------------
Person With 10 SHARED DISPOSITIVE POWER 3,480,000
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,480,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
32.3%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON IN, HC
- -------------------------------------------------------------------------------
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CUSIP No. 890910AB 13D Page 4 of 9 Pages
- -------------------------------- -------------------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON Tower Investment Group, Inc.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 59-2924229
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS OO
- -------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Florida
- -------------------------------------------------------------------------------
Number of 7 SOLE VOTING POWER 3,480,000
Shares
-------------------------------------------------------------
Beneficially 8 SHARED VOTING POWER -0-
Owned by
-------------------------------------------------------------
Each Reporting 9 SOLE DISPOSITIVE POWER 3,480,000
-------------------------------------------------------------
Person With 10 SHARED DISPOSITIVE POWER -0-
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,480,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
32.3%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON HC
- -------------------------------------------------------------------------------
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- -------------------------------- -------------------------------
CUSIP No. 890910AB 13D Page 5 of 9 Pages
- -------------------------------- -------------------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON Bay Harbour Management, L.C.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 59-3418243
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS OO
- -------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Florida
- -------------------------------------------------------------------------------
Number of 7 SOLE VOTING POWER 3,480,000
Shares
-----------------------------------------------------------
Beneficially 8 SHARED VOTING POWER -0-
Owned by
-----------------------------------------------------------
Each Reporting 9 SOLE DISPOSITIVE POWER 3,480,000
-----------------------------------------------------------
Person With 10 SHARED DISPOSITIVE POWER -0-
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,480,000
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
32.3%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON IA
- -------------------------------------------------------------------------------
<PAGE>
<PAGE>
This Statement is filed 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").
ITEM 1. SECURITY AND ISSUER.
Common Stock, no par value per share ("Tops Common Stock") of Tops
Appliance City, Inc., a New Jersey corporation ("Tops"). The principal executive
offices of Tops are located at 45 Brunswick Avenue, Edison, New Jersey, 08818.
ITEM 2. IDENTITY AND BACKGROUND.
Bay Harbour is a Florida limited company and a registered
investment adviser under the Investment Advisers Act of 1940, as amended. Tower,
a Florida corporation, is the majority stockholder of Bay Harbour. Van Dyke, a
resident of Florida and a United States citizen, is a stockholder of Tower.
Teitelbaum, a resident of New York and a United States citizen, is a stockholder
of Tower. The executive officers and directors of Bay Harbour and Tower are as
follows:
<TABLE>
<S> <C> <C> <C>
Name Address Occupation Place of Employment
Steven A. Van Dyke 777 South Harbour Island investment Bay Harbour
Boulevard, Suite 270 management Management, L.C.
Tampa, Florida 33602
Douglas P. Teitelbaum 885 Third Avenue investment Bay Harbour
34th Floor management Management, L.C.
New York, New York 10022
</TABLE>
The principal business address of each Reporting Person is 777
South Harbour Island Boulevard, Suite 270, Tampa, Florida 33602, except that the
principal business office of Douglas P. Teitelbaum is 885 Third Avenue, 34th
Floor, New York, New York 10022.
No Reporting Person has during the last five years (i) been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On June 25, 1998, Bay Harbour purchased for certain managed
accounts, in a secondary trade, 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. Commencing February 28, 1999, the Debentures will be
convertible 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).
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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>
ITEM 4. PURPOSE OF TRANSACTION.
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, 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.
As of the filing date of this Statement, (i) Van Dyke beneficially
owns 3,480,000 shares of Tops Common Stock which, assuming the conversion of the
Debentures, represent approximately 32.3% of Tops Common Stock outstanding, (ii)
Teitelbaum beneficially owns 3,480,000 shares of Tops Common Stock which,
assuming the conversion of the Debentures, represent approximately 32.3% of Tops
Common Stock outstanding, (iii) Tower beneficially owns 3,480,000 shares of Tops
Common Stock which, assuming the conversion of the Debentures, represent
approximately 32.3% of Tops Common Stock outstanding and (iv) Bay Harbour
beneficially owns 3,480,000 shares of Tops Common Stock which, assuming the
conversion of the Debentures, represent approximately 32.3% of Tops Common Stock
outstanding, in each case, based upon the 7,304,901 shares of Tops Common Stock
outstanding as of April 30, 1998 (as set forth in the most recently available
filing with the Securities and Exchange Commission by Tops). 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 3,480,000 Shares of Tops Common Stock; and (ii) the sole power to
dispose of or to direct the disposition of the 3,480,000 Shares of Tops Common
Stock; except that Van Dyke and Teitelbaum share with each other their voting
and disposition power.
Except for the purchase of the Debentures, 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 3,480,000 shares of Tops Common Stock, 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 accounts over which Van Dyke, Teitelbaum, Tower and Bay
Harbour control the power to (i) convert the Debentures into shares of Tops
Common
-7-
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<PAGE>
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., 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, the shares of Tops Common Stock to be issued upon the conversion of the
Debentures 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.
The Debentures are part of the $7,687,500 aggregate principal
amount of 6-1/2% Convertible Subordinated Debentures Due 2003 (the "BEA
Debentures") issued pursuant to a Debenture Exchange Agreement, dated as of
August 20, 1997, between Tops and BEA Associates ("BEA"). Pursuant to such
Debenture Exchange Agreement, among other things, in the event that BEA owned in
excess of 12.5% or 25%, respectively, of the outstanding Tops Common Stock upon
a conversion of the BEA Debentures, BEA had the right to designate one or two
directors of Tops, as the case may be. Bay Harbour is a successor to BEA's
rights under such Debenture Exchange Agreement. Bay Harbour has had discussions
with Tops with respect possible additional investments by Bay Harbour in
convertible debt securities or equity securities of Tops; however, an agreement
with respect to such investment has not been reached.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT I Joint Filing Agreement, dated July 2, 1998, by and among
Bay Harbour, Tower, Van Dyke and Teitelbaum.
EXHIBIT II Form of Debenture.
EXHIBIT III Debenture Exchange Agreement, dated August 20, 1997.
-8-
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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: July 2, 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
-9-
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as .......................'SS'
<PAGE>
<PAGE>
Exhibit Index
EXHIBIT I Joint Filing Agreement, by and among Bay Harbour,
Tower, Van Dyke and Teitelbaum.
EXHIBIT II Form of Debenture.
EXHIBIT III Debenture Exchange Agreement dated August 20, 1997
<PAGE>
<PAGE>
EXHIBIT I
Joint Filing Agreement
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D is filed on behalf of each of the undersigned and that all
subsequent amendments to this statement shall be filed on behalf of each of the
undersigned without the necessity of filing additional joint filing agreements.
The undersigned acknowledge that each shall be responsible for the timely filing
of such amendments, and for the completeness and accuracy of the information
concerning it contained therein, but shall not be responsible for the
completeness and accuracy of the information concerning the others, except to
the extent that it knows or has reason to believe that such information is
inaccurate.
This Agreement may be executed counterparts and each of such
counterparts taken together shall constitute one and the same instrument.
Date: July 2, 1998 BAY HARBOUR MANAGEMENT, L.C.
By: /s/ Steven A. Van Dyke
--------------------------
Name: Steven A. Van Dyke
Title: President
Date: July 2, 1998 TOWER INVESTMENT GROUP, INC.
By: /s/ Steven A. Van Dyke
--------------------------
Name: Steven A. Van Dyke
Title: President
/s/ Steven A. Van Dyke
Date: July 2, 1998 -----------------------------
STEVEN A. VAN DYKE
/s/ Douglas P. Teitelbaum
Date: July 2, 1998 -----------------------------
DOUGLAS P. TEITELBAUM
<PAGE>
<PAGE>
EXHIBIT II
[Front of Debenture]
TOPS APPLIANCE CITY, INC.
6 1/2% Convertible Subordinated Debenture Due 2003
CUSIP #
$_____________________
TOPS APPLIANCE CITY, INC. promises to pay to ____________________, or
its registered assigns, the principal sum of ___________________ (or greater or
lesser amount as indicated on the Schedule of Exchanges of Definitive Securities
on the reverse hereof) Dollars on November 30, 2003, and to pay interest thereon
as provided on the reverse hereof until the principal hereof is paid or duly
provided for.
Interest Payment Dates: February 28 and August 31.
Record Dates: February 15 and August 15.
The provisions on the back of this certificate are incorporated as if
set forth on the face hereof.
IN WITNESS WHEREOF, TOPS APPLIANCE CITY, INC. has caused this instrument
to be duly signed.
Authenticated: TOPS APPLIANCE CITY, INC.
First National Bank of
Chicago, as Registrar By:
----------------------
Philip M. Schmidt
President
By:
-----------------------------
Authorized Officer By:
----------------------
Thomas L. Zambelli
Dated: Chief Financial Officer
--------------------------
<PAGE>
<PAGE>
[Reverse of Debenture]
Tops Appliance City, Inc.
6 1/2% Convertible Subordinated Debenture due 2003
THE SECURITIES 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.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATED PERSON OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE ISSUER, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) (1),
(A) (2), (A) (3) OR (A) (7) OF RULE 501 UNDER THE SECURITITES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E), OR (F)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE ISSUER. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Capitalized terms used herein shall have the meanings ascribed to them in
the Indenture unless otherwise indicated
1. Interest. Tops Appliance City, Inc. (the "Issuer"), promises to pay
interest on the Principal amount of this Security at 6 1/2 % per annum from
September 1, 1997 until maturity and shall pay the Liquidated Damages payable
pursuant to Section 4 of the Registration Rights Agreement. The Issuer will pay
interest and Liquidated Damages semi-annually on February 28 and August 31 of
each
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<PAGE>
year, or if any such day is not a Business Day, on the next succeeding Business
Day (each an "Interest Payment Date"). Interest on the Securities will accrue
from the most recent date on which interest has been paid or, if no interest has
been paid, from the date of issuance; provided that if there is no existing
Default in the payment of interest, and if this Security is authenticated
between a record date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such next succeeding Interest
Payment Date; provided, further, that the first Interest Payment Date shall be
February 28, 1998. The Issuer shall pay interest (including post-petition
interest in any proceeding under Bankruptcy Law) on overdue Principal and
premium, if any, from time to time on demand at the same rate per annum on the
Securities then in effect; it shall pay interest (including post-petition
interest in any proceeding under Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Issuer will pay interest on the Securities
(except defaulted interest) to the Persons who are registered holders of
Securities at the close of business on the February 15 or August 15 next
preceding the Interest Payment Date, even if such Securities are cancelled or
converted after such record date and on or before such Interest Payment Date.
The Securities will be payable both as to Principal and interest (i) in respect
of Securities held of record by DTC, in same day funds on or prior to the
respective Interest Payment Date; and (ii) in respect of Securities held of
record by holders other than DTC, at the office or agency of the Issuer
maintained for such purpose within or without the City and State of New York,
or, at the option of the Issuer, payment in respect of such securities may be
made by check mailed to the holders of the Securities at their addresses set
forth in the register of holders of Securities.
3. Indenture. The terms of this Security include those stated in the
Indenture dated as of November 30, 1993 (the "Indenture") between the Issuer,
the Trustee and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code 'SS' 'SS' 77aaa-77bbbb), except
that the Trustee shall have no authority, power or obligation with respect to
this Security and no Registrar or Paying Agent shall exist with respect to this
Security. This Security is subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. The Securities are
general unsecured obligations of the Issuer limited to $2,090,000 in aggregate
Principal amount, plus amounts, if any, sufficient to pay interest and premium,
if any, on Outstanding Securities as set forth in Paragraph 2 hereof.
4. Subordination. The Issuer's payment of the principal, premium and
Liquidated Damages, if any, and interest on the Securities is subordinated to
the prior payment in full of the Issuer's Senior Indebtedness. Each holder of
Securities by his or her acceptance hereof covenants and agrees that all
payments of the Principal of, premium, if any, and Liquidated Damages, if any,
and interest on the Securities by the Issuer shall be subordinated in accordance
with the provisions of Article 12 of the Indenture, and each holder accepts and
agrees to be bound by such provisions.
5. Conversion Rights. Subject to the provisions of the Indenture, the
holder of this Security has the right, at his option, at any time after February
28, 1999 and until and including, but not after the close of business on August
29, 2003 (except that, (i) in case this Security or a portion hereof shall be
called for redemption and the Issuer shall not thereafter default in making due
provision for the payment of the redemption price, such right shall terminate
with respect to this Security or such portion hereof at the close of business on
the second Business Day prior to the date fixed for redemption and (ii) in the
case the holder of this Security exercises his right to require the Issuer to
redeem this Security or a portion hereof, such conversion right shall terminate
with respect to this Security or portion hereof on the date this Security for
redemption together with written notice to the Issuer of the holder's exercise
of such right or, if the Issuer fails to redeem this Security or portion hereof
on the date set for such redemption, upon redemption), to convert the Principal
of this Security, or any portion thereof which is
<PAGE>
<PAGE>
$1,000 or a multiple of $1,000, into fully paid and non-assessable shares of
Common Stock of the Issuer, as said shares shall be constituted at the date of
conversion if any adjustment has been made, determined as provided in this
Indenture, upon surrender of this Security to the Issuer at the office or agency
of the Issuer maintained for the purpose in the Borough of Manhattan, The City
of New York, together with a fully executed notice substantially in the form set
forth at the foot hereof that the holder elects so to convert this Security (or
any portion hereof which is a multiple of $1,000) and, if this Security is
surrendered for conversion during the period between the close of business on
February 15 or August 15, in any year and the opening of business on the
following March 2 or August 30 and has not been called for redemption on a
redemption date within such period accompanied by payment of an amount equal
to the interest payable on such February 28 or August 30 on the Principal amount
of the Security being surrendered for conversion February 28 or August 30 on
the Principal amount of the Security being surrendered for conversion. Except as
provided in the preceding sentence or as otherwise expressly provided in this
Indenture, no payment or adjustment shall be made on account of interest accrued
on this Security (or portion thereof) so converted or on account of any dividend
or distribution on any such Common Stock, issued upon conversion. If so required
by the Issuer, this Security, upon surrender for conversion as aforesaid, shall
be duly endorsed by, or be accompanied by instruments of transfer, in form
satisfactory to the Issuer, duly executed by, the holder or by his duly
authorized attorney. The conversion price is One and 75/00 Dollars ($1.75) per
share of Common Stock. No fractions of shares will be issued on conversion, but
an adjustment in cash will be made for any fractional interest as provided in
the Indenture.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the Principal of and premium, if
any, and interest on this Security at the place, times, and rate, and in the
currency, herein prescribed.
6. Mandatory Offers to Repurchase. If a Redemption Event (as defined
below) occurs, each holder of the Securities shall have the right, subject to
certain conditions, at the holder's option, to require the Issuer to redeem all
of such holder's Securities, or any portion thereof that is an integral multiple
of $1,000, on the date (the "Redemption Date") that is 45 days after the date of
the Issuer Notice (as defined below), for cash at a price equal to 101% of the
Principal amount of such Securities to be redeemed (the "Redemption Price"),
together with accrued interest to the Redemption Date.
Within 15 Business Days after the occurrence of a Redemption
Event, the Issuer is obligated to mail to all holders of record of the
Securities a notice (the "Issuer Notice") of the occurrence of such Redemption
Event and of the redemption right arising as a result thereof. To exercise the
redemption right a holder of such Securities must deliver on or before the 20th
Business Day after the date of the Issuer Notice irrevocable written notice to
the Issuer of the Holder's exercise of such right, together with the Securities
with respect to which the right is being exercised, duly endorsed for transfer
to the Issuer.
A Redemption Event will be deemed to have occurred at such time:
(i) there is a Change of Control (as defined in the
Indenture) of the Issuer;
(ii) there is a sale by the Issuer of all or
substantially all of the assets of the Issuer; or
(iii) the Issuer's Common Stock (or other common stock
into which the Securities are then convertible) is not listed for trading on a
United States national securities exchange or the National Association of
Securities Dealers Automated Quotation System.
7. Notice of Redemption. Notice of redemption will be mailed at least 20
days but not more than 60 days before the Redemption Date to each Holder whose
Securities are to be redeemed at its
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registered address. Securities in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000, unless all of the
Securities held by a Holder are to be redeemed. On and after the redemption
date interest ceases to accrue on Securities or portions thereof called for
redemption.
8. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Securities may be registered and Securities may be
exchanged as provided in the Indenture. The Issuer among other things, may
require a Holder to furnish appropriate endorsements and transfer documents and
may require a Holder to pay any taxes and fees required by law or permitted by
the Indenture. The Issuer need not exchange or register the transfer of any
Security or portion of a Security selected for redemption, except for the
unredeemed portion of any Security being redeemed in part. Also, it need not
exchange or register the transfer of any Securities for a period of 15 days
before a selection of Securities to be redeemed or during the period between a
record date and the corresponding Interest Payment Date.
9. Persons Deemed Owners. The registered Holder of a Security may be
treated as its owner for all purposes.
10. Amendments and Waivers. Subject to certain exceptions, the Indenture
or the Securities may be amended or supplemented and any existing Default under,
or compliance with any provision of, the Indenture may be waived with the
written consent of the Holders of at least a majority in Principal amount of the
Securities then Outstanding (including consents obtained on connection with a
tender offer or exchange offer for Securities). Without the consent of Holders
of at least a majority in Principal amount of the Securities then Outstanding
(including consents obtained on connection with a tender offer or exchange offer
for Securities). Without the consent of any Holder, the Issuer and the Trustee
may amend or supplement the Indenture or the Securities to cure any ambiguity,
defect or inconsistency; to provide for uncertificated Securities in addition to
or in place or certificated Securities; to comply with Section 5.01 of the
Indenture; to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the rights under the
Indenture of any Holder; or to comply with requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
Without the consent of each Holder affected, an amendment or
waiver may not (with respect to any Securities held by a nonconsenting Holder);
(i) reduce the Principal amount of Securities whose Holders must consent to an
amendment, supplement or waiver; (ii) reduce the principle of or change the
fixed maturity or any Security or alter the provisions with respect to the
redemption or purchase price in connection with respect to the redemption or
purchase price in connection with repurchases under Section 11.1 of the
Indenture; (iii) reduce the rate of or change the time for payment of interest
on any Security; (iv) waive a Default or Event of Default in the payment of the
Principal of, or premium, if any, Liquidated Damages or interest on Securities
or that resulted from a failure to comply with Article 14 of the Indenture
(except a rescission of acceleration of the Securities by Holders of at least a
majority in Principal amount of the Securities); (v) make a change in Section
4.10 of the Indenture; or (viii) waive a redemption payment with respect to any
Security.
The right of any Holder to participate in any consent required or
sought pursuant to any provision of the Indenture (and the obligation of the
Issuer to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of record
of any Securities with respect to which such consent is required or sought as of
a date identified by the Trustee in a notice furnished to Holders in accordance
with the terms of this Indenture.
11. Defaults and Remedies. An Event of Default is: default for 30 days
in payment of interest on the Securities; default in payment of Principal or
Liquidated Damages on the Securities; failure by the Issuer for 60 days after
notice to it to comply with any of its other agreements in the Indenture or the
Securities; certain defaults under and acceleration prior to maturity of other
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indebtedness; certain final judgments which remain undischarged; and certain
events of bankruptcy or insolvency. If an Even of Default occurs and is
continuing, the Holder may declare the Security to be due and payable
immediately, except that in the case of an Event of Default arising from certain
events of bankruptcy or insolvency, all Outstanding Securities become due and
payable immediately without further action or notice. Securityholders may not
enforce the Indenture of the Securities except as provided in the Indenture. The
Issuer must furnish an annual compliance certificate to a Holder.
12. Trustee Dealings with Issuer. The Trustee, in its individuals or any
other capacity, may make loans to, accept deposits from, and perform services
for the Issuer or its Affiliates, and may otherwise deal with the Issuer or its
Affiliates, as if it were not Trustee.
13. No Recourse Against Others. A director, officer, employee,
incorporator, manager, agent or shareholder, of the Issuer, as such, shall not
have any liability for any obligations of the Issuer under the Securities or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
14. Abbreviations. Customary abbreviations may be sued in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and
U/[G] [T]/M/A (= uniform [Gifts] [Transfers] to Minors Act).
15. Additional Rights of Holders of Transfer Restricted Securities. In
addition to the rights provided to Holders of Securities under the Indenture,
Holders of Transferred Restricted Securities shall have all the rights set forth
in the Registration Rights Agreement referred to above.
The Issuer will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Tops Appliance City, Inc.
45 Brunswick Avenue
Edison, New Jersey 08818
Attention: Chief Financial Officer
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ASSIGNMENT FORM
To assign this Security, fill in the form below: or (we)
assign and transfer this Security to
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(Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
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(Print or type assignee's name, address and zip code)
and irrevocably appoint_______________________________ to transfer this Security
on the books of the issuer. The agent may substitute another to act for him.
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Date: ________________________
Your Signature:
-----------------------------
(Sign exactly as your name
appears on the face of this
Security.)
Signature Guarantee
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuer
pursuant to Section 11.1. of the Indenture, check the box below:
___ Section 11.1
If you want to elect to have only part of the Security purchased by the
Issuer pursuant to Section 4.08 of the Indenture, state the amount you elect to
have purchased:
$-------------
Date:___________________ Your Signature:___________________________
(Sign exactly as your name appears on the
Security)
Tax Identification No:____________________
Signature Guarantee
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EXHIBIT III
DEBENTURE EXCHANGE AGREEMENT
Debenture Exchange Agreement dated as of August 20, 1997, by and
between TOPS APPLIANCE CITY, INC., a New Jersey corporation ("Tops"), having an
address at 45 Brunswick Avenue, CN 14, Edison, New Jersey 08818 and BEA
ASSOCIATES, a New York partnership ("BEA"), having an address at 153 East 53rd
Street, New York, New York 10022.
WHEREAS, pursuant to an indenture (the "Indenture") dated as of
November 30, 1993 by and between Tops and Midlantic National Bank as Trustee,
Tops issued $40,000,000 in principal amount of its 6 1/2 Convertible
Subordinated Debentures due 2003 (the "Debentures"); and
WHEREAS, BEA, on behalf of itself and the accounts it manages, is
the registered and beneficial owner of $15,375,000 in principal amount of the
Debentures (the "BEA Debentures"); and
WHEREAS, BEA has agreed to exchange the BEA Debentures for a new
debenture (the "New Debenture") having the terms and conditions set forth in
this Agreement, all on the terms and conditions set forth in this Agreement; and
WHEREAS, Tops has agreed to issue the New Debentures to BEA in
exchange for the BEA Debentures, all on terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, Tops and BEA agree as follows:
1. Effective September 1, 1997 (the "Effective Date"), BEA will
sell, transfer and assign all of its right, title and interest in and to the BEA
Debentures to Tops in exchange for the consideration set forth in paragraph 2 of
this Agreement. BEA will deliver to Tops certificate(s) representing the BEA
Debentures along with bond powers or similar transfer instrument, duly endorsed
for transfer, or take such other steps as may be reasonably appropriate and
necessary in order to effect the transfer and assignment of the BEA Debentures
to Tops.
2. In consideration of the purchase of the BEA Debentures from
BEA, on the Effective Date, Tops will issue and deliver to BEA a certificate or
certificates representing New Debentures in the principal amount of Seven
Million Six Hundred Eighty Seven Thousand Five Hundred and No/00 ($7,687,500.00)
Dollars. The New Indenture shall be in form of Exhibit A attached to this
Agreement.
3. The New Debentures will be freely tradeable and have the same
terms and conditions as the Debentures, including without limitation the same
interest rate and interest payment dates, subject to the following exceptions:
a. The conversion price of the New Debentures will be One and
75/00 Dollars ($1.75) per share of Tops common stock; provided that the
New Debentures may not be converted to common stock prior to February
28, 1999; and provided further that if, upon conversion BEA owns 12.5%
of the outstanding common stock of Tops, it shall have the right to
designate one director, and if BEA owns 25% of such outstanding stock,
it shall have the right to designate two directors; and
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b. The New Debentures will rank pari passu with the
Debentures in respect of the payment of principal and interest; and
c. Tops will have no right to effect an optional
redemption of the New Debentures; and
d. In the event a third party offers to purchase all of the
common stock of Tops or the securities held by BEA at a price in excess
of $1.75 per share and Tops' Board of Directors rejects such an offer,
BEA may convert its New Debentures and sell to such third party, subject
to a right of first refusal in favor of Tops for thirty (30) days.
4. On or before October 31, 1997, Tops will prepare, execute and
file with the Securities and Exchange Commission a registration statement on
Form S-3 or such other form as Tops may be qualified to use for the purpose of
registering the New Debentures and the common stock of Tops issuable upon
conversion of the New Debentures under the Securities Act of 1933, as amended
(the "Act"), and will thereafter cause such registration statement to become
effective under the Act.
5. Tops hereby represents to BEA that the execution, delivery and
performance of this Agreement has been duly authorized by all necessary and
appropriate corporate action by Tops, that this Agreement constitutes the legal
and binding obligation of Tops, enforceable against Tops in accordance with its
terms, and that the New Debentures have been duly authorized and will be validly
issued by Tops and will constitute the valid and binding obligation of Tops in
accordance with their terms.
6. BEA represents to Tops that the execution, delivery and
performance of this Agreement has been duly authorized and approved by all
necessary corporate action on the part of BEA and that this Agreement
constitutes the binding obligation of BEA, enforceable against BEA in accordance
with its terms.
7. The parties acknowledge that, if required, Tops will take all
appropriate action to offer to all other holders of Debentures the right to
receive New Debentures on the same terms and conditions as applied to BEA
pursuant to this Agreement. Such action will be taken in accordance with all
requirements of the Indenture, the Act and any other agreement, statute, law or
regulation binding upon or applicable to Tops. Tops agrees that it will provide
to any such holder terms no more favorable to such holder than the terms
applicable to BEA and the New Debentures under this Agreement. To the extent
necessary or appropriate, if Tops issues additional New Debentures pursuant to
an indenture or other agreement, BEA agrees to execute (if applicable) and be
bound by the terms of such indenture or agreement, provided that such terms are
no more burdensome or detrimental to BEA than the terms of this Agreement.
8. This Agreement constitutes the entire agreement between Tops
and BEA relating to the subject matter hereof, shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns; may be amended only in writing signed by the parties hereto, and shall
be governed by the laws of the State of New Jersey, excluding the conflicts law
provisions of such state.
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IN WITNESS WHEREOF, this Agreement has been executed and
delivered as of the date first written above.
TOPS APPLIANCE CITY, INC.
by: /s/ Robert Gross
--------------------------
Name: Robert Gross
Title: Chairman/CEO
BEA ASSOCIATES
by: /s/ Todd M. Rice
-------------------------
Name: Todd M. Rice
Title: Senior Vice President
