Attached files
FORM OF 9.00%
CONVERTIBLE SUBORDINATED DEBENTURE
DUE JULY 1, 2012
THIS DEBENTURE AND THE UNDERLYING SECURITIES OF THE COMPANY HAVE NOT BEEN
REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
BLUE SKY LAWS, AND IS SUBJECT TO CERTAIN INVESTMENT REPRESENTATIONS, THIS
DEBENTURE MAY NOT BE SOLD, OFFERED FOR SALE OR TRANSFERRED OTHER THAN AS
PROVIDED IN SECTION 4 HEREOF.
OAKRIDGE HOLDINGS, INC.
9.00% Convertible Subordinated Debenture
Due July 1, 2012
$________________ ___________,2011
(Principal Amount) (Date of Issue)
FOR VALUE RECEIVED, Oakridge Holdings, Inc., a Minnesota corporation (the
"Company"), promises to pay to _______________________, or his registered
assigns, the principal amount of _______________ Dollars ($_________) plus
accrued but unpaid interest thereon, on July 1, 2012 unless this Debenture is
earlier converted into Common Stock of the Company (the "Common Stock") as
provided herein, upon presentation and surrender of this Debenture. Interest on
the principal balance of this Debenture accrues at the rate of nine percent
(9.00%) per annum, payable quarterly on the 1st day of quarter of each calendar
year, with the first such payment due April 1, 2011, July 1, 2011,
October 1, 2011 and continuing until the principal hereof has been
paid in full, converted into Common Stock, or reduced to zero by a combination
of payment and conversion into Common Stock. Interest shall be computed on the
basis of a 365-day year. The Company may not prepay this Debenture in whole or
in part prior to maturity. All payments under this Debenture will be applied
first to accrued and unpaid interest, then to the principal balance of this
Debenture.
1. Series. This Debenture is one of a duly authorized issue of Debentures of
the Company designated as its 9.00% Convertible Subordinated Debentures Due
July 1, 2012 (each a "Debenture" and collectively the "Debentures") in the
aggregate principal amount of up to seven hundred fifty thousand dollars
($750,000).
Subordination. This Debenture is unsecured in all respects. The Company
covenants and agrees, and each holder of this Debenture by acceptance hereof
covenants and agrees, that the payment of the principal of and the interest on
this Debenture is hereby expressly subordinated and made subject to the prior
payment in full of all Senior Debt of the Company outstanding on the date
hereof or hereafter created, incurred, assumed or guaranteed by the Company.
For purposes of this Debenture, "Senior Debt" means any indebtedness, whether
or not contingent, in respect to borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereto) or representing the balance deferred and unpaid
of the purchase price of any property (including pursuant to capital leases and
any balances constituting an accrued expense or a trade payable), if and to the
extent any of the foregoing indebtedness would appear as a liability on a
balance sheet of the Company prepared on a consolidated basis in accordance
with generally accepted accounting principles, and any guarantees of items that
would be included within this definition, but shall not include any
indebtedness for which the instrument under which such indebtedness is created,
incurred, assumed or guaranteed expressly provides that such indebtedness is
not senior or superior in right of payment to this Debenture. Upon (i) the
maturity of such Senior Debt, including by acceleration or otherwise, or (ii)
any distribution of the assets of the Company upon dissolution, winding up,
liquidation or reorganization of the Company, the holders of such Senior Debt
are entitled to receive payment in full before the holders of this Debenture
are entitled to receive any payment. If in any of the situations referred to in
clauses (i) and (ii) in the preceding sentence, a payment is made to the
holders of this Debenture before all applicable Senior Debt has been paid in
full or provision has been made for such payment, the payment made to holders
of such Debenture must be paid over to the holders of such Senior Debt. This
Debenture shall rank equally with the other Debentures and the Company's other
unsecured debt to the extent such other unsecured debt, by its express terms,
is not superior in right of payment to this Debenture with respect to receiving
payments or other distributions.
2. Conversion of Debenture.
(a) Terms of Conversion. The holder of this Debenture shall have the right,
exercisable at the holder's option, at any time hereafter and until such date
as this Debenture has been paid in full by the Company, to convert, subject to
the terms and provisions of this Section 3, the unpaid principal amount of this
Debenture, or any part thereof, into shares of Common Stock at the rate of one
share of Common Stock for each $0.50 principal amount of this Debenture to be
converted, subject to adjustment as provided herein (the "Conversion Price").
(b) Exercise of Conversion Privilege: Surrender of Debenture. In order to
exercise the conversion privilege, the holder of this Debenture shall surrender
this Debenture in whole or in part to the Company together with the conversion
notice, which shall be irrevocable, in the form attached hereto as Exhibit A at
the Company's principal office or such other agency maintained by the Company
for such purpose during normal business hours. This Debenture shall be
converted in accordance with Subsection 3(a) above only when the conversion
notice is delivered and this Debenture is surrendered, accompanied by proper
assignments thereof to the Company or in blank for transfer. The Common Stock
of the Company issuable on conversion shall be issued in the same name as the
name of the holder of the Debenture appearing in the books and records of the
Company. As promptly as practicable after proper surrender of this Debenture by
the holder, as aforesaid, the Company shall issue and shall deliver at such
office or agency to such holder, a certificate or certificates for the number
of full shares of Common Stock of the Company issuable upon the conversion of
this Debenture in accordance with the provisions of this Section 3. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the date this Debenture shall have been surrendered as
aforesaid, all rights of the holder hereof as a holder of a Debenture shall
cease at such time, and the holder in whose name the certificates for the
shares are to be issued shall be treated for all purposes as having become the
holder of record of the shares represented thereby at such time. If the last
day for exercise of the conversion right shall be other than a business day,
then such conversion right may be exercised on the next succeeding business
day. If less than all of the outstanding principal balance of this Debenture is
converted into Common Stock in accordance with this Section 3, the Company
shall, upon surrender of this Debenture, issue the holder a new debenture
evidencing the outstanding principal balance of this Debenture not so converted.
(c) Fractional Shares. In the event of any portion of principal amount which
would have converted into only a fractional share in connection with such
conversion, then the Company shall pay to the holder of this Debenture the
principal amount representing such fractional share, in accordance with the
terms of this Debenture, and no fractional shares of Common Stock shall be
issued upon conversion of this Debenture.
(d) Adjustment for Certain Events. In case of (i) any consolidation or merger
to which the Company is a party or statutory exchange of securities with
another corporation (unless the shareholders of the Company immediately prior
to such consolidation, merger or exchange have beneficial ownership immediately
following such consolidation, merger or exchange of securities of the surviving
entity representing 80% or more of the combined voting power of the surviving
entity's then outstanding securities ordinarily having the right to vote at
elections of directors in approximately the same voting proportions as such
shareholders had in the Company immediately prior to such consolidation, merger
or exchange); or (ii) any sale or conveyance to another entity of all or
substantially all of the assets of the Company (in one transaction or a series
of related transactions) (each of (i) and (ii) a "Sale of the Company"), the
entire principal amount of this Debenture, to the extent not previously
converted pursuant to Section 3(a) hereof, shall be due and payable together
with accrued and unpaid interest on the effective date of such Sale of the
Company. The Company shall give the holder of this Debenture written notice of
an impending Sale of the Company not later than 15 days prior to the
shareholders' meeting of the Company called to approve such transaction, or 15
days prior to the scheduled closing of such transaction, whichever is earlier,
and shall also notify such Holder in writing of the final approval of such
transaction. The first of such notices shall give the proposed effective date
of the transaction and shall describe the material terms and conditions of the
proposed Sale of the Company, and the Company shall thereafter give such Holder
prompt notice of any material changes to such terms and conditions.
(e) Reservation of Common Stock. The Company covenants that it will at all
times reserve and keep available out of its authorized but unissued capital
stock, solely for the purpose of delivering upon conversion of this Debenture
as herein provided, such number of shares of capital stock as shall then be
deliverable upon the conversion of this Debenture, including any shares of
Common Stock necessary for exercise of warrants or other rights included as
part of the Securities offered.
(f) Anti-Dilution Adjustments. The conversion rights of the holder shall be
subject to the following adjustments:
(i) If the outstanding shares of Common Stock shall, after the Issue Date, be
subdivided (split), or combined (reverse split), by reclassification or
otherwise, or in the event of any dividend or other distribution payable on the
Common Stock in shares of Common Stock, the Conversion Price in effect
immediately prior to such subdivision, combination, dividend or other
distribution shall, concurrently with the effectiveness of such subdivision,
combination or dividend or other distribution, be proportionately adjusted.
(ii) In the event of any reclassification, reorganization or exchange of the
Company's securities, or any consolidation or merger of the Company (other than
a Sale of the Company, in which event Section 3(d) shall apply), or in the
event the Company at any time or from time to time after the date of this
Debenture makes or declares a dividend or other distribution payable in cash,
securities or property, then and in each such event provision shall be made so
that the holder shall receive, upon conversion of this Debenture, in addition
to the amount of securities receivable thereupon, the amount of cash,
securities or other property which the holder would have received had this
Debenture been converted on the date of such event and had the holder
thereafter, during the period from the date of such event to and including the
conversion date, retained such cash, securities or other property receivable
during such period.
(iii) Upon the occurrence of each adjustment or readjustment of a Conversion
Price, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the holder a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based.
(g) Rights of Debenture Holder. Until this Debenture is converted in accordance
with this Section 3, nothing contained in this Debenture confers upon the
holder the right to vote on or consent to any action to be taken by the Company.
3. Restrictions on Transferability. The holder of this Debenture, by acceptance
hereof, agrees to give written notice to the Company at least three (3) days
before transferring this Debenture, of such holder's intent to do so, describing
briefly the manner of the proposed transfer. Promptly upon receiving such
written notice, the Company shall present copies thereof to counsel for the
Company. If, in the opinion of counsel satisfactory in form and substance to
the Company, the proposed transfer may be effected without violation of the
applicable federal and state securities law, such holder shall be entitled to
transfer this Debenture in the manner contemplated in the above-referenced
notice to the Company; provided, however, that an appropriate legend may be
endorsed on this Debenture respecting restrictions on transfer thereof
necessary or advisable, in the opinion of counsel and satisfactory in form and
substance satisfactory to the Company, to prevent further transfers that would
be in violation of the securities laws or adversely affect the exemptions
relied upon by the Company. To such effect, the Company may request that the
intended transferee execute an investment and representation letter
satisfactory in form and substance to the Company. Upon transfer of this
Debenture, the transferee, by acceptance of this Debenture, agrees to be bound
by the provisions, terms, conditions and limitations of this Debenture and the
investment and representation letter, if any, required by the Company. If (i)
no opinion of counsel referred to in this Section has been provided to the
Company, or (ii) in the opinion of such counsel the proposed transfer of this
Debenture described in the holder's written notice given pursuant to this
Section may not be effected without registration or without adversely affecting
the exemptions relied upon by the Company or without violating the terms of
this Section 4, the holder will restrict its transfer accordingly.
4. Replacement of Debenture. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Debenture and in
the case of any such loss, theft or destruction, upon delivery of a bond of
indemnity satisfactory to the Company if requested by the Company, or in the
case of any such mutilation, upon surrender and cancellation of such Debenture,
the Company shall issue a new Debenture identical in form to the lost, stolen,
destroyed or mutilated Debenture.
5. Events of Default. Each of the following events shall be an Event of Default
("Event of Default") for purposes of this Debenture:
(a) Debenture Terms. The Company defaults in the due and punctual performance
or observance of any material terms contained in this Debenture, and such
default continues for a period of sixty (60) consecutive days after written
notice thereof to the Company by the holder of this Debenture, except that any
such default by the Company will not result in an Event of Default hereunder if
the default is waived by the holder of this Debenture; or
(b) Insolvency Matters. The Company makes an assignment for the benefit of
creditors, or admits in writing its inability to pay its debts as they become
due, or files a voluntary petition in bankruptcy, or is adjudicated a bankrupt
or insolvent, or files any petition or answer seeking for itself an
reorganization arrangement composition readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation, or
files any answer admitting the material allegations of a petition filed against
the Company for any such relief, or seeks or consents to or acquiesces in the
appointment of any trustee, receiver or liquidator of the company or all or any
substantial part of the properties of the company.
6. Remedies on Default. Upon the occurrence of an Event of Default as described
under Section 6 hereof, the holders of the Debentures shall have the option to
declare the principal amount of the Debentures and all accrued but unpaid
interest thereon to be immediately due and payable upon written notice from the
holder to the Company.
7. Modification and Waiver. No purported amendment, modification or waiver of
any provision of the Debentures shall be binding unless set forth in a written
document signed by the Company and the holders of more than 50% of the
principal amount of the Debentures then-outstanding (in the case of amendments
or modifications) or by the party to be charged thereby (in the case of
waivers). Any waiver shall be limited to the provision hereof in the
circumstances or events specifically made subject thereto, and shall not be
deemed a waiver of any other term hereof or of the same circumstance or event
upon any reoccurrence thereof.
8. Notices. All notices, consents and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been given,
when received, if personally delivered or delivered by telex, telegram or
telecopy, or five (5) days after depositing in the U.S. Mail for delivery by
first class mail, postage prepaid and addressed as provided below, (i) if to
any holder of this Debenture, addressed to such holder at its address as shown
on the books of the Company, or at such other address as such holder may
specify by written notice to the Company, or (ii) if to the Company at
400 W. Ontario St. #1003, Chicago, IL 60610, Attention: President, or at such
other address as the Company may specify by written notice to the holder of
this Debenture.
9. Successors and Assigns. All the terms and provisions of this Debenture shall
be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the Company and each holder of this
Debenture, whether or not so expressed.
10. Applicable Law. The laws of the State of Minnesota shall govern the
validity of this Debenture, the construction of its terms and the
interpretation of the rights and duties of the Company and each holder of this
Debenture, without regard to that state's principles of conflicts of laws.
11. Waiver of Demand Presentment and Notice of Dishonor. The undersigned and
each endorser or guarantor hereof hereby waives demand, presentment, protest,
notice of protest and notice of dishonor.
12. Corporate Obligation. No recourse under or upon any obligation, covenant or
agreement contained in this Debenture, or for any claim based hereon or
otherwise in respect hereof, shall be had against any promoter, subscriber to
shares, incorporator, shareholder, officer, or director, as such, past, present
or future, of the Company or of any successor corporation, either directly or
through the Company or any successor or corporation or through, any trustee,
receiver, or any other person, whether by virtue of any constitution, statute,
or rule of law, or by the enforcement of any assessment or penalty or
otherwise, except as expressly agreed to by the party charged.
13. Payment. Upon payment or conversion of this Debenture in full, together
with payment of any accrued but unpaid interest heron, this Debenture will
terminate and be of no further force or effect.
14. Pro Rata Payments. All interest payments and payments or prepayments of
principal shall be made and applied pro rata on the Debentures outstanding in
accordance with respective principal amounts thereof at the time of payment.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed by its
duly authorized officer as of the Date of Issue.
OAKRIDGE HOLDINGS, INC.
By _________________________
Its_________________________
Exhibit A
CONVERSION NOTICE
To: Oakridge Holdings, Inc. (the "Company")
Principal Amount to be Converted: $______________
The undersigned holder of this Debenture hereby irrevocably exercises the
option to convert the above-stated principal amount of this Debenture into
shares of Common Stock of Oakridge Holdings, Inc. in accordance with the terms
of this Debenture (the "Shares"), and directs that the Shares, together with
any check in payment for fractional shares, be issued and delivered to the
undersigned. The undersigned acknowledges that the Shares have not been
registered under the Securities Act of 1933, as amended, (the "Securities Act")
or applicable state securities laws and the Shares are being issued by the
Company pursuant to exemptions from those registration requirements and are
subject to restrictions on transferability and resale and may not be
transferred or resold except as permitted under the Securities Act and
applicable state securities laws, or pursuant to registration or an exemption
from registration. The undersigned is acquiring the Shares for his, her or
its own account, to hold for investment, and the undersigned shall not make
any sale, transfer or other disposition of the Shares in violation of the
Securities Act or the rules and regulations promulgated thereunder or in
violation of any applicable state securities law.
Dated:______________________
HOLDER
By:__________________________________
Print Name:__________________________
Title (if any):______________________
Company (if any):___________________
