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 May 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANG
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)
11935 South I-44 Service Road,
Oklahoma City, Oklahoma 73173
(Address of principal executive offices) (Zip Code)
Issuer's telephone number 405/290-7788
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 3,576,311 shares as of July 10, 1998
<PAGE>
INDEX
TOWER TECH, INC.
Part 1. Financial Information
PAGE
Item 1. Financial Statements (Unaudited)
Balance Sheet- May 31, 1998 F-1
Statement of Operations- Three months ended May 31, 1998
and 1997, and six months ended
May 31, 1998 and 1997 F-2
Statement of Cash Flows- Six months ended May 31, 1998
and 1997 F-4
Notes to Financial Statements-May 31, 1998 F-5
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations 3
Part 4 Other Information
Item 4 Submission of Matters to a Vote of Security Holders 10
Item 6 Exhibits and Reports on Form 8-K 11
Signatures 15
-2-
<PAGE>
TOWER TECH, INC.
BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
May 31, 1998
<S> <C>
Assets
Current assets:
Cash $ 325,193
Accounts receivable, net of allowance
for doubtful accounts of $297,645 6,045,276
Accounts receivable, affiliate 169,309
Notes receivable, current 201,357
Receivables from officers and employees 169,913
Costs and estimated earnings in excess of
billings on uncompleted contracts 1,900,662
Inventory 5,170,435
Restricted assets - current 158,350
Prepaid expenses 237,288
Deferred tax asset 117,147
---------------
Total current assets 14,494,930
Property, plant and equipment, net 14,171,427
Rental fleet, net 4,726,948
Patents, net 225,246
Deferred tax asset 1,229,001
Notes receivable, non-current, net of unamortized
discount of $49,587 666,789
Other assets 664,850
--------------
Total assets $36,179,191
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 955,194
Current maturities of obligations under capital lease 155,659
Accounts payable 6,660,614
Accounts payable, affiliate 77,764
Accrued liabilities 1,629,947
Interest payable 326,192
Customer deposits 956,973
Income tax payable 3,698
--------------
Total current liabilities 10,766,041
Long-term debt, net 19,147,177
Obligations under capital lease 206,669
Stockholders' equity:
Common stock, $.001 par value; 10,000,000 shares
authorized; 3,576,311 shares issued and outstanding 3,577
Capital in excess of par 8,278,561
Deficit (2,222,834)
-------------
Total stockholders' equity 6,059,304
Total liabilities and stockholders' equity $36,179,191
</TABLE>
The accompanying notes are an integral part of these financial statements
F-1
<PAGE>
TOWER TECH, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
May 31, May 31,
1998 1997
<S> <C> <C>
Sales and other operating revenue:
Tower sales $ 2,512,733 $ 3,351,615
Concrete tower sales 2,390,056 1,105,489
Tower rentals 704,753 324,880
Other tower revenue 257,691 287,604
------------ ------------
Total tower revenue 5,865,233 5,069,588
----------- -----------
Costs and expenses:
Cost of goods sold and constructed 5,712,658 3,918,558
General and administrative 629,600 295,031
Selling expenses 462,885 291,029
Research and development 112,787 124,311
------------ ------------
Total cost and expenses 6,917,930 4,628,929
----------- -----------
(Loss) income from operations (1,052,697) 440,659
----------- ------------
Other income (expense):
Interest, net (248,182) (178,731)
Miscellaneous 43,616 13,528
------------- -------------
Total other income (expense) (204,566) (165,203)
------------ ------------
(Loss) income before income taxes (1,257,263) 275,456
Income tax benefit 502,905 -
----------- ------------
Net (loss) income $ (754,358) $ 275,456
=========== ===========
Weighted average shares outstanding - basic 3,544,644 3,371,567
=========== ===========
Net (loss) income per common share - basic $ (.21) $ .08
============ ===========
Weighted average shares outstanding - diluted 3,544,644 3,512,710
=========== ===========
Net (loss) income per common share - diluted $ (.21) $ .08
========== ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-2
<PAGE>
TOWER TECH, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
May 31, May 31,
1998 1997
<S> <C> <C>
Sales and other operating revenue:
Tower sales $ 4,075,183 $ 7,918,545
Concrete tower sales 4,359,222 1,662,054
Tower rentals 1,180,433 384,324
Other tower revenue 300,985 490,771
------------ ------------
Total tower revenue 9,915,823 10,455,694
Other operating revenue - 270,000
------------ ------------
Total revenues 9,915,823 10,725,694
----------- -----------
Costs and expenses:
Cost of goods sold and constructed 9,121,219 8,234,280
General and administrative 1,074,304 662,875
Selling expenses 888,350 572,785
Research and development 195,171 268,150
------------- -------------
Total cost and expenses 11,279,044 9,738,090
----------- -----------
(Loss) income from operations (1,363,221) 987,604
----------- -------------
Other income (expense):
Interest, net (460,607) (338,698)
Miscellaneous 71,007 32,059
-------------- --------------
Total other income (expense) (389,600) (306,639)
------------ ------------
(Loss) income before income taxes (1,752,821) 680,965
Income tax benefit 701,128 -
------------ ------------
Net (loss) income $(1,051,693) $ 680,965
=========== ============
Weighted average shares outstanding - basic 3,535,377 3,371,567
=========== ===========
Net (loss) income per common share - basic $ (.30) $ .20
=========== ===========
Weighted average shares outstanding - diluted 3,535,377 3,536,931
=========== ===========
Net (loss) income per common share - diluted $ (.30 $ .19
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
TOWER TECH, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
May 31, May 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (1,051,693) $ 680,965
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation and amortization 328,531 279,992
Payment on note receivable 59,849 -
Bad debt expense 125,000 -
Deferred tax benefit (701,128) -
Increase in accounts receivable (530,238) (1,384,116)
Decrease in accounts receivable -
affiliate 157,986 -
Increase in costs in excess of
billings (1,181,215) (38,033)
Increase in inventory (2,142,779) (25,581)
Increase in prepaid expenses (108,015) (113,584)
Decrease in other assets 51,408 6,085
Increase in accounts payable 4,399,386 1,108,562
Increase in accounts payable -
affiliate 67,187 -
Increase (decrease) in interest payable
and accrued liabilities 1,036,560 (82,802)
Increase (decrease) in deposits 842,939 (124,970)
Decrease in income tax payable (25,403) -
------------ -----------
Net cash provided by operating activities 1,328,375 306,518
----------- ------------
Cash flows from investing activities:
Purchase of property and equipment (4,675,924) (2,263,066)
Decrease in restricted assets 2,118 1,579,935
Additions to rental fleet (2,779,256) (930,237)
Increase in patent costs (19,058) (40,195)
------------- -------------
Net cash used in investing activities (7,472,120) (1,653,563)
----------- -----------
Cash flows from financing activities:
Proceeds from borrowings 13,669,905 2,135,000
Repayments of long-term debt (7,783,922) (1,318,305)
Proceeds from exercise of options
and warrants 225,000 32,000
Decrease in book overdraft (193,999) -
------------- -----------
Net cash provided by financing activities 5,916,984 848,695
----------- ------------
Net decrease in cash (226,761) (498,350)
Cash at beginning of period 551,954 850,332
------------ ------------
Cash at end of period $ 325,193 $ 351,982
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
TOWER TECH, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Interim Financial Statements
The balance sheet as of May 31, 1998, and the related statements of
operations for the three month and six month periods ended May 31, 1998
and 1997 and the statement of cash flows for the six month period ended
May 31, 1998 and 1997 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, Earnings Per Share
("FAS 128"). 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 adopted FAS 128 and has restated all prior periods. FAS 128
requires a reconciliation of the numerators and denominators of the basic
and diluted EPS computations. Options to purchase 210,894 shares of common
stock at a weighted average price of $6.67 were outstanding during the
three month and six month periods ended May 31, 1998 but were not included
in the computation of diluted EPS because the effect of these outstanding
options would be antidilutive. A reconciliation for the three month and
six month periods ended May 31, 1997 is as follows:
<TABLE>
<CAPTION>
Income Shares Per Share
(Numerator)(Denominator) Amt
______________________________
<S> <C> <C> <C>
For the three month period ended May 31, 1997:
Basic EPS
Income available to common stockholders $275,456 3,371,567 $.08
====
Effect of dilutive securities
Employee stock options and warrants - 141,143
---------- ----------
Diluted EPS
Income available to common stockholders
and assumed conversions $275,456 3,512,710 $.08
========== ========= ====
For the six month period ended May 31, 1997:
Basic EPS
Income available to common stockholders $680,965 3,371,567 $.20
====
Effect of dilutive securities
Employee stock options and warrants - 165,364
---------- ----------
Diluted EPS
Income available to common stockholders
and assumed conversions $680,965 3,536,931 $.19
=========== ========= ====
</TABLE>
F-5
<PAGE>
3. Debt
Effective December 31, 1997, the Company entered into a $3,500,000 line
of credit agreement with a financial institution for working capital
requirements and completion of the Company's manufacturing facility in Oklahoma
City. During the current quarter this line was increased to $6,500,00. This
financing replaced a $2,000,000 line of credit payable to an individual. The
outstanding balance at May 31, 1998 was $4,200,721. Interest is payable monthly
at a variable rate of two basis points over national prime rate. The loan
matures June 30, 1999. The agreement is collateralized by certain accounts
receivable, inventory, rental fleet and patents. The Company has received a
commitment to increase this line of credit to $5,000,000. Also, negotiations are
in process to further increase this line of credit to help fund increases in the
Company's rental fleet and growth in accounts receivable and inventory.
In April 1998, the Company finalized a $2,000,000 construction loan for the
Oklahoma City office facility which is expected to cost approximately $2.1
million. The loan matures in April 1999 and bears interest at 9.5%, payable
monthly.
F-6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Three Months Ended May 31, 1998 Compared to Three Months Ended May 31, 1997
For the three months ended May 31, 1998, total tower revenues increased
to $5,865,233 from $5,069,588 for the comparable period in the prior year.
During the current three month period, 43 percent of total tower revenues was
derived from sales of 77 modular fiberglass cooling towers, 41 percent of total
tower revenues was derived from construction of the modular concrete tower, 12
percent of total tower revenues was derived from rental of modular fiberglass
cooling towers and 4 percent of total tower revenues was derived from other
revenues. In the comparable three month period of 1997, 66 percent of total
tower revenues was derived from sales of 86 modular fiberglass cooling towers,
22 percent of total tower revenues was derived from construction of the modular
concrete tower, 6 percent of total tower revenues was derived from rental of
modular cooling towers, and 6 percent of total tower revenues was derived from
other tower revenues. Other tower revenues consist primarily of sales of modular
tower parts and service, accessory equipment and water treatment equipment. The
decrease in fiberglass tower revenues for 1998 is due not only to the decrease
in the quantity of units sold but also to the sales of smaller capacity, less
expensive units. The decrease in the number of units sold is due primarily to
the delays in the completion and occupancy of the Oklahoma City (OKC) plant
combined with delays in the delivery of the manufacturing equipment and tooling.
It is estimated that these delays will have a significantly smaller negative
impact on the third quarter 1998. The Company has tried to minimize the impact
by continuing to aggressively market and sell its TTMT series modular fiberglass
cooling tower which is continuing to be assembled in its Chickasha, Oklahoma
plant. In addition to the delays, the Company entered into a rental contract for
80 of the Company's largest modular fiberglass cooling towers. Over 70 of these
towers had to be produced during April and May for rental start-up beginning in
June 1998. Consequently, several customer deliveries were rescheduled for third
quarter 1998. The rental revenue from this large rental project will be
recognized mostly in the third quarter of 1998. The increase in concrete tower
revenues is due to the increase in the number and size of jobs completed and in
process. The increase in tower rentals is due to an increase in the number of
rental contracts as well as an increase in contract amounts. The Company has
been focusing on marketing this segment of the business and has significantly
increased the number of units available for rental. Management believes that the
Company now has the largest rental cooling tower fleet in the industry.
Accordingly, steady growth in rental tower revenues is anticipated. Other tower
revenue is down from the previous year due to the same reasons that tower sales
decreased. No licensing agreements were finalized in the second quarter of
fiscal 1998 although negotiations are continuing for agreements in China and
Northern Europe.
-3-
<PAGE>
The Company's cost of goods sold and constructed during the three month
period ended May 31, 1998 was $5,712,658, or 97 percent of total tower revenues,
as compared to $3,918,558 or 77 percent of total tower revenues during the
comparable period in 1997. The increase in cost of goods sold and constructed
during the second quarter of 1998 resulted from increased construction costs of
the modular concrete cooling towers. Overall margin for the second quarter 1998
decreased primarily as a result of concrete cooling tower cost overruns mainly
on two projects. Total estimated losses on these projects were recognized in the
second quarter 1998. Lower margins were also incurred in the modular fiberglass
cooling line due to the additional costs associated with the OKC plant,
equipment and tooling delays. However, those decreases in margins were partially
offset by an increase in rental revenues, which is a higher margin operation.
Included in the cost of goods sold for the second quarter 1998 is $87,234 to
retrofit and service towers previously sold. This compares to expenditures of
$106,399 during the comparable period in the prior year. In 1995, design changes
were made and a complete quality control system was implemented which management
believes will continue to control such per unit expenditures in future periods.
The three month period ended May 31, 1998 reflected a 113 percent
increase in general and administrative expenses from $295,031 in 1997 to
$629,600. The increase is due mainly to the addition of office staff and related
expenses, additional expenses related to the OKC facility, and an increase of
$125,000 in the allowance for doubtful accounts. Selling expenses increased from
$291,029 to $462,885 due to increased sales and marketing efforts for both the
TTMT Series and the concrete modular cooling towers, including an increase in
sales staff and expenses related primarily to the opening of direct domestic and
international sales offices. Management expects the increased investment to have
a positive impact on revenues in future periods. Research and development
expenses decreased from $124,311 in the second quarter of 1997 to $112,787 in
the second quarter of 1998. Although the Company has no fixed research and
development budget, management does expect to continue to research refinements
in cooling tower design and construction.
The Company's loss from operations for the three months ended May 31,
1998 was $1,052,697 as compared to income of $440,659 for the comparable period
in the prior year. After interest expense, miscellaneous items, and income tax
benefit, the Company's net loss is $754,358 compared to net income of $275,456
for the quarter ended May 31, 1997.
The Company recognized an income tax benefit of $502,905 for the three
months ended May 31, 1998, compared to no income tax benefit or expense for the
comparable period in 1997. FAS 109 requires that the Company record a valuation
allowance when it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of the
deferred income tax assets depends on the Company's ability to generate
sufficient taxable income in the future. Management has determined that, based
on the Company's ability to generate taxable income in two consecutive years
(1997 and 1996), it is more likely than not that the Company will realize the
deferred tax assets.
-4-
<PAGE>
The Company's estimated backlog for the next two quarters of fiscal
year 1998 is almost $13.0 million including a total of 6 contracts for the TTCT
Series concrete cooling towers and/or parts totaling $2.8 million. These
contracts are scheduled for completion in the third quarter of 1998. Interest in
this product has continued to increase in both the United States and
international markets. The estimated backlog for the TTMT Series fiberglass
cooling towers is $6.3 million. $4.9 million is scheduled for delivery in the
third quarter and the balance in fourth quarter 1998. The Company expects the
OKC plant to be 80% operational in August 1998 and 100% operational by the end
of the fiscal year. Rental tower backlog is over $3.8 million with substantially
all scheduled for third quarter 1998. This will have a significant positive
impact on third quarter operations.
Six Months Ended May 31, 1998 Compared to Six Months Ended May 31, 1997
For the six months ended May 31, 1998, total tower revenues decreased
to $9,915,823 from $10,455,694 for the comparable period in the prior year.
During the current six month period 41 percent of total tower revenues was
derived from sales of 118 modular fiberglass cooling towers, 44 percent of total
tower revenues was derived from construction of the new modular concrete cooling
towers, 12 percent of total tower revenues was derived from rental of modular
fiberglass cooling towers, and 3 percent of total tower revenues was derived
from other tower revenue. In the comparable six month period in 1997, 75 percent
of total tower revenues was derived from sales of 193 modular cooling towers, 16
percent of total tower revenues was derived from construction of modular
concrete towers, 3 percent of total tower revenues was derived from rental of
modular cooling towers, and 5 percent of total tower revenues were derived from
other tower revenue. The decrease in fiberglass tower revenues for 1998 is due
not only to the decrease in the quantity of units sold but also to the sales of
smaller capacity, less expensive units. The decrease in the number of units sold
is due primarily to the delays in the completion and occupancy of the OKC plant
combined with delays in the delivery of the manufacturing equipment and tooling.
It is estimated that these delays will have a significantly smaller negative
impact on the third quarter 1998. However, the Company has tried to minimize the
impact by continuing to aggressively market and sell its TTMT series modular
fiberglass cooling tower which is continuing to be assembled in its Chickasha,
Oklahoma plant. In addition to the delays, the Company entered into a rental
contract for 80 of the Company's largest modular fiberglass cooling towers. Over
70 of these towers had to be produced during April and May for rental start-up
beginning in June 1998. Consequently several customer deliveries were
rescheduled for third quarter 1998. The rental revenue from this large rental
project will be recognized mostly in the third quarter of 1998. The increase in
concrete tower revenues is due to the increase in the number and size of jobs
completed and in process. The increase in tower rentals is due to an increase in
the number of rental contracts as well as an increase in contract amount. The
Company has been focusing on marketing this segment of the business and has
significantly increased the number of units available for rental. Management
believes that the Company now has the largest rental cooling tower fleet in the
industry. Accordingly, steady growth in rental tower revenues is anticipated.
Other tower revenue is down from the previous year due to the same reasons that
tower sales decreased. No licensing agreements were finalized in the first or
second quarters of fiscal 1998 although negotiations are continuing for
agreements in China and Northern Europe. Other operating revenue for the six
months ended May 31, 1997, consists of technology transfer fees which were
realized as a result of license agreements with Tecno Procesos Industriales
covering the Republic of Mexico. These 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.
-5-
<PAGE>
The Company's cost of goods sold and constructed during the six month
period ended May 31, 1998, was $9,121,219 or 92 percent of total tower revenues
as compared to $8,234,280 or 79 percent during the comparable period in 1997.
The increase in cost of goods sold and constructed during the second quarter of
1998 resulted from increased construction costs of the modular concrete cooling
towers. Overall margin decreased as a result of concrete cooling tower cost
overruns mainly on two projects, and lower margins were also incurred in the
modular fiberglass cooling line due to the additional costs associated with the
plant, equipment and tooling delays. However, these decreases in margin were
partially offset by an increase in rental revenues, which is a higher margin
operation. Included in cost of goods sold for the six month period ended May 31,
1998, is $172,234 to retrofit and service towers previously sold. This compares
to six month retrofit and warranty costs of $249,200 during the same period in
1997. 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 six month period ended May 31, 1998 reflected a 62 percent increase
in general and administrative expenses from $662,875 in 1997 to $1,074,304 in
1998. The increase is due mainly to the addition of office staff and related
expenses, additional expenses related to the OKC facility, and an increase of
$125,000 in the allowance for doubtful accounts. Selling expenses increased from
$572,785 to $888,350. The increase is due to increased sales and marketing
efforts for both the TTMT Series and the concrete modular cooling towers,
including an increase in sales staff and expenses related primarily to the
opening of direct domestic and international sales offices. Management expects
increased investment in selling expenses to have a continued positive impact on
revenues in future periods. Research and development expenses decreased from
$268,150 in the first six months of 1997 to $195,171 in the first six months of
1998. 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 loss from operations for the six months ended May 31,
1998, was $1,363,221 as compared to income from operations of $987,604 for the
comparable period in the prior year. After interest expense, miscellaneous items
and income tax benefit, the Company's net loss was $1,051,693 compared to a net
income of $680,965 for the six months ended May 31, 1997.
Liquidity and Capital Resources
At May 31, 1998, the Company had working capital of $3,728,889 as
compared to working capital of $6,307,697 at February 28, 1998. The Company's
cash flow provided by (used in) its operating, investing and financing
activities during second quarter 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Operating activities $1,328,375 $306,518
Investing activities ($7,472,120) ($1,653,563)
Financing activities $5,916,984 $848,695
</TABLE>
-6-
<PAGE>
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 1998, 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. Bringing the manufacturing
processes in-house will enable the Company to better manage inventory levels and
reduce costs when the new manufacturing facility is fully operational. However,
fluctuations in inventory levels are still expected due to the size of planned
production runs of components. Management also 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 May
31, 1998, costs in excess of billing and estimated earnings on uncompleted
contracts were $1,900,662 as compared to net costs in excess of billings and
estimated earnings on uncompleted contracts of $509,749 at May 31, 1997.
Normally, 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 will total $155,659 over
the next twelve months. In addition, $955,194 of principal payments will become
due on the Company's debt during the next twelve months.
Substantially all of the Company's planned capital expenditures during
1998 will be related to the completion of the new manufacturing facility,
construction of the new office facility in south Oklahoma City, and increases in
the rental fleet as necessary to meet demand. Management estimates the Company's
total investment in the new manufacturing facility will be $9 million, including
$3.5 million to equip the facility. As of May 31, 1998, the Company had incurred
substantially all the costs related to the manufacturing facility. Construction
of the new office facility was commenced in April 1998 and should be completed
in December 1998. The manufacturing facility includes equipment to allow the
Company to produce parts used in the TTMT Series cooling towers which have been
purchased from outside vendors. Management believes that product costs can be
reduced by producing these parts in-house. However, the Company may continue to
incur unforeseen costs and production problems, particularly in the short term,
in bringing these processes in-house.
The new manufacturing facility has been partially 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 million, 10% Convertible Subordinated
Debentures (the "Debentures"). The industrial revenue bonds were issued by the
OIA in October 1997. The bonds are payable in quarterly installments of
principal and interest in the amount of approximately $157,000. A debt service
reserve fund of $157,000 was also set aside from the bond proceeds. 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 10,
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.
-7-
<PAGE>
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
$1,250,000 is available to the Company for start-up expenses of the
manufacturing facility and associated working capital requirements. As of May
31, 1998, $1,225,025 of these funds had been advanced to the Company. 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 OKC
manufacturing facility.
The Company has entered into an agreement with a lending institution for
a total funding of $1,750,000 for equipment and tooling for the new
manufacturing facility. In November 1997, the Company executed a note payable
for initial funding of $731,890 and in December 1997, the Company executed an
additional note payable for the second funding in the amount of $442,974. The
final funding was in March 1998.
Effective December 31, 1997, the Company entered into a $3,500,000 line
of credit agreement with a financial institution for working capital
requirements and completion of the Company's manufacturing facility in Oklahoma
City. This line has been increased to $6,500,000. This financing replaced a
$2,000,000 line of credit payable to an individual. The outstanding balance at
May 31, 1998 was $4,200,721. Interest is payable monthly at a variable rate of
two basis points over national prime rate. The loan matures June 30, 1999. The
agreement is collateralized by certain accounts receivable, inventory, rental
fleet and patents. Also, negotiations are in process to further increase this
line of credit to help fund increases in the Company's rental fleet and growth
in accounts receivable and inventory.
The Company has a line of credit at Chickasha Bank in the amount of
$400,000 for short-term cash flow needs, of which $357,000 was outstanding at
May 31, 1998. This line of credit matures April 1, 1999. The Company also has a
$1,200,000 credit arrangement with one of its major vendors to fund materials
purchased from the vendor of which $1,138,000 was outstanding and included in
accounts payable at May 31, 1998.
In April 1998, the Company finalized a $2,000,000 construction loan for
the Oklahoma City office facility which is expected to cost approximately $2.1
million. The loan matures in April 1999 and bears interest at 9.5%, payable
monthly.
Due to the loss for the first half of 1998 combined with the capital
expenditures to expand the rental fleet, the Company believes it will need
additional capital resources to fund its operations including capital
requirements over the next four quarters. Accordingly, management is negotiating
for an increase in its credit facility as well as exploring other debt or equity
sources. Management recognizes that the Company is highly leveraged and that
while financial leverage can increase the Company's return on equity, it also
increases the risk presented to equity owners of the Company.
Year 2000 Compliance
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, computer
applications could fail or create erroneous results by or at the Year 2000. The
Company is in the process of determining whether its computer programs are
affected by the Year 2000 issue or whether the costs of making its systems Year
2000 compliant or the consequences of failing to take necessary actions would
have a material impact on the Company's financial position or results of
operations. The Company is currently implementing a new financial software
system that will cost approximately $100,000 which is Year 2000 compliant.
-8-
<PAGE>
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, including timely and efficient production of its products and
utilization of the new OKC plant.
-9-
<PAGE>
PART II
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of Tower Tech, Inc. was held on May
19, 1998 at 8:30 a.m. at the OKC plant facility. A total of 3,025,146 shares of
common stock, which is 86 percent of the shares outstanding on April 9, 1998,
were represented at the meeting, either in person or by proxy.
The following incumbent directors were re-elected for the next year.
VOTE TABULATION:
DIRECTORS: FOR AGAINST ABSTAIN
Leon Poag 3,025,041 0 105
Lincoln Whitaker 3,019,041 0 6,105
Randal Oberlag 3,025,041 0 105
Harold Curtis 3,019,041 0 6,105
Coopers & Lybrand L.L.P. were appointed as independent accountants for
Tower Tech, Inc. for the next year. The vote tabulation was as follows:
VOTE TABULATION: FOR AGAINST ABSTAIN
Coopers & Lybrand L.L.P. 3,022,996 8,375 2,850
These were all the matters submitted for a vote to the stockholders at the
annual stockholders meeting.
-10-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits have been filed as part of this
registration statement:
Exhibit Description
Number
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,
1997, 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, 1997.
10.2-10 Loan Agreement between Tower Tech, Inc., and the City
of Oklahoma City, dated September 8, 1997.
10.3-10 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, 1997
-11-
<PAGE>
10.5-7 Form of Debenture Purchase Agreement among the Company,
Taglich Brothers, D'Amadeo Wagner & Company, Incorporated
and various lenders.
10.6-10 Promissory Note between Tower Tech, Inc. and Electrical
Constructors, dated May 8, 1997
10.7-10 Promissory Note between Tower Tech, Inc., as Maker, and
Electrical Constructors, as Payee, dated May 8, 1997
10.8-1 Promissory Note between Tower 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.
10.14-1 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
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
-12-
<PAGE>
10.17-4 1993 Stock Option Plan, as amended
10.18 Promissory Note between Tower Tech, Inc. and Southwestern
Bank & Trust Company, dated December 31, 1997
10.19 Water Line Agreement between the City of Oklahoma City and
Tower Tech, Inc. dated November 1997
10.20 Master Security Agreement between CIT Group/Equipment
Financing, Inc and Tower Tech, Inc. dated October 31, 1997
10.21 Promissory Note between Tower Tech, Inc. and Southwestern
Bank & Trust Company, dated April 30,1998
10.22 Business Loan Agreement between Tower Tech, Inc. and
Southwestern Bank & Trust Company, dated April 30,1998
10.23 Commercial Security Agreement between Tower Tech, Inc. and
Southwestern Bank & Trust Company, dated April 30,1998
10.24 Promissory Note between Tower Tech, Inc. and Local Federal
Bank, dated June 10,1998
10.25 Omitted
10.26 Omitted
10.27 Omitted
10.28 Omitted
10.29 Omitted
10.30 Omitted
10.31 Omitted
10.32 Omitted
-13-
<PAGE>
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, 1997
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 Registration
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, 1997.
6 Incorporated by reference from the same numbered exhibit to Form 10-KSB for
the year ended November 30, 1997.
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. 333-36501, Form S-3, as filed with the Commission on
September 26, 1997.
10 Incorporated by reference from the same numbered exhibit to Form 10-QSB for
the quarter ended August 31, 1997.
(b) The Company did not file any reports on Form 8-K during the quarter ended
May 31, 1998.
-14-
<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: July 10, 1998 ss/ HAROLD CURTIS
------------- -----------------
Harold Curtis, Chief Executive Officer
Date: July 10, 1998 ss/CHARLES D. WHITSITT
------------- ----------------------
Charles D. Whitsitt, Chief Financial Officer
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Consolidated statements of operations found on pages F-1 to F-4 of the Company's
Form 10QSB for the second quarter 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000913034
<NAME> TOWER TECH, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-31-1998
<CASH> 325,193
<SECURITIES> 0
<RECEIVABLES> 6,214,585
<ALLOWANCES> 297,645
<INVENTORY> 5,170,435
<CURRENT-ASSETS> 14,494,930
<PP&E> 14,171,427
<DEPRECIATION> 328,531
<TOTAL-ASSETS> 36,179,191
<CURRENT-LIABILITIES> 10,409,041
<BONDS> 0
0
0
<COMMON> 3,577
<OTHER-SE> 6,059,304
<TOTAL-LIABILITY-AND-EQUITY> 36,179,191
<SALES> 5,865,233
<TOTAL-REVENUES> 5,865,233
<CGS> 5,712,658
<TOTAL-COSTS> 6,917,930
<OTHER-EXPENSES> 1,205,272
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (248,182)
<INCOME-PRETAX> (1,257,263)
<INCOME-TAX> 452,905
<INCOME-CONTINUING> (1,257,263)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (754,358)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
EX 10.19
Oklahoma City
Water
Utilities Trust
November 4, 1997
Randal K. Oberlag, Vice President
Tower Tech, Inc.
P.O. Box 1838
Chickasha, OK 73023
Dear Mr. Oberlag,
We are pleased to report that the water line project to serve your facilities
has been completed at a total cost of $119,219.00 which is 25.5% lower than the
original estimate.
Tower Tech, Inc. now has thirty (30) days to provide me written notice electing
to finance the cost over twenty (20) years at 7.72%. By electing to finance the
cost, monthly payments of $976.52 will be added to Tower Tech, Inc.'s City
utility billings beginning December 1997. If Tower Tech, Inc. decides to pay the
cost ($119,219.00) as one lump sum payment, the amount is due by December 4,
1997, with a check payable to the Oklahoma City Water Utilities Trust.
For your records, attached is a copy of the final amortization schedule based on
total project costs. We look forward to meeting your water service needs. Should
you have any questions, I am available at (405) 297-2822.
Sincerely,
JAMES D. COUCH
James D. Couch
General Manager
cc:
JoeVan Bullard, Assistant City Manager
Bret Weingart, Business Manager
420 West Main, Suite 500. Oklahoma City, Oklahoma 73102.
(405) 232-6238 FAX (405) 297-3813
<PAGE>
TOWER TECH, Inc.
THE TECHNOLOGY COMPANY
Forced Draft Modular Cooling Towers
C.T.I. Certified Verification #93-17-01
November 11, 1997
Mr. James D. Couch, PE, General Manager
Oklahoma City Water Utilities Trust
420 West Main St., Suite 500
Oklahoma City, OK 73102
Member C.T.I. Cooling Tower Institute
RE: Waterline extension to serve Tower Tech @ 119th and I-44;
Your letter of Nov. 4, 1997
Dear Mr. Couch:
Thank you for your letter and notice of completion of the referenced project.
Please consider this as our notification to you that Tower Tech, Inc. elects to
accept the financing of the project by the Water Utilities Trust. We understand
that the financing amount of $119,219.00 will be for twenty years with monthly
payments of $976.52 added to the utility billing beginning December, 1997.
I want to personally thank the efforts of you and your staff in working with us
to provide an integral part of our new facility. We are nearing the completion
of our overall construction and the entire Tower Tech staff is very excited
about manufacturing our new product line in this modern Oklahoma City facility.
Sincerely,
RANDAL K. OBERLAG
Randal K. Oberlag
Vice-President and General Counsel
cc: Harold Curtis
Dick Whitsitt
MODULAR FIBERGLASS COOLING TOWERS MODULAR CONCRETE COOLING TOWERS
P.O. Box 1838 Chickasha, Oklahoma 73023
Office (405) 222-2876 Fax (405) 222-2885
Exhibit 10.20
June 12, 1998
Date
THE CIT GROUP/EQUIPMENT FINANCING, INC.
900 Ashwood Parkway
Address
At1anta
City
GA 30338
State Zip Code
Gentlemen
You are irrevocably instructed to disburse the proceeds of your loan to us,
evidenced by our Schedule of Indebtedness and Collateral No. 04 dated June 12,
1998 to Master Security Agreement dated October 31, 1997 between Tower Tech,
Inc. as Debtor and the CIT Group/Equipment Financing, as Secured Party, as
follows:
Payee Names and Addresses Amount
The CIT Group/Equipment Financing, Inc. Amount
$1,671,914.59
(payoff accts. 63403-67691 73100) $ --
Product Handling Design, Inc. $ 57,941.25
Rapid Granulator, Inc. $ 23,970.34
Tower Tech, Inc. $ 22,088.41
$ --
$ --
Total Proceeds $1,775,814.59
Very truly yours,
Tower Tech, Inc.
By: CHARLES D. WHITSITT Title CFO
Charles D. Whitsitt
<PAGE>
Master Security Agreement
This Master Security Agreement provides a set of terms and conditions that the
parties hereto intend to be applicable to various loan transactions secured by
personal property. Each such loan and security agreement shall be evidenced by a
schedule of indebtedness and collateral ("Schedule") executed by Secured Party
and Debtor that explicitly incorporates the provisions of this Master Security
Agreement and that sets forth specific terms of that particular loan and
security contract. Where the provisions of a Schedule conflict with the terms
hereof, the provisions of the Schedule shall prevail. Each Schedule shall
constitute a complete and separate loan and security agreement, independent of
all other Schedules, and without any requirement of being accompanied by an
originally executed copy of this Master Security Agreement. The term Security
Agreement" when used herein shall refer to an individual Schedule.
One originally executed copy of the Schedule shall be denominated "Originally
Executed Copy No. of 1 originally executed copies" and such copy shall be
retained by Secured Party. If more than one copy of the Schedule is executed by
Secured Party and Debtor, all such other copies shall be numbered consecutively
with numbers greater than 1. Only transfer of possession by Secured Party of
Originally Executed Copy No.1 shall be effective for purposes of perfecting an
interest in such Schedule by possession.
1. Grant of Security Interest: Description of Collateral.
Debtor grants to Secured Party a security interest in the property described in
the Schedules now ~r hereafter executed by or pursuant to the authority of the
debtor and accepted by Secured Party in writing, along with all present and
future attachments and accessories thereto and replacements and proceeds
thereof, including amounts payable under any insurance policy, all hereinafter
referred to collectively as "Collateral." Each Schedule shall be serially
numbered. Unless and only to the extent otherwise expressly provided in a
Schedule, no Schedule shall replace any previous Schedule but shall be
supplementary to all previous Schedules.
2. What Obligations the Collateral Secures.
Each item of Collateral shall secure not only the specific amount which Debtor
promises to pay in each Schedule, but also all other present and future
indebtedness or obligations of Debtor to Secured Party of every kind and nature
whatsoever.
3. Promise to Pay; Terms and Place of Payment.
Debtor promises to pay Secured Party the amounts set forth on each Schedule at
the rate and upon such terms as provided therein.
4. Use and Location of Collateral.
Debtor warrants and agrees that the Collateral is to be used primarily for: X
business or commercial purposes (other than agricultural), _ agricultural
purposes (see definition on the final page), or _ both agricultural and business
or commercial purposes.
<PAGE>
Location: 11935 South I-44
----------------
Address
Oklahoma City
-------------
City
Cleveland
---------
County
OK 73170
----- -----
State Zip Code
Debtor and Secured Party agree that regardless of the manner of affixation, the
Collateral shall remain personal property and not become part of the real
estate. Debtor agrees to keep the Collateral at the location set forth above,
and will notify Secured Party promptly in writing of any change. If the location
of the Collateral within such State, but will not remove the collateral from
such State without the prior written consent of Secured Party (except that in
the State of Pennsylvania. the Collateral will not be moved from the above
location without such prior written consent.
5. Late Charges and other Fees.
Any payment not made when due shall, at the option of Secured Party, bear late
charges thereon calculated at the rate of 1-1/2% per month, but in no event
greater than the highest rate permitted by relevant law. Debtor shall be
responsible for and pay to Secured Party a returned check fee, not to exceed the
maximum permitted by law, which fee will be equal to the sum of (i) the actual
bank charges incurred by Secured Party plus (ii) all other actual costs and
expenses incurred by Secured Party. The returned check fee is payable upon
demand as indebtedness secured by the Collateral under this Security Agreement.
6. Debtors Warranties and Representations.
Debtor warrants and represents:
(a) that Debtor is justly indebted to Secured Party for the full amount of the
indebtedness set forth on each Schedule
(b) that except for the security interest granted hereby, the Collateral is
free from and will be kept free from all liens claims, security interests
and encumbrances;
(c) that no financing statement covering the Collateral or any proceeds
thereof is on file in favor of anyone other than secured Party, but if
such other financing Statement is on file, it will be terminated or
subordinated;
(d) that all information supplied and Statements made by Debtor in any
financial, credit or accounting statement or application for credit prior
to, contemporaneously with or subsequent to the execution of this Security
Agreement with respect to this transaction are and shall be true, correct,
valid and genuine; and
(e) that Debtor has full authority to enter into this agreement and in so
doing it is not violating its charter or by-laws, any law or regulation or
agreement with third parties, and it has taken all such action as may be
necessary or appropriate to make this Security Agreement binding upon it.
<PAGE>
7. Debtor's Agreements.
Debtor agrees:
(a) to defend at Debtor's own cost any action, proceeding, or claim affecting
the Collateral;
(b) to pay reasonable attorneys' fees (at least 15% of the unpaid balance if
not prohibited by law) aid other expenses incurred by Secured party in
enforcing its rights against Debtor under this Security Agreement;
(c) to pay promptly all taxes, assessments, license fees and other public or
private charges when levied or assessed against the Collateral of this
Security Agreement, and this obligation shall survive the termination of
this Security Agreement;
(d) that if a certificate of title be required or permitted by law, Debtor
shall obtain such certificate with respect to the collateral, showing the
security interest of Secured Party thereon and in any event do everything
necessary or expedient to reserve or perfect the security interest of
Secured Party;
(e) that Debtor will not misuse, fail to keep in good repair, secrete or
without the prior written consent of Secured Party, sell, rent, lend,
encumber or transfer any of the Collateral notwithstanding Secured Party's
right to Proceeds;
(f) that Secured Party may enter upon Debtor's premises or wherever the
Collateral may be locate at any reasonable time to inspect the Collateral
and Debtor's books and records pertaining to the Collateral, and Debtor
shall assist Secured Party in making such inspection; and
(g) that the security interest granted by Debtor to Secured Party shall
continue effective irrespective of any retaking or redelivery of any
Collateral and irrespective of the payment of the amount described in any
Schedule so long as there are any obligations of any kind, including
obligations under guaranties or assignments, owed by Debtor to Secured
Party, provided,- however, upon any assignment of this Security Agreement
the Assignee- shall thereafter be deemed for the purpose of this Paragraph
the Secured Party under this Security Agreement.
8. Insurance and Risk of Loss.
All risk of loss, damage to or destruction of the Collateral shall at all times
be on Debtor. Debtor will procure forthwith and maintain at Debtor's expense
insurance against all risks of loss or physical damage to the Collateral for the
full insurable value thereof for the life of this Security Agreement and such
other insurance thereon in amounts and against such risks as Secured Party may
specify, and shall promptly deliver each policy to Secured Party with a standard
long-form mortgagee endorsement attached thereto showing loss payable to secured
Party; and providing Secured Party with not less than 30 days written notice of
cancellation; each such policy shall be in form, terms and amount and with
insurance carriers satisfactory to Secured Party; Secured Party's acceptance of
Policies in lesser amounts or risks shall not be a waiver of Debtor's I
foregoing obligations. As to Secured Party's interest in such policy no act or
omission of Debtor or any of its officers, agents, employees or representatives
shall affect the obligations of the insurer to pay the full amount of any loss.
<PAGE>
Debtor hereby assigns to Secured Party any monies which may become payable under
any such policy of insurance and irrevocably constitutes and appoints Secured
Party as Debtor's attorney n fact (a) to hold each original insurance policy (b)
to make, settle and adjust claims under each policy of insurance, (c) to make
claims for any monies which may become payable under such and other insurance cm
the Collateral including returned or unearned premiums, and (d) to endorse
Debtor's name on any check, draft or other instrument received in payment of
claims or returned or unearned premiums under each policy and to apply the funds
to the payment of the indebtedness owing to Secured Party; provided, however,
Secured Party is under no obligation to do any of the forgoing.
Should Debtor fail to furnish such insurance policy to Secured Party, or to
maintain such policy in full force, or to pay any premium in whole or in part
re1ating thereto, then Secured Party, without waiving or releasing any default
or obligation by Debtor, may (but shall be under no obligation to) obtain and
maintain insurance and pay the premium therefor on behalf of Debtor and charge
the premium to Debtor's indebtedness under this Security Agreement. The full
amount of any such premium paid by Secured Party shall be payable by Debtor upon
demand, and failure to pay same shall constitute an event of default under this
Security Agreement.
A very important element of this Security Agreement is that Debtor make all its
payments promptly as agreed upon. It is essential that the Collateral remain in
good condition and adequate security for the indebtedness. The following are
events of default under this Security Agreement which will allow Secured Party
to take such action under this Paragraph and under Paragraph 10 as it deems
necessary:
(a) any of Debtor's obligations to Secured Party under any agreement with
Secured Party is not paid promptly when due;
(b) Debtor breaches any warranty or provision hereof, or of any note or of any
other instrument or agreement de1ivered by Debtor to Secured Party in
connection with this or any other transaction;
(C) Debtor dies, becomes insolvent or ceases to do business as a going concern:
(d) It is determined that Debtor has given Secured Party materially misleading
information regarding its financial condition;
(e) any of the Collateral is lost or destroyed;
(f) a complaint in bankruptcy or for arrangement or reorganization or for
relief under any insolvency law is filed by or against Debtor or Debtor
admits its inability to pay its debts as they mature
(g) property of Debtor is attached or a receiver is appointed for Debtor;
(h) whenever Secured Party in good faith believes the prospect of payment or
performance is impaired or in good faith believes the Collateral is
insecure;.
(i) any guarantor surety or endorser for Debtor dies or defaults in any
obligation or liability to Secured Party or any guaranty contained in
connection with this transaction is terminated or breached; or
<PAGE>
(j) if a default, event of default or breach by Debtor shall occur, or any
event occurs which with the giving of notice or passage of time or both
would constitute a default or event of default, under any loan agreement,
security agreement, financing arrangement, lease agreement, indenture,
promissory note, guaranty, or any other document, agreement or instrument
evidencing or securing a debt or obligation of Debtor (each individually a
"Loan Agreement" and collectively "Loan Agreements") with or to Finova
Capital, or any affiliate, subsidiary or parent of Finova Capital, or any
successors and assigns thereto or under a Loan Agreement which refinances
the indebtedness or obligations evidenced by the Finova Capital Loan
Agreement or replaces the Finova Capital Loan Agreement.
CDW
_________
Initials
If Debtor shall be in default hereunder, the indebtedness described in each
Schedule and all other indebtedness then owing by Debtor to Secured Party under
this or any other present or future agreement (collectively, the "Indebtedness")
shall, if Secured Party shall so elect, become immediately due and payable.
After acceleration;
(a) the unpaid principal balance of the indebtedness described in any Schedule
in which interest has been precomputed shall bear interest at the rate of
18% per annum (or, if less, the maximum rate permitted by law) until paid
in full; arid
(b) the unpaid principal balance of the indebtedness described in any Schedule
in which interest has not been precomputed shall bear interest at the same
rate as before acceleration until paid in full.
In no event shall the Debtor upon demand by Secured Party for payment of the
Indebtedness, by acceleration of the maturity thereof or otherwise, be obligated
to pay any interest in excess of the amount permitted by law Any acceleration of
the Indebtedness, if elected by Secured Party, shall be subject to all
applicable laws, including laws relating to rebates and refunds of unearned
charges.
10. Secured Party's Remedies After Default; Consent to Enter Premises.
Upon Debtor's default and at any time thereafter, subject to Debtor's right to a
30 day cure period (referencing item 9(a) only), Secured Party shall have all
the rights and remedies of a secured party under the Uniform Commercial Code and
any other applicable laws, including the right to any deficiency remaining after
disposition of the Collateral for which Debtor hereby agrees to remain fully
liable. Debtor agrees that Secured Party, by itself or its agent, may without
notice to any person and without judicial process of any kind, enter into any
premises or upon any land owned, leased or otherwise under the real or apparent
control of Debtor or any agent of Debtor where the Collateral may be or where
Secured Party believes the Collateral may be, and disassemble, render unusable
and or repossess all or any item of the Collateral, disconnecting and separating
all Collateral from any other property and using all force necessary. Debtor
expressly waives all further rights to possession of the Collateral after
default. Secured Party may require Debtor to assemble the Collateral and return
it to Secured Party at a place to be designated by Secured Party which is
reasonably convenient to both parties.
Secured Party may sell or lease the Collateral at a time and location of its
choosing provided that the Secured Party acts in good faith and in a
commercially reasonable manner. Secured Party will give Debtor reasonable notice
of the time and place of any public sale of the Collateral or of the time after
which any private sale or any other intended disposition of the Collateral is to
be the outstanding principal balance If not prohibited by law) and other legal
expenses. Debtor under' tends that Secured Party's rights are cumulative and not
alternative.
11. Waiver of Defaults; Agreement Inclusive.
Secured Party may in its sole discretion waive a default, or cure, at Debtor's
expense, a default. Any such waiver in a particular Instance or of a particular
default shall not be a waiver of other defaults or the same kind of default at
another time. No modification or change in this Security Agreement or any
related note instrument or agreement shall bind Secured Party unless in writing
signed by Secured Party. No oral agreement shall be binding.
12. Financing Statements; Certain Expenses.
If permitted by law, Debtor authorizes Secured Party to file a financing
statement with respect to the Collateral signed only by Secured Party, and to
file a carbon, photograph or other reproduction of this Security Agreement or of
a financing statement. At the request of Secured Party, Debtor will execute any
financing statements, agreements or documents, in form satisfactory to Secured
Party which Secured Party may deem necessary or advisable to establish and
maintain a perfected security interest in the Collateral and will pay the cost
of filing or recording the same in all public offices deemed necessary or
advisable by Secured Party. Debtor also agrees to pay all costs and expenses
incurred by Secured Party in conducting UCC, tax or other lien searches against
the debtor or the Collateral and such other fees as may be agreed.
13. Waiver of Defenses Acknowledgement.
If Secured Party assigns this Security Agreement to a third party ("Assignee")
and Secured Party Uses its best efforts to notify Debtor of such Assignment.,
then after such assignment:
(a) Debtor will make all payments directly to such Assignee at such place as
Assignee may from time to time designate in writing:
(b) Debtor agrees that it will settle all claims, defenses, setoffs and
counterclaims occurring prior to the date of assignment it may have
against Secured Party directly with Secured Party and will not set up any
such claim, defense, setoff or counterclaim against Assignee, Secured
Party hereby agreeing to remain responsible therefor;
(c) Secured Party shall not be Assignee's agent for any purpose and shall have
no authority to change or modify this Security Agreement or any related
document or instrument; and
(d) Assignee shall have all of the rights and remedies of Secured Party
hereunder but none of Secured Party's obligations arising prior to the
date of Assignment
<PAGE>
14. Miscellaneous.
Debtor waives all exemptions. Secured Party may correct patent errors herein and
fill in such blanks as serial numbers, date of first payment and the like. Any
Provisions hereof contrary to, prohibited by or invalid under applicable laws or
regulations shall be inapplicable and deemed omitted therefrom, but shall not
invalidate the remaining provisions hereof.
Debtor and Secured Party each: hereby waive any right to a trial by jury in any
action or proceeding with respect to, in connection with, or arising out of this
Security Agreement, or any note or document delivered pursuant to this Security
Agreement. Except as otherwise provided herein or by applicable law, the Debtor
shall have no right to prepay the indebtedness described in any Schedule.
Debtor acknowledges receipt of a true copy and waives acceptance hereof.
If Debtor is a corporation, this Security Agreement is executed pursuant to
authority of its Board of Directors. Except where the context otherwise
requires, "Debtor" and "Secured Party" include the heirs, executors or
administrators, successors or assigns of those parties; nothing herein shall
authorize Debtor to assign this Security Agreement, or its rights in and to the
Collateral. If more than one Debtor executes this Security Agreement, their
obligations under this Security Agreement shall be joint and several.
If at any time this transaction would be usurious under applicable law, then
regardless of any provision contained in this Security Agreement or In any other
agreement made in connection with this transaction, it is agreed that:
(a) the total of all consideration which constitutes interest under applicable
law that is contracted to; charged or received upon this Security
Agreement or any such other agreement shall under no circumstances exceed
the maximum rate of interest authorized by applicable law and any excess
shall be credited to the Debtor; and
(b) If Secured Party elects to accelerate the maturity of, or if Secured Party
permits Debtor to prepay the indebtedness described in Paragraph 3, any
amounts which because of such action would constitute interest may never
include more than the maximum rate of interest authorized by applicable
law and any excess interest, if any, provided for in this Security
Agreement or otherwise, shall be credited to Debtor automatically as of
the date of acceleration or prepayment.
15. Special Provisions.
See Special Provisions Instructions.
Dated: 10/31/97
Debtor:
Tower Tech, Inc.
Name of individual, corporation or partnership
By: CHARLES D. WHITSITT Title: Treasurer
____________________
If corporation, have signed by President, Vice President or Treasurer, and
give official title. If owner or partner, state which.
<PAGE>
11935 South I-44
Address
Oklahoma City OK 73173
City State Zip Code
Secured Party:
THE CIT GROUP / EQUIPMENT FINANCING, INC.
Name of individual, corporation or partnership
By: ______________________ Title: ___________________
If corporation, give official title. If owner or partner, state which.
900 Ashwood Parkway. Ste. 600
Address
Atlanta GA 30338
City State Zip Code
If Debtor is a partnership, enter:
Partners' names Home addresses
N/A
NOTICE: Do not use this form for transactions for personal, family or household
purposes. For agricultural and other transactions subject to Federal or State
regulations, Consult legal counsel to determine documentation requirements.
Agricultural purposes generally mean: farming, including dairy farming, but it
also includes thee transportation, harvesting, and processing of farm, dairy. or
forest products if what is transported, harvested, or processed is farm, dairy,
or forest products grown or bred by the user of the equipment itself. It does
not apply, for instance, to a logger who harvests someone else's forest, or a
contractor who prepares land or harvests products on someone else's farm.
SPECIAL PROVISIONS INSTRUCTIONS - The notations to be entered in the Special
Provisions Section of this document for use in ALABAMA, FLORIDA, GEORGIA, IDAHO,
NEVADA, NEW HAMPSHIRE, OREGON, SOUTH DAKOTA AND WISCONSIN are shown in the
applicable State pages of the Loans and Motor Vehicles Manual.
<PAGE>
Schedule No.04
Schedule of Indebtedness and Collateral
To Master Security Agreement dated October 31, 1997 between the undersigned
Secured Party and Debtor.
This Schedule of Indebtedness and Collateral incorporates the terms and
conditions of the above-referenced Master Security Agreement.
This is Originally Executed Copy No. 1 of 1 originally executed copies. Only
transfer of possession by Secured Party of Originally Executed Copy No.1 shall
be effective for purposes of perfecting an interest in this Schedule by
possession.
The equipment listed on this Schedule will be located at:
11935 S. 1-44
Address
Oklahoma City
City
OK
State
73170
Zip Code
Debtor grants to Secured Party a security interest in the property described
below, along with all present and future attachments and accessories thereto and
replacements and proceeds thereof, including amounts payable under any insurance
policy all hereinafter referred to collectively as "Collateral".
Collateral Description (Describe Collateral fully including make kind of unit
model and serial numbers and any other pertinent information)
All presently owned machinery and equipment including fixtures and all
additions, substitutions and replacements thereof located at 11935 5. I-44,
Oklahoma City, OK together with all attachments, component parts, equipment and
accessories installed thereon or affixed thereto and all proceeds thereof,
including without limitation the collateral described on the attached Exhibit A.
<PAGE>
Page 1
of 2
Debtor promises to pay Secured Party the total sum of $2,320,616.96 which
represents principal and interest precomputed over the term hereof, payable in
72 (total number) combined principal and interest payments of $32,230.79 each
commencing on _______________________ and a like sum on a like date each month
thereafter until fully paid, provided however that the final payment shall be in
the amount of the unpaid balance and interest.
Payment shall be made at the address of Secured Party shown on the Master
Security Agreement or such other place as Secured Party may designate from time
to time.
See Special Provisions Instructions below
Accepted
Secured Party:
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: _________________________ Title: _____________________
Executed on 6/16/98
Debtor:
Tower Tech, Inc.
Name of individual corporation or partnership
By: CHARLES D. WHITSITT Title: CFO
___________________
Charles D. Whitsitt
EX 10.21
PROMISSORY NOTE
Principal Loan Date Maturity Loan No Call Collateral Account Officer Ini
$6,500,000.00 4-17-1998 06-30-1999 47886 220 4O, 42 0206190 DRB DRB
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item
Borrower: Tower Tech, Inc. (TIN: 73-1210013)
P.O. Box 1838
Chickasha, OK 73023
Lender: Southwestern Bank & Trust Company
6000 South Western Ave.
P.O. Box 19100
Oklahoma City, OK 73139
Principal Amount: $6,500,000.00
Initial Rate: 10.500%
Date of Note: April 17,1998
PROMISE TO PAY. Tower Tech, Inc. ("Borrower") promises to pay to Southwestern
Bank & Trust Company ("Lender"), or order, in lawful money of the United States
of America, the principal amount of Six Million Five Hundred Thousand & 00/100
Dollars ($6,500,000.00) or so much as may be outstanding, together with interest
on the unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance. The
maximum principal amount of this Note shall be reduced to $5,000,000.00 on
December 31, 1998, and, if necessar6, Borrower shall make a mandatory prepayment
as set forth below.
PAYMENT. Borrower will pay this loan on demand, or if no demand is made, in one
payment of all outstanding principal plus all accrued unpaid interest on June
30,1999. In addition, Borrower will pay regular monthly payments of accrued
unpaid interest beginning April 30,1998, and all subsequent interest payments
are due on the same day of each month after that. Interest on this Note is
computed on a 365/360 simple interest basis; that is, by applying the ratio of
the annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing. Unless otherwise agreed or
required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the National
Prime (the "Index"). The Index is not necessarily the lowest rate charged by
Lender on its loans. If the Index becomes unavailable during the term of this
loan, Lender may designate a substitute index after notice to Borrower. Lender
will tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day. The Index
currently is 8.500% per annum. The Interest rate to be applied to the unpaid
principal balance of this Note will be at a rate of 2.000 percentage points over
the Index, resulting In an Initial rate of 10.500% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Note, Borrower understands that Lender is entitled to a minimum interest
charge of $7.50. Other than Borrower's obligation to pay any minimum interest
charge, Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note or any guarantor
seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note. (h) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of the Indebtedness is impaired. (I) Lender in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 7.000
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Oklahoma. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the
courts of Oklahoma County, the State of Oklahoma. This Note shall be governed by
and construed in accordance with the laws of the State of Oklahoma.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
COLLATERAL. This Note is secured by All Borrower's accounts (excluding accounts
arising from sales to foreign (i.e. not U.S.) nationals); inventory; general
intangibles; rental fleet inventory; U.S. Patent no.5,487,849 and U.S. Patent
no.5,487,531; and Assignment of Life Insurance on Harold 0. Curtis.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or as provided in this paragraph.
Lender may, but need not, require that all oral requests be confirmed in
writing. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized as provided in this paragraph to
request advances under the line of credit until Lender receives from Borrower at
Lender's address shown above written notice of revocation of their authority:
Charles D. Whitsitt, Chief Financial Officer. Advances under this note are
subject to the conditions and limitations set forth in the Business Loan
Agreement of even date herewith. Borrower agrees to be liable for all sums
either: (a) advanced in accordance with the instructions of an authorized person
or (b) credited to any of Borrower's accounts with Lender. The unpaid principal
balance owing on this Note at any time may be evidenced by endorsements on this
Note or by Lender's internal records, including daily computer printouts. Lender
will have no obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor ceases
doing business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note or
any other loan with Lender; (d) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by Lender; or (e) Lender in
good faith deems itself insecure under this Note or any other agreement between
Lender and Borrower.
MANDATORY PREPAYMENT. On December31, 1998, the maximum principal amount of this
Note shall be reduced to $5,000,000.00. In the event the principal amount
advanced on this Note on December 31,1998, exceeds $5,000,000.00, Borrower
shall, on December 31, 1998, pay to Lender the amount necessary to reduce the
principal amount outstanding on this Note to the lesser of: (i) $5,000,000.00 or
(ii) the Borrowing Base, as set forth in the Business Loan Agreement of even
date herewith. Thereafter, the maximum principal amount eligible to be advanced
on this Note shall not exceed the lesser of: (I) $5,000,000.00, or (ii) the
Borrowing Base.
PRIOR NOTE. This Note is executed and delivered to increase the face amount of
that certain Promissory Note #47886 from Tower Tech, Inc. to Southwestern Bank
dated December 31, 1997 in the principal amount of $3,500,000 to mature June 30,
1999, and not in payment, release or discharge of such prior note.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them. Borrower and
any other person who signs, guarantees or endorses this Note, to the extent
allowed by law, waive presentment, demand for payment, protest end notice of
dishonor. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the party
with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER
Tower Tech, Inc.
By:
CHARLES D. WHITSITT
___________________
Charles D. Whitsitt, Chief Financial Officer
Ex 10.22
COMMERCIAL SECURITY AGREEMENT
Principal Loan Date Maturity Loan No Call Collateral Account Officer Ini
$6,500,000.00 04-17-1998 06-30-1999 47886 220 40,42 0206190 DRB DRB
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: Tower Tech, Inc. (TIN: 73-1210013)
P.O. Box 1838
Chickasha, OK 73023
Lender: Southwestern Bank & Trust Company
6000 South Western Ave.
P.O. Box 19100
Oklahoma City, OK 73139
THIS COMMERCIAL SECURITY AGREEMENT Is entered Into between Tower Tech, Inc.
(referred to below as "Grantor"); and Southwestern Bank & Trust Company
(referred to below as "Lender"). For valuable consideration, Grantor grants to
Lender a security Interest In the Collateral to secure the Indebtedness and
agrees that Lender shall have the rights stated in this Agreement with respect
to the Collateral, in addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Commercial Security
Agreement from time to time.
Collateral. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether new existing or
hereafter arising, and wherever located:
All accounts (excluding accounts arising from sales to foreign (i.e. not U.S.)
nationals); inventory; general intangibles; and rental L/ fleet inventory
U.S. Patent No.5,487,849 and U.S. Patent No.5,487,531.
In addition, the word "Collateral" includes all the following, whether now owned
or hereafter acquired, whether now existing or hereafter arising, and wherever
located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions for any
property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, general intangibles, instruments, rents, monies, payments,
and all other rights, arising out of a sale, lease, or other disposition of any
of the property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale, destruction,
loss, or other disposition of any of the property described in this Collateral
section.
(e) All records and data relating to any of the property described in this
Collateral section, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of Grantor's right, title,
and interest in and to all computer software required to utilize, create,
maintain, and process any such records or data on electronic media.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"Events of Default."
Grantor. The word "Grantor" means Tower Tech, Inc., its successors and assigns
Guarantor. The word "Guarantor" means and includes without limitation each and
all of the guarantors, sureties, and accommodation parties in connection with
the Indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the
Note, including all principal and interest, together with all other indebtedness
and costs and expenses for which Grantor is responsible under this Agreement or
under any of the Related Documents. In addition, the word "Indebtedness"
includes all other obligations, debts and liabilities, plus interest thereon, of
Grantor, or any one or more of them, to Lender, as well as all claims by Lender
against Grantor, or any one or more of them, whether existing now or later;
whether they are voluntary or involuntary, due or not due, direct or indirect,
absolute or contingent, liquidated or unliquidated; whether Grantor may be
liable individually or jointly with others; whether Grantor may be obligated as
guarantor, surety, accommodation party or otherwise; whether recovery upon such
indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter may become
otherwise unenforceable.
Lender. The word "Lender" means Southwestern Bank & Trust Company, its
successors and assigns.
Note. The word "Note" means the note or credit agreement dated April 17, 1998,
in the principal amount of $6,500,000.00 from Tower Tech, Inc. to Lender,
together with all renewals of, extensions of, modifications of, refinancings of,
consolidations of and substitutions for the note or credit agreement.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory security
interest in and hereby assigns, conveys, delivers, pledges, and transfers all of
Grantor's right, title and interest in and to Grantor's accounts with Lender
(whether checking, savings, or some other account), including all accounts held
jointly with someone else and all accounts Grantor may open in the future,
excluding, however, all IRA and Keogh accounts, and all trust accounts for which
the grant of a security interest would be prohibited by law. Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all
Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Perfection of Security interest. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to perfect
and continue Lender's security interest in the Collateral. Upon request of
Lender, Grantor will deliver to Lender any and all of the documents evidencing
or constituting the Collateral, and Grantor will note Lender's interest upon any
and all chattel paper if not delivered to Lender for possession by Lender.
Grantor hereby appoints Lender as its irrevocable attorney-in-fact for the
purpose of executing any documents necessary to perfect or to continue the
security interest granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security interest
in the Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of Grantor.
This is a continuing Security Agreement and will continue in effect even though
all or any part of the Indebtedness is paid in full and even though for a period
of time Grantor may not be indebted to Lender.
No Violation. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of accounts,
chattel paper, or general intangibles, the Collateral is enforceable in
accordance with its terms, is genuine, and complies with applicable laws
concerning form, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and capacity
to contract and are in fact obligated as they appear to be on the Collateral.
Location of the Collateral. Grantor, upon request of Lender, will deliver to
Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d) all
other properties where Collateral is or may be located. Except in the ordinary
course of its business, Grantor shall not remove the Collateral from its
existing locations without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
locations as are acceptable to Lender. Except in the ordinary course of its
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the State of
Oklahoma, without the prior written consent of Lender.
Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not sell,
offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor
is not in default under this Agreement, Grantor may sell inventory, but only in
the ordinary course of its business and only to buyers who qualify as a buyer in
the ordinary course of business. A sale in the ordinary course of Grantor's
business does not include a transfer in partial or total satisfaction of a debt
or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise
permit the Collateral to be subject to any lien, security interest, encumbrance,
or charge, other than the security interest provided for in this Agreement,
without the prior written consent of Lender. This includes security interests
even if junior in right to the security interests granted under this Agreement.
Unless waived by Lender, all proceeds from any disposition of the Collateral
(for whatever reason) shall be held in trust for Lender and shall not be
commingled with any other funds; provided however, this requirement shall not
constitute consent by Lender to any sale or other disposition. Upon receipt,
Grantor shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
Collateral Schedules and Locations. Insofar as the Collateral consists of
inventory, Grantor shall deliver to Lender, as often as Lender shall require,
such lists, descriptions, and designations of such Collateral as Lender may
require to identify the nature, extent, and location of such Collateral. Such
information shall be submitted for Grantor and each of its subsidiaries or
related companies.
Maintenance and inspection of Collateral. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral. Lender
and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral wherever located.
Grantor shall immediately notify Lender of all cases involving the return,
rejection, repossession, loss or damage of or to any Collateral; of any request
for credit or adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting the Collateral
or the value or the amount of the Collateral. Grantor will furnish Lender
information adequate to identify with accuracy all Collateral and will deliver
to Lender upon request true copies of all evidence Grantor possesses concerning
the Collateral and its location. Grantor at all times will maintain adequate
books and records concerning the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other charges
that could accrue as a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in the contest
proceedings.
Compliance with Governmental Requirements. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities, now
or hereafter in effect, applicable to the ownership, production, disposition, or
use of the Collateral. Grantor may contest in good faith any such law, ordinance
or regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the Collateral, in Lender's
opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral never
has been, and never will be so long as this Agreement remains a lien on the
Collateral, used for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 9~99 ("SARA"), the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., or other applicable state or Federal laws, rules,
or regulations adopted pursuant to any of the foregoing. The terms "hazardous
waste" and "hazardous substance" shall also include, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for hazardous wastes and substances.
Grantor hereby (a) releases and waives any future claims against Lender for
indemnity or contribution in the event Grantor becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify shall survive the
payment of the Indebtedness and the satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks
insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably acceptable to
Lender and issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at least
ten (10) days' prior written notice to Lender and not including any disclaimer
of the insurer's liability for failure to give such a notice. Each insurance
policy also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default of
Grantor or any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require. If
Grantor at any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such insurance
as Lender deems appropriate, including if it so chooses "single interest
insurance," which will cover only Lender's interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor fails
to do so within fifteen (15) days of the casualty. All proceeds of any insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration. If Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Lender to be sufficient to produce,
at least fifteen (15) days before the premium due date, amounts at least equal
to the insurance premiums to be paid. If fifteen (15) days before payment is
due, the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender. The reserve funds shall be held by Lender as a general
deposit and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by Grantor as
they become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance premiums
required to be paid by Grantor. The responsibility for the payment of premiums
shall remain Grantor's sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (a) the name of the insurer; (b)
the risks insured; (c) the amount of the policy; (d) the property insured; (e)
the then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (f) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of the
tangible personal property and beneficial use of all the Collateral and may use
it in any lawful manner not inconsistent with this Agreement or the Related
Documents, provided that Grantor's right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender's security interest in such Collateral. If
Lender at any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if Lender takes such action for
that purpose as Grantor shall request or as Lender, in Lender's sole discretion,
shall deem appropriate under the circumstances, but failure to honor any request
by Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the ~
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (I) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when due on the
Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or in any other agreement between Lender and Grantor.
Default In Favor of Third Parties. Should Borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or any Grantor's
ability to repay the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Grantor under this Agreement, the Note or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any time
and for any reason.
Insolvency. The dissolution or termination Of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
the Collateral or any other collateral securing the Indebtedness- This includes
a garnishment of any of Grantor's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or such Guarantor dies or becomes
incompetent.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Oklahoma Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate indebtedness. Lender may declare the entire Indebtedness, including
any prepayment penalty which Grantor would be required to pay, immediately due
and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of Grantor
to take possession of and remove the Collateral. If the Collateral contains
other goods not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease, transfer, or
otherwise dispose of the Collateral. Unless the Collateral in whole or in part
is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Lender will give Grantor reasonable
notice of the time and place of any public sale, or of the time after which any
private sale or other disposition is to be made. Notwithstanding any other
provision of this Agreement, any requirement of notice for this purpose shall be
met if notice is mailed, postage prepaid, to the address of Grantor provided for
in this Agreement at least ten (10) days before sale or other disposition or
action. Lender shall be entitled to, and Grantor shall be liable for, all
reasonable costs and expenditures incurred in realizing on its security
interest, including without limitation, all court costs, fees for sale, selling
costs and reasonable attorneys' fees as set forth in the Note or in this
Agreement. All such costs shall be secured by the security interest in the
Collateral covered by this Agreement.
Appoint Receiver. To the extent permitted by applicable law, Lender shall have
the following rights and remedies regarding the appointment of a receiver: (a)
Lender may have a receiver appointed as a matter of right, (b) the receiver may
be an employee of Lender and may serve without bond, and (c) all tees of the
receiver and his or her attorney shall become part of the Indebtedness secured
by this Agreement.
Collect Revenues, Apply Accounts. Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral.
Lender may at any time in its discretion transfer any Collateral into its own
name or that of its nominee and receive the payments, rents, income, and
revenues therefrom and hold the same as security for the Indebtedness or apply
it to payment of the Indebtedness in such order of preference as Lender may
determine. Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, chooses in action, or similar
property, Lender may demand, collect, receipt for, settle, compromise, adjust,
sue for, foreclose, or realize on the Collateral as Lender may determine,
whether or not Indebtedness or Collateral is then due. For these purposes,
Lender may, on behalf of and in the name of Grantor, receive, open and dispose
of mail addressed to Grantor; change any address to which mail and payments are
to be sent; and endorse notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors and
obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection is a sale of
accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may be
amended from time to time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at law, in equity, or
otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether evidenced by
this Agreement or the Related Documents or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an obligation of
Grantor under this Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement: Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of Oklahoma. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the courts of the State of
Oklahoma. This Agreement shall be governed by and construed in accordance with
the laws of the State of Oklahoma.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including attorneys' fees and Lender's legal expenses,
incurred in connection with the enforcement of this Agreement. Lender may pay
someone else to help enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's attorneys'
fees and legal expenses whether or not there is a lawsuit including attorneys'
fees and legal expenses for bankruptcy proceedings (and including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor also shall pay all court costs and
such additional fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor under this
Agreement shall be joint and several, and all references to Grantor shall mean
each and every Grantor. This means that each of the Borrowers signing below is
responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be given in
writing, may be sent by telefacsimilie, and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid, addressed to
the party to whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that 6the purpose of the notice
is to change the party's address. To the extent permitted by applicable law, if
there is more than one Grantor, notice to any Grantor will constitute notice to
all Grantors. For notice purposes, Grantor will keep Lender informed at all
times of Grantor's current address(es).
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing or
payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment for
the Collateral; (c) to settle or compromise any and all claims arising under the
Collateral, and, in the place and stead of Grantor, to execute and deliver its
release and settlement for the claim; and (d) to file any claim or claims or to
take any action or institute or take part in any proceedings, either in Is own
name or in the name of Grantor, or otherwise, which in the discretion of Lender
may seem to be necessary or advisable. This power is given as security for the
Indebtedness, and the authority hereby conferred is and shall be irrevocable and
shall remain in full force and effect until renounced by Lender.
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
Successor Interests. Subject to the limitations set forth above on transfer of
the Collateral, this Agreement shall be binding upon and inure to the benefit of
the parties, their successors and assigns.
Waivers. No act, delay or omission, including Lender's waiver of remedy because
of any default under this Agreement, shall constitute a waiver of any of
Lender's rights and remedies under this Agreement or any other agreement between
the parties. All rights and remedies of Lender are cumulative and may be
exercised singularly or concurrently, and the exercise of any one or more remedy
will not be a waver of any other. No waiver, change, modification or discharge
of any of Lender's rights or of Grantor's duties as so specified or allowed will
be effective unless in writing and signed by a duly authorized officer of
Lender, and any such waiver will not be a bar to the exercise of any right or
remedy on any subsequent default. Lender shall not be liable for failure to
collect any account or enforce any contract right or for any other act or
omission on the part of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED APRIL 17,
1998.
GRANTOR:
Tower Tech, Inc.
BY
CHARLES D. WHITSIT
__________________
Charles D. Whitsitt, Chief Financial Officer
LENDER:
Southwestern Bank & Trust Company
BY
D. R. BALES
___________
D. R. Bales, Executive Vice President
Authorized Officer
EX 10.23
BUSINESS LOAN AGREEMENT
Principal Loan Date Maturity Loan No CaI1 Collateral Account Officer In
$6,500,000.00 04-17-1998 06-30-1999 47886 220 40,42 0206190 DRB
References in the shaded area are for Lender's use only and do not limit
the applicability of this document to any particular loan or item.
Borrower: Tower Tech, Inc. (TIN: 73-1210013
P.O. Box 1838
Chickasha, OK 73023
Lender: Southwestern Bank & Trust Company
6000 South Western Ave.
P.O. Box 19100
Oklahoma City, OK 73139
THIS BUSINESS LOAN AGREEMENT between Tower Tech, Inc. ("Borrower") and
Southwestern Bank & Trust Company ("Lender") is made and executed on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement Individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) In
granting, renewing, or extending any Loan, Lender Is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of April 17, 1998, and shall continue
thereafter until all Indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Business Loan Agreement from
time to time.
Borrower. The word "Borrower" means Tower Tech, Inc. The word "Borrower" also
includes, as applicable, all subsidiaries and affiliates of Borrower as provided
below in the paragraph titled "Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real or
personal property, whether granted directly or indirectly, whether granted now
or in the future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien, charge,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each and all
of the persons or entities granting a Security Interest in any Collateral for
the Indebtedness, including without limitation all Borrowers granting such a
Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation each and
all of the guarantors, sureties, and accommodation parties in connection with
any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without limitation all
Loans, together with all other obligations, debts and liabilities of Borrower to
Lender, or any one or more of them, as well as all claims by Lender against
Borrower, or any one or more of them; whether now or hereafter existing,
voluntary or involuntary, due or not due, absolute or contingent, liquidated or
unliquidated; whether Borrower may be liable individually or jointly with
others; whether Borrower may be obligated as a guarantor, surety, or otherwise;
whether recovery upon such Indebtedness may be or hereafter may become barred by
any statute of limitations; and whether such Indebtedness may be or hereafter
may become otherwise unenforceable.
Lender. The word "Lender" means Southwestern Bank & Trust Company, its
successors and assigns.
Loan. The word "Loan" or "Loans" means and includes without limitation any and
all commercial loans and financial accommodations from Lender to Borrower,
whether now or hereafter existing, and however evidenced, including without
limitation those loans and financial accommodations described herein or
described on any exhibit or schedule attached to this Agreement from time to
time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note or
notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith; (C) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (d) purchase money liens or purchase money
security interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens"; (e) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing; and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrower's assets.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act of
1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to Lender
the following documents for the Loan: (a) the Note, (b) Security Agreements
granting to Lender security interests in the Collateral, (c) Financing
Statements perfecting Lender's Security Interests; o(d) evidence of insurance as
required below; and (e) any other documents required under this Agreement or by
Lender or its counsel, including without limitation any guaranties described
below.
Borrower's Authorization. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents,
and such other authorizations and other documents and instruments as Lender or
its counsel, in their sole discretion, may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in this
Agreement or any Related Document.
Representations and Warranties. The representations and warranties set forth in
this Agreement, in the Related Documents, and in any document or certificate
delivered to Lender under this Agreement are true and correct.
04-17-1998 BUSINESS LOAN AGREEMENT Page 2
(Continued)
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Oklahoma and is
validly existing and in good standing in all states in which Borrower is doing
business. Borrower has the full power and authority to own its properties and to
transact the businesses in which it is presently engaged or presently proposes
to engage. Borrower also is duly qualified as a foreign corporation and is in
good standing in all states in which the failure to so qualify would have a
material adverse effect on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement and
all Related Documents by Borrower, to the extent to be executed, delivered or
performed by Borrower, have been duly authorized by all necessary action by
Borrower; do not require the consent or approval of any other person, regulatory
authority or governmental body; and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other instrument
binding upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to Lender
truly and completely disclosed Borrower's financial condition as of the date of
the statement, and there has been no material adverse change in Borrower's
financial condition subsequent to the date of the most recent financial
statement supplied to Lender. Borrower has no material contingent obligations
except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously disclosed
in Borrower's financial statements or in writing to Lender and as accepted by
Lender, and except for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of Borrower's properties free
and clear of all Security Interests, and has not executed any security documents
or financing statements relating to such properties. All of Borrower's
properties are titled in Borrower's legal name, and Borrower has not used, or
filed a financing statement under, any other name for at least the last five (5)
years.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. Except as disclosed to and acknowledged by Lender in writing,
Borrower represents and warrants that: (a) During the period of Borrower's
ownership of the properties, there has been no use, generation, manufacture,
storage, treatment, disposal, release or threatened release of any hazardous
waste or substance by any person on, under, about or from any of the properties.
(b) Borrower has no knowledge of, or reason to believe that there has been (i)
any use, generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on, under, about or from
the properties by any prior owners or occupants of any of the properties, or
(ii) any actual or threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant, contractor, agent
or other authorized user of any of the properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous waste or
substance on, under, about or from any of the properties; and any such activity
shall be conducted in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation those laws,
regulations and ordinances described above. Borrower authorizes Lender and its
agents to enter upon the properties to make such inspections and tests as Lender
may deem appropriate to determine compliance of the properties with this section
of the Agreement. Any inspections or tests made by Lender shall be at Borrower's
expense and for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any other
person. The representations and warranties contained herein are based on
Borrower's due diligence in investigating the properties for hazardous waste and
hazardous substances. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower becomes
liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and alt claims, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to Borrower's ownership
or interest in the properties, whether or not the same was or should have been
known to Borrower. The provisions of this section of the Agreement, including
the obligation to indemnify, shall survive the payment of the Indebtedness and
the termination or expiration of this Agreement and shall not be affected by
Lender's acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower's financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower's Loan and
Note, that would be prior or that may in any way be superior to Lender's
Security Interests and rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly or
indirectly securing repayment of Borrower's Loan and Note and all of the Related
Documents are binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance with
their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may have
any liability complies in all material respects with all applicable requirements
of law and regulations, and (i) no Reportable Event nor Prohibited Transaction
(as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower
has not withdrawn from any such plan or initiated steps to do so, (iii) no steps
have been taken to terminate any such plan, and (iv) there are no unfunded
liabilities other than those previously disclosed to Lender in writing.
Location of Borrower's Offices and Records. Borrower's place of business, or
Borrower's Chief executive office, if Borrower has more than one place of
business, is located at P.O. Box 1838, Chickasha, OK 73023. Unless Borrower has
designated otherwise in writing this location is also the office or offices
where Borrower keeps its records concerning the Collateral.
Information. All information heretofore or contemporaneously herewith furnished
by Borrower to Lender for the purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all information hereafter
furnished by or on behalf of Borrower to Lender will be, true and accurate in
every material respect on the date as of which such information is dated or
certified; and none of such information is or will be incomplete by omitting to
state any material fact necessary to make such information not misleading.
Survival of Representations and Warranties. Borrower understands and agrees that
Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower. Borrower
further agrees that the foregoing representations and warranties shall be
continuing in nature and shall remain in full force and effect until such time
as Borrower's Indebtedness shall be paid in full, or until this Agreement shall
be terminated in the manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect,
Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial condition of any
Guarantor.
Financial Records. Maintain its books and records in accordance with generally
accepted accounting principles, applied on a consistent basis, and permit Lender
to examine and audit Borrower's books and records at all reasonable times.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables, inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as Lender may request
from time to time.
Insurance. Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrower's
properties and operations, in form, amounts, coverages and with insurance
companies reasonably acceptable to Lender. Borrower, upon request of Lender,
will deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that coverages
will not be cancelled or diminished without at least ten (10) days' prior
written notice to Lender. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be impaired in
any way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or is offered
a security interest for the Loans, Borrower will provide Lender with such loss
payable or other endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties
insured; (e) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (f) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually),
04-17-1998 BUSINESS LOAN AGREEMENT Page 3
(Continued)
Borrower will have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral. The
cost of such appraisal shall be paid by Borrower.
Guaranties. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, on Lender's forms, and in the amount
and by the guarantor named below:
Guarantor Amount
Harold D. Curtis Unlimited
Other Agreements. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any ether party and
notify Lender immediately in writing of any default in connection with any other
such agreements. Loan Proceeds. Use all Loan proceeds solely for Borrower's
business operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (a) the legality of the same shall be
contested in good faith by appropriate proceedings, and (b) Borrower shall have
established on its books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with generally
accepted accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies, liens and
claims and will authorize the appropriate governmental official to deliver to
Lender at any time a written statement of any assessments, taxes, charges,
levies, liens and claims against Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions set
forth in this Agreement and in the Related Documents in a timely manner, and
promptly notify Lender if Borrower learns of the occurrence of any event which
constitutes an Event of Default under this Agreement or under any of the Related
Documents.
Operations. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's employee benefit
plans.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of Borrower's books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender at
least annually and at the time of each disbursement of Loan proceeds with a
certificate executed by Borrower's chief financial officer, or other officer or
person acceptable to Lender, certifying that the representations and warranties
set forth in this Agreement are true and correct as of the date of the
certificate and further certifying that, as of the date of the certificate, no
Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all respects with
all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower's part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing statements,
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence and secure the Loans and to perfect all Security
Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal course
of business and indebtedness to Lender contemplated by this Agreement, create,
incur or assume indebtedness for borrowed money, including capital leases, (b)
except as allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets, or
(c) sell with recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change ownership, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, (c) pay any dividends on
Borrower's stock (other than dividends payable in its stock), provided, however
that notwithstanding the foregoing, but only so long as no Event of Default has
occurred and is continuing or would result from the payment of dividends, if
Borrower is a Subchapter S Corporation" (as defined in the Internal Revenue Code
of 1986, as amended), Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the shareholders
to pay income taxes and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their ownership of shares
of stock of Borrower, or (d) purchase or retire any of Borrower's outstanding
shares or alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise or
entity, or (c) incur any obligation as surety or guarantor other than in the
ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) Lender in good faith deems itself insecure, even
though no Event of Default shall have occurred.
ACCOUNTS. Borrower will maintain all major operating accounts at Southwestern
Bank.
BORROWING BASE REPORT. Borrower will deliver to Southwestern Bank, as soon as
available but in no event later than 45 days from month end, a completed
Borrowing Base Certificate (see attached Exhibit "A") along with monthly
accounts receivable agings, inventory listings and rental fleet listings.
FINANCIAL STATEMENTS. Borrower will provide Southwestern Bank with, as soon as
available but in no event later than 45 days from quarter end, Borrower's
quarterly 1OQ Report. In addition, Borrower will provide Southwestern Bank with,
as soon as available but in no event later than 90 days from fiscal year end,
Borrower's annual audited financial statement
TAX REPORTING. Borrower will provide Southwestern Bank with, as soon as
available but in no event later than 15 days from filing, Borrower's annual tax
return.
VERIFICATION OF INVENTORY AND RENTAL FLEET. Borrower agrees to permit
independent on site verifications of the accuracy of the Borrowing Base
Certificates with respect to inventory and rental fleet, to be completed on an
annual basis beginning 12-31-98, or sooner at Southwestern Bank's request. The
verifications will be performed by an independent third party, contracted by the
Bank, and paid for by Tower Tech, Inc.
TANGIBLE NET WORTH. During the term of this agreement Borrower will maintain a
tangible net worth of at least $4,500,000.00, which will be tested quarterly
beginning quarter end 2/28/98. Tangible net worth is defined as total assets
excluding all receivables from officers, directors, or employees and all
intangible assets (i.e., goodwill, trademarks, patents, copyrights,
organizational expenses, and similar intangible items) less total Indebtedness.
GUARANTOR. Borrower shall cause Guarantor to provide Southwestern Bank with
annual financial statements and tax returns.
LIFE INSURANCE. Borrower will provide life insurance on Guarantor in an amount
not less than $1,000,000.00 to be assigned to Southwestern Bank.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due on the
Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to perform
when due any other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents, or failure of Borrower to comply
with or to perform any other term, obligation, covenant or condition contained
in any other agreement between Lender and Borrower.
Default in Favor of Third Parties. Should Borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or any Grantor's
ability to repay the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Borrower or any Grantor under this Agreement or the
Related Documents is false or misleading in any material respect at the time
made or furnished, or becomes false or misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and for
any reason.
Insolvency. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower, any creditor of any Grantor against
any collateral securing the Indebtedness, or by any governmental agency. This
includes a garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lender's option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of Oklahoma. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of Oklahoma County,
the State of Oklahoma. This Agreement shall be governed by and construed In
accordance with the laws of the State of Oklahoma.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under this
Agreement shall be joint and several, and all references to Borrower shall mean
each and every Borrower. This means that each of the Borrowers signing below is
responsible for all obligations in this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's sale or
transfer, whether now or later, of one or more participation interests in the
Loans to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers,
or potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation interests, as
well as all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loans and will have
all the rights granted under the participation agreement or agreements governing
the sale of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or against
any purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower's obligation under the
Loans irrespective of the failure or insolvency of any holder of any interest in
the Loans. Borrower further agrees that the purchaser of any such participation
interests may enforce its interests irrespective of any personal claims or
defenses that Borrower may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's expenses,
including without limitation attorneys' fees, incurred in connection with the
preparation, execution, enforcement, modification and collection of this
Agreement or in connection with the Loans made pursuant to this Agreement.
Lender may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes, subject to any
limits under applicable law, Lender's attorneys' fees and Lender's legal
expenses, whether or not there is a lawsuit, including attorneys' fees for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums provided
by law.
Notices. All notices required to be given under this Agreement shall be given in
writing, may be sent by telefacsimilie, and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid, addressed to
the party to whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of the notice
is to change the party's address. To the extent permitted by applicable law, if
there is more than one Borrower, notice to any Borrower will constitute notice
to all Borrowers. For notice purposes, Borrower will keep Lender informed at all
times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity:
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word "Borrower" as used herein
shall include all subsidiaries and affiliates of Borrower. Notwithstanding the
foregoing however, under no circumstances shall this Agreement be construed to
require Lender to make any Loan or other financial accommodation to any
subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on behalf
of Borrower shall bind its successors and assigns and shall inure to the benefit
of Lender, its successors and assigns. Borrower shall not, however, have the
right to assign its rights under this Agreement or any interest therein, without
the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower in
this Agreement or in any certificate or other instrument delivered by Borrower
to Lender under this Agreement shall be considered to have been relied upon by
Lender and will survive the making of the Loan and delivery to Lender of the
Related Documents, regardless of any investigation made by Lender or on Lender's
behalf.
Time is of the Essence. Time is of the essence in the performance of this
Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lender's rights or of any obligations of Borrower or of any
Grantor as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances where
such consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF APRIL
17,1998.
BORROWER
Tower Tech, Inc.
By:
CHARLES D. WHITSITT
___________________
Charles D. Whitsitt, Chief Financial Officer
LENDER:
Southwestern Bank & Trust Company
By:
DAN R. BALES
Dan R. Bales, ExecutiveVice President
Authorized Officer
Exhibit 10.24
TOWER TECH, INC. LOCAL FEDERAL BANK, F.S.B. Loan Number _______________
RR #3 P O BOX 1838 3601 N.W. 63RD STREET Date JUNE 10, 1998
CHICKASHA OK 73023 OKLAHOMA CITY, OK 73116 Maturity Date JUNE 10, 2003
Loan Amount $ 135, 500.00
Renewal Of ________________
BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS
"I" includes each borrower "You" means the lender, its
above, joint and severally. successors and assigns.
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of ONE HUNDRED THIRTY FIVE THOUSAND FIVE HUNDRED
AND NO/100* ** * * Dollars $ 135,500.00 XX Single Advance: I will receive all of
this principal sum on JUNE 10, 1998. No additional advances are contemplated
under this note.
__ Multiple Advance: The principal sum shown above is the maximum amount of
principal I can borrow under this note. On ______________________
________________ I will receive the amount of $_______________________________
and future principal advances are contemplated.
Conditions: The conditions for future advances are _____________________________
__Open End Credit: You and I agree that I may borrow up to the maximum amount of
principal more than one lime. This feature is subject to all other conditions
and expires on ________________________
___Closed End Credit: You and I agree that I may borrow up to the maximum only
one time land subject to all other conditions).
INTEREST: I agree to pay interest on the outstanding principal balance from JUNE
10, 1998 at the rate of 8.250 % per year until JUNE 10, 2003.
--------------
__Variable Rate: This rate may then change as stated below.
__Index Rate: The future rate will be_______the following index rate: _________.
__No Index: The future rate will not be subject to any internal or external
index. It will be entirely in your control.
__Frequency and Timing: The rate on this note may change as often as
___________________________ A change in the interest rate will take effect
_________________________________________________
__Limitations: During the term of this loan, the applicable annual interest rate
will not be more than _________________________% or less than
_________________________ %. The rate may not change more than
_________________________ % each_________________________.
Effect of Variable Rate: A change in the interest rate will have the following
effect on the payments:
__The amount of each scheduled payment will change.
__The amount of the final payment will change.
- -- ------------------------------------------------------------
ACCRUAL METHOD: Interest will be calculated on an ACTUAL/365 basis.
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note
owing after maturity, and until paid in full, as stated below:
XX on the same fixed or variable rate basis in effect before maturity (as
indicated above). __at a rate equal to __________
XX LATE CHARGE:
If a payment is made more than 15 days after it is due, I agree to pay a late
charge of 5.000% OF THE LATE PAYMENT.
XX ADDITIONAL CHARGES: In addition to
interest, I agree to pay the following charges which __ are __ are not included
in the principal amount above:
PAYMENTS: I agree to pay this note as follows:
__Interest: I agree to pay accrued interest ___________________________________
__Principal: I agree to pay the principal _____________________________________
XX Installments: I agree to pay this note in 60 payments. The first payment will
be in the amount of $2,764.26 and will be due JULY 10, 1998. A payment of
$2,764.26 will be due ON THE 10TH DAY OF EACH MONTH thereafter. The final
payment of the entire unpaid balance of principal and interest will be due on
JUNE 10, 2003.
ADDITIONAL TERMS:
PURPOSE: The purpose of this loan is BUSINESS:
PURCHASE USED THERMOFORMER AND BLOWER
XX SECURITY: This note is separately secured by (describe separate document by
type and date): 1989 LYLE MODEL 125FI' THERMOFORMER SERIAL#
______________________________USED 1989 CUMBERLAND 1426 20HP BLOWER AND
DISCHARGE.
SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 2). I
have received a copy on today's date.
TOWER TECH, INC.
BY: CHARLES D. WHITSITT, CFO
________________________
Charles D. Whitsitt
Signature for Lender
CHERYL H. BORELLI
_________________
Cheryl H. Borelli
<PAGE>
DEFINITIONS: As used on page 1, "X" means the terms that apply to this loan.
"I," "me" or "my" means each Borrower who signs this note and each other person
or legal entity (including guarantors, endorsers, and sureties) who agrees to
pay this note (together referred to as "us"). "You" or "your" means the Lender
and its successors and assigns. APPLICABLE LAW: The law of the State in which
you are located will govern this note. Any term of this note which is contrary
to applicable law will not be effective, unless the law permits you and me to
agree to such a variation. If any provision of this agreement cannot be enforced
according to its terms, this fact will not affect the enforceability of the
remainder of this agreement. No modification of this agreement may be made
without your express written consent. T ime is of the essence in this agreement.
PAYMENTS: Each payment I make on this note will first reduce the amount I owe
you for charges which are neither interest nor principal. The remainder of each
payment will then reduce accrued unpaid interest, and then unpaid principal. If
you and I agree to a different application of payments, we will describe our
agreement on this note. I may prepay a part of, or the entire balance of this
loan without penalty, unless we specify to the contrary on this note. Any
partial prepayment will not excuse or reduce any later scheduled payment until
this note is paid in full (unless, when I make the prepayment, you and I agree
in writing to the contrary). INTEREST: Interest accrues on the principal
remaining unpaid from time to time, until paid in full. If I receive the
principal in more than one advance, each advance will start to earn interest
only when I receive the advance. The interest rate in effect on this note at any
given time will apply to the entire principal advanced at that time.
Notwithstanding anything to the contrary, I do not agree to pay and you do not
intend to charge any rate of interest that is higher than the maximum rate of
interest you could charge under applicable law for the extension of credit that
is agreed to here (either before or after maturity). If any notice of interest
accrual is sent and is in error, we mutually agree to correct it, and if you
actually collect more interest than allowed by law and this agreement, you agree
to refund it to me. INDEX RATE: The index will serve only as a device for
setting the rate on this note. You do not guarantee by selecting this index, or
the margin, that the rate on this note will be the same rate you charge on any
other loans or class of loans to me or other borrowers. ACCRUAL METHOD: The
amount of interest that I will pay on this loan will be calculated using the
interest rate and accrual method stated on page 1 of this note. For the purpose
of interest calculation, the accrual method will determine the number of days in
a "year." If no accrual method is stated, then you may use any reasonable
accrual method for calculating interest. POST MATURITY RATE: For purposes of
deciding when the "Post Maturity Rate" (shown on page 11 applies, the term
"maturity" means the date of the last scheduled payment indicated on page 1 of
this note or the date you accelerate payment on the note, whichever is earlier.
SINGLE ADVANCE LOANS: If this is a single advance loan, you and I expect that
you will make only one advance of principal. However, you may add other amounts
to the principal if you make any payments described in the "PAYMENTS BY LENDER"
paragraph below. MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you
and I expect that you will make more than one advance of principal. If this is
closed end credit, repaying a part of the principal will not entitle me to
additional credit. PAYMENTS BY LENDER: If you are authorized to pay, on my
behalf, charges I am obligated to pay (such as property insurance premiums),
then you may treat those payments made by you as advances and add them to the
unpaid principal under this note, or you may demand immediate payment of the
charges. SET-OFF: I agree that you may Set off any amount due and payable under
this note against any right I have to receive money from you.
"Right to receive money from you," means:
(1) any deposit account balance I have with you;
(2) any money owed to me on an item presented to you or in your possession
for collection or exchange; and (3) any repurchase agreement or other
nondeposit obligation. "Any amount due and payable under this note" means
the total amount of which you are entitled to demand payment under the terms
of this note at the time you Set off. This total includes any balance the
due date for which you properly accelerate under this note. If my right to
receive money from you is also owned by someone who has not agreed to pay
this note, your right of set-off will apply to my interest in the obligation
and to any other amounts I could withdraw on my sole request or endorsement.
Your right of set-off does not apply to an account or other obligation where
my rights are only as a representative. It also does not apply to any
Individual Retirement Account or other tax-deferred retirement account. You
will not be liable for the dishonor of any check when the dishonor occurs
because you set off this debt against any of my accounts. I agree to hold
you harmless from any such claims arising as a result of your exercise of
your right of set-off.
REAL ESTATE OR RESIDENCE SECURITY: If this note is secured by real estate or a
residence that is personal properly, the existence of a default and your
remedies for such a default will be determined by applicable law, by the terms
of any Separate instrument creating the security interest and, to the extent not
prohibited by law and not contrary to the terms of the separate security
instrument, by the "Default" and Remedies" paragraphs herein. DEFAULT: I will be
in default if any one or more of the following occur: (1) I fail to make a
payment on time or in the amount due; (2) I fail to keep the property insured,
if required; (3) I fail to pay, or keep any promise, on any debt or agreement I
have with you; (4) any other creditor of mine attempts to collect any debt I owe
him through court proceedings; (5) I die, am declared incompetent, make an
assignment for the benefit of creditors, or become insolvent (either because my
liabilities exceed my assets or I am unable to pay my debts as they become due);
(6) I make any written statement or provide any financial information that is
untrue or inaccurate at the time it was provided; (7) 1 do or fail to do
something which causes you to believe that you will have difficulty collecting
the amount lowe you; (8) any collateral securing this note is used in a manner
or for a purpose which threatens confiscation by a legal authority; (9) I change
my name or assume an additional name without first notifying you before making
such a change; (10) I fail to plant, cultivate and harvest crops in due season
if I am a producer of crops; (11) any loan proceeds are used for a purpose that
will contribute to excessive erosion of highly erodible land or to the
conversion of wetlands to produce an agricultural commodity, as further
explained in 7 C.F.R. Part 1940, Subpart G, Exhibit M. REMEDIES: If I am in
default on this note you have, but are not limited to, the following remedies:
(1) You may demand immediate payment of all I owe you under this note
(principal, accrued unpaid interest and other accrued charges)
(2) You may set off this debt against any right I have to the payment of money
from you, subject to the terms of the "Set-Off" paragraph herein.
(3) You may demand security, additional security, or additional parties to be
obligated to pay this note as a condition for not using any other remedy.
(4) You may refuse to make advances to me or allow purchases on credit by me.
(5) You may use any remedy you have under state or federal law. By selecting
any one or more of these remedies you do not give up your right to later
use any other remedy. By waiving your right to declare an event to be a
default, you do not waive your right to later consider the event as a
default if it continues or happens again.
COLLECTION COSTS AND ATTORNEY'S FEES: I agree to pay all costs of collection,
replevin or any other or similar type of cost if I em in default. In addition,
if you hire an attorney to collect this note, I also agree to pay any fee you
incur with such attorney plus court costs (except where prohibited by law). To
the extent permitted by the United States Bankruptcy Code, I also agree to pay
the reasonable attorney's fees and costs you incur to collect this debt as
awarded by any court exercising jurisdiction under the Bankruptcy Code.
WAIVER: I give up my rights to require you to do certain things. I will not
require you to:
(1) demand payment of amounts due (presentment);
(2) obtain official certification of nonpayment (protest); or
(3) give notice that amounts due have not been paid (notice of dishonor). I
waive any defenses I have based on suretyship or impairment of collateral.
OBLIGATIONS INDEPENDENT: I understand that I must pay this note even if someone
else has also agreed to pay it (by, for example, signing this form or a separate
guarantee or endorsement). You may sue me alone, or anyone else who is obligated
on this note, or any number of us together, to collect this note. You may do so
without any notice that it has not been paid (notice of dishonor). You may
without notice release any party to this agreement without releasing any other
party. If you give up any of your rights, with or without notice, it will not
affect my duty to pay this note. Any extension of new credit to any of us, or
renewal of this note by all or less than all of us will not release me from my
duty to pay it. (Of course, you are entitled to only one payment in full.) I
agree that you may at your option extend this note or the debt represented by
this note, or any portion of the note or debt, from time to time without limit
or notice and for any term without affecting my liability for payment of the
note. I will not assign my obligation under this agreement without your prior
written approval.
CREDIT INFORMATION: I agree and authorize you to obtain credit
information about me from time to time (for example, by requesting a credit
report) and to report to others your credit experience with me (such as a credit
reporting agency). I agree to provide you, upon request, any financial statement
or information you may deem necessary. I warrant that the financial statements
and information I provide to you are or will be accurate, correct and complete.
NOTICE: Unless otherwise required by law, any notice to me shall be given by
delivering it or by mailing it by first class mail addressed to ome at my last
known address. My current address is on page 1. I agree to inform you in writing
of any change in my address. I will give any notice to you by mailing it first
class to your address stated on page 1 of this agreement, or to any other
address that you have designated.
