U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the period ended August 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the transition period from . . . . . . . . . . .
Commission file number 1-12556
TOWER TECH, INC.
(Name of small business issuer in its charter)
Oklahoma 73-1210013
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Rural Route 3, Post Office Box 1838, Chickasha, Oklahoma 73023
(Address of principal executive offices) (Zip Code)
Issuers telephone number 405/222-2876
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date
Common Stock $.001 par value 3,526,311 shares as of October 10, 1997
<PAGE>
INDEX
TOWER TECH, INC.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheet -- August 31, 1997
Statement of Operations -- Three months ended August 31, 1997 and
1996, and nine months ended August 31,
1997 and 1996
Statement of Cash Flows -- Nine months ended August 31, 1997 and
August 31, 1996
Notes to Financial Statements -- August 31, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART 2. OTHER INFORMATION
Item 1. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
TOWER TECH, INC.
BALANCE SHEET (UNAUDITED)
August 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Assets
Current assets:
Cash $ 1,418,805
Accounts receivable, net of allowance
for doubtful accounts of $22,645 5,913,945
Notes receivable, current 100,200
Receivables from officers and employees 55,920
Costs and estimated earnings in excess of
billings on uncompleted contracts 219,047
Inventory 3,618,471
Restricted assets 614,493
Prepaid expenses 135,404
--------------
Total current assets 12,076,285
Property, plant and equipment, net 7,729,515
Rental fleet, net 2,015,748
Restricted assets 76,765
Patents, net 199,485
Notes receivable, non-current 524,800
Other assets 746,455
--------------
$ 23,369,053
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 813,872
Current maturities of obligations under capital lease 122,345
Accounts payable 2,819,597
Accrued liabilities 435,511
Interest payable 173,663
--------------
Total current liabilities 4,364,988
Long-term debt, net 12,659,283
Obligations under capital lease 208,784
Stockholders' equity:
Common stock, $.001 par value; 10,000,000 shares
authorized; 3,526,311 shares issued and outstanding 3,526
Capital in excess of par 8,082,294
Deficit (1,949,822)
--------------
Total stockholders' equity 6,135,998
$ 23,369,053
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TOWER TECH, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended
August 31, August 31,
1997 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Sales and other operating revenue:
Tower sales $ 1,634,734 $ 2,260,771
Concrete tower sales 612,024 1,638,262
755,301 202,535
Other tower revenue 1,025,657 298,587
------------- --------------
Total tower revenue 4,027,716 4,400,155
Other operating revenue 250,000 250,000
-------------- --------------
4,277,716 4,650,155
------------- -------------
Costs and expenses:
Cost of goods sold and constructed 2,616,053 3,418,716
General and administrative 366,507 384,953
Selling expenses 309,180 252,781
Research and development 255,364 94,215
------------- -------------
3,547,104 4,150,665
------------- -------------
Income from operations 730,612 499,490
------------- -------------
Other income (expense):
Interest (164,055) (134,160)
Miscellaneous 36,748 23,929
-------------- -------------
(127,307) (110,231)
-------------- -------------
Income before income taxes 603,305 389,259
Income taxes - -
-------------- -------------
Net income $ 603,305 $ 389,259
============= =============
Weighted average shares outstanding-
primary 3,462,271 3,527,428
============= =============
Net income per common share - primary $ .17 $ .11
============= ==============
Weighted average shares outstanding-
fully diluted 3,462,271 3,528,312
============= =============
Net income per common share-
fully diluted $ .17 $ .11
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TOWER TECH, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
Nine Months Ended
August 31, August 31,
1997 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Sales and other operating revenue:
Tower sales $ 9,555,308 $ 8,596,077
Concrete tower sales 2,274,078 4,128,828
Tower rentals 1,139,625 486,737
Other tower revenue 1,514,401 506,121
------------ ------------
Total tower revenue 14,483,412 13,717,763
Other operating revenue 520,000 589,983
------------ ------------
15,003,412 14,307,746
------------ ------------
Costs and expenses:
Cost of goods sold and constructed 10,850,333 10,940,165
General and administrative 1,029,383 1,097,399
Selling expenses 881,965 718,757
Research and development 523,515 251,579
------------ ------------
13,285,196 13,007,900
------------ ------------
Income from operations 1,718,216 1,299,846
------------ ------------
Other income (expense):
Interest (502,753) (333,300)
Miscellaneous 68,807 59,798
------------- -------------
(433,946) (273,502)
------------- -------------
Income before income taxes 1,284,270 1,026,344
Income taxes - -
------------- -------------
Net income 1,284,270 1,026,344
Less dividends on preferred shares - (62,812)
------------- -------------
Net income applicable to common shares $ 1,284,270 $ 963,532
============ =============
Weighted average shares outstanding-primary 3,533,419 3,150,373
============ =============
Net income per common share-primary $ .36 $ .31
============= =============
Weighted average shares outstanding-
fully diluted 3,533,419 3,240,797
============= =============
Net income per common share-
fully diluted $ .36 $ .30
============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TOWER TECH, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Months Ended
August 31, August 31,
1997 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,284,270 $ 1,026,344
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 437,705 303,522
Loss on sale of assets - 2,397
Increase in notes receivable (625,000) -
Increase in accounts receivable (894,300) (1,718,126)
Decrease (increase) in costs in excess
of billings 252,669 (896,666)
Increase in inventory (699,207) (1,013,000)
Increase in prepaid expenses (106,950) (16,626)
Decrease in other assets 25,777 -
Increase in accounts payable 264,855 202,810
(Decrease) increase in interest payable
and accrued liabilities (247,660) 274,080
Decrease in billings in excess of costs - (481,400)
Decrease in deposits (129,114) -
-------------- -------------
Net cash used operating activities (436,955) (2,316,665)
------------- -------------
Cash flows from investing activities:
Purchase of property and equipment (4,214,531) (635,961)
Decrease in restricted assets 3,254,890 -
Additions to rental fleet (1,279,657) (350,191)
Proceeds from sale of assets - 11,226
Increase in patent costs (49,828) (118,866)
------------- -------------
Net cash used in investing activities (2,289,126) (1,093,792)
------------- -------------
Cash flows from financing activities:
Proceeds from borrowings, net of costs 9,533,682 5,190,461
Repayments of long-term debt (7,133,629) (3,812,426)
Proceeds from exercise of warrants
and options 894,501 -
Proceeds from common stock issuances - 3,734,997
Redemption of preferred stock - (1,500,000)
Payment of preferred dividends - (164,531)
------------ ------------
Net cash provided by financing activities 3,294,554 3,448,501
------------ ------------
Net increase in cash 568,473 38,044
Cash at beginning of period 850,332 638,260
------------ ------------
Cash at end of period $ 1,418,805 $ 676,304
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TOWER TECH, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Interim Financial Statements
The balance sheet as of August 31, 1997, and the related statements of
operations for the three month and nine month periods ended August 31,
1997 and 1996 and the statement of cash flows for the nine month period
ended August 31, 1997 and 1996 are unaudited; in the opinion of
management, all adjustments necessary for a fair presentation of such
financial statements have been included.
These financial statements and notes are presented as permitted by Form
10-QSB and should be read in conjunction with the Company's financial
statements and notes included in the annual report on Form 10-KSB.
2. Recently Issued Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earning Per Share
("FAS 128"). FAS 128 will change the computation, presentation and
disclosure requirements for earnings per share. FAS 128 requires
presentation of "basic" and "diluted" earnings per share, as defined, on
the face of the income statement for all entities with complex capital
structures. FAS 128 is effective for financial statements issued for
periods ending after December 15, 1997 and requires restatement of all
prior period earnings per share amounts. The Company has determined that
FAS 128 will not have a material impact on its earnings per share when
adopted.
3. Licensing Agreement
In August 1997, the Company entered into a license agreement with Tower
Tech de Mexico S.A., (the "Licensee"). The agreement grants the Licensee
the exclusive right to sell the Company's modular fiberglass cooling tower
product in the Republic of Mexico. The agreement requires the Licensee to
pay a royalty based on the net promotional value on projects containing
the Company's technology subject to certain minimum royalties in the
second and third years. The term of the agreement is for three years. The
Company earned an initial license fee of $250,000.
4. Issuance of Convertible Debentures
In June 1997, the Company consummated a private placement of $6 million of
10% Convertible Subordinated Debentures ("Debentures"), yielding net
proceeds of approximately $5,467,000. The Debentures bear interest at 10%,
which is payable semiannually, and mature on June 30, 2000. The principal
balance of each Debenture is convertible into shares of common stock at a
price of $8.75 per share at the option of the Debenture holder or at the
option of the Company if certain conditions exist.
<PAGE>
5. Subsequent Events
In September 1997, the Company entered into a loan agreement with the City
of Oklahoma City under which a HUD Section 108 loan in the amount of $1.25
million is available to the Company for start-up expenses of the
manufacturing facility and associated working capital requirements.
Initially, the loan bears interest at 20 basis points above the LIBOR rate,
adjusted monthly and payable quarterly. When HUD provides permanent
financing, the interest rate becomes fixed at the rate charged by HUD to
the City. Principal and interest are payable quarterly based on an
eight-year amortization period. The loan is collateralized by a second
mortgage on the manufacturing facility.
In September 1997, the Company extended the maturity of three notes
totaling approximately $550,000, for one to two years. The other terms of
the notes will remain the same.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Three Months Ended August 31, 1997 Compared to Three Months Ended
August 31, 1996
Total tower revenues were $4,027,716 for the three months ended August
31, 1997, compared to $4,400,155 in the same period in the prior year. During
the current three month period, 41% of total tower revenues was derived from
sales of 54 modular fiberglass cooling towers, 15% of total tower revenues was
derived from design and construction of the new modular concrete towers, 19% of
total tower revenues was derived from rental of modular fiberglass cooling
towers, and 25% of total tower revenues was derived from other tower revenues.
In the comparable three month period of 1996, 51% of revenues was derived from
sales of 57 modular fiberglass cooling towers, 37% of total tower revenues was
derived from design and construction of the new modular concrete towers, 5% of
revenues was derived from rental of modular fiberglass cooling towers, and 7% of
total tower revenues was derived from other tower revenues. Other tower revenues
consist primarily of modular tower parts sales and service, with the addition of
accessory equipment, water treatment equipment and water treatment chemicals in
the current year. The decrease in fiberglass tower sales revenues for 1997 is
due to the sales of smaller capacity, less expensive units, coupled with a small
decline in the number of units sold. The decrease in concrete tower revenue is
due to the decrease in the number and size of jobs completed and in process for
1997. The increase in other tower revenue is due mainly to the sale of
proprietary parts to licensees. Other operating revenue for the three months
ended August 31, 1997, consists of a technology transfer fee realized from an
international license agreement for the Republic of Mexico. Technology transfer
fees continue to demonstrate the Company's ability to capitalize on the
technology it develops. The Company is in the business of developing technology
for the cooling tower industry and marketing that technology either directly or
in the form of products such as its TTMT Series cooling towers.
The Company's cost of goods sold and constructed during the three month
period ended August 31, 1997, was $2,616,053 or 65% of total tower revenues as
compared to $3,418,716 or 78% of total tower revenues during the comparable
period in 1996. The decrease in cost of goods sold and constructed is due
primarily to decreased sales of the modular fiberglass cooling tower and
construction costs of the modular concrete tower. Higher margin during the
current period is due mainly to the change in the revenue mix. The Company has
experienced an improvement in gross margins in the fiberglass cooling tower line
which management believes is the result of wider recognition of the
technological and operating advantages of the Company's product over competing
products. The Company is able to capitalize on these factors rather than
competing based solely on price. In the concrete line, the Company sees moderate
improvement in gross margins but is still incurring higher construction costs
due to the recent introduction of the product. Management expects that gross
margins on concrete projects will continue to show improvement in the next
several quarters and will eventually be consistent with gross margins realized
on the Company's fiberglass cooling tower line. During the three-month period
ended August 31, 1997, the Company expended $81,000 to retrofit and service
fiberglass towers previously sold and $38,000 of warranty costs on concrete
towers. Comparable costs in 1996 were $76,000 to retrofit and service fiberglass
towers and $5,800 warranty costs on concrete towers. In 1995, design changes
were made and a complete quality control system was implemented which management
believes will control such expenditures in future periods. Management believes
that the previously established reserve of $100,000 is sufficient to cover
future costs to retrofit and service towers previously sold.
In the three month period ended August 31, 1997, general and
administrative expenses decreased from $384,953 in 1996, to $366,507 in 1997.
The decrease is due mainly to an increase in allocation of certain expenses to
selling and marketing activities. Selling expenses increased from $252,781 for
the three months ended August 31, 1996 to $309,180 for the three months ended
August 31, 1997, due to the increase in allocation of certain expenses as
previously stated plus an increase in sales staff. Research and development
expenses were $255,364 compared to $94,215 in the third quarter of 1996.
Management expects to continue to research refinements in cooling tower design
and construction. Although the Company has no fixed research and development
budget, such costs are anticipated to continue at current levels.
The Company's income from operations for the three months ended August
31, 1997, was $730,612 as compared to $499,490 for the comparable period in the
prior year. After interest expense and miscellaneous items, the Company's net
income was $603,305 as compared to $389,259 for the quarter ended August 31,
1996.
Currently, the estimated backlog is $8,100,000 including a total of six
contracts for the modular concrete cooling towers totaling $3,600,000 which are
projected to be completed by March 1998. Interest in this product has continued
to increase in both the United States and international markets. Sixty-two
percent of the backlog for the modular fiberglass cooling towers is scheduled
for delivery in the fourth quarter of 1997, with the balance scheduled for
delivery evenly in the first and second quarters of 1998.
Nine Months Ended August 31, 1997 Compared to Nine Months Ended August 31, 1996
For the nine months ended August 31, 1997, total tower revenues
increased to $14,483,412 from $13,717,763 for the comparable period in the prior
year. During the current nine month period, 66% of total tower revenues was
derived from sales of 247 modular fiberglass cooling towers, 16% of total tower
revenues was derived from design and construction of the new modular concrete
cooling towers, 8% of total tower revenues was derived from rental of modular
fiberglass cooling towers, and 10% of total tower revenues was derived from
other tower revenue. In the comparable nine month period in 1996, 63% of total
tower revenues was derived from sales of 213 modular cooling towers, 30% of
total tower revenues was derived from design and construction of modular
concrete towers, 3% of total tower revenues was derived from rental of modular
cooling towers, and 4% of total tower revenues were derived from other tower
revenue. Other tower revenues consist primarily of modular tower parts sales and
service, with the addition of accessory equipment, water treatment equipment and
water treatment chemicals in the current year. The increase in fiberglass tower
revenues for 1997 is due to the increase in the quantity of units sold. The
decrease in concrete tower revenue is due to the decrease in the number and size
of jobs completed and in process. The increase in other tower revenue is due
mainly to the sale of proprietary parts to licensees. Other operating revenue
for the nine months ended August 31, 1997, consists of technology transfer fees
realized as a result of license agreements covering the Republic of Mexico.
Technology transfer fees demonstrate the Company's ability to capitalize on the
technology it develops. The Company is in the business of developing technology
for the cooling tower industry and marketing that technology, either directly or
in the form of products such as its TTMT Series cooling tower.
The Company's cost of goods sold and constructed during the nine month
period ended August 31, 1997, was $10,850,333 or 75% of total tower revenues as
compared to $10,940,165 or 80% during the comparable period in 1996. Higher
margin for the current nine months is due mainly to the change in revenue mix.
Included in cost of goods sold for the nine month period ended August 31, 1997,
is $334,000 to retrofit and service towers previously sold. This compares to
nine month retrofit and warranty costs of $205,000 during the same period in
1996. In 1995, design changes were made and a complete quality control system
was implemented which management believes will control such expenditures in
future periods.
The nine month period ended August 31, 1997 reflected a 6% percent
decrease in general and administrative expenses from $1,097,399 in 1996 to
$1,029,383 in 1997. The decrease is due mainly to an increase in allocation of
certain expenses to selling and marketing activities. Selling expenses increased
from $718,757 to $881,965. The increase is due in part to the increase in
allocation of certain expenses as stated above and in part to a continued
increase in sales and marketing efforts for both the fiberglass and concrete
cooling towers. Management expects increased investment in selling expenses to
have a positive impact on revenues in future periods. Research and development
expenses increased from $251,579 in the first nine months of 1996 to $523,515 in
the first nine months of 1997. Management expects to continue to conduct
research to develop refinements in cooling tower design and construction.
Although the Company has no fixed research and development budget, such costs
are anticipated to continue at current levels.
The Company's income from operations for the nine months ended August
31, 1997, was $1,718,216 as compared to income from operations of $1,299,846 for
the comparable period in the prior year. After interest expense and
miscellaneous items, the Company's net income was $1,284,270 compared to net
income of $1,026,344 for the nine months ended August 31, 1996. The increase in
the Company's net income reflects the Company's success in developing and
marketing of its technology and products both nationally and internationally.
Liquidity and Capital Resources
At August 31, 1997, the Company had working capital of $7,711,297 as
compared to working capital of $3,641,797 at May 31, 1997. Improvement in the
Company's liquidity during the third quarter resulted primarily from reductions
in current liabilities due to financing activities during the quarter, described
below. The Company also received approximately $862,000 from the exercise of
common stock warrants during the quarter. The Company's cash flow provided by
and used in its operating, investing and financing activities during the first
nine months of 1997 and 1996 are as follows:
<TABLE>
1997 1996
---- ----
<CAPTION>
<S> <C> <C>
Operating activities ($436,955) ($2,316,665)
Investing activities ($2,289,126) ($1,093,792)
Financing activities $3,294,554 $3,448,501
</TABLE>
The Company's capital requirements for its continuing operations
consist of its general working capital needs, scheduled payments on its debt
obligations and capital expenditures. Management anticipates that the Company's
operating activities will require cash during the next six to nine months which
primarily relates to the anticipated growth in receivables and inventory levels
to support expanding sales. The Company tries to minimize its inventory of
component parts, although minimum order requirements of some suppliers can cause
inventory levels to fluctuate significantly from period to period. Similarly,
management attempts to manage accounts receivable to increase cash flow, but it
is anticipated that accounts receivable will increase as sales increase. Other
significant variances in working capital items can also be expected. Also, the
Company's concrete construction projects will have a greater effect on working
capital requirements in the future. At August 31, 1997, net costs in excess of
billing and estimated earnings on uncompleted contracts were $219,047 as
compared to net costs in excess of billings and estimated earnings on
uncompleted concrete construction projects of $509,749 at May 31, 1997.
Generally, concrete construction projects provide for progress payments of the
contract price with a retainage of 10 to 15 percent payable after completion of
the project.
Scheduled principal payments on capital leases total $122,345 over the
next twelve months. In addition, $813,872 of the Company's debt will become due
and payable during the next twelve months.
Budgeted capital expenditures during the next four quarters consist of
the costs of completing and equipping the new manufacturing facility in south
Oklahoma City. The 100,000 square foot manufacturing facility will cost
approximately $8.0 million, including equipment and tooling and is expected to
be completed by mid-November. Construction of the accompanying administration
facility has been delayed until the Company obtains additional financing to
begin its construction. The manufacturing facility will include equipment to
allow the Company to produce parts used in the TTMT Series cooling towers which
are currently purchased from outside vendors. Management believes that product
costs can be reduced by producing these parts in-house. However, the Company may
incur unforeseen costs and production problems, particularly in the short term,
in bringing this process in-house.
The new manufacturing facility has been financed with a $4.4 million
loan from the Oklahoma Industries Authority (the "OIA") and a portion of the
proceeds of a private placement of $6.0 million of 10% Convertible Subordinated
Debentures (the "Debentures"). The industrial revenue bonds were issued by the
OIA in October 1996. The bonds paid interest only for the first nine months out
of an interest reserve fund of $238,000 set aside from the bond proceeds.
Beginning October 1, 1997, the bonds are payable in quarterly installments of
principal and interest in the amount of $157,000. A debt service reserve fund of
$157,000 was also set aside from the bond proceeds. The balance of the bond
proceeds, less issuance costs, is available to fund construction of the
facility. The OIA holds a mortgage on the facility to collateralize the bond
indebtedness.
The Debentures were issued by the Company during the third quarter of
1997, yielding net proceeds of approximately $5,467,000. The Debentures bear
interest at 10 percent, which is payable semiannually, and mature on June 30,
2000. The principal balance of each Debenture is convertible into shares of
common stock at a price of $8.75 per share at the option of each Debenture
holder or at the option of the Company if the closing price of the common stock
is at least 175% of the conversion price for 20 of 30 consecutive trading days
and certain other conditions are satisfied.
In September 1997, the Company entered into a loan agreement with the
City of Oklahoma City under which a HUD Section 108 loan in the amount of $1.25
million is available to the Company for start-up expenses of the manufacturing
facility and associated working capital requirements. Initially the loan bears
interest at 20 basis points above the LIBOR rate, adjusted monthly, and interest
only is payable quarterly. When HUD provides permanent financing, the interest
rate becomes fixed at the rate charged by HUD to the City and principal and
interest are payable quarterly based on an eight-year amortization period. The
loan is collateralized by a second mortgage on the manufacturing facility. The
Company is currently negotiating with lenders to provide financing for plant
equipment, tooling and computer system, and a $5.0 million revolving line of
credit for working capital purposes.
The Company has loans and a line of credit with noncommercial lenders
totaling $3,500,000 to finance its working capital needs, of which
$2,499,507,was outstanding at August 31, 1997. Interest rates and payment terms
are as follows:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Loan Interest Interest Maturity
Amount Rate Payable Date
$ 499,507 13% Quarterly 5/31/98
$ 500,000 13% Quarterly 3/25/99
$ 1,000,000 11.25% Quarterly 5/8/99
$ 500,000 11.25% Quarterly 5/8/99
</TABLE>
Management also has secured a line of credit at Chickasha Bank in the
amount of $400,000 for short-term cash flow needs, of which $380,000 was
outstanding at August 31, 1997. This line of credit bears interest at the bank's
base floating rate, which was 10% at August 31, 1997. This note was renewed in
September 1997, and matures April 1, 1999. Interest is payable quarterly
beginning January 1, 1998. In December 1995, the Company secured financing in
the amount of $294,505 to acquire extrusion equipment to produce the water
collection system for the cooling towers. Previously these parts were
out-sourced. However, to insure quality and an uninterrupted supply, the Company
made the decision to bring this manufacturing process in-house. This note is
payable monthly and matures in January 2000. In April 1995, the Company secured
a real estate mortgage in the amount of $116,000 to finance the acquisition of
property adjacent to its existing facilities to be used as offices. Principal
and interest on this mortgage is due in monthly payments of $1,555 with the
remaining principal and interest due April 22, 2000. This mortgage bears
interest at the bank's base floating rate, which was 10% at August 31, 1997. In
October 1995, the Company obtained another mortgage loan in the amount of
$83,723 collateralized by real estate. The loan bears interest at the bank's
floating rate, which was 10% at August 31, 1997, and is payable semi-annually,
and matures on September 22, 2000. In April 1996, the Company secured an
$1,200,000 credit arrangement with one of its major vendors to fund materials
purchased from the vendor of which $510,000 was included in accounts payable at
August 31, 1997.
The Company has sufficient capital resources to fund its ordinary
capital requirements for at least the next four quarters. Additional debt and
equity capital will be required to finalize the expansion in Oklahoma City.
Management is very pleased with the continued improvement in the Company's
liquidity and capital resources and believes that the Company's improved
financial position will facilitate additional growth. Although the Company's
financial position has improved, substantial growth beyond that projected by
management could increase the Company's capital requirements and require it to
obtain additional capital to maintain its growth.
Forward Looking Statements
Statements of the Company's or management's intentions, beliefs,
anticipations, expectations and similar expressions concerning future events
contained in this report constitute "forward looking statements" as defined in
the Private Securities Litigation Reform Act of 1995. As with any future event,
there can be no assurance that the events described in forward looking
statements made in this report will occur or that the results of future events
will not vary materially from those described in the forward looking statements
made in this report. Important factors that could cause the Company's actual
performance and operating results to differ materially from the forward looking
statements include, but are not limited to, changes in the general level of
economic activity in the markets served by the Company, competition in the
cooling tower industry and the introduction of new products by competitors,
delays in refining the Company's manufacturing and construction techniques, cost
overruns on particular projects, availability of capital sufficient to support
the Company's level of activity and the ability of the Company to implement its
business strategy.
<PAGE>
PART II
Item 1. Exhibits
The following exhibits have been filed as part of this registration
statement:
Exhibit No. Description
3.1-1 Amended and Restated Certificate of Incorporation of Tower
Tech, Inc.
3.2-1 Amended Bylaws of Tower Tech, Inc.
3.3-1 Amendment to Bylaws
4.1-7 Form of 10% Subordinated Convertible Debenture
4.2 Omitted
4.3-1 Form of Stock Certificate
4.4-1 Form of Underwriters' Warrants
4.5-8 Form of Placement Agent Warrants
4.10-3 Registration Rights Agreement, dated February 2, 1996,
among Tower Tech, Inc., Lancer LP, Michael Taglich,
and Robert Taglich.
10.1-5 Promissory Note between Tower Tech, Inc., and Campbell,
Hurley, Campbell and Campbell, dated August 1, 1996.
10.2 Loan Agreement between Tower Tech, Inc., and the City of
Oklahoma City, dated September 8, 1997.
10.3 Form of Loan Agreement between Tower Tech, Inc., and
Chickasha Bank & Trust, dated September 22, 1997.
10.4-6 Loan Agreement between Tower Tech, Inc., and Oklahoma
Industries Authority dated October 1, 1996
10.5-7 Form of Debenture Purchase Agreement among the Company,
Taglich Brothers, D'Amadeo Wagner & Company, Incorporated
and various lenders.
10.6 Promissory Note between Tower Tech, Inc. and Electrical
Constructors, Inc., dated May 8, 1996
10.7 Note between Tower Tech, Inc., as Maker, and Electrical
Constructors, as Payee, dated May 8, 1996
<PAGE>
10.8-1 Promissory Note between ower Tech, Inc., and Electrical
Constructors, dated March 25, 1997.
10.9-1 Agreement by and between Morrison Molded Fiber Glass Co.,
and Tower Tech, Inc., made effective July 26, 1993,
regarding the purchase by Tower Tech, Inc. of certain
pultruded components from Morrison Molded Fiber Glass
Company
10.10-1 U. S. Patent No. 5,143,657 entitled FLUID DISTRIBUTOR
issued September 1, 1992
10.11-1 U. S. Patent No. 5,152,458 entitled AUTOMATICALLY
ADJUSTABLE FLUID DISTRIBUTOR issued October 6, 1992
10.12-1 U. S. Patent No. 5,227,095 entitled MODULAR COOLING TOWER
issued July 13, 1993
10.13-1 Exclusive License Agreement by and between Harold D.Curtis
and Tower Tech, Inc.
10.1-1 Assignment by and between Harold D. Curtis, as Assignor,
and Tower Tech, Inc., as Assignee
10.15-1 Assignment of Invention Contained in PCT Application by
and between Harold D. Curtis, as Assignor, and Tower Tech,
Inc., as Assignee
<PAGE>
10.16-1 Assignment of Patent by and between Harold D. Curtis, as
Assignor, and Tower Tech, Inc., as Assignee, of Patent No.
5,227,095
10.17-4 1993 Stock Option Plan, as amended
10.18 Omitted
10.19 Omitted
10.20 Omitted
10.21 Promissory Note between Tower Tech, Inc. and J. David
Bronstad, dated May 31, 1996
10.22 Omitted
10.23 Omitted
10.24 Omitted
10.25 Omitted
10.26 Omitted
10.27 Omitted
10.28 Omitted
10.29 Omitted
10.30 Omitted
10.31-2 Warrant Certificate, dated April 25, 1995, between J.
David Bronstad and Tower Tech, Inc., entitling J. David
Bronstad to purchase 40,000 shares of Tower Tech, Inc.'
common stock, $.001 par value
10.32-2 Warrant Certificate, dated April 25, 1995, between James
McDonald and Tower Tech, Inc., entitling James McDonald
to purchase 10,000 shares of Tower Tech, Inc.'s common
stock, $.001 par value
1 Incorporated by reference from the same numbered exhibit to Registration
Statement No. 33-69574-FW, as filed with the Commission on September 29,
1993, and as amended.
2 Incorporated by reference from the same numbered exhibit to Form 10-QSB
for the quarter ended August 31, 1996.
3 Incorporated by reference from the same numbered exhibit to Form 10-KSB/A
for the year ended November 30, 1995.
4 Incorporated by reference from the same numbered exhibit to Registratio
Statement No. 333-07337 on Form S-8.
5 Incorporated by reference from the same numbered exhibit to Form 10-QSB
for the quarter ended August 31, 1996.
6 Incorporated by reference from the same numbered exhibit to Form
10-KSB for the year ended November 30, 1996.
7 Incorporated by reference from the same numbered exhibit to Form 10-QSB
for the quarter ended May 31, 1997.
8 Incorporated by reference from the same numbered exhibit to Registration
Statement No. 333- Form S-3, as filed with the Commission on September
26, 1997.
(b) The Company did not file any reports on Form 8-K during the quarter
ended August 31, 1997.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TOWER TECH, INC.
(Registrant)
Date: October 14, 1997 ss/HAROLD CURTIS
----------------------
Harold Curtis, Chief Executive Officer
Date: October 14, 1997 ss/CHARLES D. WHITSITT
-----------------------
Charles D. Whitsitt, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON PAGES 3 THROUGH 7 OF THE
COMPANY'S FROM 10-QSB FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> JUN-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 1,418,805
<SECURITIES> 0
<RECEIVABLES> 5,936,590
<ALLOWANCES> 22,645
<INVENTORY> 3,618,471
<CURRENT-ASSETS> 12,076,285
<PP&E> 7,729,515
<DEPRECIATION> 437,705
<TOTAL-ASSETS> 23,369,053
<CURRENT-LIABILITIES> 4,364,988
<BONDS> 0
0
0
<COMMON> 3,526
<OTHER-SE> 8,082,294
<TOTAL-LIABILITY-AND-EQUITY> 23,369,053
<SALES> 4,027,716
<TOTAL-REVENUES> 4,277,716
<CGS> 2,616,053
<TOTAL-COSTS> 3,547,104
<OTHER-EXPENSES> 931,051
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 164,055
<INCOME-PRETAX> 603,305
<INCOME-TAX> 0
<INCOME-CONTINUING> 603,305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 603,305
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
Exhibit 10.21
PROMISSORY NOTE - FIXED RATE - COMMERCIAL ADVANCE
$2,000,000.00 Chickasha, Oklahoma
May 31, 1996
PRINCIPAL AMOUNT. The principal amount of this note shall be Two Million
and No/100 Dollars ($2,000,000).
MATURITY DATE. The maturity date of this note shall be May 31, 1998.
INTEREST RATE. The interest rate of this note shall be 13.00% per annum.
PAYMENT TERMS. The outstanding principal balance plus unpaid accrued interest
shall be due and payable at maturity. Accrued interest shall be payable
quarterly beginning on August 31, 1996.
PROMISE TO PAY. For value received, Tower Tech, Inc., an Oklahoma corporation,
hereinafter "Debtor", agrees to the terms of this Note and promises to pay to
the order of J. David Bronstad, hereinafter "Lender" at 3101 Castle Rock, Villa
#82, Oklahoma City, OK 73120 as indicated in this Note or at such other places
as may be designated in writing by Lender, the Principal Amount of this Note
together with interest on the unpaid Principal Amount until Maturity at the per
annum interest rate or rates stated above and according to the Payment Terms
stated in this Note. Interest on this Note is calculated on the actual number of
days elapsed on a basis of a 365 day year unless otherwise indicated above. For
purposes of computing interest and determining the date principal and interest
payments are received, all payments will be deemed made only when received in
collected funds. Payments are applied first to accrued and unpaid interest and
other charges, and then to unpaid Principal Amount.
ADVANCES AND PAYMENTS. It is agreed that the sum of all advances under this Note
may exceed the Principal Amount as shown above, but the unpaid balance shall
never exceed said Principal Amount. Advances and payments on this Note shall be
recorded on records of Lender and such records shall be prima facie evidence of
such advances, payments and unpaid principal balance. Subsequent advances and
the procedures described in this Note shall not be construed or interpreted as
granting a continuing line of credit for Principal Amount. Lender reserves the
right to apply any payment by Debtor, or for account of Debtor, toward this Note
or any other obligation of Debtor to Lender.
PREPAYMENT. Except as otherwise provided in this Note, Debtor shall have the
right to prepay all or any part of principal due under this Note at any time
without penalty, subject to the following condition: all interest must be paid
through the date of any prepayment.
COLLATERAL. This Note and all other obligations of Debtor to Lender, including
renewals and extensions, are secured by all collateral securing this Note and by
all other security interests previously or later granted to Lender and by all
money, deposits and other property owned by Debtor and in Lender's possession or
control.
ACCELERATION. At option of Lender, the unpaid balance of this Note and all other
obligations of Debtor to Lender, whether direct or indirect, absolute or
contingent, now existing or later arising, shall become immediately due and
payable without notice or demand, upon or after the occurrence or existence of
any of the following events or conditions: (a) Any payment required by this Note
or by any other note or obligation of Debtor to Lender is not made when due, or
any event or condition occurs or exists which results in acceleration of the
maturity of any Debtor's obligation to Lender under any promissory note,
agreement or undertaking; (b) Debtor defaults in performing any covenant,
obligation, warranty or provision contained in any loan agreement or in any
instrument or document securing or relating to this Note or any other note or
obligation of Debtor to Lender; (c) any warranty, representation, financial
information or statement made or furnished to Lender by or on behalf of Debtor
proves to have been false in any material respect when made or furnished; (d)
Lender determines, at any time and upon reasonable basis, that the prospect of
payment of this Note is impaired; (e) whenever, in Lender's reasonable judgment,
the collateral for the debt evidenced by this Note becomes unsatisfactory or
insufficient either in character or value and, upon request, Debtor fails to
provide additional collateral as required by Lender; (f) a receiver is appointed
over all or part of any Debtor's property, or Debtor files for relief under any
bankruptcy or insolvency laws, or becomes subject to an involuntary proceeding
under such laws.
ADDITIONAL PROVISIONS. (1) No waiver by Lender of any payment or other right
under this Note, any related agreement or documentation shall operate as a
waiver of any other payment or right. Debtor waives presentment, notice of
acceleration, notice of dishonor and protest and consent to substitutions,
releases and failure to perfect as to collateral. (2) This Note and obligations
evidenced by it are to be construed and governed by the laws of the State of
Oklahoma. (3) Debtor agrees to pay cost of collection, including, as allowed by
law, reasonable attorney's fees. No variation, condition, modification, change
or amendment to this Note or related documents shall be binding unless in
writing and signed by both parties. No legal relationship is created by the
execution of this Note and related documents except that of debtor and creditor
or as stated in writing.
This note is secured by a Security Agreement and Financing Statements
dated May 31, 1996.
TOWER TECH, INC.
By: ss/HAROLD CURTIS
-------------------------
Harold Curtis, President
GUARANTEE
For value received, the undersigned, Harold Curtis and Carolyn Curtis,
as primary obligors, hereby jointly and severally unconditionally guarantee the
prompt payment of principal and interest on the foregoing promissory note when
and as due in accordance with its terms, and hereby waive diligence,
presentment, demand, protest, or notice of any kind whatsoever, as well as any
requirement that the holder exhaust any right or take any action against the
maker of the foregoing promissory note and hereby consent to any extension of
time or renewal thereof.
ss/ HAROLD CURTIS
----------------------
Harold Curtis
ss/ CAROLYN CURTIS
----------------------
Carolyn Curtis
TOWER TECH LOAN
Exhibit 10.2
LOAN AGREEMENT
This Agreement made this 8th day of September, 1997, between The City
of Oklahoma City, an Oklahoma Municipal Corporation (hereinafter "Lender") and
Tower Tech Inc., a publicly held Oklahoma Corporation (hereinafter "Borrower").
Definitions Unless specifically provided otherwise or the context otherwise
requires, when used in the Loan Agreement:
(1) "Act" means the Housing and Community Development Act of 1974, Pub. L.
No. 93-383 codified as 42 U.S.C. ss.5301 et seq., as amended, and regulations
promulgated thereunder.
((2) "Audits" means the regular audit of the Borrower, a copy of which may
be requested by the Lender if required by HUD.
(3) "Appropriate Draw Request" shall consist of a complete and accurate
statement by the Borrower on forms supplied by Lender showing a complete and
detailed breakdown of the total costs and expenses incurred by Borrower for the
project for which reimbursement is being requested.
(4) "City" means the City of Oklahoma City, an Oklahoma municipal
corporation.
(5) "Closing Date" means the date of execution of this Loan Agreement by
the City.
(6) "Fiscal Agent" means the Chase Manhattan Bank, a banking corporation
organized and existing under the laws of the State of New York, or its successor
in interest, or any successor fiscal agent appointed as provided in the Fiscal
Agency Agreement.
(7) "Fiscal Agency Agreement" a fiscal agency agreement between the Lender
and Chase Manhattan Bank.
(8) "HUD" means the United States Department of Housing and Urban
Development and fiscal agents and other entities involved in Section 108 Loan
Guarantee funding transactions with the City.
(9) "HUD Note(s) means the City's Note(s) to HUD secured by a Section 108
Loan Guarantee.
(10) "Interim Loan" means Loan Funds advanced before the Public Offering
Date.
(11) "Interim Loan Period" means the period from the initial advance of
Loan Funds to the Public Offering Date.
(12) "Loan Funds" or "Funds" means proceeds of the sale of negotiable
securities sold at a public offering by Underwriter and secured by a Section 108
Loan Guarantee from HUD to the Underwriter.
(13) "Loan Documents" means this Loan Agreement, the Promissory Note, the
Mortgage, Fiscal Agency Agreement and other instruments, if any, securing
repayment of the Loan.
(14) "Low and Moderate- Income Persons" means
such persons as defined in 24 C.F.R. Part 570, Section 570.3.
(15) "Permanent Loan" means the cumulative Loan funds secured by the City's
Notes before and after the Public Offering Date.
(16) "Project" means the relocation of the Tower Tech manufacturing
facility to Oklahoma City and other working capital after the new plant is
opened.
(17) "Project Site" means the location of the Project at SW 119th Street
and Interstate 44 within the corporate boundaries of the City of Oklahoma City,
Oklahoma, as more particularly described in Attachment "A".
(18) "Promissory Note" or "Note" means the promissory note of even date
herewith from Borrower to Lender evidencing the Loan.
(19) "Public Offering Date" means the date on which the Underwriter offers
the City's HUD Notes.
(20) "Secretary" means the Secretary of Housing and Urban Development or
any other official of HUD to whom the Secretary has delegated authority pursuant
to the Act.
(21) "Section 108" means Section 108 of the Act, codified as 42 U.S.C.
ss.5308, as amended, and regulations promulgated thereunder.
(22) "Section 108 Loan Guarantee" means the loan guarantee provided by HUD
to Underwriter pursuant to the Act.
(23) "Underwriter" means Federal Short-Term U.S. Government Trust or such
other entity designated by HUD.
(24) "Term" means the term of this Agreement, which shall commence upon the
Closing Date and shall terminate on the eighth anniversary thereof.
RECITALS
WHEREAS, Borrower has applied to the Lender for a Loan in the principal
sum of One Million Two Hundred and Fifty Thousand Dollars ($1,250,000) from the
proceeds of a Section 108 Loan Guarantee to the Lender, and Lender has agreed to
make a loan of such funds upon the terms and conditions set forth below; and
WHEREAS, the purpose of this Loan is to assist the Borrower in the
relocation of his manufacturing facility to Oklahoma City and providing
operating capital to aid the borrower in the transition; and
WHEREAS, the Planning Department ("Planning") of the Lender is
responsible within The City of Oklahoma City for the receipt and disbursement of
the proceeds of Notes guaranteed by HUD under a Section 108 Loan Guarantee
Program with the City pursuant to the Act; and
WHEREAS, the development of the Project will add an additional 140
presently existing employees to the Oklahoma City area economy and will add
approximately 200 new employees within the next three years and will provide
other public benefits and qualify for Section 108 assistance under 24 CFR
570.208(c); and the Lender has agreed to provide Loan Funds to Borrower for the
Project; and the Loan from the Lender to Borrower for the Project will assist in
the development of the Project; and
WHEREAS, the Loan shall be evidenced by this Loan Agreement, the
Borrower's Promissory Note, Fiscal Agency Agreement and the Mortgage; and
WHEREAS, the Lender is willing to make the Loan to Borrower exclusively
for the purposes hereinabove set forth, all upon the terms and conditions herein
set forth; and
WHEREAS, the Lender makes no commitment to future support and assumes
no obligation for future support of the activities contracted for herein, except
as expressly set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
terms, covenants and conditions, representations and warranties contained
herein, the parties hereto agree as follows:
TITLE I
THE LOAN
1.1 The Loan. In reliance upon Borrower's representations and warranties
contained herein, and subject to the terms and conditions set forth herein, the
Lender hereby agrees to make a Loan to Borrower in the sum of One Million Two
Hundred Fifty Thousand Dollars ($1,250,000) exclusively for the purposes set
forth herein, which Loan shall be funded out of funds received by the Lender
through HUD from the sale of the HUD Note(s) under the Section 108 Loan
Guarantee Program and from no other source. Borrower shall have the right to
receive Loan Funds only pursuant to the terms and conditions of this Agreement
and in accordance with the Act, and then only to the extent Section 108 Loan
proceeds are made available to the Lender by HUD. Should anticipated sources of
Loan Funds become unavailable to the Lender, the Lender shall within a
reasonable time not to exceed ten (10) working days notify Borrower in writing
and the Lender shall be released from all liability for that portion of the
Funds to be provided to Borrower by the Lender under this Loan Agreement which
have not been received by the Lender from HUD.
1.2 Loan Documentation. The Loan will be evidenced by this Loan Agreement,
the Note, Fiscal Agency Agreement and the Mortgage.
1.3 Demand. Lender may demand repayment of the Loan in the event of the
occurrence of an Event of Default hereunder.
1.4 Lender's Expense. Borrower agrees and acknowledges that all Lender's
expense with respect to the sale of the bonds for permanent financing and any
additional charges imposed by HUD, the Fiscal Agency Agreement and the Custodial
Accounts shall be deducted from the Loan Funds.
<PAGE>
ARTICLE II
BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to make the Loan, Borrower represents and
warrants (which representations and warranties shall be true and correct as of
the execution hereof and shall survive the execution and delivery of this Loan
Agreement) as follows:
2.1 Organization of Borrower; Authority to Enter into Agreement.
Borrower is an Oklahoma corporation duly formed and validly in existence and in
good standing pursuant to laws of the State of Oklahoma and duly domesticated in
the State of Oklahoma. Borrower has the right and power to purchase and occupy
the Project Site, and to develop the Project; and Borrower has full power and
authority to enter into this Agreement. The execution, delivery and performance
of this Agreement has been duly authorized by all necessary corporate action and
no other authorization by Borrower is required for the execution, delivery and
performance of this Agreement.
2.2 No Litigation. As of the date of execution of this Agreement, there
are no actions, suits or proceedings pending, or to the knowledge of Borrower
threatened against or affecting it, its controlling Board, or the Project in any
court at law or in equity, or before or by any governmental or municipal
authority which might have a materially adverse effect on the ability of
Borrower to perform its obligations hereunder.
2.3 Title. Borrower has legal title in the Project Site sufficient to
enable Borrower to develop the Project thereon.
2.4 Covenants, Zoning and Codes. Borrower has complied to date and will
continue to comply with all applicable environmental statutes and regulations
applicable to the development of the Project. All permits, consents, approvals
or authorizations by, or registrations, declarations, withholding of objections
or filings with any governmental body necessary in connection with the valid
execution, delivery and performance of the Loan Documents, or presently
necessary for the development of the Project, have been obtained, are valid,
adequate and in full force and effect or will be obtained prior to the
commencement of any Project Activities for which a permit, consent, approval or
authorization is necessary. Development of the Project will in all respects
conform to and comply with all covenants, conditions, restrictions and
reservations affecting the Project Site and with all applicable zoning,
environmental protection, use and building codes, laws, regulations and
ordinances.
<PAGE>
2.5 Creation of Jobs. Lender and the Secretary have relied upon
representations made by Borrower that the Project is expected to create a
specific number of permanent new job opportunities, including a specific number
of new permanent job opportunities for Low and Moderate-Income Persons. By its
execution of the Loan Documents, Borrower acknowledges its representation
pertaining to the creation of jobs and obligates itself to create approximately
200 new permanent jobs. Borrower agrees to use its best efforts to ensure that
at least 51 percent of all new permanent jobs resulting from the Project are
made available to Low and Moderate- income Persons.
2.6 Compliance With Documents. As of the date hereof and for so long as
this Agreement remains in effect, Borrower is and shall remain in full
compliance with all of the terms and conditions of the Loan Documents, and no
Event of Default has or shall have occurred and be continuing, which, with the
lapse of time or the giving of notice, or both, would constitute such an Event
of Default under the foregoing.
2.7 Incorporation of Representations and Warranties. The request by
Borrower for any payment of Loan funds under the Loan Documents shall constitute
a certification by Borrower that the aforesaid representations and warranties
are true and correct as of the date of such request.
ARTICLE III
CONDITIONS PRECEDENT TO LOAN CLOSING
The Lender's obligation to enter into and perform its duties under the
Loan Documents shall be subject to the full and complete satisfaction of the
following conditions precedent:
3.1 Documents. The Lender shall have received and approved fully
executed originals of this Loan Agreement, the Note, and the Mortgage which
shall have been duly authorized, executed and delivered by Borrower.
3.2 Evidence of Authority. The Lender shall, upon written request,
receive evidence satisfactory to it that Borrower and the persons signing on
behalf of Borrower have the capacity and authority to execute and deliver the
Loan Documents on behalf of Borrower.
<PAGE>
3.3 Insurance. Borrower shall, for so long as the Loan Documents remain
in effect, at its cost and expense, carry and maintain general public liability
insurance against claims for bodily injury, personal injury, death and property
damage occurring or arising out of the Project, which insurance shall cover such
claims as may be occasioned by any act, omission, or negligence of Borrower or
its officers, agents, representatives, assigns or servants relating to the
Project. The limits of liability insurance, which may be required to be
increased from time to time as deemed necessary by the Lender, with the approval
of Borrower, which shall not be unreasonably withheld, shall be not less than
One Million Dollars ($1,000,000.00) combined single limit personal injury and
property damage insurance. The insurance required above shall be issued by an
insurance company or companies authorized to do business within the State of
Oklahoma or by such other similar insurance coverage approved by the Insurance
Commissioner of the State of Oklahoma. The Lender shall be specifically named as
an additional insured on all such policies, and any such policy or policies
shall be primary to any other valid and collectible insurance.
ARTICLE IV
CONDITIONS PRECEDENT TO LOAN DISBURSAL
4.1 Conditions Precedent to Disbursal of Loan Funds. The Lender's
obligation to disburse Loan Funds pursuant to the terms hereof shall, in
addition to compliance with the terms of Article III hereof, be subject to
satisfaction of the following condition precedent:
(a) The Lender shall have received and have in its possession sufficient
proceeds from HUD to fund the disbursal request of Borrower. Borrower
acknowledges that it has no right to the Loan funds other than to have them
disbursed by the Lender in accordance with the terms of this Loan Agreement
and in accordance with the Act and then only to the extent the Lender has
received funds from HUD.
(b) Receipt by Lender of an Appropriate Draw
Request covering the sum to be reimbursed for eligible expenses incurred to
develop the Project.
4.2 Conditions Precedent to Subsequent Disbursals. In addition to compliance
with the conditions set forth in Section 4.1 hereof, Lender's obligation to
make any dispersal of Loan Funds after the initial dispersal shall be
subject to satisfaction of the following conditions precedent:
(a) Borrower shall be in full compliance and shall not be in
default hereunder or under any of the Loan Documents, provided,
however, that Lender may, in its sole discretion, elect to make
advances notwithstanding the existence of a default, and any advance so
made shall be deemed to have been made pursuant to the Loan Documents;
(b) Neither the Project nor the Project Site nor any part
thereof shall have been materially damaged, destroyed, condemned or
threatened with condemnation unless Borrower shall show to Lender's
satisfaction that the Project remains viable; and
(c) No order or notice shall been made by, or received from,
any governmental agency having jurisdiction, stating that the
development of the Project is or will be in violation of any law,
ordinance, code or regulation affecting the Project Site.
4.3 Borrower's Draw Requests. Subject to the conditions precedent in
Section 4.1 (a), Lender agrees that it will make every reasonable effort to
disburse the Loan installments within ten (10) days after receipt of each
Appropriate Draw Request from Borrower provided said Draw Request is submitted
on any Monday work day.
4.4 Collateral. Borrower has executed a Promissory Note of even date
with this Loan Agreement to evidence its promise to repay the Loan. The
Promissory Note will be secured by a Mortgage on the Project Site.
ARTICLE V
BORROWER'S LOAN COVENANTS
5.1 General. From and after the date hereof and during the Term,
Borrower covenants and agrees that it will:
(a) Accomplish the project and provide for the "Creation of
Jobs" as set forth in Section 2.5. (b) Obtain and maintain the
insurance required herein.
5.2 Payment of Obligations. Borrower shall pay all indebtedness, taxes
and other obligations pertaining to the Project or Project Site for which it is
liable before they shall become delinquent; provided, however, Borrower shall
have the right to contest any such obligations in good faith, and shall not be
obligated to pay any such obligation so long as such contest has not been
finally determined.
5.3 Changes to Project. There shall be no material change to the
Project without the prior written approval of the Lender, and, to the extent
that such approvals may be required, the appropriate governmental authorities.
5.4 Compliance with Laws. All work performed in connection with
Borrower's development of the Project and Borrower's use of the proceeds of the
Loan shall comply with the Act and all other applicable laws, ordinances, rules
and regulations of federal, state, county or municipal governments or agencies.
<PAGE>
5.5 Inspections. The Lender and the Secretary or their representatives
shall have the right at all reasonable times during regular business hours (and
at any time in the event of an emergency) to enter upon the Project Site and
inspect the Project to determine that the same is in conformity with this Loan
Agreement and all laws, ordinances, rules and regulations applicable to
Borrower's use of the Loan Funds. The Lender and the Secretary or their
representatives shall have the further right, from time to time, to inspect
Borrower's books and records relating to Borrower's use of the Loan Funds.
Without limiting the foregoing, Borrower shall permit the Lender and the
Secretary or their representatives to examine and copy all books, records and
other papers relating to Borrower's use of the Loan Funds to insure Borrower's
compliance with the Act and applicable provisions of 24 CFR Part 570. The Lender
agrees that subject to provisions of the Oklahoma Open Records Act, 51 Okla.
Stat. 1991, ss. 24.A.1 et seq. and any other applicable law, to keep all
information regarding Borrower and its operations confidential, and to provide
Borrower with prior notice and an opportunity to object to any request for
disclosure of such information, other than to the Secretary or as otherwise
required by law.
5.6 Notify the Lender of Litigation or Complaints. Borrower shall
immediately notify the Lender in writing, of all material proceedings,
litigations or claims which may adversely affect Borrower's rights hereunder or
any part of the Project or Project Site, and of all material complaints or
charges made by any governmental authority affecting Borrower, the Project, or
the Project Site which may require material changes in the development of the
Project.
5.7 Indemnify the Lender. Borrower shall indemnify and hold the Lender,
its elected and appointed officials and any employees, harmless from all claims
and causes of actions of any person or entity which results in damages or injury
incurred by the Lender of whatsoever nature (excluding any consequential or
incidental damages or damages, claims or causes of action due to the Lender's
negligence or the Lender's breach of this Loan Agreement), caused by any acts or
omissions of Borrower and arising out of or in any way connected with this Loan
Agreement, the Project Site and or the development of the Project or arising out
of Borrower's breach of the provisions of this Loan Agreement, including the
cost and defense thereof using counsel approved by the Lender. Notwithstanding
anything contained herein to the contrary, the foregoing indemnification given
by Borrower to the Lender shall not be effective or enforceable against Borrower
unless the Lender gives Borrower written notice of any such claims or causes of
action of said person or entity made against the Lender within ten (10) working
days of the Lender's knowledge of such claims or causes of action, and the
Lender does not commence or enter into any settlements or negotiations of
settlement with any person or entity relating to the matters covered by
Borrower's indemnification without Borrower's prior written consent. If Borrower
fails to defend or perform its obligations under this indemnification within
twenty (20) days after written request by the Lender, the Lender may settle,
commence, or defend any action or proceeding purporting to affect the rights,
duties or liabilities of the Lender, the parties to the Loan Document, or the
Project Site or the Project and Borrower shall pay all of the Lender's costs and
expense incurred thereby on demand. This section shall survive execution,
delivery and performance of the Loan Documents.
5.8 Further Assistance. Borrower shall at any time and from time to
time upon request of the Lender take or cause to be taken any action or execute,
acknowledge, deliver or record any further documents, opinions, or other
instruments which the Lender is required to do or obtain by HUD or by any other
federal, state or county regulatory agency or which the Lender feels are
required to carry out the intent of the Lender and Borrower under the Loan
Documents.
5.9 Upon failure of Borrower to comply with any of the foregoing Loan
Covenants, the Lender may declare an Event of Default hereunder and exercise its
rights and remedies pursuant to Article VI of this Agreement.
ARTICLE VI
DEFAULT AND REMEDIES
6.1 Event of Default. The occurrence of any of the following events and failure
to cure such occurrence within stated periods shall constitute an Event of
Default hereunder:
6.2
(a) Any breach by Borrower of any of the covenants and conditions of
the Loan Documents, which breach is not cured by Borrower to the Lender's
reasonable satisfaction within twenty (20) days from the receipt of written
notice thereof; provided, however, that in the event of a breach or default by
Borrower which is outside of the control of Borrower and which cannot be cured
within said twenty (20) days, Borrower shall have commenced to cure its breach
or default within said twenty (20) days and thereafter diligently proceed to
cure its breach or default; or
(b) Any written representation, warranty or disclosure made to the
Lender by Borrower that proves to be materially false or misleading as of the
date when made, whether or not such representation or disclosure appears in this
Loan Agreement; or
(c) Any material change in the development of the Project without the
prior written approval of the Lender which change is not corrected or
substantially corrected within twenty (20) days after receipt of written notice
thereof from the Lender to Borrower; or
(d) Failure by Borrower to defend, indemnify and/or hold harmless the
Lender pursuant to Section 5.7 to this Loan Agreement.
(e) Notwithstanding anything to the contrary contained herein, any
violation by Borrower of the Act or any other laws, ordinances, rules or
regulations applicable to the Project or Borrower's use of the Loan Funds shall
immediately constitute an Event of Default hereunder.
6.2 Remedies. Upon the occurrence of any Event of Default not timely
cured as provided herein, all of the outstanding principle balance and interest
accrued thereon, if any, shall be immediately due and payable and the Lender
shall have recourse against the collateral pledged as described in Section 4.4
hereof to the extent such amount remains unpaid.
6.3 Penalties. In the event of a default, interest at the per annum
rate established in the Note shall accrue on the total principal amount of the
Loan then outstanding, from the date of the occurrence of such default until
payment as required hereunder shall have been made in full.
ARTICLE VII
MISCELLANEOUS
7.1 No Waiver. No waiver of any default or breach by Borrower under the
Loan Documents shall be implied from any failure by Lender to take action on
account of such default if such default persists or is repeated, and no express
waiver shall be operative only for the time and to the extent therein stated.
Waivers of any covenant, term or condition contained herein shall not be
construed as a waiver of any subsequent breach of the same covenant, term or
condition. The consent or approval by Lender to, or of, any act by Borrower
requiring further consent or approval shall not be deemed to waive or render
unnecessary the consent or approval to, or of, any subsequent similar act.
7.2 Successors and Assigns. This Loan Agreement is made and entered
into for the sole protection and benefit of the Lender and Borrower, their
successors and assigns, and no other person or persons shall have any right of
action hereunder. The terms hereof shall inure to the benefit of the successors
and assigns of the parties hereto; provided, however, that Borrower's interest
hereunder cannot be assigned or otherwise transferred without the prior written
consent of the Lender.
7.3 Notices. Any notice, demand or request required under the Loan
Document shall be given in writing at the addresses set forth below by personal
service, overnight courier providing a receipt, or registered or certified first
class mail, return receipt requested. The addresses may be changed by notice to
the other party given in the same manner as provided above. If notice is given
by mail, it shall be deemed received on the earlier of: (I) receipt as shown on
the return receipt, or (ii) three (3) days after its deposit in the U.S. Mail.
<PAGE>
To Borrower: Tower Tech Inc.
P.O. Box 1838
Chickasha, OK 73023
Attention: Charles D. Whitsitt,
Chief Financial Officer
To The Lender: The City of Oklahoma City
Planning Department
420 West Main
Oklahoma City, OK 73102
Attention: Garner Stoll, Planning Director
7.4 Time. Time is of the essence of the Loan Document.
7.5 Amendments. No amendment, modification, or termination of any
provisions of any of the Loan Document shall in any event be effective unless
the same shall be in writing and signed by parties.
7.6 Headings. The article and section headings in no way define, limit,
extend or interpret the scope of the Loan Document or of any particular article
or section thereof.
7.7 Number and Gender. When the context in which the words are used in
the Loan Documents indicate that such is the intent, words in the singular
number shall include the plural and vice-versa. References to any gender shall
also include the other gender if applicable under the circumstances.
7.8 Validity. The provisions of this Loan Agreement are severable and
if any word, sentence, clause, phrase, or other portion of this Loan Agreement
is, for any reason, held invalid by any court of competent jurisdiction, such
portion shall be deemed a separate, distinct and independent provision and such
holding shall not affect the validity of the remaining portions of this Loan
Agreement.
7.9 Governing Law. This Loan Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma, except to the
extent federal law applies.
7.10 Survival of Warranties. All agreements, representations and warranties
made herein survive the execution and delivery of the Loan Document and the
making of the Loan hereunder and continue in full force and effect until the
obligations of Borrower under the Loan Documents are satisfied in full.
7.11 Venue and Forum. In the event that any legal action should be filed by
either party against the other, the venue and forum for such action shall be the
District Court of Oklahoma County, Oklahoma.
7.12 Attorney's Fees. In the event Lender shall bring an action to enforce
the terms and conditions of the Loan Documents, Lender, if prevailing, shall be
entitled to recover all of its costs and expenses, including, but not limited
to, reasonable attorney's fees as determined by the court.
7.13 Duplicate Originals. The Loan Document shall be executed in more than
one counterpart, each of the parties hereto shall receive an original
counterpart; provided, however, that all originals together shall constitute one
and the same agreement.
7.14 Other Federal Provisions. This Loan is subject to applicable
provisions contained in 24 CFR 570.
IN WITNESS WHEREOF, Borrower and the Lender have executed this Loan
Agreement as of the date first written above by and through their duly
authorized representatives.
THE CITY OF OKLAHOMA CITY
ss/Ronald J. Norick
-------------------------
RONALD J. NORICK, Mayor
ATTEST:
ss/Thomas P. Hurley
- ----------------------------
THOMAS P. HURLEY, City Clerk
APPROVED as to form and legality this 3rd day of September, 1997.
ss/Daniel L. Brunner
---------------------------
DANIEL L. BRUNNER, Assistant Municipal Counselor
TOWER TECH, INC.
By: ss/Charles D. Whitsitt
-----------------------------
CHARLES D. WHITSITT
ATTEST:
ss/Lana Morgan
- -------------------
LANA MORGAN
CORPORATE ACKNOWLEDGMENT
STATE OF OKLAHOMA
COUNTY OF OKLAHOMA
On this 8th day of September, 1997, before me personally appeared Charles D.
Whitsitt to me known to be the Treasurer, C. F. O. of Tower Tech, Inc., that
executed the within and foregoing instrument, and acknowledged said instrument
to be the free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned, and on oath stated that he/she was authorized to
execute said instrument and that the seal affixed is the corporate seal of said
corporation.
In Witness Whereof I have hereunto set my hand the day and year first above
written.
ss/Lana Morgan
--------------------------
LANA MORGAN, NOTARY PUBLIC
MY COMMISSION EXPIRES: 9/20/00
Exhibit 10.3
LOAN AGREEMENT
DATE OF AGREEMENT: 09/22/97
BORROWERS NAME AND ADDRESS
TOWER TECH, INC.
P.O. BOX 1838
CHICKASHA, OK 73023
LENDERS NAME AND ADDRESS
CHICKASHA BANK TRUST CO
P. O. Box 1307
CHICKASHA, OK 73023
The undersigned Borrower with principal office, place of record keeping and
mailing address as shown above, hereby acknowledges receipt of proceeds, or some
part thereof, or renewal thereof, of the following described loan and/or
extension of credit from the Lender named in this Agreement;
Loan #20720-16 dated 09/22/97 in the amount of $400,037.50 with a
maturity of 04/01/99.
IN CONSIDERATION of Lender making such loan and/or extension of credit, or any
part thereof, Borrower agrees as follows:
A. Financial Information. To deliver to Lender within the stated time limits the
following financial information and income tax returns as of the dates and for
the period indicated:
1. ANNUAL PERSONAL FINANCIAL STATEMENT
2. ANNUAL PERSONAL TAX RETURNS
3. ANNUAL CORPORATE FINANCIAL STATEMENT
4. ANNUAL CORPORATE TAX RETURNS
B. Litigation. To inform Lender promptly of any litigation, or of any claim or
controversy which might become the subject of litigation, against Borrower or
affecting any of Borrower's property, if such litigation or potential
litigation, in the event of an unfavorable outcome, would have a material
adverse effect on Borrower's financial condition;
C. Taxes. To pay promptly when due any and all taxes, assessments and
governmental charges against Borrower or against any of Borrower's property,
unless the same is being contested in good faith by appropriate proceedings and
reserves deemed adequate by Lender have been established therefor;
D. Labor and Material. To pay promptly all lawful claims whether for labor,
materials or otherwise, which might or could, if unpaid, become a lien or charge
on any property or assets of Borrower, unless and to the extent only that the
same are being contested in good faith by appropriate proceedings and reserves
deemed adequate by Lender have been established therefor;
<PAGE>
E. Insurance. To maintain with financially sound and reputable insurance
organizations approved by Lender, insurance of the kinds and covering the risks
and in the amounts usually carried by companies engaged in businesses similar to
that of Borrower, which insurance in all events shall be satisfactory to Lender
and provide suitable loss payable clauses in favor of Lender, and, at Lender's
request deliver to Lender evidence of the maintenance of such insurance; and
F. Accounting Records. To maintain adequate records in accordance with generally
accepted accounting principles of an transactions so that at any time and from
time to time the true and complete financial condition of the Borrower may be
readily determined.
G . BUILDING OCCUPANCY. TO OCCUPY THE BUILDING AS A MANUFACTURING OR PRODUCTION
FACILITY DURING THE TERM OF THE LOAN. IN THE EVENT THE BUILDING IS VACATED,
BORROWER AGREES THAT NO FURTHER ADVANCES WILL BE MADE AND THE BALANCE WOULD
BECOME DUE AND PAYABLE UPON DEMAND.
LENDER NAME AND ADDRESS
CHICKASHA BANK & TRUST CO.
P. O. 1307
CHICKASHA, OK 73023
By: ss/Tom L. Avant
-----------------------
TOM L. AVANT, VICE PRES.
BORROWER(S) SIGNATURE(S)
By: ss/Harold D. Curtis
-----------------------
HAROLD D. CURTIS, PRESIDENT
ss/Harold D. Curtis
-----------------------
HAROLD D. CURTIS, INDIVIDUALLY
ss/Carolyn M. Curtis
-----------------------
CAROLYN M. CURTIS, INDIVIDUALLY
Exhibit 10.6
PROMISSORY NOTE
$500,000.00 Chickasha, Oklahoma
May 8, 1996
MAKER: LENDER:
Tower Tech, Inc. Electrical Constructors
Post Office Box 1838 Maturity Date: May 8,1997
Chickasha, OK 73023 Amount of Note: $500,000.00
FOR VALUE RECEIVED, the undersigned Maker, agrees to the terms of this Note and
promises to pay to the order of Lender named below the Amount of Note together
with interest until Maturity at the per annum interest rate stated below.
PAYMENT TERMS. Principal due in full at maturity. Partial payments can be made
without penalty prior to maturity. Simple interest due quarterly. Beginning
interest rate shall be 11.25% per annum through June 1, 1996, on the unpaid
principal amount. Interest rate thereafter shall be determined and adjusted if
required, on the first day of each quarter, beginning June 1, 1996, and
calculated to be at the rate of New York Prime plus 3% as published in The Wall
Street Journal on said date or first date of publication after said date.
Interest rate shall not be less than 10%.
WAIVERS. All parties liable for payment hereunder shall be regarded as a
principal and agree that any party hereto with approval of holder may from time
to time renew this Note or consent to one or more extensions or deferrals of
Maturity Date for any term or terms and shall be liable in same manner as on
original note. All parties liable for payment hereunder waive presentment,
notice of dishonor and protest and consent to partial payments, substitutions or
release of collateral and to addition or release of any party or guarantor.
COLLATERAL. This Note and obligation of Maker to Lender, and all renewals or
extensions thereof, are secured by a lien and Right of Assignment on U.S. Patent
Number 5,227,095 for MODULAR COOLING TOWER, filed July 13, 1993, and on U.S.
Patent Number 5,152,458 for AUTOMATICALLY ADJUSTABLE FLUID DISTRIBUTOR filed
November 5, 1991 and on U.S. Patent Application Serial No. 08/352,023 for
INDUSTRIAL COOLING TOWER and any subsequently issued Patent from said
application. Notice of Lien and Right of Assignment shall be properly filed by
Maker with the U.S.
Patent and Trademark Office.
EVENTS OF DEFAULT. At option of Lender, the unpaid balance of this Note and all
other obligations of Maker to holder, whether direct or indirect, absolute or
contingent, now existing or hereafter arising, shall become immediately due and
payable without notice or demand upon the occurrence or existence of any of the
following events or conditions: (a) Any payment required by this Note is not
made when due. (b) Maker becomes insolvent or admits in writing its inability to
pay its debts as they become due; or any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any bankruptcy or insolvency law
is commenced in respect of Maker and is not dismissed within ninety (90) days.
<PAGE>
RIGHT OF ASSIGNMENT. At the option of Lender, in the event of default and upon
written notice to Maker that an occurrence of default has occurred, the Lender
shall receive an immediate assignment of all right, title and interest to the
patents specified as collateral. Lender agrees that Maker shall be entitled to a
non-exclusive royalty-free license of the subject patents for a period of one
year from the maturity date together with any renewals or extensions thereof.
During this license period, the Maker is entitled to redeem the assignment and
receive all right, title and interest in the subject patents upon payment in
full of all principal and interest accrued. In the event of default due to
insolvency or bankruptcy, Maker agrees that Lender may during the one-year
license period, license said patent technology to third parties under reasonable
commercial terms. Upon redemption of assignment by Maker, Maker shall receive
credit, less Lender's expenses, for license fees received and Maker shall assume
third party agreement as Licensor. Interest shall accrue from the effective date
of loan funding until payment in full of the entire principal.
GENERAL AUTHORITY and REMEDY. Maker hereby irrevocably appoints Lender and any
partner or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact, in the name of the Maker or its own name, for the sole
use and benefit of Lender, but at Maker's expense, at any time after an Event of
Default, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to carry out the
terms of this Right of Assignment and, without limiting the foregoing, Maker
hereby gives Lender the power and right on its behalf, upon notice to Maker to
sell, transfer, assign or otherwise deal in or with the subject patents, as
fully and effectually as if Lender were the absolute owner thereof. Upon payment
in full of this Note, the Right of Assignment and Power of Substitution shall
expire.
COLLECTION COSTS. Upon default all parties liable for payment hereunder
agree to pay reasonable costs of collection, including reasonable attorney's
fees.
LENDER MAKER
Electrical Constructors Tower Tech, Inc., an Oklahoma corporation
Post Office Box 2178 Post Office Box 1838
Columbus, Ohio 43216 Chickasha, OK 73023
ss/ JAMES ELLIOTT ss/ HAROLD CURTIS
- ---------------------- ------------------------
James Elliott, Partner Harold Curtis, Chief Executive Officer
ATTEST ATTEST:
ss/ DONALD HAYES ss/ LANA MORGAN
- ---------------------- -------------------------
Witness Lana Morgan, Corporate Secretary
Exhibit 10.7
PROMISSORY NOTE
$1,000,000.00 Chickasha, Oklahoma
May 8, 1996
MAKER: LENDER:
Tower Tech, Inc. Electrical Constructors
Post Office Box 1838 Maturity Date: May 8, 1999
Chickasha, OK 73023 Amount of Note: $1,000,000.00
FOR VALUE RECEIVED, the undersigned Maker, agrees to the terms of this Note and
promises to pay to the order of Lender named below the Amount of Note together
with interest until Maturity at the per annum interest rate stated below.
PAYMENT TERMS. Principal due in full at maturity. Partial payments can be made
after May 8, 1997, without penalty prior to maturity. Simple interest due
quarterly. Beginning interest rate shall be 11.25% per annum through June 1,
1996, on the unpaid principal amount. Interest rate thereafter shall be
determined and adjusted if required, on the first day of each quarter, beginning
June 1, 1996, and calculated to be at the rate of New York Prime plus 3% as
published in The Wall Street Journal on said date or first date of publication
after said date. Interest rate shall not be less than 10%.
WAIVERS. All parties liable for payment hereunder shall be regarded as a
principal and agree that any party hereto with approval of holder may from time
to time renew this Note or consent to one or more extensions or deferrals of
Maturity Date for any term or terms and shall be liable in same manner as on
original note. All parties liable for payment hereunder waive presentment,
notice of dishonor and protest and consent to partial payments, substitutions or
release of collateral and to addition or release of any party or guarantor.
COLLATERAL. This Note and obligation of Maker to Lender, and all renewals or
extensions thereof, are secured by a first lien and Right of Assignment on U.S.
Patent Number 5,227,095 for MODULAR COOLING TOWER, filed July 13, 1993, and on
U.S. Patent Number 5,152,458 for AUTOMATICALLY ADJUSTABLE FLUID DISTRIBUTOR
filed November 5, 1991 and on U.S. Patent Application Serial No. 08/352,023 for
INDUSTRIAL COOLING TOWER and any subsequently issued Patent from said
application. Notice of Lien and Right of Assignment shall be properly filed by
Maker with the U.S. Patent and Trademark Office.
EVENTS OF DEFAULT. At option of Lender, the unpaid balance of this Note and all
other obligations of Maker to holder, whether direct or indirect, absolute or
contingent, now existing or hereafter arising, shall become immediately due and
payable without notice or demand upon the occurrence or existence of any of the
following events or conditions: (a) Any payment required by this Note is not
made when due. (b) Maker becomes insolvent or admits in writing its inability to
pay its debts as they become due; or any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any bankruptcy or insolvency law
is commenced in respect of Maker and is not dismissed within ninety (90) days.
<PAGE>
RIGHT OF ASSIGNMENT. At the option of Lender, in the event of default and upon
written notice to Maker that an occurrence of default has occurred, the Lender
shall receive an immediate assignment of all right, title and interest to the
patents specified as collateral. Lender agrees that Maker shall be entitled to a
non-exclusive royalty-free license of the subject patents for a period of one
year from the maturity date together with any renewals or extensions thereof.
During this license period, the Maker is entitled to redeem the assignment and
receive all right, title and interest in the subject patents upon payment in
full of all principal and interest accrued. In the event of default due to
insolvency or bankruptcy, Maker agrees that Lender may during the one-year
license period, license said patent technology to third parties under reasonable
commercial terms. Upon redemption of assignment by Maker, Maker shall receive
credit, less Lender's expenses, for license fees received and shall assume third
party agreement as Licensor. Interest shall accrue from the effective date of
loan funding until payment in full of the entire principal.
GENERAL AUTHORITY and REMEDY. Maker hereby irrevocably appoints Lender and any
partner or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact, in the name of the Maker or its own name, for the sole
use and benefit of Lender, but at Maker's expense, at any time after an Event of
Default, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to carry out the
terms of this Right of Assignment and, without limiting the foregoing, Maker
hereby gives Lender the power and right on its behalf, upon notice to Maker to
sell, transfer, assign or otherwise deal in or with the subject patents, as
fully and effectually as if Lender were the absolute owner thereof. Upon payment
in full of this Note, the Right of Assignment and Power of Substitution shall
expire.
COLLECTION COSTS. Upon default all parties liable for payment hereunder agree to
pay reasonable costs of collection, including reasonable attorney's fees.
LENDER MAKER
Electrical Constructors Tower Tech, Inc., an Oklahoma corporation
Post Office Box 2178 Post Office Box 1838
Columbus, Ohio 43216 Chickasha, OK 73023
ss/ JAMES ELLIOTT ss/ HAROLD CURTIS
- ---------------------- --------------------------
James Elliott, Partner Harold Curtis, Chief Executive Officer
ATTEST ATTEST:
ss/ DONALD HAYES ss/ LANA MORGAN
- --------------------- ---------------------------
Witness Lana Morgan, Corporate Secretary
