**EXHIBIT 10.6**

 

THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSIONHEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,OR APPLICABLE STATE SECURITIES LAWS AND MAYNOT BE SOLD, TRANSFERRED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE DISTRIBUTEDFOR VALUE UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTAND SUCH LAWS COVERING SUCH SECURITIES, OR THE COMPANY RECEIVES AN OPINION OFCOUNSEL ACCEPTABLE TO THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT,OFFER, PLEDGE OR OTHER DISTRIBUTION FOR VALUE IS EXEMPT FROM THE REGISTRATIONAND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

 

THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSIONHEREOF, ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY.

 

**NORTHERN STAR FINANCIAL, INC.**

**CONVERTIBLE SUBORDINATED UNSECURED NOTE**

 
| $ |        July     2001 |
|---|------------------------------------------------------------------------|

 

 

                FOR VALUE RECEIVED, NorthernStar Financial, Inc., a Minnesota corporation (the “Company”) promises to payto the order of                                                                   or his successors orassigns (the “Holder”), the principal amount of                                                     Dollars ($                            ).  Interest on the unpaid principal hereofshall accrue from and after the date hereof and shall be paid quarterly withthe first payment due on October 1, 2001 and on the first day of each thirdmonth thereafter at a rate of eight percent (8%) per annum (computed on thebasis of a 360-day year, 30-day month). All then outstanding principal amount hereof and accrued interestthereon shall be paid in full on July    , 2004.  This ConvertibleSubordinated Unsecured Note (this “Note”) may be prepaid in whole or in partonly after fifteen (15) days written notice to the Holder of the Company’sintention to prepay.  All payments shallbe applied first to accrued but unpaid interest and the balance to thereduction of principal and shall be made at the address determined pursuant toSection 7 below.  This Note has beenissued pursuant to and is subject to the terms and provisions of theSubscription and Loan Agreement (“Agreement”), dated on or about the datehereof, between the Company and the Holder, and this Note and the holder hereofare entitled to all the benefits provided for in the Agreement, or which arereferred to therein.  The provisions ofthe Agreement are incorporated herein by reference with the same force andeffect as if fully set forth herein.

 

                A.            Conversion of Note.

 

                                                                1.1           Right of Conversion.  The Holder of this Note shall have the right to convert all orany part of the principal amount and accrued but unpaid interest of this Noteinto fully paid and non-assessable shares of Common Stock of the Company (the“Conversion Shares”) at a conversion rate of $10.50 per share, subject to theadjustments provided for below (the “Conversion Price”).  This Note shall be convertible at any timeon or before it is paid in full, and the date of such conversion shall bereferred to herein as the “Conversion Date”. This Note may be converted only upon presentation and 

 

 

 

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surrender of this Note and following written notice to the Company ofthe Holder’s election to convert all or a portion hereof, in the mannerprovided in Section 1.2 hereof.

 

                                                                1.2           Surrender of Note. In order to exercise the conversion privilege, the Holder of this Noteshall surrender this Note to the Company at its principal office and shall givewritten notice to the Company that the Holder elects to convert this Note orthe portion thereof into Conversion Shares as specified in such notice.  As promptly as practicable after thesurrender of this Note, the Company shall issue and deliver to the Holder acertificate or certificates for the number of whole shares of Common Stockissuable upon the conversion of this Note or portion thereof in accordance withthe provisions of this Section.  In theevent that only a portion of this Note is converted, then the Company shallissue to the Holder a new note with a principal amount representing the portionof this Note not converted and otherwise containing the same terms contained inthis Note.

 

                                                                1.3           Adjustment of Conversion Price.  The Conversion Price shall be adjusted fromtime to time such that, in case the Company shall hereafter:  (i) pay a dividend or make a distribution onits Common Stock in shares of Common Stock, (ii) subdivide its outstandingshares of Common Stock into a greater number of shares, (iii) combine itsoutstanding shares of Common Stock into a smaller number of shares, or (iv)issue by reclassification of its Common Stock or otherwise any shares ofcapital stock of the Company, the Conversion Price in effect immediately priorto such action shall be adjusted so that the Holder thereafter shall beentitled to receive the number of units of such other capital stock of theCompany that the Holder would have owned immediately following such action hadthis Note been converted immediately prior thereto.  An adjustment made pursuant to this Section shall becomeeffective immediately after the record date in the case of a dividend ordistribution and shall become effective immediately after the effective date inthe case of a subdivision, combination, reclassification or other stockissuance.  If, as a result of anadjustment made pursuant to this Section, the Holder thereafter shall becomeentitled to receive shares of two or more classes of capital stock or shares ofCommon Stock and other capital stock of the Company, the Board of Directors ofthe Company shall determine the allocation of the adjusted Conversion Pricebetween or among shares of such classes of capital stock or shares of CommonStock and other capital stock.  In theevent that at any time as a result of an adjustment made pursuant to thisSection, the Holder thereafter shall become entitled to receive any securitiesof the Company other than shares of Common Stock represented by the ConversionShares, thereafter the Conversion Price of such other securities so receivableupon conversion of this Note shall be subject to adjustment from time to timein a manner and on terms as nearly equivalent as practicable to the provisionswith respect to Conversion Shares contained in this Section.

 

                                                                1.4           Adjustment for Mergers.  In case of any consolidation or merger to which the Company is aparty other than a merger or consolidation in which the Company is thecontinuing corporation, or in case of any sale or conveyance to anothercorporation of all or substantially all of the property of the Company, or inthe case of any exchange of 

 

 

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securities with another corporation (including any exchange effected inconnection with a merger of a third corporation into the Company), there shallbe no adjustment under Section 1.3 but the Holder shall have the rightthereafter to convert this Note into the kind and amount of shares of stock andother securities and property that it would have owned or have been entitled toreceive immediately after such consolidation, merger, statutory exchange, saleor conveyance had this Note been converted immediately prior to the effectivedate of such consolidation, merger, statutory exchange, sale or conveyance and,in any such case, if necessary, appropriate adjustment shall be made in theapplication of the provisions set forth in this Section with respect to therights and interest thereafter of the Holder, to the end that the provisionsset forth in this Section shall thereafter correspondingly be made applicable,as nearly as may reasonably be, in relation to any shares of stock and othersecurities and property thereafter deliverable on the conversion of this Note.

 

                                                                1.5           Reservation of Common Stock.  The Company covenants that it will at alltimes reserve and keep available out of its authorized but unissued CommonStock, such number of shares of Common Stock as shall then be deliverable uponthe conversion of this Note into Conversion Shares.

 

                                                                1.6           Definition of Common Stock.  The term “Common Stock” shall include allshares of capital stock so designated by the Company’s Articles ofIncorporation, as in effect as of the date hereof.

 

                2.             Transferability. Other than pursuant to registration under federal and state securitieslaws or an exemption from such registration, the availability of which theCompany shall determine in its sole discretion, neither this Note nor anyConversion Shares may be sold, pledged, assigned or otherwise disposed of(whether voluntarily or involuntarily). The Company may condition such sale, pledge, assignment or otherdisposition on the receipt from the party to whom this Note is to be sotransferred or to whom Conversion Shares are to be issued or so transferred onany representations and agreements requested by the Company in order to permitsuch transfer to be made pursuant to exemptions from registration under federaland applicable state securities laws. The Holder, by acceptance hereof, agrees to give written notice to theCompany before transferring this Note or transferring any Conversion Shares ofthe Holder’s intention to do so, describing briefly the manner of any proposedtransfer.  Within fifteen (15) daysafter receiving such written notice, the Company shall notify the Holder as towhether such transfer may be effected.

 

                3.             Subordination; Security.  The payment of the principal of and theinterest on this Note is hereby expressly subordinated and made subject to theprior payment in full of all indebtedness of the Company outstanding on thedate hereof or hereinafter incurred in connection with the acquisition or leaseof capital equipment or for working capital from banks, finance companies,trust companies, insurance companies or other financial institutions, all suchindebtedness, together with renewals, extensions, substitutions, andrefinancings thereof (collectively, hereinafter referred to as the “SeniorDebt”).  The Holder acknowledges andagrees that the Holder will not exercise any collection rights or proceed inany way to enforce any claims the Holder has or may have against the Companywith respect to this Note unless and until the Senior Debt shall have beenindefeasibly paid in full, without the prior written consent of the holders ofthe Senior Debt.  The Holder agrees toexecute such documents and take such

 

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actionsnecessary to give further effect to the foregoing subordination as arereasonably requested by the holders of Senior Debt.  This Note is unsecured.

 

                4.             Events of Default.  Each of the following events shall be an Event of Default (“Eventof Default”) for purposes of this Note:

 

                                                                (i)            The Company defaults in the due and punctual performanceor observance of any material terms contained in this Note, and such defaultcontinues for a period of 15 consecutive days after written notice thereof tothe Company by the Holder.

 

                                                                (ii)           The Company sells, transfers or otherwise disposes of allor substantially all of its assets; or commences to liquidate, dissolve orcease all or substantially all of its business activities.

 

                                                                (iii)          The Company makes an assignment for the benefit ofcreditors; admits in writing its inability to pay its debts as they become due,or files a voluntary petition in bankruptcy; is adjudicated to be bankrupt orinsolvent; files any petition or answer seeking for itself any reorganization,arrangement, composition, readjustment, liquidation, dissolution or similarrelief under any present or future statute, law or regulation; files any answeradmitted or failing to deny the material allegations of a petition filedagainst the Company for any such relief; seeks or consent to or acquiesces inthe appointment of any trustee, receiver; liquidator of the Company for all orany substantial part of the properties of the Company; or commences to dissolveor liquidate.

 

                5.             Remedies on Default.  Upon the occurrence of an Event of Default as described underSection 4 hereof, the Holder shall have the option to declare the principalamount hereof and all accrued but unpaid interest thereon to be immediately dueand payable upon written notice from the Holder to the Company, and suchamounts shall thereupon be immediately due and payable.

 

                6.             Modification and Waiver.  No purported amendment, modification orwaiver of any provision hereof shall be binding unless set forth in a writtendocument signed by the Company and the Holder (in the case of amendments ormodifications) or by the party to be charged thereby (in the case ofwaivers).  Any waiver shall be limitedto the provisions hereof and the circumstances or events specifically madesubject thereto, and shall not be deemed a waiver of any other term hereof orof the same circumstance or event upon any recurrence thereof.

 

                7.             Notices. All notices, requests, consents and other communications required orpermitted hereunder shall be in writing and shall be deemed to have been given,when received, if personally delivered or delivered by telex, telegram, ortelecopy, or three days after depositing in the U.S. Mail for delivery by firstclass mail, postage prepaid and addressed as provided below, or one day afterdepositing for next-day delivery by Federal Express or similar overnightcourier, (i) if to the Holder, addressed to the Holder at its address as shownon the books of the Company, or at such other address as the Holder may specifyby written notice to the Company, or (ii) if to the Company at 1650 MadisonAvenue, Mankato, Minnesota 56001, or at such other address as the Company mayspecify by written notice to the Holder.

 

 

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                8.             Miscellaneous. All the terms and provisions of this Note shall be binding upon andinure to the benefit of and be enforceable by the respective heirs,representatives, successors, and assigns of the Company and the Holder, whetheror not so expressed.  The laws of theState of Minnesota shall govern the validity of this Note, the construction ofits terms, and the interpretation of the rights and duties of the Company andthe Holder.  The Company hereby waivesdemand, presentment, protest, notice of protest, and notice of dishonor.  The Company shall pay all reasonable costsand expenses incurred by the Holder in effecting the collection hereof,including reasonable attorneys’ fees, whether or not suit is brought.

 

                IN WITNESS WHEREOF, the Companyhas caused this Note to be executed by its duly authorized officer as of thedate first written above.

 
|   |   |   |   |   |   |   | NORTHERN  STAR FINANCIAL, INC. |
|--------|--------|--------|--------|--------|--------|--------|--------------------------------|
|   |   |   |   |   |   |   |                           |   |
|   |   |   |   |   |   |   | By:                            |   |   |
|   |   |   |   |   |   |   |                           | Thomas  Stienessen |
|   |   |   |   |   |   |   |                           | Its:  Chief Executive Officer |
|   |   |   |   |   |   |   |                           |   |
|        |        |        |        |        |        |        |                                |  |  |  |

 

 

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DATESAND PRINCIPAL AMOUNTS OF NOTES

HELDBY REGISTRANT’S DIRECTORS

 

 

 

 

 

 
| **Director**        |   | **Date of  Note** |   | **Amount** |    | **Due Date** |
|---------------------|--------|-------------------|--------|------------|---------|--------------|
|                |   |              |   |       |    |         |
| Dean M. Doyscher    |   | August  7, 2001   |   | $          | 100,000 |         | August  7, 2004 |
|                |   |              |   |       |    |         |
| James H. Illies     |   | August  6, 2001   |   | $          | 100,000 |         | August  6, 2004 |
|                |   |              |   |       |    |         |
| Michael P. Reynolds |   | July  30, 2001    |   | $          | 200,000 |         | July  30, 2004 |
|                |   |              |   |       |    |         |
| Thomas J. Reynolds  |   | August  1, 2001   |   | $          | 200,000 |         | August  1, 2004 |

 

 

 

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