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:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
By:
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Authorized Officer By:
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Dated: Chief Financial Officer
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[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
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
$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
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
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.
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▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
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:
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(Sign exactly as your name
appears on the face of this
Security.)
Signature Guarantee
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
