EXHIBIT 4
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
(COLLECTIVELY, THE “ACTS”). THE SECURITIES
MAY NOT BE SOLD, DISTRIBUTED, OFFERED, PLEDGED, ENCUMBERED,
ASSIGNED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF THE FOLLOWING:
(1) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE ACTS COVERING THE TRANSACTION, (2) THE COMPANY
RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACTS, OR
(3) THE COMPANY OTHERWISE SATISFIES ITSELF THAT REGISTRATION
IS NOT REQUIRED UNDER THE ACTS.
GANDER MOUNTAIN
COMPANY
FLOATING RATE CONVERTIBLE
SUBORDINATED NOTE
Due: August 15,
2010
|
$20,000,000
|
August 16, 2005
|
For value received, the undersigned,
Gander Mountain Company, a Minnesota corporation (the “
Company ”), hereby promises to pay to the order of
DAVID C. PRATT IRREVOCABLE GRANTOR RETAINED ANNUITY
TRUST, DATED 12/1/92 (the “ Original Noteholder
”), at its principal office in the City of Saint Paul,
Minnesota, the principal sum of $20,000,000 in lawful money of the
United States on August 15, 2010 (the “ Maturity
Date ”), together with interest on the unpaid principal
amount thereof, as more fully provided below.
The interest rate per annum for this
Convertible Subordinated Note (the “ Convertible Note
”) will initially be 7%. The interest rate per annum
will be reset semi-annually on the first day of each Interest
Period (as defined below) commencing with the Interest Period
beginning on August 17, 2007 and will be equal to Federal
Funds Rate (as defined below) plus 3.50%; provided, that in no
event shall (a) the change in interest rate in connection with
any semi-annual adjustment exceed 0.25% or (b) the interest
rate be less than 6% per annum or more than 8.5% per annum (the
“ 8.5% Cap ”). The amount of interest for
each day this Convertible Note is outstanding (the “ Daily
Interest Amount ”) will be calculated by dividing the
interest rate in effect for that day by 360 and multiplying the
result by the principal amount of this Convertible Note. The
amount of interest to be paid on this Convertible Note for each
Interest Period will be calculated by adding the Daily Interest
Amounts for each day in the Interest Period.
Interest on this Security will be
paid on each February 15 and August 16, commencing
February 15, 2006, and at maturity. Each of these dates
on which interest will be paid is referred to as an “
Interest Payment Date .” If an Interest Payment
Date would fall on a day that is not a business day, other than the
Interest Payment Date that is also the date of maturity, such
Interest Payment Date will be postponed to the following day that
is a business day.
On each Interest Payment Date, the
Company will pay interest for the period commencing on the next day
immediately following the most recent Interest Payment Date and
ending on the then-current Interest Payment Date. This period
is referred to as an “ Interest Period .”
The first Interest Period will begin on and include August 15,
2005 and, subject to the immediately preceding paragraph, will end
on and include February 15, 2006.
1
“ Federal Funds Rate
” means, at any time, an interest rate per annum equal to the
weighted average of the rates for overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day by the Federal
Reserve Bank of New York, or, if such rate is not so published for
any day which is a business day, the average of the quotations for
such day for such transactions received by the Company from three
federal funds brokers of recognized standing selected by it, it
being understood that for any day which is not a business day the
applicable rate shall be the rate as determined for the preceding
business day.
All percentages resulting from any
of the above calculations will be rounded, if necessary, to the
nearest one hundred-thousandth of a percentage point, with five
one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655))
and all dollar amounts used in or resulting from such calculations
will be rounded to the nearest cent (with one-half cent being
rounded upwards).
The interest rate on this
Convertible Note will in no event be higher than the maximum rate
permitted by Minnesota law as the same may be modified by United
States law of general application.
The Company will, upon the request
of the holder of this Convertible Note, provide the interest rate
then in effect. All calculations of the Company, in the
absence of manifest error, shall be conclusive for all
purposes.
Any amounts to be paid on this
Convertible Note will be payable by the Company in cash, by check
or by wire transfer to the holder of this Convertible Note to such
account as the holder may request.
This Convertible Note has been
issued under the terms and provisions of a Note Purchase Agreement
(the “ Purchase Agreement ”), dated as of the
date hereof, among the Company and the Investors named on the
signature pages thereto.
Upon the occurrence of any one or
more of the Events of Default specified in Article VIII of the
Purchase Agreement, all amounts then remaining unpaid on this
Convertible Note, including any accrued but unpaid interest, may be
declared to be or shall become immediately due and payable as
provided in the Purchase Agreement. In addition, from and
after receipt of written notice to the Company from the holder
following the occurrence of an Event of Default, and during the
continuation thereof, the rate per annum at which interest shall
accrue on the unpaid principal balance hereof shall increase by 2%,
without regard to the 8.5% Cap.
This Convertible Note is subject to
the following additional provisions, terms and
conditions:
1.
Conversion
.
(a)
Optional Conversion
. Subject to Section 3,
the unpaid principal amount of this Convertible Note shall be
convertible at the option of the holder, in whole or in part, at
any time on or prior to the Maturity Date into such number of fully
paid and non-assessable shares of Common Stock of the Company as is
determined by dividing the portion of this Convertible Note that is
being converted by the “ Conversion Price ” of
$16.00 per share. Until such time as this Convertible Note is
converted or paid off, the Conversion Price is subject to
adjustment as hereinafter provided. The ability of the holder
to effect conversion of this Convertible Note shall continue during
the period following the Company’s notice to the holder of
its intent to prepay this Convertible Note in accordance with
Section 8 until the date of such prepayment.
(b)
Mandatory Conversion
. In the event the
Volume-Weighted Average Closing Price (as hereinafter defined)
equals or exceeds $24.00, the Company may thereafter, at any time,
in lieu of payment of the principal and interest on this
Convertible Note, upon written notice to the holder of the Note,
require the conversion of the entire unpaid principal amount of
this Convertible Note and all accrued interest, or any portion
thereof, into such number of fully paid and non-assessable shares
of Common Stock of the Company as is determined by dividing the
portion of this Convertible Note that is
2
being converted by the Conversion Price.
“ Volume-Weighted Average Closing Price ” means
the volume-weighted (based on the number of shares of the
Company’s Common Stock traded on each day that the closing
price is used in this calculation) average of the closing sale
prices of the Company’s Common Stock on the securities
exchange or automated quotation system where the Company’s
Common Stock is listed on the 20 trading days with the highest
closing sale prices out of any 30 cons
