Exhibit 4.1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR CERTAIN STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THEY ARE REGISTERED OR
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE
RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THIS
COMPANY, THAT SUCH AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
PAPER WAREHOUSE, INC.
10% SUBORDINATED NOTE DUE NOVEMBER 30, 2004
No. R-__
December 7, 1994
$__________
FOR VALUE RECEIVED, the undersigned, PAPER WAREHOUSE, INC., a
corporation organized under the laws of the state of Minnesota (the "Company"),
hereby unconditionally promises to pay to the order of
_______________________________, or its registered assigns (the "Holder"), the
principal amount of __________________________ ($_________), together with
interest (a) on the unpaid principal amount hereof from time to time outstanding
from the date hereof, at the rate of 10% per annum (computed on the basis of a
360-day year of 12 thirty day months), payable quarterly on the last day of
April, July, October, and January, and at maturity, commencing with the April
30, July 31, October 31 or January 31 next succeeding the date hereof, until the
principal hereof shall have become due and payable, and (b) on any overdue
payment of principal and any overdue payment of interest, payable quarterly as
aforesaid (or at the option of the registered Holder hereof, on demand), at the
rate of 12% per annum. The principal of this Note is payable in installment
payments on the dates set forth in the Amortization Schedule attached hereto
and, in accordance therewith, will be fully paid on November 30, 2004.
This Note is one of a series of Subordinated Notes (all Notes of such
series are collectively referred to herein as the "Subordinated Notes") issued
to separate purchasers pursuant to the Confidential Private Placement
Memorandum, dated as of November 4, 1994 (the "Private Placement Memorandum").
If any payment on this Note becomes due and payable on a Saturday,
Sunday or other day on which commercial banks in Minneapolis, Minnesota are
authorized or required by law to close, the due date shall be extended to the
next succeeding day on which commercial banks in Minneapolis, Minnesota are
authorized or required by law to be open, and with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.
This Note shall be subject to prepayment, in whole or in part, at any
time or from time to time, at the option of the Company, at 100% of the
principal amount to be prepaid plus interest thereon to the prepayment date. The
Company shall give the Holder irrevocable written notice of any such prepayment
not less than thirty (30) days nor more than sixty (60) days prior to the
prepayment date, specifying such prepayment date and the principal amount of
this Note, and all of the Subordinated Notes to be prepaid on such date and such
notice may require the surrender of this Note to the Company as a condition of
prepayment. If the prepayment is in part, then the Company will issue a Note to
the Holder for the remaining aggregate principal amount.
The Company covenants that it will not make any prepayment pursuant to
the immediately preceding paragraph unless it shall also make a prepayment on
all of the Subordinated Notes in proportion to the respective outstanding
principal amounts thereof.
The Company further covenants that it will deliver to the Holder:
(i) as soon as practicable and in any event within 60 days after
the end of each fiscal quarter (other than the last fiscal quarter) in
each fiscal year, consolidated statements of operations and
shareholders' equity, and consolidated balance sheets of the Company
and its subsidiaries as at the end of such fiscal quarter, setting
forth in the case of the consolidated statements in comparative form
corresponding consolidated figures for the corresponding fiscal
quarter in the preceding fiscal year, all in reasonable detail and
certified by an authorized financial officer of the Company, subject
to changes resulting from year-end adjustments; and
(ii) as soon as practicable and in any event within 120 days
after the end of each fiscal year, consolidated statements of
operations and shareholders' equity and consolidated statements of
cash flows of the Company and its subsidiaries for such year, and
consolidated balance sheets of the Company and its subsidiaries as at
the end of such year, setting forth in the case of the consolidated
statements in comparative form corresponding consolidated figures from
the preceding annual audit; the consolidated statements and balance
sheet of the Company and its subsidiaries will be reported on to the
Company by independent public accountants of recognized national
standing selected by the Company whose report shall be in scope and
substance based on accepted auditing practices; and such other
statements and balance sheets as herein required will be certified by
the chief financial officer or treasurer of the Company.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to the Holder a certificate stating that
there exists no Event of Default
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(as hereinafter defined) or Default (as hereinafter defined), or, if any
Event of Default or Default exists, specifying the nature and period of
existence thereof and what action the Company proposes to take with respect
thereto. Together with each delivery of financial statements required by
clause (ii) above, the Company will deliver to the Holder a certificate of
such accountants stating that, in making the audit necessary to the
certification of such financial statements, they have obtained no knowledge
of any Event of Default or Default, or, if they have obtained knowledge of
any Event of Default or Default, specifying the nature and period of
existence thereof.
If any one of the following events (each, an "Event of Default") shall
occur and be continuing for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation of
law or otherwise): (i) there should be a default in the payment of principal
when the same shall become due hereunder; or (ii) there should be a default in
the payment of interest when the same shall become due hereunder and such
default shall continue for more than 90 days; or (iii) the Company defaults in
any payment of principal of or interest on any other obligations for money
borrowed, other than this Note, for 180 days; or (iv) the Company defaults in
the performance or observance of an agreement set forth herein and such default
shall not have been remedied within 30 days after the written notice thereof
shall have been received by the Company from any holder of Subordinated Notes
(other than as set forth in clause (i) and (ii) above); or (v) the Company
should make an assignment for the benefit of creditors; or (vi) attachment or
garnishment proceedings are commenced against the Company, and such proceedings
continue for 90 days undismissed or undischarged; or (vii) a receiver, trustee
or liquidator is appointed over or execution levied upon any property of the
Company; or (viii) proceedings are instituted by or against the Company under
any bankruptcy, insolvency, reorganization, receivership or other law relating
to the relief of debtors from time to time in effect, including without
limitation the United States Bankruptcy Code, as amended, and such proceedings
shall remain unstayed for 90 days or an order for relief shall be entered; then
(a) if such Event of Default is an event specified in clauses (v), (vi), (vii)
or (viii) above, this Note shall automatically become immediately due and
payable at par together with interest accrued thereon, without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company, (b) if such Event of Default is an event specified in clauses (i) or
(ii) above, the registered Holder may at its option, by notice in writing to the
Company, declare this Note to be, and this Note shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or notice of any kind, all of which are
hereby waived by the Company, and (c) if such Event of Default is an Event of
Default specified in clauses (iii) or (iv), the Holder or Holders of at least
70% in aggregate principal amount of the Subordinated Notes at the time
outstanding may, at its or their option and in addition to any right, power or
remedy permitted by law or in equity, by notice in writing to the Company,
declare all of the Subordinated Notes to be, and all of the Subordinated Notes
shall thereupon be and become forthwith due and payable together with interest
accrued thereon with respect to each Subordinated Notes, including this Note,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company.
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For purposes of this Note "Default" shall mean any condition or event
which constitutes an Event of Default or which the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of Default.
All payments made hereunder shall be made in lawful currency of the
United States of America by check payable to such place as the registered Holder
may designate in writing to the Company. All payments made hereunder, whether a
scheduled installment, prepayment, or payment as a result of acceleration, shall
be allocated FIRST to costs and expenses of the registered Holder resulting from
collection efforts with respect to this Note, SECOND to accrued but unpaid
interest, and THIRD to installments of principal remaining outstanding hereunder
first to principal amounts overdue then to principal amounts currently due and
then to installments of principal due in the future in the inverse order of
their maturity.
The Company agrees to pay all reasonable costs of collection,
including attorneys' fees, paid or incurred by the registered Holder in
enforcing this Note on default or the rights and remedies herein provided.
The indebtedness evidenced by the Subordinated Notes, including the
principal of and interest on the Subordinated Notes, shall be subordinate and
junior to Senior Indebtedness. For purposes of this Note, the following term
shall have the ascribed meaning: "SENIOR INDEBTEDNESS" shall mean and include
all obligations (whether now outstanding or hereafter incurred), for the payment
of which the Company is responsible or liable as obligor, guarantor or
otherwise, other than the following: (1) any indebtedness as to which, in the
instrument evidencing such indebtedness or pursuant to which such indebtedness
was issued, it is expressly provided that such indebtedness is subordinate in
right of payment to all indebtedness of the Company not expressly subordinated
to such indebtedness; and (2) any indebtedness which by its terms refers
explicitly to the Subordinated Notes and states that such indebtedness shall not
be senior, but shall be pari passu or shall be subordinated in right of payment
to the Subordinated Notes. Notwithstanding anything to the contrary in the
foregoing, "SENIOR INDEBTEDNESS" shall not include: (a) indebtedness of or
amounts owed by the Company for compensation to employees, or for goods or
materials purchased in the ordinary course of business, or for services, or (b)
indebtedness of the Company to a subsidiary or an affiliate of the Company.
The Company, for itself and for any guarantors, sureties, endorsers
and/or any other person or persons now or hereafter liable hereon, if any,
hereby waives demand of payment, presentment for payment, protest, notice of
nonpayment or dishonor -and any and all other notices and demands whatsoever,
and any and all delays or lack of diligence in the collection hereof, and
expressly consents and agrees to any and all extensions or postponements of the
time of payment hereof from time to time at or after -maturity and any other
indulgence and waives all notice thereof.
No delay or failure by the registered Holder in exercising any right,
power, privilege or remedy hereunder shall affect such right, power, privilege
or remedy or be deemed to be a waiver of the same or any part thereof; nor shall
any single or partial exercise thereof or any failure to
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exercise the same in any instance preclude any further or future exercise
thereof, or exercise of any other right, power, privilege or remedy, and the
rights and privileges provided for hereunder are cumulative and not
exclusive. The delay or failure to exercise any right hereunder shall not
waive such right.
This Note is a registered Note and upon surrender of this Note for
registration of transfer, duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the registered Holder hereof or such Xxxxxx's
attorney duly authorized in writing, a new Note for a like principal amount, or
in the case of a partial transfer in the amount of $5,000 or any integral
multiple thereof, will be issued to, and registered in the name of, the
transferee. Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Note is registered as the owner hereof
for the purpose of receiving payment and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
By executing this Note the Company represents to the registered Holder
that he is duly authorized and empowered to execute and deliver this Note and
that this Note constitutes the legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
The Company will not amend any Subordinated Notes unless the Company
shall have obtained the prior written consent to such amendment of the holders
of not less than 51 % of the aggregate principal amount of the Subordinated
Notes outstanding, except (i) that the provisions of the Subordinated Notes
requiring a greater percentage to take any actions shall require such greater
percentage in order to effect an amendment to such provisions, and (ii) that
without the written consent of the holders of all Subordinated Notes, no
amendment to the Subordinated Notes shall change the maturity of any
Subordinated Notes, or change the principal of, or the rate or time of payment
of interest payable with respect to any Subordinated Notes, or affect the amount
or allocation of any required prepayment thereon.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA.
IN WITNESS WHEREOF, the undersigned has duly caused this Note to be
executed and delivered at the place specified above and as of the date first
written above.
PAPER WAREHOUSE, INC.
By:
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Name : Yale X. Xxxxxxxx
Title: President
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AMORTIZATION SCHEDULE
PAPER WAREHOUSE, INC.
10% SUBORDINATED NOTES
The principal amortization for each date listed on this schedule shall be equal
to (x) the stated principal amount of the Note to which this Amortization
Schedule is attached, MULTIPLIED by (y) the aggregate amount of principal
amortization for such date for all Subordinated Notes, as set forth below as a
Required Principal Installment Payment, DIVIDED by (z) the original aggregate
principal amount of all Subordinated Notes, as set forth below, such principal
amount to be subject to adjustment for any prior optional prepayments of
principal.
Amount of Required Principal
Payment Date Installment Payment
------------ -------------------
November 30, 2001 $ 575,000
November 30, 2002 $ 575,000
November 30, 2003 $ 575,000
November 30, 2004 $ 575,000
-------
$ 2,300,000
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