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, 1999
[ ] 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
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 14, 1999
<PAGE>
INDEX
TOWER TECH, INC.
Part I. Financial Information
PAGE
Item 1. Financial Statements (Unaudited)
Balance Sheet -- May 31, 1999 F-1
Statements of Operations -- Three months ended May 31,
1999 and 1998
and six months ended May 31,
1999 and 1998 F-2
Statements of Cash Flows -- Six months ended May 31, 1999
and 1998 F-4
Notes to Financial Statements -- May 31, 1999 F-5
Item 2. Management's Discussion and Analysis of Financia
Condition and Results of Operations 3
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 14
-2-
<PAGE>
TOWER TECH, INC.
BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
May 31, 1999
<S> <C>
Assets
Current assets:
Cash $ 179,788
Accounts receivable, net of allowance
for doubtful accounts of $340,000 5,101,875
Notes receivable, current 1,401,408
Receivables from officers and employees 133,658
Costs and estimated earnings in excess of
billings on uncompleted contracts 148,166
Inventory 7,561,576
Restricted assets - current 159,784
Prepaid expenses 248,844
Deferred tax asset 308,698
---------------
Total current assets 15,243,797
Property, plant and equipment, net 17,955,179
Patents, net 232,769
Goodwill 396,541
Deferred tax asset 918,344
Notes receivable, non-current, net of unamortized
discount of $29,751 686,574
Other assets 506,144
---------------
Total assets $ 35,939,348
============
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 6,325,953
Current maturities of obligations under capital lease 132,680
Accounts payable 5,444,593
Accrued liabilities 792,347
Interest payable 328,442
Customer deposits 189,511
---------------
Total current liabilities 13,213,526
Long-term debt, net 16,471,097
Obligations under capital lease, net 162,459
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 (2,189,872)
--------------
Total stockholders' equity 6,092,266
Total liabilities and stockholders' equity $ 35,939,348
============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-1
<PAGE>
TOWER TECH, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
May 31, May 31,
<S> <C> <C>
1999 1998
Sales and other operating revenue:
Tower sales $ 3,602,542 $ 2,512,733
Concrete tower sales 842,358 2,390,056
Tower rentals - 704,753
Other tower revenue 229,242 257,691
-------------- --------------
Total tower revenue 4,674,142 5,865,233
------------- -------------
Costs and expenses:
Cost of goods sold and constructed 4,868,437 5,712,658
General and administrative 526,317 629,600
Selling expenses 375,895 462,885
Research and development 431,678 112,787
-------------- --------------
Total cost and expenses 6,202,327 6,917,930
------------- -------------
Loss from operations (1,528,185) (1,052,697)
------------- -------------
Other income (expense):
Interest, net (562,025) (248,182)
Miscellaneous 48,655 43,616
------------- ---------------
Total other income (expense) (513,370) (204,566)
------------- --------------
Loss before income taxes (2,041,555) (1,257,263)
Income tax benefit 817,060 502,905
------------- --------------
Net loss $ (1,224,495) $ (754,358)
============ =============
Weighted average shares outstanding-basic 3,576,311 3,544,644
============= =============
Net loss per common share - basic $ (.34) $ (.21)
============= =============
Weighted average shares outstanding-diluted 3,576,311 3,544,644
============ =============
Net loss per common share - diluted $ (.34) $ (.21)
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
TOWER TECH, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
May 31, May 31,
1999 1998
<S> <C> <C>
Sales and other operating revenue:
Tower sales $ 7,427,280 $ 4,075,183
Concrete tower sales 1,107,966 4,359,222
Tower rentals 31,239 1,180,433
Other tower revenue 442,760 300,985
-------------- --------------
Total tower revenue 9,009,245 9,915,823
------------- -------------
Costs and expenses:
Cost of goods sold and constructed 9,355,174 9,121,219
General and administrative 1,018,006 1,074,304
Selling expenses 739,368 888,350
Research and development 877,575 195,171
-------------- --------------
Total cost and expenses 11,990,123 11,279,044
------------ ------------
Loss from operations (2,980,878) (1,363,221)
------------- -------------
Other income (expense):
Interest, net (1,068,721) (460,607)
Gain on sale of rental operations 6,688,670 -
Miscellaneous 115,310 71,007
-------------- ---------------
Total other income (expense) 5,735,259 (389,600)
------------- --------------
Income (loss) before income taxes 2,754,381 (1,752,821)
Income tax (expense) benefit (1,101,880) 701,128
------------- --------------
Net income (loss) $ 1,652,501 $ (1,051,693)
============ ============
Weighted average shares outstanding - basic 3,576,311 3,535,377
============= =============
Net income (loss) per common share - basic $ .46 $ (.30)
============== =============
Weighted average shares outstanding-diluted 3,576,311 3,535,377
============= =============
Net income (loss) per common share-diluted $ .46 $ (.30)
============= =============
</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,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,652,501 $ (1,051,693)
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation and amortization 545,037 328,531
Payment on note receivable - 59,849
Equity share of loss of investee (21,205) -
Gain on sale of rental operations (6,688,670) -
Bad debt expense 65,000 125,000
Decrease (increase) in deferred tax 1,088,066 (701,128)
Increase in accounts receivable (518,229) (530,238)
Decrease in accounts receivable-
affiliate 17,215 157,986
Decrease (increase) in costs in
excess of billings 289,041 (1,181,215)
Increase in inventory (2,085,029) (2,142,779)
Increase in prepaid expenses (72,414) (108,015)
Decrease in other assets 110,191 51,408
Increase in accounts payable 348,787 4,399,386
Increase in accounts payable-
affiliate 26,583 67,187
Increase (decrease) in interest payable
and accrued liabilities (455,886) 1,036,560
Increase in deposits 54,065 842,939
Decrease in income tax payable - (25,403)
-------------- ---------------
Net cash (used in) provided by operating
activities (5,644,947) 1,328,375
------------ -------------
Cash flows from investing activities:
Cash paid for acquisition of joint
venture, net (99,096) -
Purchase of property and equipment (1,882,649) (4,675,924)
Increase in notes receivable (9,918) -
(Increase) decrease in restricted assets (990) 2,118
Additions to rental fleet - (2,779,256)
Proceeds from sale of rental operations 12,150,000 -
Increase in patent costs (10,298) (19,058)
------------- ---------------
Net cash provided by (used in) investing
activities 10,147,049 (7,472,120)
------------ ------------
Cash flows from financing activities:
Proceeds from borrowings 16,888,594 13,669,905
Repayments of long-term debt (20,979,387) (7,783,922)
Proceeds from exercise of options
and warrants - 225,000
Decrease in book overdraft (235,319) (193,999)
------------- --------------
Net cash (used in) provided by
financing activities (4,326,112) 5,916,984
------------ -------------
Net increase (decrease) in cash 175,990 (226,761)
Cash at beginning of period 3,798 551,954
---------------- --------------
Cash at end of period $ 179,788 $ 325,193
============= =============
</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 Statement
The balance sheet as of May 31, 1999, and the related statements of
operations for the three and six month periods ended May 31, 1999 and 1998
and the statements of cash flows for the six month periods ended May 31,
1999 and 1998 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. Earnings Per Share
The Company has adopted FAS 128. FAS 128 requires a reconciliation of the
numerators and denominators of the basic and diluted EPS computations.
Options to purchase 354,584 and 210,894 shares of common stock at weighted
average prices of $6.43 and $6.67 were outstanding during the three month
and six month periods ended May 31, 1999 and 1998 respectively, but were
not included in the computation of diluted EPS because the effect of these
outstanding options would be antidilutive. During the three and six month
periods ended May 31, 1999 and 1998, respectively, the Company had
outstanding $6,000,000 of convertible debentures which could be converted
into common stock at a price of $8.75 per share. These securities were not
included in the computation of diluted EPS because they would be
antidilutive.
3. Sale of Rental Operations
In December 1998, the company consummated the sale of its industrial
cooling tower rental operations (the "Rental Operations") to Aggreko Inc.,
an unrelated party, for $13,500,000, with $12,150,000 paid in cash at
closing and the remaining $1,350,000 paid by delivery of Aggreko Inc.'s
promissory note (the "Note"). The Note bears interest at 1% above prime.
The outstanding principal balance of the Note, together with accrued
interest, is due and payable in December 1999. The assets sold included the
modular cooling tower rental fleet, other rental fleet equipment, and
certain assets used in the operation of the Rental Operations. Accordingly,
the Company recorded a pre-tax gain of $6,688,670 for the three months
ended February 28, 1999. Proceeds were used to reduce debt and for working
capital. In connection with the sale of assets described above, Aggreko
Inc., the Company, and Harold D. Curtis, The Company's Chief Executive
Officer, entered into a Noncompetition Agreement. The Noncompetition
Agreement generally prohibits the Company and Mr. Curtis from conducting
any business in competition with the Rental Operations, as well as hiring
certain of the Company's prior employees who worked in the Rental
Operations. Additionally, in connection with the sale of assets described
above, the Company and Aggreko Inc. entered into a License Agreement and a
Supply Agreement. The License Agreement grants to Aggreko Inc. an exclusive
license to use for a limited time period the patents, trademarks, trade
names and other proprietary rights related to the Rental Operations. The
Supply Agreement describes the terms upon which the Company has agreed to
sell to Aggreko Inc., and Aggreko Inc. has agreed to purchase from the
Company, all modular cooling tower units and replacement parts necessary
for future operations of the Rental Operations. F-5
<PAGE>
4. Debt
In April 1999, the Company increased its line of credit with a financial
institution from $4,000,000 to $6,500,000 for working capital requirements.
Interest is payable monthly at a variable rate of 2.0% over national prime.
This line of credit matures on April 30, 2000. This credit facility is
collateralized by certain accounts/notes receivable, inventory and general
intangibles and as of May 31, 1999, $5,060,811 was outstanding. The
agreement contains a financial covenant that provides for a minimum tangible
net worth of $12,000,000 for the first three quarters of 1999 and
$14,000,000 for the year-end November 30, 1999. Tangible net worth includes
the $6,000,000 of subordinated convertible debentures.
5. Acquisition and Dissolution of Joint Venture
On December 29, 1995, Tower Tech entered into a joint venture agreement with
J-Tech Enterprises, Inc. ("J-Tech") to form Tower Tech SE ("TTSE"). The
original joint venture gave TTSE the sole and exclusive right to use certain
Tower Tech technology in Alabama, Florida, and Georgia.
On April 30, 1999, Tower Tech entered into an agreement and plan of
dissolution to acquire J-Tech's interest and dissolve the joint venture. The
aggregate purchase price of $430,677 was comprised of $100,000 in cash and
$330,677 of net receivables owed to the Company by TTSE. Tower Tech also
received all cash, accounts receivable, inventory, accounts payable, and
other current liabilities of TTSE. The transaction resulted in goodwill to
Tower Tech of $398,200, which will be amortized on a straight-line basis
over its estimated useful life.
F-6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended May 31, 1999 Compared to Three Months Ended May 31, 1998
Total tower revenues were $4,674,142 for the three months ended May 31,
1999, compared to $5,865,233 in the same period in the prior year. During the
current three month period, 77 percent of total tower revenues was derived from
sales of 114 modular factory assembled cooling towers, 18 percent of total tower
revenues was derived from design and construction of modular concrete towers,
and 5 percent of total tower revenues was derived from other revenues. In the
comparable three month period of 1998, 43 percent of total tower revenues was
derived from sales of 77 modular factory assembled cooling towers, 41 percent of
total tower revenues was derived from construction of modular concrete towers,
12 percent of total tower revenues was derived from rental of modular cooling
towers, and 4 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
factory assembled tower sales for 1999 is due to the increase in the quantity of
units sold. Such increase is due to marketing efforts for the newly designed
TTEF Series tower and a selling price reduction made possible because of
significant completion of the manufacturing processes for TTEF Series component
parts at the OKC facility. The decrease in concrete revenues is due to the
decrease in the number and size of jobs completed and in process. For the three
months ended May 31, 1998, 33% of concrete tower sales was generated from two
international projects as compared to no international projects for the
three-months ended May 31, 1999. However, the Company has seen some improvement
in certain international markets with recent orders from Mexico, Brazil, Austria
and Singapore for concrete cooling tower projects and factory assembled cooling
towers. The Company has restructured its pricing on its precast concrete cooling
tower and has redesigned certain proprietary parts which management believes
will lower costs as well as increase thermal capability of its concrete cooling
tower. Management is optimistic that concrete tower revenues will improve with
continued improvement in the international market economies, and domestically
with aggressive marketing of its redesigned precast concrete cooling towers.
Decreased tower rentals is due to the sale of the rental operations as below
described. No licensing agreements were finalized in the second quarter of 1999
although discussions are continuing for agreements for Spain, Peru, New Zealand,
Australia, and the United Kingdom.
The Company's cost of goods sold and constructed during the three month
period ended May 31, 1999, was $4,868,437 or 104 percent of total tower
revenues, as compared to $5,712,658 or 97 percent of total tower revenues during
the comparable period in 1998. The decrease in cost of goods sold and
constructed during the second quarter of 1999 resulted mainly from decreased
sales of concrete cooling towers. Overall margin decreased as a result of
concrete cooling tower cost overruns on certain jobs, and decreased tower
rentals which carried a higher margin. In an effort to control costs on future
concrete cooling tower projects, the Company will utilize precast panels in lieu
of "tilt-up" on site construction. Slightly improved margins in the factory
assembled cooling tower line continue to be hampered by the refinements required
for completion of the manufacturing processes, equipment, and tooling. It is
estimated that these refinements will continue to have a negative, although
lessening, impact on third quarter 1999 margins and operations.
Included in the cost of goods sold for the second quarter 1999 is
$306,023 to retrofit and service towers previously sold. This compares to
expenditures of $87,234 during the comparable period in the prior year.
Approximately 60% of the increase is due to retrofit and service costs incurred
on certain concrete towers. Management does not expect these costs to be
recurring.
-3-
<PAGE>
The three month period ended May 31, 1999 reflected a 16 percent
decrease in general and administrative expenses from $629,600 in 1998 to
$526,317 in 1999. The decrease is due to a reduction in expenses related to the
OKC facility and a reduction of $60,000 in bad debt expenses. Selling expenses
decreased from $462,885 to $375,895 due to a reduction in expenses related
primarily to the opening of direct domestic and international sales offices in
1998. Research and development expenses increased from $112,787 in the second
quarter of 1998 to $431,678 in the second quarter of 1999. A significant portion
of the increase in R & D costs is related to the redesign of the TTMT Series
tower to the TTEF Series tower in order to lower production costs. With the
redesign of the tower combined with manufacturing of component parts in-house,
management believes that the Company has positioned itself to grow its share of
the cooling tower market. With the lower expected production costs, management
believes that it will be able to lower prices to its customers and, at the same
time, increase margins. 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 future costs are
anticipated to be less than current expenditures.
The Company's loss from operations for the three months ended May 31,
1999 was $1,528,185 as compared to a loss from operations of $1,052,697 for the
comparable period in the prior year. After interest expense, miscellaneous
items, and income tax benefit, the Company's net loss was $1,224,495 compared to
a net loss of $754,358 for the quarter ended May 31, 1998.
Interest expense increased from $248,182 for the three months ended May
31, 1998 to $562,025 for the three months ended May 31, 1999. The increase is
due to the increase in debt related primarily to the OKC manufacturing facility
and equipment and the fact that interest on such debt was capitalized during
1998.
The Company recognized an income tax benefit of $817,060 for the three
months ended May 31, 1999, compared to an income tax benefit of $502,905 for the
comparable period in 1998. The ultimate realization of the deferred income tax
assets at May 31, 1999 depends on the Company's ability to generate sufficient
taxable income in the future. Management has determined that it is more likely
than not that the Company will realize the deferred tax assets.
Currently, the estimated backlog is $5.9 million including one contract
for the modular concrete cooling tower totaling $.9 million. This project is
scheduled for completion in fourth quarter 1999. Estimated backlog for the
factory assembled cooling towers is $5.0 million. $4.2 million is scheduled for
delivery in the third quarter 1999, with the balance scheduled for delivery in
the fourth quarter of 1999.
Six Months Ended May 31, 1999 Compared to Six Months Ended May 31, 1998
For the six months ended May 31, 1999, total tower revenues decreased
to $9,009,245 from $9,915,823 for the comparable period in the prior year.
During the current six month period, 82 percent of total tower revenues was
derived from sales of 236 modular factory assembled cooling towers, 12 percent
of total tower revenues was derived from construction of modular concrete
cooling towers, less than 1 percent of total tower revenues was derived from
rental of modular fiberglass cooling towers, and 5 percent of total tower
revenues was derived from other tower revenue. In the comparable six month
period in 1998, 41 percent of total tower revenues was derived from sales of 118
modular factory assembled cooling towers, 44 percent of total tower revenues was
derived from construction of modular concrete towers, 12 percent of total tower
revenues was derived from rental of modular cooling towers, and 3 percent of
total tower revenues were derived from other tower revenue. The increase in
factory assembled tower sales for 1999 is due to the increase in the quantity of
units sold. Such increase is due to marketing efforts for the newly designed
TTEF Series tower and a selling price reduction made possible because of
significant completion of the manufacturing processes for TTEF Series component
parts at the OKC facility. The decrease in concrete revenues is due to the
decrease in the number and size of jobs completed and in process. For the six
months ended May 31, 1998, 46% of concrete tower sales was generated from two
international projects as compared to no international projects for the six
months ended May 31, 1999. Decreased tower rentals is due to the sale of the
rental operations as below discussed. Other tower revenue is up from the
previous year due to the same reasons that tower sales increased. No licensing
agreements were finalized in the first six months of 1999 although negotiations
are continuing for agreements for Spain, Peru, New Zealand, Australia, and the
United Kingdom.
-4-
<PAGE>
In December 1998, the company consummated the sale of its industrial
cooling tower rental operations (the "Rental Operations") to Aggreko Inc., an
unrelated party, for $13,500,000, with $12,150,000 paid in cash at closing and
the remaining $1,350,000 paid by delivery of Aggreko Inc.'s promissory note (the
"Note"). The Note bears interest at 1% above prime. The outstanding principal
balance of the Note, together with accrued interest, is due and payable in
December 1999. The assets sold included the modular cooling tower rental fleet,
other rental fleet equipment, and certain assets used in the operation of the
Rental Operations. Accordingly, the Company recorded a pre-tax gain of
$6,688,670 for the three months ended February 28, 1999. Proceeds were used to
reduce debt and for working capital.
In connection with the sale of assets described above, Aggreko Inc.,
the Company, and Harold D. Curtis, the Company's Chief Executive Officer,
entered into a Noncompetition Agreement. The Noncompetition Agreement generally
prohibits the Company and Mr. Curtis from conducting any business in competition
with the Rental Operations, as well as hiring certain of the Company's prior
employees who worked in the Rental Operations.
Additionally, in connection with the sale of assets described above,
the Company and Aggreko Inc. entered into a License Agreement and a Supply
Agreement. The License Agreement grants to Aggreko Inc. an exclusive license to
use for a limited time period the patents, trademarks, trade names and other
proprietary rights related to the Rental Operations. The Supply Agreement
describes the terms upon which the Company has agreed to sell to Aggreko Inc.,
and Aggreko Inc. has agreed to purchase from the Company, all modular cooling
tower units and replacement parts necessary for future operations of the Rental
Operations.
The Company's cost of goods sold and constructed during the six month
period ended May 31, 1999, was $9,355,174 or 104 percent of total tower revenues
as compared to $9,121,219 or 92 percent during the comparable period in 1998.
The increase in cost of goods sold and constructed for the six months ending May
31, 1999 resulted from the increase in tower sales. Overall margin decreased as
a result of concrete cooling tower cost overruns on certain jobs, lower margins
incurred in the factory assembled cooling tower line, and decreased tower
rentals which carry a higher margin. Lower margins in the factory assembled
cooling tower line are 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 for the first three months of 1999, and
continued refinements required for the completion of the manufacturing
processes, equipment, and tooling for the second three months of 1999. It is
estimated that these refinements will continue to have a negative, although
lessening, impact on third quarter 1999 margins and operations. Included in cost
of goods sold for the six month period ended May 31, 1999, is $453,608 to
retrofit and service towers previously sold. This compares to six month retrofit
and service costs of $172,234 during the same period in 1998. Approximately 60%
of the increase is due to retrofit and service costs incurred on certain
concrete towers. Management does not expect these increased costs to be
recurring.
The six month period ended May 31, 1999 reflected a 5 percent decrease
in general and administrative expenses from $1,074,304 in 1998 to $1,018,006 in
1999. The decrease is due mainly to the reduction in expenses related to the OKC
facility. Selling expenses decreased from $888,350 to $739,368. The decrease is
due to a reduction in expenses related primarily to the opening of direct
domestic and international sales offices in 1998. Research and development
expenses increased from $195,171 in the first six months of 1998 to $877,575 in
the first six months of 1999. A significant portion of the increase in R & D
costs is related to the redesign of the TTMT Series tower to the TTEF Series
tower in order to lower production costs. With the redesign of the tower
combined with manufacturing of component parts in-house, management believes
that the Company has positioned itself to grow its share of the cooling tower
market. With the expected lower production costs, management believes that it
will be able to lower prices to its customers and, at the same time, increase
margins. 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 future costs are anticipated to
be less than current expenditures.
The Company's loss from operations for the six months ended May 31,
1999, was $2,980,878 as compared to loss from operations of $1,363,221 for the
comparable period in the prior year. After interest expense, miscellaneous
items, gain on sale of rental operations and income tax (expense) benefit, the
Company's net income was $1,652,501 compared to a net loss of $1,051,693 for the
six months ended May 31, 1998.
-5-
<PAGE>
Interest expense increased from $460,607 for the six months ended May
31, 1998 to $1,068,721 for the six months ended May 31, 1999. The increase is
due to the increase in debt related primarily to the OKC manufacturing facility
and equipment and the fact that interest on such debt was capitalized during
1998.
The Company recognized an income tax expense of $1,101,880 for the six
months ended May 31, 1999, compared to an income tax benefit of $701,128 for the
comparable period in 1998. The ultimate realization of the deferred income tax
assets at May 31, 1999 depends on the Company's ability to generate sufficient
taxable income in the future. Management has determined that it is more likely
than not that the Company will realize the deferred tax assets.
Liquidity and Capital Resources
At May 31, 1999, the Company had working capital of $2,030,271 as
compared to a working capital deficit of $3,890,374 at November 30, 1998. The
Company's cash flow provided by (used in) its operating, investing and financing
activities for the six months ended May 31, 1999 and 1998 are as follows:
1999 1998
---- ----
Operating activities ($5,644,947) $1,328,375
Investing activities $10,147,049 ($7,472,120)
Financing activities ($4,326,112) $5,916,984
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 over 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 efficient. 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 cooling tower projects have an effect on
working capital requirements. At May 31, 1999, costs and estimated earnings in
excess of billings on uncompleted contracts were $148,166 as compared to costs
and estimated earnings in excess of billings on uncompleted contracts of
$1,900,662 at May 31, 1998. Normally, concrete cooling tower 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 $132,680 over
the next twelve months. In addition, $6,325,953 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 the
remainder of 1999 will be related to additional equipment and tooling for the
new manufacturing facility. Management estimates the Company's total investment
in the new manufacturing facility will be $13.5 million, including $7.2 million
to equip the facility. As of May 31, 1999, the Company had incurred
approximately $10 million related to the manufacturing facility. The
manufacturing facility includes equipment to allow the Company to produce parts
used in the modular cooling towers which previously had 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.
-6-
<PAGE>
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 1996. 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, providing net proceeds of approximately $5,467,000. The Debentures bear
interest at 10 percent, which is payable semiannually, and mature on June 30,
2000. The principal balance of each Debenture is convertible into shares of
common stock at a price of $8.75 per share at the option of each Debenture
holder or at the option of the Company if the closing price of the common stock
is at least 175% of the conversion price for 20 of 30 consecutive trading days
and certain other conditions are satisfied.
In September 1997, the Company entered into a loan agreement with the
City of Oklahoma City in the form of a HUD Section 108 loan in the amount of
$1,250,000 for start-up expenses of the manufacturing facility and associated
working capital requirements. As of May 31, 1999, all of these funds had been
advanced to the Company. The loan bears interest at 5.5% and interest is payable
August 1, 1999 and each February 1, thereafter. Thereafter, principal and
interest payments are due annually August 1 in the amount of $140,000. The loan
is collateralized by a second mortgage on the manufacturing facility.
The Company has entered into an agreement with a lending institution for
a total funding of $1,775,815 for equipment and tooling for the new
manufacturing facility. Principal and interest, at 9.25%, is paid monthly with
the final payment due in July 2004 and is collateralized by equipment. The
outstanding balance at May 31, 1999, was $1,563,804.
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 was increased to $8,500,000 to help fund increases in the
Company's rental fleet. This credit facility was paid off in December 1998 with
proceeds from the sale of the rental operations.
The Company has a line of credit at Chickasha Bank in the amount of
$400,000 for short-term cash flow needs, of which $400,000 was outstanding at
May 31, 1999. This line of credit matures August 31, 1999 and was reduced to
$380,000 subsequent to May 31, 1999.
In April 1998, the Company finalized a $2,000,000 construction loan for
the Oklahoma City office facility which cost approximately $2.4 million. At May
31, 1999, $1,999,937 was outstanding. This loan was converted to a permanent
loan in June 1999 in the amount of $2,010,000. Initially, the loan bears
interest at 8.25%. Principal and interest payments of $17,127 are due monthly.
The note matures in June 2002. Also, in June 1999, a second mortgage in the
amount of $253,000 was finalized. Initially, the loan bears interest at 8.25%.
Principal and interest payments of $3,103 are due monthly. The note matures in
June 2002. The interest rates on both of these notes are variable at Wall Street
Journal prime rate plus .5%.
In December 1998, the Company entered into a $4,000,000 line of credit
agreement with a financial institution for working capital requirements. In
April 1999, this line was increased to $6,500,000. Interest is payable monthly
at a variable rate of 2.0% over national prime. This line of credit matures in
April 2000. This credit facility is collateralized by certain accounts/note
receivable, inventory and general intangibles, and as of May 31, 1999,
$5,060,811 was outstanding. The Company is negotiating to extend the maturity of
the facility.
On December 29, 1995, Tower Tech entered into a joint venture agreement
with J-Tech Enterprises, Inc. ("J-Tech") to form Tower Tech SE ("TTSE"). The
original joint venture gave TTSE the sole and exclusive right to use certain
Tower Tech technology in Alabama, Florida, and Georgia.
-7-
<PAGE>
On April 30, 1999, Tower Tech entered into an agreement and plan of
dissolution to acquire J-Tech's interest and dissolve the joint venture. The
aggregate purchase price of $430,677 was comprised of $100,000 in cash and
$330,677 of net receivables owed to the Company by TTSE. Tower Tech also
received all cash, accounts receivable, inventory, accounts payable, and other
current liabilities of TTSE. The transaction resulted in goodwill to Tower Tech
of $398,200, which will be amortized on a straight-line basis over its estimated
useful life.
The Company does not believe it has sufficient capital resources to fund
its capital requirements for the next four quarters. Although the Company's
financial position has improved from November 30, 1998, planned growth and
continued operating losses have increased the Company's funding requirements and
require it to obtain additional capital to maintain its growth. Accordingly,
management is negotiating for increases in its credit facilities and additional
sources of capital. 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
Approximately two years ago the Company developed a plan to address the
Year 2000 (Y2K) issue. The plan consists of the following steps and is ongoing:
- -- Testing of all computer equipment, plant production equipment, hardware
and/or software.
- -- Upgrading or replacing, as needed, any component found to not be Y2K
compliant.
- -- Contacting our vendors, customers and business partners to ensure
that they are also addressing the Y2K issue.
And, if any are found to not be addressing the Y2K issue, establish
alternative sources for those goods and/or services supplied by the non-Y2K
compliant party.
Accordingly, the Company has upgraded its accounting systems 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 Y2K compliant. Any computer equipment, plant production
equipment, hardware or software found to not be Y2K compliant has been, or will
be upgraded or replaced as needed in order to insure uninterrupted normal
operation of production and office processes. As a result of our Y2K plan and
information furnished to us by our business partners, the Company does not
expect to be materially affected by the Y2K problem.
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.
-8-
<PAGE>
PART II Other Information
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, 1999 at 10:30 a.m. at the OKC office facility. A total of 3,456,883 shares
of common stock, which is 97 percent of the shares outstanding on April 9, 1999,
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 3,444,512 1,000 11,371
Lincoln Whitaker 3,441,512 1,000 14,371
Harold Curtis 3,444,512 1,000 11,371
PricewaterhouseCoopers LLP was approved as independent accountants for Tower
Tech, Inc. for the next year. The vote tabulation was as follows:
VOTE TABULATION: FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP 3,445,962 3,300 7,621
These were all the matters submitted for a vote to the stockholders at the
annual stockholders meeting.
-9-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits have been filed as part of this registration
statement:
Exhibit No. Description
3.1-1 Amended and Restated Certificate of Incorporation
of Tower Tech, Inc.
3.2-1 Amended Bylaws of Tower Tech, Inc.
3.3-1 Amendment to Bylaws
4.1-7 Form of 10% Subordinated Convertible Debenture
4.2 Omitted
4.3-1 Form of Stock Certificate
4.4 Omitted
4.5-8 Form of Placement Agent Warrants
10.1-3 Promissory Note between Tower Tech, Inc., and Local
Federal Bank, dated June 24, 1998.
10.2-9 Loan Agreement between Tower Tech, Inc., and the
City of Oklahoma City, dated September 8, 1997.
10.3 Form of Deferral Agreement between Tower Tech,
Inc., and Chickasha Bank & Trust, dated June 16,
1999.
10.4-6 Loan Agreement between Tower Tech, Inc., and
Oklahoma Industries Authority dated October 1, 1997.
10.5-7 Form of Debenture Purchase Agreement among the
Company, Taglich Brothers, D'Amadeo Wagner &
Company, Incorporated and various lenders.
10.6-9 Promissory Note between Tower Tech, Inc. and
Electrical Constructors, dated May 8, 1996
10.7-9 Promissory Note between Tower Tech, Inc., as Maker,
and Electrical Constructors, as Payee, dated May 8,
1997, and amendment extending maturity date.
10.8-9 Promissory Note between Tower Tech, Inc., and
Electrical Constructors, dated March 25, 1997, and
amendment extending maturity date.
-10-
<PAGE>
10.9 Omitted
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
10.17-4 1993 Stock Option Plan, as amended.
10.18-11 Amended and Restated Loan Agreement between Tower
Tech, Inc. and People First Bank dated April 23,
1999.
10.19-6 Water Line Agreement between the City of Oklahoma
City and Tower Tech, Inc. dated November 1997
10.20-6 Master Security Agreement between CIT
Group/Equipment Financing, Inc. and Tower Tech,
Inc. dated October 31, 1997
10.21-11 Modification and Extension Agreement between Tower
Tech, Inc. and First United Bank and Trust Company,
dated June 17, 1999.
10.22-11 Commercial Mortgage, Security Agreement, Financing
Statement and Assignment of Rents between Tower
Tech, Inc. and First United Bank and Trust Company,
dated June 17, 1999.
10.23-11 Commercial Promissory Note between Tower Tech, Inc.
and First United Bank and Trust Company, dated June
17, 1999.
-11-
<PAGE>
10.24-2 Promissory Note between Tower Tech, Inc. and Local
Federal Bank, dated June 10, 1998
10.25-2 Promissory Note between Tower Tech, Inc. and Local
Federal Bank, dated February 18, 1998
10.26-10 Promissory Note dated as of December 4, 1998 to the
Company from Aggreko Inc.
10.27-10 Noncompetition Agreement dated as of December 4,
1998 between the Company, Harold D. Curtis and
Aggreko Inc.
10.28-10 License Agreement dated as of December 4, 1998
between the Company and Aggreko Inc.
10.29-10 Supply Agreement dated as of December 4, 1998
between the Company and Aggreko Inc.
10.30-5 Asset Purchase Agreement dated as of December 4, 1998
between the Company and Aggreko Inc.
10.31-11 Agreement and Plan of Dissolution between the Company
and J-Tech Enterprises dated April 30, 1999.
21.1-11 Tower Tech, Inc. subsidiary
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 May 31, 1998.
3 Incorporated by reference from the same numbered exhibit to Form 10-QSB
for the quarter ended August 31, 1998.
4 Incorporated by reference from the same numbered exhibit to Registration
Statement No. 333-07337 on Form S-8.
5 Incorporated by reference from exhibit number 99.1 to Form 8-K filed
December 18, 1998.
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.
9 Incorporated by reference from the same numbered exhibit to Form 10-QSB
for the quarter ended August 31, 1997.
-12-
<PAGE>
10 Incorporated by reference from the same numbered exhibit to Form 8-K
filed December 18, 1998.
11 Filed herewith.
b. The company has not filed any reports on Form 8-K during the quarter
for which this report is filed.
-13-
<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 15, 1999 ss/ HAROLD CURTIS
--------------------------------
Harold Curtis, Chief Executive Officer
Date: July 15, 1999 ss/ROBERT BRINK
--------------------------------
Robert Brink, President
Date: July 15, 1999 ss/CHARLES D. WHITSITT
---------------------------------
Charles D. Whitsitt, Chief Financial Officer
-14-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Consolidated statements of operations found on pages F-2 to F-4 of the
Company's Form 10-QSB for the period ended 05-31-99 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000913034
<NAME> TOWER TECH, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> MAR-01-1999
<PERIOD-END> MAY-31-1999
<EXCHANGE-RATE> 1
<CASH> 179,788
<SECURITIES> 0
<RECEIVABLES> 5,101,875
<ALLOWANCES> 340,000
<INVENTORY> 7,561,576
<CURRENT-ASSETS> 15,243,797
<PP&E> 17,955,179
<DEPRECIATION> 545,037
<TOTAL-ASSETS> 35,939,348
<CURRENT-LIABILITIES> 13,213,526
<BONDS> 0
0
0
<COMMON> 3,577
<OTHER-SE> 6,092,266
<TOTAL-LIABILITY-AND-EQUITY> 35,939,348
<SALES> 4,674,142
<TOTAL-REVENUES> 4,674,142
<CGS> 4,868,437
<TOTAL-COSTS> 6,202,327
<OTHER-EXPENSES> 1,333,890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (562,025)
<INCOME-PRETAX> (2,041,555)
<INCOME-TAX> (817,060)
<INCOME-CONTINUING> (2,041,555)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,224,495)
<EPS-BASIC> (.34)
<EPS-DILUTED> (.34)
</TABLE>
Exhibit 10.3
DEFERRAL AGREEMENT
Dear Customer:
We have deferred payment on your loan or sales contract as described
below. To assist us in completing this deferral please: (1) Sign this
form in the lower right corner, (2) Return the Lender Copy to us, and
(3) Keep the Customer Copy for your records. If applicable, the
premium cost for extending your insurance coverage and official fees
for the deferral period are shown below.
Please sign and return this form as soon as possible, and don't
hesitate to call if we may be of further assistance.
Sincerely,
ss/TOM AVANT
________________
Tom Avant
CUSTOMER NAME AND ADDRESS
TOWER TECH, INC. CHICKASHA BANK & TRUST CO
P 0 BOX 891810 1924 5 4TH
OKLAHOMA CITY, OK 73189 P0 BOX 1507
CHICKASHA, OK 73023.
PRINCIPAL REDUCTION OF $20,000.00 PLUS INTEREST $2,849.33 = TOTAL DUE $22,849.33
DEFERRAL TERMS & ITEMIZATION OF CHARGES
DATE OF DEFERRAL AGREEMENT LOAN/NOTE NUMBER DATE OF ORIGINAL CONTRACT
6/16/99 20720-16 9/22/97
ORIGINAL PAYMENT DUE DATE(S) CUSTOMER SIGNATURES
May 21, 1999 I/We agree to the terms and acknowledge
receiving a completed copy of this Agreement.
REMARKS NOTICE:This Agreement, together with all other
EXTENDED MATURITY DATE documents, agreements, instruments or other
TO AUGUST 30, 1999 writings, executed by your and accepted by the
Lender are the final expression of the
agreement between you and the Lender, and may
not be contradicted by evidence of any prior
or contemporaneous oral agreements between you
and the Lender. Any credit agreement not
contained in the printed form must be inserted
below to be enforceable.
$380,001.00 7. TOTAL AMOUNT
----------- DEFERRED
-----------
11.00% 8. ANNUAL
PERCENTAGE
RATE
I/We affirm that there are no unwritten oral
agreements between the Lender and me/us.
By: ss/CHARLES D. WHITSITT CFO
---------------------------------------
Charles D. Whitsitt
DEFERRAL CHARGE
$
DATE DEFERRAL CHARGE
IS DUE
(If different from Payment
Due Date below) By: ss/HAROLD CURTIS CEO
---------------------------------------
Harold Curtis
TOTAL PAYMENT AMOUNT
$----------------------
DATE PAYMENT IS DUE
AUGUST 30, 1999 LENDER SIGNATURE
---------------------------------------------
Exhibit 10.18
AMENDED AND RESTATED
LOAN AGREEMENT
THIS AGREEMENT is made and entered into as of this 23rd day of
April, 1999, by and among Tower Tech, Inc., an Oklahoma corporation (the
"Borrower"); Harold D. Curtis (the "Guarantor"); and, People First Bank, a
banking corporation organized under the laws of the State of Oklahoma (the
"Bank").
W I T N E S S E T H:
WHEREAS, as of December 7, 1998, Borrower and Bank entered
into a Loan Agreement with respect to an extension of credit made by Bank to
Borrower in the maximum principal amount of $4,000,000.00; and,
WHEREAS, Guarantor has unconditionally guaranteed payment of
Bank's extension of credit to Borrower; and,
WHEREAS, Borrower has requested that Bank increase the amount
of the extension of credit, and Bank has agreed to do so, upon the terms and
subject to the conditions set forth in this Amended and Restated Loan Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Bank, the Borrower and the Guarantor hereby covenant and agree
as follows:
1. DEFINITIONS.
1.1 Terms Previously Defined. Except as otherwise
specifically set forth, the terms defined in the Recitals to this Agreement
shall have the same meaning when used hereinafter
1.2 Certain Definitions. As used in this Agreement, the
following terms shall have the meanings indicated below, unless the context
otherwise requires, and the singular shall include the plural and vice-versa:
1.2.1 Advances shall mean the revolving loans made
and to be made from time to time by the Bank to the Borrower, as
provided in paragraph 2.
1.2.2 Affiliate shall mean, with respect to the
Borrower, any person, corporation, partnership, limited liability
company or association which owns or controls more than 10% of the
issued and outstanding capital stock of the Borrower at any time, or
any corporation, partnership or association in which Borrower owns or
controls more than 10% of the issued and outstanding capital stock,
partnership interest or other ownership interest.
<PAGE>
1.2.3 Agreement and such terms as "herein,"
"hereof," "hereby," "hereunder," and the like shall mean and refer to
this Amended and Restated Loan Agreement, together with any and all
exhibits attached hereto and any and all supplements, modifications or
amendments hereto.
1.2.4 Aggreko Note shall mean that certain
promissory note, dated December 4, 1998, from Aggreko, Inc., to
Borrower, in principal amount of $1,350,000.00.
1.2.5 Base Rate shall mean that fluctuating annual
rate of interest published in the Money Rates Section of the Wall
Street Journal, from time to time, as the "Prime Rate."
1.2.6 Borrowing Base shall mean, as of any
particular date, the sum of (i) 75 % of Eligible Receivables, plus
(ii) 50% of Inventory.
1.2.7 Borrowing Base Certificate and Compliance
Statement shall mean the Borrowing Base Certificate, Request for
Advance and Compliance Statement in form attached hereto as Exhibit "E"
to be delivered to Bank by Borrower as set forth in paragraphs 4.1.7,
4.2.1 and 6.1.3.
1.2.8 Borrower's Security Agreement shall mean the
Security Agreement to be executed and delivered by Borrower to Bank at
Closing, in form attached hereto as Exhibit "B".
1.2.9 Business Day shall mean that portion of any
day, other than a Saturday, a Sunday or a legal holiday for commercial
banks under the laws of the United States, during which the Bank is
open for substantially all of its normal banking functions.
1.2.10 Closing Date shall mean the time and date, as
provided in paragraph 2.12, on which the Loan Documents are executed
and delivered by the appropriate parties thereto.
1.2.11 Code shall mean the Uniform Commercial Code
of the State of Oklahoma, as the same may from time to time be in
effect.
1.2.12 Collateral shall mean and refer to the items
of collateral described in paragraph 3 of this Agreement.
1.2.13 Commitment shall mean the amount of
$6,500,000.00. The Borrower may reduce the Commitment as provided in
paragraph 2.8 hereof.
1.2.14 Collateral Assignment shall mean the
Collateral Assignment of the Aggreko Note, to be executed and
delivered by Borrower to Bank at Closing, in form attached hereto as
Exhibit "C".
2
<PAGE>
1.2.15 Debt shall mean and include, as of any date,
all items which, in accordance with generally accepted accounting
principles, would be included on the liabilities side of the Borrower's
consolidated balance sheet, including all obligations under leases
which, in accordance with generally accepted accounting principles,
would be recorded as capital leases, but excluding stated capital,
paid-in capital and retained earnings and deferred income taxes.
1.2.16 Default shall mean the occurrence of any
event which, but for the giving of notice or the passage of time, or
both, would constitute an Event of Default.
1.2.17 Eligible Receivable shall mean a Receivable
of the Borrower (i) which arises from a bona fide, outright sale of
inventory or for services performed, or expenses incurred in the normal
course of business and (ii) which is based upon a valid, enforceable
and legally binding order or contract, and (iii) as to which an invoice
for payment has been sent to the account debtor and for which the
account debtor is unconditionally obligated and liable to make payment
thereof, and (iv) in and to which the rights of the Borrower are
absolute and not subject to any assignment, claim, lien or security
interest (except in favor of the Bank), and (v) except as otherwise
agreed by Bank, which is not an intracompany account receivable or an
account receivable between the Borrower and any Affiliate of the
Borrower, and (vi) which is not evidenced by any note, chattel paper,
trade acceptance, draft, check or other instrument with respect thereto
or in payment thereof, and (vii) except as otherwise agreed by Bank, as
to which the account debtor thereof has not died and is not the subject
of dissolution, liquidation, termination of existence, insolvency,
business failure, receivership, bankruptcy, readjustment of debt,
assignment for the benefit of creditors or similar proceedings, and
(viii) which has not been outstanding for more than 90 days from date
of invoice, and (ix) which is not owed by an account debtor not a
resident of the United States or who has outstanding invoices from the
Borrower 50% or more of which in dollar amount have been outstanding
for more than 90 days, and (x) which does not arise from the sale of
concrete or concrete products. At any particular date, the Eligible
Receivables shall be the sum of the unpaid principal balance of all of
the accounts receivable, as defined above; provided, however, that
Receivables from any one account debtor shall not exceed 20% of the
Eligible Receivables, unless otherwise approved by Bank.
1.2.18 ERISA shall mean the Employee Retirement
Income Security Act of 1974, as amended and as in effect from time to
time.
1.2.19 Event of Default shall mean the occurrence of
any of the events specified in paragraph 8.
1.2.20 General Intangibles shall mean all property
included within the meaning assigned to that term under Article 9 of
the Code.
1.2.21 Guaranty shall mean the Guaranty Agreement to
be executed in favor of the Bank by the Guarantor pursuant to paragraph
3.2, substantially in the form of Exhibit "D" attached hereto.
3
<PAGE>
1.2.22 Indebtedness shall mean and include all
liabilities, obligations or indebtedness of the Borrower to the Bank,
of every kind and description, now existing or hereafter incurred,
direct or indirect, absolute or contingent, due or to become due,
matured or unmatured, and whether or not of the same or a similar class
or character as the Advances and whether or not contemplated by the
Bank or the Borrower, together with future advances and all extensions
and renewals.
1.2.23 Inventory shall mean all of Borrower's
inventory and stock in trade, including, without limitation, any
inventory purchased and for which payment has been made, but not
delivered, wherever located, but excluding, for purposes of the
calculation of the Borrowing Base, work in process. For purposes
hereof, Inventory shall be valued at the lower of cost or market value.
1.2.24 Loan Documents shall mean this Loan
Agreement, the Note, the Collateral Assignment, the Guaranty, the
Security Agreement, and all other instruments and documents executed or
issued or to be executed or issued pursuant hereto or thereto or in
connection with the Loan, and all amendments, modification, extensions
and renewals of any of the foregoing.
1.2.25 The Loan shall mean and refer to the
extension of credit from Bank to Borrower evidenced by the Note.
1.2.26 The Note shall mean and refer to the
Promissory Note to be executed and delivered by Borrower to Bank, in
form attached hereto as Exhibit "A", and all renewals and extensions
thereof.
1.2.27 Proceeds shall mean, with respect to the
Collateral, property included within the meaning assigned to that term
under the Code and, in any event, shall include, but shall not be
limited to, (i) any and all Proceeds of any insurance, judgment,
indemnity, warranty or guaranty payable to or for the account of
Borrower, from time to time, with respect to any of the Collateral;
(ii) any and all Proceeds in the form of accounts, collections,
contract rights, documents, instruments, chattel paper or general
intangibles relating in whole or in part to the Collateral; and (iii)
any and all payments (in any form whatsoever) made or due and payable
to or for the account of Borrower, from time to time, in connection
with any requisition, confiscation, condemnation, seizure or forfeiture
of all or any part of the Collateral by any governmental department,
commission, board, bureau, authority, agency or body (domestic or
foreign).
1.2.28 Receivables shall mean all accounts,
accounts receivable and any other obligations or indebtedness owed to
Borrower from whatever source arising; all rights of Borrower to
receive any payments in money or kind; all guarantees of Receivables
and security thereof; all cash or non-cash proceeds of all of the
foregoing; all of the right, title and interest of Borrower in and
with respect to the goods, services or other property which gave rise
to or which secure any of the Receivables, and insurance policies
and proceeds relating thereto, and all of the rights of Borrower as an
unpaid seller of goods or services, including, without limitation, the
rights of stoppage in transit, replevin, reclamation and resale; and
all of the foregoing, whether now existing or hereafter created or
acquired.
4
<PAGE>
1.3 Accounting Terms. Accounting and financial terms used
herein and not otherwise defined with respect to the Borrower's financial
statements and financial position shall have the meanings ascribed thereto
pursuant to generally accepted accounting principles in effect from time to
time, applied on a consistent basis, as set forth in opinions of the Accounting
Principles Board of the American Institute of Certified Public Accountants
and/or Statements of the Financial Accounting Standards Board which may be
applicable in the circumstances as of the date involved.
1.4 Terms Defined in Code. Definitions contained in the Code
shall apply to terms, words and phrases used herein, except that in case of any
conflict between such definitions and definitions contained in Article 9 of the
Code, the Article 9 definitions shall apply.
2. LENDING AGREEMENT
2.1 Loan. Subject to the terms and conditions of this
Agreement and applicable Loan Documents, and in reliance upon the
representations and warranties contained herein and therein, the Bank agrees to
make the Loan in favor of the Borrower, which shall be available during the
period from the Closing Date until June 1, 2000, and which may be drawn upon, in
whole or in part, by Advances from the Bank pursuant to paragraph 2.2.
The aggregate principal amount of all such Advances at any one
time outstanding shall not exceed the lesser of (i) the Commitment (as the same
may be reduced by the Borrower pursuant to paragraph 2.8) or (ii) the Borrowing
Base. The Loan shall be a revolving credit facility, and, subject to the terms
and conditions of this Agreement, the Borrower shall be permitted to make
prepayments (as provided in paragraph 2.5) and reborrowings thereunder.
2.2 Advances on Loan. All Advances on the Loan shall be
subject to the following terms and conditions:
2.2.1 Use of Proceeds. Advances shall be used by
the Borrower only for Borrower's business purposes.
2.2.2 Borrowing Base Certificate and Compliance
Statement. The Borrower shall have delivered to the Bank a properly
completed and executed Borrowing Base Certificate and Compliance
Statement, stating the amount of the disbursement requested, at least
one (1) Business Day prior to the date of each requested Advance. Each
request for an Advance shall be in an amount not less than $10,000.00.
2.2.3 Obligation to Make Advances. Notwithstanding
any provision of this Agreement, the Bank shall not be required to make
any Advance hereunder if the conditions precedent in paragraph 4 hereof
have not been satisfied or if any Event of Default has occurred and is
continuing.
5
<PAGE>
2.3 The Note. The Advances made by the Bank under the Loan
shall be evidenced by the Note, which shall be made, executed and delivered by
the Borrower at the Closing. Notwithstanding the principal amount stated on the
face of the Note, the actual principal amount due from the Borrower on account
thereof shall be the sum of all Advances made by the Bank, less all principal
payments actually received by the Bank in collected funds thereon. All Advances
shall be recorded by the Bank on its books or at its option endorsed on the
reverse side of the Note, and the unpaid principal balance so recorded or
endorsed shall be conclusive evidence of the principal amount owing thereon,
absent manifest error.
2.4 Interest.
2.4.1 Rate. The unpaid principal amount of all
Advances on the Loan from time to time outstanding shall bear interest
prior to Default at a rate equal to the sum of two percent (2.0%) plus
the Base Rate. Upon the occurrence of an Event of Default, the unpaid
principal amount on all Advances from time to time outstanding on the
Notes shall bear interest at a rate equal to the greater of (i) the sum
of eight percent (8.0%) plus the Base Rate, or (ii) fifteen percent
(15%) per annum. Interest rate changes in the Base Rate will be
effective on the day of the rate change, without notice to Borrower or
Guarantor.
2.4.2 Basis of Computation. Interest shall be
computed for the actual number of days elapsed on the basis of a year
consisting of 360 days.
2.4.3 Payment Dates. Interest and principal payments
on the Note shall be due and payable at the times specified in the Note.
2.5 Optional Prepayments. The Borrower may from time to time
prepay the outstanding Advances on the Loan, in whole or in part, without
premium or penalty.
2.6 Mandatory Prepayments. If at any time the aggregate
principal amount of all outstanding Advances on the Loan exceeds the amount
available for Advances, as set forth in paragraph 2.1, the Borrower shall
immediately make a mandatory prepayment on the Note to the extent necessary to
reduce the principal balance outstanding to the amount specified in paragraph
2.1.
2.7 Making of Payments. All payments, including prepayments,
of principal of, or interest on, the Note shall be made in immediately available
funds by the Borrower to the Bank. Whenever a payment is due on a day other than
a Business Day, the due date shall be extended to the next succeeding Business
Day and interest (if any) shall accrue during such extension. All payments shall
be made to the Bank at its principal office in Oklahoma City, Oklahoma, not
later than 2:00 p.m., Oklahoma City time, on the date due, and funds received
after that hour shall be deemed to have been received by the Bank on its next
following Business Day.
2.8 Reduction of Commitment. The Borrower may, from time to time, on at
least five (5) Business Days' prior written notice received by the Bank,
permanently reduce the amount of the Commitment, but only upon repayment of the
amount, if any, by which the aggregate unpaid principal amount of all
outstanding Advances on the Loan exceeds the amount available for Advances
thereon after giving effect to such reduction. Any such reduction shall be in an
aggregate amount of $50,000.00 or an integral multiple thereof
6
<PAGE>
2.9 Minimum Advance Outstanding on the Loan. At all times
during the term of this Agreement, the Borrower will maintain a minimum Advance
of $10,000.00 on the Loan.
2.10 Renewal and Extension. In the event the Loan is renewed
and extended, then the terms and provisions of this Agreement shall continue in
full force and effect, except as may otherwise be agreed in writing by the
Borrower and the Bank. Notwithstanding the foregoing, nothing contained in this
Agreement shall be construed as obligating the Bank to agree or consent to any
such renewal and extension.
2.11 Maximum Lawful Interest Rate. It is not the intention of
the Bank or the Borrower to violate the laws of any applicable jurisdiction
relating to usury or other restrictions on the maximum lawful interest rate. The
Loan Documents and all other agreements between the Borrower and the Bank,
whether written or oral, are hereby limited so that in no event shall the
interest paid or agreed to be paid to the Bank for the use, forbearance or
detention of money loaned, or for the payment or performance of any covenant or
obligation contained herein or in any other Loan Document, exceed the maximum
amount permissible under applicable law. If from any circumstances whatsoever
fulfillment of any provision hereof or of any other Loan Document, at the time
the performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity. If from any such
circumstances, the Bank shall ever receive anything of value deemed interest
under applicable law which would exceed interest at the highest lawful rate,
such excessive interest shall be applied to the reduction of the principal
amount owing hereunder, and not the payment of interest, or if such excessive
interest exceeds any unpaid balance of principal, such excess shall be refunded
to the Borrower. All sums paid or agreed to be paid to the Bank for the use,
forbearance or detention of monies shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full term of
such indebtedness until payment in full so that the rate of interest on account
of such indebtedness is uniform throughout the term thereof. This paragraph 2.11
shall control every other provision of the Loan Documents and all other
agreements between the Bank and the Borrower contemplated thereby.
2.12 Closing. The Closing shall be held on or before April 23,
1999, at 10:00, a.m., at the offices of the Bank, 1601 S.E. 19th, Edmond,
Oklahoma, or at such other time, date or place as may be agreeable to the Bank
and the Borrower.
3. GUARANTY AND COLLATERAL
3.1 Prior Collateral Unaffected. Nothing in this Agreement
shall be deemed to affect or impair the validity, enforceability or priority of
the security agreement and other collateral pledges previously executed and
delivered to Bank by Borrower, and the Borrower hereby ratifies and reaffirms
said prior security agreement and other collateral pledges.
3.2 Guaranty. To secure the timely payment of the Indebtedness, including the
Loan, the Borrower shall cause the Bank to receive, and there to be maintained
at all times during the term of this Agreement and until the Indebtedness is
paid and satisfied in full, the absolute and continuing guaranty of payment of
the Indebtedness from the Guarantor. At the Closing, the Borrower shall cause
the Bank to receive the duly executed and delivered Guaranty from the Guarantor.
7
<PAGE>
3.3 Borrower's Security Agreement. To secure timely payment of
the Indebtedness, including the Loan, at Closing, Borrower will execute and
deliver to Bank the Borrower's Security Agreement granting to Bank a prior and
perfected security interest in all Receivables, General Intangibles (excluding
trade marks, trade names, patents and copyrights) and Inventory now owned or
hereafter acquired, including products and Proceeds. Borrower shall further
grant Bank a security interest in Borrower's trademarks, trade names and
patents, subject only to the existing liens thereon. Borrower shall further
execute and deliver to Bank such Financing Statements and other instruments as
Bank may reasonably require to perfect the security interest granted to Bank in
all jurisdictions in which Borrower transacts business.
3.4 Collateral Assignment. At Closing, to secure timely
payment of the Indebtedness, Borrower shall execute and deliver to Bank the
Collateral Assignment. Borrower shall further deliver to Bank the written
acknowledgment of, and consent to, the Collateral Assignment, executed by
Aggreko, Inc.
4. CONDITIONS OF LENDING. The obligation of the Bank to perform this
Agreement and to make any Advance is subject to the performance and existence of
the following conditions precedent:
4.1 Conditions to Closing. At and as of the Closing Date:
4.1.1 No Defaults. There shall have not have
occurred and be continuing any Default or Event of Default, and the
representations and warranties set forth in the Loan Documents shall be
true and accurate.
4.1.2 Loan Documents The Loan Documents shall have
been duly and validly authorized, executed, acknowledged (where
appropriate) and delivered to the Bank, all in form and substance
satisfactory to Bank and its counsel.
4.1.3 Borrower's Organizational Documents. The Bank
shall have been provided with the following, all in form and substance
satisfactory to the Bank and Bank's counsel:
(a) Resolutions adopted by the
Board of Directors of the Borrower duly authorizing
the execution, delivery and performance of its
obligations under the Loan Documents, certified by
its duly elected and acting corporate Secretary,
together with certificates of such Secretary as to
the incumbency of the officers designated and
authorized to execute and deliver the Loan Documents.
(b) A current certificate issued
by the Secretary of State of Oklahoma as to the due
organization, existence and good standing of the
Borrower.
(c) A copy of the Borrower's
Articles of Incorporation and By-Laws, and any
amendments thereto, certified as true and correct by
Borrower's Chief Executive Officer, as of a current
date.
8
<PAGE>
4.1.4 Perfection: Recordings and Filings. All
actions shall have been taken as are necessary or appropriate for Bank
to maintain a valid and perfected first lien in the personal property
described in the Borrower's Security Agreement and the Collateral
Assignment, including without limitation, the filing and recording of
such Loan Documents as may be necessary and appropriate, and delivery
to Bank of the Aggreko Note, duly endorsed by Borrower in favor of
Bank, together with the written acknowledgment of, and consent to, the
Collateral Assignment, executed by Aggreko, Inc..
4.1.5 Insurance. Borrower shall have provided to
Bank policies of hazard and liability insurance, certified by the
appropriate agent, broker or insurer, or certificates and other
evidence in respect thereof, in form and substance satisfactory to the
Bank, accompanied by satisfactory evidence of payments of premiums
therefor, in the following particulars:
(a) Liability Insurance. General
comprehensive public liability insurance insuring Borrower in
an amount of not less than $5,000,000.00 per occurrence, and
$5,000,000.00 in the aggregate, by a company acceptable to
Bank; and,
(b) Casualty Insurance. Casualty insurance
covering fire and extended coverage risk, endorsed with the
standard mortgagees clause in favor of Bank, for the
replacement amount of the Borrower's tangible personal
property.
4.1.6 Financial Information. Borrower shall have
provided Bank with copies of financial statements and such other
financial information relating to the Borrower as required by the Loan
Documents or as otherwise reasonably required in writing by Bank.
4.1.7 Borrowing Base Certificate and Compliance
Statement. A Borrowing Base Certificate and Compliance Statement, dated
as of April 15, 1999 for the period ending March 31, 1999, shall have
been delivered to Bank.
4.1.8 Legal Matters. All legal matters incident to
the Loan Documents and the Credit Facility shall be satisfactory to the
Bank and its counsel.
4.2 Conditions to Each Advance. Prior to the making of any
Advance:
4.2.1 Request for Advance. With respect to the Loan,
the Bank shall have received a properly completed and executed
Borrowing Base Certificate and Compliance Statement in accordance with
paragraph 6.1.3.
4.2.2 No Defaults. There shall not have occurred and
be continuing any Default or Event of Default, and the representations
and warranties set forth in the Loan Documents shall be true and
accurate as of that date.
4.2.3 No Violation. The making of such Advance shall
not cause the Bank to be in violation of any statute or regulation or
any order or decree of any court or regulatory agency.
9
<PAGE>
5. REPRESENTATIONS AND WARRANTIES. In addition to the other
representations and warranties made herein, the Borrower represents and warrants
to the Bank that:
5.1 Borrower's Corporate Existence. The Borrower is and will
continue to be a corporation duly organized, validly existing and in good
standing under the laws of the State of Oklahoma and duly qualified and licensed
as a foreign corporation in all jurisdictions in which it holds any properties
or conducts any business, except where failure to be qualified or licensed would
not have a material adverse effect on its financial condition, business
operations or properties, or render any of its material agreements void or
unenforceable, or materially impair its ability to fulfill its obligations under
the Loan Documents. The Borrower is duly authorized, qualified and licensed
under all applicable laws, regulations, ordinances or orders of public
authorities to carry on its business as presently conducted or as contemplated
to be conducted.
5.2 Authority. Validity and Binding Nature. The Borrower is
duly authorized and empowered to execute, deliver and perform the Loan
Documents, and all corporate and other action necessary for such execution,
delivery and performance has been duly and validly taken. The Loan Documents to
which it is a party are valid and binding obligations of the Borrower
enforceable in accordance with their respective terms, and the Guaranty is valid
and binding obligations of the Guarantor, enforceable in accordance with its
terms. The execution, delivery and performance of the Loan Documents will not
violate any provisions of the Articles of Incorporation or By-Laws of the
Borrower.
5.3 Conflicting Agreements and Restrictions. Neither the
execution and delivery of the Loan Documents, nor fulfillment or compliance with
the terms and provisions thereof, (i) will conflict with, or result in a breach
of, the terms, conditions or provisions of, or constitute a default under, or
result in any violation of any agreement, instrument, undertaking, judgment,
decree, order, writ, injunction, statute, law, rule or regulation to which the
Borrower is subject, (ii) result in the creation or imposition of any lien,
charge or encumbrance on, or security interest in, any property now or hereafter
owned by the Borrower pursuant to the provision of any mortgage, indenture,
security agreement, contract, undertaking or other agreement, other than the
Loan Documents, or (iii) will require any authorization, consent, license,
approval or authorization of or other action by, or notice or declaration to, or
registration with, any court or administrative or governmental department,
commission, board, bureau, authority, agency, or body (domestic or foreign), or,
to the extent that any such consent or other action may be required, it has been
validly procured or duly taken.
5.4 Burdensome Obligations. The Borrower is not subject to any
restriction under any agreement or instrument which is so unusual or burdensome
as to be likely to have a material adverse effect on the financial condition,
business operations or properties of the Borrower or to materially impair the
ability of the Borrower to perform its obligations under the Loan Documents.
5.5 Actions and Proceedings. There is no action or proceeding against or
investigation of the Borrower pending or, to the knowledge of the Borrower,
threatened, which questions the validity, enforceability or performance of the
Loan Documents or which is likely to have a material adverse effect on the
financial condition, business operations or properties of the Borrower taken as
a whole or to materially impair the Borrower's ability to fulfill its
obligations under the Loan Documents.
10
<PAGE>
5.6 Financial Condition. The most recent financial statement
of the Borrower dated as of February 28, 1999, a copy of which has been
furnished to the Bank, is correct and complete in all material respects and
fairly presents the financial condition of the Borrower as of the date thereof.
There has occurred no material adverse change in the financial condition of the
Borrower from the effective date of said Financial statement to the date hereof.
The Borrower does not have any contingent obligations, unusual or long-term
commitments, or unrealized or anticipated losses from any unfavorable commitment
not reflected in such financial statement which are individually or in the
aggregate substantial in relation to the financial position of the Borrower.
5.7 Ownership of Properties Liens. The Borrower has good and
marketable title to, or valid leasehold interests in, all of its respective
properties and assets, real or personal, tangible or intangible, which are owned
or used in connection with its business and operations, and none of such
properties, assets or leasehold interests is subject to any mortgage, pledge,
security interest, encumbrance, lien or charge of any kind, excluding only; (i)
deposits to secure payment of worker's compensation, unemployment insurance and
other similar benefits; (ii) liens for property taxes not yet due; (iii)
statutory liens, against which there are established reserves in conformity with
generally accepted accounting principles, and which (A) are being contested in
good faith by appropriate legal proceedings, or (B) arise in the ordinary course
of business and secure obligations of the Borrower which are not yet due and not
in default; (iv) encumbrances, if any, in favor of the Bank; (v) minor
irregularities or defects in title and easements and restrictions which do not
materially interfere with the occupation, use or enjoyment by the Borrower of
any of its properties in the ordinary course of business or materially impair
the value thereof; and (vi) liens to secure current indebtedness of the Borrower
as reflected on the attached Exhibit "F".
5.8 Subsidiaries. The Borrower has one subsidiary. That
subsidiary is Do. Brasil.
5.9 No Violation of Applicable Law. The Borrower has not
violated and is not violating any applicable statute, regulation or ordinance of
the United States of America or any foreign country, or of any state,
municipality or any other jurisdiction, or of any agency thereof, which
violation has or is likely to have a material adverse effect on the financial
condition, business operations or properties of the Borrower taken as a whole or
materially impair the Borrower's ability to fulfill its obligations under the
Loan Documents.
5.10 No Defaults. The Borrower is not in default of or in
breach under any material contract, agreement or instrument to which it is a
party or by which it or any of its properties may be bound, which default or
breach has or is likely to have a material adverse effect on the financial
condition, business operations or properties of the Borrower taken as a whole or
materially impair the Borrower's ability to fulfill its obligations under the
Loan Documents.
5.11 Intentionally omitted.
11
<PAGE>
5.12 Taxes. The Borrower has filed all federal, state, local,
county and foreign tax returns required by law to be filed, has paid all
material taxes, assessments and similar charges (collectively referred to as
"Taxes") shown to be due and payable on said returns, and has paid all other
Taxes imposed upon it, to the extent that such Taxes have become due, except
those being diligently contested by appropriate legal proceedings in good faith
and against which reserves have been established in conformity with generally
accepted accounting principles. As of the date of this Agreement, no extensions
of time are in effect for assessments of deficiencies for federal income taxes
of the Borrower. For purposes of this paragraph 5.12, Taxes owing to a
particular taxing authority or governmental agency shall not be considered
material if they do not exceed $5,000 in the aggregate (excluding sales taxes).
5.13 Compliance with Federal Reserve Board Regulations. No
part of any Advance will be used, and no part of any loan to be repaid with the
proceeds of any Advance, was or will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or margin stock within the
meaning of Regulations G or U of the Board of Governors of the Federal Reserve
System. The assets of the Borrower do not include any margin securities or
margin stock, and the Borrower has no present intention of acquiring any such
security or stock, directly or indirectly.
5.14 Investment Company Act: Public Utility Ho1din~ Company
Act. The Borrower is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and the Borrower is not a holding company", a "subsidiary company"
thereof or an "affiliate" of a "holding company" or of such a "subsidiary
company", each within the meaning of the Public Utility Holding Company Act of
1935, as amended.
5.15 Survival of Representations. All representations and
warranties made herein or in any other Loan Documents will survive the delivery
of {he Note and the making of any Advances, and any investigation at any time
made by or on behalf of the Bank shall not diminish its rights to rely thereon.
All statements contained in any certificate or other instrument delivered by or
on behalf of the Borrower under or pursuant to this Agreement or any other Loan
Documents or in connection with the transactions contemplated hereby or thereby
shall constitute representations and warranties made hereunder.
6. AFFIRMATIVE COVENANTS. Until the Indebtedness is paid in full, the
Borrower agrees to perform or cause to be performed the following unless the
Bank shall otherwise consent in writing:
6.1 Reports. Certificates and Notifications.
6.1.1 Annual Financial Statements. Commencing with
the Borrower's current fiscal year, within ninety (90) days after the
close of each fiscal year, the Borrower will furnish to the Bank a copy
of an annual audited financial statement of the Borrower prepared on a
consolidating and consolidated basis and in conformity with generally
accepted accounting principles applied on a consistent basis, by
independent certified public accountants of recognized standing
selected by the Borrower and reasonably acceptable to the Bank.
12
<PAGE>
6.1.2 Interim Financial Reports. Within thirty
(30) days after the end of each month, the Borrower will furnish to
the Bank a copy of an unaudited Financial statement of the Borrower,
signed by the Chief Executive Officer or Chief Financial Officer of
Borrower, prepared in accordance with generally accepted accounting
principals, consistently applied from prior periods, and containing at
least a balance sheet as of the close of such month and a statement of
earnings for such month and for the period from the beginning of such
fiscal year to the close of such month. Within forty-five (45) days
from the end of each calendar quarter, Borrower shall furnish Bank
with a complete copy of Borrower's Form 10-QSB for that quarter.
6.1.3 Borrowing Base Certificate and Compliance
Statement. Within fifteen (15) days from the end of each calendar
month, and each time an Advance on the Loan is requested, Borrower
shall provide Bank with a Borrowing Base Certificate and Compliance
Statement, in form attached hereto as Exhibit "E," as well as
Borrower's accurate revenue report for the prior calendar month.
6.1.4 Tax Returns. Borrower will furnish Bank with a
full, true and correct copy of Borrower's Federal income tax return
within ten (10) days from the date said return is filed.
6.1.5 Other Financial Information. Within ten (10)
days from request, Borrower will furnish the Bank with such other
information concerning the business, operations and financial condition
of the Borrower as may be reasonably requested by the Bank, from time
to time.
6.1.6 Litigation. The Borrower will promptly furnish
the Bank with written notice if at any time there are pending lawsuits
or other legal proceedings against either the Borrower or Guarantor
where the aggregate amount sued for or the total value of the property
involved is in excess of $10,000.00, or is not otherwise adequately
covered by insurance. Thereafter, the Borrower will keep the Bank
informed on a current basis as to status of all such litigation until
all matters are settled or adjudicated.
6. 1.7 Notification of Liens. The Borrower will
notify the Bank of the existence or asserted existence of any mortgage,
pledge, lien, charge or encumbrance on any of the properties of the
Borrower, personal or real, tangible or intangible, forthwith upon the
Borrower's obtaining knowledge thereof, excluding only: (i)
encumbrances, if any, in favor of the Bank; (ii) deposits to secure
payment of worker's compensation, unemployment insurance and similar
benefits; (iii) statutory liens arising in the ordinary course of the
Borrower's business which secure current obligations of the Borrower
which are not in default; and (iv) liens to secure Debt as reflected on
Exhibit "F."
6.2 Books, Records and Inspections. The Borrower will maintain
adequate and accurate books and records of account in conformity with generally
accepted accounting principles, consistently applied.
13
<PAGE>
6.3 Taxes Other Liens. The Borrower will pay when due all taxes,
assessments, governmental charges or levies, and all claims for labor,
materials, supplies, rent and other obligations which, if unpaid, might become a
lien against its property, excluding only liabilities being diligently contested
in good faith by appropriate legal proceedings and against which there are
established reserves in conformity with sound business practices and generally
accepted accounting principles.
6.4 Maintenance. The Borrower will maintain its existence,
remain licensed or qualified and in good standing in each jurisdiction in which
it holds any properties or conducts any business, except where failure to be
qualified or licensed would not have a material adverse effect on the financial
condition, business operations or properties of the Borrower, taken as a whole,
or render any of Borrower's material agreements void or unenforceable, or
materially impair the Borrower's ability to fulfill its obligations under the
Loan Documents. The Borrower will maintain all franchises, permits, trademarks,
trade names, and licenses necessary or useful in the operation of its business
as heretofore operated and as to be operated as contemplated hereby, subject to
changes in the ordinary course of business, and maintain or cause to be
maintained all of its properties in good and workable condition, repair, and
appearance, and protect the same from deterioration, other than normal wear and
tear, at all times.
6.5 Compliance with Laws. The Borrower will comply in all
material respects with all statutes, laws, rules or regulations to which it is
subject or by which its properties are bound or affected, including without
limitation, (i) those pertaining or relating to environmental standards and
controls and hazardous waste disposal, (ii) those pertaining to occupational
health and safety standards, (iii) those pertaining to equal employment and
credit practices and civil rights, and (iv) those pertaining to its business or
operations, except to the extent that any of the foregoing are being diligently
contested in good faith by appropriate legal proceedings and against which there
are established reserves in conformity with sound business practices and
generally accepted accounting principles. Borrower will promptly notify Bank in
the event Borrower receives any notice from any governmental agency of any
alleged failure to comply with any such laws, rules or regulations.
6.6 Further Assurances. The Borrower will promptly cure any
defects or omissions in the execution and delivery of, or the compliance with
the Loan Documents, or the conditions described in paragraph 4, including the
execution and delivery of additional documents reasonably requested by the Bank.
6.7 Reimbursement of Expenses. The Borrower will pay all reasonable and
customary out-of-pocket expenses incurred by the Bank in connection with the
negotiation and preparation of this Agreement and the Loan Documents and the
consummation of the transactions herein contemplated7 including fees of Bank's
special counsel and all filing fees, recording costs, examinations of and
certifications as to public records, and all expenses of every kind resulting
from or incident to the creation and consummation of the transactions
contemplated herein.
14
<PAGE>
Upon the occurrence of an Event of Default, the Borrower will,
from time to time within ten (10) days after a request made by the Bank,
reimburse the Bank for all amounts reasonably expended, advanced or incurred by
the Bank to satisfy any obligation of the Borrower under the Loan Documents, or
to collect upon the Note or any other obligations included in the Indebtedness,
or to enforce the rights of the Bank under the Loan Documents, which amounts
will include all court costs, reasonable attorneys' fees, fees of auditors and
accountants, and investigation expenses reasonably incurred by the Bank in
connection with any such matters, together with interest at the Base Rate plus
8.0% on each such amount from the date the same is due and payable to the Bank
until the date it is repaid to the Bank. All amounts advanced in connection
herewith shall be considered Indebtedness for purposes of this Agreement.
6.8 Access. The Bank shall have the right to examine and copy
the books and records of the Borrower and to discuss with the Borrower its
affairs, finances and accounts. Any authorized representative of the Bank will
be afforded access to any property owned by the Borrower during normal business
hours upon reasonable prior notice. The Bank agrees to maintain any records of
Borrower in Bank's possession in strict confidence.
6.9 Insurance. Policies of insurance will be maintained by the
Borrower with insurance companies satisfactory to the Bank, in amounts and
against risks satisfactory to the Bank, to the extent insurance coverage is
required by applicable state and federal regulatory agencies or is consistent
with insurance coverage customarily or typically maintained by similar
businesses which are similarly situated, and the Bank will be furnished with a
certificate of insurance in form and substance satisfactory to the Bank. The
Borrower will not commit or suffer to be committed any act whereby any insurance
required hereby shall or may be suspended, impaired or defeated, nor will the
Borrower suffer or permit its properties to be used in a manner not permitted
under any applicable policy of insurance then in effect.
6.10 Financial Covenants.
6.10.1 Tangible Net Worth. The Borrower's minimum
Tangible Net Worth as of February 28, 1999, May 31, 1999, and August
31, 1999, shall be at least $12,000,000.00. The Borrower's Tangible Net
Worth as of November 30,1999, and thereafter until maturity of the
Loan, shall be at least $14,000,000.00.
As used herein, "Tangible Net Worth" shall mean
Borrower's assets (excluding loans and advances to employees, goodwill
and intangible assets) less total liabilities (excluding subordinated
Debt), as reflected on Borrower's most recent monthly financial
statement, or in the case of the Borrower's Tangible Net Worth as of
November 30, 1999, as reflected on Borrower's audited annual financial
statement.
6.11 Maintenance of Accounts. So long as any Indebtedness
remains unpaid, Borrower will maintain its operating accounts at the Bank.
6.12 Lien Filings. Borrower shall timely take all actions
necessary or appropriate to properly perfect Borrower's rights to assert
mechanics and materialmen's liens, laborers liens, or other statutory or common
law liens to which the Borrower is entitled in all jurisdictions in which
Borrower does business. Borrower will further timely take such action as may be
necessary or appropriate to foreclose such liens or otherwise collect Borrower's
Accounts Receivables.
16
<PAGE>
6.13 Lock Box Arrangement. All payments on Borrower's Receivables and on
the Aggreko Note will be directed for deposit to a post office box designated by
Bank, and over which Bank will exercise exclusive control. Borrower hereby
agrees that Bank may, as Borrower's attorney in fact (which appointment shall be
deemed coupled with an interest and shall be irrevocable during the term of this
Agreement), take possession of all remittances to such post office box, endorse
Borrower's name thereon, and deposit such remittance in Borrower's account for
application to the Indebtedness. Borrower further agrees that Bank may take such
other actions, for and on behalf of Borrower and in Borrower's name, place and
stead, as may, in Bank's good faith judgment, be necessary or helpful to effect
collection of Borrower's accounts and application of such collections to the
Indebtedness.
6.14 Non-Usage Fee. On June 30, 1999, September 30, 1999,
December 31, 1999, and March 31, 2000, Borrower shall pay Bank a fee equal to
.25% of the average difference, during the calendar quarter (or portion thereof)
then ended, between (i) the maximum principal amount of the Note (i.e.,
$6,500,000.00), and (ii) the daily outstanding principal balance of the Note
plus amounts reserved under special arrangements between Bank and Borrower.
7. NEGATIVE COVENANTS. So long as any Indebtedness is unpaid, the
Borrower will not perform or permit to be performed any of the following acts
unless the Bank shall otherwise agree in writing:
7.1 Creation or Existence of Liens. The Borrower will not
create, assume or suffer to exist any mortgage, pledge, lien, charge or
encumbrance on any of the properties of the Borrower, personal or real, tangible
or intangible, excluding only: (i) encumbrances in favor of the Bank; (ii)
deposits to secure payment of worker's compensation, unemployment insurance and
similar benefits; (ii) statutory liens, against which there are established
reserves in accordance with generally accepted accounting principles, and which
(a) are being contested in good faith by appropriate legal proceedings, or (b)
arise in the ordinary course of the Borrower's business and secure current
obligations of the Borrower which are not in default; (iv) liens for property
taxes not yet due; (v) liens for Debt as reflected on Exhibit "F."
7.2 Intentionally Omitted.
7.3 Intentionally Omitted.
7 4 Limitation on Dividends and Redemption. Provided no Event
of Default has occurred and is continuing, Borrower may pay dividends to its
shareholders. Upon the occurrence of an Event of Default, Borrower will not
directly or indirectly (i) declare or pay, or become obligated to declare or
pay, any dividends or set apart any sum or any of its assets for the payment of
dividends, or make any other distribution, by reduction or capital or otherwise,
in respect of any class of stock of the Borrower, (ii) purchase, redeem or
otherwise retire any such shares or apply or set apart any sum or any of is
assets therefor, or (iii) otherwise make any payments in cash or assets to any
stockholder, other than reasonable compensation for services rendered. For the
purpose of this paragraph 7.4, references to stock of the Borrower shall include
options or warrants to purchase such shares.
7.5 Limitation on Debt. The Borrower will not create or
incur any additional Debt for borrowed money except the Loan.
17
<PAGE>
7.6 Limitation on Contingent Liabilities. The Borrower will
not directly or indirectly, guarantee, co-sign, agree to purchase or repurchase
or provide funds in respect of, or otherwise become or remain liable with
respect to, indebtedness of any character of any other person or entity, except
contingent liabilities arising out of claims or litigation which are fully
covered by insurance.
7.7 Changes in Nature of Business. The Borrower will not
discontinue or make any material change in the nature of its business as
conducted on the date of this Agreement, or make any material change in the
manner in which it conducts its business unless otherwise consented to by the
Bank, which consent will not be unreasonably withheld.
7.8 Changes to Method of Accounting. The Borrower will not
make any material change in its method of accounting for purposes of the
reporting requirements of this Agreement, except as may be mandated by generally
accepted accounting principles and with the consent of the Borrower's
independent certified public accountants.
7.9 Sale-Leaseback Transactions. The Borrower will not
make any sale, transfer or disposition of any of its real or personal property
in a sale-leaseback transaction.
7.10 Payments on Subordinated Debt. The Borrower will not make
any payment of principal on its subordinated debentures, and will pay interest
only as and when due under the express terms of the subordinated debentures.
Upon the occurrence of a Default, Borrower will make no payments on its
subordinated debenture without Bank's prior consent.
8. EVENTS OF DEFAULT. The occurrence of any of the following events,
unless waived in writing by the Bank, shall constitute an "Event of Default":
8.1 Nonpayment of Note. The failure of the Borrower to pay any
principal of the Loan as and when the same shall have become due and payable, or
any failure of the Borrower to pay any interest on the Loan, or any fees due
hereunder within ten (10) calendar days after the same shall have become due and
payable; or,
8.2 Other Nonpayment. The failure of the Borrower to pay any
other amount due and payable to the Bank under the terms of the Loan Documents
within ten (10) calendar days after the date any such payment shall have become
due and payable; or,
8.3 Representations and Warranties. Any representation, statement,
certificate, schedule or report made or furnished to the Bank by or on behalf of
the Borrower or the Guarantor proves to have been false or erroneous in any
material respect as of the date on which such representation was made, or any
warranty ceases to be complied with in any material respect, and the Borrower or
the applicable Guarantor fails to correct such false or erroneous representation
or to comply with such warranty within twenty (20) Business Days after written
notice thereof from the Bank (provided that no notice or opportunity to cure
need be given if by its nature the false representation or breach of warranty is
incapable of being corrected); or,
8.4 Covenants. The failure of the Borrower to perform or
observe any of the covenants or agreements contained in paragraphs 6 or 7 of
this Agreement and continuance thereof for twenty (20) Business Days after
written notice thereof from the Bank; or,
18
<PAGE>
8.5 Other Breach of Covenants. The failure of the Borrower to
perform or observe any other covenant or agreement contained in any other Loan
Documents and continuance thereof beyond the expiration of any applicable grace
period expressly stated therein; or,
8.6 Insolvency. The Borrower or the Guarantor shall (i) apply
for or consent to the appointment of a custodian, receiver, trustee or
liquidator of the Borrower or such Guarantor or any of its properties, (ii)
admit in writing the inability to pay, or generally fail to pay, its Debts as
they become due, (iii) make a general assignment of the benefit of creditors,
(iv) commence any proceeding relating to the bankruptcy, reorganization,
liquidation, receivership, conservatorship, insolvency, readjustment of debt,
dissolution, or liquidation of the Borrower or such Guarantor, or if action
should be taken by the Borrower or such Guarantor for the purpose of effecting
any of the foregoing, (v) suffer any such appointment or commencement of a
proceeding as described in clause (i) or (iv) of this paragraph 8.6, which
appointment or proceeding is not terminated or discharged within thirty (30)
days, or (vi) become insolvent; or,
8.7 Judgment. Entry by any court of a final judgment or
judgments against the Borrower and/or the Guarantor for an aggregate amount in
excess of $50,000.00 or the attachment of, levy upon or garnishment of any of
their respective properties having a fair market value in an aggregate amount in
excess of $50,000.00, which in either case is not discharged to the satisfaction
of the Bank within thirty (30) days thereafter; provided, however, that no
Default or Event of Default shall occur if any such judgment has been appealed
and execution thereon stayed by the posting of a supersedeas bond; or,
8.8 Maturity of Other Debt. The acceleration by the holder of
the maturity of any indebtedness for borrowed funds of the Borrower to any other
person or entity for an aggregate amount in excess of $50,000.00, or the
Borrower shall be in material breach of or default under any material agreement
with any person or entity and such breach or default shall remain unremedied for
a period of thirty (30) days.
9. REMEDIES.
9.1 Acceleration of Indebtedness Upon the occurrence of any
Event of Default specified in paragraph 8.1, the Bank's obligations to make
Advances on the Loan shall automatically be terminated and the Note and all
other Indebtedness shall become immediately due and payable, all without notice
or demand. Upon the occurrence of any other Event of Default specified in
paragraph 8, the Bank, without further notice or demand, may, at its option,
terminate the Loan and its obligation to make Advances and declare all
Indebtedness to be immediately due and payable, whereupon the same shall be
forthwith due and payable. The Bank shall promptly advise the Borrower of any
such declaration, but failure to do so shall not impair the effect of such
declaration. Upon such acceleration of maturity, the Bank shall be entitled to
exercise all remedies available to it under the Loan Documents or otherwise
under applicable law, including without limitation: (i) terminating the Bank's
obligations and the Borrower's rights under this Agreement, and (ii) commencing
one or more actions against the Borrower and/or the Guarantor to reduce the
claim of the Bank against the Borrower and/or the Guarantor to judgment. In the
event the Bank elects to enforce its rights under any one or more of the Loan
Documents selectively and successively, such action shall not be deemed a waiver
or discharge of any other right until such time as the Bank shall have been paid
in full all Indebtedness.
19
<PAGE>
9.2 Waiver of Default. The Bank may, by an instrument in
writing, waive any Default or Event of Default and any of the consequences of
such Default or Event of Default, and, in such event, the Bank, the Borrower and
the Guarantor shall be restored to their respective former positions, rights and
obligations hereunder. Any Default or Event of Default so waived shall for all
purposes of this Agreement be deemed to have been cured and not be continuing,
but no such waiver shall extend to any subsequent or other Default or Event of
Default or impair any consequence of such subsequent or other Default or Event
of Default.
9.3 Deposits Setoff. Regardless of the adequacy of any
collateral held by the Bank, any deposits or other sums credited by or due from
the Bank to the Borrower shall at all times constitute collateral security for
the Indebtedness and, upon the occurrence of an Event of Default, may be set off
against the absolute or contingent, due or to become due, now existing or
hereafter arising, Indebtedness of the Borrower to the Bank. The rights granted
by this paragraph 9.3 shall be in addition to the rights of the Bank under any
statutory banker's lien or the common law right of set off. This paragraph shall
not apply to any monies of which the Borrower is only the beneficial owner,
regardless of the name in which the money is deposited, nor shall this paragraph
apply to any monies which the Borrower is contractually obligated to spend in
whole or in part for the accounts of others, provided that the Borrower shall
have established special accounts or given the Bank written notice that
particular funds are beneficially owned by others or are dedicated for
particular expenditures. If the Borrower fails to establish such special
accounts and fails to give such notice, the Bank may assume that funds on
deposit to the account of the Borrower belong solely to the named depositor and
are subject to this paragraph 9.3.
10. TERM. This Agreement shall remain in full force and effect until
all Indebtedness of Borrower to Bank has been paid in full.
11. GENERAL PROVISIONS.
11.1 Participating Lenders. The Borrower understands that,
although the Note names the Bank as the holder thereof, the Bank may sell a
participation interest in the Loan to one or more other lenders, and the
Borrower agrees that, subject to the terms of the agreements of participation,
each participating lender will be entitled to rely on the terms of this
Agreement and the other Loan Documents as fully as if such participating lender
had been named as the holder of such Note and named in the other Loan Documents.
11.2 Hold Harmless. Except for a successful claim against the
Bank by the Borrower, the Borrower will indemnify and hold the Bank, and any
participant in any or one or more of the Loans, harmless from all liability,
loss, damages or expense, including reasonable attorney's fees, that the Bank or
any such participant may incur in good faith as a result of entering into the
Loan Documents, making any Advances, or in compliance with or in the enforcement
of the terms of the Loan Documents.
11.3 Cumulative Remedies. No failure on the part of the Bank
to exercise, and no delay in exercising, any right or remedy under the Loan
Documents shall operate as a waiver thereof, nor shall any single or partial
exercise by the Bank of any right thereunder preclude any other or further right
of exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not alternative.
20
<PAGE>
11.4 Notices. All notices, requests and demands shall be
served in person or delivered by registered or certified mail as follows:
21
The Borrower:
Tower Tech, Inc.
11935 S. 1-44 Service Road
Oklahoma City, Oklahoma 73173
The Bank:
People First Bank
P.O. Box 5258
Edmond, OK 73702
or at such other address as any party hereto shall designate
for such purpose in a written notice to the other party hereto. Notices served
in person shall be effective and deemed given when delivered, and notices sent
by mail shall be effective and deemed given on the second Business Day following
deposit in the U.S. mail, postage prepaid; provided, however, that any notice
changing the address to which notice shall be sent shall only be effective when
actually received by the party to whom it is directed.
11.5 Construction: Applicable Law. Irrespective of the place
of execution, this Agreement and all other Loan Documents shall be deemed
executed in Oklahoma County, Oklahoma, and shall be construed in accordance with
the laws of the State of Oklahoma. Nothing in this Agreement shall be construed
to constitute the Bank as a joint venturer with the Borrower or to constitute a
partnership. The descriptive headings of the paragraphs of this Agreement are
for convenience only and shall not be used in the construction of the content of
this Agreement.
11.6 Binding Effect. This Agreement and the other Loan
Documents shall be binding on, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns; provided that, without the
prior, written consent of the Bank, the Borrower will not assign or transfer any
of its interest, rights or obligations arising out of or relating to the Loan
Documents.
11.7 Exhibits. Exhibits attached to this Agreement are
incorporated herein for all purposes and shall be considered a part of this
Agreement.
11.8 Severability. In the event any one or more of the
provisions contained in this Agreement or the other Loan Documents shall, for
any reason, be held to be invalid, illegal or unenforceable in any respect and
in any jurisdiction, (i) such invalidity, illegality or unenforceability shall
not affect any other provision thereof, (ii) the remaining provisions shall
continue in full force and effect, and (iii) such invalid, illegal or
unenforceable provision shall not be affected in any other jurisdiction.
11.9 Entire Agreement: Conflicting Provisions. This Agreement
constitutes the entire agreement of the parties hereto with respect to the Loan
and all matters arising out of or related thereto. In the event of any direct
conflict between or among the provisions of this Agreement and the provisions of
any other Loan Document(s), the provisions of this Agreement shall control.
22
<PAGE>
11.10 Waivers. No act, delay, omission or course of dealing
between or among the parties hereto will constitute a waiver of their respective
rights or remedies under this Agreement or the other Loan Documents. No waiver,
change, modification or discharge of any of the rights and duties of the parties
hereto will be effective unless contained in a written instrument signed by the
party sought to be bound.
IN WITNESS WHEREOF, the Bank, the Borrower and the Guarantor have
caused this Agreement to be duly executed in multiple counterparts, each of
which shall be considered an original, as of the date first above written.
BORROWER: Tower Tech, Inc., an Oklahoma corporation
ss/CHARLES D. WHITSITT, Chief Financial Officer
-----------------------------------------------
Charles D. Whitsitt
GUARANTOR: ss/HAROLD D. CURTIS, Chief Executive Officer
-----------------------------------------------
Harold D. Curtis
BANK: People First Bank
ss/DAN R. BALES, SR., Vice President
-----------------------------------------------
Dan R. Bales, Sr.
23
<PAGE>
EXHIBIT "A"
REVOLVING CREDIT NOTE
$6,500,000.00 April 23, 1999 Oklahoma City, Oklahoma
FOR VALUE RECEIVED, the undersigned, Tower Tech, Inc., an
Oklahoma corporation (the "Borrower"), hereby promises to pay to the order of
People First Bank (the "Bank"), the lesser of the principal sum of Six Million
Five Hundred Thousand Dollars ($6,500,000.00) or the aggregate unpaid principal
amount of all revolving credit loans made by the Bank to the Borrower pursuant
to the Loan Agreement (as hereinafter defined), payable in full on April 30,
2000, provided, however, that should the principal amounts outstanding on all
Advances made hereunder exceed the lesser of the Commitment or the Borrowing
Base (as those terms are defined in the Loan Agreement) at any time during the
term hereof, the Borrower will promptly pay, without demand by the Bank, an
amount sufficient to reduce the then-outstanding principal balance on this Note
to an amount which does not exceed the lesser of the Commitment or the Borrowing
Base.
Interest shall be paid on any and all principal amounts
outstanding hereunder from time to time from the date any Advance is made until
this Revolving Credit Note is paid in full, on the last day of each month during
the term hereof, commencing May 31, 1999, with all accrued unpaid interest due
and payable on June 1, 2000.
Interest shall accrue at the rate of interest equal to the
"Base Rate" (as hereinafter defined) plus 2.0% per annum. As used herein, "Base
Rate" shall mean that fluctuating annual rate of interest published from time to
time in the Money Rates Section of the Wall Street Journal as the "Prime Rate."
Each change in the per annum interest rate charged hereunder shall become
effective, without notice (which notice is hereby waived), on the date of each
change in the Base Rate (or any component thereof). As of April 23, 1999, the
Base Rate is 7.75% per annum and the interest rate provided for herein is 9.75%
per annum. The Bank may, from time to time, extend credit to anyone at rates of
interest varying from, and having no relationship to, the Base Rate.
All computations of interest hereunder shall be made on the
basis of a year of 360 days for the actual number of days elapsed, including the
first day but excluding the last.
Both principal and interest are payable in lawful money of the
United States of America to the Bank at its offices at 1601 SE 19th Street,
Edmond, Oklahoma 73013. All Advances made by the Bank to the Borrower pursuant
to the Loan Agreement and all payments made on account of principal hereof shall
be recorded by the Bank on its books. The unpaid principal balance set forth on
the books of the Bank shall be presumptive evidence of the principal amount
owing and unpaid on this Revolving Credit Note.
1
<PAGE>
This Revolving Credit Note is the Note referred to in, and is entitled
to the benefits of, the Amended and Restated Loan Agreement, dated April 23,
1999 (the "Loan Agreement"), among the Bank, the Borrower and others named
therein, which Loan Agreement, among other things, contains provisions for
prepayments on account of principal hereof and reborrowings hereunder, upon the
terms and conditions specified in said Loan Agreement.
This Revolving Credit Note is secured by collateral described in the
Loan Agreement, reference to which is hereby made for a statement of the rights
of the Bank with respect to said collateral.
In the event this Note is placed in the hands of an attorney for
collection, the holder shall be entitled to recover its costs of litigation,
including a reasonable attorney's fee.
This Revolving Credit Note is executed and delivered to increase the
principal amount of, and to renew and extend the maturity date of, that certain
Promissory Note executed by Borrower in favor of Bank dated December 7, 1998, in
the face amount of $4,000,000.00, and not in payment, release or discharge of
said prior Note.
Upon the occurrence of a Default or an Event of Default, as defined in
the Loan Agreement, the Bank or any holder of this Revolving Credit Note may
exercise any and all remedies specified in the Loan Agreement, or otherwise
available at law or in equity.
This Revolving Credit Note is executed for Borrower's business
purposes.
The undersigned and all endorsers, sureties, guarantors and other
persons liable hereon or who may become liable for the payment hereof, severally
waive demand, presentment, notice of dishonor or nonpayment, notice of protest
and any and all lack of diligence in the enforcement hereof and hereby consent
to each and any extension or postponement of the time of payment, at or after
demand, or other indulgence and hereby waive any and all notice thereof.
EXECUTED as of the day and year first above written.
Tower Tech, Inc., an Oklahoma corporation
By: ss/CHARLES D. WHITSITT, Chief Financial Officer
-------------------------------------------------------
Charles D. Whitsitt
2
<PAGE>
EXHIBIT "B"
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is executed this 23rd day of April,
1999, by Tower Tech, Inc., an Oklahoma corporation ("Debtor"), in favor of
People First Bank (11 Secured Party").
W I T N E S S E T H:
WHEREAS, Debtor has executed and delivered to Secured Party a
Promissory Note in the face amount of $6,500,000.00 (hereinafter the "Note"),
and;
WHEREAS, Debtor desires to execute this Security Agreement to
secure payment of the Note and any and all other indebtedness owing by Debtor to
the Secured Party.
NOW, THEREFORE, for valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Debtor does hereby covenant and agree
as follows:
1. Definitions. The terms as used herein shall be construed and
controlled by the following definitions, and, except as the context may
otherwise require or as may be otherwise provided herein, (i) the singular shall
be deemed to include the plural and the plural shall be deemed to include the
singular, and (ii) definitions contained in the Uniform Commercial Code of
Oklahoma (the "Code") shall apply to terms, words and phrases used herein,
except that in case of any conflict between such definitions and definitions
contained in Article 9 of the Code, the Article 9 definitions shall apply.
1.1 Collateral. "Collateral" shall mean all of Debtor's right,
title and interest, now owned or existing or hereafter acquired or arising, in
and to (i) Receivables, (ii) Inventory, (iii) general intangibles, (iv)
copyrights, trademarks and patents, and all Proceeds of the foregoing property.
1.2 Indebtedness. "Indebtedness" shall mean any and all
liabilities, obligations or indebtedness of Debtor to Secured Party, now
existing or hereafter owing, including but not limited to, the indebtedness
evidenced by the Note, that certain Amended and Restated Loan Agreement of even
date herewith between Debtor, Secured Party and others, or this Agreement, of
every kind and description, now existing or hereafter incurred or arising,
matured or unmatured, direct or indirect, absolute or contingent, including
future advances, and all renewals, consolidations, modifications and extensions
thereof.
1.3 Inventory. "Inventory" shall mean property included within
the meaning assigned to that term under the Code, and, in any event, shall
include, but shall not be
limited to, materials, supplies, goods or work in process,
finished goods, materials used or consumed in Debtor's business and returned
goods.
1.4 Loan Agreement. "Loan Agreement" shall mean that certain
Amended and Restated Loan Agreement of even date herewith between Secured Party,
Debtor and others.
1.5 Note. "Note" shall mean the Promissory Note made by Debtor
to Secured Party in face amount of $6,500,000.00.
1
<PAGE>
1.6 Proceeds. "Proceeds" shall mean, with respect to the
property included in the Collateral, property included within the meaning
assigned to that term under the Code, and, in any event, shall include, but
shall not be limited to, (i) any and all Proceeds of any insurance, judgment,
indemnity, warranty or guaranty payable to or for the account of Debtor, from
time to time, with respect to any of such property; (ii) any and all Proceeds in
the form of accounts, collections, contract rights, documents, instruments,
chattel paper or general intangibles relating in whole or in part to such
property; and (iii) any and all payments (in any form whatsoever) made or due
and payable to or for the account of Debtor, from time to time, in connection
with any requisitions, confiscation, condemnation, seizure or forfeiture of all
or any part of such property by any governmental department, commission, board,
bureau, authority, agency or body (domestic or foreign).
1.7 Receivables. "Receivables" shall mean all accounts
(excluding accounts arising from sales to foreign [i.e., not U.S.] nationals),
contract rights, instruments, documents, chattel paper, general intangibles,
(including, without limitation, choses in action, tax refunds and insurance
proceeds); any other obligations or indebtedness owed to Borrower from whatever
source arising; all right of Borrower to receive any payments in money or kind;
all guarantees of Receivables and security therefor; all cash or non-cash
proceeds of all of the foregoing; all of the rights, title and interest of
Borrower in and with respect to the goods, services or other property which gave
rise to or which secure any of the Receivables and insurance policies and
proceeds relating thereto, and all of the rights of Borrower as an unpaid seller
of goods or services, including, without limitation, the rights of stoppage in
transit, replevin, reclamation and resale; and all of the foregoing, whether now
existing or hereafter created or acquired.
2. Security Interest. Debtor hereby grants to Secured Party a security
interest in the Collateral to secure the Indebtedness.
3. Representations Warranties and Covenants. Debtor represents,
warrants and covenants that:
3.1 Preservation and Maintenance. Debtor, at its cost and
expense, shall maintain the Collateral in good condition, repair and appearance,
and protect the same from deterioration, other than normal wear and tear. The
Collateral will not be maintained, used, operated, sold or leased in violation
of any law or any rule, regulation or order of any government or governmental
authority having jurisdiction thereof. Debtor's Inventory is and will be held by
Debtor for sale or lease or used in Debtor's business and not for personal,
family, household, farming or agricultural purposes. Until notified by Secured
Party to the contrary pursuant to the terms hereof, Debtor will, at its own cost
and expense, endeavor to collect, as and when due, all amounts due with respect
to Receivables and Proceeds thereof, including the taking of such action with
respect to such collection as Secured Party may reasonably request or, in the
absence of such request, as Debtor may deem advisable.
3.2 Insurance. Debtor, at its cost and expense, shall maintain in full
force and effect, public liability insurance on the Collateral. Such insurance
policies shall: (a) provide for such coverage as is customary in the industry;
(b) be in a form and with insurers which are reasonably satisfactory to Secured
Party; (c) cover such risks and in such amounts as Secured Party may require,
consistent with the Loan Agreement; (d) contain a "breach of warranty clause"
whereby the insurer agrees that a breach of the insuring conditions or
declarations or any negligence by Debtor or any other person shall not
invalidate the insurance as to Secured Party; and (e) provide that such policies
may not be cancelled or materially altered without thirty (30) days prior
written notice to Secured Party. In no event shall Secured Party be required to
ascertain the existence of or examine any insurance policy or to advise Debtor
in the event such insurance coverage shall not comply with the requirements
hereof. Debtor further agrees to notify Secured Party of any damage to or loss
of any of its Collateral and of any modification or cancellation of any
insurance policy with respect thereto. Debtor, upon written request of Secured
Party, shall furnish to Secured Party policies, certificates or other
appropriate evidence of the insurance coverage required hereby.
2
<PAGE>
3.3 Ownership Free of Encumbrances. Debtor is, and will
remain, the owner of the Collateral free and clear of any prior liens, security
interests, encumbrances or conflicting claims or rights of any kind, except
security interests in favor of Secured Party, and, with respect to Debtor's
patents, trade marks and trade names, except for an existing security interest.
Debtor will not transfer or offer or attempt to transfer, by lease, sale or
otherwise, any interest in the Collateral or possession thereof without the
express written consent of Secured Party. Debtor will defend the Collateral
against all claims and demands all of persons at any time claiming the
Collateral or any interest therein. Notwithstanding the foregoing, but subject
to other provisions hereof and of the Loan Agreement, Debtor may collect its
Receivables and dispose of or consume its Inventory in the ordinary course of
Debtor's business, and may sell assets not of a material value if no longer used
or useful in Debtor's business, provided that any such sale, transfer or other
disposition shall be for a price not less than the fair market value of any such
assets and shall be pursuant to commercially reasonable terms and conditions,
and provided further that such sales, transfers and dispositions will not create
an Event of Default under any other provision of this Agreement or the Loan
Agreement.
3.4 Recording: Filing: Further Assurances. At the request of
Secured Party, from time to time, Debtor will execute one or more financing
statements pursuant to the Code in a form satisfactory to Secured Party, and
will promptly cure any defects in the execution and delivery of this Agreement
or the creation, perfection or priority of the security interest created hereby,
including the execution and delivery of any documents reasonably requested by
Secured Party.
3.5 Records and Inspection: Reports. Debtor shall keep and
shall make available to Secured Party at reasonable times, accurate and complete
books and records with respect to the Collateral and Debtor's business
generally, in accordance with generally accepted accounting principles, and
Secured Party shall have the right to inspect and copy such records and to
inspect the Collateral at reasonable times. Debtor shall, from time to time upon
the request of Secured Party, prepare and submit to Secured Party such reports
relating to the Collateral as Secured Party may request, in form and substance
satisfactory to Secured Party.
3.6 Location of Principal Office and Certain Records. The
location of the principal and chief executive office and chief place of business
of Debtor, and the location of Debtor's records concerning its accounts and
contract rights is at its offices at 11935 S. 1-44 Service Road, Oklahoma City,
Oklahoma, and, unless Debtor shall have given Secured Party at least ninety (90)
days prior written notice, Debtor will continue to keep its principal and chief
executive office and its chief place of business and its records concerning its
accounts and contract rights in said location.
3.7 Location of Collateral and Notice of Removal. The Collateral is now
located in the State of Oklahoma, and, except for sales of Inventory in Debtor's
ordinary course of business, Debtor shall keep the Collateral in said state
unless it shall have given Secured Party at least thirty (30) days written
notice of its intention to remove the Collateral (or any portion thereof) from
said state to any other. Debtor shall not remove the Collateral nor suffer the
Collateral to be removed, from the United States of America, other than in the
normal course of business.
3
<PAGE>
3.8 Collections. Upon the occurrence of an Event of Default,
Secured Party shall have the right to notify account debtors and to collect,
demand, receive, settle, compromise, adjust or sue for the Collateral, and the
right, either in Secured Party's own name or in the name of Debtor, to take such
legal or other proceedings as Debtor might have taken except for this Agreement.
Upon the request of Secured Party, after the occurrence of an Event of Default,
Debtor will give notice to account debtors of the assignment of or the granting
of a security interest in any property included in the Collateral, requiring
such account debtors to pay all sums due directly to Secured Party. Debtor will
make entries on its books and records in form satisfactory to Secured Party
disclosing the absolute and unconditional assignment to Secured Party of
property included in the Collateral. In accordance with normal practices of
Secured Party, invoices to and other requests for payment from account debtors
in connection with the Collateral will, upon Secured Party's request after the
occurrence of an Event of Default, clearly direct payments to be mailed to a
post office box controlled by Secured Party in accordance with directions of
Secured Party, so as to afford Secured Party rights and control over Collateral
pursuant to a "lock box" arrangement. Debtor does hereby appoint Secured Party
as its true and lawful attorney, with power of substitution (such appointment to
be effective immediately, without notice, upon the occurrence of an Event of
Default), to take control in any manner of Collateral, to endorse the name of
Debtor thereon, to sign Debtor's name on any proof of claim in any bankruptcy or
similar proceedings against account debtors, to sign Debtor's name on any notice
of lien or similar proceeding, and to do all other acts and things necessary, in
Secured Party's sole discretion, to effect and protect Secured Party's rights
and powers described in this paragraph 3.8 or otherwise in this Agreement.
4. Default. The term "Event of Default" for all purposes of this
Agreement shall have the meaning set forth in the Loan Agreement.
5. Remedies. Upon the occurrence of any Event of Default and at any
time thereafter, Secured Party shall have and may exercise the following rights
and remedies, without notice to Debtor:
5.1 Acceleration. Declare the Indebtedness to be immediately
due and payable, whereupon the same shall become forthwith due and payable.
5.2 All Legal Remedies. Proceed to selectively and
successively enforce and exercise any and all rights and remedies which Secured
Party may have under this Agreement, any other applicable agreement or
applicable law including without limitation: (i) commencing one or more actions
against Debtor and reducing the claims of Secured Party against Debtor to
judgment, (ii) foreclosure or other enforcement of Secured Party's security
interest in the Collateral, or any portion thereof, or other enforcement of
Secured Party's rights and remedies in respect of and to recover upon the
Collateral, through judicial action or otherwise, including all available
remedies under the applicable provisions of the Code, (iii) payment or discharge
of any claim or lien, prior or subordinate, in respect of or affecting the
Collateral.
5.3 Cash Equivalent Items. As regards any portion of the
Collateral consisting of cash equivalent items (e.g., checks, drafts or other
items convertible at face), Secured Party may immediately apply them against the
Indebtedness and for this purpose Debtor agrees that such items will be
considered identical in character to cash proceeds.
5.4 Assembly of Collateral. Require Debtor to assemble the Collateral and
make it available to Secured Party at a location within the State of Oklahoma
designated by Secured Party which is reasonably convenient to all parties.
4
<PAGE>
5.5 Possession of Collateral. Take possession of and remove
the Collateral wherever the same may be located, without demand or notice,
without any court order or other process of law and without incurring any
liability to Debtor for any damages occasioned by such taking of possession.
5.6 Disposition. Sell, lease or otherwise dispose of the
Collateral at private or public sale, in bulk or in parcels, and, where
permitted by law, without having the Collateral present at the place of sale.
Unless the Collateral is perishable or its appears that the value of the
Collateral will decline speedily or the Collateral is a type customarily sold on
a recognized market, or unless Debtor has signed a statement (after the
occurrence of an Event of Default) renouncing or modifying Debtor's right to
notice, Secured Party will give Debtor reasonable notice of the time and place
of any public sale or other disposition thereof or the time after which any
private sale or other disposition thereof is to be made. The requirements of
reasonable notice shall be met if such notice is given to Debtor at least ten
(10) days before the time of any such sale or disposition.
5.7 Costs and Expenses. Recover from Debtor an amount equal to
all costs, expenses and attorney fees incurred by Secured Party in connection
with the exercise of rights and remedies contained or referred to herein,
together with interest on such sums at the default rates applicable to the Notes
from time to time.
5.8 Selective Enforcement. In the event Secured Party shall
elect to selectively and successively enforce its rights and remedies in respect
of any of the Collateral, pursuant to any applicable agreements or otherwise,
such action shall not be deemed a waiver or discharge of any other right,
remedy, lien or encumbrance until such time as the Indebtedness shall have been
paid in full.
5.9 Waiver of Default. Secured Party may, by an instrument in
writing signed by Secured Party, waive any Event of Default which shall have
occurred and any of the consequences thereof, and, in such event, Secured Party
and Debtor shall be restored to their respective former positions, rights and
obligations. Any Event of Default so waived shall for all purposes of this
Agreement be deemed to have been cured and not to be continuing, but no such
waiver shall extend to any subsequent or other Event of Default or impair any
consequence thereof.
5.10 Deposits: Setoff. Regardless of the adequacy of any other
collateral held by Secured Party (including without limitation the Collateral),
any deposits or other sums credited by or due from Secured Party to Debtor shall
at all times constitute collateral security for the Indebtedness and may be set
off against the Indebtedness. The rights granted by this paragraph 5.10 shall be
in addition to the rights of Secured Party under any statutory banker's lien or
common law right of set off.
5.11 Collections. Exercise any and all rights and remedies of
Debtor relating to the Collateral including, but not by way of limitation, the
right to collect, demand, receive, settle, compromise, adjust or sue for all
amounts due thereon or thereunder and the right either in Secured Party's own
name or in the name of Debtor to take such legal or other proceedings as Debtor
might have taken except for this Agreement, together with all other rights
specified in paragraph 3.8 hereof.
5.12 Application of Payments. During the continuance of any
Event of Default, all payments received by Secured Party in respect of the
Indebtedness, whether from Debtor, any guarantor, recoveries upon any portion of
the Collateral or otherwise, may be applied by Secured Party to any liabilities,
obligations or indebtedness included in the Indebtedness selected by Secured
Party in its sole and exclusive discretion.
5
<PAGE>
5.13 Cumulative Remedies. All rights and remedies of Secured
Party hereunder are cumulative and may be exercised singularly or concurrently,
and the exercise of any one or more of them shall not be a waiver of any other.
5.14 Secured Party's Satisfaction of Debtor's Obligations.
Upon the occurrence of any event which, but for the giving of notice or the
passage of time, would constitute an Event of Default, Secured Party may, but
shall not be obligated to, pay, satisfy or cure any liability or obligations of
Debtor arising out of or relating to this Agreement or the Note, and Debtor
will, from time to time within ten (10) days after a request made by Secured
Party, reimburse Secured Party for all amounts expended, advanced or incurred by
Secured Party in connection with such payment, cure or satisfaction, together
with interest on such sums at the rate applicable to the Note from time to time.
6. Miscellaneous.
6.1 Power of Attorney. To effectuate the terms and provisions
hereof, Debtor hereby designates and appoints Secured Party and its designees or
agents as attorney-in-fact of Debtor, irrevocably and with power of substitution
(such appointment to be effective immediately, without notice, upon the
occurrence of an Event of Default), with authority to receive, open and dispose
of all mail addressed to Debtor, to notify the Postal authorities to change the
address for delivery of mail addressed to Debtor to such address as Secured
Party may designate; to endorse the name of Debtor on any notes, acceptances,
checks, drafts, money orders, instruments or other evidences of payment or
proceeds of the Collateral that may come into Secured Party's possession; to
sign the name of Debtor on any invoices, documents, drafts against and notices
to account debtors or obligors of Debtor, assignments and requests for
verification of accounts; to execute proofs of claim and loss; to execute any
endorsements, assignments or other instruments of conveyance or transfer; to
adjust and compromise any claims under insurance policies; to execute releases;
and to do all other acts and things necessary and advisable in the sole
discretion of Secured Party to carry out and enforce this Security Agreement.
This power of attorney is coupled with an interest and is irrevocable while any
of the Indebtedness shall remain unpaid.
6.2 Amendment Entire Agreement. This Agreement cannot be
amended, modified or supplemented except by an agreement in writing signed by
the party or parties against whom enforcement of any waiver, change, amendment,
modification or discharge is sought. This Agreement constitutes the entire
agreement of the parties hereto with respect to the matters dealt with herein,
except as expressly indicated to the contrary herein.
6.3 Notices. Except as otherwise provided herein, all notices
and other communications required or permitted hereunder shall be in writing and
shall be deemed given when mailed as set forth in the Loan Agreement.
6.4 Waivers: Consents. Debtor does hereby (i) consent to all extensions and
renewals of the Indebtedness, (ii) consent to the addition, release or
substitution of any person other than Debtor liable on any portion of the
Indebtedness, and (iii) consent to any substitutions for, exchanges of or
releases of the Collateral of any portion thereof.
6
<PAGE>
6.5 Survival of Representations and Warranties. All
representations and warranties of Debtor contained herein or made in writing by
Debtor in connection herewith shall continue and shall survive the execution and
delivery of this Agreement.
6.6 Successors and Assigns. All covenants and agreements in
this Agreement made by Debtor and Secured Party shall inure to the benefit of,
and shall be binding upon, Secured Party and Debtor and their respective
successors and assigns, whether so expressed or not.
6.7 Descriptive Headings. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
6.8 Governing Law. This Agreement is executed and delivered in
the State of Oklahoma, and except insofar as the law of any other state or
jurisdiction may be mandatorily applicable, shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
said State.
6.9 Severability. In the event any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof.
IN WITNESS WHEREOF, Debtor has executed and delivered this
Agreement to and in favor of Secured Party as of the effective date first set
forth above.
Tower Tech, Inc., an Oklahoma corporation
By: ss/CHARLES D. WHITSITT, Chief Financial Officer
-----------------------------------------------------
Charles D. Whitsitt
7
<PAGE>
EXHIBIT "C"
COLLATERAL ASSIGNMENT OF NOTE
THIS AGREEMENT is made and entered into this 23rd day of
April, 1999, by Tower Tech, Inc., an Oklahoma corporation ("Borrower"), in favor
of People First Bank, an Oklahoma state banking association ("Bank").
W I T N E S S E T H:
WHEREAS, Borrower has executed and delivered to Bank a
Promissory Note (the "Note"), of even date herewith, in the principal amount of
$6,500,000.00; and,
WHEREAS, Borrower is the owner and holder of a certain
Promissory Note (the "Aggreko Note") in the principal amount of $1,350,000.00,
dated December 4, 1998, executed by Aggreko, Inc. ("Aggreko"); and,
WHEREAS, as a condition to the extension of credit to Borrower
evidenced by the Note, Bank has required that Borrower assign the Aggreko Note
to Bank as additional security for repayment of the Note and that Borrower
deliver to Bank Aggreko's written acknowledgment of, and consent to, this
Collateral Assignment, all as more particularly set forth hereinafter.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Grant of Security Interest. Borrower hereby grants Bank a first and
prior security interest in the Aggreko Note, including all rights to payment
thereunder, proceeds and products thereof and substitutions therefor. In
connection therewith, Borrower has, concurrently with the execution of this
Agreement, transferred and delivered the Aggreko Note to Bank, duly endorsed in
Bank's favor.
2. Representations. Warranties and Covenants. Borrower represents,
warrants and covenants that:
2.1 Ownership of Collateral. Borrower is the owner of the
Aggreko Note, free and clear of any lien, pledge or encumbrance.
2.2 No Restrictions. There are no restrictions upon the
transfer of the Aggreko Note to Bank, except as provided in Section 5 therein.
Borrower has obtained the written approval of Aggreko to this Collateral
Assignment of the Aggreko Note.
2.3 Limitation on Enforcement. Amendment or Renewal. During
the term of this Agreement, Borrower will not, without Bank's prior written
consent:
(a) Commence or take any action to enforce the
Aggreko Note; or, (b) Grant or make any extension,
renewal or modification to the Aggreko Note.
1
3. Return of Collateral. Upon payment in full of the Note, the Bank
shall transfer the Aggreko Note to Borrower, without recourse.
4. Default. The terms "Default" and "Event of Default" for purposes of
this Agreement shall have the same meanings as set forth in that certain Amended
and Restated Loan Agreement (the "Loan Agreement"), of even date herewith,
between Borrower, Bank and others.
5. Remedies. Upon the occurrence of any Event of Default and at any
time thereafter, Bank shall have and may exercise the following rights and
remedies, without notice to Borrower:
5.1 Acceleration. Declare the indebtedness evidenced by the
Note to be immediately due and payable, whereupon the same shall become
forthwith due and payable.
5.2 All Legal Remedies. Proceed to selectively and
successfully enforce and exercise any and all rights and remedies which Bank may
have under this Collateral Assignment and/or the Loan Agreement and other Loan
Documents, any other applicable agreement or applicable law including, without
limitation: (i) commencing one or more actions against Borrower and reducing the
claims of Bank against Borrower to judgment; (ii) foreclosure or other
enforcement of Bank's security interest in the Aggreko Note, or any portion
thereof, or other enforcement of Bank's rights and remedies in respect of, and
to recover upon, the Aggreko Note, through judicial action or otherwise,
including all available remedies under the applicable provisions of the Uniform
Commercial Code; and, (iii) payment or discharge of any claim or lien, prior or
subordinate, in respect to, or affecting the Aggreko Note.
5.3 Disposition. Upon ten (10) days' notice to Borrower, given
as hereinafter provided, and without liability for any diminution in price which
may have occurred, sell all or any portion of the Aggreko Note in such manner
and for such price as the Bank may determine. At any bona fide public sale the
Bank shall be free to purchase all or any part of the Aggreko Note. Out of the
proceeds of any sale the Bank may retain an amount equal to the principal and
interest then due on the Note, plus the amount of the expenses of the sale, and
Bank's reasonable costs of collection, including attorneys fees, and shall then
pay any balance of such proceeds to Borrower. In the event that the proceeds of
any sale are insufficient to cover the principal and interest of the Note plus
expenses of the sale, and Bank's reasonable costs of collection, including
attorneys fees, Borrower shall be liable to the Bank for any deficiency.
5.4 Costs and Expenses. Recover from Borrower an amount equal
to all costs, expenses and reasonable attorneys' fees incurred by Bank in
connection with the exercise of rights and remedies contained or referred to
herein, together with interest on such sums at the rate of interest set forth in
the Note.
5.5 Selective Enforcement. In the event Bank shall elect to selectively and
successively enforce its rights and remedies in respect to the Aggreko Note,
pursuant to any applicable agreements or otherwise, such action shall not be
deemed a waiver or discharge of any other right, remedy, lien or encumbrance
until such time as the Note shall have been paid in full. To the fullest extent
permitted by law, Borrower waives all rights to require that the collateral
described in this Agreement be marshalled prior to sale.
2
<PAGE>
5.6 Waiver of Default. Bank may, by an instrument in writing
signed by Bank, waive any Default or Event of Default which shall have occurred
and any of the consequences thereof, and, in such event, Bank and Borrower shall
be restored to their respective former positions, rights and obligations. Any
Default or Event of Default so waived shall for all purposes of this Collateral
Assignment be deemed to have been cured and not to be continuing, but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any consequences thereof.
5.7 Cumulative Remedies. All rights and remedies of Bank
hereunder are cumulative and may be exercised singularly or concurrently, and
the exercise of any one or more of them shall not be a waiver of any other.
6. Miscellaneous.
6.1 Amendment: Entire Agreement. This Collateral Assignment
cannot be amended, modified or supplemented except by an agreement in writing
signed by Borrower and the Bank. Any amendment, extension, renewal or
restructure of the indebtedness evidenced by the Note shall not affect the
validity of this Collateral Assignment. This Collateral Assignment constitutes
the entire agreement of the parties hereto with respect to the matters dealt
with herein, except as expressly indicated to the contrary herein.
6.2 Notices. Except as otherwise provided herein, all notices
and other communications required or permitted hereunder shall be in writing and
shall be deemed given as set forth in the Loan Agreement.
6.3 Waivers: Consents. Borrower does hereby (i) consent to all
extensions and renewals of the indebtedness evidenced by the Note, (ii) consent
to the addition, release or substitution of any person other than Borrower
liable on any portion of the said indebtedness, and (iii) consent to any
substitutions for, exchanges of or releases of the collateral described in this
Collateral Assignment, or any portion thereof.
6.4 Survival of Representations and Warranties. All
representations and warranties of Borrower contained herein or made in writing
by Borrower in connection herewith shall continue and shall survive the
execution and delivery of this Collateral Assignment.
6.5 Successors and Assigns. All covenants and agreements in
this Collateral Assignment made by Borrower and Bank shall inure to the benefit
of, and shall be binding upon Bank and Borrower and their respective successors
and assigns, whether so expressed or not.
6.6 Descriptive Headings. The descriptive headings of the several
paragraphs of this Collateral Assignment are inserted for convenience only and
do not constitute a part of this Collateral Assignment.
6.7 Governing Law. This Collateral Assignment is executed and delivered in
the State of Oklahoma, and shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the laws of the State of
Oklahoma.
6
<PAGE>
6.8 Severability. In the event any one or more of the provisions contained
in this Collateral Assignment shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Collateral Assignment to and in favor of Bank as of the date first set forth
above.
BORROWER: Tower Tech, Inc., an Oklahoma corporation
By: ss/CHARLES D. WHITSITT, Chief Financial Officer
---------------------------------------------------
Charles D. Whitsitt
STATE OF OKLAHOMA )
) SS:
COUNTY OF OKLAHOMA )
Before me, the undersigned, a Notary Public, within and for
said County and State, on this _____ day of __________________, 1999, personally
appeared Charles Whitsitt, to me known to be the identical person who as Chief
Financial Officer subscribed the name of Tower Tech, Inc. the maker thereof to
the within and foregoing instrument and acknowledged to me that he executed the
same as his free, voluntary act and deed, and as the free and v6luntary act and
deed of such corporation, for the uses and purposes set forth.
In Testimony Whereof, I have hereunto set my hand and official seal the day and
year last above written.
My Commission Expires: Notary Public
7
<PAGE>
EXHIBIT "D"
GUARANTY AGREEMENT
FOR VALUABLE CONSIDERATION, the receipt of which by the
undersigned (the "Guarantor'1) is hereby acknowledged, and to induce People
First Bank (the "Lender") to extend credit to Tower Tech, Inc., an Oklahoma
corporation (the "Borrower"), in the aggregate amount of $6,500,000.00, as
evidenced by that certain Promissory Note (the "Note") of even date herewith,
the Guarantor hereby covenants and agrees with the Lender as follows:
1. The Guarantor unconditionally and absolutely guarantees to the
Lender, its successors and assigns, the full and prompt payment when due,
whether at stated maturity, by acceleration or otherwise, and at all times
thereafter, of the Note, all other extensions of credit by the Lender in favor
of the Borrower, all other obligations of the Borrower to the Lender, and any
extensions, renewals or modifications thereof, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, or now or
hereafter existing or due or to become due, and all interest thereon, and the
Guarantor further guarantees the full, punctual and faithful performance of each
and every covenant, term, condition and obligation to be performed by the
Borrower in respect to the Note, any mortgage and security agreement securing
the payment of the Note and Borrower's performance of the Amended and Restated
Loan Agreement of even date herewith, by and between the Lender, the Borrower,
the Guarantor and others (as amended from time to time, the "Loan Agreement")
and any document executed in connection therewith (all such indebtedness,
extensions of credit and obligations being hereinafter collectively called the
"Liabilities").
The undersigned further agrees to pay all expenses (including but not
limited to attorneys' fees, court costs and legal expenses) paid or incurred by
the Lender, its successors or assigns, in endeavoring to collect the
Liabilities, or any part thereof, and in enforcing this Guaranty. The Guarantor
further guarantees that all payments made by the Borrower to the Lender on any
obligation hereby guaranteed will, when made, be final and agrees that, if any
such payment is recovered from, or repaid by, the Lender in whole or in part in
any bankruptcy, insolvency or similar proceeding instituted by or against the
Borrower, this Guaranty shall continue to be fully applicable to such obligation
to the same extent as though the payment so recovered or repaid had never been
originally made on such obligation.
2. This Guaranty shall, in all respects, be a continuing, absolute and
unconditional guaranty of payment, and not collection, and shall remain in full
force and effect (notwithstanding, without limitation, the validity, regularity
or enforceability of the Note, the Loan Agreement or any document executed in
connection therewith, or any other agreement or document relating to the
Liabilities). The Guarantor further agrees that its obligation hereunder shall
be unconditional irrespective of any other circumstances which might otherwise
constitute a discharge at law or in equity of a guarantor or surety.
3. Without in any way affecting the liability of the Guarantor
hereunder, the Lender may, from time to time, at its sole discretion and without
notice to the Guarantor, take any or all of the following actions:
(a) Retain or obtain a security interest
in any property to secure any of the Liabilities or any
obligation hereunder;
1
<PAGE>
(b) Retain or obtain the primary or
secondary obligation of any obligor or obligors, in addition
to the Borrower and the Guarantor, with respect to any of the
Liabilities;
(c) Extend or renew for one or more periods
(whether or not longer than the original period), alter or
exchange any of the Liabilities, or release or compromise any
obligation of the Borrower or the Guarantor or any obligation
of any nature of any other obligor with respect to any of the
Liabilities; or,
(d) Fail to perfect or release its security
interest in, or surrender, release or permit any substitution
or exchange for, all or any part of any property securing any
of the Liabilities or any obligation hereunder, or extend or
renew for one or more periods (whether or not longer than the
original period) or release, compromise, alter or exchange any
obligations of any nature of any obligor with respect to any
such property; or,
(e) Resort to the Guarantor or to any
collateral securing this Guaranty for payment or performance
of any of the Liabilities, whether or not the Lender shall
have resorted to any property securing any of the Liabilities
or any obligation hereunder or shall have proceeded against
the Borrower or any other obligor primarily or secondarily
obligated with respect to any of the Liabilities.
4. Nothing herein contained shall prevent the Lender from suing on any
instrument or document evidencing all or any part of the Liabilities, or from
foreclosing any lien held by the Lender upon any property securing the
Liabilities or from exercising any other rights available to it against the
Borrower, and, if such foreclosure or other remedy is availed of only the net
proceeds therefrom, after deduction of all charges and expenses of every kind
and nature whatsoever, shall be applied in reduction of the Liabilities, and the
Lender shall not be required to institute proceedings to recover any deficiency
as a condition of payment hereunder or enforcement hereof. At any sale of any
security or collateral for the Liabilities or any part thereof, whether by
foreclosure or otherwise, the Lender may, at its discretion, purchase all or any
part of such collateral so sold or offered for sale for its own account and may
apply against the amount bid therefor the balance due on the Liabilities.
5. Any amounts received by the Lender from whatsoever source on account
of the Liabilities may be applied by it toward the payment of such of the
Liabilities, and in such order of application, as the Lender may from time to
time elect; and, notwithstanding any payments made by or for the account of the
Guarantor pursuant to this Guaranty, the Guarantor shall not be subrogated to
any rights of the Lender until such time as the Lender has received payment of
the full amount of all Liabilities and of all obligations of the Guarantor
hereunder.
6. The Guarantor hereby expressly waives:
(a) Notice of the acceptance by the Lender
of this Guaranty;
(b) Notice of the existence or creation or
nonpayment of all or any of the Liabilities;
(c) Presentment, demand, notice of dishonor
or protest;
2
<PAGE>
(d) All setoffs and counterclaims; and,
(e) All diligence in collection or
protection of or realization upon the Liabilities or any
portion thereof, any obligation hereunder, or any security for
or guaranty of any of the foregoing.
7. The Lender may, from time to time, without notice to the Guarantor,
assign or transfer any of the Liabilities owing to it or any interest therein;
and, notwithstanding any such assignment or transfer or any subsequent
assignment or transfer thereof, such Liabilities shall be and remain Liabilities
for the purposes of this Guaranty, and each and every immediate and successive
assignee or transferee of any of the Liabilities or of any interest therein
shall, to the extent of the interest of such assignee or transferee in the
Liabilities, be entitled to the benefits of this Guaranty to the same extent as
if such assignee or transferee were the Lender; provided, however, that unless
the Lender shall otherwise consent in writing, the Lender shall have an
unimpaired right, prior and superior to that of any such assignee or transferee,
to enforce this Guaranty, for the benefit of the Lender as to those of the
Liabilities owing to it which the Lender has not assigned or transferred.
8. No delay on the part of the Lender in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
the Lender of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy; nor shall any modification
or waiver of any of the provisions of this Guaranty be binding upon the Lender,
except as expressly set forth in a writing duly signed and delivered on behalf
of the Lender. No action of the Lender permitted hereunder shall in any way
affect or impair the rights of the Lender and the obligation of the Guarantor
under this Guaranty.
9. The Guarantor agrees and acknowledges that the execution and
delivery of this Guaranty by the Guarantor is for a valid, proper and bona fide
business purpose of the Guarantor.
10. The Guarantor agrees to maintain adequate records of all
transactions so that at any time and from time to time the true and complete
financial condition of the Guarantor may be readily determined.
Guarantor shall furnish to the Lender, within 60 days following the end
of each calendar year while any portion of the Liabilities remains unpaid, the
Guarantor's full and complete financial statement, prepared in form acceptable
to Lender and on a basis consistent with the prior year. Guarantor shall further
furnish Lender with a full, true and correct copy of Guarantor's personal
Federal income tax return within two weeks of filing, but in no event later than
October 31 of each year.
11. This Guaranty shall be binding upon the Guarantor and upon the
heirs, personal representatives, successors and assigns of the Guarantor; and
all references herein to the Borrower shall be deemed to include any successor
or successors, whether immediate or remote, of the Borrower.
12. This instrument is executed and delivered as an incident to a
transaction negotiated and consummated in, and shall be construed according to
the laws of, the State of Oklahoma.
13. The Guarantor hereby agrees that the rights of the Lender created
by this Guaranty shall be cumulative and not in the alternative.
3
14. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or held invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Guaranty.
SIGNED AND DELIVERED this 23rd day of April, 1999.
ss/HAROLD D. CURTIS, Individually
---------------------------------------
Harold D. Curtis
4
EXHIBIT 21.1
LIST OF SUBSIDIARY OF TOWER TECH, INC.
Tower Tech do Brasil, a Brazilian corporation. *
Note: * 90% owned by Tower Tech, Inc.
Exhibit 10.21
MODIFICATION AND EXTENSION AGREEMENT
TOWER TECH, INC., FIRST UNITED BANK AND TRUST COMPANY
an Oklahoma Corporation
11919 So. Interstate 44 Service Road P.O. Box 130
Oklahoma City, Oklahoma 73173 Durant, Oklahoma 74702-O130
(hereinafter called "Borrower") (hereinafter called "Lender")
THE STATE OF OKLAHOMA
COUNTY OF CLEVELAND KNOW ALL MEN BY THESE PRESENTS:
THIS AGREEMENT (herein so called) is made and entered into as of the
14th day of June, 1999, by and between Lender, and Borrower,
WITNESSETH:
WHEREAS, TOWER TECH, INC., an Oklahoma Corporation executed and delivered to
SOUTHWESTERN BANK & TRUST COMPANY that promissory note dated April 14, 1998, in
the original principal sum of $2,000,000.00 (the "Note") which is currently held
by Lender and;
WHEREAS, the Note is secured by a mortgage lien conveyed in a mortgage dated
April 14, 1998 recorded in Book 2941, Page 19 of the Official Public Records of
Cleveland County, Oklahoma (the "Mortgage") covering the real property (the
"Property") owned by Borrower, more fully described as follows:
A part of the Southeast Quarter (SE/4) of Section Eleven (11), Township Ten (10)
North, Range Four (4) West of the Indian Meridian, Cleveland County, Oklahoma
and being more particularly described in Exhibit "A" attached hereto and made a
part hereof for all purposes.
WHEREAS, the Note is further secured by certain other security (the "Additional
Security") more fully described as follows, to-wit: Commercial Guaranty
Agreement executed by Harold Curtis dated June 17, 1999; the Mortgage and
Additional Security being collectively referred to as the "Security Documents";
and
WHEREAS, the Note presently matures on June 14, 1999, and Borrower has requested
and Lender has agreed to amend and modify the Note and Security Documents.
NOW THEREFORE, in consideration of the sum of Ten and No/1O0 Dollars ($10.00)
and the exchange of other good and valuable consideration paid by each of the
parties to the other, the receipt and sufficiency of which is hereby
acknowledged, Lender and Borrower AGREE AS FOLLOWS:
1. Acknowledgment of Outstanding Balance. The outstanding principal balance
of the Note as of the date hereof is $2,010,000.00.
2. Renewal and Extension of Maturity. The Note is hereby renewed and the
maturity of the Note is hereby extended to June 14, 2002 ("Revised Maturity
Date").
3. Amendment of Interest Rate. The interest rate in the Note is hereby amended
as follows:
Interest shall accrue on the unpaid balance of this Note from time to time
outstanding which is not past due, calculated on a 300 day annual basis (the
"Rate"), except as otherwise provided herein, as follows:
The lesser of (a) the Loan Rate (hereinafter defined) in effect from day to day
or (b) the Highest Lawful Rate (hereinafter defined) in effect from day to day.
The term "Loan Rate" shall mean the sum of one-half of one percent (0.5%) and
the Index as hereafter defined. The Loan Rate shall be subject to change daily
with changes in the Index.
As of the date of this Note, the lesser of the Loan Rate and the Highest Lawful
Rate is eight and one quarter percent (8.25%) per annum. Any change in either
the Loan Rate or the Highest Lawful Rate shall, after Lender gives only such
notice as may be required by applicable law or regulation, be effective for
purposes of determining the Rate as of the opening of business on the date of
any such change.
The Index is:
The Wall Street Journal Prime Rate which is the highest rate shown as the base
rate on corporate loans posted by at least 75% of the nation's 30 largest banks
as published daily in the Money Rates Section of the Wall Street Journal.
The Index currently is seven and three quarters percent (7.75%) per annum.
The "Highest Lawful Rate" is the maximum lawful rate which may be contracted
for, charged, taken, received, or reserved by Lender in accordance with the
applicable laws of the State of Oklahoma (or applicable United States federal
law to the extent that it permits Lender to contract for, charge, take, receive
or reserve a greater amount of interest than under Oklahoma law), taking into
account all charges made in connection with this loan which are treated as
interest under applicable law.
If at any time (i) the Loan Rate, (ii) interest on matured unpaid amounts, if
applicable, as provided for herein or in any of the other Loan Documents,
together with (iii) all fees and charges, if any, contracted for, charged,
received, taken or reserved by Lender in connection with the loan evidenced
hereby which are treated as interest under applicable law (collectively, the
'Charges'), computed over the full term of this Note, exceed the Highest Lawful
Rate, the rate of interest payable hereunder, together with all Charges, shall
be limited to the Highest Lawful Rate; provided, however, that any subsequent
reduction in the Loan Rate shall not cause a reduction of the rate of interest
payable hereunder below the Highest Lawful Rate until the total amount of
interest earned hereunder, together with all Charges, equals the total amount of
interest which would have accrued on the Loan Rate if such interest rate had at
all times been in effect. Changes in the Loan Rate resulting from a change in
the Index shall be subject to the provisions of this paragraph.
4. Required Payments. Principal and accrued and unpaid interest on the Note
shall be due and payable as follows:
Principal and interest shall be due and payable in monthly installments of
$17,126.52 or more, each, payable on the 14th day of each and every calendar
month, beginning July 14, 1999, and continuing regularly thereafter until the
whole of said sum, with interest, has been duly paid, (or until June 14, 2002,
when the entire amount of principal and interest then remaining unpaid, shall be
then due and payable) interest being calculated on the unpaid principal to the
date of each installment paid and the payment made credited first to the
discharge of the interest accrued and the balance to the reduction of the
principal.
Interest, computed on the unpaid principal balance, shall be due and payable
monthly on the same dates as, and in addition to the installments of principal.
In the event any monthly installment is not received by Note Holder within days
from due date, Borrower shall pay a late charge of five percent (5%) of the
regularly scheduled payment of principal and interest.
5. Financial Statements and Appraisals. Borrower and each person liable for
repayment of the Note shall furnish to Lender on an annual basis, balance
sheets, income statements and cash flow statements in such form and detail as
Lender shall require. Borrower shall furnish to Lender upon request, such
appraisals of the Property as may be required of Lender under applicable State
or Federal laws and regulations issued pursuant thereto.
6. Hazardous Substances. Borrower shall not cause or permit the presence, use,
disposal, storage, or release of any Hazardous Substances on or in the Property.
Borrower shall not do, nor allow anyone else to do, anything affecting the
Property that is in violation of any Environmental Law. The preceding two
sentences shall not apply to the presence, use, or storage on the Property of
small quantities of Hazardous Substances that are generally recognized to be
appropriate to normal use and maintenance of the Property. Borrower shall
promptly give Lender written notice of any investigation, claim, demand, lawsuit
or other action by any governmental or regulatory agency or private party
involving the Property and any Hazardous Substance or Environmental Law of which
Borrower has actual knowledge. If Borrower learns, or is notified by any
governmental or regulatory authority, that any removal or other remediation of
any Hazardous Substance affecting the Property is necessary, Borrower shall
promptly take all necessary remedial actions in accordance with Environmental
Law. As used in this Paragraph 6, 'Hazardous Substances' are those substances
defined as toxic or hazardous substances by Environmental Law and the following
substances: gasoline, kerosene, other flammable or toxic petroleum products,
toxic pesticides and herbicides, volatile solvents, materials containing
asbestos or formaldehyde, and radioactive materials. As used in this Paragraph
6, 'Environmental Law' means federal laws and laws of the jurisdiction where the
Property is located that relate to health, safety or environmental protection.
7. Additional Provisions. THIS LOAN IS PAYABLE IN FULL AT MATURITY. BORROWER
MUST REPAY THE ENTIIRE PRINCIPAL BALANCE OF THE LOAN AND UNPAID INTEREST THEN
DUE. THE LENDER IS UNDER NO OBLIGATION TO REFINANCE THE LOAN AT THAT TIME.
BORROWER WILL, THEREFORE, BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS THAT
BORROWER MAY OWN, OR BORROWER WILL HAVE TO FIND A LENDER WHICH MAY BE THE LENDER
BORROWER HAS THIS LOAN WITH, WILLING TO LEND BORROWER THE MONEY. IF BORROWER
REFINANCES THIS LOAN AT MATURITY, BORROWER WILL HAVE TO PAY SOME OR ALL OF THE
CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF BORROWER OBTAINS
REFINANCING FROM THE SAME LENDER. THIS LENDER WILL CONSIDER AN APPLICATION TO
REFINANCE THE BALLOON PAYMENT AT THE TIME PAYMENT IS DUE, ON THE SAME BASIS AS
ALL OTHER NEW MORTGAGE LOAN APPLICATIONS.
8. Ratification of Security Documents. Borrower and Lender further agree that
the liens, assignments and security interests created by the Security Documents
shall continue and carry forward until the Note and all indebtedness evidenced
thereby is paid in full. Borrower further agrees that Lender is the holder of
the Note and the Security Documents and that such liens, assignments and
security interests are hereby ratified and affirmed as valid and subsisting
against the Property, and that this Agreement shall in no manner vitiate, affect
or impair the Note or the Security Documents (except as expressly modified in
this Agreement), and that such liens, assignments, and security interests shall
not in any manner be waived, released, altered or modified until the Note and
all other obligations secured by the Security Documents (including any and all
subsequent renewals and extensions) have been paid in full.
9. Release of Claims. Borrower hereby RELEASES, RELINQUISHES and forever
DISCHARGES Lender, its agents, officers, directors. employees and
representatives of and from any and all claims, demands, actions and causes of
action of any and every kind or character, whether known or unknown, present or
future, which Borrower may have against Lender, its agents, officers, directors,
employees and representatives arising out of or with respect to any and all
transactions relating to the Note and the Security Documents occurring prior to
the date hereof.
10. Miscellaneous.
(a) Except as modified hereby, all terms and provisions of the Note and
Security Documents remain unchanged, are expressly ratified and shall
continue in full force and effect, and Borrower acknowledges and affirms
Borrower's liability to Lender thereunder. In the event of an inconsistency
between this Agreement and the terms of the Note and/or Security Documents,
this Agreement shall govern.
(b) Borrower hereby agrees to pay all costs and expenses incurred by Lender in
connection with the execution and administration of this Agreement, the
reinstatement and modification of the Note and/or Security Documents, and
any other documents executed in connection herewith.
<PAGE>
(c) Any default by Borrower in the performance of its obligations herein
contained shall constitute a default under the Note and Security Documents, and
shall allow Lender to exercise any or all of its remedies set forth in the Note
and Security Documents or at law or in equity. (d) Lender does not, by its
execution of this Agreement, waive any rights it may have against any person not
a party hereto. (e) This Agreement may be executed in multiple counterparts,
each of which shall constitute an original instrument, but all of which shall
constitute one and the same Agreement. (f) Borrower agrees that this Agreement
and all of the covenants and agreements contained herein shall be binding upon
the parties hereto and shall inure to the benefit of and be binding upon each of
their respective heirs, executors, legal representatives, successors and
permitted assigns.
11. No Oral Agreements. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
LENDER: BORROWER:
FIRST UNITED BANK AND TRUST COMPANY TOWER TECH, INC.,
an Oklahoma Corporation
BY: BY:
ss/JAMES L. BATSON ss/CHARLES D. WHITSITT
- ------------------------- ----------------------------
James L. Batson Charles D. Whitsitt
Executive Vice President Chief Financial Officer
THE STATE OF OKLAHOMA
COUNTY OF OKLAHOMA
This instrument was acknowledged before me on the day of June, 1999, by JAMES L.
BATSON, Executive Vice President, of FIRST UNITED BANK AND TRUST COMPANY, a
banking association, on behalf of said banking association.
NOTARY PUBLIC - STATE OF OKLHOMA
<PAGE>
THE STATE OF OKLAHOMA
COUNTY OF OKLAHOMA
This instrument was acknowledged before me on the _____ day of June, 1999, by
CHARLES D. WHITSITT, Chief Financial Officer of TOWER TECH, INC., an Oklahoma
Corporation. on behalf of said corporation.
- ---------------------------------------
NOTARY PUBLIC - STATE OF OKLAHOMA
PREPARED IN THE LAW OFFICE OF:
MUNSON, MUNSON, PIERCE & CARDWELL, PC.
301 W. WOODARD ST.
P.O. BOX 1099
DENISON, TX 73010
(903) 463-3750
<PAGE>
Exhibit "A"
A part of the Southeast Quarter (SE/4) of Section Eleven (11), Township Ten (10)
North, Range Four (4) West of the Indian Meridian, Cleveland County, Oklahoma,
being more particularly described as follows:
Commencing at the Southeast Corner of said Southeast Quarter (SE/4);
Thence South 89(degree)42'04" West along the South line of said Southeast
Quarter (SE/4) a distance of l,780.60 feet;
Thence continuing South 89(degree)42'04" West along the South line a distance of
843.24 feet to the Southwest Corner of said Southeast Quarter (SE/4);
Thence North 00(degree)07'35" West on the West line of said Southeast Quarter
(SE/4) a distance of 1764.49 feet to a point 880.00 feet South of the Northwest
Corner of said Southeast Quarter (SE/4);
Thence North 89(degree)42'07" East parallel to and 880.00 feet South of the
North line of said Southeast Quarter (SE/4) a distance of 240.00 feet;
Thence South 00(degree)07'35" East and parallel with the West line of said
Southeast Quarter (SE/4) distance of 735.00 feet to the point of beginning;
Thence continuing South 00(degree)07'35" East a distance of 65.00 feet;
Thence South 14(degree)49'10" East a distance of 490.68 feet;
Thence North 89(degree)42'07" East and parallel with the North line of said
Southeast Quarter (SE/4) a distance of 360.55 feet;
Thence North 00(degree)07'35" West and parallel with the West line of said
Southeast Quarter (SE/4) a distance of 540.00 feet;
Thence South 89(degree)42'07" West and parallel with the North line of said
Southeast Quarter (SE/4) a distance of 485.00 feet to the point or place of
beginning.
Exhibit 10.22
COMMERCIAL MORTGAGE, SECURITY AGREEMENT, FINANCING
STATEMENT AND ASSIGNMENT OF RENTS
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY
ALLOW THE MORTGAGEE (ALSO CALLED THE "LENDER" HEREIN) TO TAKE THE MORTGAGED
PROPERTY (ALSO CALLED THE "PROPERTY" HEREIN) AND SELL IT WITHOUT GOING TO
COURT IN A FORECLOSURE ACTION UPON A DEFAULT BY THE MORTGAGOR (ALSO CALLED
THE "BORROWER" HEREIN) UNDER THIS MORTGAGE.
TOWER TECH, INC., an Oklahoma Corporation 11919 So. Interstate 44 Service Road
Oklahoma City, Oklahoma 73173
(hereafter called "Borrower')
FIRST UNITED BANK AND TRUST COMPANY, P.O. Box 130
Durant, Oklahoma 74702-0130
(hereinafter called "Lender')
This COMMERCIAL MORTGAGE, SECURITY AGREEMENT, FINANCING STATEMENT AND ASSIGNMENT
OF RENTS (the "Mortgage" is made as of the 17th day of June, 1999, between the
Borrower as mortgagor and Lender as mortgagee.
DEFINITIONS. The following words shall have the following meanings when used in
this Mortgage. Terms not otherwise defined in this Mortgage shall have the
meanings attributed to such terms in the Oklahoma Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Mortgage. The words "Mortgage" mean this Mortgage among Borrower and Lender, and
includes without limitation all assignment and security interest provisions
relating to the Personal Property and Rents.
<PAGE>
Fixtures. The word "Fixtures" means all building material, machinery, apparatus,
equipment, fittings, fixtures and personal property of every kind and nature
whatsoever, now in, part of, affixed to, delivered to or used in connection with
the buildings and improvements on the Real Property or hereafter acquired by the
Mortgagor and hereafter placed in, affixed to, delivered to or used in
connection which such buildings and improvements or any buildings hereinafter
constructed or placed upon the Real Property or any part thereof, including, but
without limiting the generality of the foregoing, all engines, furnaces,
boilers, stokers, pumps, heaters, tanks, dynamos, transformers, motors,
generators, fans, blowers, vents, switchboards, electrical equipment, heating,
plumbing, lifting and ventilating apparatus, air-cooling and air-conditioning
apparatus, water, gas and electrical fixtures, elevators, mail conveyors,
escalators, drapes, carpets, shades, awnings, screens, radiators, partitions,
ducts, shafts, pipes, conduits, lines and facilities of whatsoever nature for
air, gas, water, steam, electricity, waste sewage and for other utilities,
services and uses, compressors, vacuum cleaning systems, call systems, fire
prevention and extinguishing apparatus, kitchen equipment, cafeteria equipment,
all of which to the extent permitted by law are hereby understood and agreed to
be part and parcel of the Real Property and improvements thereon and
appropriated to the use and operation of the Real Property and said
improvements, and whether affixed or annexed or not, shall for the purposes of
this Mortgage be deemed constructively to be real estate and conveyed hereby,
excluding, however, readily movable trade fixtures not used or acquired for use
in connection with the operation of any such building or any part thereof,
readily movable office furniture, furnishings and equipment not so used or
acquired for use, and consumable supplies, whether or not affixed or annexed,
that have been or that may hereafter be placed in any building constructed upon
the Real Property or any part thereof.
Guarantor. The word "Guarantor" (individually and/or collectively, as the
context may require) means those persons, firms or entities, if any, designated
as Guarantor in the Related Documents.
Guaranty. The word "Guaranty" (individually and/or collectively, as the context
may require) means that or those instruments of guaranty, if any, now or
hereafter in effect, from Guarantor to Lender guaranteeing the repayment of all
or any part of the indebtedness.
Improvements. The word "Improvements" means and includes without limitation all
existing and future improvements, fixtures, buildings, structures, mobile homes
affixed on the Real Property, facilities, additions and other construction on
the Real Property.
Indebtedness. The word "Indebtedness" means: (a) the Note; (b) all principal and
earned interest and other sums required to be paid pursuant to the Note, this
Mortgage, and any other instruments related thereto; (c) all sums advanced or
costs or expenses incurred by Lender (whether by Lender directly or on Lenders
behalf by the Lender) which are made or incurred pursuant to or allowed by the
terms of this instrument, plus interest thereon at the same rate as provided in
the Note from the date paid until reimbursed; (d) other and additional notes,
debts, obligations, and liabilities of any kind and character of Borrower, now
and hereafter existing in favor of Lender regardless of whether such notes.
debts, obligations, and liabilities be direct or indirect, primary or secondary,
joint, several or joint and several, fixed or contingent and regardless of
whether such present or future notes, debts, obligations, and liabilities may,
prior to their acquisition by Lender, be or have been payable to or be or have
been in favor of some other person or have been acquired by Lender in a
transaction with one other than Lender, together with any and all renewals and
extensions of such notes, debts, obligations, and liabilities, or any part
thereof; and (e) all renewals and extensions of the above whether or not
Borrower executes any renewal or extension agreement. Note. The word "Note"
means the note dated June 17, 1999, in the principal amount of $253,000.00, from
Borrower to Lender, together with all renewals, extensions, modifications,
refinancings, and substitutions for the Note. The Note will mature on June 17,
2002.
Personal Property. The words "Personal Property" mean all equipment, and other
articles of personal property now or hereafter owned by Borrower, and now or
hereafter attached or affixed to the Real Property, and such other personal
property as may be described in this Mortgage: together with all accessions,
parts, additions to, replacements of, and substitutions for, any of such
property; and together with all proceeds (including without limitation all
insurance proceeds and refunds of premiums) from any sale or other disposition
of the Property.
Property. The word "Property" means collectively the Real Property and the
Personal Property (also called the "Mortgaged Property").
Real Property. The real property located in Cleveland County, Oklahoma described
in Exhibit "A" attached hereto and made a part hereof for all purposes, together
with all tenements, hereditaments, rights and appurtenances now or hereafter
belonging thereto, including, without limitation, any adjacent land or easements
rights or appurtenances acquired or created for the benefit of the Real Property
after the date hereof. SUBJECT TO all conditions, covenants, restrictions,
reservations and easements that appear of record. The Real Property address is
commonly known as 11919 So. Interstate 44 Service Road, Oklahoma City, Oklahoma.
Related Documents. The words "Related Documents" mean and include without
limitation all credit agreements, loan agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments and documents,
whether now or hereafter existing, executed in connection with the Indebtedness.
Rents. The word "Rents" means all present and future rents, revenues, income,
issues, bonuses, production payments, royalties, profits, and other benefits
derived from the Property.
THIS MORTGAGE IS GIVEN AND ACCEPTED ON THE FOLLOWING TERMS:
PAYMENT AND PERFORMANCE. Borrower does hereby mortgage, pledge, grant, convey
and assign to Lender, with power of sale, the Property to secure to Lender the
payment of the Indebtedness and all amounts secured by this Mortgage as they
become due and except as otherwise provided, Borrower shall strictly and in a
timely manner, perform all of Borrowers obligations under the Indebtedness and
this Mortgage.
Borrower hereby absolutely assigns to Lender all of Borrowers right, title and
interest in and to all present and future leases of the Property and all Rents
from the Property. In addition, Borrower grants Lender a Uniform Commercial Code
security interest in the Rents and the Personal Property.
TO HAVE AND TO HOLD the Property unto the Lender, its successors and assigns,
forever.
POSSESSION AND MAINTENANCE OF THE PROPERTY. Borrower agrees that Borrower's
possession and use of the Property shall be governed by the following
provisions:
Possession and Use. Until the occurrence of an Event of Default, Borrower may:
(a) remain in possession and control of the Property: (b) use, operate or manage
the Property: and (c) collect any Rents from the Property.
Duty to Maintain. Borrower shall maintain the Property in tenantable condition
and promptly perform all repairs, replacements. and maintenance necessary to
preserve its value.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and threatened release," as used in this Mortgage, shall
have the same meanings as set forth 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. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 49 U.S.C.
Section 6901, et seq., or other applicable state or Federal laws, rules, or
regulations adopted pursuant to any of the foregoing. Borrower represents and
warrants to Lender that: (a) During the period of Borrowers ownership of the
Property, 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, or about the Property: (b) Borrower has no knowledge of,
or reason to believe that there has been, except as previously disclosed to and
acknowledged by Lender in writing, (i) any use, generation, manufacture,
storage, treatment, disposal, release, or threatened release of any hazardous
waste or substance by any prior owners or occupants of the Property or (ii) any
actual or threatened litigation or claims of any kind by any person relating to
such matters; (c) Except as previously disclosed to and acknowledged by Lender
in writing. (i) neither Borrower nor any tenant, contractor. agent or other
authorized user of the Property shall use, generate, manufacture, store, treat,
dispose of, or release any hazardous waste or substance on, under, or about the
Property and (ii) 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 Property to make
such inspections and tests as Lender may deem appropriate to determine
compliance of the Property with this section of the Mortgage. Any inspections or
tests made by Lender shall be at Borrower's expense, shall be for Lenders
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 Borrowers due
diligence in investigating the Property for hazardous waste. 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 all 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 Mortgage or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened release
occurring prior to Borrowers ownership or interest in the Property, whether or
not the same was or should have been known to Borrower. The provisions of this
section of the Mortgage including the obligation to indemnity, shall survive the
payment of the Indebtedness and the satisfaction and release of the lien of
this Mortgage and shall not be affected by Lenders acquisition of any interest
in the Property, whether by foreclosure or otherwise.
Nuisance, Waste. Borrower shall not cause. conduct or permit any nuisance nor
commit, permit, or suffer any stripping of or waste on or to the Property or any
portion of the Property. Specifically without limitation, Borrower will not
remove, or grant to any other party the right to remove, any timber, minerals
(including oil and gas), soil, gravel or rock products without the prior written
consent of Lender. This restriction will not apply to rights and easements (such
as gas and oil) not owned by Borrower and of which Borrower has informed Lender
in writing prior to Borrowers signing of this Mortgage.
Removal of Improvements. Borrower shall not demolish or remove any Improvements
from the Real Property without the prior written consent of Lender. As a
condition to the removal of any Improvements, Lender may require Borrower to
make arrangements satisfactory to Lender to replace such Improvements with
Improvements of at least equal value.
Lenders Right to Enter. Lender and its agents and representatives may enter upon
the Real Property at all reasonable times to attend to Lenders interests and to
inspect the Property for purposes of Borrowers compliance with the terms and
conditions of this Mortgage.
Compliance with Governmental Requirements. Borrower shall promptly comply with
all laws, ordinances, and regulations, now or hereafter in effect, of all
governmental authorities applicable to the use or occupancy of the Property.
Borrower may contest in good faith any such law, ordinance, or regulation and
withhold compliance during any proceeding, including appropriate appeals, so
long as Borrower has notified Lender in writing prior to doing so and so long as
Lenders interests in the Property are not jeopardized. Lender may require
Borrower to post adequate security or a surety bond, reasonably satisfactory to
Lender, to protect Lenders interest.
Duty to Protect. Borrower agrees neither to abandon nor leave unattended the
Property. Borrower shall do all other acts, in addition to those acts set forth
above in this section, which from the character and use of the Property are
reasonably necessary to protect and preserve the Property.
DUE ON SALE - CONSENT BY LENDER. Lender may, at its option, declare immediately
due and payable all Indebtedness secured by this Mortgage upon the sale or
transfer, without the Lenders prior written consent, of all or any part of the
Real Property, or any interest in the Real Property. A "sale or transfer" means
the conveyance of Real Property or any right, title or interest therein; whether
legal or equitable; whether voluntary or involuntary; whether by outright sale,
deed, installment sale contract, land contract, contract for deed, leasehold
interest with a term greater than three (3) years, lease-option contract, or by
sale, assignment, or transfer of any beneficial interest in or to any land trust
holding title to the Real Property, or by any other method of conveyance of such
Real Property interest. If any Borrower is a corporation or partnership,
transfer also includes any change in ownership of more than twenty-five percent
(25%) of the voting stock or partnership interests, as the case may be, of
Borrower. However, this option shall not be exercised by Lender if such exercise
is prohibited by Federal law or by Oklahoma Law. A lease or conveyance by
Borrower to a corporation controlled by Borrower, an associated or affiliated
company, partnership or to an individual family member of the shareholders of
the Borrower, will not be deemed a violation of this paragraph, provided that
(i) Borrower and Guarantors remain liable for the loan; (ii) Lender is notified
in writing in advance of such transfer and provides prior written approval,
which approval shall not be unreasonably withheld; and (iii) all individuals who
become involved directly or indirectly in the ownership of the Property,
personally guarantee the Indebtedness.
TAXES AND LIENS. The following provisions relating to the taxes and liens on the
Property are a part of this Mortgage:
Payment Borrower shall pay when due (and in all events prior to delinquency) all
taxes, special taxes, assessments', charges (including water and sewer), fines
and impositions levied against or on account of the Property, and shall pay when
due all claims for work done on or for services rendered or material furnished
to the Property. Borrower shall maintain the Property free of all liens having
priority over or equal to the interest of Lender under this Mortgage, except for
the lien of taxes and assessments not due and except as otherwise provided in
this Mortgage.
Right to Contest. Borrower may withhold payment of any tax, assessment, or claim
in connection with a good faith dispute over the obligation to pay, so long as
Lenders interest in the Property is not jeopardized. If a lien arises or is
filed as a result of nonpayment, Borrower shall within fifteen (15) days after
the lien arises or, if a lien is filed, within fifteen (15) days after Borrower
has notice of the filing, secure the discharge of the lien. or if requested by
Lender, deposit with Lender, cash or a sufficient corporate surety bond or other
security satisfactory to Lender in an amount sufficient to discharge the lien
plus any costs and attorneys' fees or other charges that could accrue as a
result of a foreclosure or sale under the lien. In any contest, Borrower shall
defend itself and Lender and shall satisfy any adverse judgment before
enforcement against the Property. Borrower shall name Lender as an additional
obligee under any surety bond furnished in the contest proceedings.
Evidence of Payment. Borrower shall upon demand furnish to Lender satisfactory
evidence of payment of the taxes or assessments and shall authorize the
appropriate governmental official to deliver to Lender at any time a written
statement of the taxes and assessments against the Property.
Notice of Construction. Borrower shall notify Lender at least fifteen (15) days
before any work is commenced, any services are furnished, or any materials are
supplied to the Property, if any mechanic's lien, materialmen's lien, or other
lien could be asserted on account of the work, services, or materials and the
cost exceeds $1,000.00. Borrower will upon request of Lender furnish to Lender
advance assurances satisfactory to Lender that Borrower can and will pay the
cost of such improvements.
PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring the
Property are a part of this Mortgage:
Maintenance of Insurance. Borrower shall procure and maintain policies of fire
insurance with standard extended coverage endorsements on a replacement basis
for the full insurable value covering all Improvements on the Real Property and
all Personal Property in an amount sufficient to avoid application of any
coinsurance clause, and with a standard mortgagee clause in favor of Lender,
together with such other insurance, including but not limited to hazard,
liability, business interruption, and boiler insurance, as Lender may reasonably
require. Policies shall be written in form, amounts, coverages and basis
reasonably acceptable to Lender. Borrower MAY FURNISH THE REQUIRED INSURANCE
WHETHER THROUGH EXISTING POLICIES OWNED OR CONTROLLED BY BORROWER OR THROUGH
EQUIVALENT INSURANCE FROM ANY INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS
IN THE STATE OF OKLAHOMA. If Borrower fails to provide any required insurance or
fails to continue such insurance in force, Lender may, but shall not be required
to, do so at Borrowers expense, and the cost of the insurance will be added to
the Indebtedness. If any such insurance is procured by Lender at a rate or
charge not fixed or approved by the State Board of Insurance, Borrower will be
so notified, and Borrower will have the option for five (5) days of furnishing
equivalent insurance through any insurer authorized to transact business in
Oklahoma. 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.
Application of Proceeds. Borrower shall promptly notify Lender of any loss or
damage to the Property if the estimated cost of repair or replacement exceeds
$1,000.00. Lender may make proof of loss if Borrower fails to do so within
fifteen (15) days of the casualty. Whether or not Lender's security is impaired,
Lender may, at its election, apply the proceeds to the reduction of the
Indebtedness, payment of any lien affecting the Property, or the restoration and
repair of the Property. If Lender elects to apply the proceeds to restoration
and repair, Borrower shall repair or replace the damaged or destroyed Property
in a manner satisfactory to Lender. Lender shall, upon satisfactory proof of
such expenditure, pay or reimburse Borrower from the proceeds for the reasonable
cost of repair or restoration if Borrower is not in default under this Mortgage.
Any proceeds which have not been disbursed within 180 days after their receipt
and which Lender has not committed to the repair or restoration of the Property
shall be used first to pay any amount owing to Lender under this Mortgage, then
to pay accrued interest, and the remainder, if any, shall be applied to the
principal balance of the Indebtedness. If Lender holds any proceeds after
payment in full of the Indebtedness, such proceeds shall be paid to Borrower as
Borrower's interests may appear.
Unexpired Insurance at Sale. Any unexpired insurance shall inure to the benefit
of, and pass to, the purchaser of the Property covered by this Mortgage at any
sale held under the provisions of this Mortgage, or at any foreclosure sale of
such Property.
Borrower's Report on Insurance. Upon request of Lender, however not more than
once a year, Borrower shall furnish to Lender a report on each existing policy
of insurance showing: (a) the name of the insurer; (b) the risks insured; (c)
the amount of the policy; (d) the property insured, the then current replacement
value of such property. and the manner of determining that value; and (e) the
expiration date of the policy. Borrower shall, upon request of Lender, have an
independent appraiser satisfactory to Lender determine the cash value
replacement cost of the Property.
ESCROW FOR TAXES AND INSURANCE. At the request of Lender, Borrower shall create
a fund or reserve for the payment of all insurance premiums, taxes, and
assessments against the Property by paying to Lender contemporaneously with each
installment of principal and interest on the note a sum equal to the premiums
that will next become due and payable on the hazard insurance policies covering
the Property, or any part thereof, plus taxes and assessments next due on the
Property or any part thereof, as estimated by Lender, less all sums paid
previously to Lender, divided by the number of months to elapse before one month
prior to the date when such premiums. taxes, and assessments will become
delinquent, such sums to be held by Lender without interest, for the purpose of
paying such premiums, taxes, and assessments. Any excess reserve shall, at the
discretion of Lender therefor, be credited by Lender on subsequent payments to
be made on the Indebtedness, and any deficiency shall be paid by Borrower to
Lender on or before the date when such premiums, taxes, and assessments shall
become delinquent. Transfer of legal title to the Property shall automatically
transfer to the transferee title in all sums deposited under the provisions of
this Section.
FINANCIAL STATEMENTS. Borrower and each Guarantor of the Indebtedness, shall
furnish to Lender on an annual basis, balance sheets, income statements and cash
flow statements in such form and detail as Lender shall require.
APPRAISALS. Borrower shall furnish to Lender, upon request, such appraisals of
the Property as may be required of Lender under applicable State or Federal laws
and regulations issued pursuant thereto.
ANNUAL REPORTS. Borrower shall furnish to Lender, upon request, a certified
statement of Net Operating Income received from the Property during Borrowers
previous fiscal year in such form and detail as Lender shall require. "Net
Operating Income" shall mean all cash receipts from the Property less all cash
expenditures made in connection with the operations of the Property.
EXPENDITURES BY Lender. If Borrower fails to comply with any provision of this
Mortgage, or if any action or proceeding is commenced that would materially
affect Lender's interests in the Property, Lender on Borrower's behalf may, but
shall not be required to, take any action that Lender deems appropriate. Any
amount that Lender expends in so doing will bear interest at the Note rate from
the date incurred or paid by Lender to the date of repayment by Borrower. All
such expenses, 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
Mortgage also will secure payment of these amounts. The rights provided for in
this paragraph shall be in addition to any other rights or any remedies to which
Lender may be entitled on account of the default. Any such action by Lender
shall not be construed as curing the default so as to bar Lender from any remedy
that it otherwise would have had.
WARRANTY: DEFENSE OF TITLE. The following provisions relating to ownership of
the Property are a part of this Mortgage:
Title. Borrower warrants that: (a) Borrower holds good and marketable title of
record to the Property in fee simple, free and dear of all liens and
encumbrances other than those set forth herein or in any title insurance policy,
title report, or attorney's opinion issued in favor of, and accepted by Lender
in connection with this Mortgage: and (b) Borrower has the full right. power,
and authority to execute and deliver this Mortgage to Lender.
Defense of Title. Subject to the exception in the paragraph above, Borrower
warrants and will forever defend the title to the Property against the lawful
claims of all persons. In the event any action or proceeding is commenced that
questions Borrower's title or the interest of Lender under this Mortgage,
Borrower shall defend the action at Borrower's expense. Borrower may be the
nominal party in such proceeding, but Lender shall be entitled to participate in
the proceeding and to be represented in the proceeding by counsel of Lender's
own choice, and Borrower will deliver. or cause to be delivered, to Lender such
instruments as Lender may request from time to time to permit such
participation.
Compliance with Laws. Borrower warrants that the Property and Borrower's use of
the Property complies with all existing applicable laws, ordinances, and
regulations of governmental authorities.
CONDEMNATION. The following provisions relating to proceedings in condemnation
are a part of this Mortgage:
Application of Net Proceeds. If all or any part of the Property is condemned by
eminent domain proceedings or by any proceeding or purchase in lieu of
condemnation, Lender may at its election require that all or any portion of the
net proceeds of the award be applied to the Indebtedness or the repair or
restoration of the Property. The net proceeds of the award shall mean the award
after payment of all reasonable costs, expenses, and attorneys' fees necessarily
paid or incurred by Borrower or Lender in connection with the condemnation.
Proceedings. If any proceeding in condemnation is filed, Borrower shall promptly
notify Lender in writing, and Borrower shall promptly take such steps as may be
necessary to defend the action and obtain the award. Borrower may be the nominal
party in such proceeding, but Lender shall be entitled to participate in the
proceeding and to be represented in the proceeding by counsel of its own choice,
and Borrower will deliver or cause to be delivered to Lender such instruments as
may be requested by it from time to time to permit such participation.
ASSIGNMENT OF RENTS. As additional security for the payment of the Indebtedness,
Borrower hereby absolutely assigns to Lender all Rents as defined above. Until
the occurrence of an Event of Default, Borrower is granted a license to collect
and retain the Rents; however, upon receipt from Lender of a notice that an
Event of Default exists under this Mortgage, Lender may terminate Borrower's
license. and then Lender, as Borrower's agent, may collect the Rents. In
addition, if the Property is vacant, Lender may rent or lease the Property.
Lender shall not be liable for its failure to rent the Property, to collect any
rents, or to exercise diligence in any matter relating to the Rents; Lender
shall be accountable only for Rents actually received. Lender neither has nor
assumes any obligation as lessor or landlord with respect to any occupant of the
Property. Rents so received shall be applied by Lender first to the remaining
unpaid balance of the Indebtedness, in such order or manner as Lender shall
elect, and the residue, if any, shall be paid to the person or persons legally
entitled to the residue.
SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating to
this Mortgage as a security agreement are a part of this Mortgage:
Security Agreement. This instrument shall constitute a security agreement to the
extent any of the Property constitutes fixtures or other personal property, and
Lender shall have all of the rights of a secured party under the Oklahoma
Uniform Commercial Code as amended from time to time.
Security Interest. Upon request by Lender, Borrower shall execute financing
statements and take whatever other action is requested by Lender to perfect and
continue Lender's security interest in the Property. In addition to recording
this Mortgage in the real property records, Lender may, at any time and without
further authorization from Borrower, file executed counterparts, copies or
reproductions of this Mortgage as a financing statement. Borrower shall
reimburse Lender for all expenses incurred in perfecting or continuing this
security interest. Upon default, Borrower shall assemble the Personal Property
in a manner and at a place reasonably convenient to Borrower and Lender and make
it available to Lender within three (3) days after receipt of written demand
from Lender.
Addresses. The mailing addresses of Borrower (debtor) and Lender (secured
party), from which information concerning the security interest granted by this
Mortgage may be obtained (each as required by the Oklahoma Uniform Commercial
Code), are as stated on the first page of this Mortgage.
FURTHER ASSURANCES; ATTORNEY-IN-FACT. The following provisions relating to
further assurances and attorney-in-fact are a part of this Mortgage:
Further Assurances. At any time, and from time to time, upon request of Lender,
Borrower will make, execute and deliver, or will cause to be made, executed or
delivered, to Lender or to Lender's designee, and when requested by Lender,
cause to be filed, recorded, refiled, or rerecorded, as the case may be, at such
times and in such offices and places as Lender may deem appropriate, any and all
such mortgages, deeds of trust, security deeds, security agreements, financing
statements, continuation statements, instruments of further assurance.
certificates, and other documents as may, in the sole opinion of Lender, be
necessary or desirable in order to effectuate, complete, perfect, continue, or
preserve: (a) the obligations of Borrower under the Note, this Mortgage, and the
Related Documents; and (b) the liens and security interests created by this
Mortgage as first and prior liens on the Property, whether now owned or
hereafter acquired by Borrower. Unless prohibited by law or agreed to the
contrary by Lender in writing, Borrower shall reimburse Lender for all costs and
expenses incurred in connection with the matters referred to in this paragraph.
Attorney-In-Fact. If Borrower fails to do any of the things referred to in the
preceding paragraph, Lender may do so for and in the name of Borrower and at
Borrower's expense. For such purposes, Borrower hereby irrevocably appoints
Lender as Borrower's attorney-in-fact for the purpose of making, executing,
delivering. filing, recording, and doing all other things as may be necessary or
desirable, in Lender's sole opinion, to accomplish the matters referred to in
the preceding paragraph.
FULL PERFORMANCE. If Borrower pays all the Indebtedness when due, and Otherwise
performs all the obligations imposed upon Borrower under this Mortgage, Lender
shall execute and deliver to Borrower a release of this Mortgage lien and
suitable statements of termination of any financing statement on file evidencing
Lender's security interest in the Rents and the Personal Property. Reasonable
costs for preparation of such release and statements of termination together
with any filing fees required by law shall be paid by Borrower, if permitted by
applicable law.
EVENTS OF DEFAULT. The following events shall constitute Events of Default.
Default. Default in the timely payment of any installment of principal and
interest of the Indebtedness or in the performance of any covenant or provision
of any Related Document.
Insolvency. Borrower, or any Guarantor, shall: (a) execute an assignment for the
benefit of creditors or take any action in furtherance thereof; or (b) admit in
writing his inability to pay his debts generally as they become due; or (c) as a
debtor, file a petition, case. proceeding, or other action pursuant to, or
voluntarily seek the benefit or benefits of any debtor relief law or take any
action in furtherance thereof; or (d) seek, acquiesce in, or suffer the
appointment of a receiver, trustee, or custodian of Borrower, any Guarantor, the
Property, in whole or in part, or any significant portion of other property
belonging to Borrower or any Guarantor that affects performance of the
Indebtedness; or (e) voluntarily become a party to any proceeding seeking to
effect a suspension or having the effect of suspending any of the rights of
Lender granted or referred to in the Related Documents or take any action in
furtherance thereof.
Bankruptcy. The filing of a petition, case, proceeding, or other action against
Borrower, or any Guarantor, as a debtor under any debtor relief law; or seeking
appointment of a receiver, trustee, or custodian of Borrower, or any Guarantor,
or of any property described in the Related Documents or any part thereof, or of
any significant portion of other property belonging to Borrower or any
Guarantor, that affects its ability to perform under the Indebtedness, or
seeking to effect a suspension or having the effect of suspending any of the
rights of Lender granted or referred to in the Related Documents, and: (a)
Borrower or any Guarantor admits. acquiesces in, or fails to contest the
material allegations thereof; or (b) the petition, case, proceeding, or other
action results in entry of an order for relief or order granting the relief
sought against Borrower or any Guarantor; or (c) the petition, case, proceeding,
or other action is not permanently dismissed on or before the earliest of trial
thereon or sixty (60) days next following the date of its filing.
Breaches. The discovery by Lender that any warranty, covenant. or representation
made to Lender by or on behalf of Borrower or any Guarantor is false,
misleading, erroneous, or breached in any material respect.
A default shall not be an Event of Default if the default is cured within ten
(10) days following the delivery of or the mailing of written notice from
Beneficiary to Borrower's most current address as reflected in Beneficiary's
business records specifying the existence of any such default. If such default
is not cured within the ten-(10) day period, the default shall be an Event of
Default without need of any further notice or action by Beneficiary.
RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any Event of Default, and
after giving any required statutory notice of default, including any notice
required under the laws of the State of Oklahoma, at any time thereafter,
Lender, at its option, may exercise any one or more of the following rights and
remedies, in addition to any other rights or remedies provided by law:
Accelerate Indebtedness. Lender may declare the unpaid principal balance of the
Indebtedness due and payable. In no event will Borrower be required to pay any
unearned Interest.
Foreclosure. In the event Lender elects to foreclose this Mortgage, then Lender,
at its option, may: (a) foreclose this Mortgage and sell the Property by a power
of sale (which power of sale is hereby granted by Borrower to Lender) pursuant
to the Oklahoma Power of Sale Mortgage Foreclosure Act or any successor statute
(the "Power of Sale Act"); (b) foreclose this Mortgage by judicial proceeding;
and/or (c) invoke any other remedies provided herein or in any other instrument
evidencing, guaranteeing, or securing payment of the sums secured hereby by or
otherwise provided by applicable law. Without limiting the generality of the
foregoing, Lender shall be entitled to seek specific performance and/or
injunctive relief (prohibitive or mandatory) with respect to the Borrower's
covenants and agreements contained in this Mortgage and the other documents
evidencing and securing the loan secured hereby, whether or not Lender elects to
accelerate the sums secured hereby.
UCC Remedies. With respect to all or any part of the Personal Property, Lender
shall have all the rights and remedies of a secured party under the Oklahoma
Uniform Commercial Code.
Lender's Power. Borrower hereby jointly and severally authorizes and empowers
Lender to sell all or any portion of the Property together or in lots or
parcels, as Lender may deem expedient, and to execute and deliver to the
purchaser or purchasers of such Property good and sufficient deeds of conveyance
of fee simple title, or of lesser estates, and bills of sale and assignments,
with covenants of general warranty made on behalf of Borrower. In no event shall
Lender be required to exhibit, present or display at any such sale any of the
Property to be sold at such sale. The Lender making such sale shall receive the
proceeds of the sale and shall apply the same as provided below. Payment of the
purchase price to Lender shall satisfy the liability of the purchaser at any
such sale of the Property, and such person shall not be bound to look after the
application of the proceeds.
Appoint Receiver. Lender shall have the right to have a receiver appointed to
take possession of all or any part of the Property, with the power to protect
and preserve the Property, to operate the Property preceding foreclosure or
sale, and to collect the Rents from the Property and apply the proceeds, over
and above the cost of the receivership, against the Indebtedness. The receiver
may serve without bond if permitted by law. Lender's right to the appointment of
a receiver shall exist whether or not the apparent value of the Property exceeds
the Indebtedness by a substantial amount. Employment by Lender shall not
disqualify a person from serving as a receiver.
Tenancy at Sufferance. If Borrower remains in possession of the Property after
the Property is sold as provided above or Lender otherwise becomes entitled to
possession of the Property upon default of Borrower, Borrower shall become a
tenant at sufferance of Lender or the purchaser of the Property and shall, at
Lenders option, either: (a) pay a reasonable rental for the use of the Property:
(b) vacate the Property immediately upon the demand of Lender; or (c) if such
tenants refuse to surrender possession of the Property upon demand, the
purchaser shall be entitled to institute and maintain the statutory action of
forcible entry and detainer and procure a writ of possession thereunder, and
Borrower expressly waives all damages sustained by reason thereof.
Appraisement and Sale of the Property. To the extent permitted by applicable
law, Borrower hereby waives any and all rights to have the Property marshalled.
In exercising its rights and remedies, the Lender shall be free to sell all or
any part of the Property together or separately, in one sale or by separate
sales. Lender shall be entitled to bid at any public sale on all or any portion
of the Property. Lender may convey all or any part of the Property to the
highest bidder for cash with a general warranty binding Borrower, subject to
prior liens and to other exceptions to the conveyance and warranty. Appraisement
of the Property is hereby waived or not waived at Lenders option, which shall be
exercised at the time judgment is entered in any foreclosure hereof or at any
time prior thereto. The affidavit of any person having knowledge of the facts to
the effect that proper notice as required by Oklahoma law was given shall be
prima facie evidence of the fact that such notice was in fact given. Recitals
and statements of fact in any notice or in any conveyance to the purchaser or
purchasers of the Property in any foreclosure sale under this Mortgage shall be
prima facie evidence of the truth of such facts, and all prerequisites and
requirements necessary to the validity of any such sale shall be presumed to
have been performed. Any sale under the powers granted by this Mortgage shall be
a perpetual bar against Borrower, Borrowers heirs, successors, assigns and legal
representatives.
Proceeds. Lender shall pay the proceeds of any sale of the Property: (a) first,
to the expenses of foreclosure, including reasonable fees or charges paid to the
Lender, including but not limited to fees for enforcing the lien, posting for
sale, selling, or releasing the Property: (b) then to Lender the full amount of
the Indebtedness; (c) then to any amount required by law to be paid before
payment to Borrower; and (d) the balance.
if any, to Borrower.
Waiver; Election of Remedies. A waiver by any party of a breach of a provision
of this Mortgage shall not constitute a waiver of or prejudice that party's
rights otherwise to demand strict compliance with that provision or any other
provision. Election by Lender to pursue any remedy provided in this Mortgage,
the Indebtedness, in any Related Document, or provided by law shall not exclude
pursuit of any other remedy, and an election to make expenditures or to take
action to perform an obligation of Borrower under this Mortgage after failure of
Borrower to perform shall not affect Lenders right to declare a default and to
exercise any of its remedies.
Attorneys' Fees; Expenses. If Lender institutes any suit or action to enforce
any of the terms of this Mortgage, Lender shall be entitled to recover such sum
as the court may adjudge reasonable as attorneys' fees at trial and on any
appeal, whether or not any court action is involved, all reasonable expenses
incurred by Lender which in Lenders opinion are necessary at any time for the
protection of its interest or the enforcement of its rights shall become a part
of the indebtedness, be payable on demand and shall bear interest at the Note
rate from the date of expenditure until repaid. Expenses covered by this
paragraph include, without limitation, however subject to any limits under
applicable law, Lenders reasonable attorneys' fees 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, the cost of searching records,
obtaining title reports (including foreclosure reports), surveyors' reports,
environmental assessments, appraisal fees, title insurance. and fees for the
Lender, to the extent permitted by applicable law. Borrower will also pay any
court costs, in addition to all other sums provided by law. In the event of
foreclosure of this Mortgage, Lender shall be entitled to recover from Borrower
Lenders reasonable attorneys' fees and actual disbursements necessarily incurred
by Lender in pursuing such foreclosure.
POWERS AND OBLIGATIONS OF LENDER. The following provisions relating to the
powers and obligations of Lender are part of this Mortgage:
Powers of Lender. In addition to all powers of Lender arising as a matter of
law, Lender shall have the power to take the following actions with respect to
the Property upon the written request of Borrower: (a) join in preparing and
filing a map or plat of the Real Property. including the dedication of streets
or other rights to the public: (b) join in granting any easement or creating any
restriction on the Real Property: and (c) join in any subordination or other
agreement affecting this Mortgage or the interest of Lender under this Mortgage.
Obligations to Notify. Lender shall not be obligated to notify any other
lienholder of the Property of the commencement of a foreclosure proceeding or of
the commencement of any other action to which Lender may avail itself as a
remedy, except to the extent required by applicable law or by written agreement.
Foreclosure. In addition to the rights and remedies set forth above, with
respect to all or any part of the Property, the Lender shall have the right to
foreclose by notice and sale, and by judicial foreclosure, in either case in
accordance with and to the full extent provided by applicable law.
NOTICES TO BORROWER AND OTHER PARTIES. Any notice under this Mortgage shall be
in writing and shall be effective when actually delivered or, if mailed, shall
be deemed effective when deposited in the United States mail first class,
certified mail, postage prepaid. directed to the addresses shown near the
beginning of this Mortgage. Any party may change its address for notices under
this Mortgage by giving formal written notice to the other parties, specifying
that the purpose of the notice is to change the party's address. For notice
purposes, Borrower agrees to keep Lender informed at all times of Borrowers
current address.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Mortgage:
Amendments. This Mortgage, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Mortgage. No alteration of or amendment to this Mortgage 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 Mortgage has been delivered to Lender and accepted by
Lender in the State of Oklahoma. This Mortgage shall be governed by and
construed in accordance with the laws of the State of Oklahoma and applicable
Federal laws.
Caption Headings. Caption headings in this Mortgage are for convenience purposes
only and are not to be used to interpret or define the provisions of this
Mortgage.
Limitation of interest. All agreements between Borrower and Lender are expressly
limited so that in no contingency or event whatsoever whether by reason of
advancement of the proceeds of the Indebtedness, acceleration of maturity of the
Indebtedness hereof, or otherwise, shall the amount paid or agreed to be paid to
the Lender for the use, forbearance, or detention of the money to be advanced
hereunder exceed the highest rate permissible under the laws of the State of
Oklahoma and of the United States, (to the extent not preempted by Federal law,
if any) and any subsequent revisions repeals, or judicial interpretations
thereof, to the extent any of same are applicable hereto and thereto. If, from
any circumstance whatsoever, fulfillment of any provisions hereof or of the
Indebtedness or any other agreement referred to herein or therein shall, at the
time fulfillment of such provision be due, involve transcending the limit of
validity prescribed by law that a court of competent jurisdiction may deem
applicable hereto, then ipso facto the obligations to be fulfilled shall be
reduced to the limit of such validity, and if from any circumstance the Lender
shall ever receive as interest an amount which would be excessive interest, it
shall: (a) be applied to the reduction of the unpaid principal balance of the
Indebtedness: or (b) be refunded to Borrower and not to the payment of
interest. It is further agreed. without limitation of the foregoing, that all
calculations of the rate of interest contracted for, charged, or received on the
indebtedness evidenced or secured hereby that are made for the purpose of
determining whether such rate exceeds the maximum lawful contract rate, shall be
made, to the extent permitted by applicable law, by amortizing, prorating,
allocating, and spreading throughout the full stated term of the Indebtedness
so that such rate of interest on account of such Indebtedness, as so calculated,
is uniform throughout the term thereof. This provision shall control every other
provision of all agreements between Borrower and the Lender.
Merger. There shall be no merger of the interest or estate created by this
Mortgage with any other interest or estate in the Property at any time held by
or for the benefit of Lender in any capacity, without the written consent of
Lender.
Multiple Panties. All obligations of Borrower under this Mortgage shall be joint
and several, and all references to Borrower shall mean each and every Borrower.
This means that each of the persons signing below is responsible for all
obligations in this Mortgage. Where any one or more of the parties are
corporations or partnerships, it is not necessary for Lender to inquire into the
powers of any of the parties or of the officers, directors, partners, or agents
acting or purporting to act on their behalf.
Severability. If a court of competent jurisdiction finds any provision of this
Mortgage 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 provisions 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 Mortgage in all other respects shall remain
valid and enforceable.
Successors and Assigns. Subject to the limitations stated in this Mortgage on
transfer of Borrowers interest, this Mortgage shall be binding upon and inure to
the benefit of the parties, their successors and assigns. If ownership of the
Property becomes vested in a person other than Borrower, Lender, without notice
to Borrower, may deal with Borrowers successors with reference to this Mortgage
and the Indebtedness by way of forbearance or extension without releasing
Borrower from the obligations of this Mortgage or liability under the
Indebtedness.
Time is of the Essence. Time is of the essence in the performance of this
Mortgage.
Waivers and Consents. Lender shall not be deemed to have waived any rights under
this Mortgage (or under the Related Documents) unless such waiver is 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 any party of a provision of this Mortgage shall not constitute a waiver of or
prejudice the party's right otherwise to demand strict compliance with that
provision or any other provision. No prior waiver by Lender, nor any course of
dealing between Lender and Borrower, shall constitute a waiver of any of Lenders
rights or any of Borrowers obligations as to any future transactions, whenever
consent by Lender is required in this Mortgage, the granting of such consent by
Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required.
ADDITIONAL PROVISIONS:
Proceeds. The Note hereby secured is given for the purpose of constructing
improvements on the Property, subject to the terms and conditions of the
Construction Loan Agreement of even date herewith. This is a "Construction
Mortgage" within the meaning of the Oklahoma Uniform Commercial Code.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MORTGAGE, AND
BORROWER AGREES TO ITS TERMS.
EXECUTED this 17th day of June, 1999.
BORROWER:
TOWER TECH, INC., an Oklahoma Corporation
By:
ss/CHARLES D. WHITSITT, Chief Financial Officer
- -----------------------------------------------
Charles D. Whitsitt
STATE OF OKLAHOMA
COUNTY OF OKLAHOMA
This investment was acknowledged before me on this ________ day of June, 1999,
by CHARLES D. WHITSITT, Chief Financial Officer of TOWER TECH, INC., an Oklahoma
Corporation, on behalf of said corporation.
NOTARY PUBLIC - STATE OF OKLAHOMA
Prepared in the Law Office of:
MUNSON, MUNSON, PIERCE & CARDWELL, P.C.
301 W. Woodard, P.O. Box 1099
Denison, TX 75020
(903) 463-3750
<PAGE>
Exhibit "A"
A part of the Southeast Quarter (SE/4) of Section Eleven (11), Township Ten (10)
North, Range Four (4) West of the Indian Meridian, Cleveland County, Oklahoma,
being more particularly described as follows:
Commencing at the Southeast Corner of said Southeast Quarter (SE/4);
Thence South 89(degree)42'04" West along the South line of said Southeast
Quarter (SE/4) a distance of l,780.60 feet;
Thence continuing South 89(degree)42'04" West along the South line a distance of
843.24 feet to the Southwest Corner of said Southeast Quarter (SE/4);
Thence North 00(degree)07'35" West on the West line of said Southeast Quarter
(SE/4) a distance of 1764.49 feet to a point 880.00 feet South of the Northwest
Corner of said Southeast Quarter (SE/4);
Thence North 89(degree)42'07" East parallel to and 880.00 feet South of the
North line of said Southeast Quarter (SE/4) a distance of 240.00 feet;
Thence South 00(degree)07'35" East and parallel with the West line of said
Southeast Quarter (SE/4) distance of 735.00 feet to the point of beginning;
Thence continuing South 00(degree)07'35" East a distance of 65.00 feet;
Thence South 14(degree)49'10" East a distance of 490.68 feet;
Thence North 89(degree)42'07" East and parallel with the North line of said
Southeast Quarter (SE/4) a distance of 360.55 feet;
Thence North 00(degree)07'35" West and parallel with the West line of said
Southeast Quarter (SE/4) a distance of 540.00 feet;
Thence South 89(degree)42'07" West and parallel with the North line of said
Southeast Quarter (SE/4) a distance of 485.00 feet to the point or place of
beginning.
Exhibit 10.23
Loan No.
COMMERCIAL PROMISSORY NOTE
TOWER TECH, INC., FIRST UNITED BANK AND TRUST COMPANY
an Oklahoma Corporation
11919 So. Interstate 44 Service Road P.O. Box 130
Oklahoma City, Oklahoma 73173 Durant, Oklahoma 74702~130
(hereafter called "Borrower") (hereafter called "Lender")
$ 253,000.00 June 17, 1999 June 17, 2002
Note Amount Execution Date Maturity Date
FOR VALUE RECEIVED, Borrower, jointly and severally if more than one, promises
to pay to the order of Lender (which term shall include all subsequent holders
of this Note) at its offices set forth above or at such other address as Lender
may from time to time designate. in lawful money of the United States of
America, the principal sum of $253,000.00, or so much thereof as may be advanced
and outstanding from time to time, with interest at the rate provided below on
the principal balance from time to time remaining unpaid, in the amounts, at the
times and upon the terms provided in this Note. This Note is performable in
Bryan County, Oklahoma.
INTEREST RATE. Interest shall accrue on the unpaid balance of this Note from
time to time outstanding which is not past due, calculated on a 360 day annual
basis (the "Rate"), except as otherwise provided herein, as follows:
The lesser of (a) the Loan Rate (hereinafter defined) in effect from day to day
or (b) the Highest Lawful Rate (hereinafter defined) in effect from day to day.
The term "Loan Rate" shall mean the sum of one-half of one percent (0.5%) and
the Index as hereafter defined. The Loan Rate shall be subject to change daily
with changes in the index.
As of the date of this Note, the lesser of the Loan Rate and the Highest Lawful
Rate is eight and one quarter percent (8.25%) per annum. Any change in either
the Loan Rate or the Highest Lawful Rate shall, after Lender gives only such
notice as may be required by applicable law or regulation, be effective for
purposes of determining the Rate as of the opening of business on the date of
any such change.
The Index is:
The Wall Street Journal Prime Rate which is the highest rate shown as the base
rate on corporate loans posted by at least 75% of the nation's 30 largest banks
as published daily in the Money Rates Section of the Wall Street Journal.
The index currently is seven and three quarters percent (7.75%) per annum.
The "Highest Lawful Rate" is the maximum lawful rate which may be contracted
for, charged, taken, received, or reserved by Lender in accordance with the
applicable laws of the State of Oklahoma (or applicable United States federal
law to the extent that it permits Lender to contract for, charge, take, receive
or reserve a greater amount of interest than under Oklahoma law), taking into
account all charges made in connection with this loan which are treated as
interest under applicable law.
If at any time (i) the Loan Rate, (ii) interest on matured unpaid amounts, if
applicable, as provided for herein or in any of the other Loan Documents,
together with (iii) all fees and charges, if any, contracted for, charged,
received, taken or reserved by Lender in connection with the loan evidenced
hereby which are treated as interest under applicable law (collectively, the
"Charges"), computed over the full term of this Note, exceed the Highest Lawful
Rate, the rate of interest payable hereunder, together with all Charges, shall
be limited to the Highest Lawful Rate; provided, however, that any subsequent
reduction in the Loan Rate shall not cause a reduction of the rate of interest
payable hereunder below the Highest Lawful Rate until the total amount of
interest earned hereunder, together with all Charges, equals the total amount of
interest which would have accrued on the Loan Rate if such interest rate had at
all times been in effect. Changes in the Loan Rate resulting from a change in
the index shall be subject to the provisions of this paragraph.
PREPAYMENT. Borrower may prepay this Note in whole or in part at any time
without being required to pay any penalty or premium for such privilege. in the
event a prepayment is made, such payment shall be applied first against accrued
but unpaid interest, then to the discharge of any expenses for which the holder
of this Note may be entitled to receive reimbursement under the terms of this
Note or under the terms of any other documents related thereto and lastly
against the principal hereof. Any partial prepayment shall not postpone the due
date or change the amount of any subsequent installment due hereunder.
PAST DUE PAYMENTS. Lender may charge and collect a late fee of 5% of any
scheduled installment more than 10 days past due. The annual interest rate on
matured unpaid amounts shall be the highest lawful rate.
DISHONORED CHECK CHARGE. Borrower may pay a processing fee of $15.00 for each
check given by Borrower to Lender as a payment on this loan which is dishonored.
Page 1
INITIALS
<PAGE>
Loan No.
PAYMENT TERMS. This Note shall be due and payable as follows:
Principal and interest shall be due and payable in monthly installments of
$3,103.11 or more, each, payable on the 17th day of each and every calendar
month, beginning July 17, 1999, and continuing regularly thereafter until the
whole of said sum, with interest, has been duly paid, (or until June 17,2002,
when the entire amount of principal and interest then remaining unpaid, shall be
then due and payable) interest being calculated on the unpaid principal to the
date of each installment paid and the payment made credited first to the
discharge of the interest accrued and the balance to the reduction of the
principal.
WAIVER. Except as otherwise expressly stated in any of the Loan Documents,
Borrower and any and all co-borrowers, endorsers, guarantors, and sureties
severally waive notice, notice of intent to accelerate, notice of acceleration,
demand, grace, presentment for payment, and protest and agree that this Note and
all liens securing its payment may be extended and re-extended and the time for
payment extended and re-extended from time to time without notice to them or any
of them, and they severally agree that their liability on or with respect to
this Note shall not be affected by any release or change in any security at any
time existing or by any failure to perfect or maintain perfection of any
security interest in such security.
EVENTS OF DEFAULT. It is especially agreed that time is of the essence of this
Note. The following events shall constitute Events of Default:
1. Default in the timely payment (timely payment shall mean payment within 10
days after notice of nonpayment) of any installment of principal and interest or
in the performance of any covenant or provision of any Loan Document as
hereafter defined.
2. Borrower, or any Guarantor, shall: (a) execute an assignment for the benefit
of creditors or take any action in furtherance thereof; or (b) admit in writing
his inability to pay his debts generally as they become due; or (c) as a debtor,
file a petition, case, proceeding, or other action pursuant to, or voluntarily
seek the benefit or benefits of any debtor relief law or take any action in
furtherance thereof; or (d) seek, acquiesce in, or suffer the appointment of a
receiver, trustee, or custodian of Borrower, any Guarantor, the Property as
herein defined, in whole or in part, or any significant portion of other
property belonging to Borrower or any Guarantor that affects performance under
this Note; or (e) voluntarily become a party to any proceeding seeking to effect
a suspension or having the effect of suspending any of the rights of Lender
granted or referred to in the Loan Documents or take any action in furtherance
thereof.
3. The filing of a petition, case, proceeding, or other action against Borrower,
or any Guarantor, as a debtor under any debtor relief law; or seeking
appointment of a receiver, trustee, or custodian of Borrower, or any Guarantor,
or of any property described in the Loan Documents or any part thereof, or of
any significant portion of other property belonging to Borrower or any
Guarantor, that affects its ability to perform under this Note, or seeking to
effect a suspension or having the effect of suspending any of the rights of
Lender granted or referred to in the Loan Documents, and: (a) Borrower or any
Guarantor admits, acquiesces in, or fails to contest the material allegations
thereof; or (b) the petition, case, proceeding, or other action results in entry
of an order for relief or order granting the relief sought against Borrower or
any Guarantor; or (c) the petition, case, proceeding, or other action is not
permanently dismissed on or before the earlier of trial thereon or sixty (60)
days next following the date of its filing.
4. The discovery by Lender that any warranty, covenant, or representation made
to Lender by or on behalf of Borrower or any Guarantor is false, misleading,
erroneous, or breached in any material respect.
A default shall not be an Event of Default if the default is cured within ten
(10) days following the delivery of or the mailing of written notice from Lender
to Borrower's most current address as reflected in Lender's business records
specifying the existence of any such default. If such default is not cured
within the ten (10) day period, the default shall be an Event of Default without
need of any further notice or action by Lender, except as may be otherwise
required by law.
ACCELERATION AND WAIVER OF NOTICE. Upon the occurrence of an Event of Default,
the entire unpaid principal balance plus all accrued and unpaid interest due and
owing on this Note and any and all other indebtedness of Borrower to Lender
shall, at the option of Lender, become and be due and payable forthwith without
demand, notice of default, notice of intent to accelerate, or the acceleration
of the maturity hereof, notice of nonpayment, presentment, protest, or notice of
dishonor, all of which are hereby expressly waived to the full extent not
prohibited by law by Borrower and each other liable party. Failure to exercise
this option upon the occurrence of any such Event of Default shall not
constitute a waiver of the right to exercise such option in the event of any
subsequent Event of Default.
COLLECTION COSTS AND JOINT AND SEVERAL LIABILITY. If the unpaid principal
balance plus all accrued and unpaid interest due and owing on this Note is not
paid at maturity, whether by acceleration or otherwise, and this Note is placed
in the hands of an attorney for collection, or suit is filed hereon, or
proceedings are had in probate, bankruptcy, receivership, reorganization,
arrangement, or other legal proceedings for collection hereof, Borrower and each
other liable party agree to pay Lender its reasonable collection costs,
including a reasonable amount for attorneys' fees. Borrower and each other
liable party is and shall be directly and primarily, jointly and severally,
liable for the payment of all sums due hereunder, under the Loan Documents and
under any instrument securing the payment hereof, and Borrower and each other
liable party hereby expressly waives bringing of Suit and diligence in taking
any action to collect any sums owing hereon and in the handling of any security,
and Borrower and each other liable party hereby consents to and agrees to remain
liable hereon regardless of any renewals, extensions for any period or
rearrangements hereof, or any release or substitution of security hereof in
whole or in part, with or without notice, from time to time, before or after
maturity.
INITIALS
<PAGE>
Loan No.
LOAN CHARGES. It is expressly stipulated and agreed to be the intent of Borrower
and Lender at all times to comply with the applicable Oklahoma law governing the
maximum rate or amount of interest payable on this Note or the indebtedness
evidenced hereby and by the other Loan Documents (or applicable United States
federal law to the extent that it permits the Borrower to contract for, charge,
take, reserve or receive a greater amount of interest than under Oklahoma law).
If the applicable law is ever judicially interpreted so as to render usurious
any amount called for under this Note or under any of the Loan Documents, or
contracted for, charged, taken, reserved or received with respect to such
indebtedness, or if Borrower's exercise of the option herein contained to
accelerate the maturity of this Note or if any prepayment by Borrower results in
Borrower having paid any interest in excess of that permitted by applicable law,
then it is Borrower's and Lender's express intent that all excess amounts
theretofore collected by Lender be credited on the principal balance of this
Note (or, if this Note has been or would thereby be paid in full, refunded to
Borrower), and the provisions of this Note and the other Loan Documents
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
Notwithstanding anything to the contrary contained herein or in any of the other
Loan Documents, it is not the intention of Lender to accelerate the maturity of
any interest that has not accrued at the time of such acceleration or to collect
unearned interest at the time of such acceleration. All sums paid or agreed to
be paid by Lender for the use, forbearance or detention of the indebtedness
evidenced hereby and by the other Loan Documents shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread throughout the
full term of such indebtedness until payment in full so that the rate or amount
of interest on account of such indebtedness does not exceed the usury ceiling
from time to time in effect and applicable to such indebtedness evidenced hereby
for so long as debt is outstanding. To the extent United States federal law
permits Lender to contract for, charge or receive a greater amount of interest,
Lender will rely on United States federal law instead of state law, for the
purpose of determining the Highest Lawful Rate.
RIGHT OF SET OFF. Borrower grants to Lender a contractual possessary 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, Keogh and trust accounts.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or set off all sums owing on this Note against any and all such amounts.
ADDITIONAL SECURITY. This Note is secured by all security agreements, collateral
assignments, assignments, guaranties, mortgages, and lien instruments executed
by Borrower (or by any Guarantor) in favor of Lender or any other holder of this
Note, including those executed simultaneously herewith, those executed
heretofore and those hereafter executed, and by all such agreements,
assignments, guaranties, and security instruments securing the payment of all
other indebtedness of Borrower to Lender.
REMEDIES OF LENDER. Lender shall have all rights, remedies, and recourses
granted in this Note, the Loan Documents and all other instruments securing the
payment hereof and the payment of all indebtedness of Borrower to Lender,
howsoever evidenced, and those which are available at law or equity, and same:
(a) shall be cumulative and concurrent; (b) may be pursued separately,
successively, or concurrently against Borrower or any other liable party or
against any one or more of them at the sole discretion of Lender and in such
order as Lender, in its sole discretion, shall determined; (c) may be exercised
as often as occasion therefore shall arise, it being agreed by Borrower that the
exercise or failure to exercise any of the same shall in no event be construed
as a waiver or release thereof or of any other right, remedy, or recourse; and
(d) are intended to be, and shall be, nonexclusive. If any part of this Note
cannot be enforced, this fact will not affect the rest of this Note. This loan
shall be governed by and construed in accordance with the laws of the State of
Oklahoma and applicable United States federal law.
NOTICES TO BORROWER AND OTHER PARTIES. Any notice under this Note shall be in
writing and shall be effective when actually delivered or, if mailed, shall be
deemed effective when deposited in the United States mail first class, certified
mail, postage prepaid, directed to the addresses shown near the beginning of
this Note. Any party may change its address for notices under this Note by
giving formal written notice to the other parties, specifying that the purpose
of the notice is to change the party's address. For notice purposes, Borrower
agrees to keep Lender informed at all times of Borrower's current address.
LOAN DOCUMENTS. This Note and all other instruments executed in connection
herewith and/or securing repayment hereof (the "Loan Documents"), including but
not limited to:
(a) The Additional Security as described above.
(b) Commercial Mortgage, Security Agreement, Financing Statement and Assignment
of Rents given by Borrower to Lender and any subsequent holder of this Note, of
even date herewith.
PROPERTY. The property described in the Loan Documents (the "Property") is:
A part of the Southeast Quarter (SE/4) of Section Eleven (11), Township Ten (10)
North, Range Four (4) West of the Indian Meridian, Cleveland County, Oklahoma
and being more particularly described in Exhibit 'A" attached hereto and made a
part hereof for all purposes.
INITIALS
<PAGE>
Loan No. ___________
TOWER TECH, INC., an Oklahoma Corporation
ss/CHARLES D. WHITSITT
- --------------------------------------------
Charles D. Whitsitt, Chief Financial Officer
Page 4
<PAGE>
Exhibit "A"
A part of the Southeast Quarter (SE/4) of Section Eleven (11), Township Ten (10)
North, Range Four (4) West of the Indian Meridian, Cleveland County, Oklahoma,
being more particularly described as follows:
Commencing at the Southeast Corner of said Southeast Quarter (SE/4);
Thence South 89(degree)42'04" West along the South line of said Southeast
Quarter (SE/4) a distance of l,780.60 feet;
Thence continuing South 89(degree)42'04" West along the South line a distance of
843.24 feet to the Southwest Corner of said Southeast Quarter (SE/4);
Thence North 00(degree)07'35" West on the West line of said Southeast Quarter
(SE/4) a distance of 1764.49 feet to a point 880.00 feet South of the Northwest
Corner of said Southeast Quarter (SE/4);
Thence North 89(degree)42'07" East parallel to and 880.00 feet South of the
North line of said Southeast Quarter (SE/4) a distance of 240.00 feet;
Thence South 00(degree)07'35" East and parallel with the West line of said
Southeast Quarter (SE/4) distance of 735.00 feet to the point of beginning;
Thence continuing South 00(degree)07'35" East a distance of 65.00 feet;
Thence South 14(degree)49'10" East a distance of 490.68 feet;
Thence North 89(degree)42'07" East and parallel with the North line of said
Southeast Quarter (SE/4) a distance of 360.55 feet;
Thence North 00(degree)07'35" West and parallel with the West line of said
Southeast Quarter (SE/4) a distance of 540.00 feet;
Thence South 89(degree)42'07" West and parallel with the North line of said
Southeast Quarter (SE/4) a distance of 485.00 feet to the point or place of
beginning.
Exhibit 10.31
AGREEMENT AND PLAN OF DISSOLUTION
This Agreement and Plan of Dissolution ("Agreement") is entered into
effective as of the 30th day of April, 1999 (the "Effective Date"), between and
among J-TECH ENTERPRISES, INC., a Florida corporation with offices at 600
Cleveland Street, Suite 750, Clearwater, Florida 33755 ("J-Tech") and TOWER
TECH, INC., an Oklahoma corporation with offices located at 11935 South I-44
Service Road, Oklahoma City, Oklahoma ("Tower Tech"), JACK T. EUNSON, an
individual residing at 1270 Gulf Boulevard, Apt. 1201, Clearwater, Florida 33767
("Eunson") and HAROLD CURTIS, an individual residing at 11935 South I-44 Service
Road, Oklahoma City, Oklahoma ("Curtis").
R E C I T A L S
A. On or about December 29, 1995, J-Tech and Tower Tech associated
themselves as joint venture partners (Florida general partnership) under the
name and style of Tower Tech SE (hereinafter referred to as the "Joint
Venture"), pursuant to a Joint Venture Agreement dated December 29, 1995 (the
"Joint Venture Agreement").
B. The Joint Venture Agreement provides that the Joint Venture shall
continue until, among other things, the agreement of the parties.
C. The undersigned partners constitute all of the partners of the Joint
Venture.
D. Under the terms of the Joint Venture Agreement, the Joint Venture
was given rights as exclusive licensee of certain technology referenced in the
Technology License (the "Technology License") which was made a part of the Joint
Venture Agreement.
E. The undersigned partners have unanimously agreed to (i) dissolve the
Joint Venture in accordance with the Joint Venture Agreement and (ii) terminate
the Technology License.
F. The undersigned parties agree that there is no longer a need for the
continuance of the business of the Joint Venture and that the dissolution of the
Joint Venture as provided herein will be mutually beneficial to all the parties.
NOW, THEREFORE, the parties hereto agree as follows:
1. Dissolution. J-Tech and Tower Tech hereby dissolve the
Joint Venture effective as of April 30, 1999 (the "Closing Date"). No further
business shall be conducted by the Joint Venture and no further obligations
shall be incurred on its behalf, except for the purposes of carrying out the
dissolution and winding up the business of the Joint Venture as provided herein.
2. Closing. The closing (the "Closing") of this transaction
shall take place at the offices of Holland & Knight, located at 400 North Ashley
Drive, Suite 2300, Tampa, Florida, on the Closing Date.
3. Financial Statements. Prior to the Closing Date, J-Tech
will prepare a balance sheet and an income statement for the Joint Venture as of
April 30, 1999 (the "Financial Statements". The Financial Statements will be
closed in the usual manner and will be provided to Tower Tech prior to closing.
4. Distributions and Payments of Liabilities. Upon dissolution
of the Joint Venture, Tower Tech shall have the sole authority and power to wind
up, and shall commence the winding up of, the affairs of the Joint Venture. The
assets and liabilities of the Joint Venture shall be shared as follows:
4.1. Lease Agreement. On October 1, 1996, the Joint
Venture entered into a Lease Agreement with Lennar Central FL-III Q.A.
("Lennar") (the "Lease Agreement"). The rights and obligations of the
Joint Venture in the Lease Agreement shall be distributed to J-Tech and
shall become the sole property and obligation of J-Tech.
4.2. Office Furniture and Equipment Leases. The Joint
Venture owns certain furniture and equipment and has entered into
leases (the "Office Lease") for certain office equipment (collectively,
the "Office Furniture and Equipment"). Upon Closing, J-Tech shall
retain the Office Furniture and Equipment (as owner or lessee) and
Tower Tech and the Joint Venture shall have no further rights or
obligations concerning the Office Furniture and Equipment.
4.3. Other Assets and Liabilities. All other assets
and liabilities that remain after Closing and are reflected on the
Financial Statements shall be distributed to Tower Tech and shall
become the sole property and obligation of Tower Tech. All financial
records of the Joint Venture of any kind are specifically included as
assets hereunder and shall be distributed to Tower Tech.
<PAGE>
4.4. Unknown Assets and Liabilities. Any assets or
liabilities of the Joint Venture not reflected on the Financial
Statements, except for any liabilities relating to the design or
performance of any of Tower Tech's products that were marketed and sold
by the Joint Venture which shall remain the sole obligation of Tower
Tech after dissolution, shall be distributed to and become the
responsibility of J-Tech and Eunson.
5. Technology License. Immediately upon the execution of this
Agreement, the Technology License is hereby revoked and void. Neither the Joint
Venture nor J-Tech shall have any rights as licensees or otherwise for any
technology that was the subject matter of the Technology License.
6. Termination Payment. Immediately prior to the Closing Date,
the Joint Venture shall make a lump-sum payment to J-Tech of $327,161.40 (the
"Termination Payment"). Prior to Closing, the Joint Venture shall pay to its
employees $12,959.00 as severance pay.
7. Releases.
7.1. J-Tech and Eunson Release. In consideration
of the mutual covenants contained within this Agreement and of the Termination
Payment provided for in Section 6 hereof, and other good and valuable
consideration, the adequacy and sufficiency of which are hereby acknowledged,
J-Tech and Eunson do hereby fully release, acquit and forever discharge the
Joint Venture, Tower Tech, and Curtis, and their respective successors,
assigns, officers, directors, agents, employees, attorneys and representatives,
past and present (all of which released parties being hereinafter collectively
referred to as the "Tower Tech Released Parties"), from any and all claims,
demands, liabilities, grievances, loans and causes of action of any kind
whatsoever, except for claims made pursuant to Section 8.3., whether known
or unknown at the present time, contingent or not contingent, which J-Tech and
Eunson may have had or may now have against the Tower Tech Released Parties
or any of them, including, without limitation, claims, demands, liabilities,
grievances, and causes of action arising out of or in any way connected with or
related to (i) any obligations or liabilities of the Joint Venture to J-Tech
and Eunson; (ii) any obligations or liabilities of Tower Tech or Curtis to
J-Tech or Eunson; (iii) any obligations or liabilities of Tower Tech or Curtis
to J-Tech and Eunson arising out of any letter or other agreements; and (iv)
any obligations or liabilities of Tower Tech or Curtis relating to Eunson's
employment agreement or stock options. It is the intent of the parties that
this release terminate whatever options or rights that Eunson has under a
letter agreement dated on or about March 26, 1998.
<PAGE>
7.2. Tower Tech and Curtis Release. In consideration of the mutual
covenants contained within this Agreement and of the Termination Payment
provided for in Section 6 hereof, and other good and valuable consideration, the
adequacy and sufficiency of which are hereby acknowledged, Tower Tech and Curtis
do hereby fully release, acquit and forever discharge the Joint Venture, J-Tech,
and Eunson, and their respective successors, assigns, officers, directors,
agents, employees, attorneys and representatives, past and present (all of which
released parties being hereinafter collectively referred to as the "J-Tech
Released Parties"), from any and all claims, demands, liabilities, grievances,
loans and causes of action of any kind whatsoever, except for claims made
pursuant to Section 8.2., whether known or unknown at the present time,
contingent or not contingent, which Tower Tech and Curtis may have had or may
now have against the J-Tech Released Parties or any of them, including, without
limitation, claims, demands, liabilities, grievances, and causes of action
arising out of or in any way connected with or related to (i) any obligations or
liabilities of the Joint Venture to Tower Tech and Curtis; (ii) any obligations
or liabilities of J-Tech to Tower Tech and Curtis; and (iii) any obligations or
liabilities of J-Tech to Tower Tech and Curtis arising out of any letter or
other agreements.
8. Remedies for Breaches of This Agreement.
8.1. Survival of Representations and Warranties. All of the representations
and warranties of the parties contained in Sections 10 and 11 shall survive the
Closing and continue in full force and effect for a period of 18 months.
8.2. Indemnification Provisions for the Benefit of Tower Tech. In the event
J-Tech or Eunson breach any of their representations, warranties, and covenants
contained in this Agreement, provided that Tower Tech makes a written claim for
indemnification against J-Tech within such 18-month survival period, then J-Tech
and Eunson jointly and severally agree to indemnify Tower Tech from and against
the entirety of any damages, judgments, claims, demands or liabilities
(collectively, "Adverse Consequences") that Tower Tech shall suffer caused
proximately by the breach; provided, however, that J-Tech shall not have any
obligation to indemnify Tower Tech from and against any Adverse Consequences
caused by the breach of any representation or warranty of J-Tech or Eunson (i)
until Tower Tech has suffered Adverse Consequences by reason of all such
breaches in excess of $20,000 (after which point J-Tech will be obligated only
to indemnify Tower Tech from and against further Adverse Consequences) or
thereafter (ii) to the extent the Adverse Consequences Tower Tech has suffered
by reason of all such breaches exceeds the Termination Payment (after which
point J-Tech will have no obligation to indemnify Tower Tech from and against
further such Adverse Consequences); provided, however, that any breach of a
representation or warranty arising out of fraud, intentional misrepresentation
or with actual knowledge that it contained an untrue statement of fact or
omitted a fact necessary to make the statement not misleading shall not be
subject to such $20,000 threshold or the ceiling set by the Termination Payment.
8.3. Indemnification Provisions for the Benefit of J-Tech. In the event
that Tower Tech breaches any of its representations, warranties, and covenants
contained in this Agreement, provided that J-Tech makes a written claim for
indemnification against Tower Tech within such survival period, then Tower Tech
agrees to indemnify J-Tech from and against the entirety of any Adverse
Consequences J-Tech shall suffer caused proximately by the breach; provided,
however, that Tower Tech shall not have any obligation to indemnify J-Tech from
and against any Adverse Consequences caused by the breach of any representation
or warranty of Tower Tech, unless such breach was the result of fraud or an
intentional misrepresentation (i) until J-Tech has suffered Adverse Consequences
by reason of all such breaches in excess of $20,000 (after which point Tower
Tech will be obligated only to indemnify J-Tech or Eunson from and against
further Adverse Consequences) or thereafter (ii) to the extent the Adverse
Consequences J-Tech has suffered by reason of all such breaches exceeds the
Termination Payment (after which point Tower Tech will have no obligation to
indemnify J-Tech from and against further such Adverse Consequences); provided,
however, that any breach of a representation or warranty arising out of fraud,
intentional misrepresentation or with actual knowledge that it contained an
untrue statement of fact or omitted a fact necessary to make the statement not
misleading shall not be subject to such $20,000 threshold or the ceiling set by
the Termination Payment.
9. Termination of Joint Venture Agreement. All rights of the
parties under the Joint Venture Agreement are hereby terminated, except as
otherwise specifically provided herein.
10. Representations and Warranties of J-Tech and Eunson.
J-Tech and Eunson jointly and severally represent and warrant to Tower Tech that
the statements contained in this Section are correct and complete as of the date
of this Agreement and shall be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 10).
10.1. Organization of J-Tech. J-Tech is a corporation
duly organized, validly existing, and in good standing under the laws
of Florida.
10.2. Authorization of Transaction. J-Tech and Eunson
have full power and authority to execute and deliver this Agreement and
to perform their respective obligations hereunder. This Agreement and
any document or instrument to be executed by it in connection herewith
constitute the valid and legally binding obligations of J-Tech and
Eunson, enforceable in accordance with their terms and conditions.
<PAGE>
10.3. Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, shall (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which J-Tech or Eunson is subject or any provision of J-Tech's
articles of incorporation or bylaws, or (ii) conflict with, result in a
breach of, constitute a default under, result in then of, create in any
party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which J-Tech or Eunson is a party or by which
either is bound or to which any of their assets is subject. Neither
J-Tech nor Eunson needs to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order for the parties to consummate the
transactions contemplated by this Agreement.
10.4. Financial Statements. Except as set forth on
Schedule 10.4 or the Financial Statements, to the knowledge of J-Tech
and Eunson, the Joint Venture has no liabilities except for those that
may have been incurred since April 30, 1999 in the ordinary course of
business.
11. Representations and Warranties of Tower Tech. Tower Tech
represents and warrants to J-Tech that the statements contained in this Section
are correct and complete as of the date of this Agreement and shall be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 11).
11.1. Organization of Tower Tech. Tower Tech is a
corporation duly organized, validly existing, and in good standing
under the laws of Oklahoma.
11.2. Authorization of Transaction. Tower Tech has
full power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement and any document or
instrument to be executed by it in connection herewith constitute the
valid and legally binding obligations of Tower Tech, enforceable in
accordance with their terms and conditions.
<PAGE>
11.3. Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, shall (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which Tower Tech is subject or any provision of its articles of
incorporation or bylaws, or (ii) conflict with, result in a breach of,
constitute a default under, result in then of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or
other arrangement to which Tower Tech is a party or by which it is
bound or to which any of its assets is subject. Tower Tech does not
need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order for the parties to consummate the transactions
contemplated by this Agreement.
12. Closing and Conditions to Obligation to Close.
12.1. Conditions to Obligation of J-Tech. The
obligation of J-Tech to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties of
Tower Tech set forth in Section 11 above shall be true and
correct in all material respects at and as of the Closing
Date;
(b) Tower Tech shall have performed and
complied with all of its covenants hereunder in all material
respects; and
(c) all actions to be taken by Tower Tech in
connection with consummation of the transactions contemplated
hereby and all certificates, instruments, and other documents
required to effect the transactions contemplated hereby shall
be reasonably satisfactory in form and substance to J-Tech.
J-Tech may waive any condition specified in this Section 12.1.
12.2. Conditions to Obligation of Tower Tech. The
obligation of Tower Tech to consummate the transactions to be performed
by it in connection with the Closing is subject to satisfaction of the
following conditions:
(a) the representations and warranties of
J-Tech and Eunson set forth in Section 10 above shall be true
and correct in all material respects at and as of the Closing
Date;
(b) J-Tech has obtained a release from
Lennar specifically releasing Tower Tech from any obligations
under the Lease Agreement between the Joint Venture and Lennar
and the Office Lease;
(c) J-Tech and Eunson shall have performed
and complied with all of their covenants hereunder in all
material respects;
(d) all actions to be taken by J-Tech in
connection with consummation of the transactions contemplated
hereby and all certificates, instruments, and other documents
required to effect the transactions contemplated hereby shall
be reasonably satisfactory in form and substance to Tower
Tech; and
(e) J-Tech and Eunson shall have delivered
to Tower Tech a certificate as of May 7, 1999, certifying that
the conditions in Section 12.2(a) and (c) are correct (such
certificate shall be considered a representation and warranty
of J-Tech and Eunson).
Tower Tech may waive any condition specified in this Section 12.2.
13. Integration; Amendment. This is the entire agreement
between the parties with respect to the subject matter hereof and supersedes in
its entirety all prior agreements between the parties with respect hereto. No
alteration, modification, interpretation or amendment of this Agreement shall be
binding on the parties unless in writing, designated as an amendment thereto and
executed with equal formality by each of the parties.
14. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida.
15. Binding Effect of Agreement. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, their respective
legal representatives, successors and assigns.
<PAGE>
16. Severability. In the event any clause, provision or
provisions of this Agreement prove to be or are adjudicated invalid for any
reason, then such invalid or void clause, provision or provisions, shall not
affect the whole of this Agreement, but the balance of the provision hereof
shall remain operative and shall be carried into effect insofar as legally
possible.
17. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement and any party hereto may execute
this Agreement by signing one or more counterparts hereof.
18. Attorneys' Fees and Costs. In any action by any party as a
result of a breach of or to enforce this Agreement, the prevailing party shall
be entitled to recover a reasonable attorneys' fees and costs incurred in
preparation for and prosecution of such action or suit and, if any appeal is
taken from the decision of the trial court, reasonable attorneys' fees and costs
as fixed by the appellate court.
19. Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
20. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to Tower Tech:
Tower Tech, Inc.
11935 South I-44 Service Road
Oklahoma City, Oklahoma 73173
With a copy to:
Hartzog Conger & Cason
1600 Bank of Oklahoma Plaza
Oklahoma City, Oklahoma 73102
Attn: Armand Paliotta, Esq.
If to Curtis:
Harold Curtis
11935 South I-44 Service Road
Oklahoma City, Oklahoma 73173
If to J-Tech:
J-Tech Enterprises, Inc.
600 Cleveland Street, Suite 750
Clearwater, Florida 33755
With a copy to:
Holland & Knight LLP
400 North Ashley Drive, Suite 2300
Tampa, Florida 33602
Attn: Douglas A. Wright, Esq.
If to Eunson:
Jack T. Eunson
1270 Gulf Boulevard, Apt. 1201
Clearwater, Florida 33767
21. Expenses. Each of the parties shall bear his or its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
22. Confidentiality. During the period commencing on the
Closing Date and continuing for three years thereafter, both J-Tech and Eunson
shall keep confidential all, and shall not divulge to any other party any, of
the private, secret, or confidential information of Tower Tech or the Joint
Venture including, but not limited to, private, secret, and confidential
information relating to such matters as the intellectual property, finances,
methods of operation and completion, pricing, marketing plans and strategies,
equipment, and operational requirements and information concerning personnel,
clients, independent contractors, and suppliers of Tower Tech or the Joint
Venture, unless J-Tech or Eunson is required to disclose such information by law
or a judicial administrative, or regulatory authority. The remedy at law for any
breach of this Section 22 is and will be inadequate, and in the event of a
breach or threatened breach by either J-Tech or Eunson, Tower Tech shall be
entitled to an injunction restraining J-Tech or Eunson from any breach or
threatened breach of Section 22. Nothing in this Section 22 shall be construed
as prohibiting Tower Tech from contemporaneously pursuing any other remedies
available for such breach or threatened breach, including the recovery of
damages. This section 22 shall be inoperative as to any confidential information
that: (a) is or becomes generally available to the public other than as a result
of an improper disclosure by J-Tech or Eunson; (b) becomes available on a
non-confidential basis and not in contravention of applicable law from a source
other than J-Tech or Eunson; or (c) was known to J-Tech or Eunson prior to the
formation of the Joint Venture.
23. Cooperation. Each party shall use its reasonable efforts
to cooperate with the other party in connection with this Agreement and take
such actions as the other party may reasonably request, and to the extent that
such cooperation is reasonably necessary, Eunson will assist Tower Tech in the
collection of outstanding accounts receivables of the Joint Venture.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date above written.
J-TECH ENTERPRISES, INC.
BY: ss/JACK EUNSON
-----------------------------
Jack T. Eunson, President
TOWER TECH, INC.
BY: ss/ROBERT BRINK
----------------------------
Robert Brink, President
ss/HAROLD CURTIS
----------------------------
Harold Curtis, Individually
ss/JACK EUNSON
----------------------------
Jack T. Eunson, Individually
