U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the period ended August 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from . . . . . . . . . . .
Commission file number 1-12556
TOWER TECH, INC.
(Name of small business issuer in its charter)
Oklahoma 73-1210013
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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 October 15, 1998
<PAGE>
INDEX
TOWER TECH, INC.
Part 1. Financial Information
Page
Item 1. Financial Statements (Unaudited)
Balance Sheet - August 31, 1998 F-1
Statements of Operations -
Three months ended August 31, 1998 and 1997, F-2
Nine months ended August 31, 1998, and 1997 F-3
Statements of Cash Flows -
Nine months ended August 31, 1998 and 1997 F-4
Notes to Financial Statements - August 31, 1998 F-5
Item 2. Management's Discussion and Analysis of Financia
Condition and Results of Operations 3
Part 2. Other Information
Item 1. Legal Proceedings 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 11
<PAGE>
TOWER TECH, INC.
BALANCE SHEET (UNAUDITED)
August 31 1998
Assets
Current assets:
Cash $ 217,011
Accounts receivable, net of allowance
for doubtful accounts of $422,645 6,007,612
Accounts receivable, affiliate 385,746
Notes receivable, current 201,357
Receivables from officers and employees 196,026
Costs and estimated earnings in excess of billings
on uncompleted contracts 687,000
Inventory 6,020,402
Restricted assets-current 158,335
Prepaid expenses 261,967
Deferred tax asset 169,147
-------------
Total current assets 14,304,603
Property, plant and equipment, net 14,862,593
Rental fleet, net 6,864,873
Patents, net 228,380
Deferred tax asset 775,667
Notes receivable, non-current, net of unamortized
discount of $44,628 676,707
Other assets 657,056
--------------
$ 38,369,879
==============
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 8,722,078
Current maturities of obligations under capital lease 158,357
Accounts payable 5,334,537
Accounts payable, affiliate 1,735
Accured liabilities 1,125,435
Interest payable 273,416
Customer deposits 606,485
-------------
Total current liabilities 16,222,043
-------------
Long-term debt, net 15,315,170
-------------
Obligations under capital lease, net 171,359
-------------
Stockholders' equity
Common stock, $.001 par value; 10,000,000 shares
authorized; 3,576,311 shares isssued and outstanding 3,577
Capital in excess of par 8,278,561
Deficit (1,620,831)
-------------
Total stockholders' equity 6,661,307
-------------
Total liabilities and stockholders' equity $ 38,369,879
==============
The accompanying notes are an integral part of these financial statements.
F-1
<PAGE>
TOWER TECH, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended
August 31, August 31,
1998 1997
Sales and other operating revenue:
Tower sales $ 2,723,161 $ 1,634,734
Concrete tower sales 1,108,455 612,024
Tower rentals 3,849,941 755,301
Other tower revenue 381,398 1,025,657
----------- ------------
Total tower revenue 8,062,955 4,027,716
Other operating revenue - 250,000
------------ ------------
8,062,955 4,277,716
Costs and expenses:
Cost of goods sold and constructed 5,276,083 2,616,053
General and administrative 658,111 366,507
Selling expenses 499,702 309,180
Research and development 375,446 255,364
------------ ------------
Total costs and expenses 6,809,342 3,547,104
------------ ------------
Income from operations 1,253,613 730,612
------------ ------------
Other income (expense):
Interest, net (265,901) (164,055)
Miscellaneous 15,624 36,748
----------- ------------
Total other income (expense) (250,277) (127,307)
----------- ------------
Income before income taxes 1,003,336 603,305
Income tax expense (401,334) -
---------- -----------
Net income $ 602,002 $ 603,305
========== ===========
Weighted average shares outstanding-basic 3,526,311 3,380,026
========== ===========
Net income per common share-basic $ 0.17 $ 0.18
========== ===========
Weighted average shares outstanding-diluted 3,526,311 3,462,271
========== ===========
Net income per common share-diluted $ 0.17 $ 0.17
========== ===========
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
TOWER TECH, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months Ended
August 31, August 31,
1998 1997
Sales and other operating revenue:
Tower sales $ 6,798,284 $ 9,555,308
Concrete tower sales 5,467,676 2,274,078
Tower rentals 5,030,374 1,139,625
Other tower revenue 682,443 1,514,401
------------ -------------
Total tower revenue 17,978,777 14,483,412
Other operating revenue - 520,000
------------ -------------
17,978,777 15,003,412
Costs and expenses:
Cost of goods sold and constructed 14,397,302 10,850,333
General and administrative 1,732,415 1,029,383
Selling expenses 1,388,052 881,965
Research and development 570,617 523,515
----------- ------------
18,088,386 13,285,196
----------- ------------
Income (loss) from operations (109,609) 1,718,216
----------- ------------
Other income (expense):
Interest (726,508) (502,753)
Miscellaneous 86,631 68,807
----------- ------------
(639,877) (433,946)
----------- ------------
Income (loss) before income taxes (749,486) 1,284,270
Income tax benefit 299,794 -
----------- -----------
Net income (loss) $ (499,692) $ 1,284,270
=========== ============
Weighted average shares outstanding-basic 3,532,355 3,381,226
=========== =============
Net income (loss) per common share-basic $ (0.13) $ 0.38
=========== ============
Weighted average shares outstanding-diluted 3,532,355 3,533,420
=========== ============
Net income (loss) per common share-diluted $ (0.13) $ 0.36
=========== ============
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
August 31, August 31,
1998 1997
Cash flows from operating activities:
Net income (loss) $ (449,692) $ 1,284,270
Adjustments to reconcile net income
(loss)
to net cash provided (used) by
operating activities:
Depreciation and amortization 600,534 437,705
Decrease (increase) in notes
receivable 49,931 (625,000)
Bad debt expense 125,000 -
Deferred tax benefit (299,794) -
Increase in accounts receivable (518,687) (894,300)
Increase in accounts receivable-
affiliate (58,451) -
Decrease in costs in excess of billings 32,447 252,669
Increase in inventory (2,992,746) (699,207)
Increase in prepaid expenses (132,694) (106,950)
Decrease in other assets 59,202 25,777
Increase in accounts payable 3,073,309 264,855
Decrease in accounts payable-affiliate (8,842) -
Increase (decrease) in interest payable
and accrued liabilities 488,393 (247,660)
Decrease in income tax payable (38,222) -
Increase (decrease) in deposits 492,451 (129,114)
---------- -----------
Net cash provided (used) by operating activities 422,139 (436,955)
---------- -----------
Cash flows from investing activities:
Purchase of property and equipment (5,501,708) (4,214,531)
Decrease in restricted assets 2,133 3,254,890
Additions to rental fleet (5,043,665) (1,279,657)
Increase in patent costs (25,811) (49,828)
----------- ------------
Net cash used in investing acitivies (10,569,051) (2,289,126)
------------ ------------
Cash flows from financing activities:
Proceeds from borrowings, net of costs 28,028,096 9,533,682
Repayments of long-term debt (18,247,128) (7,133,629)
Proceeds from exercise of warrants and
options 225,000 894,501
Decrease in book overdraft (193,999) -
----------- ------------
Net cash provided by financing activities 9,811,969 3,294,554
----------- ------------
Net (decrease) increase in cash (334,943) 568,473
Cash at beginning of period 551,954 850,332
---------- ------------
Cash at end of period $ 217,011 $ 1,418,805
========== =============
The accompanying notes are an integral part of these financial statements
F-4
TOWER TECH, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Interim Financial Statements
The balance sheet as of August 31, 1998, and the related statements of
operations for the three month and nine month periods ended August 31,
1998 and 1997 and the statements of cash flows for the nine month period
ended August 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 and warrants to purchase 382,556 shares of common stock at a
weighted average price of $6.91 were outstanding during the three month and
nine month periods ended August 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 nine month
periods ended August 31, 1997 is as follows:
Income Shares Per Share
(Numerator) (Denominator) Amount
----------------------------------------
For the three month period ended
August 31, 1997:
Basic EPS
Income available to common
stockholders $ 603,305 3,380,026 $ .18
========
Effect of dilutive securities
Employee stock options and warrants - 82,245
----------- ----------
Diluted EPS
Income available to common
stockholders and assumed
conversions $ 603,305 3,462,271 $ .17
========= ========= ========
For the nine month period ended August 31, 1997:
Basic EPS
Income available to common
stockholders $1,284,270 3,381,226 $ .38
========
Effect of dilutive securities
Employee stock options and
warrants - 152,194
------------- ----------
Diluted EPS
Income available to common
stockholders and assumed
conversions $1,284,270 3,533,420 $ .36
========== ========= ========
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 second and third quarters this line was
increased to $8,500,000. The outstanding balance at August 31, 1998 was
$7,530,521. Interest is payable monthly at a variable rate of two points
over national prime rate. $3.5 million of the loan matures on October 31,
1998, and the remaining $5 million on June 30, 1999. The agreement is
collateralized by certain accounts receivable, inventory, rental fleet and
patents. Management is negotiating to restructure and/or extend the
maturity dates of this credit facility.
4. Subsequent Event
In October 1998, the Company initiated the process of a private placement
of 10% Convertible Debentures in the minimum amount of $4,833,334 and a
maximum of $8,700,000. Up to $6,000,000 of the purchase price for the new
debentures will be paid by the Company's existing debenture holders
exchanging at face value their existing debentures and the remaining
amount of the purchase price will be new indebtedness incurred by the
Company. This placement will provide gross cash proceeds of $1,500,000
minimum to $2,700,000 maximum.
5. Litigation
The Company is a party to litigation styled Tower Tech, Inc. v. Goodyear
Rubber & Tire Company, U.S.D.C. Western District Court of Oklahoma Case
No. CIV-97-1682-T. The complaint filed by the Company is for judgment
against Goodyear Rubber & Tire Company ("Goodyear") for $78,000 for the
balance due for construction of a cooling tower at Goodyear's Lawton,
Oklahoma plant. Goodyear has counterclaimed that the Company's tower was
negligently constructed and that the Company breached its contract. As a
result, Goodyear claims that it has sustained actual damages of $1,200,000
and has demanded judgment against the Company for that amount. The case is
set for trial on December 7, 1998 and is being vigorously defended by the
Company.
F-6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended August 31, 1998 Compared to Three Months Ended August 31,1997
Total tower revenues were $8,062,955 for the three months ended August
31, 1998, compared to $4,027,716 in the same period in the prior year. During
the current three month period, 34 percent of total tower revenues was derived
from sales of 84 modular fiberglass cooling towers, 14 percent of total tower
revenues was derived from design and construction of modular concrete towers, 48
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, 41 percent of total
tower revenues was derived from sales of 54 modular fiberglass cooling towers,
15 percent of total tower revenues was derived from construction of modular
concrete towers, 19 percent of total tower revenues was derived from rental of
modular cooling towers, and 25 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
increase in fiberglass tower revenues for 1998 is due mainly to the increase in
the quantity of units sold. 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 the rental of 80 of the Company's largest
modular fiberglass cooling towers. The rental revenue from this large project
was substantially all recognized in the third quarter of 1998. 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. Other
tower revenue is down from the previous year due to less sales of proprietary
parts to licensees. No licensing agreements were finalized in the third quarter
of 1998 although negotiations are continuing for agreements in China and
Northern Europe.
The Company's cost of goods sold and constructed during the three month
period ended August 31, 1998 was $5,276,083 or 65 percent of total tower
revenues, as compared to $2,616,053 or 65 percent of total tower revenues during
the comparable period in 1997. The increase in cost of goods sold and
constructed during the third quarter of 1998 resulted from increased sales of
modular fiberglass cooling towers and increased sales of the modular concrete
cooling towers. Overall marginpercentage for the third quarter 1998 remained
consistent. However, lower margins were realized in both the modular fiberglass
and modular concrete cooling tower lines. The lower margins in the two cooling
tower lines were offset by an increase in rental revenues which is a higher
margin operation. Lower margins in the modular fiberglass cooling tower line is
due 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 continue to have a negative
impact on fourth quarter 199 margins and operations.
Included in the cost of goods sold for the third quarter 1998 is
$131,000 to retrofit and service towers previously sold. This compares to
expenditures of $119,000 during the comparable period in the prior year. The
Company has a complete quality control system in place which management believes
will control such expenditures in future periods. Management believes that the
previously established reserve of $100,000 is sufficient to cover future costs
to retrofit and service towers previously sold.
The three month period ended August 31, 1998 reflected an 80 percent
increase in general and administrative expenses from $366,507 in 1997 to
$658,111 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 $309,180 to $499,702 due to increased sales and marketing efforts
for both the cooling tower lines, water treatment, accessory equipment and
rental towers. This includes 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 increased from
$255,364 in the third quarter of 1997 to $375,446 in the third 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 income from operations for the three months ended August
31, 1998 was $1,253,613 as compared to income of $730,612 for the comparable
period in the prior year. After interest expense, miscellaneous items, and
income tax expense, the Company's net income was $602,002 compared to net income
of $603,305 for the quarter ended August 31, 1997.
<PAGE>
The Company recognized income tax expense of $401,334 for the three months
ended August 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.
Currently, the estimated backlog is $7.1 million including two contracts
for the modular concrete cooling towers totaling $.8 million. One project is
scheduled for completion in November 1998 and the other project is scheduled to
start and complete in the second quarter of 1999. Estimated backlog for the
modular fiberglass cooling towers is $5.8 million. $4.8 million is scheduled for
delivery in the fourth quarter 1998, with the balance scheduled for delivery in
the first half of fiscal year 1999.
Nine Months Ended August 31, 1998 Compared to Nine Months Ended August 31, 1997
For the nine months ended August 31, 1998, total tower revenues
increased to $17,978,777 from $14,483,412 for the comparable period in the prior
year. During the current nine month period, 38 percent of total tower revenues
was derived from sales of 202 modular fiberglass cooling towers, 30 percent of
total tower revenues was derived from construction of the modular concrete
cooling towers, 28 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 tower revenue. In the comparable nine month period in 1997,
66 percent of total tower revenues was derived from sales of 247 modular cooling
towers, 16 percent of total tower revenues was derived from design and
construction of modular concrete towers, 8 percent of total tower revenues was
derived from rental of modular cooling towers, and 10 percent of total tower
revenues were derived from other tower revenue. Other tower revenues consist
primarily of modular tower parts sales 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 OKC
plant combined with delays in the delivery of the manufacturing equipment and
tooling. It is estimated that these delays will have a negative impact on the
fourth quarter 1998. The increase in concrete tower revenue is due to the
increase in the number and size of jobs completed and in process. The increase
in tower rentals is due mainly to one rental contract for 80 of the Company's
largest modular fiberglass cooling towers in the third quarter of 1998. 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. Other tower revenue is down from the previous year due to the same
reasons that tower sales decreased combined with less sales of proprietary parts
to licensees. No licensing agreements were finalized in the first nine months of
fiscal 1998 although negotiations are continuing for agreements in China and
Northern Europe. Other operating revenue for the nine months ended August 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 modular
cooling towers.
The Company's cost of goods sold and constructed during the nine month
period ended August 31, 1998, was $14,397,302 or 80 percent of total tower
revenues as compared to $10,850,333 or 75 percent during the comparable period
in 1997. Overall margin decreased as a result of concrete cooling tower cost
overruns and lower margins were also incurred in the modular fiberglass cooling
tower line due to the additional costs associated with the plant, equipment and
tooling delays. However, these decreases in margin were mostly offset by an
increase in rental revenues, which is a higher margin operation. Included in
cost of goods sold for the nine month period ended August 31, 1998 is $303,000
to retrofit and service towers previously sold. This compares to nine month
retrofit and warranty costs of $368,000 during the same period in 1997. The
Company has a complete quality control system in place which management believes
will control such expenditures in future periods.
<PAGE>
The nine month period ended August 31, 1998 reflected a 68 percent
increase in general and administrative expenses from $1,029,383 in 1997 to
$1,732,415 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 $400,000 in the allowance for doubtful accounts. Selling expenses
increased from $818,965 to $1,388,052. The increase is due to increased sales
and marketing efforts for both cooling tower lines, water treatment, accessory
equipment and rental towers. This includes an increase in sales staff and
expenses related primarily to the opening of direct domestic and international
sales offices. Due to the downturn in the international economy, the Company has
taken steps to curtail expenses in the international areas. Management expects
the overall increased investment in selling expenses to have a continued
positive impact on revenues in future periods. Research and development expenses
increased from $523,515 in the first nine months of 1997 to $570,617 in the
first nine 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 be less than current levels.
The Company's loss from operations for the nine months ended August 31,
1998, was $109,609 as compared to income from operations of $1,718,216 for the
comparable period in the prior year. After interest expense, miscellaneous items
and income taxes, the Company's net loss was $449,692 compared to a net income
of $1,284,270 for the nine months ended August 31, 1997.
Liquidity and Capital Resources
At August 31, 1998, the Company had working capital deficit of $1,917,440
as compared to working capital of $3,728,889 at May 31, 1998. The Company's cash
flow provided by (used in) its operating, investing and financing activities for
the nine months ended August 31, 1998 and 1997 are as follows:
1998 1997
---- ----
Operating activities $422,139 ($436,955)
Investing activities ($10,569,051) ($2,289,126)
Financing activities $9,811,969 $3,294,554
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. 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. Although
bringing the manufacturing processes in-house has taken almost a year longer
than expected and has cost substantially more than anticipated, it 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 have an effect on
working capital requirements. At August 31, 1998, costs and estimated earnings
in excess of billings on uncompleted contracts were $687,000 as compared to net
costs and estimated earnings in excess of billings on uncompleted contracts of
$219,047 at August 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. However, in an effort to control costs
and profits on future concrete cooling tower projects, the Company will utilize
precast panels in lieu of "tilt-up" on site construction.
Scheduled principal payments on capital leases will total $158,357 over
the next twelve months. In addition, $8,722,078 of principal payments will
become due on the Company's debt during the next twelve months. Approximately
$7,500,000 of this current debt is due on the Company's line of credit.
Management is negotiating to restructure and/or extend this line of credit.
<PAGE>
Substantially all of the Company's planned capital expenditures during
1998 will be related to the completion of the new manufacturing facility and
construction of the new office facility in south Oklahoma City. 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 August 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 early in 1999. The manufacturing facility
includes equipment to allow the Company to produce parts used in the modular
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. (See further discussion below.)
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 August
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 $8,500,000 to help fund increases in the
Company's rental fleet. The outstanding balance at August 31, 1998 was
$7,530,721. Interest is payable monthly at a variable rate of two points over
national prime rate. $3,500,000 of this line of credit matures October 31, 1998.
The remaining $5,000,000 matures June 30, 1999. The agreement is collateralized
by certain accounts receivable, inventory, rental fleet and patents. Management
is negotiating to restructure and/or extend the maturity dates of this credit
facility.
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
August 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 all of which was outstanding and included in accounts
payable at August 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. At August 31, 1998, $345,385 was outstanding.
<PAGE>
Due to the loss for the first nine months 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, the Company has in
process a private placement of 10% Convertible Debentures due December 31, 2000,
in the minimum amount of $4,833,334 and a maximum of $8,700,000. Up to
$6,000,000 of the purchase price for new debentures will be paid by the
Company's existing debenture holders exchanging at face value their existing
debentures and the remaining amount of the purchase price will be new
indebtedness incurred by the Company. This placement will provide gross cash
proceeds of $1,500,000 minimum to $2,700,000 maximum. 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. Management believes that completion of the private
placement, renogotiated/extended line of credit terms and cash generated from
operations will eliminate the working capital deficit and provide sufficient
capital to fund the Company's requirements for the next four quarters.
However, there can be no assurance that the Company will be able to complete
the private placement or renogotiate/extend the line of credit terms, and
its failure to do so would curtail the Company's growth and operating results.
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
(Y2K). Such failures could materially and adversely affect the Company's results
of operations, liquidity and financial condition. Due to the general uncertainty
inherent in the Y2K problems, resulting in part from the uncertainty of the Y2K
readiness of third-party suppliers and customers, the Company is unable to
determine at this time whether the consequences of Y2K failures will have a
material impact on the Company's results of operations, liquidity or financial
condition. However, for the past 17 months the company has been testing,
upgrading and/or replacing computer hardware and software in order to address
the impact the Y2K may have on its products and information technology
environment. During the last year, the Company has upgraded its accounting
system and main application software to the latest versions available from the
software developers at a cost of approximately $100,000. Each of these various
software developers has stated that the version(s) of software to which the
Company upgraded is or will be made Y2K compliant. Any computer equipment, plant
production equipment, hardware or software found to not be Y2K compliant is
being, or will be upgraded or replaced as needed in order to insure
uninterrupted normal operation of production and office processes. Also,
critical vendors, partners and creditors are being queried as to the steps they
are taking to be sure they are Y2K compliant.
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 both domestic and international 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.
<PAGE>
Part 2. Other Information
Item 1. Legal Proceedings
The Company is a party to litigation styled Tower Tech, Inc. v.
Goodyear Rubber & Tire Company, U.S.D.C. Western District Court of Oklahoma Case
No. CIV-97-1682-T. The complaint filed by the Company is for judgment against
Goodyear Rubber & Tire Company ("Goodyear") for $78,000 for the balance due for
construction of a cooling tower at Goodyear's Lawton, Oklahoma plant. Goodyear
has counterclaimed that the Company's tower was negligently constructed and that
the Company breached its contract. As a result, Goodyear claims that it has
sustained actual damages of $1,200,000 and has demanded judgment against the
Company for that amount. The case is set for trial on December 7, 1998 and is
being vigorously defended by the Company.
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, due June
30, 2000
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 Omitted
10.1-5 Promissory Note between Tower Tech, Inc. and Local Federal
Bank, dated June 24, 1998
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
<PAGE>
10.5-7 Form of Debenture Purchase Agreement among the Company,
Taglich Brothers, D'Amadeo Wagner & Company, Incorporated
and various lenders.
10.6-5 Promissory Note between Tower Tech, Inc. and Electrical
Constructors, dated May 8, 1997, and amendment extending
maturity date.
10.7-5 Promissory Note between Tower Tech, Inc., as Maker, and
Electrical Constructors, as Payee, dated May 8, 1997, and
amendment extending maturity date.
10.8-5 Promissory Note between Tower Tech, Inc., and Electrical
Constructors, dated March 25, 1997, and amendment extending
maturity date.
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
<PAGE>
10.16-1 Assignment of Patent by and between Harold D. Curtis, as
Assignor, and Tower Tech, Inc., as Assignee, of Patent No.
5,227,095
10.17-4 1993 Stock Option Plan, as amended
10.18-5 Promissory Note between Tower Tech, Inc. and Southwestern
Bank & Trust Company, dated July 27, 1998
10.19-3 Water Line Agreement between the City of Oklahoma City and
Tower Tech, Inc. dated November 1997
10.20-3 Master Security Agreement between CIT Group/Equipment
Financing, Inc and Tower Tech, Inc. dated October 31, 1997
10.21-3 Promissory Note between Tower Tech, Inc. and Southwestern
Bank & Trust Company, dated April 30,1998
10.22-3 Business Loan Agreement between Tower Tech, Inc. and
Southwestern Bank & Trust Company, dated April 30,1998
10.23-3 Commercial Security Agreement between Tower Tech, Inc. and
Southwestern Bank & Trust Company, dated April 30,1998
10.24-3 Promissory Note between Tower Tech, Inc. and Local Federal
Bank, dated June 10,1998
10.25-5 Promissory Note between Tower Tech, Inc. and Local Federal
Bank, dated February 18, 1998
10.26 Omitted
10.27 Omitted
10.28 Omitted
10.29 Omitted
10.30 Omitted
10.31 Omitted
10.32 Omitted
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-QSB
for the quarter ended May 31, 1998
4 Incorporated by reference from the same numbered exhibit to Registration
Statement No. 333-07337 on Form S-8.
5 Filed herewith.
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 filed a report on Form 8-K on October 5, 1998.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TOWER TECH, INC.
Registrant)
Date: October 15, 1998 ss/ HAROLD CURTIS
- ---------------------- -----------------
Harold Curtis, Chief Executive Officer
Date: October 15, 1998 ss/CHARLES D. WHITSITT
- ---------------------- ----------------------
Charles D. Whitsitt, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Consolidated statements of operations found on pages F-1 to F-4 of the company's
10QSB for the quarter ended August 31, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> AUG-31-1998
<CASH> 217,011
<SECURITIES> 0
<RECEIVABLES> 6,007,612
<ALLOWANCES> 422,645
<INVENTORY> 6,020,402
<CURRENT-ASSETS> 14,304,603
<PP&E> 14,862,593
<DEPRECIATION> 600,534
<TOTAL-ASSETS> 38,369,879
<CURRENT-LIABILITIES> 16,222,043
<BONDS> 0
0
0
<COMMON> 3,577
<OTHER-SE> 6,661,307
<TOTAL-LIABILITY-AND-EQUITY> 38,369,879
<SALES> 17,978,777
<TOTAL-REVENUES> 17,978,777
<CGS> 14,397,302
<TOTAL-COSTS> 18,088,386
<OTHER-EXPENSES> 3,691,084
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (726,508)
<INCOME-PRETAX> (499,692)
<INCOME-TAX> (299,794)
<INCOME-CONTINUING> (499,692)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (499,692)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
EXTENSION AGREEMENT
This extension agreement is entered into between Tower Tech, Inc. as Maker
and Electrical Constructors as Lender to mutually extend the Maturity date of
that certain Promissory Note dated May 8, 1996 in the amount of$1,000,000.00 to
June 14, 2000. Initials: JHE HC
Lender Signature: Maker Signature:
Electrical Constructors Tower Tech, Inc.
37 East Sylvan PO Box 1838
Columbus, Ohio 43204 Chickasha, Oklahoma 73023
ss/J. H. Elliott ss/Harold Curtis
______________________ _______________________
JAMES ELLIOTT HAROLD CURTIS
Partner Chief Executive Officer
Attest: Attest:
Ss/Nancy L. Fenstemaker ss/Lana Morgan
_______________________ ________________________
NANCY L. FENSTEMAKER LANA MORGAN
Witness Secretary
EXTENSION AGREEMENT
This extension agreement is entered into between Tower Tech, Inc. as Maker
and Electrical Constructors as Lender to mutually extend the Maturity date of
that certain Promissory Note dated May 8, 1996 in the amount of $500,000.00 to
June 14, 2000. Initials: JHE HC
Lender Signature: Maker Signature:
Electrical Constructors Tower Tech, Inc.
37 East Sylvan PO Box 1838
Columbus, Ohio 43204 Chickasha, Oklahoma 73023
ss/J. H. Elliott ss/Harold Curtis
______________________ _______________________
JAMES ELLIOTT HAROLD CURTIS
Partner Chief Executive Officer
Attest: Attest:
Ss/Nancy L. Fenstemaker ss/Lana Morgan
______________________ ________________________
NANCY L. FENSTEMAKER LANA MORGAN
Witness Secretary
EXTENSION AGREEMENT
This extension agreement is entered into between Tower Tech, Inc. as Maker
and Electrical Constructors as Lender to mutually extend the Maturity date of
that certain Promissory Note dated March 25,1997 in the amount of $500,000.00 to
June 14, 2000. Initials: JHE HC
Lender Signature: Maker Signature:
Electrical Constructors Tower Tech, Inc.
37 East Sylvan PO Box 1838
Columbus, Ohio 43204 Chickasha, Oklahoma 73023
ss/J. H. Elliott ss/Harold Curtis
_______________________ ________________________
JAMES ELLIOTT HAROLD CURTIS
Partner Chief Executive Officer
Attest: Attest:
Ss/Nancy L. Fenstemaker ss/Lana Morgan
_______________________ ________________________
NANCY L. FENSTEMAKER LANA MORGAN
Witness Secretary
LOAN NO. LOAN NAME ACCOUNT NO. NOTE DATE RATE NOTE AMOUNT MATURITY INT
TOWER TECH, INC. 06/24/98 8.25% $72,315.00 DEMAND CHB
07/01/03
PROMISSORY NOTE
(Business Purpose)
LOCAL FEDERAL BANK
1. DATE AND PARTIES. The date of this Promissory Note (Note) is June 24, 1998.
This Note evidences a loan which includes all extensions, renewals,
modifications and substitutions (Loan). The parties to this Note and Loan
are:
BORROWER:
TOWER TECH, INC.
an OKLAHOMA corporation
11935 SOUTH 1-44 SERVICE ROAD
OKLAHOMA CITY, OK 73173
Tax ID. #73-1210013
BANK:
LOCAL FEDERAL BANK an OKLAHOMA corporation 3801 NW 63rd Oklahoma
City, Oklahoma 73112 Tax ID. # 73-2415816 Branch No.029
2. PROMISE TO PAY. For value received, Borrower promises to pay to Bank's
order at its office at the above address, or such other place as Bank may
designate, the sum of $72,315.00 (Principal) plus interest from June 24,
1998, on the unpaid principal balance at the rate of 8.25% per annum
(Contract Rate) until this Note matures or the obligation is accelerated.
After maturity or acceleration, the unpaid balance shall bear interest at
the rate specified in the paragraph in this Note entitled "DEFAULT RATE OF
INTEREST" until paid in full. The Loan and this Note are limited to the
maximum lawful amount of interest (Maximum Lawful Interest) permitted under
federal and state laws. If the interest accrued and collected exceeds the
Maximum Lawful Interest as of the time of collection, such excess shall be
applied to reduce the principal amount outstanding, unless otherwise
required by law. If or when no principal amount is outstanding, any excess
interest shall be refunded to Borrower according to the actuarial method.
Interest shall be computed on the basis of a 380-day year and the actual
number of days elapsed.
All unpaid principal and accrued interest are due and payable upon demand.
Until demand is made, principal and accrued interest are due and payable in
60 equal monthly payments of $1,481.75 on the 1st day of each month,
beginning August 1, 1998, or the day following if the payment day is a
holiday or is a non-business day for Bank. Unless paid prior to maturity or
demand is made, all other unpaid principal, accrued Interest, costs and
expenses are due and payable on July 1, 2003, which is the date of maturity.
These payment amounts are based upon timely payment of each installment. All
amounts shall be paid in legal U.S. currency. Any payment made with a check
will constitute payment only when collected.
3. EFFECT OF PREPAYMENT. Borrower may prepay this Loan in full, subject to any
prepayment penalty or minimum charge as agreed to below. However, no partial
prepayment shall excuse or defer Borrower's subsequent payments or entitle
Borrower to a release of any collateral. Interest will cease to accrue on
the amounts prepaid on the day actually credited by Bank.
4. MINIMUM INTEREST CHARGE. If Borrower pays this Note in full before the
maturity date or otherwise, Borrower agrees to pay Bank a minimum interest
charge of $10.00 or the earned finance charge, whichever amount is greater.
5. RETURNED CHECK CHARGE. To the extent not prohibited by law, Borrower agrees
to pay Bank $10.00 for each check presented for payment and dishonored
because of insufficient funds or no account.
6. EVENTS OF DEFAULT. Borrower shall be in default upon the occurrence of any
of the following events, circumstances or conditions (Events of Default):
A. Failure by any party obligated on this Note or any other obligation
Borrower has with Bank to make payment when due; or
B. A default or breach by Borrower or any cosigner, endorser, surety,
or guarantor under any of the terms of this Note, any construction
loan agreement or other loan agreement, any security agreement,
mortgage, deed to secure debt, deed of trust, trust deed, or any
other document or instrument evidencing, guarantying, securing or
otherwise relating to this Note or any other obligations Borrower
has with Bank; or
C. The making or furnishing of any verbal or written representation,
statement or warranty to Bank which is or becomes false or
incorrect in any material respect by or on behalf of Borrower, or
any cosigner, endorser, surety or guarantor of this Note or any
other obligations Borrower has with Bank; or
D. Failure to obtain or maintain the insurance coverages required by
Bank, or insurance as is customary and proper for any collateral
(as herein defined); or
E. The death, dissolution or insolvency of, the appointment of a
receiver by or on behalf of, the assignment for the benefit of
creditors by or on behalf of, the voluntary or involuntary
termination of existence by, or the commencement of any proceeding
under any present or future federal or state insolvency,
bankruptcy, reorganization, composition or debtor relief law by or
against Borrower, or any co-signer, endorser, surety or guarantor
of this Note or any other obligations Borrower has with Bank; or
F. A good faith belief by Bank at any time that Bank Is insecure with
respect to Borrower, or any cosigner, endorser, surety or
guarantor, that the prospect of any payment is impaired or that any
collateral (as herein defined) is impaired; or
G. Failure to pay or provide proof of payment of any tax, assessment,
rent, insurance premium, escrow or escrow deficiency on or before
its due date; or
H. A material adverse change in Borrower's business, including
ownership, management, and financial conditions, which in Bank's
opinion, impairs any collateral or repayment of the Obligations; or
I. A transfer of a substantial part of Borrower's money or property.
7. DEFAULT RATE OF INTEREST. If there is a default in this Note, the rate of
interest, at Bank's option, shall immediately be increased by 5 percentage
points or to 18% per annum, whichever is higher, whether or not Bank
accelerates the maturity, and interest shall accrue thereafter at the
resulting rate until all obligations under this Note are paid in full.
Unless Bank has accelerated the maturity, Bank shall, within 10 days
following the effective date of such interest rate increase, notify Borrower
of the fact that the interest rate has been increased pursuant to this
provision.
8. REMEDIES ON DEFAULT. On or after the occurrence of an Event of Default, at
the option of Bank, all or any part of the Principal and accrued interest on
this Note, the Loan and all other obligations which Borrower owes Bank shall
become immediately due and payable without notice or demand. Bank may
exercise all rights and remedies provided by law. equity, this Note, any
mortgage, deed of trust or similar instrument and any
9. COLLECTION EXPENSES. On or after an Event of Default, Bank may recover from
Borrower all fees and expenses in collecting, enforcing and protecting
liabilities and reasonable expenses in realizing on any security incurred by
Bank, plus expenses of collecting and enforcing this Note. Such fees and
expenses shall include, but are not limited to, filing fees, publication
expenses, deposition fees, stenographer fees, witness fees and any other
court costs. Any such fees and expenses shall be added to the Principal of
this Note and shall accrue interest at the same rate as provided for in this
Note.
TOWER TECH, NO 0550-8 READ ANY PAGE WHICH FOLLOWS FOR ANY REMAINING PROVISIONS.
Initials ___________
Page 1
<PAGE>
10. ATTORNEYS' FEES. Upon default of this Note, Bank may recover from Borrower
reasonable attorneys' fees incurred by Bank. Such reasonable attorneys' fees
shall include, without limitation, paralegal fees. Any such reasonable
attorneys' fees shall be added to the principal amount of this Note and
shall accrue interest at the same rate as this Note. Borrower agrees that
reasonable attorneys' fees shall be construed to mean 15% of the total of
the unpaid balance at the time of default, plus all accrued interest. Such
recovery will be to the extent not prohibited by law.
11. NO DUTY BY BANK. Bank is under no duty to preserve or protect any Collateral
until Bank is in actual, or constructive, possession of the Collateral. For
purposes of this paragraph, Bank shall only be considered to be in "actual"
possession of the Collateral when Bank has physical, immediate and exclusive
control over the Collateral and has affirmatively accepted such control.
Bank shall only be considered to be in "constructive" possession of the
Collateral when Bank has both the power and the intent to exercise control
over the Collateral.
12. WAIVER AND CONSENT BY BORROWER AND OTHER SIGNERS. Regarding this Note, to
the extent not prohibited by law, Borrower and any other signers:
A. waive protest, presentment for payment, demand, notice of
acceleration, notice of intent to accelerate and notice of
dishonor.
B. consent to any renewals and extensions for payment on this Note,
regardless of the number of such renewals or extensions.
C. consent to Bank's release of any borrower, endorser, guarantor,
surety, accommodation maker or any other co-signer.
D. consent to the release, substitution or impairment of any
collateral.
E. consent that Borrower is authorized to modify the terms of this
Note or any instrument securing, guarantying or relating to this
Note.
F. consent to Bank's right of set-oft as well as any right of set-off
of any bank participating in the Loan.
G. consent to any and all sales, repurchases and participations of
this Note to any person in any amounts and waive notice of such
sales, repurchases or participations of this Note.
13. SECURITY. This Note is secured by the following type(s) (or items) of
property (Collateral):
Equipment
which includes (but is not limited to) the following described property:
RDN MODEL 172-18 HEAVY DUTY BELT PULLER
The term "Collateral" further includes, but is not limited to, the
following property, whether now owned or hereafter acquired, and whether or
not held by a bailee for the benefit of the Owner or owners, all:
accessions, accessories, additions, fittings, increases, insurance benefits
and proceeds, parts, products, profits, renewals, rents, replacements,
special tools and substitutions, together with all books and records
pertaining to the Collateral and access to the equipment containing such
books and records including computer stored information and all software
relating thereto, plus all cash and non-cash proceeds and all proceeds of
proceeds arising from the type(s) (items) of property listed above.
14. PAYMENTS APPLIED. All payments, including but not limited to regular
payments or prepayments, received by Bank shall be applied first to costs,
then to accrued interest and the balance, if any, to Principal except as
otherwise required by law.
15. LOAN PURPOSE. Borrower represents and warrants that the proceeds of this
Note shall only be used for business purposes.
16. JOINT AND SEVERAL. Borrower or any other signers shall be jointly and
severally liable under this Note.
17. FINANCIAL STATEMENTS. Until this Note is paid in full, Borrower shall
furnish Bank upon Bank's request and in the event of no request, at least
annually a current financial statement which is certified by Borrower and
Borrower's accountant to be true, complete and accurate.
18. GENERAL PROVISIONS.
A. TIME IS OF THE ESSENCE. Time is of the essence in Borrower'
performance of all duties and obligations imposed by this Note.
B. NO WAIVER BY BANK. Bank's course of dealing, or Bank's forbearance
from, or delay in, the exercise of any of Bank's rights, remedies,
privileges or right to insist upon Borrower's strict performance of
any provisions contained in this Note, or other loan documents,
shall not be construed as a waiver by Bank, unless any such waiver
is in writing and is signed by Bank.
C. AMENDMENT. The provisions contained in this Note may not be
amended, except through a written amendment which is signed by
Borrower and Bank.
D. INTEGRATION CLAUSE. This written Note and all documents executed
concurrently herewith, represent the entire understanding between
the parties as to the Obligations and may not be contradicted by
evidence of prior, contemporaneous, or subsequent oral agreements
of the parties.
E. FURTHER ASSURANCES. Borrower agrees, upon request of Bank and
within the time Bank specifies, to provide any information, and to
execute, acknowledge, deliver and record or file such further
instruments or documents as may be required by Bank to secure this
Note or confirm any lien.
F. GOVERNING LAW. This Note shall be governed by the laws of the State
of OKLAHOMA, provided that such laws are not otherwise preempted by
federal laws and regulations.
G. FORUM AND VENUE. In the event of litigation pertaining to this
Note, the exclusive forum, venue and place of jurisdiction shall be
in the State of OKLAHOMA, unless otherwise designated in writing by
Bank or otherwise required by law.
H. SUCCESSORS. This Note shall inure to the benefit of and bind the
heirs, personal representatives, successors and assigns of the
parties, provided however, that Borrower may not assign, transfer
or delegate any of the rights or obligations under this Note.
I. NUMBER AND GENDER. Whenever used, the singular shall include th
plural, the plural the singular, and the use of any gender shall be
applicable to all genders.
J. DEFINITIONS. The terms used in this Note, if not defined herein,
shall have their meanings as defined in the other documents
executed contemporaneously, or in conjunction, with this Note.
K. PARAGRAPH HEADINGS. The headings at the beginning of any paragraph,
or any subparagraph, in this Note are for convenience only and
shall not be dispositive in interpreting or construing this Note.
L. IF HELD UNENFORCEABLE. If any provision of this Note shall be held
unenforceable or void, then such provision to the extent not
otherwise limited by law shall be severable from the remaining
provisions and shall in no way affect the enforceability of the
remaining provisions nor the validity of this Note.
M. CHANGE IN APPLICATION. Borrower will notify Bank in writing prior
to any change in Borrower's name, address, or other application
information.
N. NOTICE. All notices under this Note must be in writing. Any notice
given by Bank to Borrower hereunder will be effective upon personal
delivery or 24 hours after mailing by first class United States
mail, postage prepaid, addressed to Borrower at the address
indicated below Borrower's name on page one of this Note. Any
notice given by Borrower to Bark hereunder will be effective upon
receipt by Bank at the address indicated below Bank's name on page
one of this Note. Such addresses may be changed by written notice
to the other party.
0. HOLDER. The term "Bank" shall include any transferee and assignee
of Bank or other holder of this Note.
P. BORROWER DEFINED. The term "Borrower" includes each and ever
person signing this Note as a Borrower and any co-signers.
19. RECEIPT OF COPY. By signing below, Borrower acknowledges that Borrower has
read and received a copy of this Note.
BORROWER:
TOWER TECH, INC. an OKLAHOMA corporation
[Corporate Seal*)
<PAGE>
By:
ss/CHARLES D. WHITSITT
____________________________________
Charles D. Whitsitt, CFO, CONTROLLER
ss/HAROLD D. CURTIS
____________________________________
Harold D. Curtis, C.E.O.
____________________________________
Attest
(*Corporate seal may be affixed. but failure to affix shall not affect
validity or reliance.)
THIS IS THE LAST PAGE OF A 2 PAGE DOCUMENT. EXHIBITS AN/OR ADDENDA MAY FOLLOW.
Initials __________
Page 2
PROMISSORY NOTE
Principal Loan Date Maturity Loan No Call Collateral Account Officer Int
$8,500,000.00 07-27-1998 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: 731210013)
P.O. Box 891810
Oklahoma City, OK 73173
Lender: Southwestern Bank & Trust Company
6000 South Western Ave.
P.O. Box 19100
Oklahoma City, OK 73139
________________________________________________________________________________
Principal Amount-$8,500,000.00 Initial Rate: 10.500% Date of Note: July 27,1998
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 Eight Million Five Hundred Thousand & 00/100
Dollars ($8,500,000.00) 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
(Initials: DRB, CDW) $5,000,000.00 on October 31, 1998, and if necessary,
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 accred unpaid interest on June 30, 1999. In
addition, Borrower will pay regular monthly payments of accrued unpaid interest
beginning August 30, 1998, and all subsequent Interest payments are due on the
same day of each month after that. The annual interest rate for this Note is
computed on a 365/360 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.
<PAGE>
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 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 D. 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 print-outs.
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 October 31,1998, 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 October 31,1998, exceeds $5,000,000.00, Borrower shall,
on October 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 end delivered to increase the face amount of
that certain Promissory Note #47886 from Tower Tech, Inc. to Southwestern Bank
dated April 17, 1998 in the principal amount of $6,500,000.00 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 and 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.
07-27-1998 PROMISSORY NOTE Page 2
(Continued)
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: ss/CHARLES D. WHITSITT
_______________________
Charles D. Whitsit
Chief Financial Officer
TOWER TECH, INC. LOCAL FEDERAL BANK, F.S.B.
RR#3 P.O. BOX 1838 3601 N.W. 63RD STREET Loan Number ______________
CHICKASHA, OK 73023 OKLAHOMA CITY, OK 73116 Date February 18.1998
Maturity Date February 18, 2003
Loan Amount--$168,300.00
Renewal of _________________
BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS
"I" includes each borrower above, "You" means the lender, its successors
joint and severally. 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 SIXTY EIGHT THOUSAND THREE HUNDRED
AND NO/100* * * * * * * * * * * * Dollars $168,300.00
XX Single Advance: I will receive all of this principal sum on FEBRUARY 18.
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 td the maximum amount of
principal more than one time. 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 (and subject to all other conditions.
INTEREST: I agree to pay interest on the outstanding principal balance from
FEB. 18, 1998 at the rate of 8.250% per year until FEBRUARY 18, 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.
__ ___________________________________________.
<PAGE>
ACCRUAL METHOD: Interest will be calculated on a 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.
__ ADDITIONAL CHARGES: In addition to interest, I agree to pay the followin
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 $3, 432.04 and will be due MARCH 18, 1998. A
payment of $3,432.04 will be due ON THE 18TH DAY OF EACH MONTH
thereafter. The final payment of the entire unpaid balance of principal
and interest will be due FEBRUARY 18, 2003.
ADDITIONAL TERMS:
__ SECURITY: This note is separately secured by (describe separate documen
by type and date):
This section is for your internal use. Failure to list a separate
Security document does not mean the agreement will not secure this
note.)
PURPOSE: The purpose of this loan is BUSINESS:
PURCHASE INJECTION MACHINE
SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON
PAGE 2). I have received a copy on today's date.
Signature for Lender TOWER TECH, INC.
BY:
ss/CHERYL H. BORELLI ss/CHARLES D. WHITSITT
_________________________________ ___________________________________
Cheryl H. Borelli, Vice President Charles D. Whitsitt, C.F.O.
UNIVERSAL NOTE
(page 1 of 2)
<PAGE>
TOWER TECH, INC. LOCAL FEDERAL BANK, F.S.B.
RR#3 P.O. BOX 1838 3601 N.W. 63RD STREET
CHICKASHA, OK 73023 OKLAHOMA CITY, OK 73116
TAXPAYER I.D. NUMBER: 73-1210013
DEBTOR'S NAME, ADDRESS AND SSN OR TIN SECURED PARTY'S NAME AND ADDRESS
("I" means each Debtor who signs.) ("You" means the Secured Party
its successors and assigns.)
I am entering into this security agreement with you on FEBRUARY 18, 1998 (date).
SECURED DEBTS. I agree that this security agreement will secure the payment and
performance of the debts, liabilities or obligations described below that (Check
one) I (name) ____________________________ owe(s) to you now or in the future:
___
(Check one below):
__ Specific Debt(s). The debt(s), liability or obligations evidenced by
(describe): ________________________________________________________and
all extensions, renewals, refinancings, modifications and replacements of
the debt, liability or obligation.
__ All Debt(s). Except in those cases listed in the "LIMITATIONS" paragraph
on page 2, each and every debt, liability and obligation of every type
and description (whether such debt, liability or obligation now exists or
is incurred or created in the future and whether it is or may be direct
or indirect, due or to become due, absolute or contingent, primary or
secondary, liquidated or unliquidated, or joint, several or joint and
several).
Security Interest. To secure the payment and performance of the above described
Secured Debts, liabilities and obligations, I give you a security
interest in all of the property described below that I now own and that I
may own in the future (including, but not limited to. all parts,
accessories, repairs, improvements, and accessions to the property),
wherever the property is or may be located, and all proceeds and products
from the property.
__ Inventory: All inventory which I hold for ultimate sale or lease, or
which has been or will be supplied under contracts of service, or which
are raw materials, work in process, or materials used or consumed in my
business.
__ Equipment: All equipment including, but not limited to, all machinery,
vehicles, furniture, fixtures, manufacturing equipment, farm machinery
and equipment, shop equipment, office and recordkeeping equipment, and
parts and tools. All equipment described in a list or schedule which I
give to you will also be included in the secured property, but such a
list is not necessary for a valid security interest in my equipment.
__ Farm Products: All farm products including, but not limited to:
(a) all poultry and livestock and their young, along with their products,
produce and replacements; (b) all crops, annual or perennial, and all
products of the crops; and (c) all feed, seed, fertilizer, medicines, and
other supplies used or produced in my farming operations.
__ Accounts, Instruments, Documents, Chattel Paper and Other Rights to
Payment: All rights I have now and that I may have in the future to the
payment of money including, but not limited to:
(a) payment for goods and other property sold or leased or for services
rendered, whether or not I have earned such payment by performance;
and
(b) rights to payment arising out of all present and future debt
instruments, chattel paper and loans and obligations receivable.
The above include any rights and interests (including all liens and
security interests) which I may have by law or agreement against any
account debtor or obligor of mine.
__ General Intangibles All general intangibles including, but not limited to,
tax refunds, applications for patents, patents, copyrights, trademarks, trade
secrets, good will, trade names, customer lists, permits and franchises, and the
right to use my name.
__ Government Payments and Programs: All payments, accounts, general
intangibles, or other benefits (including, but not limited to, payments in kind,
deficiency payments, letters of entitlement, warehouse receipts, Storage
payments, emergency assistance payments, diversion payments, and conservation
reserve payments) in which I now have and in the future may have any rights or
interest and which arise under or as a result of any preexisting, current or
future Federal or state governmental program (including, but not limited to, all
programs administered by the Commodity Credit Corporation and the ASCS).
__ The secured property includes, but is not limited by, the following:
If this agreement covers timber to be cut, minerals (including oil and gas),
fixtures or crops growing or to be grown, the legal description is:
_______________________________________________________________________________
I am a(n) __ Individual __ Partnership XX Corporation
__ If checked, file this agreement in the real estate records.
Record Owner (if not me):
I AGREE TO THE TERMS SET OUT ON PAGES 1 AND 2 OF THIS AGREEMENT. I have receive
a copy of this document on today's date.
The property will be used for ___ personal X business __ agricultural
TOWER TECH, INC.
(Debtor's Name)
By: ss/CHARLES D. WHITSITT
_____________________
Charles D. Whitsitt
Title: CHIEF FINANCIAL OFFICER
<PAGE>
LOCAL FEDERAL BANK, F.S.B.
(Secured Party's Name)
By: ss/CHERYL BORRELLI
_____________________
Cheryl Borelli
Title: VICE PRESIDENT
UNIVERSAL NOTE
(page 2 of 2)
