Introduction

A convertible debenture is a hybrid security that combines the features of both debt and equity into a single investment instrument. The debenture is a loan that the investor will make to Sun Valley Club, LLC for a term of five years, with interest at the five-year treasury note rate, plus a coupon rate of 6% (10.12%), and a warrant to convert the principal value of the note amount into a subscription of equity in the LLC. The warrant is a method to convert the principal amount of the debenture into equity; however, the Investor may elect to receive a return of the debenture note principal in the same cash amount as the original investment. In other words, “cash out at the end of five years is an investor exit strategy.” The accrued interest will be paid in full in one lump sum at maturity of the note and the note holder may elect to convert the note into an equity in the LLC by exercising the warrant option. The warrant option will entitle the holder to convert the note into LLC Class C interest at $1.00 per interest (1:1 ratio).