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Consolidated statements of operations found on pages F-2 to F-6 of the
Company's Form 10-KSB for the fiscal year 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
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<NAME> TOWER TECH, INC.
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U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended November 30, 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
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001
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 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 ____.
-------
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
State the issuer's revenues for its most recent fiscal year. $13,975,235.
<PAGE>
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. $3,059,742 based on 1,882,918 shares at
$1.625 per share, the last sale price of the Common stock on March 8, 2000. (For
purposes of calculating this amount only, all the directors and executive
officers of the issuer have been treated as affiliates.)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Common stock $.001 par value 3,576,311 shares as of March 8, 2000.
Transitional Small Business Disclosure Format Yes { } No { X }
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
The listed documents should be clearly described for identification purposes.
Items 9 through 12 of Part III of this Form 10-KSB are incorporated by reference
from the Issuer's definitive proxy statement to be filed on or before March 30,
2000.
2
<PAGE>
TABLE OF CONTENTS
Part I
PAGE
Item 1. Description of Business 4
Item 2. Description of Property 11
Item 3. Legal Proceeding 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Part II
Item 5. Market for Common Equity and Related Stockholder Matters 13
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 7. Financial Statements 21
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 21
Part III
Items 9-12 Incorporated by reference from the Company's proxy
statement to be filed on or before March 30, 2000 22
Item 13. Exhibits and Reports on Form 8-K 23
Financial Statements F-1
3
<PAGE>
PART I
Item 1. Description of Business.
The Company is an Oklahoma corporation formed on February 27, 1984 and is
in the business of manufacturing and selling modular cooling towers. To signify
that the Company has redesigned and has begun to manufacture the main components
of its factory assembled modular cooling tower, the Company changed the "TTMT"
designation to "TTEF". The factory assembled TTEF Series cooling tower is made
primarily of non-corrosive materials, and is sold in both the air conditioning
and industrial segments of the cooling tower market. The field erected TTCT
Series modular concrete cooling tower was introduced in 1995 for the industrial
and utility segments of the cooling tower market. The Company's TTEF Series
cooling tower utilizes several innovative design features including the Rotary
Spray Nozzle(TM), a bottom-mounted direct drive motor fan assembly, and a
modular design to create a compact, efficient cooling tower which management
believes addresses many of the deficiencies common to cooling towers, which do
not incorporate all of these innovative design features. Individual modules can
be utilized for air conditioning and light industrial applications. The modular
design also allows a number of modules to be connected in series for large
industrial and utility applications. The compact design of TTEF Series modules
permits them to be factory assembled, inventoried for immediate shipment, easily
transported and quickly installed. The design of the TTEF Series cooling tower
also allows it to be transported as a complete module on a standard lowboy
trailer. The TTCT Series modular concrete cooling tower features pre-cast
concrete construction and incorporates many of the innovative design
characteristics of the TTEF Series cooling tower.
Drawing on the proprietary knowledge gained since 1997 during the process
of bringing manufacturing of component parts in-house, the Company's ThermoQuest
operating unit was formed in late 1999 to produce extruded, injection molded and
thermoformed products for its own purposes and for custom projects for others.
ThermoQuest's main product line is comprised of extruded fiberglass polymer
structural components which are offered for sale to customers for use in
repairing and reconstructing existing wood cooling towers and for constructing
complete cooling tower systems. When sold as a complete cooling tower system,
this product is known as the TQFX Series cooling tower. TQFX Series cooling
towers have an innovative design that promotes labor efficiency during assembly
and are equipped with Rotary Spray NozzlesTM to give owners added operational
flexibility. TQFX Series cooling towers are available in six pre-engineered
sizes.
In December 1998 the Company sold its rental division assets to Aggreko, Inc.,
the U.S. subsidiary of United Kingdom-based Aggreko plc, and licensed Aggreko as
the Company's exclusive global licensee for the rental of the Company's cooling
towers. The Company also sells accessory equipment and non-chemical water
treatment equipment. The Company also develops technology for the cooling tower
industry and markets that technology either directly through licensing
arrangements or in the form of products as above stated.
4
<PAGE>
The Cooling Tower Market
The market for cooling towers is divided into three general market
segments: the air conditioning or HVAC segment, the light to medium industrial
segment, and the heavy industrial and utility segment. Although all cooling
towers work on the same basic principles, cooling towers generally are divided
into two categories: (1) factory assembled units and (2) field erected cells.
Factory assembled cooling towers are shipped to the customer as a completed unit
and typically are sold to HVAC and light to medium industrial users. In the HVAC
segment of the market, cooling towers are sized from 30 to 1,000 nominal tons.
Light to medium industrial applications require cooling towers with capacities
ranging from 500 to 10,000 gallons per minute ("GPM"). GPM is the standard unit
of measurement in the industrial segment, while the HVAC segment denominates
capacity in nominal tons, with one ton approximately equal to three GPM. Because
of shipping and other technical constraints, factory assembled units ordinarily
range in size from 30 to 1,000 nominal tons. Field erected cooling towers are
constructed on site and typically are sold to medium and heavy industrial and
utility users. Heavy industrial applications require cooling towers sized from
10,000 to 100,000 GPM, while utility applications range from 30,000 to 200,000
GPM or more.
Cooling towers can range in price from less than $20,000 for a 500
nominal ton unit intended for HVAC use to $1,000,000 or more for a cooling tower
built to meet the specifications of a heavy industrial or utility customer.
Accurate information about cooling tower industry sales is difficult to obtain
because many cooling tower companies are privately held or are divisions of
large companies. In addition, the size of the new cooling tower market can be
understated because the refurbishment or rebuilding of a cooling tower in some
cases essentially entails the erection of a new cooling tower even though it may
not be characterized as such. Limited market information is available from the
U.S. Department of Commerce and from private studies. Based on this limited
information and management's evaluation of the market, management estimates that
the total annual United States cooling tower market ranges from $300 million to
$380 million and that the total annual worldwide market ranges from $1.5 billion
to $2.0 billion.
The TTEF Series Modular Factory-Assembled Cooling Tower
Cooling towers come in a variety of sizes, prices, designs and quality.
Small capacity cooling towers intended for HVAC applications typically are
forced draft or induced draft towers which may be constructed of wood,
galvanized metal, plastic or fiberglass. Most large capacity cooling towers used
in the United States and worldwide today are induced draft towers and are
constructed primarily of wood. These towers are usually constructed on a
concrete water basin and have a treated wood framework, which is sometimes clad
with galvanized steel or fiberglass. Internal components of conventional cooling
towers are typically made of wood, galvanized steel, stainless steel, fiberglass
and plastic.
The TTEF Series cooling tower is designed to address many of the
deficiencies which management believes exist in the design of most other cooling
towers on the market. Management believes that the modular design and
interconnectability of the TTEF Series cooling tower is unique in the industrial
segment of the market. The TTEF Series cooling tower is efficient,
corrosion-free, low maintenance and usually is available for immediate delivery.
5
<PAGE>
The modular design of the TTEF Series cooling tower allows a number of
units to be interconnected to meet almost any cooling requirement. Other
manufacturers offer small factory assembled cooling towers, including units
which incorporate plastic and fiberglass components and which can be
interconnected. However, interconnection of some models of such towers
exacerbates recirculation of exhaust air, resulting in thermal performance
losses which are typical of this type of tower. Thus, other factory assembled
cooling towers have limited application except in the HVAC segment and light
industrial segment of the market. Most segments of the cooling tower market can
be served by the TTEF Series cooling tower, from light HVAC applications to
large petrochemical, refinery and utility operations.
Immediate delivery of the TTEF Series cooling tower is possible because
the modules are factory assembled and can be inventoried. Usually, only one hour
of installation time is required per module, excluding electrical and piping
connections. The concrete basin of most field erected cooling towers is replaced
in the TTEF Series cooling tower by an internal water basin. The TTEF Series
cooling tower is supported on a substructure which can either be
customer-provided fabricated metal, concrete piers, or the Company's own
fiberglass reinforced substructure. The modular design also lends itself to
shipping via standard trucking without special permits. TTEF Series modules are
readily shipped to international customers as well, either in unassembled kits
or fully assembled.
Management believes that a problem with many cooling towers manufactured
today arises from water distribution nozzles that tend to clog. Most nozzles
used in cooling towers today utilize a fixed orifice/splash plate combination in
an attempt to minimize the clogging problem. This design often creates void
areas in the water distribution pattern which causes inefficient operation and
performance deficiencies. These deficiencies can be mitigated to some degree by
installing additional fill media and/or designing a higher air inlet area in the
cooling tower, although these steps result in additional capital investment and
higher operating costs due to increased pump head and fan horsepower
requirements.
To address this design deficiency, Mr. Harold Curtis designed and
patented the Rotary Spray Nozzle(TM) primarily for use in the Company's cooling
towers. The Rotary Spray Nozzle(TM) is designed to operate clog-free even in
severe operating conditions. This nozzle utilizes a rotating disc that floats on
a water bearing to evenly distribute the flow of water throughout the entire
fill area while generating a self-cleaning action. The radial discharge design
allows the nozzle to operate as low as one inch above the fill media and at
lower pressure than most conventional nozzles. Since conventional nozzles
typically operate at distances of 18 inches or more above the fill media, the
Rotary Spray Nozzle(TM) increases tower performance and significantly reduces
pump head requirements.
In addition to reduced pump head requirements attributable to the Rotary
Spray Nozzle(TM), the pump head requirement in the TTEF Series cooling tower is
reduced because the circulating water is collected in an elevated water basin
above the air inlet. This results in reduced pump operating costs for the TTEF
Series cooling tower compared with a comparable size conventional cooling tower.
The TTEF Series cooling tower is designed with a bottom mounted fan
system. Maintenance is greatly reduced by this design as the fans are direct
motor driven without gearboxes, drive shafts, or pulleys. Depending on the size
of the module, each module has a number of fans which can be zoned on and off
automatically to deliver more efficient cooling. The mechanical equipment is
located in the cool, dry intake air stream and is protected from the natural
elements by the cooling
6
<PAGE>
tower itself. Service can be performed from ground level and customer spare
parts inventory is limited to one motor and one fan. In the event of mechanical
failure, the probability is that only one fan or motor would be inoperable,
enabling the continued operation of the remaining fans until repairs could be
made, thus the TTEF Series cooling tower has built-in redundancy not typically
seen in other companies' cooling towers.
The TTEF Series cooling tower has a water collection system installed
just below the fill media and above the fans. The water collection system
consists of a series of parallel chevron type blades positioned in a canopy over
the fans. As cooled water falls from the fill media, it is discharged into
hollow support beams which serve as the cooling tower's water basin. The fill
media is nestled on top of the water collector vanes and is easily installed or
removed from the cooling tower module when cleaning or replacement of fill media
is needed. The water distribution system, consisting of a PVC header pipe and
laterals, is connected to the top of the module. The drift (or mist) eliminators
are supported by the water distribution piping header and laterals and locked
into the molded perimeter wall channel.
The materials of construction of the TTEF Series cooling tower virtually
eliminate all significant corrosion problems. Conventionally designed wood
cooling towers contain wood structural components which usually are treated with
chemicals and thus may be environmentally undesirable. Conventionally designed
galvanized metal cooling towers contain zinc and lead which also may be
environmentally undesirable. Corrosion and deterioration of the wood and metal
parts of a conventionally designed cooling tower often lead to costly
maintenance, repair, and ultimately replacement.
The TTEF Series cooling tower is produced in several sizes. The basic
units range in size from a seven foot by eight-foot module to a twelve foot by
thirty-one foot module. The individual module capacities range from 50 nominal
tons to approximately 850 nominal tons, or approximately 150 GPM to 2,550 GPM.
These ranges of cooling duty are achieved by using various sizes of modules and
internal components, including motors, fans and fill media. Individual modules
of varying sizes can be connected in series to satisfy the specific cooling
requirements of customers.
The TTCT Series Field-Erected Modular Concrete Cooling Tower
In 1995, the Company introduced its TTCT Series concrete cooling tower
for the industrial and utility segments of the cooling tower market. The design
of the concrete cooling tower incorporates some of the patented technology used
in the Company's TTEF Series cooling tower, as well as technology unique to the
concrete product. The TTCT Series cooling tower gives the Company added
capabilities to penetrate the large utility, petrochemical and industrial
markets. The same technological advances made with the TTEF Series cooling
towers are utilized in the concrete tower. The concrete cooling tower is built
using a pre-cast construction method which substantially reduces construction
time as compared with a similar size wood or conventional concrete tower.
ThermoQuest and The TQFX Series Field-Erected Cooling Tower
In October 1999, the Company formed the ThermoQuest operating division to
capitalize on its technological know-how of extrusion, injection molding and
thermoforming processes and to gain additional utilization from its plant and
equipment. ThermoQuest began soliciting opportunities in October and was awarded
its first contract in November to produce cooling tower structural members. In
February 2000, ThermoQuest introduced the TQFX Series field-erected cooling
tower
7
designed for the industrial and utility segments of the cooling tower market.
The TQFX Series cooling tower competes in the price-driven segment of the
cooling tower market and is generally price-competitive with other fiberglass
cooling towers.
The design of the TQFX Series cooling tower incorporates some of the
patented technology used in the Company's TTEF Series and TTCT Series cooling
towers, as well as technology unique to the TQFX product. The TQFX Series
cooling tower gives the Company added capabilities to penetrate the utility,
petrochemical, food processing and other industrial markets. The design basis
for TQFX Series cooling towers is a "bent-line" construction method, in which
major frame members are assembled on the ground, then hoisted into place and
connected to other major frame assemblies. This assembly method increases labor
efficiency and reduces labor costs, safety hazards and construction time. This
construction method differs from the "stick-built" method, which is commonly
used to field-erect cooling towers of a conventional design. In such designs,
structural members are connected in place, requiring significantly greater use
of man-lifts, scaffolding and safety equipment. In addition to assembly and
efficiency features, the TQFX Series cooling tower is designed with a low
profile to reduce capital cost and pump energy requirements.
TQFX Series cooling towers are available in several cell sizes. The
smallest cell measures 24' wide by 24' long; the largest cell measures 54' wide
by 54' long. Same size cells may be connected in series to satisfy virtually any
water flow and heat load requirement, thereby satisfying the cooling needs of
any customer. Different ranges of duty can be achieved by selecting various fill
media types and different motor sizes and fan types.
The fiberglass and polymer construction of TQFX Series field-erected
cooling towers virtually eliminates the significant corrosion problems common to
cooling towers.
Modular Cooling Tower Rental Program
Until December 1998, the Company also rented modular cooling towers to
customers. Because of the compact size and other design features of the
Company's factory assembled cooling tower, they could be easily mounted on skids
and equipped with necessary electrical connections to produce a mobile cooling
tower which could be transported by truck to the desired location. The Company's
rented towers were used to augment customer's existing cooling towers during
peak heat loads, to provide temporary cooling while maintenance and repairs are
being made to existing cooling towers, to supply cooling in the event of a
failure of an existing cooling tower due to fire, weather damage or mechanical
malfunctions, and to provide temporary cooling during research and development,
testing and evaluation programs.
In December 1998, the Company sold its fleet of rental cooling towers to
Aggreko, Inc., the United States subsidiary of Aggreko, plc, a London Stock
Exchange Company in the business of renting industrial temperature control
equipment, electrical power generators, and oil-free compressed air equipment.
In the transaction, Aggreko purchased Tower Tech's rental operation for $13.5
million and also entered into a strategic long-term alliance with the Company.
The Company will receive a three (3) percent royalty from the rental of its
technology by Aggreko. See further discussion in "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
8
<PAGE>
Patents
The Company owns patents (U.S. Patent No. 5,227,095) covering the basic
design of the TTEF Series cooling tower and the TTCT Series concrete cooling
tower (U.S. Patent No. 5,545,356). The patents expire in 2010 and 2014,
respectively. The Company owns and has applied for other United States and
foreign patents for technology used in the TTEF Series and TTCT Series cooling
towers. Mr. Harold Curtis has also granted an exclusive, royalty-free license to
the Company for the Rotary Spray Nozzle(TM)which gives the Company the exclusive
right to use this technology in cooling tower applications. The licensed
technology is the subject of patents (U.S. Patent Nos. 5,143,657 and 5,152,458)
which expire in 2009. Mr. Curtis has retained all rights with respect to the
patents in all applications other than cooling towers.
Product Design and Research and Development
The Company spent $2,491,157, $1,810,985, $667,222, $386,474, and
$108,183 on research and development during fiscal years 1999, 1998, 1997, 1996
and 1995, respectively. A significant portion of the 1999 and 1998 costs were
related to the redesign of the TTMT Series tower to the TTEF Series tower in
order to lower future production costs. The development costs related to
ThermoQuest and the TQFX Series cooling tower were not significant. The Company
is continuously evaluating its products and manufacturing methods. The Company
has not incurred substantial costs for any products other than its TTEF Series
and TTCT Series cooling towers, and related technology, at this time. The
Company plans to continue to research refinements in cooling tower design and
construction. Although the Company has no fixed research and development budget,
such costs are anticipated to be significantly less than current levels.
Assembly of Products
The Company's TTEF Series modular cooling towers are currently assembled
at its new manufacturing and assembly plant in Oklahoma City, Oklahoma. (See
Item 2. Description of Property). In addition to assembly, the Company has
brought "in-house" the manufacturing of substantially all component parts which
were previously manufactured by other companies using pultrusion or extrusion
molding technology. The Company believes that bringing these manufacturing
processes in-house will help ensure and control quality and supply, as well as
substantially reduce costs of production of these parts. However, the Company
incurred problems in bringing these processes in-house. See further discussion
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations". The Company also pre-casts most of the concrete component parts of
its TTCT Series modular concrete cooling towers. The Company also manufactures
all of the extruded and injection-molded structural components for its TQFX
Series cooling tower.
Suppliers and Vendors
The Company relies upon suppliers for materials and parts used to
manufacture and assemble its products. Most materials and parts purchased from
suppliers are available from multiple sources. The Company has invested in tools
and dies which in a few cases are used by suppliers in the manufacture of
components for the Company. However, as noted above, the Company has moved
substantially all of these manufacturing processes "in-house." The Company has
not experienced any significant delays in obtaining parts and components for its
products. The Company owes vendors and suppliers significant past-due amounts
and is currently on a cash-in-advance basis with most suppliers. Several of the
Company's vendors have filed suit for nonpayment (see Item 3 Legal Proceedings).
See further discussion at "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
9
<PAGE>
Marketing and Sales
The Company sells its products through a combination of direct sales by
Company employees, sales through an established nationwide network of sales
representatives, and sales through representatives, licensees, distributors and
other arrangements in international markets. The Company has sales offices in
Houston and in Sao Paulo, Brazil. During 1998 and 1999, the Company closed sales
offices in Mississippi and Singapore. The Company also has international
ventures and/or licensing agreements for the manufacture, marketing and/or sales
of the Company's products in India, Southeast Asia, South America, South Africa,
Mexico and the Mediterranean region. Negotiations are in process for similar
arrangements for other international regions. Sales representatives typically
market the Company's products along with a variety of other products related to
cooling towers.
In addition to its direct sales activities, the Company markets its
products in a number of other ways, including exhibiting at trade shows,
conducting direct mail solicitation, and advertising in various trade
publications. The Company makes extensive use of marketing videos which portray
its products using photography and computer animation. These media and compact
discs are distributed to engineering firms, contractors, manufacturers and
specialized mailing lists in the HVAC; utility and industrial cooling tower
markets. The Company also has a full-time marketing manager who is responsible
for publicizing the product, identifying marketing opportunities and developing
a marketing strategy.
Warranties and Customer Service
The Company provides a limited warranty on its products. In 1999, the
Company incurred $1,622,422 of expenses to retrofit and service towers, as
compared to $671,267 during fiscal 1998. See further discussion in "Management's
Discussion and Analysis of Financial Condition and Results of Operations". The
Company also provides field support services on an individual call basis and
offers service maintenance contracts. Necessary repairs are made at the
installation site.
Governmental Regulation and Environmental Laws
The Company is subject to the requirements of a number of federal, state
and local laws, such as the federal Occupational Safety and Health Act ("OSHA").
The Company generates small quantities of waste in the course of its
manufacturing activities, some of which are classified as hazardous waste under
state and federal law. The Company endeavors to comply with all state and
federal laws and believes that it is in compliance with all applicable federal,
state and local regulations, including environmental regulations.
Competition
The market for cooling towers is extremely competitive. There are 15 to
25 manufacturers of cooling towers in the United States. The two largest
manufacturers, Marley Cooling Tower Co. and Baltimore Air Coil, collectively
account for 60 percent to 70 percent of the market. A number of the Company's
competitors are substantially larger in size and have greater financial and
other resources than the Company. Many of these competitors have been in
business for a number of years and are well established in the industry. The
Company estimates that its share of the United States cooling tower market for
1999 was approximately 5%.
10
<PAGE>
A number of the Company's competitors manufacture and market cooling towers
which use concrete, fiberglass and other composite materials, PVC cellular fill
media and other construction and design refinements which are similar to the
Company's cooling towers. Several competitors manufacture factory assembled
fiberglass cooling towers, including units which can be connected in a series.
Management believes that its cooling towers offer several advantages over
cooling towers produced by the Company's competitors. There can be no assurance
that competitors will not develop and produce a product which is comparable or
superior to the Company's products.
Employees
As of November 30, 1999, the Company had 155 full-time employees. None of
the Company's employees is subject to a collective bargaining agreement. The
Company believes that relations with its employees are good.
Item 2. Description of Property
The Company's principal place of business is located in south Oklahoma
City, Oklahoma, on a 50-acre tract. The new manufacturing facility of
approximately 98,000 square feet houses the Company's manufacturing and assembly
operations as well as plant office facilities. The Company began to occupy the
facility in January 1998 and began production operations in the fourth quarter
1998. A new administrative office facility of approximately 25,000 square feet
has been constructed on the site and was completed in March 1999. In 1999, the
Company moved its general headquarters to this new facility. For additional
information about the Company's total investment and financing of the Oklahoma
City facility, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Liquidity and Capital Resources".
The Company owns approximately 17 acres of land near Chickasha, Oklahoma,
with three separate production buildings totaling over 52,000 square feet, a
building of approximately 8,000 square feet used as offices and a test facility,
and an office building having approximately 4,000 square feet. These facilities
were leased to unaffiliated entities through March 2000 when the facilities were
sold.
The new Oklahoma City (OKC) plant is expected to increase efficiency of
the Company's production and assembly process. The ceiling height and
configuration of the Chickasha plant limited production methods. The OKC plant
should be adequate to support annual TTEF Series cooling tower sales of
approximately $100 million, which should be adequate for several years. The OKC
plant is closer to major transportation routes and facilities, particularly the
Will Rogers World Airport.
The Oklahoma City plant and administrative office facility are subject to
mortgages in favor of the Oklahoma Industries Authority, the City of Oklahoma
City and a financial institution.
Item 3. Legal Proceedings
The Company is a party to litigation styled Companhia Petroquimica Do Sul
v. Tower Tech, Inc., U.S.D.C. Western District Court of Oklahoma Case
No.CIV-99-1985. The complaint was filed on December 14, 1999. The complaint
alleges, among other things, that the Company sold, through one of its
licensees, cooling tower cells to Companhia Petroquimica Do Sul (Copesul"), that
the cooling cells did not perform in accordance with their design, that the
Company has refused to correct the alleged defects of the cooling towers, and
that Copesul has been damaged as a result thereof.
11
<PAGE>
Copesul alleges that it has been damaged by the acts of the Company in amounts
in excess of $3,500,000, plus continuing losses, and that it is also entitled to
punitive damages. The Company has filed an answer denying the allegations in the
complaint, and the Company continues to vigorously defend the allegations in the
complaint. The Company cannot estimate when this lawsuit will go to trial.
The Company is a party to litigation styled Segotta v. Tower Tech., Inc.,
District Court of Grady County, Oklahoma Case No. CJ-99-11. The petition was
filed on March 4, 1999. The petition alleges that the Company terminated the
plaintiff (i) in violation of the Family Medical Leave Act and (ii) improperly
as a result of the plaintiff's alleged whistle-blowing activities in connection
with workers' compensation claims. The plaintiff has claimed that he is entitled
to damages in excess of $10,000. The Company has filed an answer denying the
allegations in the petition, and the Company continues to vigorously defend the
allegations in the petition.
Commencing in 1997 and continuing into December 1998, the Company was a
party to litigation styled Tower Tech, Inc. v. Goodyear Rubber & Tire Company,
U.S.D.C. Western District Court of Oklahoma Case No. CIV-97-1682-T. The Company
and Goodyear have resolved and compromised their disputes in such lawsuit.
Pursuant to a Settlement Agreement and Conditional Release, the lawsuit has been
dismissed without prejudice, and both Goodyear and the Company have denied the
claims made by both parties in the lawsuit. Tower Tech is in default of the
payment of final settlement amount of $100,000 due December 15, 1999. Under the
terms of the settlement agreement, if that amount due is not timely paid,
consent judgment may be entered against Tower Tech for $250,000.
The Company is a defendant in five other legal proceedings which all
allege that the Company is in default of payments owed on open accounts. The
aggregate amount claimed under those five proceedings, exclusive of costs,
interest, and attorneys' fees, is approximately $220,000. Two of those
proceedings have been reduced to judgment against the Company, and the Company
is currently negotiating to settle two of those proceedings. The Company has
denied the allegations in the fifth proceeding and is vigorously defending that
proceeding.
The Company is the plaintiff in litigation styled Tower Tech, Inc. v.
Hickman Mechanical, Inc., Superior Court of Los Angeles, California Case No.
BC-222326. The Company has filed suit against the general contractor of a
cooling tower project in California alleging that the general contractor refused
to pay the contract amount due. The Company has alleged that approximately
$205,000 remains unpaid by the general contractor. The general contractor has
filed a counterclaim against the Company for $615,000 alleging, among other
things, breach of contract against the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to stockholders during the fourth quarter of
the fiscal year covered by this report.
12
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's Common Stock is quoted on the NASDAQ SmallCap system under
the symbol "TTMT". The following table shows the high and low closing bid prices
for the Common Stock as reported by NASDAQ for each quarter during the last
three fiscal years. Bid prices represent prices between dealers, do not include
retail mark-ups, markdowns or commissions, and may not represent actual
transactions.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Quarter Ended High Low
------------- ---- ---
February 28, 1997 $11.250000 $10.00000
May 31, 1997 9.625000 8.00000
August 31, 1997 9.375000 7.37500
November 30, 1997 8.625000 7.00000
February 28, 1998 7.250000 6.25000
May 31, 1998 6.875000 6.12500
August 31, 1998 5.250000 4.50000
November 30, 1998 3.800000 3.50000
February 28, 1999 5.000000 2.75000
May 31, 1999 3.375000 2.75000
August 31, 1999 3.000000 0.59375
November 30, 1999 1.671875 0.37500
</TABLE>
On March 8, 2000, the last sale price of the Common Stock as reported by
NASDAQ was $1.625 per share. On March 8, 2000, 60 record holders held the Common
Stock. The Company believes that there are more than 400 beneficial holders of
its Common Stock.
The Company has not paid dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future. The Company intends to
retain future earnings, if any, for use in its business.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
The following discussion should be read in conjunction with the Company's
financial statements and the related notes thereto.
The Company began the extensive effort of introducing new technology to the
cooling tower industry in 1991. From 1991 through 1999, the Company has focused
significant efforts on research and development. As the Company's technology
evolved, the market's acceptance of its factory-assembled and field-erected
lines of cooling towers accelerated. To date, the Company and its international
licensees have sold approximately $100,000,000 of products containing the
Company's technology. Now that the Company's research and development stage is
substantially completed, management is optimistic that the Company's technology
will continue to gain acceptance in international markets and that domestic
market share will increase going forward. The Company's estimated sales backlog
is over $8 million, as of March 8, 2000, compared to $6.9 million as of February
1, 1999. Financial stability and sufficient cash flow are key to continuing this
positive trend in revenues.
13
<PAGE>
Although the Company has seen strong market acceptance of its technology,
extensive investment in research and development has limited operating capital
and cash reserves. Several setbacks have exerted tremendous financial strain on
the Company:
o In 1996, in an effort to reduce costs and improve profit margins, the
Company redesigned its TTMT Series of factory-assembled towers, started
construction on a new manufacturing plant in Oklahoma City, and began
bringing the production of certain component parts in-house. Product
development delays, coupled with construction and tooling delays, caused
the new manufacturing plant to become operational over a year later than
anticipated. The delays contributed significantly to the Company's losses
in FY 1998 and FY 1999.
o Another major setback was the downturn of several Asian economies, which
rapidly spread throughout our international markets in 1998. This economic
downturn resulted in the cancellation or postponement of cooling tower
projects. Since 1995, the Company has invested considerable resources in
the development of international markets. The Company had anticipated
significant revenues from international activities. As a direct result of
the international market downturn, the Company's actual revenues from
international activities were significantly lower than anticipated.
o The Company's new Oklahoma City manufacturing plant was put into production
at the beginning of 1999. At that time, the Company began shipping the
first factory-assembled cooling towers of the new design. From February
1999 to May 1999, the Company shipped approximately 145 TTEF Series cooling
towers with all in-house extruded wall panels. When put into service, a
number of these units contained unforeseen design or quality defects that
caused water leaks, and the larger size units had an additional undetected
structural deficiency. To effect permanent solutions to these problems, the
Company ceased its assembly operations for forty-two days during the third
quarter 1999 so extrusion and injection molding tools could be modified. As
a result, 1999 tower sales, cost of goods sold (including warranty
expense), and research and development costs were negatively impacted.
Management believes that the design deficiencies have been corrected, and
towers are again being shipped.
Losses resulting from the foregoing business setbacks have reduced equity
and have negatively impacted cash flow. The Company had a $14.6 million deficit
in working capital at November 30, 1999. As a result, the Company is presently
not in compliance with the net worth covenants in its loan agreements. The
Company is also unable to pay past-due balances owed to materials suppliers, and
consequently is now required to pay for new materials on a
cash-in-advance-basis, which compounds cash flow problems.
The Company has been able to make payments due on secured credit
obligations and its convertible subordinate debentures. However, the Company has
significant amounts of debt, including its operating line of credit ($6,304,748
outstanding at November 30, 1999) and $6,000,000 of the convertible subordinate
debentures, which are due through June 2000. Currently, the Company does not
have sufficient cash flow to satisfy these obligations.
Management has formulated a plan to address obstacles to the Company's
financial health. If the plan is successfully implemented, management believes
that the Company's financial condition will improve. However, management cannot
assure that the plan will be consummated, consummated in its current form; or if
consummated, that it will return the Company to profitability.
14
<PAGE>
The plan consists of several phases. The objective of the initial phase
is to resuscitate what then was a failing enterprise and to lead it to a
position of relative stability from which a long-range plan can be launched. The
initial phase consists of the following steps:
o Sales orders need to be rekindled and average $400,000 or more per week.
This goal was substantially met in the period from September 15, 1999 to
November 30, 1999. Sales orders fell off somewhat during the holiday season
as is typical for that time of year, and they have begun increasing again
since early February 2000.
o Trade creditors need to give temporary forbearance and agree to supply
materials on a cash-in-advance basis. A few trade creditors, most having
little prospects for ongoing business with the Company, have filed suit for
payment. The remaining trade creditors have shown tremendous patience and
forbearance. Still, the cash-in-advance arrangement has exerted tremendous
pressure on cash flow.
o The Company needs its primary lender to temporarily waive the breach of net
worth covenant in its loan agreements. To date the net worth covenant has
neither been amended nor waived.
o The Company needs to obtain working capital of at least $1,500,000. A
$2,000,000 loan was obtained from the City of Oklahoma City in November
1999. Virtually all of the loan proceeds were used to make payments due on
secured obligations, for materials and labor to manufacture cooling towers,
and for overhead expenses.
o The Company needed to resolve the remaining technical issues related to its
new line of factory-assembled cooling towers and the Company's production.
Management believes that virtually all the technical issues are now
resolved, and the Company is producing a quality product.
o The Company needs to reduce its breakeven point by reducing costs and
increasing cooling tower selling prices. Opportunities to reduce costs are
being pursued, and cooling tower selling prices were increased in October
1999 by an average of 30%.
The objectives of the second phase are to:
o Restore liquidity.
o Secure additional working capital, or a suitable combination of working
capital and credit guarantees, so the Company can move away from
cash-in-advance purchasing arrangements.
o Return to compliance with net worth covenants in loan agreements.
o Restore financial strength needed to win large cooling tower projects.
o Reduce debt and increase equity.
A small, private investor group has expressed a willingness to purchase
$900,000 of the Company's common stock. Further, in consideration of the
Company's agreement to issue stock warrants, the investor group has agreed to
provide credit guarantees for a period of up to two (2) years. The investor
group's commitments are contingent upon certain concessions from the unsecured
creditors including a deferral of up to two years in maturity of amounts due to
unsecured creditors, and amendment of the net worth covenants in the loan
agreements. The Company has not yet been able to satisfy these conditions.
15
<PAGE>
An investment by the group, coupled with the recovery steps described
above, will be a first step to restoring the Company financially. In addition,
the Company hopes the investment will increase customer and distributor
confidence resulting in increased sales. The Company believes this new
investment, coupled with the forbearance of its current creditors, will increase
the Company's ability to raise additional working capital. However, there can be
no assurance that these objectives will be accomplished, including being able to
meet the Company's current debt obligations.
Results of Operations
Twelve Months Ended November 30, 1999 Compared to Twelve Months Ended
November 30, 1998
Tower sales, cost of goods sold, and research and development costs for
the year ended November 30, 1999, were negatively impacted due to design
deficiencies in the initial production of the first TTEF factory-assembled
cooling towers which were assembled with all extruded wall panels assembled
in-house. See the discussion above.
For the twelve months ended November 30, 1999, total tower revenues
decreased to $13,975,235 from $21,044,304 for the comparable period in the prior
year. During the current twelve month period, 84 percent of total tower revenue
was derived from sales of 377 modular fiberglass cooling towers; 9 percent of
total tower revenue was derived from design and construction of the TTCT Series
concrete cooling towers; and 7 percent of total tower revenue was derived from
other tower revenue. In the comparable twelve month period ended November 30,
1998, 44 percent of total tower revenue was derived from sales of 275 modular
cooling towers; 27 percent of total tower revenue was derived from design and
construction of modular concrete towers; 26 percent of total tower revenue was
derived from rental of modular cooling towers; and 3 percent of total tower
revenues were derived from other tower revenue. The increase in tower sales
revenue for the year ended November 30, 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. The decrease in
concrete revenues is due to the decrease in the number and size of jobs
completed and in process. Other tower revenue is up from the previous year due
to increased sales of proprietary parts and an increase in service sales. No
licensing agreements were finalized in 1999.
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 provided for interest at 1% above prime. The outstanding
principal balance of the Note, together with accrued interest, was paid 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 Non-competition Agreement. The Non-competition 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.
16
<PAGE>
The Company's cost of good sold and constructed for the year ended
November 30, 1999 was $16,429,004, or 118 percent of total tower revenue as
compared to $17,594,126, or 84 percent during the comparable period in 1998.
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 last six months of
1999 (see discussion above). Included in cost of goods sold for the twelve month
period ended November 30, 1999 is $1,622,422 to retrofit and service towers
previously sold. This compares to twelve month retrofit and warranty costs of
$671,267 during the same period in 1998. The increase is due to design
deficiencies as described above and includes $400,000 to increase the reserve to
$600,000 to cover future costs to retrofit and service towers previously sold.
The twelve-month period ended November 30, 1999 reflected a decrease in
general and administrative expenses from $3,033,369 in 1998 to $2,869,824 in
1999. The decrease is due mainly to the reduction in expenses related to the OKC
facility offset by an increase in bad debt expense. Selling expenses decreased
from $1,989,322 to $1,442,531. 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 $1,810,985 in
1998 to $2,491,157 in 1999. A significant portion of the increase is related to
the redesign of the TTMT Series tower to the TTEF Series tower. With the
redesign of the tower and with manufacturing of component parts in-house,
management believes that the Company will be able to reduce future production
costs. (See discussion above related to design flaw in the first production run
of the TTEF tower). Although the Company has no research and development budget,
such future costs are anticipated to be significantly less than those incurred
in the twelve months ended November 30, 1999.
Interest expense increased from $899,066 to $2,088,917 primarily due to
the capitalization of $1.1 million of interest costs in 1998. Due to the
completion of the manufacturing facility, no interest was capitalized in 1999.
Miscellaneous income for the twelve months ended November 30, 1999 consists of
royalties and interest related to the sale of the Rental Operations (see above).
The Company recognized an income tax expense of $2,330,636 for the year
ended November 30, 1999, compared to an income tax benefit of $1,670,088 for the
comparable period in 1998. FAS 109 requires that the Company record a valuation
allowance when it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of the
deferred income tax assets depends on the Company's ability to generate
sufficient taxable income in the future. The sale of the Rental Operations in
the first quarter of 1999 allowed the Company to conclude that the deferred tax
assets at November 30, 1998 and the first three quarters of 1999 were
realizable. The severity of the design flaws and resultant difficulties
discussed above have caused management to believe that a full valuation
allowance is required at November 30, 1999. Management has determined that based
on the Company's inability to generate taxable income in the last two years
(1999 and 1998), even with the gain from the sale of the Rental Operation in
December 1998, it is more likely than not the Company will not realize the net
deferred tax assets at November 30, 1999. Therefore, a valuation allowance in
the amount of $4,082,451 was established in the fourth quarter of 1999. The
Company has a net operating loss carryforward of $10,500,000 expiring 2009 to
2019.
17
<PAGE>
The Company's estimated backlog is $8 million as of March 8, 2000, and
includes one contract for TTCT Series modular concrete cooling towers totaling
$.85 million. This contract is scheduled for completion in the second quarter of
2000. Estimated backlog for the TTEF Series modular cooling towers is over $7.2
million. Substantially all this backlog is scheduled for delivery in first six
months of FY2000.
Liquidity and Capital Resources
At November 30, 1999, the Company had a working capital deficit of
$14,623,196 as compared to a deficit of $3,890,374 at November 30, 1998. The
Company's cash flow provided by (used in) its operating, investing and financing
activities during fiscal years 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
----------- --------------
<S> <C> <C>
Operating activities ($6,722,443) ($495,572)
Investing activities $9,739,564 ($11,912,145)
Financing activities ($2,769,024) $11,859,561
</TABLE>
The Company's capital requirements for its continuing operations consist
of its general working capital needs, scheduled payments on its debt obligations
and capital expenditures. 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, management believes
that it will enable the Company to better manage inventory levels and reduce
costs. However, fluctuations in inventory levels are still expected due to the
size of planned production runs of components. Management also attempts to
manage accounts receivable to increase cash flow, but it is anticipated that
accounts receivable will increase as sales increase. Other significant variances
in working capital items can also be expected. Also, the Company's concrete
construction projects will have an effect on working capital requirements. At
November 30, 1999, costs and estimated earnings in excess of billings on
uncompleted contracts were $85,120 as compared to costs and estimated earnings
in excess of billings on uncompleted contracts of $437,207 at November 30, 1998.
Normally, concrete construction projects provide for progress payments of the
contract price with a retainage of 10 to 15 percent payable after completion of
the project.
Scheduled principal payments on capital leases will total $231,620 over
the next twelve months. In addition, $17,787,578 of principal payments will
become due on the Company's debt during the next twelve months. The Company does
not have sufficient capital resources to fund its debt service and capital
requirements for the next four quarters.
Virtually all of the Company's capital expenditures during 1999 were
related to additional equipment and tooling for the new manufacturing facility.
As of November 30, 1999, the manufacturing facility was substantially complete
with a total investment of $11.5 million. However, to finalize the process of
producing all component parts in-house, the Company added a 2200 ton
injection-molder, at a cost of $1.2 million in December 1999. Management
anticipates additional capital expenditures of $1.0 million in FY 2000 to
complete the final tooling requirements of the production process. The
manufacturing facility includes equipment and tooling to allow the Company to
produce parts used in its modular cooling towers which previously had been
purchased from outside vendors. Management believes manufacturing these parts
in-house can reduce product costs.
18
<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 in 1997 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,
with final payment due October 1, 2007. A debt service reserve fund of $157,000
was also set aside from the bond proceeds. The reserve fund was used to pay the
October 1, 1999 principal and interest payment. This reserve fund was
reestablished in November 1999. The OIA holds a mortgage on the Oklahoma City
facility to collateralize the bond indebtedness. The balance outstanding was
$3,705,000 at November 30, 1999.
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. The Company is currently negotiating
with Debenture holders to either convert the Debentures or extend the maturity
date up to two years.
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 November 30, 1999, all of these funds had
been advanced to the Company and were outstanding. The loan bears interest at
5.5%. Principal and interest payments are due annually beginning August 1, 2000,
in the amount of $140,000. An interest only payment is due each February 1 until
maturity on August 1, 2008. 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 November 30, 1999, was $1,440,389. The Company is not in
compliance with net worth requirements in the loan agreement and accordingly
this debt is classified as current in the Company's financial statements.
The Company has a line of credit at Chickasha Bank, secured by the
Chickasha property, in the amount of $380,000 for short-term cash flow needs, of
which $373,577 was outstanding at November 30, 1999. This line of credit matures
December 6, 2000. In March 2000, the Company closed the sale of the Chickasha
plant and the proceeds were used to pay off this loan.
In April 1998, the Company finalized a $2,000,000 construction loan for
the Oklahoma City office facility that cost approximately $2.4 million. 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%. The balances on
the loans at November 30, 1999, are $1,993,232 and $246,087 respectively.
19
<PAGE>
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 in June 2000. The agreement contains a financial covenant
that provides for a minimum tangible net worth. At November 30, 1999, the
Company was not in compliance with this covenant. This credit facility is
collateralized by certain accounts/notes receivable, inventory and general
intangibles and as of November 30, 1999, $6,304,748 was outstanding. Subsequent
to year-end this note was reduced to $5,034,060 and the financial institution
has indicated that it will not advance above this amount.
In November 1999, the Company entered into a loan agreement with the City
of Oklahoma City in the amount of $2,000,000 for working capital purposes. As of
November 30, 1999, $1,150,000 of these funds had been advanced to the Company.
The loan bears interest at 6%. An interest-only payment is due May 2, 2000.
Remaining interest and principal is due at maturity on November 2, 2000.
Total notes payable of $2,000,000 to a company were outstanding at
November 30, 1999. These notes are secured by certain patents and bear interest
ranging from 10.75% to 13% at November 30, 1999 and mature June 14, 2000.
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 $431,120 that will be
amortized on a straight-line basis over its estimated useful life of twenty
years.
The Company does not have sufficient capital resources to fund its debt
service and capital requirements for the next four quarters. Continued operating
losses have increased the Company's funding requirements and require it to
obtain additional capital. Accordingly, management is negotiating for increases
in its credit facilities, as well as term extensions. The Company has also
engaged an investment banker to seek additional sources of capital. There can be
no assurances that management's or the investment banker's efforts will be
successful.
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 and
equipment.
20
<PAGE>
Item 7. Financial Statements
The financial statements required by this item begin at page F-1 of
this report.
Item 8. Changes In and Disagreements With Accountants on Accountin
and Financial Disclosure.
None.
PART III
Items 9 through 12 of Part III of this Form 10-KSB are incorporated by reference
from the Company's proxy statement to be filed on or before March 30, 2000.
21
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
a. The following exhibits have been filed as part of this report:
Exhibit No. Description
3.11 Amended and Restated Certificate of Incorporation of Tower
Tech, Inc.
3.21 Amended Bylaws of Tower Tech, Inc.
3.31 Amendment to Bylaws
4.17 Form of 10% Subordinated Convertible Debenture
4.2 Omitted
4.31 Form of Stock Certificate
4.4 Omitted
4.5 Omitted
4.10 Omitted
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.
10.3-9 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
22
<PAGE>
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.
10.9-11 Master Lease Agreement between Tower Tech, Inc. and HPM
Corporation, dated June 16, 1999.
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 Loan Agreement between Tower Tech, Inc. and People First
Bank dated December 7, 1999.
10.19-6 Water Line Agreement between the City of Oklahoma City and
Tower Tech, Inc. dated November 1997.
23
<PAGE>
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.
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.
10.32-11 Security Agreement between Tower Tech, Inc. and HPM
Corporation dated June 16, 1999.
10.33-12 Security Agreement between Tower Tech, Inc. and HPM
Corporation dated November 30, 1999.
24
<PAGE>
10.34-12 Master Lease Agreement between Tower Tech, Inc. and U.S.
Bancorp dated August 4, 1999.
10.35-12 Lease Agreement between Tower Tech, Inc. and JACOM Leasing
dated September 22, 1999.
10.36-12 Secured Promissory Note between Tower Tech, Inc. and the
City of Oklahoma City dated November 2, 1999.
10.37-12 Mortgage between Tower Tech, Inc. and the City of Oklahoma
City dated November 2, 1999.
10.38-12 Loan Agreement between Tower Tech, Inc. and the City of
Oklahoma City dated November 2, 1999.
10.39-12 Security Agreement between Tower Tech, Inc. and the City of
Oklahoma City dated November 2, 1999.
21.1-12 Tower Tech, Inc. subsidiaries
23.1-12 Consent of PricewaterhouseCoopers LLP
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 t
Form 10-QSB for the quarter ended May 31, 1998.
3 Incorporated by reference from the same numbered xhibit 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.
25
<PAGE>
9 Incorporated by reference from the same numbered exhibit to
Form 10-QSB for the quarter ended August 31, 1997.
1 Incorporated by reference from the same numbered exhibit to
Form 8-K filed December 18, 1998.
11 Incorporated by reference from the same numbered exhibit t
10-QSB for the quarter ended August 31, 1999.
12 Filed herewith.
b. The Company has not filed any reports on Form 8-K during the
last quarter of 1999.
26
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TOWER TECH, INC.
By: ss/HAROLD CURTIS
Harold Curtis, Chief Executive Officer
In accordance with the requirements of the Securities Exchange Act of
1934, this registration statement was signed by the following persons in the
capacities and on the dates stated.
SIGNATURE TITLE DATE
ss/HAROLD CURTIS Chief Executive Officer Director March 14, 2000
- ----------------
Harold Curtis (Principal Executive Officer)
ss/ROBERT BRINK President March 14, 2000
- ---------------
Robert Brink (Principal Operating Officer)
ss/CHARLES D. WHITSITT Chief Financial Officer March 14, 2000
- ----------------------
Charles D. Whitsitt (Principal Financial Officer and
Principal Accounting Officer)
ss/LINCOLN WHITAKER Director March 14, 2000
- -------------------
Lincoln E. Whitaker
ss/LEON POAG Director March 14, 2000
- ------------
Leon Poag
27
<PAGE>
TOWER TECH, INC.
FINANCIAL STATEMENTS
INDEX
Page
Report of Independent Accountants F-2
Financial Statements:
Balance Sheets as of November 30, 1999 and 1998 F-3
Statements of Operations for the years ended
November 30, 1999 and 1998 F-5
Statements of Stockholders' Equity (Deficit) for the years ended
November 30, 1999 and 1998 F-6
Statements of Cash Flows for the years ended
November 30, 1999 and 1998 F-7
Notes to Financial Statements F-9
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
Tower Tech, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' equity (deficit) and cash flows present fairly, in all
material respects, the financial position of Tower Tech, Inc. (the "Company") at
November 30, 1999 and 1998 and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has experienced recurring net losses and
negative cash flow from operations in fiscal 1999 and 1998, has a working
capital deficit of $14,623,196 at November 30, 1999 and is not in compliance
with financial covenants contained in certain debt agreements. Included in the
working capital deficit is the Company's operating line of credit ($6,304,748
outstanding at November 30, 1999) and $6,000,000 Convertible Subordinated
Debentures, which come due in June 2000. These matters raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are described in Note 2. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
PricewaterhouseCoopers LLP
Oklahoma City, Oklahoma
March 7, 2000
F-2
<PAGE>
Tower Tech, Inc.
Balance Sheets
As of November 30,
1999 1998
Assets
<TABLE>
<CAPTION>
<S> <C> <C>
Current assets:
Cash $ 251,895 $ 3,798
Accounts receivable, net of allowance
of $800,000 and $275,000, respectively 2,794,116 4,678,685
Accounts receivable, affiliate - 432,216
Notes receivable, current 1,514,519 238,621
Receivables from officers and employees 60,806 32,261
Costs in excess of billings and estimated
earnings on uncompleted contracts 85,120 437,207
Inventory 7,447,926 5,468,702
Restricted assets 157,613 158,794
Prepaid expenses 108,041 176,430
Deferred tax asset - 2,674,530
------------ ------------
Total current assets 12,420,036 14,301,244
Property, plant and equipment, net 18,506,712 16,630,165
Rental fleet, net - 6,789,217
Patents, net 232,715 230,327
Goodwill, net of accumulated amortization
of $11,614 421,165 -
Notes receivable, non-current, net of
unamortized discount of $19,833 and
$39,669, respectively 503,086 489,443
Other assets 379,588 616,335
------------- --------------
Total assets $ 32,463,302 $ 39,056,731
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Tower Tech, Inc.
Balance Sheets, continued
As of November 30,
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Liabilities and Stockholders'Equity (Deficit) Current liabilities:
Current portion of long-term debt $ 17,787,578 $ 11,029,319
Current portion of obligations under
capital lease 231,620 166,683
Accounts payable 7,153,514 5,092,629
Book overdraft - 235,319
Accrued liabilities 1,069,897 1,030,692
Interest payable 505,315 501,530
Customer deposits 295,308 135,446
---------- -----------
Total current liabilities 27,043,232 18,191,618
---------- -----------
Deferred tax liability - 359,422
---------- -----------
Long-term debt, net of current portion 7,349,061 15,832,228
---------- -----------
Obligations under capital lease, net
of current portion 615,728 154,751
---------- -----------
Liability for equity share of investment - 78,946
---------- -----------
Commitments and Contingencies
(Notes 9, 10, 16 and 17)
Stockholders' equity (deficit):
Preferred stock, $.001 par value; 2,000,000
shares authorized; no shares issued and
outstanding at November 30, 1999 and 1998 - -
Common stock, $.001 par value; 10,000,000
shares authorized; 3,576,311 outstanding
at November 30, 1999 and 1998 3,577 3,577
Capital in excess of par 8,278,561 8,278,561
Accumulated deficit (10,826,857) (3,842,372)
------------ -----------
Total stockholders' equity (deficit) (2,544,719) 4,439,766
------------ -----------
Total liabilities and stockholders
equity (deficit) $ 32,463,302 $ 39,056,731
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Tower Tech Inc.
Statements of Operations
For the years ended November 30,
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Revenues:
Tower sales $ 11,708,898 $ 9,235,101
Concrete tower construction 1,220,050 5,716,664
Tower rentals 31,239 5,462,758
Other tower revenue 1,015,048 629,781
------------ ------------
Total tower revenue 13,975,235 21,044,304
------------ ------------
Cost and expenses:
Cost of goods sold and constructed 16,429,004 17,594,126
General and administrative 2,869,824 3,033,369
Selling expenses 1,442,531 1,989,322
Research and development 2,491,157 1,810,985
------------ ------------
Total costs and expenses 23,232,516 24,427,802
------------ ------------
Loss from operations (9,257,281) (3,383,498)
------------ ------------
Other income (expense):
Interest, net (2,088,917) (899,066)
Miscellaneous 133,706 20,190
Gain on sale of property, equipment
and rental fleet 6,537,438 -
Income (loss) on investee company 21,205 (78,946)
------------ -----------
Total other income (expense) 4,603,432 (957,822)
------------ -----------
Loss before income taxes (4,653,849) (4,341,320)
Income tax benefit (expense) (2,330,636) 1,670,088
------------ -----------
Net loss $ (6,984,485) $ (2,671,232)
============= =============
Weighted average shares outstanding - basic 3,576,311 3,556,010
============= =============
Net loss per common share - basic $ (1.95) $ (0.75)
============= =============
Weighted average shares outstanding - diluted 3,576,311 3,556,010
============= =============
Net loss per common share - diluted $ (1.95) $ (0.75)
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Tower Tech Inc.
Statements of Stockholders' Equity (Deficit)
For the years ended November 30,
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Common stock
- ------------
Balance at beginning of period $ 3,577 $ 3,527
Exercise of warrants - 50
----------- -----------
Balance at end of period 3,577 3,577
----------- -----------
Capital in excess of par
- ------------------------
Balance at beginning of period 8,278,561 8,066,403
Exercise of warrants - 212,158
----------- -----------
Balance at end of period 8,278,561 8,278,561
----------- -----------
Accumulated deficit:
- -------------------
Balance at beginning of period (3,842,372) (1,171,140)
Net loss (6,984,485) (2,671,232)
------------ -----------
Balance at end of period (10,826,857) (3,842,372)
------------ -----------
Total stockholders'equity (deficit) $ 2,544,719) $ 4,439,766
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-6
<PAGE>
Tower Tech Inc.
Statements of Cash Flows
For the years ended November 30,
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
Cash flows from operating activities:
Net loss $ (6,984,485) $ (2,671,232)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,239,047 971,390
Gain on sale of property, equipment
and rental fleet (6,537,438) -
Bad debt expense 596,057 546,125
Equity share of (income) loss of investee (21,205) 78,946
Deferred income taxes 2,330,636 (1,670,088)
Payments on trade note receivable 60,459 199,932
Decrease in accounts receivable 1,359,870 515,594
Decrease (increase) in accounts
receivable, affiliate 17,215 (104,921)
Decrease in costs in excess of billings 352,087 282,240
(Increase) decrease in receivables for
officers and employees (28,545) 37,286
Increase in inventory (1,971,379) (2,441,047)
Decrease (increase) in prepaid expenses 68,389 (47,156)
Decrease in other assets 554,159 381,580
Increase in accounts payable 2,057,708 2,831,400
Increase (decrease) in accounts
payable, affiliate 26,583 (10,577)
(Decrease) increase in accrued liabilities (1,463) 612,644
Increase in customer deposits 159,862 21,413
Decrease in income tax payable - (29,101)
----------- -----------
Net cash used in operating activities (6,722,443) (495,572
----------- -----------
Cash flows from investing activities:
Cash paid for acquisition, net (99,096) -
Purchase of property and equipment (2,293,768) (6,868,872)
Decrease in restricted assets 1,181 1,673
Additions to rental fleet - (5,012,935)
Increase in patent costs (18,753) (32,011)
Proceeds from sale of rental operation 12,150,000 -
----------- -----------
Net cash provided by (used in)
investing activities 9,739,564 (11,912,145)
----------- ------------
Cash flows from financing activities:
proceeds from borrowings, net of costs 22,175,727 32,917,003
(Decrease) increase in book overdraft (235,319) 41,320
Repayments of long-term debt and capital
lease obligations (24,709,432) (21,310,970)
Proceeds from exercise of warrants - 212,208
------------ ------------
Net cash (used in) provided by financing
activities (2,769,024) 11,859,561
----------- ------------
Net increase (decrease) in cash 248,097 (548,156)
Cash at beginning of year 3,798 551,954
----------- -----------
Cash at end of year $ 251,895 $ 3,798
=========== ===========
</TABLE>
continued
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
Tower Tech Inc.
Statements of Cash Flows, continued
Supplemental Disclosure of Cash Flow Information
Cash paid for interest during the years ended November 30, 1999 and 1998
was $2,207,944 and $1,831,306, respectively.
Supplemental Schedule of Non-Cash Investing and Financing Activities
The Company acquired certain property, plant and equipment under capital
lease obligations of $736,533 and $176,358 for the years ended November 30, 1999
and 1998, respectively.
The Company acquired certain real estate and improvements, and property,
plant and equipment during 1999 and 1998 by executing notes payable in the
aggregate amount of $42,176 and $418,658, respectively.
In 1999, the Company sold its rental assets for $13,500,000, with
$12,150,000 paid in cash and a note receivable for the remaining $1,350,000. See
Note 8.
On April 30, 1999, the Company acquired Tower Tech Southeast. (See Note
13). In accordance with the agreement, Tower Tech received the following assets
and assumed the following liabilities:
Cash $ 904
Accounts receivable $ 71,358
Inventory $ 7,845
Accounts Payable $ 3,177
Other current liabilities $ 44,453
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
Tower Tech Inc.
Notes to Financial Statements
1. Summary of Significant Accounting Policies
General
Tower Tech, Inc. (the "Company") has been in the business of building,
repairing and upgrading conventional water cooling towers since 1985. In
1991, the Company began developing a new line of modular water cooling
towers made primarily of fiberglass ("TTMT Series"). In 1993, the Company
began production of the TTMT Series cooling tower, which has been
introduced into both the air conditioning and industrial segments of the
cooling tower market. Compact design of the modules permits them to be
factory assembled, inventoried for immediate shipment, easily transported
and quickly installed. In 1995, the Company introduced a concrete
water-cooling tower, which is constructed using the TTMT technology. The
concrete towers, which are constructed using tilt-up concrete
construction methods at the customer's location, are sold under fixed
price contracts. In 1996, the Company began marketing its technology by
entering into licensing agreements with international cooling tower
companies. In 1998 and continuing into 1999, the Company redesigned its
towers and changed the TTMT designation to "TTEF". Additionally, during
this time, the Company began to manufacture substantially all component
parts for its towers, which were previously purchased from outside
suppliers.
Revenue and cost recognition
Revenue from tower sales is recognized as towers are shipped to
customers.
Revenues and costs under fixed price contracts for the construction of
concrete towers are recognized on the percentage of completion method and
are recorded based upon a ratio of costs incurred to date on the contract
to total estimated costs. Contract costs include material, direct labor
and other direct costs related to contract performance. Changes in job
conditions, estimated profitability and final contract settlements may
result in revisions to cost and income, and are recognized in the period
in which the revisions are determined. Provisions for estimated losses on
uncompleted contracts, if any are made in the period in which such losses
are determined.
Rental towers were rented under short-term or month-to-month rental
agreements and revenue was recognized when earned. See Note 8 - Sale of
Rental Operations.
Revenues from licensing agreements are recognized when a non-cancelable
contract is signed specifying a fixed non-refundable fee, the related
technology materials are delivered and the licensee has obtained
government approval, when required. License fees are included in other
operating revenue. The Company had no revenue from licensing agreements
in 1999 and 1998.
F-9
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
1. Summary of Significant Accounting Policies, continued
Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all
short-term investments with a maturity of three months or less to be cash
equivalents.
Inventory
Inventory is stated at the lower of cost or market. Cost is determined on
a first-in, first-out basis.
Property, plant and equipment
Property, plant and equipment is recorded at cost. Depreciation (which
includes amortization of assets under capital leases) is provided for
using the straight-line method over the estimated useful lives of the
assets as follows:
Buildings and plant improvements 7-40 years
Shop equipment 5-10 years
Office furniture and equipment 3-10 years
Molds and dies 7-10 years
Trucks and vehicles 5 years
Assets under capital lease 5-10 years
Repairs and maintenance charges, which do not increase the useful lives
of assets, are charged to expense as incurred.
Interest costs incurred on borrowed funds during a period of construction
are capitalized as a component of the costs of construction of qualifying
assets.
Patents
Costs associated with obtaining patents are capitalized and amortized
from the date granted over the life of the patents (17 years).
Goodwill
Goodwill represents the excess of cost over the fair value of tangible
net assets acquired and is being amortized over 20 years, subject to
impairment write-offs determined by underlying cash flows. Goodwill is
periodically reviewed for impairment whenever facts and circumstances
indicate that the carrying amount may not be recoverable.
Debt issue costs
Other assets relate primarily to costs associated with the issuance of
debt obligations. Debt issue costs are being amortized over the life of
the related debt obligations.
F-10
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
1. Summary of Significant Accounting Policies, continued
Warranty costs
The Company's products are sold with various limited warranty terms. The
Company provides, by a current charge to cost of goods sold, an amount it
estimates will be needed to cover future warranty obligations for towers
sold during the year. The estimated liability for warranty costs is
included in accrued liabilities in the accompanying balance sheets.
Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(FAS 109). FAS 109 requires deferred tax liabilities or assets to be
recognized for the anticipated future tax effects of temporary
differences that arise as a result of the differences in the carrying
amounts and tax basis of assets and liabilities, and for loss
carryforwards and tax credit carryforwards.
Research and development
Costs associated with research and development of new and improved
products are charged to expense as incurred.
Income (loss) per common share
Net income (loss) per common share is computed based on the weighted
average number of shares of common stock outstanding plus dilutive common
equivalent shares arising from the issuance of warrants and options.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenue and expenses
during the reporting periods. Actual results could differ from those
estimates.
Estimates are used when accounting for construction contracts, the
allowance for doubtful accounts and warranty reserve. It is reasonably
possible that actual results could differ significantly from the
estimates in the near term.
Fair value of financial instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, restricted assets and debt instruments. Fair value estimates
have been determined by the Company, using available market information
and appropriate valuation methodologies. These estimates are subjective
in nature, involve uncertainties and matters of significant judgment, and
therefore cannot be determined with precision.
F-11
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
1. Summary of Significant Accounting Policies, continued
Fair value of financial instruments, continued
The carrying value of cash and cash equivalents and restricted assets is
considered to be representative of their respective fair values, due to
the short maturity of these instruments. Based on the borrowing rates
currently available to the Company for loans with similar terms and
average maturities, the fair market value of long-term debt and notes
payable approximates their carrying value.
Concentration of credit risk
Financial instruments, which potentially subject the Company to credit
risk, consist of cash and cash equivalents, accounts receivable and notes
receivable, some of which are from international companies. The Company
maintains its cash balances in high credit quality financial
institutions. From time-to-time, the Company's cash and cash equivalents
may exceed federally insured limits although management believes any
possible credit risk is minimal.
The Company sells cooling towers and related parts to customers
throughout the U.S. and enters into licensing agreements with
international companies. The Company extends credit based upon an
evaluation of the customer's financial condition, generally without
requiring collateral. Exposure to losses on accounts receivable and notes
receivable is principally dependent on each customer's financial
condition and economic conditions in countries where they operate. The
Company monitors its exposure for credit losses and maintains allowances
for anticipated losses.
2. Going Concern and Management's Plans
The Company has experienced recurring net losses in fiscal 1999 and 1998
of $6,984,485 and $2,671,232, respectively, has a working capital deficit
of $14,623,196 at November 30, 1999 and is not in compliance with
financial covenants contained in certain of its debt agreements.
Additionally, as a result of unforeseen design and structural problems
encountered with the Company's new design of cooling towers, the Company
incurred significant warranty and research and development expenses, and
production was ceased for 42 days during 1999. As a result of the
liquidity problems caused by these factors, the Company has been unable
to pay its materials suppliers when amounts become due. Consequently,
several suppliers have sued the Company for nonpayment and others now
require payment for materials on a cash in advance basis, which compounds
the Company's cash flow problems. Included in the working capital deficit
are significant amounts of debt, including the operating line of credit
F-12
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
2. Operations and Management's Plans, continued
($6,304,748 outstanding at November 30, 1999) and $6,000,000 Convertible
Subordinated Debentures, which come due through June 2000. Recent
operating results bring into question whether such amounts can be paid in
accordance with their terms or refinanced. These matters raise
substantial doubt about the Company's ability to continue as a going
concern.
Management has developed a new business plan and strategy to address the
Company's current financial situation and recent financial performance.
The objective of the plan, if successfully implemented, is to restore
liquidity, secure additional working capital, return the Company into
compliance with debt covenants, restore financial strength and reduce
debt.
In February 2000, the Company presented a restructuring proposal to its
trade creditors, debenture holders and other debt holders. The proposal
asks for extensions of certain debt owed by the Company and for
concessions from trade creditors, including deferral of amounts due. It
is not yet known whether or not the Company's creditors will accept the
proposal. The Company continues to negotiate with its lenders in an
attempt to extend amounts due and waive noncompliance with financial
covenants.
The Company has retained an investment banker to review its financial
alternatives and to seek additional sources of capital, which could
include refinancing debt. The accompanying financial statements do not
include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities
that might result should the Company be unable to continue as a going
concern.
3. Contract Receivables
Contract receivables consist of the following at November 30:
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Completed contracts, including retainage $ 641,432 $ 224,917
Contracts in progress:
Current accounts 51,175 612,330
Retainage 11,826 377,467
----------- --------------
$ 704,433 $ 1,214,714
=========== ==============
</TABLE>
Contract receivables are included in accounts receivable in the
accompanying balance sheets.
F-13
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
4. Costs in Excess of Billings and Estimated Earnings on Uncompleted Contracts
The following is a summary of costs and estimated earnings on uncompleted
projects at November 30:
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Cost incurred on uncompleted projects $ 109,924 $ 3,716,410
Estimated earnings 93,454 565,132
---------- ------------
203,378 4,281,542
Less: Billings to date (118,258) (3,844,335)
----------- ------------
$ 85,120 $ 437,207
=========== =============
</TABLE>
5. Inventories
Inventories consist of the following at November 30:
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Raw materials $ 5,617,180 $ 4,234,498
Work in progress 548,254 731,992
Finished goods 1,282,492 502,212
--------------- -----------------
$ 7,447,926 $ 5,468,702
=============== =================
</TABLE>
F-14
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
6. Restricted Assets
Restricted assets consist of investments held by a trustee in connection
with financing obtained to fund construction of the Company's new
manufacturing and office facilities. See Note 9. Amounts required for
obligations classified as current liabilities are reported in current
assets. Investments are stated at cost, which approximates market. The
composition of restricted assets at November 30, is set forth in the
following table:
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Under bond induenture agreements - held by trustee:
Cash and cash equivalents $ 682 $ 1,698
U.S. Treasury Notes 156,931 157,096
---------- ----------
Total restricted assets $ 157,613 $ 158,794
---------- ----------
---------- ----------
</TABLE>
7. Property, Plant and Equipment
Following is a summary of property, plant and equipment at November 30:
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Building and plant improvements $ 9,704,473 $ 1,833,830
Shop equipment 4,725,481 781,607
Office furniture and equipment 954,549 977,260
Molds and dies 3,123,003 1,436,062
Trucks and vehicles 35,357 30,180
Assets under capital lease 1,511,670 732,993
Construction in progress 12,467 11,297,609
Capitalized interest 1,328,120 1,451,049
------------ ------------
21,395,120 18,540,590
Accumulated depreciation (2,634,670) (1,718,212)
Accumulated depreciation, capital leases (253,738) (192,213)
------------- ------------
$ 18,506,712 $ 16,630,165
================= =================
</TABLE>
F-15
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
7. Property, Plant and Equipment, continued
Depreciation of property, plant and equipment, and rental fleet was
$1,023,625 and $718,201 for the years ended November 30, 1999 and 1998,
respectively, of which $707,192 and $483,678 was included in costs of
good sold and constructed.
8. 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, was paid 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. 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-17
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
9. Long-Term Debt
The following is a summary of long-term debt at November 30:
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
10% Convertible Subordinated Debentures
("Debentures") as discussed below. $ 6,000,000 $ 6,000,000
Oklahoma Industries Authority Revenue Bonds, Series 1996, principal and interest
are payable quarterly on January 1, April 1, July 1 and October 1; interest at
an average rate of 7.28%, final payment is due October 1, 2007; collateralized
by the Company's right, title and interest in the real estate comprising the
Company's manufacturing facility, along with all building, structures, fixtures
and improvements on said real estate; bonds are eligible for early redemption
subject to
certain restrictions. 3,705,000 4,035,000
Notes payable to a company; principal payments of $1,500,000 and $500,000 due on
June 14, 2000, interest at bank prime plus 3% (11.50% at November 30, 1999), and
a fixed rate of 13%, respectively; collateralized by a first lien and right of
assignment on
certain patents. 2,000,000 2,000,000
Line of credit with a bank for $400,000; monthly principal and interest payments
of $5,000 with final payment due December 6, 2000; interest at a floating rate
(10% at November 30,
1999); collateralized by real estate. 373,577 330,000
Note payable to a bank. - 86,706
Note payable to a bank; semi-annual payments of principal and interest of $1,577
with final payment due September, 2000; interest at a floating rate (10% at
November 30, 1999)
collateralized by real estate. 52,612 62,944
Note payable to a lending institution; monthly principal and interest payments
of $13,651 with final payment due July 9, 2004; interest at 9.25%;
collateralized by certain
equipment. 1,440,389 1,681,663
Notes payable to an institution; monthly principal and interest payments of
$977, with final payment due November 4, 2017; interest at 7.72% collateralized
by certain
improvements. 114,524 117,062
Construction loan payable to a bank of $2,000,000; monthly principal and
interest payments of $17,127 with final payment due June 14, 2002; interest at
bank prime plus .5% (9.00% at November 30, 1999); collateralized
by real estate. 1,993,232 1,069,813
</TABLE>
F-18
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
9. Long-Term Debt, continued
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Line of credit with a bank. - 8,333,721
Note payable to a bank. - 900,000
Note payable to an individual. - 500,000
Line of credit; principal due November 10, 2003, interest at LIBOR plus .2%
(5.5125% at November 30, 1999); collateralized by real
estate. 1,250,000 1,250,000
Line of credit; principal due November 2, 2000, interest at 6% due May 2, 2000
and upon maturity; collateralized by real estate, accounts receivable and
inventory. 1,150,000 -
Line of credit with a bank; principal due June 1, 2000, interest payable monthly
at bank prime plus 2% (10.5% at November 30, 1999); collateralized by accounts
receivable,
inventory and certain notes receivable. 6,304,748 -
Various notes payable to financial
institutions; principal and interest due
monthly; collateralized by vehicles and
equipment. 752,557 494,638
------------- ------------
25,136,639 26,861,547
Current portion (17,787,578) (11,029,319)
------------- ------------
Long-term debt, net $ 7,349,061 $ 15,832,228
============= ==============
</TABLE>
Principal amounts maturing on long-term debt for each year is as follows at
November 30, 1999:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 17,787,578
2001 1,039,980
2002 2,768,735
2003 624,255
2004 619,056
Thereafter 2,297,035
-----------------
$ 25,136,639
=================
</TABLE>
F-19
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
9. Long-Term Debt, continued
The Company issued the Debentures during the third quarter of 1997,
yielding net proceeds of approximately $5,467,000. The Debentures bear
interest at 10 percent, which is payable semiannually, and mature on June
10, 2000. The principal balance of each Debenture is convertible into
shares of common stock at a price of $8.75 per share at the option of
each Debenture holder or at the option of the Company if the closing
price of the common stock is at least 175% of the conversion price for 20
of 30 consecutive trading days and certain other conditions are
satisfied.
Some of the debt agreements contain financial covenants such as
maintaining minimum tangible net worth and subjective acceleration
clauses. The Company was not in compliance with the financial covenants
as of November 30, 1999 and therefore the entire amount of the debt in
non compliance relating to such agreements has been classified as
current. The Company has also classified all debt ($14,065) with
subjective acceleration clauses in current portion of long-term debt.
10.Obligations under Capital Leases
The Company leases certain equipment under capital lease agreements. The
equipment leases have original terms ranging from 3 to 5 years. Most
equipment leases have purchase options at the end of the original lease
term. Future minimum payments by year and in the aggregate under
noncancellable capital leases consist of the following at November 30,
1999:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 264,047
2001 253,418
2002 227,745
2003 134,431
2004 86,336
------------------
Total minimum lease payments 965,977
Amount representing interest (118,629)
------------------
Present value of net minimum lease payments 847,348
Current portion (231,620)
------------------
$ 615,728
==================
</TABLE>
F-20
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
11.Retirement Plan
Effective June 8, 1990, the Company implemented the Tower Tech, Inc.,
401(k) Retirement Plan (the "Plan"), a voluntary, contributory 401(k)
savings plan. The Plan currently permits employees of the Company to
commence participation in the Plan as of the first January 1 or July 1
following the completion of twelve months of service and the attainment
of 18 years of age. Participants may make tax-deferred contributions from
their compensation during each year, subject to statutory limits imposed
under Section 401(k) and other applicable sections of the Internal
Revenue Code of 1986, as amended. The Plan provides for a discretionary
matching contribution by the Company although none was made in 1999 and
1998. The matching contribution, if any, is allocated to participants
based on a percentage of participant's eligible contributions compared to
total eligible contributions. Eligible contributions are the
participant's contributions not to exceed 6% of compensation.
Participants in the Plan are at all times fully vested in their
contributions and in the earnings attributable to their contributions and
become fully vested in Company contributions made on their behalf after
seven years of service. The Plan permits withdrawals during employment in
the event of proven financial hardship. In the case of termination of
employment, disability, or death, a participant's account balance is
distributed to the participant (or his beneficiary) in either a lump sum
or part lump sum and part installments depending on the participant's
vested balance.
12.Income Taxes
The benefit (expense) provision for income taxes for the years ended
November 30 are comprised of the following:
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Current:
Federal $ - $ -
-------------- ---------------
Deferred:
Federal (1,998,023) 1,431,745
State (332,613) 238,343
-------------- --------------
Total deferred (2,330,636) 1,670,088
-------------- --------------
Income tax benefit (expense) $ (2,330,636) $ 1,670,088
=============== ==============
</TABLE>
F-21
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
12.Income Taxes, continued
The following is a reconciliation of the statutory federal income tax
rate to the Company's effective income tax rate:
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Statutory federal income tax rate 34 % 34%
Change in valuation allowance (87) -
Other 3 4
--------- ---------
Effective income tax rate (50)% 38%
========= =========
</TABLE>
Deferred tax liabilities and assets at November 30 are comprised of the
following:
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Deferred tax liabilities:
Depreciation $ 698,687 $ 359,422
Workers' compensation - 21,712
----------- ------------
Total deferred tax liability 698,687 381,134
----------- ------------
Deferred tax assets:
Accounts receivable allowance 317,280 109,065
Warranty reserve 237,960 79,320
Other 39,660 120,313
Net operating loss carryforward 4,186,238 2,387,544
----------- ----------
Total deferred tax assets before valuation
allowance 4,781,138 2,696,242
Valuation allowance for deferred tax assets (4,082,451) -
------------ ------------
Total deferred tax asset 698,687 2,696,242
Net deferred tax asset $ - $ 2,315,108
============= =============
</TABLE>
F-22
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
12.Income Taxes, continued
FAS 109 requires that the Company record a valuation allowance when it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of the deferred income tax
assets depends on the Company's ability to generate sufficient taxable
income in the future. In the fourth quarter of fiscal 1999, management
determined that, based on the Company's inability to generate taxable
income in 1999 and 1998, it is more likely than not that the Company will
not realize the net deferred tax assets. Therefore, the a valuation
allowance was established against the net deferred tax asset.
At November 30, 1999, the Company had a net operating loss carryforward
(NOL) for regular tax purposes of approximately $10,500,000 expiring in
2009 to 2019. The ability of the Company to utilize the NOL carryforward
to reduce future income taxes may be limited upon occurrence of certain
capital stock transactions during any three-year period resulting in an
aggregate ownership change of more than 50%.
13. Related Party Transactions
R&B Enterprises ("R&B"), an affiliate of Lincoln E. Whitaker who is a
director of the Company, is an independent sales representative for the
Company. As a sales representative, R&B purchases products from the
Company for resale and sells products as an agent for the Company on a
commission basis. During 1999 and 1998, R&B purchased $52,950 and
$16,760, respectively, of products from the Company and earned $44,587
and $14,255 respectively, in commissions.
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 and inventory, and assumed accounts payable
and other current liabilities of TTSE. The transaction resulted in
$398,200, which is being amortized on a straight-line basis over 20
years.
F-23
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
14.Net Earnings (Loss) Per Share
Financial Accounting Standards No. 128, Earnings Per Share ("FAS 128")
requires presentation of "basic" and "diluted" earnings per share, as
defined, on the face of the income statement for all entities with
complex capital structures. Options and warrants to purchase 424,156 and
371,356 shares of common stock at a weighted average price of $6.84 and
$6.93 were outstanding during the period ended November 30, 1999 and
1998, respectively, but were not included in the computation of diluted
EPS because the effect of these outstanding options and warrants would be
antidilutive.
15.Stockholders' Equity (Deficit)
At November 30, 1999, and 1998, the Company had outstanding warrants and
options allowing the holders to purchase a total of approximately 424,156
and 371,356 shares, respectively, of the Company's Common Stock at an
average price of $6.84 and $6.93 per share, respectively, expiring at
various periods through July 2007. These warrants and options were issued
in conjunction with the initial public offering, various financing
agreements with unrelated individuals and the Company's stock option plan
(see Note 16). Warrants for 50,000 shares of common stock were exercised
at an average exercise price of $4.50 during 1998. No options or warrants
were exercised during 1999.
16.Stock Option Plan
In October 1997, the Company amended the Tower Tech, Inc. 1993 Stock
Option Plan (the "Plan"). Under the Plan, the Company is authorized to
issue up to 500,000 shares of common stock pursuant to stock options. The
Plan is administered by a committee consisting of at least two members of
the Board of Directors who are not employees of the Company. The
committee has not established a fixed formula for awarding options under
the Plan. Options under the Plan can be in the form of incentive stock
options or nonqualified stock options. The exercise price for
nonqualified stock options issued under the Plan may be for more or less
than the fair market value of the common stock at the time an option is
granted. The exercise price for incentive stock options must be equal to
the fair market value of the common stock at the time the options are
granted. There have been no stock options issued with an exercise price
less than the market price of common stock at the date of issuance. All
stock options granted through 1999 have terms of ten years and vest
incrementally 20% each year.
F-24
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
16.Stock Option Plan, continued
Vested options may be exercised after five years of employment or upon
termination from the Company. The Company has elected to follow APB No.
25, Accounting for Stock Issued to Employees and related Interpretations
in accounting for the Plan. Under APB No. 25, compensation expense is
recognized for the difference between the option price and market value
on the measurement date. No compensation expense has been recognized
because the exercise price of the stock options equaled the market price
of the underlying stock on the date of grant.
In 1995, the FASB issued FASB Statement No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123") which, if fully adopted by the
Company, would change the methods the Company applies in recognizing the
cost of the Plan. Adoption of the cost recognition provisions of SFAS 123
is optional and the Company has elected not to adopt these provisions.
However, the Company is required by SFAS 123 to provide the following pro
forma disclosures as if the Company adopted the cost recognition
provisions of SFAS 123 with respect to the Plan.
Pro forma information regarding net income and earnings per share is
required by FAS No. 123 and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
the Statement. The fair value for these options was estimated at the date
of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for fiscal 1999 and 1998:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumption 1999 1998
Expected Term 6.00 6.00
Expected Volatility 45.88% 45.13%
Expected Dividend Yield 0% 0%
Risk-Free Interest Rate N/A 5.50%
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
F-25
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
16.Stock Option Plan, continued
The Company's pro forma information follows for November 30:
1999 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Net loss as reported $ (6,984,485) $ (2,671,232)
Pro Forma (7,124,074) (2,701,459)
Loss per share as reported (1.95) (0.75)
Pro forma (1.99) (0.76)
</TABLE>
A summary of the status of the Company's stock options as of November 30,
1999 and November 30, 1998, and the changes during the years ending on
those dates is presented below:
1999 1998
- ----------------------------------- -----------------------------
<TABLE>
<CAPTION>
<S> <S> <S> <S>
Weighted Weighted
# Shares Average # Shares Average
of Underlying Exercise of Underlying Exercise
Options Prices Options Prices
- -------------------- ------------ -------------- --------------
<C> <C> <C> <C>
301,785 $ 6.50 214,094 $ 6.66
- - 124,700 6.25
- - - -
(5,760) 6.25 29,329 6.61
(5,440) 6.25 7,680 6.25
--------------- --------------
312,985 6.49 301,785 6.50
================ ==============
172,062 6.43 103,750 6.40
</TABLE>
The weighted-average fair value of options granted during the year ended
November 30, 1998 was $2.72. No options were granted in 1999.
The following table summarizes information about stock options
outstanding at November 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------- -------------------------
<S> <S> <S> <S> <S> <S>
Number Wgtd. Avg. Wgtd. Avg. Number Wgtd. Avg.
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 11/30/99 Contr. Life Price at 11/30/99 Price
- ---------------- ----------- ----------- -------- ----------- -----------
<C> <C> <C> <C> <C> <C>
$6.25 to $8.25 298,780 6.63 $6.36 166,380 $6.33
$9.00 to $10.00 14,205 7.64 $9.27 5,682 $9.27
- --------------- --------- ------ ------ -------- --------
$6.25 to $10.00 312,985 6.67 $6.49 172,062 $6.43
========== ============
</TABLE>
F-26
<PAGE>
Tower Tech Inc.
Notes to Financial Statements, continued
17. Commitments and Contingencies
Included in cost of goods sold and constructed for the years ended
November 30, 1999 and 1998 are $1,622,422 and $671,267, respectively, of
expense to retrofit and service towers previously sold. The Company has
recorded a liability for estimated warranty costs of $600,000 and
$200,000 at November 30, 1999 and 1998, respectively. Management believes
the warranty reserve is sufficient to cover future warranty costs.
The Company is a defendant in a lawsuit filed December 14, 1999 which
alleges that the Company, through one of its licensees, sold defective
towers to the plaintiff and the Company refuses to correct the alleged
defects. The plaintiff is seeking damages in excess of $3.5 million, plus
continuing losses and punitive damages. The Company is vigorously
defending the allegations and has filed an answer denying the plaintiff's
claims. Since discovery has not been conducted on the case, a reasonable
judgement cannot be made as to the likely outcome or estimated loss, if
any, resulting from this case.
In 1998, the Company entered into a settlement agreement in connection
with litigation with a customer that required a final settlement payment
of $100,000 on December 15, 1999. The Company is currently in default on
the final payment. Under the terms of the settlement agreement, upon
default, a consent judgement may be entered against the Company for
$250,000. At November 30, 1999, the Company had $100,000 accrued and is
currently negotiating with the plaintiff in settlement of the matter.
The Company is a defendant in certain other litigation related primarily
to default of payments on trade accounts and employment matters.
Management is of the opinion that liabilities, if any, arising from these
actions will not have a material effect on the Company's financial
position.
18.Licensing Agreements
The Company has entered into certain license agreements with various
international cooling tower companies. The license agreements grant the
licensees an exclusive, nontransferable right and license to manufacture,
develop and promote cooling towers, using the Company's technology in
specified regions, such as Mexico, India, South Africa and the
Mediterranean area. Under the agreements, the Company earns an initial
fixed, nonrefundable technology transfer fee upon delivery of the
technology materials. No fees were earned during the year ended November
30, 1999 and 1998. Pursuant to certain agreements, the Company will earn
continuing royalties for all Licensed Products promoted by the licensee,
although no such royalties have been earned through November 30, 1999.
The agreements with two international cooling tower companies give the
Company an option to purchase 49% of a company set up to market cooling
towers using the TTEF technology in specified regions. At November 30,
1999, the Company has not exercised these options.
Tower Tech Inc.
Notes to Financial Statements, continued
19.Subsequent Events
Effective December 1999 the Company entered into a $1.1 million lease for
equipment. The term of the lease is 36 months with monthly payments,
beginning in December 1999, of $25,000. At the end of the lease term or
any time during the lease, the Company can purchase the equipment for
$516,097.
In March 2000, Tower Tech sold the Chickasha manufacturing plant for
$434,937, which resulted in a loss of approximately $144,000. The loss is
included in the November 30, 1999 income statement in gain on sale of
property, equipment and rental fleet.
F-27
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 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (File No. 333-07337) of Tower Tech, Inc. of our report
dated March 7, 2000, relating to the financial statements, which appear in this
Form 10-KSB.
PricewaterhouseCoopers LLP
Oklahoma City, Oklahoma
March 7, 2000
Exhibit 10.33
SECURITY AGREEMENT
TOWER TECH, INC., an Oklahoma corporation, with its principal
place of business located 11935 S. 1-44 Service Road, Oklahoma City, Oklahoma
73170 ("Debtor"), for valuable consideration, receipt whereof is hereby
acknowledged, does hereby grant unto HPM CORPORATION, with its principal place
of business located at 820 Marion Road, Mount Gilead, Morrow County, Ohio 43338
("Secured Party"), a security interest in the following property (hereinafter
called the "Collateral"):
Whether now owned or hereafter acquired, all of the Equipment
identified on Schedule 1, which is attached hereto and
incorporated by this reference herein, to be used by Debtor
in the conduct of its business together with all
replacements, permanent additions, accessions, substitutions
and proceeds thereof and thereto (including any claims or
insurance payable by reason of loss or damage thereto),
to secure the payment of One Million One Hundred Nine Thousand Eight Hundred
Twenty-Nine and 00/100 Dollars ($1,109,829.00) (all hereinafter called the
"Obligations").
Debtor hereby warrants and covenants that:
1 . The Collateral will be kept at 11935 S. 1-44 Service Road,
Oklahoma City, Oklahoma 73170. Debtor will notify Secured Party of any change in
location of the Collateral within Oklahoma and will not remove the Collateral
from Oklahoma without the written consent of Secured Party. Secured Party may
examine and inspect the Collateral at any time, wherever located.
2. The Collateral is or is to be used primarily in business.
3. Debtor's chief executive office is located at 11935 S. 1-44
Service Road, Oklahoma City, Oklahoma 73170.
4. Except for the security interest granted hereby, Debtor is
the owner of the Collateral free from any prior lien, security interest or
encumbrances, and Debtor will defend the Collateral against all claims and
demands of all persons at any time claiming the same or any interest therein.
5. Debtor will not sell or offer to sell or otherwise transfer
or encumber the Collateral without the written consent of Secured Party, will
keep the Collateral in good order and repair and will not waste or destroy the
Collateral.
<PAGE>
6. No financing statement covering the Collateral is on file
in any public office, and at the request of Secured Party Debtor will join with
Secured Party in executing one or more financing statements pursuant to the
Uniform Commercial Code in form satisfactory to Secured Party and will pay the
cost of filing the same in all public offices wherever filing is deemed
necessary or desirable by Secured Party.
7. Debtor will keep the Collateral insured at all times
against loss by fire and/or other hazards concerning which, in the judgment of
Secured Party, insurance protection is reasonably necessary, in a company or
companies satisfactory to the Secured Party and in amounts sufficient to
protect Secured Party against loss or damage to the Collateral; and a loss
payee certificate, with loss payable clauses in favor of the Secured Party as
its interest may appear, in form satisfactory to Secured Party, will be
delivered to Secured Party.
8. At its option, Secured Party may discharge taxes, liens,
or security interests or other encumbrances at any time levies are placed on
the Collateral, may pay for insurance on the Collateral and may pay for the
maintenance and preservation of the Collateral. Debtor agrees to reimburse
Secured Party on demand for any reasonable payment made, or any reasonable
expense incurred, by Secured Party pursuant to the foregoing authorization.
Until default, Debtor may have possession of the Collateral and use it in any
lawful manner not inconsistent with this Security Agreement and not
inconsistent with any policy of insurance thereon.
9. Upon the happening of any of the following events or
conditions, namely: (a) default in the payment or performance of any of the
Obligations or of any covenant or liability contained or referred to herein or
in any note or other instrument or document evidencing any of the Obligations;
(b) any warranty, representation or statement made or furnished to Secured Party
by or on behalf of Debtor in connection with this Security Agreement or to
induce Secured Party to make a loan to Debtor or sell to debtor on account
proves to have been false in any material respect when made or furnished; (c)
loss, theft, substantial damage, destruction, sale or encumbrance to or of any
of the Collateral, or the making of any levy, seizure or attachment thereof or
thereon; or (d) death, dissolution, termination of existence, insolvency,
business failure, appointment of a receiver of any part of the Collateral of,
assignment for the benefit of creditors by, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against, Debtor or any
guarantor or surety for Debtor; thereupon, or at any time thereafter (such
default not having previously been cured), Secured Party at its option may
declare all of the Obligations to be immediately due and payable and shall then
have the remedies for a secured party under the laws of the state where the
Collateral is located and the State of Ohio, including, without limitation
thereto, the right to take possession of the Collateral, and for that purpose
Secured Party may, so far as Debtor can give authority therefor, enter upon any
premises on which the Collateral or any part thereof may be situated and remove
the same therefrom. Secured Party may require Debtor to make the Collateral
available to Secured Party at a place to be designated by Secured Party which is
reasonably convenient to both parties. Secured Party will give Debtor ten (10)
days' prior written notice of the time and place of any public sale thereof or
of the time after which any private sale or any other intended disposition
thereof is to be made, and at any such public or private sale Secured Party may
purchase the Collateral.
10. This Security Agreement and the security interest in the
Collateral created hereby shall terminate when the Obligations have been paid in
full. No waiver by Secured Party of any default shall be effective unless in
writing or operate as a waiver of any other default or of the same default on a
future occasion. Secured Party is authorized to fill in any blank spaces herein
and to date this Security Agreement as of the date the loan or open account is
made. All rights of Secured Party hereunder shall inure to the benefit of the
heirs, executors, administrators, successors and assigns of Secured Party; and
all other obligations of Debtor shall bind the heirs, executors, administrators,
successors and assigns of Debtor. If there be more than one Debtor, their
obligations hereunder shall be joint and several. This Security Agreement shall
take effect when signed by Debtor.
11. This Security Agreement contains the entire agreement
between the parties regarding the subject matter hereof and, except as stated
herein, no representations, inducements, promises or agreements, oral or
written, shall be of any force and effect.
12. This Security Agreement shall be deemed to have been made
and entered into in the State of Ohio, and all rights and obligations of the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Ohio.
13. No failure by either party to exercise any power given to
it or to insist upon strict compliance by the other party of any obligation
hereunder shall affect either party's rights concerning such default or any
subsequent default.
Secured Party: Debtor:
HPM CORPORATION TOWER TECH, INC.
By: ____________________ BY: ss/HAROLD CURTIS
-------------------
Print: ________________ Print: Harold Curtis
Its: ________________ Its: Chief Executive Officer
Date: ________________
<PAGE>
SCHEDULE 1
Debtor: TOWER TECH, INC.
Secured Party: HPM CORPORATION
Property Description (continued)
One HPM Corporation Model MLH2200 WP-600 Injection Molding Machine with
the following options: 460v power, dual core pull, wide platen, power tie-bar
puller, cycle counter, wedgemounts, oil alarms, robot interface, motion/no
motion, platform & ladder, air bags, Filtroil system, "B" barrel & screw,
intrusion molding circuit, power pivot, 12" ram spacer, PVC modifications.
Serial Number: 99042. Year of Manufacture: 1999.
Exhibit 10.34
MASTER LEASE AGREEMENT
U.S. BANKCORP
THIS LEASE, dated as of AUGUST 4, 1999, is made by and between U.S.
Bancorp Leasing & Financial - Machine Tool Finance Group, hereafter referred to
as "Lessor," and TOWER TECH, INC., hereafter referred to as "Lessee."
LESSOR AND LESSEE COVENANT AND AGREE AS FOLLOWS:
1. PROPERTY LEASED. Lessor agrees to lease to Lessee and Lessee agrees
to lease from Lessor the personal property ("Property") together with any
replacements, additions, repairs, now or hereafter incorporated therein as
described in any Schedule to Master Lease Agreement ("Schedule") now or
hereafter executed by the parties hereto, the terms of which are incorporated
herein.
2. TERM. This Lease shall become effective on the execution hereof by
Lessor. The Term of this Lease may consist of an "Interim Term" and a "Base
Term" in regard to each Schedule. The Interim Term for each Schedule shall begin
on the date that Lessee executes a Delivery and Acceptance Certificate in
connection with any item of Property or provides to Lessor written approval for
payment for such item of Property. Each Interim Term shall continue until the
Base Term Commencement Date set forth in each Schedule. The Base Term for each
Schedule shall begin on the Base Term Commencement Date and shall continue for
the period specified in each Schedule. During each Interim Term, if any, Lessee
shall pay rental ("Interim Rental") in the amount set forth in each Schedule
plus applicable tax thereon.
3. RENT, PAYMENT AND TAXES. Rental payments are specified in each
Schedule. All rents shall be payable by Lessee each month on or before the
payment date shown in each Schedule at Lessees address herein, or as otherwise
directed by Lessor, without notice or demand and without abatement, set-off or
deduction of any amount whatsoever. Lessee shall pay when due all taxes, fees,
assessments, or other charges, however designated, now or hereafter levied or
based upon the rentals, ownership, use, possession, leasing, operation, control,
or maintenance of the Property, whether or not paid or payable by Lessor,
excluding Lessees income, franchise and business and occupation taxes, and shall
supply Lessor with proof of payment satisfactory to Lessor at least seven (7)
days before delinquency. At its option, Lessor may pay any tax, assessment,
insurance premium, expense, repair, release, confiscation expense, lien,
encumbrance, or other charge or fee payable hereunder by Lessee, and any amount
so paid shall be repayable by Lessee on demand.
For any payment due hereunder which is not paid within ten (10) days
after the date such payment is due, Lessee agrees to pay a late charge
calculated thereon of such late charge represents a reasonable estimate
of the cost at a rate of five percent (5.0%) of such overdue amount The
parties hereto agree that: a) the amount that Lessor would incur in
processing each delinquent payment by Lessee and that such late charge
shall be paid as liquidated damages for each delinquent payment-, and,
b) the payment of late charges and the payment of Default Interest are
distinct and separate from one another. Acceptance of any late charge
or interest shall not constitute a waiver of default with respect to
the overdue amount or prevent Lessor from exercising any other
available rights and remedies. Payments received shall be applied first
to delinquent amounts due, including late charges, then to current
installments. If any such rental payment is made by check and such
check is returned to Lessor for any reason, including without
limitation, insufficient funds in Lessee's account, then Lessee shall
be assessed a fee of S25.00 in addition to any other late charge or any
other fee which may be applicable.
If the Property is located in a jurisdiction which imposes any "Sales,"
"Use," or "Rental" tax, Lessor shall collect such tax from Lessee and remit such
tax to the appropriate taxing authority or Lessee shall remit such tax directly
to the appropriate taxing authority. Such requirement may only be waived if
Lessee is exempt from such tax under applicable laws or regulations. Lessee is
responsible for ensuring that such exemption is properly documented in
accordance with such laws and regulations and that such documentation is
provided to Lessor at the inception of each Schedule.
If the Property is subject to Personal Property Taxes, both Lessee and
Lessor are required to advise the proper taxing authorities of all leased
property. Lessee agrees that it will report the Property as having an original
cost as set forth on each Schedule and as Property leased from U.S. BANCORP
LEASING & FINANCIAL. If Lessor receives an invoice from the taxing authorities
for applicable Personal Property Taxes, Lessor shall pay any such taxes directly
and Lessee agrees to reimburse Lessor for all such taxes paid by Lessor. If
Lessee receives such invoice, Lessee agrees to promptly remit such tax directly
to the taxing authority and maintain proof of payment. Upon termination of each
Schedule, Lessor will, if applicable, estimate Personal Property Taxes on the
Property based upon the most recent tax assessment of the Property or on the tax
rates and taxable value calculations as available from the appropriate taxing
jurisdiction. In the event that the actual personal property tax bill is within
$500.00 of such estimate, then Lessor shall not seek reimbursement from Lessee
for any underpayment, and Lessor may retain any overpayment. If the difference
between such estimate and the actual tax bill exceeds $500.00, Lessor shall
refund or Lessee shall remit the entire difference.
4. LOSS OR DAMAGE. No loss or damage to the Property, or any part of
it, shall impair any obligation of Lessee hereunder. Lessee assumes all risk of
damage to or loss of the Property, however caused, while in transit and during
the term hereof. If any Property is totally destroyed, Lessee's liability to pay
rent for it may be discharged by paying Lessor the Stipulated Loss Value of the
Property if such a Value is provided in the applicable Schedule or, the amount
specified in Se on 14(e) of this Lease, less the amount of any recovery received
by Lessor from any insurance or other source.
5. OWNERSHIP, LOCATION, MAINTENANCE AND USE. Lessee transfers to Lessor
all right, title and interest, including any and all ownership interest, which
Lessee may have in or to the Property. Lessee represents and warrants that it
has the legal right to make such transfer and that such transfer does not
constitute a transfer of all or substantially all of the assets of Lessee, and
that such transfer does not constitute all or a portion of a "bulk transfer"
under the Uniform Commercial Code. It is agreed between the parties hereto that
Lessor shall be the owner of, and hold title to, the Property for all purposes
throughout each Schedule. At its own risk, Lessee shall use or permit the use of
the Property primarily at the location specified in the Schedule and, without
Lessees prior written consent, shall not loan, sublet, remove from such
location, part with possession or otherwise dispose of the Property. Lessee
shall at its sole expense maintain the Property in good repair, appearance and
functional order and in compliance with any manufacturer's and regulatory
maintenance and performance standards, shall keep complete records and documents
regarding its use, maintenance and repair, shall not use or permit the use of
the Property in any unintended, injurious or unlawful manner, shall not permit
use or operation of the Property by any one other than Lessee's qualified
employees and shall not change or alter the Property without Lessor's written
consent. Lessee shall not create, cause, or permit any kind of claim, levy, lien
or legal process on the Property, and shall forthwith satisfy, remove and
procure the release thereof The Property is and always shall remain personal
property. Lessee shall not cause or permit the Property to be used or located in
such a manner that it might be deemed a fixture. Lessee shall secure from each
person not a party hereto who might secure an interest, lien or other claim in
the Property, a waiver thereof Lessee shall affix and maintain, at its expense,
in a prominent and visible location, all ownership notices supplied by Lessor.
Lessee shall permit Lessor to mark the Property in a manner sufficient to
identify the Property as Lessor's Property.
6. LEASE This is a non-cancelable contract of lease only and nothing
herein or in any other document executed in conjunction herewith shall be
construed as conveying or granting to Lessee any option to acquire any right,
title or interest, legal or equitable, in or to the Property, other than use,
possession and quiet enjoyment of the Property, subject to and upon full
compliance with the provisions hereof Lessee and Lessor agree that this Lease is
a "Finance Lease" as defined by the Uniform Commercial Code Article 2A, the
Uniform Personal Property Leasing Act. Notwithstanding the foregoing, Lessee
hereby grants to Lessor a security interest in and to the Property as security
for all Lessee's obligations to Lessor of every kind and nature.
Lessee hereby acknowledges that all of the leased Property was selected
by Lessee from Supplier(s) chosen by Lessee. Lessee is familiar with all Supply
Contract rights provided by the Supplier(s) and is aware that the Supplier(s)
may be contacted for a full description of any rights Lessee may have under any
Supply Contract Providing Lessee is not in Default under this Lease, Lessor
hereby assigns to Lessee without recourse, all rights arising under any
warranties applicable to the Property provided by the manufacturer or any other
person. All proceeds of any warranty claim from the manufacturer or any other
person shall first be used to repair the affected Property.
7. GENERAL INDEMNIFICATION AND INSURANCE. Lessee assumes liability for,
and agrees to defend, indemnify and hold Lessor harmless from any claim,
liability, loss, cost, expense, or damage of every nature (including, without
limitation, fines, forfeitures, penalties, settlements, and attorneys' fees) by
or to any person whomsoever, regardless of the basis, including wrongful,
negligent or improper act or misuse by Lessor, which directly or indirectly
results from or pertains to the leasing, manufacture, delivery, ownership, use,
possession, selection, performance, operation, inspection, condition (including
without limitation, latent or other defects, and whether or not discoverable),
improvements, removal, return or storage of the Property, except arising while
the Property is in the possession of Lessor.
Upon request of Lessor, Lessee shall assume the defense of all demands,
claims, or actions, suits and all proceedings against Lessor for which indemnity
is provided and shall allow Lessor to participate in the defense thereof. Lessor
shall be subrogated to all rights of Lessee for any matter which Lessor has
assumed obligation hereunder, and may settle any such demand, claim, or action
without Lessee's prior consent, and without prejudice to Lessees right to
indemnification hereunder.
At its expense, Lessee shall maintain in force, at all times from
shipment of the Property to Lessee until surrender thereof, property damage
insurance and liability insurance with such deductibles and from such insurance
carriers as shall be satisfactory to Lessor. The Property must be insured
against all risks which are customarily insured against on the type of property
leased hereunder. The amount of Lessee's liability insurance shall not be less
than $500,000.00. Such insurance policies must name Lessor as an additional
insured and loss payee, and provide for ten (10) days advance written notice to
Lessor of modification or cancellation. Lessee shall, upon request, deliver to
Lessor satisfactory evidence of the insurance coverage. In the event Lessee
fails to do so, Lessor may, at Lessees option, in addition to any other rights
available to Lessor, obtain coverage, and any sum paid therefor by Lessor
(including any charges assessed by Lessor for such service) shall be immediately
due and p able to Lessor by Lessee.
8. INCOME TAX INDEMNITY. Lessee hereby represents, warrants, and covenants
to Lessor as follows:
(a) This Lease will be a lease for Federal and Oregon state income tax
purposes; Lessor will be treated as the purchaser, owner, lessor, and original
user of the Property and Lessee will be treated as the lessee of the Property
for such purposes.
(b) Lessor shall be entitled to depreciation deductions with respect to
each item of Property as provided by Section 167(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), determined under Section 168 of the Code by
using the applicable depreciation method, the applicable recovery period, and
the applicable convention, all as may be specified on the applicable Schedule
for the Property, and Lessor shall also be entitled to corresponding Oregon
depreciation deductions
(c) For purposes of determining depreciation deductions, the Property
shall have an income tax basis equal to Lessees cost for the Property specified
on the applicable Schedule, plus such expenses of the transaction incurred by
Lessor as may be included in basis under Section 1012 of the Code.
(d) The maximum federal and Oregon income tax rates applicable to
Lessor in effect on the date of execution and delivery of a Schedule with
respect to an item or items of Property will not change during the lease term
applicable to such Property.
If for any reason whatsoever any of the representations, warranties, or
covenants of Lessee contained in this Lease or in any other agreement relating
to the Property shall prove to be incorrect and (i) Lessor shall determine that
it is not entitled to claim all or any portion of the depreciation deductions in
the amounts and in the taxable years deter-mined as specified in (b) and (c),
above, or (ii) such depreciation deductions are disallowed, adjusted,
recomputed, reduced, or recaptured, in whole or in part, by the internal Revenue
Service or Oregon Department of Revenue (such determination, disallowance,
adjustment, recomputation, reduction, or recapture being herein called a
"Loss"), then Lessee shall pay to Lessor as an indemnity and as additional rent
such amount as shall, in the reasonable opinion of Lessor, cause Lessor's
after-tax economic yield (the "Net Economic Return") to equal the Net Economic
Return that would have been realized by Lessor if such Loss had not occurred.
Ile amount payable to Lessor pursuant to this section shall be payable on the
next succeeding rental payment date after written demand therefor from Lessor
accompanied by a written statement describing in reasonable detail such Loss and
the computation of the amount so payable.
Further, in the event (i) there shall be any change, amendment,
addition, or modification of any provision of Oregon law or of the Code or
regulations thereunder or interpretation thereof with respect to the matters set
forth in this section effective prior to the commencement date of the term of
this Lease with respect to any Property or (ii) if at any time there shall be
any change, amendment, addition, or modification of any provision of Oregon law
or of the Code or regulations thereunder or interpretation thereof with respect
to the maximum applicable federal and state income tax rates as set forth in (d)
above, which results in a decrease in Lessees Net Economic Return, then Lessor
shall recalculate and submit to Lessee the modified rental rate required to
provide Lessor with the same Net Economic Return as it would have realized
absent such change and the lease shall thereupon automatically be deemed to be
amended to adopt such rental rate and values.
9. INSPECTION AND REPORTS. Lessor shall have the right, at any
reasonable time, to enter on Lessee's premises or elsewhere and inspect the
Property and any records and documents regarding its use, maintenance and
repair. Upon Lessees request, but in no event later than thirty (30) days after
such request, Lessee will deliver all information requested by Lessor which
Lessor deems necessary to determine Lessee's current financial condition or
faithful performance of the terms hereof. Lessee shall give Lessor immediate
notice and copy of all tax notices, reports, or inquiries, and of all seizure,
attachment, or judicial process affecting or relating to the use, maintenance,
operation, possession, or ownership of the Property.
10. LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee represents and warrants
to Lessor that as of the date of this Lease and of each Schedule:
(a) Lessee has adequate power and capacity to enter into this Lease,
any Schedule, and any other documents required to be delivered in connection
with this Lease (collectively, the "Documents"); the Documents have been duly
authorized, executed and delivered by Lessee and constitute valid, legal and
binding agreements, enforceable in accordance with their terms; there are no
proceedings presently pending or threatened against Lessee which will impair its
ability to perform under the Lease; and all information supplied to Lessor is
accurate and complete.
(b) Lessee's entering into the Lease and leasing the Property does not
and will not; (i) violate any judgment, order, or law applicable to the Lease,
Lessee or Lessee's organizational documents; or (ii) result in the creation of
any lien, security interest or other encumbrance upon the Property, other than
as granted hereunder.
(c) All information and representations furnished by Lessee to Lessor
concerning the Property are accurate and correct
(d) All financial data of Lessee or of any consolidated group of
companies of which Lessee is a member ("Lessee Group"), delivered to Lessor have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis with prior periods and fairly present the
financial position and results from operations of Lessee, or of the Lessee
Group, as of the stated date and period(s). Since the date of the most recently
delivered financial data, there has been no material adverse change in the
financial or operating condition of Lessee or of the Lessee Group.
(e) If Lessee is a business entity, it is and will be validly existing
and in good standing under laws of the state of its organization; the persons
signing the Documents are acting with all necessary authority and hold the
offices indicated below their signatures, which are genuine.
11. ASSIGNMENT. LESSEE SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR
ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS LEASE OR ENTER INTO ANY SUBLEASE OF
ALL OR ANY PART OF THE LEASED PROPERTY WITHOUT THE PRIOR WRITTEN CONSENT OF
LESSOR WHICH SHALL NOT BE UNREASONABLY WITHHELD. IN CONNECTION WITH THE GRANTING
OF SUCH CONSENT AND THE PREPARATION OF NECESSARY DOCUMENTATION, A FEE SHALL BE
ASSESSED EQUAL TO ONE PERCENT (1%) OF THE TOTAL REMAINING BALANCE THEN DUE
HEREUNDER.
LESSEE AGREES THAT LESSOR MAY ASSIGN OR TRANSFER THIS LEASE OR LESSOR'S
INTEREST IN THE LEASED PROPERTY WITHOUT NOTICE TO LESSEE. Any assignee of Lessor
shall have all of the rights, but none of the obligations, of Lessor under this
Lease and Lessee will not assert against any assignee of Lessor any defense,
counter claim or offset that Lessee may have against Lessor. Lessee acknowledges
that any assignment or transfer by Lessor will not materially change Lessee's
duties or obligations under this Lease nor materially increase the burdens or
risks imposed on Lessee. Lessee shall cooperate with Lessor in executing any
documentation reasonably required by Lessor or any assignee of Lessor to
effectuate any such assignment.
12. SURRENDER. On the expiration or termination of the term specified
in each Schedule, Lessee shall, at its risk and expense and according to
manufacturers recommendations, assemble, prepare for delivery, and deliver the
applicable Property and all manuals, records, certificates and documents
regarding its use, maintenance and repair to any location specified by Lessor
within the continental United States. Upon return of the Property any upgrades
and improvements shall become the property of Lessor. Any upgrades, parts or
improvements may only be removed from the Property if their removal shall not
impair the Property's ability to operate according to any manufacturers and
regulatory performance standards and specifications. The Property shall be
delivered unencumbered and free of any liens, charges, or other obligations
(including delivery expense and sales or use taxes, if any, arising from such
delivery) and shall be in good working order, in the same condition, appearance,
and functional order as when first leased hereunder, reasonable wear excepted,
and in the condition specified or described in the applicable Schedule. At
Lessees request, Lessee shall at Lessee's expense provide Lessor with a written
certification by an independent engineer or other recognized expert acceptable
to Lessor to the effect that the Property is in the condition required
hereunder. In lieu of delivery, Lessor may, at its option, direct Lessee to
dispose of all or a portion of the Property in a proper and lawful manner at a
recognized disposal site at Lessee's sole cost and responsibility.
13. DEFAULT. Time is of the essence under this Lease, and Lessee shall
be in default in the event of any of the following ("Event of Default"): (a) any
failure to pay when due the full amount of any payment required hereunder,
including, without limitation, rent, taxes, liens, insurance, indemnification,
repair or other charge; (b) any misstatement or false statement in connection
with, or non-performance of any of Lessee's obligations, agreements, or
affirmations under or emanating from, this Lease; (c) Lessee's death,
dissolution, termination of existence; (d) if any of the following actions or
proceedings are not dismissed within sixty (60) days after commencement:
Lessee's insolvency, becoming the subject of a petition in bankruptcy, either
voluntary or involuntary, or in any other proceeding under federal bankruptcy
laws; making an assignment for benefit of creditors; or being named in, or the
Property being subjected to a suit for the appointment of a receiver, (e) any
failure to pay, as and when due, any obligation of Lessee, whether or not to
Lessor, arising independently of this Lease; (f) any removal, sale, transfer,
sublease, encumbrance, seizure or levy of or upon the Property; or (g)
bankruptcy, insolvency, termination, death, dissolution, or default of any
guarantor for Lessee.
14. REMEDIES. Upon the occurrence of any Event of Default which
continues for more than ten (10) days and at any time thereafter, Lessor shall
have all remedies provided by law; and, without limiting the generality of the
foregoing and without terminating this Lease, Lessor, at its sole option, shall
have the right at any time to exercise concurrently, or separately, without
notice to Lessee (unless specifically stated), any one or all of the following
remedies:
(a) thereof on demand;
Request Lessee to assemble the Property and make it available to Lessor at a
reasonable place designated by Lessor and put Lessor in possession
(b) Immediately and without legal proceedings or notice to Lessee,
enter the premises, take possession of, remove and retain the Property or render
it unusable (any such taking shall not terminate this Lease);
(c) Declare the entire amount of rent and other sums payable hereunder
immediately due and payable; however, in no event shall Lessor be entitled to
recover any amount in excess of the maximum permitted by applicable law;
(d) Terminate the leasing of any or all items of Property. Such
termination shall occur only upon notice by Lessor and only as to such items of
Property as Lessor specifically elects to terminate. This Lease shall continue
in full force and effect as to any remaining items;
(e) Recover the sum of. (i) any accrued and unpaid rent, plus (ii) the
present value of all future rentals reserved in the Lease and contracted to be
paid over the unexpired term of the Lease, discounted at the rate of six percent
(6%); plus, (iii) the anticipated residual value of the Property as of the
expiration of this Lease or any renewal thereof-, (iv) any indemnity payment, if
then determinable; (v) all commercially reasonable costs and expenses incurred
by Lessor in any repossession, recovery, storage, repair, sale, re-lease or
other disposition of the Property, including reasonable attorneys' fees and
costs incurred in connection therewith or otherwise resulting from Lessee's
default (including any incurred at trial, on appeal or in any other proceeding);
and, (vi) the value of all tax benefits lost to Lessor as a result of Lessee's
default or the enforcement by Lessor of any remedy; plus interest on each of the
foregoing at a rate of fifteen percent (15.0%) per annum ("Default Interest");
and,
(f) Lessor may, but is not required to, re-lease or sell any or all of
the Property at a public or private sale on such terms and notice as Lessor
shall deem reasonable. The proceeds of any sale or lease shall be applied in the
following order of priorities: (i) to pay all of Lessees expenses in taking,
removing, holding, repairing and disposing of Property; then (ii) to pay any
late charges and interest accrued; then (iii) to pay accrued but unpaid rent
together with the anticipated residual value, future rent, interest and all
other due but unpaid sums (including any indemnification and sums due under
other Leases or agreements in default). Any remaining proceeds will reimburse
Lessee for payments which it made to reduce the amounts owed to Lessor in the
preceding sentence. Lessor shall keep any excess. If the proceeds of any sale or
lease are not enough to pay the amounts owed to Lessor under this Section,
Lessee shall pay the deficiency.
No remedy referred to in this paragraph is intended to be exclusive,
but shall be cumulative and in addition to any other remedy referred to above or
otherwise available to Lessor at law or in equity.
15. LESSEE'S WAIVER To the extent permitted by applicable law, Lessee
hereby waives any and all rights and remedies now or hereafter conferred by
statute or otherwise including but not limited to Lessee's rights to: (i) cancel
or repudiate this Lease; (ii) reject or revoke acceptance of the Property; (iii)
recover damages from Lessor for any breaches of warranty; (iv) claim, grant or
permit a security interest in the Property in Lessee's possession or control for
any reason; (v) deduct all or part of any claimed damages resulting from
Lessor's default, if any, under this Lease; (vi) accept any partial delivery of
the property; (vii) "cover" by making any purchase or lease of or contract to
purchase or lease property in substitution for the Property; (viii) commence
legal action against Lessor for specific performance, replevin, sequestration,
claim and delivery or the like for the Property.
16. NOTICES, PAYMENTS AND GOVERNING LAW. All notices and payments shall
be mailed or delivered to the respective parties at the below address, or such
other address as a party may provide in writing from time to time. This Lease
shall be considered to have been made in the State of Oregon and shall be
interpreted, and the rights and liabilities of the parties determined, in
accordance with applicable federal law and the laws of the State of Oregon. In
the event of suit enforcing this Lease, Lessee agrees that venue may, at Lessees
option, be laid in the county of Lessor's address below. LESSOR AND LESSEE EACH
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING FROM OR RELATED TO
THIS LEASE.
17. SEVERABILITY. If any of the provisions of this Lease are contrary
to, prohibited by, or held invalid under applicable laws, regulations or public
policy of any jurisdiction in which it is sought to be enforced, then that
provision shall be considered inapplicable and omitted but shall not invalidate
the remaining provisions. In no event shall this Lease be enforced in any way
which permits Lessor to charge or collect interest in excess of the maximum
lawful rate. Should interest collected exceed such rate, Lessor shall refund
such excess interest to Lessee. In such event, Lessee agrees that Lessor shall
not be subject to any penalties provided by law for contracting for or
collecting interest in excess of the maximum lawful rate.
18. SURVIVAL. All of Lessees rights, privileges and indemnities
contained herein shall survive the expiration or other termination of the Lease
and any Schedules, and the rights, privileges and indemnities contained herein
are expressly made for the benefit of, and shall be enforceable by, Lessor, its
successors and assigns.
19. LESSOR'S DISCLAIMERS. Lessor has obtained the Property based on
specifications furnished by the Lessee. Lessor does not deal in property of this
kind or otherwise hold itself or its agents out as having knowledge or skill
peculiar to the Property. Lessee acknowledges that it has relied on its own
skill and experience in selecting property suitable to the Lessee's particular
needs or purposes and has neither relied upon the skill or judgment of Lessor
nor believes that Lessor or its agents possess any special skill or judgment in
the selection of Property for Lessee's particular purposes. Further, Lessee has
not notified Lessor of Lessee's particular needs in using the Property.
Lessee understands and agrees that neither the Supplier(s) nor any
salesman or any agent of the Supplier(s) is an agent of Lessor. No salesman or
agent of supplier is authorized to waive or alter any term or condition of this
Lease, and no representation as to the Property or any other matter by the
Supplier shall in any way affect Lessee's duty to pay the rent and perform its
obligations as set forth in this Lease. Lessor shall not be liable to Lessee for
any incidental, consequential, or indirect damages or for any act, neglect,
omission, breach or default by any third party.
LESSOR ASSUMES NO RESPONSIBILITY FOR AND MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, AS TO THE TITLE, DESIGN, COMPLIANCE WITH
SPECIFICATIONS, CONDITION, QUALITY, WORKMANSHIP, OR THE SUITABILITY, SAFETY,
ADEQUACY, OPERATION, USE OR PERFORMANCE OF THE PROPERTY OR AS TO ITS
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR AS TO PATENT, TRADEMARK
OR COPYRIGHT INFRINGEMENT. ANY DELAY IN DELIVERY SHALL NOT AFFECT THE VALIDITY
OF THIS LEASE.
LESSOR SHALL NOT BE LIABLE TO LESSEE FOR ANY REPRESENTATION, CLAIM,
BREACH OF WARRANTY, EXPENSE OR LOSS DIRECTLY OR INDIRECTLY CAUSED BY ANY PERSON,
INCLUDING LESSOR, OR IN ANY WAY RELATED TO THE PROPERTY.
20. ENTIRE AGREEMENT, WAIVERS, SUCCESSORS, NOTICE. This Lease and any
Schedule expressly referring hereto (each, a "Transaction") contain the entire
agreement of the parties and shall not be qualdied or supplemented by course of
dealing. However, in any case where the Lessor takes an assignment from a vendor
of its security interest in the same Property, the terms of the Transaction
shall be incorporated into the assigned agreement and shall prevail over any
inconsistent terms therein but shall not be construed to create a new contract.
No waiver or modification by Lessor of any of the terms or conditions hereof
shall be effective unless in writing signed by an officer of Lessor. No waiver
or indulgence by Lessor of any default or deviation by Lessee of any required
performance shall be a waiver of Lessees right to subsequent or other full and
timely performance. This Lease shall be binding on the parties hereto and their
respective successors and assigns and shall inure to the benefit of such
successors and assigns. Paragraph headings shall not be considered a part of
this Lease.
Under Oregon law, most agreements, promises and commitments made by
Lessor after October 3, 1989, concerning loans and other credit extensions which
are not for personal. family or household purposes or secured solely by the
Lessee's residence must be in writing, express consideration and be cyanide by
Lessor to be enforceable.
BY INITIALING THIS SECTION, LESSEE ACKNOWLEDGES THAT LESSEE HAS READ THE ABOVE
PARAGRAPHS UNDER SECTION 19, LESSOR'S DISCLAIMERS, AND.SECTION 20, ENTIRE
AGREEMENT, AND FULLY UNDERSTANDS THEIR CONTENT.
INITIALED: ss/HC
21. POWER OF ATTORNEY. LESSEE HEREBY AUTHORIZES AND APPOINTS LESSOR AS
ITS ATTORNEY-IN-FACT TO COMPLETE, AMENDANDEXECUTE ONLESSEE'S BEHALF FINANCING
STATEMENTS INCONNECTION WITHTHIS LEASE AND TO CONFORM THE DESCRIPTION OF THE
PROPERTY (INCLUDING SERIAL NUMBERS) IN ANY SUCH FINANCING STATEMENTS OR OTHER
DOCUMENTATION. LESSEE WILL ALSO PROMPTLY EXECUTE AND DELIVER TO LESSOR SUCH
FURTHER DOCUMENTS AND TAKE FURTHER ACTION AS LESSOR MAY REQUEST TO MORE
EFFECTIVELY CARRY OUT THE INTENT AND PURPOSE OF THIS LEASE.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Master
Lease Agreement to be duly executed as of the day and year first above written.
TOWER TECH, INC. (LESSEE)
By: ss/HAROLD CURTIS
-------------------
PRESIDENT
U.S. BANCORP LEASING & FINANCIAL -
MACHINE TOOL FINANCE GROUP (LESSOR)
By:____________________________________
An Authorized Officer Thereof
Address for All Notices:
U. S. BANCORP LEASING & FINANCIAL
P.O. Box 2177, 7659 S.W. Mohawk Street
Tualatin, Oregon 97062-2177
SCHEDULE TO MASTER LEASE AGREEMENT
U.S. BANCORP
Schedule Number 27208A-17269-001
THIS SCHEDULE made as of AUGUST 4, 1999 by and between U.S. BANCORP
LEASING & FINANCIAL -MACHINE TOOL FINANCE GROUP ("Lessor"), having its principal
place of business at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon
97062-2177, and TOWER TECH, INC. ("Lessee"), having its principal place of
business located at P.O. BOX 891810, OKLAHOMA CITY, OK 73189, to the Master
Lease Agreement dated as of AUGUST 4, 1999 between the Lessee and the Lessor
(the "Lease"). Capitalized terms used but not defined herein are used with the
respective meanings specified in the Lease. If any terms hereof are inconsistent
with the terms of the Lease, the terms of the Schedule shall prevail.
LESSOR AND LESSEE HEREBY COVENANT AND AGREE AS FOLLOWS:
(a) The following specified equipment (the "Property") is hereby made and
constituted Property for all purposes pursuant to the Lease:
ONE (1) HPM MODEL MLH730-160 INJECTION MOLDING MACHINE WITH BIMETALLIC BARREL,
RECIPROCATING SCREW, 3/4" RADIUS NOZZLE, HYDRAULIC EJECTOR WITH 9/16" THRU HOLE
EJECTOR PLATE, HPM WRAP-AROUND TANK, ROBOT TAKE-OUT AND ALL ACCESSORIES AND
ATTACHMENTS.
(b) The Property will be installed or stored at the following address
11935 S. I-44 SERVICE ROAD,
OKLAHOMA CITY, OK 73173, COUNTY: CLEVELAND
(c) The cost of the Property is $371,513.00;
(d) The total amount financed pursuant to this Schedule is $278,634.75;
Please Initial Here: ss/HC
-----
(e) The Term applicable to this Schedule (the "Term") shall be Thirty Six (36)
months, with basic monthly rental payments of One @ $14,000.00 Followed by
Eleven (11) @ $9,500.00 Followed by Twenty Four (24) @ $8,687.41 each plus
applicable sales and/or Use tax. The first such payment shall be due on the
Equipment Acceptance Date. Each subsequent payment shall be due on the Payment
Due Date (as defined in Paragraph 1 below) corresponding to the day of the month
of the Equipment Acceptance Date.
(f) The record owner of the premises at which the Property will be
installed or stored is: Tower Tech, Inc.,
(g) Lessor and Lessee agree that Section 8 of the Lease entitled "Income Tax
Indemnity" shall NOT apply to this Schedule.
1. PAYMENT DUE DAY. Payment Due Days are on the First, 10th and 20th of each
month. Acceptance or Rental Commencement Dates occurring on the 26th through the
5th day of a month shall have a Payment Due Day on the First of each month.
Acceptance or Rental Commencement Dates occurring on the 6th through the 15th
day of a month shall have a Payment Due Day on the 10th of each month.
Acceptance or Rental Commencement Dates occurring on the 16th through the 25th
day of a month shall have a Payment Due Day on the 20th of each month.
2. PAYMENT ADJUSTMENT. If a Delivery and Acceptance Certificate (a
"Certificate") is not executed within Thirty (30) day(s) of the date of this
Schedule, then, as of the date such Certificate is executed (the "Adjustment
Date"), the basic monthly rental payments due hereunder shall be recalculated
based upon increases in the 30-day rolling average of Thirty Six (36)-month U.
S. Treasury Notes (the "Rolling Average") from the date hereof until the
Adjustment Date. If, on the Adjustment Date, the Rolling Average is greater than
5.66%, then the basic monthly rental payments due hereunder shall be increased
accordingly to reflect the actual rate. Thereafter, the basic monthly rental
payments shall remain fixed during the Term hereof, In no event shall the amount
of the basic monthly rental payment as set forth above be decreased.
3. LATE CHARGE. If any installment of Rent shall not be received by Lessor or
Lessor's Assignee within ten (10) days after such amount is due, Lessee shall
pay to Lessor a late charge equal to Eight percent (8.0%) of such overdue
amount.
4. TITLE PASSAGE. a.. As long as no event of default has occurred and is
continuing under the Lease, Lessee shall have the option to purchase all, but
not part, of the Property at the end of the Term or any renewal thereof (the
"Option") for a purchase price of $1.00, (the "Purchase Price"). Payment of the
Purchase Price must be received by Lessor on or before the last day of the Term.
The Purchase Price shall be deemed to be the "anticipated" or "estimated"
residual value of the Property (as such terms are used in the Lease).
b. Upon receipt of payment of the Purchase Price together with any and
all applicable sales or other taxes due in connection therewith, and any and all
remaining sums or other amounts payable under this Schedule, Lessor shall
transfer all its right, title and interest in and to the Property to Lessee. The
Property shall be transferred "As Is" and "Where Is" without any express or
implied representations or warranties.
Year 2000. Lessee has reviewed and assessed or will review and assess its
business operations and computer systems and applications to address the "year
2000 problem" (that is, that computer applications and equipment used by Lessee,
directly or indirectly through third parties, may be unable to properly perform
date-sensitive functions before, during and after January 1, 2000). Lessee
reasonably believes that the year 2000 problem will not result in a material
adverse change in Lessee's business condition (financial or otherwise),
operations, properties or prospects or ability to repay Lessor. Based upon the
review, Lessee has developed or will develop and implement a plan to address the
year 2000 problem, to remediate any material year 2000 problem, and to complete
testing with respect thereto, as soon as practicable and in any event by
September 30, 1999. Lessee will promptly deliver such information relating to
this covenant as Lessor requests from time to time.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this
Schedule to be duly executed as of the day and year first above written.
TOWER TECH, INC.
By: ss/HAROLD CURTIS
- --------------------
Title: PRESIDENT
U.S. BANCORP LEASING & FINANCIAL - MACHINE TOOL FINANCE GROUP
By: ________________________
An Authorized Officer Thereof
Address for All Notices:
U. S. BANCORP LEASING & FINANCIAL
P.O. Box 2177, 7659 S.W. Mohawk Street
Tualatin, Oregon 97062-2177
Machine Tool Finance Group
(800) 225-8029 (503) 797-0222
General Equipment Group
(800) 253-3468 (503) 797-0200
<PAGE>
EXHIBIT "A"
U.S. BANCORP
Lease/Loan Schedule Number 27208A-17269-001
----------------
Reference is made to that certain Schedule to Master Lease/Loan
Agreement (the "Agreement") dated AUGUST 4, 1999 wherein U.S. BANCORP LEASING &
FINANCIAL - MACHINE TOOL FINANCE GROUP is the Lessor/Secured Party and TOWER
TECH, INC. is the Lessee/Debtor.
The "Property" and/or "Collateral" (as defined and used in the above Agreements
and any and all related documents) includes the following:
ONE (1) HPM MODEL MLH730-160 INJECTION MOLDING MACHINE WITH BIMETALLIC BARREL,
RECIPROCATING SCREW, 3/4" RADIUS NOZZLE, HYDRAULIC EJECTOR WITH 9/16" THRU HOLE
EJECTOR PLATE, HPM WRAP-AROUND TANK, ROBOT TAKE-OUT AND ALL ACCESSORIES AND
ATTACHMENTS.
ADDRESS FOR ALL NOTICES:
P.O. Box 2177, 7659 S.W. Mohawk Street
Tualatin, Oregon 97062-2177
GUARANTY
U.S. BANCORP
In order to induce U.S. BANCORP LEASING & FINANCIAL - MACHINE TOOL FINANCE GROUP
(the "Creditor") to enter into one or more financing arrangements in the form of
leases or loans (referred to herein as the "Transaction(s)") with, or otherwise
directly or indirectly making property available to TOWER TECH, INC. (the
"Obligor"), and/or to induce Creditor to grant to Obligor such renewals,
extensions, forbearances, releases of collateral or other relinquishments of
rights, whether in connection with the Transaction(s) or otherwise, as Creditor
may in its sole discretion deem advisable, and in consideration of any
agreements heretofore or hereafter entered into between Creditor and Obligor
(any and all such notes, security agreements, loan agreements, lease agreements,
entered into between Obligor and Creditor together with any and all schedules
and riders thereto and any and all other instruments or agreements including,
without limitation, pledge agreements and assignments, executed and delivered by
Obligor in connection therewith, being hereinafter collectively called the
"Agreements"), and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF
WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY
JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT
AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR
IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES
OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND
WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED,
SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS
AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS").
Each Guarantor hereby promises to pay Creditor when due, on demand, all
indebtedness of any kind or nature emanating from the Agreements (including,
without limitation, if an event of default shall occur under the Agreements,
payment on demand of all unpaid sums to become due under the defaulted
Agreements for the entire term thereof), whether now or hereafter arising and
however and whenever evidenced-, and each Guarantor agrees to indemnify and hold
Creditor harmless from and against any and all losses, liabilities and costs
emanating from any failure of Obligor to fully, promptly and completely satisfy
the Obligations. For purposes hereof (i) "losses, liabilities and costs" shall
include (without limitation), all losses, liabilities, obligations, claims,
demands, judgments, costs and expenses of whatever kind or nature (including,
without limitation, attorneys' fees) and (ii) "emanating" from an event or cause
shall include (without limitation) in any way directly or indirectly being
caused by or in any other way arising out of such event or cause.
Each Guarantor hereby waives any notice of default or nonpayment or of late or
inadequate satisfaction in regard to the Obligations. In particular (and not in
limitation of the foregoing), each Guarantor hereby agrees that, in enforcing
this Guaranty, Creditor shall not be required (i) to demand payment of the
amount due (known as "demand"); (ii) to present for payment any evidence of the
Obligations (known as "presentment" or "presentment for payment"); (iii) to give
notice that amounts due have not been paid (known as "notice of dishonor"); or
(iv) to obtain an official certification of nonpayment (known as "protest") or
to give any Guarantor notice of any such "protest;" and each Guarantor hereby
waives demand, presentment, presentment for payment, notice of dishonor, protest
and notice of protest as aforesaid. Each Guarantor hereby further waives notice
of acceptance hereof and any and all other notices to which such Guarantor may
be entitled.
Each Guarantor hereby consents and agrees that without any further notice to, or
assent by Guarantor, the liability of Obligor or any other guarantor of the
Obligations may from time to time, in whole or in part, be extended, renewed,
continued, amended, modified, composed, accelerated, supplemented, compromised,
settled or released in Crudities sole discretion, and that any collateral for
any of the Obligations or for any guaranty thereof (including this Guaranty) may
from time to time, in whole or part, be exchanged, sold or surrendered in
Creditor's sole discretion. Each Guarantor hereby agrees that no such extension,
renewal, continuation, amendment, modification, composition, acceleration,
supplement, compromise, settlement, release, exchange, sale or surTender shall
in any way impair, affect or release the liability of any Guarantor hereunder or
constitute a waiver of any of Creditor's rights hereunder.
This Guaranty is unlimited, absolute, irrevocable and unconditional and shall
continue in full force and effect until all the Obligations shall have been
fully, completely and finally satisfied and paid. The obligations of each
Guarantor hereunder shall continue and survive the repossession of any equipment
or other property leased pursuant to the Agreements (or any property in which
Creditor has a security interest securing any of the Obligations) whether or not
any such repossession constitutes an "election of remedies" against the Obligor
or any other person. Each Guarantor agrees to be obligated hereunder
notwithstanding any termination of the Agreements in whole or part by operation
of law or any unenforceability or invalidity of the Agreements for any reason
whatsoever (including, without limitation, invalidity or voidness ab initio
and/or partial or complete unenforceability as a result of impossibility or
impracticability of performance or frustration of the purpose of the
Agreements). The obligations of the Guarantors hereunder are joint and several
and shall not be subject to any abatement, setoff, defense or counterclaim for
any cause whatsoever.
Each Guarantor hereby agrees that its obligations hereunder are direct and
primary and that Creditor may proceed directly and in the first instance against
each or any Guarantor or combination of Guarantors and have its remedy hereunder
without first being obliged to resort to any other right or remedy or security
for any of the Obligations. Each Guarantor hereby waives any right to require
Creditor to proceed against the Obligor or to proceed against any other
Guarantor or to proceed against any other guarantor of the Obligations. If there
shall be any securities for any of the Obligations or for the obligations of any
Guarantor hereunder, or for the obligations of any other guarantor of any of the
Obligations, Creditor may proceed against and/or enforce any or all of such
securities in whatever order it may, in its sole discretion, deem appropriate.
Any amount(s) received by Creditor from whatever source and applied by it to any
of the Obligations shall be applied in such order ofapplication as Creditor
shall, in its sole discretion, elect.
ADDRESS FOR ALL NOTICES:
P.O. Box 2177, 7659 S.W. Mohawk Street
Tualatin, Oregon 97062-2177
Initial: ss/HC
-----
In the event of any default in regard to any Guarantors obligations hereunder,
or in the event of death, incompetency, termination, dissolution or insolvency
of the Obligor, or if a receiver, liquidator or conservator be appointed for any
part of the property or assets of the Obligor, or if the Obligor makes an
assignment for the benefit of creditors, or if the Obligor shall file a
voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall
be filed against it then, and in any such case, each Guarantor agrees to pay to
Creditor, upon demand, the full amount which would be payable hereunder by such
Guarantor if all the Obligations were then due and payable.
Notwithstanding any provision hereof or any provision of any other instrument or
agreement, or any presumption of applicable law or principle of legal
construction to the contrary: (i) nothing shall discharge or satisfy any
Guarantors liability hereunder except full, complete and final payment and
satisfaction of all the Obligations; (ii) each Guarantor hereby waives any and
all defenses to its liability hereunder including, without limitation, any
defense arising by reason of any cessation ofthe Obligor's business or any
bankruptcy, insolvency or business failure of the Obligor or any other person;
and (iii) no Guarantor shall have any right of subrogation against the Obligor,
and each Guarantor hereby waives any and all rights of subrogation it may have
against the Obligor, to enforce any right or remedy which Creditor has or may
hereafter have against the Obligor, and waives the benefits of, and any and all
rights to participate in, any security or securities now or hereafter held by
Creditor. It is expressly understood by each Guarantor that payments received by
Creditor from or on behalf of Obligor shall be solely for the benefit of
Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby
further acknowledges that such Guarantor is not and shall not be construed as a
"Creditor" of Obligor by virtue of this Guaranty.
Each Guarantor hereby represents and warrants to Creditor that all information
concerning such Guarantor, including (without limitation) financial statements
and other financial information, furnished to Creditor in connection with the
Agreements or any of the other Guaranteed Agreements, was true, complete and
accurate as of the date of delivery thereof to Creditor, and that all such
information remains true, complete and accurate, and that there have been no
material adverse changes in such Guarantors financial condition as of the date
hereof. In the event of any breach of any Guarantors representations and
warranties herein or any material adverse change in the financial condition of
any Guarantor, upon the request of Creditor, such Guarantor shall promptly
furnish to Creditor such additional security for the performance of such
Guarantor's obligations hereunder as Creditor may reasonably request.
No notice of termination of this Guaranty shall be effective unless and until
such notice shall be in writing and executed by Guarantor and shall have been
received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659
S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the
event of such notice, this Guaranty shall continue in full force and effect with
regard to all Obligations created, existing or arising prior to the date of such
receipt. No modification hereof or amendment hereto and no waiver of any term or
provision hereof shall be valid unless in writing and signed by an authorized
officer of Creditor. No delay or failure on the part of Creditor in the exercise
of any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by Creditor of any right or remedy shall preclude any other or
further exercise thereof or the exercise of any other right or remedy. No action
of Creditor permitted hereunder shall invalidate or in any way impair this
Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver
of any other or further right or remedy hereunder.
Each Guarantor hereby consents and agrees that without any further notice to, or
assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned,
in the sole discretion of Creditor or its assignee. As used herein, the term
"Creditor" includes Creditor and any successor or assign of Creditor. This
Guaranty shall be binding upon each Guarantor, and upon the legal successors,
representatives, and assigns of such Guarantor. Each and every waiver made
herein by any Guarantor is and shall be deemed to be and construed as an
absolute, irrevocable and unconditional waiver of the right waived.
This Guaranty is intended to be legal, valid, binding and enforceable in
accordance with its terms. Whenever possible, each term and provision of this
Guaranty shall be interpreted so as to be effective and to effectuate its intent
under applicable law. If any term or provision of this Guaranty shall be
unenforceable, invalid or prohibited in any jurisdiction under applicable law,
such term or provision shall be ineffective in such jurisdiction, but only to
the extent of such unenforceability, invalidity or prohibition, and the
remainder of such term or provision, and the other terms and provisions of the
Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor
shall any of the terms or provisions of the Guaranty be thereby affected or
impaired in any way in any other jurisdiction.
This Guaranty shall be governed by the construed in accordance with Federal Law
and the laws of the State of Oregon, and that service of process by certified
mail, return receipt requested, will be sufficient to confer personal
jurisdiction over such Guarantor for purposes of litigating any actions arising
hereunder in the courts of such State. This Guaranty is in addition to, and not
in limitation or derogation of, any and all other guaranties of the Obligations
executed by any Guarantor. In the event of any conflict between the provisions
of this Guaranty and those of any such other guaranty, the provisions of this
Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time
is of the essence with regard to the performance of such Guarantors obligations
hereunder. This Guaranty shall take effect as a scaled instrument.
IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly
executed and delivered as of AUGUST 4, 1999.
Witness:
Print Name: Lana Morgan
Address: Rt. 5 Box 125, Chickasha, OK 73018
GUARANTOR'S SIGNATURE MAY
NOT BE WITNESSED BY GUARANTOR'S
SPOUSE OR OTHER FAMILY MEMBER
Harold Curtis
ss/HAROLD CURTIS
- ----------------
SS# ###-##-####
ADDRESS FOR ALL NOTICES:
P.O. Box 2177, 7659 S.W. Mohawk Street
Tualatin, Oregon 97062-2177
Initial: ss/HC
- ---------------
JACOM LEASING Exhibit 10.35
A DIVISION OF JACOM COMPUTER SERVICES INC.
207 WASHINGTON STREET, NORTHVALE, NEW JERSEY 07647-0947
VENDOR (NAME & ADDRESS)
EQUIPMENT DESCRIPTION:
See Attached Equipment Listing
LEASE NUMBER 3362
SCHEDULE OF PAYMENT
60 MONTHLY PAYMENTS OF $8,798.50 (PLUS TAX)
(applicable taxes to be billed
PAYABLE AT SIGNING OF THE LEASE
Last 2 MONTHS PAYABLE IN ADVANCE
MAKE CHECKS PAYABLE TO: JACOM LEASING
EQUIPMENT LOCATION IF OTHER THAN BILLING ADDRESS:
LEASE AGREEMENT
This agreement is made the 22nd day of September 1999 between Jacom Leasing, its
principal office at 207 Washington Street, Northvale, New Jersey 07647 (the
"Lessor") and Tower Tech, Inc.,11935 South 1-44 Service Road, Oklahoma City, OK
73189 (the "Lessee").
1. LEASE
Lessor agrees to lease to Lessee, and Lessee agrees to hire from Lessor, the
personal property (the "Equipment") described above. Neither Lessor nor Lessee
shall have any obligations hereunder until the execution and delivery of this
Lease Agreement. The terms and conditions contained herein (including the
Supplements, if any annexed hereto) shall govern the leasing and use of the
Equipment.
2. ADDITIONAL DEFINITIONS
(a)The "Installation Date" means the date on which the Equipment is installed
at Lessee's site. If Lessee shall fail, without reasonable cause, to execute
a delivery and acceptance certificate within seven (7) days of the delivery
of the Equipment at Lessee's site, the Installation Date will be considered
to be seven (7) days after the date of delivery of the Equipment by the
supplier.
(b)The "Commencement Date" means, as to the Equipment designated above, where
the Installation Date for such Equipment falls on the first day of the month,
that date, and in any other case, the first day of the month following the
month in which such Installation Date falls.
3. TERMS OF LEASE
(a)The term of this Agreement, as to all Equipment designated above, shall
commence on the Installation Date for such Equipment, and shall continue for
an initial period ending that number of months from the applicable
Commencement Date (the "Initial Period"); thereafter, the term of this
Agreement for all such Equipment shall be automatically extended for
successive three-month periods unless and until terminated by either party
giving to the other not less than six months' prior written notice. Any such
termination shall be effective only on the last day of the Initial Period or
the last day of any such successive periods. No Equipment Schedule may be
terminated with respect to less than all items of Equipment identified
therein.
(b)Any notice of termination given by either party under this Agreement or
under arty Supplement annexed hereto may not be revoked without the written
consent of the other party.
4. RENTALS
As to the Equipment, the monthly rental payable by Lessee to Lessor is as set
forth above. Rental shall begin on the Installation Date and shall be due and
payable by Lessee in advance on the first day of each month. If the Installation
Date does not fall on the first day of a month, the first payment shall be a pro
rata portion of the monthly rental, calculated on a 30-day basis, due and
payable on the Installation Date. In addition to the monthly rental set forth
above, Lessee shall pay to Lessor an amount equal to all taxes paid, payable or
required to be collected by Lessor, however designated, which are levied or
based on such rental, on this Agreement, or on the Equipment or its use, lease
operation, control, or value, including without limitation, state and local
privilege or excise taxes based on gross revenue, any penalties or interest in
connection therewith or taxes or amounts in lieu thereof paid or payable by
Lessor in respect of the foregoing, but excluding taxes based on Lessor's net
income. Personal property taxes on the Equipment shall be paid by Lessee. Lessee
agrees to file, on behalf of Lessor, all required property tax returns and
reports concerning the Equipment with all appropriate governmental agencies,
and, within not more than 45 days after the due date of such filing, to send
Lessor confirmation of such filing. Charges for taxes, penalties and interest
shall be promptly paid by Lessee when invoiced by Lessor.
A late charge on any past due payment shall accrue at the rate of 10% of each
such late payment for each month such payment shall be late, or if such rate
shall exceed the maximum rate allowed by law, then at such maximum rate, and
shall be payable on demand. Late payment charges shall be paid not later than
thirty (30) days following the date that the original payment was due.
5. INSTALLATION AND USE OF EQUIPMENT
(a) Lessee will provide the required suitable electric current and/or other
power source to operate the Equipment and suitable place of installation
for the Equipment with all appropriate facilities as specified by the
manufacturer.
(b) Subject to the terms of this Agreement, Lessee shall be entitled to
unlimited usage of the Equipment without extra charge by Lessor and may
sell time on the Equipment to third parties.
(c) Lessee will at all times keep the Equipment in its sole possession and
control. The Equipment shall not be moved from the locations stated
above without the prior written consent of Lessor.
(d) After prior notice to Lessor, Lessee may, at its own expense, make
alterations in or add attachments to the Equipment, provided that such
alterations or attachments do not decrease the value of the Equipment or
interfere with the normal and satisfactory operation or maintenance of the
Equipment or with Lessee's ability to obtain and maintain the maintenance
contract required by this Agreement. Unless Lessor shall otherwise agree in
writing, all such alterations and attachments shall be and become the
property of Lessor or, at the option of Lessee, shall be removed by Lessee
and the Equipment restored at Lessee's expense to its original condition,
reasonable wear and tear only accepted.
6. MAINTENANCE AND REPAIRS
(a)Lessee shall, during the continuance of this Agreement, at its expense, keep
the Equipment in good working order and condition and make all necessary
adjustments, repairs and replacements thereto. Lessee shall not use or permit
the Equipment to be used for any purpose for which, in the opinion of
manufacturer, the Equipment is not designed or reasonably suitable.
(b)Without limiting the generality of the foregoing, Lessee shall, during the
continuance of this Agreement, at its own expense, enter into and maintain in
force a contract with the manufacturer (or other qualified service
organization approved in writing by both parties) covering at least prime
shift maintenance of each item of Equipment. Such contract as to each item
shall commence upon expiration of the warranty period, if any, relating to
such items. Lessee shall furnish Lessor with a copy of such contract(s) upon
demand.
(c)At the termination of this Agreement, Lessee shall, at its expense, return
the Equipment to Lessor (at the location designated by Lessor within the
continental United States) in the same operating order, repair, condition and
appearance as on the Installation Date, reasonable wear and tear only
excepted with all engineering changes prescribed by the manufacturer prior
thereto incorporated therein, and Lessee shall arrange and pay for such
repairs (if any) as are necessary for the manufacturer to accept the
equipment under contract maintenance at its then standard rates.
(d) Lessee shall comply with all governmental laws, regulations and
requirements, and all insurance requirements, if any, with respect to the
use, maintenance and operation of the Equipment.
7. OWNERSHIP AND INSPECTION
(a)The Equipment shall at all times remain the property of the Lessor. Lessor
may affix or request Lessee to affix tags, decals or plates to the Equipment
indicating Lessor's ownership, and Lessee shall not permit their removal or
concealment.
(b)It is the intention and understanding of both Lessor and Lessee that the
Equipment shall be and at all times remain separately identifiable personal
property. Lessee shall not permit the Equipment to be installed in, or used,
stored or maintained with, any personal property in such manner or under such
circumstances that such Equipment might be or become an accession to or
confused with such other personal property; provided, however, that the use
or maintenance in accordance with normal operating procedures of Lessee of
the Equipment with arty other computer equipment owned by or leased to Lessee
shall not be a violation of the foregoing provisions of this sentence. Lessee
shall not permit the Equipment to be installed in or used, stored, or
maintained with, any real property in such a manner or under such
circumstances that any person might acquire any rights in such Equipment
paramount to the rights of Lessor by reason of such Equipment being deemed to
be real property or a fixture thereon.
(c)Lessee shall keep the Equipment free and clear of all liens and
encumbrances. Lessee shall not assign this Agreement or any of its rights
hereunder or sublease the Equipment without the prior written consent of
Lessor, except that Lessee may, at its expense, upon prior written notice to
Lessor, assign this Agreement or sublease the Equipment to any parent or
subsidiary corporation, or to a corporation which shall have acquired all or
substantially all of the property of Lessee by merger, consolidation or
purchase. No permitted assignment or sublease shall relieve Lessee of any of
its obligations hereunder.
(d) Lessor or its agents shall have free access to the Equipment at all
reasonable times for the purpose of inspection and for any other purpose
contemplated in this Agreement.
(e) Lessee shall immediately notify Lessor of all details concerning any damage
or loss arising out of the improper manufacture, functioning or operation of
the Equipment.
8. WARRANTIES
(a) Lessor shall, at the request and expense of Lessee, enforce for the benefit
of Lessee any rights which Lessor shall be entitled to enforce against the
manufacturer in respect of the Equipment.
(b) EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, THERE ARE NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND EXPRESS OR IMPLIED, WITH RESPECT
TO THE CONDITION OR PERFORMANCE OF THE EQUIPMENT, ITS MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR WITH RESPECT TO PATENT INFRINGEMENT OR
THE LIKE. LESSOR SHALL HAVE NO LIABILITY TO LESSEE FOR ANY CLAIM, LOSS OR
DAMAGE OF ANY KIND OR NATURE WHATSOEVER, NOR SHALL THERE BE ANY ABATEMENT OF
RENTAL, ARISING OUT OF OR IN CONNECTION WITH (i) THE DEFICIENCY OR
INADEQUACY OF THE EQUIPMENT FOR ANY PURPOSE, WHETHER OR NOT KNOWN OR
DISCLOSED TO LESSOR, (ii) ANY DEFICIENCY OR DEFECT IN THE EQUIPMENT, (iii)
THE USE OR PERFORMANCE OF THE EQUIPMENT, (iv) ANY INTERRUPTION OR LOSS OF
SERVICE OR USE OF THE EQUIPMENT, or (v) ANY LOSS OF BUSINESS OR OTHER
CONSEQUENTIAL LOSS OR DAMAGE WHETHER OR NOT RESULTING FROM ANY OF THE
FOREGOING. LESSEE WILL DEFEND, INDEMNIFY AND HOLD LESSOR HARMLESS AGAINST
ANY AND ALL CLAIMS, DEMANDS AND LIABILITIES ARISING OUT OF OR IN CONNECTION
WITH THE DESIGN. MANUFACTURE, POSSESSION OR OPERATION OF THE EQUIPMENT.
9. SECURITY INTEREST
(a)In the event that Lessor transfers or assigns or grants a security interest
in all or any part of its rights in this Agreement, the Equipment and/or sums
payable hereunder to the third party, whether as collateral security for any
loans or advances made or to be made to Lessor by such third party or
otherwise, Lessee, upon receipt of notice of any such transfer or assignment
and instructions from Lessor, shall pay its obligations hereunder or amounts
equal thereto to the third party (or to arty other party designated by the
third party), and Lessee's obligations hereunder shall be absolute and
unconditional and shall not be subject to any abatement, reduction,
recoupment, defense, offset or counterclaim available to Lessee against
Lessor for any reason whatsoever; nor, except as otherwise expressly provided
herein, shall this Agreement terminate, or the respective obligations of
Lessor or Lessee be otherwise affected, by reason of any defect in the
Equipment, condition, design, operation or fitness for use thereof or any
loss or destruction of the Equipment or any part thereof, the prohibition of
or other restriction against Lessee's use of the Equipment, the interference
with such use by any private person or entity, or by reason of any failure by
Lessor to perform any of its obligations herein contained, or by reason of
any other indebtedness or liability, howsoever and whenever arising, of
Lessor to Lessee or to any other person, firm or corporation or to any
governmental authority or for any other cause whether similar or dissimilar
to the foregoing, any present or future law to the contrary notwithstanding,
it being the intention of the parties hereto that the Rental payable by
Lessee hereunder shall continue to be payable in all events and at the times
herein provided, except as otherwise expressly provided for herein.
(b)On the Installation Date as to the Equipment, Lessee will furnish to Lessor,
and/or its assignee, a certificate signed by an officer of Lessee to the
effect that: Lessee has full power and authority to enter into this
Agreement; this Agreement has been duty authorized; executed and delivered by
Lessee and is its valid and binding obligation, enforceable in accordance
with its terms; no approval, consent, or withholding of obligation is
required from any governmental authority with respect to the entering into or
performance of this Agreement by Lessee; the entering into or performance of
this Agreement by Lessee does not and will not violate a judgment, order, law
or regulation applicable to Lessee or any provision of Lessee's certificate
of incorporation or by-laws or result in a breach of, or constitute a default
under, or result in the creation of any lien, charge, security interest or
other encumbrance upon any assets of Lessee or on the Equipment or this
Agreement pursuant to, any indenture, mortgage, deed of trust, bank loan,
credit agreement or other instrument to which Lessee is a party or by which
it or its assets may be bound: the Equipment is located at Lessee's facility
as shown above; the Equipment has been and is then operating to the
satisfaction of Lessee; Lessee has no right, title or interest in the
Equipment or any part thereof except the rights, title and interest therein
as Lessee thereof under this Agreement; and that, on the Installation Date,
this Agreement is in full force and effect, neither party is in default
hereunder, and Lessee's obligations hereunder are subject to no defenses,
setoffs or counterclaims. In addition, Lessee agrees promptly to execute and
deliver to Lessor standard form UCC-1 financing statements (to be filed for
information purposes only) as well as such other agreements, documents,
instruments and certificates as Lessor may reasonably request (including,
without limitation, an opinion of counsel and certified copies of Board
resolutions, both in form and substance satisfactory to Lessor) in order to
effect Lessor's purchase of the Equipment or financing thereof. Lessee
authorizes Lessor to file a financing statement with respect to the Equipment
signed only by the Lessor where permitted by the Uniform Commercial Code or
other applicable law. Lessee hereby appoints Lessor as lessee's
attorney-in-fact to execute such financing statement on Lessee's behalf and
to do all acts or things which Lessor may deem necessary to protect Lessors
fide and interest hereunder. Lessor and Lessee further agree that a carbon,
photographic or other reproduction of this Lease may be filed as a financing
statement and shall be sufficient as a financing statement under the Uniform
Commercial Code or other applicable law. It is the intent of the parties that
this is a true lease, and the filing of a financial statement under the
Uniform Commercial Code or other applicable law shall not be construed as
evidence that any security interest was intended to be created, but only to
give public notice of Lessor's ownership of the Equipment. If this Lease is
deemed at any time to be one intended as security then Lessee grants Lessor a
security interest in the Equipment and the proceeds from the sale, lease or
other disposition of the Equipment.
10. MISCELLANEOUS CHARGES
Except as otherwise specifically provided in this Agreement, it is understood
and agreed that this is a net lease, and that, as between Lessor and Lessee,
Lessee shall be responsible for all costs and expenses of every nature
whatsoever arising out of or in connection with or related to this Agreement or
the Equipment (such as, but not limited to, transportation in and out,
transportation insurance, rigging, drayage, packing, installation and disconnect
charges). On the commencement of this Lease, Lessee agrees to pay to Lessor an
administrative fee, not to exceed $100.00 to reimburse Lessor for its lease
initiation and recording costs.
11. SECURITY DEPOSIT
As security for the prompt and full payment of the amounts due under this Lease,
and Lessee's complete performance of all of its obligations under this Lease,
and any extension or renewal hereof, Lessee has deposited with Lessor the
security amount set forth in the section shown as "Schedule of Payments". In the
event any default shall be made in the performance of any of Lessee's
obligations under this Lease, Lessor shall have the right, but not the
obligation, to apply the security deposit to the curing of such default. Within
fifteen (15) days after Lessor mails notice to Lessee that Lessor has applied
any portion of the security deposit to the curing of any default, Lessee shall
restore said security deposit to the full amount set forth above. On the
expiration or earlier termination or cancellation of this Lease, or any
extension or renewal hereof, provided Lessee has paid all of the rent called for
and fully performed all other provisions of this Lease, Lessor will return to
the Lessee any then remaining balance of said security deposit, without
interest. Said security deposit may be commingled with Lessor's other funds.
12. RISK OF LOSS ON LESSEE
Lessee shall obtain and maintain from the time Lessee executes a document
evidencing physical receipt of the Equipment and for the entire term of this
Agreement, at its own expense, property damage and liability insurance and
insurance against loss or damage to the Equipment including, without limitation,
loss by fire (including so-called extended coverage) theft and such other risks
of loss as are customarily insured against the type of Equipment leased
hereunder by any businesses in which Lessee is engaged, in such amounts, in such
form and with such insurers as shall be satisfactory to Lessor; provided,
however, that the amount of insurance against loss or damage to the Equipment
shall not be less than the greater of the full replacement value of the
Equipment or the installments of rent then remaining unpaid hereunder plus any
renewal or purchase options contained herein. Each insurance policy will name
Lessee as an insured and Lessor as an additional insured and loss payee thereof
as Lessor's interest may appear, and shall contain a clause requiring the
insurer to give Lessor at least 10 days prior written notice of any alteration
in the terms of such policy or of the cancellation thereof. Lessee shall furnish
to Lessor a certificate of insurance or other evidence satisfactory to Lessor
that such insurance coverage is in effect provided, however, that Lessor shall
be under no duty either to ascertain the existence of or to examine such
insurance policy or to advise Lessee in the event such insurance coverage shall
not comply with the requirements hereof. Lessee further agrees to give Lessor
prompt notice of any damage to, or loss of, the Equipment, or any part thereof.
Lessor shall be named as the Loss Payee on such policies, which shall be written
by an insurance company of recognized responsibility Lessee agrees to insure the
interest of any third party (referred to in Paragraph 9 of this Agreement) under
a standard mortgagee clause. Evidence of such insurance coverage shall be
furnished to Lessor upon demand. If Lessee shall fail to provide such insurance
coverage or evidence thereof, then Lessor will have the right, but not the
obligation, to have such insurance protecting Lessor placed at Lessee's expense.
Lessee's expense shall include the full premium paid for such insurance and any
customary charges or fees of Lessor or of Lessor's assignees associated with
such insurance. Lessee shall pay such amounts upon presentation by the Lessor of
such premiums and associated charges. If any item of Equipment is rendered
unusable as a result of any physical damage to, or destruction of, the
Equipment, the Lessee shall give Lessor immediate notice thereof and this
Agreement shall continue in full force and effect without any abatement of
rental. Lessee shall determine, within fifteen (15) days after the date of
occurrence of such damage or destruction, whether such item of Equipment can be
repaired. In the event Lessee determines that such item of Equipment can be
repaired, Lessee, at its expense, shall cause such item of Equipment to be
promptly repaired. In the event Lessee determines that the item of Equipment
cannot be repaired, Lessee, at its expense. shall promptly replace such item of
Equipment and convey title to such replacement to Lessor free of all liens and
encumbrances, and this Lease shall continue in full force and effect as though
such damage or destruction had not occurred. All proceeds of insurance received
by Lessor or Lessee under the policy referred to in the preceding paragraph of
this section shall be applied toward the cost of any such repair or replacement.
13. INDEMNIFICATION
Lessee hereby agrees to assume liability for, and does hereby agree to
indemnify, protect, save and keep harmless Lessor and its respective successors,
assigns, legal representatives, agents and servants, from and against, any and
all liabilities, obligations, losses, damages, penalties, claims. actions,
suits, costs, expenses or disbursements (including legal fees and expenses) of
any kind and nature whatsoever which may be imposed on, incurred by or asserted
against Lessor or any of its respective successors, assigns, legal
representatives, agents and servants (whether or not also indemnified against by
the manufacturer(s) or any other person), in any way relating to or arising out
of this Lease or any document contemplated hereby, or the performance or
enforcement of any of the terms hereof, or in any way relating to or arising out
of the manufacture, purchase, acceptance, rejection, return lease, ownership,
possession, use, condition, operation, sale or other disposition of the
Equipment or any accident in connection therewith (including, without
limitation, latent or other defects, whether or not discoverable); provided,
however, that Lessee shall not be required to indemnity Lessor or its respective
successors, assigns, legal representatives, agents and servants, for loss or
liability in respect of any item of Equipment arising from acts or events which
occur after possession of such item of Equipment has been returned to Lessor or
loss or liability resulting from the willful misconduct or gross negligence of
the party otherwise to be indemnified hereunder. Lessee agrees that Lessor shall
not be liable to Lessee for any liability, claim, loss, damage or expense of any
kind or nature arising in strict liability or caused directly or indirectly by
the inadequacy of the Equipment for any purpose or any deficiency or defect
therein or the use or maintenance, thereof or any repairs, servicing or
adjustments thereto or any delay in providing or failure to provide any thereof
or any interruption or loss of service or use thereof or any loss of business.
14. REMEDIES
Lessee shall be in default hereunder, and there shall be a breach of this
Agreement, if:
(a) Lessee fails to pay any installment of rent within twenty (20) days when the
same becomes due and payable.
(b) Lessee attempts to remove, sell, transfer, encumber, sublet or part with
possession of the Equipment or any items thereof, except as expressly
permitted herein.
(c) Lessee shall fail to observe or perform any of the other obligations
required to be observed or performed by Lessee hereunder, and such failure
shall continue uncured for ten (10) days after written notice thereof to
Lessee by Lessor.
(d) Lessee ceases doing business as a going concern, makes an assignment for
the benefit of creditors, admits in writing its inability to pay its debts as
they become due, files a voluntary petition in bankruptcy, is adjudicated a
bankrupt or an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar arrangement under any present or future statute, law
or regulation, or files an answer admitting the material allegations of a
petition filed against it in any such proceeding, consents to, or acquiesces
in the appointment of, a trustee, receiver, or liquidator of it or of all or
any substantial part of its assets or properties, or if it or its
shareholders shall take any action looking to its dissolution or liquidation.
(e) Within 30 days after the commencement of any proceedings against Lessee
seeking reorganization, arrangement, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation,
such proceedings shall not have been dismissed, or if within 30 days after
the appointment without Lessee's consent or acquiescence of any trustee,
receiver or liquidator of it or of all or any substantial part of its assets
and properties, such appointment shall not be vacated.
In the event that Lessee is in default hereunder, then, in any such event,
Lessor may at its option do any or all of the following: (i) by notice to Lessee
terminate this Agreement as to all the Equipment; (ii) whether or not this
Agreement is terminated as to all or any Equipment, take possession of any or
all of the Equipment wherever situated, and for such purpose, enter upon any
premises without liability for so doing; (iii) sell, dispose of, hold, use or
lease any of the Equipment as Lessor in its sole discretion may decide, without
any duty to account to Lessee; (iv) by notice to Lessee, declare immediately due
and payable all monies to be paid by Lessee during the Initial Period or, if the
Initial Period has then expired, declare immediately due and payable all monies
to be paid during any term (extended as provided in Paragraph 3(a) hereof) then
in effect, and Lessee shall thereupon be obliged to pay such monies to Lessor
immediately. Lessee shall in any event remain fully liable for reasonable
damages as provided by law and for all costs and expenses incurred by Lessor on
account of such default, including all court costs and reasonable attorney's
fees. The waiver by Lessor of any breach of any obligation of Lessee shall not
be deemed a waiver of such obligation or of any subsequent breach of the same or
any other obligation. The subsequent acceptance of rental payments hereunder by
Lessor shall not be deemed a waiver of any prior existing breach by Lessee
regardless of Lessor's knowledge of such prior existing breach at the time of
acceptance of such rental payments. The rights afforded Lessor under this
Paragraph shall not be deemed to be exclusive, but shall be in addition to any
rights or remedies provided by law.
15. PERFORMANCE OF OBLIGATIONS OF LESSEE BY LESSOR
If Lessee shall be in default hereunder, Lessor may thereafter, without thereby
waiving any obligation of Lessee or such default make the payment or perform or
comply with the agreement, the nonpayment, nonperformance or noncompliance with
which caused such default, and the amount of such payment and the amount of the
reasonable expenses of Lessor incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be, shall be
payable by Lessee upon demand.
LEASE APPLICATION
Vendor Vendor Full Name Telephone
Lessee Full Company Name Fax
Tower Tech, Inc.
Address City State zip
11935 South 1-44 Service Rd. Oklahoma City OK 73189
Telephone No. Contact Person Title
Business Structure:
Proprietorship
Partnership
Corporation
X Monthly Rental Lease Term No. of Mos. 6
No. of Years in Business
Equipment cost
Equipment Description Type of Business
See Attached Equipment Listing
NOTICE: IF YOUR APPLICATION FOR BUSINESS CREDIT IS DENIED, YOU HAVE THE
RIGHT TO A WRITTEN STATEMENT OF THE SPECIFIC REASONS FOR THE DENIAL. TO OBTAIN
THE STATEMENT, PLEASE CONTACT THE LESSOR NAMED HEREIN WITHIN 60 DAYS FROM THE
DUE YOU ARE NOTIFIED OF OUR DECISION. WE WILL SEND YOU A WRITTEN STATEMENT OF
REASONS FOR THE DENIAL WITHIN 30 DAYS OF RECEIVING YOUR REQUEST FOR THE
STATEMENT THE FEDERAL EQUAL CREDIT OPPORTUNITY ACT PROHIBITS CREDITORS FROM
DISCRIMINATING AGAINST CREDIT APPLICANTS ON THE BASIS OF RACE, COLOR, RELIGION,
NATIONAL ORIGIN, SEX, MARITAL STATUS, AGE (PROVIDED THE APPLICANT HAS THE
CAPACITY TO ENTER INTO A BINDING CONTRACT); BECAUSE ALL OR PART OF THE
APPLICANTS INCOME DERIVES FROM ANY PUBLIC ASSISTANCE PROGRAM; OR BECAUSE THE
APPLICANT HAS IN GOOD FAITH EXERCISED ANY RIGHT UNDER THE CONSUMER CREDIT
PROTECTION ACT. THE FEDERAL AGENCY THAT ADMINISTERS COMPLIANCE WITH THIS LAW
CONCERNING THIS CREDITOR IS FEDERAL TRADE COMMISSION, ECOA COMPLIANCE,
WASHINGTON, DC 20581.
GUARANTOR INFORMATION REQUESTED FOR ALL CORPORATIONS IN
BUSINESS LESS THAN THREE YEARS, AND ALL PARTNERSHIPS,
PROPRIETORS, PROFESSIONALS AND SERVICE RELATED BUSINESSES.
NAME:
HOME ADDRESS
NAME: .. ADDRESS
SOC.SEC. NO.
SOC. SEC. NO
REFERENCES: (LIST BANK OR BANKS. PREVIOUS BANK REQUIRED IF APPLICANT HAS BEEN AT
PRESENT BANK LESS THAN TWO YEARS)
PRESENT BANK
OF APPLICANT
PREVIOUS OR SECOND BANK OF APPLICANT
BRANCH: PHONE:
NAME OF ACCOUNT NO.
BANK OFFICER:
LOAN-LEASE-TRADE REFERENCES: NAME AND ADDRESS
1.
2.
3.
BRANCH: PHONE:
NAME OF ACCOUNT NQ
BANK OFFICER:
PHONE:
CONTACT
1 AUTHORIZE THE RELEASE OF ANY CREDIT OR FINANCIAL INFORMATION TO:
AUTHORIZED SIGNER & TITLE
FINANCIAL STATEMENTS GENERALLY REOUIRED ON TRANSACTIONS OVER $15,000.
CERTIFICATE OF DELIVERY AND ACCEPTANCE OF LEASED EQUIPMENT
Lease Number: 3362
Lessee hereby acknowledges receipt of the equipment described in its
Lease with Lessor (the "Equipment") and accepts the
Equipment after full inspection thereof as satisfactory for all
purposes of the Lease. Lessee acknowledges that Lessor has fully and
satisfactorily performed all covenants and conditions to be performed
by Lessor.
TOWER TECH, INC.
DATE OF DELIVERY LESSEE
September 22, 1999 ss/CHARLES D. WHITSITT, C.F.O.
---------------------------
DATE OF LEASE LESSEE
9/24/99 Charles D. Whitsitt
(Print Name of Signor)
16.GENERAL
(a)This Agreement shall not be binding upon Lessor unless signed on its behalf
by a duly authorized officer. This Agreement shall be deemed to have been
made in the State at New Jersey and shall be governed in all respects by the
laws of such State.
(b)This Agreement constitutes the entire Agreement between Lessee and Lessor
with respect to the Equipment, and no covenant, condition or other term or
provision may be waived or modified orally.
(c)All notices hereunder shall be in writing and shall be delivered in person
or sent by registered or certified mail, postage prepaid, to the address of
the other party as set forth herein or to such other address as such party
shall have designated by proper notice.
ACCEPTED: JACOM LEASING
A Division of Jacom Computer Services Inc.
TITLE
LESSEE (FULL LEGAL NAME)
Tower Tech, Inc.
11935 South 1-44 Service Road
Oklahoma City OK 73189
CITY COUNTY STATE zip
PHONE NO. ( DATED:
(The undersigned certifies that the Equipment shall be used for business
purposes and agrees that no modification to this Lease will be effective unless
made in writing and
signed by both parties.
BY ss/CHARLES D. WHITSITT, CFO
---------------------------
PRINT NAME Charles D. Whitsitt
PERSONAL GUARANTY
*Guarantor must provide Personal Financial Statements and
most recent, Personal Tax Return before Lease will be
approved.
I guarantee that the Lessee will make all payments and pay all the other
required charges required under this Lease when they are due and will perform
all other obligations under the Lease fully and promptly. I also agree that you
may make other arrangements with the Lessee and I will still be responsible for
those payments and other obligations. You do not have to notify me if the Lessee
fails to meet all of its obligations under the Lease. If Lessee fails to meet
all of its obligations, I will immediately pay in accordance with the default
provisions of the Lease all sums due under the anginal terms of the Lease and
will perform all other obligations of Lessee under the Lease. I will reimburse
you for all the expenses you incur in enforcing any of your rights against the
Lessee or me, including attorney fees. If this is a corporate guaranty, it is
authorized by the Board of Directors of the guaranteeing corporation. If this is
a partnership guaranty, it is authorized under the partnership agreement. THIS
GUARANTY SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW JERSEY. I AGREE AND
CONSENT THAT THE COURT OF THE STATE OF NEW JERSEY FOR BERGEN COUNTY OR ANY
FEDERAL DISTRICT COURT HAVING JURISDICTION IN THAT COUNTY SHALL HAVE
JURISDICTION AND SHALL BE PROPER LOCATION FOR THE DETERMINATION OF DISPUTES
ARISING UNDER THIS LEASE. I agree and consent that you may serve me by
registered or certified mail, which will be sufficient to obtain jurisdiction. I
waive trial by jury in any action between us
WITNESS SIGNATURE DATED PERSONAL GUARANTOR SIGNATURE, AN INDIVIDUAL DATED
X X
witness SIGNATURE DATED PERSONAL GUARANTOR SIGNATURE, AN INDIVIDUAL DATED
SECRETARY'S CERTIFICATE RELATING TO
INCUMBENCY AN CORPORATE RESOLUTIONS
The undersigned, Patty Lewis Poag
Secretary of TOWER TECH, INC.
An Oklahoma Corporation (herein the "Corporation"), does hereby certify:
1 . That he/she is the duly elected, qualified and acting Secretary of
the Corporation and has the custody of the corporate records, minutes and
corporate seal.
2. That the following names person(s) has/have been properly
designated, elected and assigned to the office in such corporation as indicated
below; that such person(s) hold(s) such office at this time an that the specimen
signature appearing beside the name of such officer is his true and correct
signature:
NAME TITLE SPECIMEN SIGNATURE
Charles D Whitsitt CFO
3. Under the Certificate of Incorporation and By-Laws of the
Corporation all corporate officers have the authority to bind the Corporation to
contractual obligations.
4. That he/she is one of the duly authorized and proper officers of
such corporation to make certificates in its behalf and that she has caused this
certificate to be executed and the seal of the corporation to be hereunto
appended this 28th day of September, 1999.
(Corporate Seal)
ss/PATTY LEWIS POAG
- --------------------
SECRETARY
<PAGE>
EQUIPMENT SCHEDULE NO. 2
LEASE AGREEMENT NO. 3362 DATED SEPTEMBER 22,1999 ("LEASE")
BETWEEN JACOM LEASING
A DIVISION OF JACOM COMPUTER SERVICES, INC
("LESSOR")
AND TOWER TECH. INC. ("LESSEE")
1. Equipment:
Item No. Qty Equip. Type Model/Feature Description
- -------- --- ----------- ------------- -----------
EXTRUSION MACHINE
2. Equipment Location:
11935 SOUTH 1-44 SERVICE RD.
OKLAHOMA CITY, OK 73189
3. Initial Period: 60 Months from Commencement Date
(Last 2 Months payable in advance)
4. Monthly Rental: $6,460.88
All of the terms and conditions of the above described Lease Agreement #3362
dated September 22, 1999 are incorporated herein by reference. Each Equipment
Schedule shall constitute a separate Lease Agreement.
Lessor: Lessee:
JACOM LEASING A DIVISION TOWER TECH, INC.
OF JACOM COMPUTER SERVICES, INC.
By:__________________ By ss/CHARLES D. WHITSITT
--------------------------
Title:________________ Title: CFO
Date:________________ Date: 11/9/99
Exhibit 10.36
SECURED PROMISSORY NOTE
Date: November 2, 1999
Oklahoma City, Oklahoma
This promissory note ("Note") is made by Tower Tech, Inc.,
("Borrower"),an Oklahoma Corporation, in favor of the City of Oklahoma City, a
municipal corporation organized and existing under the laws of the State of
Oklahoma, whose address is 200 North Walker Avenue, Oklahoma City, Oklahoma
73102 ("Lender").
FOR VALUE RECEIVED, Borrower promises to pay to Lender, on order, the
sum of Two Million Dollars ($2,000,000) together with interest thereon, all as
hereinafter provided and upon the following agreements, terms and conditions:
Interest. The Loan have an interest rate of six percent (6%).
Payment. Borrower shall pay interest only at the end of the first six
months. Borrower shall pay interest an all principal at the end of the twelfth
month or at such time thereafter as may be agreed to in writing by both parties.
All payments shall be made to the Lender, on order, at 420 West Main Street,
Suite 920, Oklahoma City, Oklahoma 73102, or at such other place as the Lender
or subsequent holder hereof may specify in writing from time to time.
Prepayment. Except as otherwise provided, Borrower may prepay interest
or principal. No prepayment hereunder shall affect the obligation of the
Borrower to pay the regular installments of principal and interest. Prepayments
shall not extend or postpone the due date of any subsequent installment or
change the amount of such installment.
Modification. This Note shall only be modified with the written consent
of the Borrower and the Lender.
Security. This Note and the sums evidenced hereby are secured as
follows: $1,000,000 will be secured by a Mortgage on Borrower's plant real
estate and $1,000,000 will be secured by a Uniform Commercial Code Financing
Statement on the Borrower's inventory and accounts receivable, which lien will
be subject to liens in favor of People First Bank of Kingfisher. In addition,
Harold Curtis, CEO; Robert Brink, President; Micah Curtis, Vice President; and
Charles Whitsitt, Chief Finance Officer have executed non-recourse personal
guaranties secured by a pledge of their common stock in Tower Tech, Inc.
Borrower agrees to perform and comply with all of the agreements, terms and
conditions of the Mortgage. Default by the Borrower, or Mortgagor under the
Mortgage in any of the terms and conditions of the Mortgage or other security
agreements shall at the option of the holder hereof, be construed as a default
under this Note.
Transfer of Property. If the real property given as security for this
Note or any part thereof is sold, transferred or otherwise disposed of without
Lender's prior written consent, Lender may declare all principal and interest to
be immediately due and payable. The obligations of the Borrower are not
assignable nor assumable by any person or firm, nor may any person or firm take
or receive the property "subject to" this Note, without the prior written
consent of Lender.
Default, Late Charges and Acceleration. In the event of any payment
default, the Lender or any subsequent holder may, at its option, declare the
entire principal balance and accrued interest of this Note immediately due and
payable without notice or other demand. Failure to exercise this option to
accelerate shall not constitute a waiver of the right to exercise such option at
any time Borrower is in default. In addition, if any installment under this Note
is unpaid more than fifteen (15) days after it is due, there shall be added to
each such delinquent installment a late charge equal to four percent (4%) of the
installment. A "default" shall mean any failure to pay any sum then owing hereon
when due, or the failure to pay any other sum which may become due and payable
pursuant to the Mortgage, or other Loan Documents as defined in the Loan
Agreement, or any breach of warranty in or the failure to perform or comply with
any of the agreements, terms and conditions of the Mortgage, or other Loan
Documents. All payments made after default shall be applied first to late
charges, then to interest, and then to principal.
Attorney's Fees, Costs and Expenses. In the event of any default in
the payment of this Note, and if this Note is referred to an attorney for
collection or suit is brought hereon, the Borrower shall pay to Lender or any
subsequent holder all expenses and costs of collection, including, but not
limited to, reasonable attorney's fees. Any judgment recovered by the Lender or
subsequent holder shall bear interest at the highest rate permitted by law on
such judgment.
Liability. All persons signing this Note as Borrower agree that they
shall be liable hereon jointly and severally, and they waive demand, presentment
for payment, protest and notice of protest, and of nonpayment. Each such person
agrees that any modification or extension of the terms of payment made by the
Lender or subsequent holder of this Note with or without notice, at the request
of any person liable hereon or owning an interest in any property, real or
personal, described in the Mortgage, or a release of any party liable for his
obligation, or a release of property, real or personal, or any part hereof from
the lien of the Mortgage shall not diminish or impair his or their liability for
the payment hereof.
Venue and Applicable Law. Borrower agrees that the venue and forum of
any action hereon shall be the District Court of Oklahoma County, Oklahoma, and
this Note shall be construed according to the laws of the State of Oklahoma.
Tower Tech, Inc.
By: ss/CHARLES D./ WHITSITT
-----------------------
Charles D. Whitsitt
Chief Financial Officer
CORPORATE ACKNOWLEDGMENT
STATE OF OKLAHOMA
COUNTY OF OKLAHOMA
On this lst day of November, 1999, before me personally appeared Charles D.
Whitsitt to me known to be the CFO of Tower Tech, Inc. that executed the within
and foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he/she was authorized to execute said
instrument and that the seal affixed is the corporate seal of said corporation.
In Witness Whereof I have hereunto set my hand the day and year first above
written.
ss/PATTY LEWIS POAG
-------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES: March 9, 2002
APPROVED as to form and legality this 2nd day of November, 1999.
ss/DARRELL SIMMONS
-------------------
Assistant Municipal Counselor
Exhibit 10.37
MORTGAGE
KNOW ALL MEN BY THESE PRESENTS:
This MORTGAGE is made this 2nd day of November, 1999, by and between Tower
Tech Inc. an Oklahoma corporation, ("Mortgagor"), and The City of Oklahoma City,
a municipal corporation, ("Mortgagee").
TREASURER'S ENDORSEMENT I certify that I received $ no tax and
issued receipt No. 1611 therefore in payment of mortgage tax
on the within mortgage $5.00 filing fee. Dated this 8th day of
November, 1999.
WITNESSETH: Saundra DeSeims, County Treasurer.
By: Jean Campbel, Deputy.
WHEREAS, Mortgagor is justly indebted to Mortgagee in the principal sum
of Two Million Dollars ($2,000,000) which indebtedness is evidenced by a
promissory note (the "Note") and a loan ,agreement (the "Loan Agreement") of
even date herewith, said Note payable to the order of Mortgagee, and providing
for payment of the principal amount thereof, together with interest thereon on
the terms set forth therein until paid in full.
NOW, THEREFORE, Mortgagor, in consideration of said principal sum, and
for the purpose of securing one million dollars of said indebtedness as provided
in the Note, (2) the payment of all other monies secured hereby, (3) the
performance of all the covenants, conditions, stipulations and agreements
contained in the Loan Agreement, grants, conveys and mortgages unto Mortgagee
subject to the terms hereof, its successors and assigns forever all of the
property, real estate and premises of the Mortgagor, situate in Oklahoma County,
State of Oklahoma, described as follows, to wit:
SEE ATTACHED EXHIBIT "A"
together with all buildings and improvements, (including the appurtenances,
hereditaments and all other rights thereto belonging), to be constructed thereon
or acquired and affixed thereto with the proceeds of the loans described in
Paragraph 2 hereafter and the loan secured by this Mortgage. This mortgage is
assignable to the Secretary of the Department of Housing and Urban Development
TO HAVE AND TO HOLD said premises, together with all rights of
Mortgagor therein, to Mortgagee, to successors and assigns forever.
The Mortgagor covenants and agrees with Mortgagee as follows, subject
to the lien priorities described in paragraph 2 hereof.
1. The following described estate, property and rights of Mortgagor are
also included as security for the performance of each covenant and agreement of
Mortgagor contained herein, the payment of all sums of money secured hereby, and
the covenants, conditions and agreements contained in the Loan Agreement;
<PAGE>
(a) All the estate and rights of Mortgagor in and to said property and
in and to land lying in streets and roads adjoining said premises, and all
access rights and easements appertaining thereto.
(b) All the estates and rights of Mortgagor in and to all buildings,
structures, improvements, fixtures and articles of property now or hereafter
attached to, or used or adapted for use in the operation of the "Project", as
defined in the Loan Agreement. Provided that nothing herein shall be construed
to extend the lien created by this Mortgage to cover equipment and personalty
which Mortgagor may from time to time purchase, rent or lease but which do not
become an integral part of the facility.
(c) All and singular the lands, tenements, privileges, water rights,
hereditaments and appurtenances thereto belonging or in anyway appertaining, and
the reversion and reversions, remainder and remainders, and all the estate,
rights, title, claim, interest and demand whatsoever of the Mortgagor, either in
law or in equity, of, in and to the premises; TO HAVE AND TO HOLD said premises
described, together with all and singular the lands, tenements, privileges,
water rights hereditaments and appurtenances thereto belonging or in anyway
appertaining, and the reversion and reversions, remainder and remainders, and
all of the estate, right, title, claim and demands whatsoever of the Mortgagor,
either in law or in equity, of, in and to the above described premises as
security for the faithful performance of the Note secured hereby, as security
for the faithful performance of each and all of the covenants, agreements, terms
and conditions of this Mortgage and as security for the faithful performance of
the covenants, conditions and agreements contained in the Loan Agreement,
SUBJECT, HOWEVER, to the right, power, and authority hereinafter given to and
conferred upon Mortgagee.
(d) All of Mortgagor's rights further to encumber said property for
debt except by such encumbrance which by its actual terms and specifically
expressed intent shall be and at all times remain subject and subordinate to any
and all tenancies in existence when such encumbrance becomes effective;
Mortgagor hereby (i) representing as a special inducement to Mortgagee to make
this Loan that as of the date hereof there are no encumbrances to secure debt
junior to this Mortgage and (ii) covenanting that there are to be none as of the
date when this Mortgage becomes of Record, except in either case encumbrances
having the prior written approval of Mortgagee, and subject to the liens set out
in Paragraph 2 below.
2. To pay all debts and monies secured hereby or secured by any mortgage
prior to this Mortgage, when from any cause the same shall become due. To keep
the property free from statutory and governmental liens of any kind. Mortgagor
represents that there are no liens or encumbrances against or upon the property,
except for the Oklahoma Industries Authority First Mortgage in the principal
amount of Four Million Four Hundred Five Thousand Dollars ($4,405,000) and City
of Oklahoma City Mortgage in the amount of One Million Two Hundred Fifty
Thousand Dollars ($1,250,000) and none superior to such liens and this Mortgage
will be created or suffered to be created by the Mortgagor during the life of
this Mortgage without the written consent of Mortgagee; that it has good right
to make this Mortgage and that it will forever warrant and defend said property
unto the Mortgagee, its successors and assigns, against every person whomsoever
lawfully claiming or to claim the same or any part thereof The Mortgagor upon
request by mail will furnish a written statement duly acknowledged of the amount
due on this Mortgage and whether any offsets or defenses exist against the debt
secured hereby.
3. To maintain the buildings and other improvements on the property in
a tenantable condition and good and operable state of repair, to neither commit
nor suffer any waste, to promptly comply with all requirements of the Federal,
State, County and Municipal authorities and all other laws, ordinances,
regulations, covenants, conditions and restrictions respecting said property or
the use thereof, and pay all fees or charges of any kind in connection
therewith. The Mortgagee may recover as damages for any breach of this covenant
the amount it would cost to put the property in the condition called for herein.
Mortgagor shall permit Mortgagee or its agents and the Secretary of the
Department of Housing and Urban Development and his agents to inspect the
Project during normal business hours, including the interior of any structures
upon request by Mortgagee, the Secretary or their agents.
4. To complete or restore promptly and in good workmanlike manner any
building or improvement which may be constructed, damaged or destroyed thereon,
and pay when due all costs incurred therefor.
5. No building, improvement, or fixture covered by this Mortgage may be
removed at any time without the prior written consent of Mortgagee unless
actually replaced by an article of equal suitability, owned by Mortgagor, free
and clear of any lien or security interest except the lien described in
paragraph 2 or those approved in writing by Mortgagee.
6. To provide to the Mortgagee, at least thirty (30) days notice prior
to expiration of existing insurance, and maintain unceasingly, insurance, with
premiums paid, on all of the property that is the subject of this Mortgage, or
hereafter becoming part of the said property, against loss by fire and other
hazards, casualties and contingencies, as may be required from time to time by
the Mortgagee in such amounts and for such period of time, with standard
Mortgagee clauses (without contribution) in favor of and in form satisfactory to
the Mortgagee. In event of foreclosure of this Mortgage or other transfer of
title to the subject property in extinguishment of some or all of the
indebtedness secured hereby, all interest of the Mortgagor in any insurance
policies in force shall pass to the purchaser or grantee. On default under this
paragraph Mortgagee may, at its option, pay any such sums, without waiver of any
other right of Mortgagee by reason of such default of Mortgagor, and Mortgagee
shall not be liable to Mortgagor for failure to exercise any such option.
7. To appear in and defend any suit, action or proceeding that might affect
the value of this security instrument or the security itself or the rights and
powers of Mortgagee; and should Mortgagee after consultation with Mortgagor
elect also to appear in or defend any such action or proceeding, be made a party
to such by reason of this Mortgage, or elect to prosecute such action as appears
necessary to preserve said value, the Mortgagor will at all times, indemnify
from, and, on demand reimburse Mortgagee for any and all loss, damage, expense
or cost, including cost of evidence of title and attorneys' fees, arising out of
or incurred in connection with any such suit, action or proceeding, and the sum
of such expenditures shall be secured by this Mortgage with interest as provided
in the Note secured hereby and shall be due and payable on demand. To pay costs
of suit, costs of evidence of title and reasonable attorneys' fees in any
proceeding or suit brought by Mortgagee to foreclose this Mortgage.
8. To pay in full at least ten (10) days before delinquent all rents,
taxes, assessments and encumbrances, charges or liens with interest, that may
now or hereafter be levied, assessed or claimed upon the property that is the
subject of this Mortgage or any part thereof, which may at any time appear to be
prior or superior hereto for which provision has not been made heretofore, and
upon request will exhibit to Mortgagee official receipts therefor, and to pay
all taxes imposed upon, reasonable costs, fees and expenses of this Mortgage. On
default under this paragraph Mortgagee may, at its option, pay any such sums,
without waiver of any other right of Mortgagee by reason of such default of
Mortgagor, and Mortgagee shall not be liable to Mortgagor for failure to
exercise any such option.
9. To repay immediately on written notice to Mortgagor all sums
expended or advanced hereunder by or on behalf of Mortgagee, with interest from
the date of such advance or expenditure at the rate of six percent ( 6%) per
annum until paid, and the repayment thereof shall be secured hereby. Failure to
repay such expenditure or advance and interest thereon within thirty (30) days
of the mailing of such notice will, at Mortgagee's option, constitute an event
of default hereunder; or, Mortgagee may, at its option, commence an action
against Mortgagor for the recovery of such expenditure or advance and interest
thereon, and in such event Mortgagor agrees to pay, in addition to the amount of
such expenditure or advance and interest thereon, all costs and expenses
incurred in such action, together with attorneys' reasonable fees.
10. Should Mortgagor fail to make any payment or do any act as herein
provided, the Mortgagee, but without obligation to do so and with thirty (30)
days written notice to or demand upon Mortgagor and without releasing Mortgagor
from any obligation hereof, may: Make or do the same in such manner and to such
extent as is necessary to protect the security hereof, Mortgagee shall be
authorized to enter upon the property for such purposes; if necessary to protect
Mortgagee's interest in the security shall be authorized to commence, appear in
and defend any action or proceeding purporting to affect the security hereof or
the rights or powers of Mortgagee; pay, purchase, contest, or compromise any
encumbrance, charge or lien which in the judgment of Mortgagee appears to be
prior or superior hereto; and in exercising any said powers, incur any
liability, and expend whatever amounts are reasonably necessary therefor
including cost of evidence of title and employing counsel.
11. Should the property or any part or appurtenance thereof or. right or
interest therein be taken or damaged by reason of any public or private
improvement, condemnation proceeding (including change of grade), fire,
earthquake or other casualty, or in any other manner, Mortgageemay, at its
option, but after written notice to and consultation with Mortgagor, commence,
appear in and prosecute, in its own name, any action or proceeding, or make any
compromise or settlement, in connection with such taking or damage, and obtain
all compensation, awards or other relief therefor. All such compensation,
awards, damages, rights of action and proceeds, including the proceeds of any
policies of insurance affecting the property, are hereby assigned to Mortgagee,
which may, after deducting therefrom all its expenses, including attorneys'
fees, release any monies so received by it, or apply the same on any
indebtedness secured hereby or apply the same to the repair or restoration of
the property, provided that Mortgagee agrees that if the Project remains viable,
such proceeds will first be used to repair and restore the property. In such
event, Mortgagor further assigns to Mortgagee any return premiums or other
repayments upon any insurance at any time provided for the benefit of the
Mortgagee, refunds, or rebates made of taxes or assessments on said property,
and Mortgagee may at any time collect said return premiums, repayments, refunds,
rebates, etc., notwithstanding that no sum secured hereby be overdue when such
right to collection be asserted. Mortgagor also agrees to execute such further
assignments of any such compensation, award, damages, rebates, return of
premiums, repayments, rights of action and proceeds as Mortgagee may require.
12. Time is of the essence in connection with all obligations of the
Mortgagor in this Mortgage or in the Note or Loan Agreement. By accepting
payment of any sum secured hereby after its due date, Mortgagee does not waive
its right either to require prompt payment when due of all other sums so secured
or to declare default for failure to pay.
13. In case of a sale under this Mortgage, the said property, real,
personal and mixed, may be sold in one parcel.
14. The Mortgagor shall not hereafter, impair the security for the debt or
the Mortgagee's lien upon said property. In the event of breach of any
requirement of this paragraph, the Mortgagee may, in addition to any other
rights or remedies, at any time thereafter declare the whole of said principal
sum immediately due and payable; provided, that Mortgagee shall advise Mortgagor
of any such breach in writing and Mortgagor shall have thirty (30) days from the
date of the notice to remedy the breach.
15. All sums secured hereby shall become immediately due and payable,
at the option of Mortgagee, should Mortgagor fail to cure any default within
thirty (30) days, unless otherwise provided, of written notice to Mortgagor by
Mortgagee of such default. Each of the following occurrences shall constitute an
event of default:
(a) default by Mortgagor in the payment of any indebtedness secured
hereby or in performance or observance of any agreement contained herein; or any
indebtedness to any subsequent lender which is secured by a lien on the
property; or
(b) any assignment made by Mortgagor or the then owner of said
property for the benefit of creditors; or
(c) any transfer of title made by the Mortgagor without the prior
written approval of the Mortgagee or any of the following shall occur, with
respect to the property, the Mortgagor or the then owner of said property: (i)
the appointment of a receiver, liquidator, or Trustee; (ii) the adjudication as
a bankrupt or insolvent; (iii) the filing of any Petition for-Bankruptcy or
reorganization; (iv) the institution of any proceeding for dissolution or
liquidation; (v) if Mortgagor be unable, or admit in writing an inability to pay
his debts when due; or (vi) a default in any provision of any other instrument
which may be held by Mortgagee as security for said Note, including the Loan
Agreement and related documents, the term and covenants of which are
incorporated herein by reference as though fully set forth herein. No waiver by
Mortgagee of any default on the part of Mortgagor shall be construed as a waiver
of any subsequent default hereunder.
16. In the event of the passage, after the date of this Mortgage, of
any Federal, State or local law, deducting from the value of real property, for
the purpose of taxation, any lien thereon or changing in any way the laws now in
force for the taxation of Mortgages, deeds of trust or debts secured thereby,
for Federal, State or local purposes, or the manner of the collection of any
such taxes so as to affect the interest of Mortgagee, then and in such event
Mortgagor shall bear and pay the full amount of such taxes, provided that if for
any reason payment by Mortgagor of any such new or additional taxes would be
unlawful or if the payment thereof would constitute usury or render the loan or
indebtedness secured hereby wholly or partially usurious under any of the terms
or provisions of the Note, or the Mortgage or other vise, Mortgagee may, at its
option, after three (3) months written notice, declare the whole sum secured by
this Mortgage with interest thereon to be immediately due and payable, or
Mortgagee may, at its option pay that amount or portion of such taxes as renders
the loan or indebtedness secured hereby unlawful or usurious, in which event
Mortgagor shall concurrently therewith pay the remaining lawful and non-usurious
portion or balance of said taxes.
17. If from any circumstances whatever fulfillment of any provision of
this Mortgage or of the Note or Loan Agreement at the time performance of such
provision shall be due shall involve transcending the limit of validity
prescribed by the usury statute or any other law, then ipso facto the obligation
to be fulfilled shall be reduced to the limit of such validity, so that in no
event shall any exaction be possible under this Mortgage or under said Note that
is in excess of the limit of such validity; but such obligation shall be
fulfilled to the limit of such validity. The provisions of this paragraph shall
control every other provision of this Mortgage and said Note and Loan Agreement.
18. In the event that this Mortgage is foreclosed and the property
sold at a foreclosure sale, the purchaser may, during any redemption period
allowed, make such repairs or alterations on said property as may be reasonably
necessary for the proper operation, care, preservation, protection and insuring
thereof. Any sums so paid together with interest thereon from time of such
expenditure at the highest lawful rate shall be added to and become a part of
the amount required to be paid for redemption from such sale.
19. Mortgagor shall deliver to Mortgagee an audited annual statement
within ninety (90) days of the end of Mortgagor's fiscal year which shall cover
the income from and operating expenses of the Project; or within thirty (30)
days after written requested by Mortgagee, a detailed operating statement in
form satisfactory to the Mortgagee covering the Project and certified as correct
by Mortgagor. Mortgagor shall permit the Mortgagee or its representative, or the
Secretary of the Department of Housing and Urban Development or his
representative, to examine all books and records pertaining to the property at
any time upon reasonable notice. In the event of Mortgagor's failure to provide
access to such records, Mortgagee shall, in addition to all other remedies, have
the option of maturing the indebtedness hereby secured.
20. Mortgagee shall have the right, at its option, to foreclose this
Mortgage subject to the rights of any tenant or tenants of the property and the
failure to make any such tenant or tenants a party defendant to any suit or
action or to foreclose their rights will not be asserted by the Mortgagor as a
defense in any action or suit instituted to collect the indebtedness secured
hereby or any part thereof or any deficiency remaining unpaid after foreclosure
and sale of the property, any statute or rule of law at any time existing to the
contrary notwithstanding.
21. Notwithstanding anything to the contrary herein contained, the
Mortgagee agrees to look solely to the Mortgagor's interest in the Project as
security for payment of the indebtedness hereby secured and for the performance
of the provisions of the Note, the Mortgage and any other document securing
payment of the Note. Nothing in the Loan Agreement, the Note or the Mortgage or
in any other instrument securing payment of the Note shall impose any personal
obligation or liability on any individual having or acquiring any interest in
the Project. On default in payment of the Note or performance of the Mortgage or
of any other instrument securing payment of the Note, no deficiency or other
money judgment shall be sought or obtained against any such person. Nothing
herein contained shall impair any lien or security interest securing payment of
the indebtedness owing to the Mortgagee or otherwise limit or restrict the
rights of the Mortgagee with respect to the Project or any other collateral.
22. All Mortgagee's rights and remedies herein specified are intended
to be cumulative and not in substitution for any right or remedy otherwise
available and no requirement whatsoever may be waived at any time except by a
writing signed by the Mortgagee, nor shall any waiver be operative upon other
than a single occasion. This Mortgage cannot be changed or terminated orally.
This Mortgage applies to, insures to the benefit of, and is binding not only on
the parties hereto, but on their heirs, devises, legatees, administrators,
executors, successors and assigns. All obligations of Mortgagor hereunder are
joint and several. Without affecting the liability of any other person for the
payment of any obligation herein mentioned (including Mortgagor should it convey
said property) and without affecting the lien hereof upon any property not
released, Mortgagee may, without notice, release any person so liable, extend
the maturity or modify the terms of any such obligation, or grant other
indulgences, release or reconvey or cause to be released or reconveyed at any
time all or part of the said property described herein, take or release any
other security or make other arrangements with debtors. Mortgagee may also
accept additional security, either concurrently herewith of thereafter, and sell
same or otherwise realize thereupon, either before, concurrently with, or after
sale hereunder. This Mortgage shall be so construed that wherever applicable,
the use of the singular number shall include the plural number, the use of any
gender shall be applicable to a corporation. The word "Note" shall include all
notes evidencing the indebtedness secured hereby. If any of the provisions
hereof shall be determined to contravene or be-invalid under the laws of the
State of Oklahoma, such contravening or invalidity shall be construed as if not
containing the particular provision or provisions held to be invalid, and all
rights and obligations of the parties shall be construed or enforced
accordingly. Any written notice required or allowed to be given pursuant to any
of the terms of this Mortgage shall mean by Certified Mail addressed to the
parties as follows:
The Borrower: Tower Tech, Inc.
P.O. Box 891810
Oklahoma City, OK 73023
Attention: Charles D. Whitsitt,
Chief Financial Officer
The Lender: The City of Oklahoma City
420 West Main
Suite 920
Oklahoma City, OK 73102
Attention: Garner Stoll, Planning Director
Any time period provided in the giving of any notice hereunder shall commence
three (3) days after the date such notice is mailed.
23. Borrower shall, for so long as the Loan Documents remain in effect,
at its cost and expense, carry and maintain general public liability insurance
against claims for bodily injury, personal injury, death and property damage
occurring or arising out of the Project, which insurance shall cover such claims
as may be occasioned by any act, omission, or negligence of Borrower or its
officers, agents, representatives, assigns or servants relating to the Project.
The limits of liability insurance, which may be required to be increased from
time to time as deemed necessary by the Lender, with the approval of Borrower,
which shall not be unreasonably withheld, shall be not less than One Million
Dollars ($1,000,000.00) combined single limit personal injury and property
damage insurance. The insurance required above shall be issued by an insurance
company or companies authorized to do business within the State of Oklahoma or
by such other similar insurance coverage approved by the Insurance Commissioner
of the State of Oklahoma. The Lender shall be specifically named as an
additional insured on all such policies, and any such policy or policies shall
be primary to any other valid and collectible insurance.
WITNESS the hand and seal of the Mortgagor on the day and year first above
written.
Tower Tech, Inc.
By:ss/CHARLES D. WHITSITT
-----------------------
Charles D. Whitsitt
Chief Financial Officer
ATTEST:
ss/PATTY POAG
- -------------
Secretary
CORPORATE ACKNOWLEDGMENT
STATE OF OKLAHOMA
COUNTY OF OKLAHOMA
On this 1st day of November, 1999, before me personally appeared Charles D.
Whitsitt to me known to be the CFO of Tower Tech, Inc., an Oklahoma corporation,
that executed the within and foregoing instrument, and acknowledged said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that he/she was
authorized to execute said instrument and that the seal affixed is the corporate
seal of said corporation.
In Witness Whereof I have hereunto set my hand the day and year first above
written.
ss/PATTY LEWIS POAG
----------------
N0TARY PUBLIC
MY COMMISSION EXPIRES: March 9, 2002
APPROVED as to form and legality this 2nd day of November, 1999.
ss/DARRELL SIMMONS
---------------
Assistant Municipal Counselor
<PAGE>
EXHIBIT "A"
TRACT 1
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 SE/4; thence S 89 degrees 42' 04" W along the South line of said SE/4 a
distance of 1,780.60 feet to the point of beginning, thence continuing S 89
degrees 42' 04" W along the South line a distance. of 843.24 feet to the
Southwest corner of said SE/4: thence N 00degrees 07' 35" W on the West line of
said SE/4 a distance of 1764.49 feet to a point 880 feet South of the Northwest
corner of said SE/4, thence N 89 degrees 42' 07" E parallel to and 880.00 feet
South of the North line of said SE/4 a distance of 240.00 feet; thence S 00
degrees 07' 35" E and parallel with the West line of said SE/4 a distance of
800.00 feet; thence S 14 degrees 49' 10" E a distance of 490.68 feet, thence N
89 degrees 42' 07" E and parallel with the North line of said SE/4 a distance of
1092.55 feet to a point on the West right-of-way line of Will Rogers West
Expressway (Interstate Highway No. 44); thence S 48 degrees 12' 00" W along the
West right-of-way line of said Expressway a distance of 431.80 feet; thence S 89
degrees 42' 04" W and parallel with the South line of said SE/4 a distance of
200.00 feet; thence S 48 degrees 11' 34" W and" parallel to the Westerly
right-of way line of said Expressway for a distance of 3.15 feet to a point of
curvature; thence Southwesterly and parallel to the Westerly right-of-way line
of said Expressway and on the arc of a curve to the left having a radius of
185.78 feet, and a chord bearing of S 23 degrees 56' 51" W for an arc distance
of 157.23 feet to a point, thence S 42 degrees 20' 39" W a distance of 39.62
feet to a point 33.00 feet North of the South line of said SE/4; thence S 00
degrees 17' 56" E a distance of 33.00 feet to the point or place of beginning.
Said parcel contains 20.310 acres more or less.
Tract 2
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
Southwest corner of said SE/4; thence N 00 degrees 07' 35" W on the West line of
said SE/4 a distance of 1764.49 feet to a point 880 feet south of the Northwest
corner of said SE/4, thence 9 89 degrees 42' 07" E parallel to and 880.00 feet
South of the North line of said SE/4 a distance of 240.00 feet to the point or
p1ace of beginning; thence continuing N 89 degrees 42' 07" E parallel to and
880.00 feet South of the North line of said SE/4 a distance of 250.00 feet;
thence S 00 degrees 07' 35" E and paral1el with the West line of said SE/4 a
distance of 450.00 feet; thence N 89 degrees 42' 07" East parallel with the
North line of said SE/4 a distance of 1380.65 feet to a point on the West
right-of-way line of Will Rogers West Expressway (Interstate Highway No. 44);
thence S 18 degrees 12' 00" W along the West right-of-way line of said
Expressway a distance of 501.74 feet to a point of curvatures, thence
Southwesterly along the West right-of-way line of said Expressway and on the arc
of a curve to the right having a radius of 681.20 feet and a chord bearing of S
33 degrees 11' 53" W for an arc distance of 356.68 feet to a point of tangency;
Thence S 48 degrees 1l' 34"W along the West right-of-way line of said Expressway
a distance of 83.25 feet, thence S 89 degrees 42' 07" W and parallel to the
North line of said SE/4 a distance of 1092.55 feet; thence N 14 degrees 49' 10"
W a distance of 490.68 feet; thence N 89 degrees 42' 07" W and parallel to the
West line of said SE/4 a distance of 1.169.19 feet to the point or place of
beginning. Said parcel contains 29.849 acres more or less.
Attachment "B"
Less This Parcel
A part of the Southeast Quarter (SW4) of Section (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 degrees 42' 04" West along the South line of said Southeast
Quarter (SE/4) a distance of 1,780 feet;
Thence continuing South 89 degrees 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 degrees 07' 35" West on the West line of said Southeast Quarter
(SE/4) a distance of 1764.49 feet to a point South of the Northwest Corner of
said Southeast Quarter (SE/4);
Thence North 89 degrees 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 degrees 07' 35" East and parallel with the West line of said
Southeast Quarter (SE/4) a distance of 735.00 feet to the point of beginning;
Thence continuing South 00 degrees 07' 35"East a distance of 65.00 feet;
Thence North 80 degrees 42' 07" East and parallel with the North line of said
Southeast Quarter (SE/4) a distance of 360.55 feet;
Thence North 00 degrees 07' 35" West and parallel with the West line of said
Southeast Quarter (SE/4) a distance of 540.00 feet;
Thence south 80 degrees 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.
(Administration Building)
Exhibit 10.38
LOAN AGREEMENT
This Agreement made this 2nd day November 1999, between The City of
Oklahoma City, an Oklahoma Municipal Corporation (hereinafter "Lender") and
Tower Tech Inc., a publicly held Oklahoma Corporation (hereinafter "Borrower").
Definitions
Unless specifically provided otherwise or the context otherwise requires,
when used in the Loan Agreement:
(1) "Act" means the Housing and Community Development Act of 1974, Pub. L.
No. 93-383 codified as 42 U.S.C.ss.5301 et seq., as amended, and regulations
promulgated thereunder.
(2) "Audits" means the regular audit of the Borrower, a copy of which may be
requested by the Lender if required by HUD. 3) "Appropriate Draw Request" shall
consist of a complete and accurate statement by the Borrower on forms supplied
by Lender showing a complete and detailed breakdown of the total costs and
expenses incurred by Borrower for the project, reviewed by a committee comprised
of one representative of the Oklahoma Industries Authority, one from the Bank of
Oklahoma, one from the City Manager's office, and one from the Planning
Department.
(4) "City" means the City of Oklahoma City, an Oklahoma municipal corporation.
(5 "Closing Date" means the date of execution of this Loan Agreement by the
City.
(6) "Loan Funds" or "Funds" means proceeds of this Agreement.
(7) "Loan Documents" means this Loan Agreement, the Promissory Note, the
Mortgage, and other instruments, if any, securing repayment of the Loan. (8)
"Low and Moderate- Income Persons" means such persons as defined in 24 C.F.R.
Part 570, Section 570.3.
(9) "Project" means the Tower Tech manufacturing facility and other working
capital.
(10)"Project Site" means the location of the Project at SW 119th Street and
Interstate 44 within the corporate boundaries of the City of Oklahoma City,
Oklahoma, as more particularly described in Attachment "A".
(11)"Promissory Note" or "Note" means the promissory note of even date herewith
from Borrower to Lender evidencing the Loan.
(12)"Secretary" means the Secretary of Housing and Urban Development or any
other officialof HUD to whom the Secretary has delegated authority pursuant t
the Act.
(13) "Term" means the term of this Agreement, which shall commence upon the
Closing Date and shall terminate on the 12th month anniversary thereof or at
such time thereafter agreed to by both parties.
RECITALS
WHEREAS, Borrower has applied to the Lender for a Loan in the principal
sum of Two Million Dollars ($2,000,000) from Community Development Block Grant
Funds, and Lender has agreed to make a loan of such funds upon the terms and
conditions set forth below; and
WHEREAS, the purpose of this Loan is to assist the Borrower in the
operation of his manufacturing facility in Oklahoma City and providing operating
capital to aid the borrower; and
WHEREAS, the development ofthe Project will add, as previously agreed,
an additional 140 presently existing employees to the Oklahoma City area economy
and will add, as previously agreed, approximately 200 new employees within the
next three years and will provide other public benefits and qualify for
assistance under 24 CFR 570.208(a); and the Lender has agreed to provide Loan
Funds to Borrower for the Project; and the Loan from the Lender to Borrower for
the Project will assist in the development of the Project; and
WHEREAS, the Loan shall be evidenced by this Loan Agreement, the
Borrower's Promissory Note, and the Mortgage, and Uniform Commercial Code
Financing Statement; and
WHEREAS, the Lender is willing to make the Loan to Borrower
exclusively for the purposes herein above set forth, all upon the terms and
conditions herein set forth; and
WHEREAS, the Lender makes no commitment to future support and assumes
no obligation for future support of the activities contracted for herein, except
as expressly set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
terms, covenants and conditions, representations and warranties contained
herein, the parties hereto agree as follows:
TITLE I
THE LOAN
1.1 The Loan. In reliance upon Borrower's representations and
warranties contained herein, and subject to the terms and conditions set forth
herein, the Lender hereby agrees to make a Loan to Borrower in the sum of Two
Million Dollars ($2,000,000) exclusively for the purposes set forth herein,
which Loan shall be funded out of funds received by the Lender through HUD from
the Community Development Block Grant (CDBG) program and from no other source.
Borrower shall have the right to receive Loan Funds only pursuant to the terms
and conditions of this Agreement and in accordance with the Act, and then only
to the extent CDBG proceeds are made available to the Lender by HUD. Should
anticipated sources of Loan Funds become unavailable to the Lender, the Lender
shall within a reasonable time not to exceed ten (10) working days notify
Borrower in writing and the Lender shall be released from all liability for that
portion of the Funds to be provided to Borrower by the Lender under this Loan
Agreement which have not been received by the Lender from HUD.
1.2 Loan Documentation. The Loan will be evidenced by this Loan
Agreement, the Note, the Mortgage, and the Uniform Commercial
Code Financing Statement.
1.3 Demand. Lender may demand repayment of the Loan in the event
of the occurrence of an Event of Default hereunder.
ARTICLE II
BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to make the Loan, Borrower represents
and warrants (which representations and warranties shall be true and correct as
of the execution hereof and shall survive the execution and delivery of this
Loan Agreement) as follows:
2.1 Organization of Borrower, Authority to Enter into Agreement.
Borrower is an Oklahoma corporation duly formed and validly in existence and in
good standing pursuant to laws of the State of Oklahoma and duly domesticated in
the State of Oklahoma. Borrower has the right and power to purchase and occupy
the Project Site, and to develop the Project; and Borrower has full power and
authority to enter into this Agreement. The execution, delivery and performance
of this Agreement has been duly authorized by all-necessary corporate action and
no other authorization by Borrower is required for the execution, delivery and
performance of this Agreement.
2.2 No Litigation. As of the date of execution of this Agreement,
there are no actions, suits or proceedings pending, or to the knowledge of
Borrower threatened against or affecting it, its controlling Board, or the
Project in any court at law or in equity, or before or by any governmental or
municipal authority which might have a materially adverse effect on the ability
of Borrower to perform its obligations hereunder.
2.3 Title. Borrower has legal title in the Project Site sufficient
to enable Borrower to develop the Project thereon.
2.4 Covenants, Zoning and Codes. Borrower has complied to date and
will continue to comply with all-applicable enviromenental statutes and
regulations applicable to the development of the Project. All permits, consents,
approvals or authorizations by, or registrations, declarations, withholding of
objections or filings with any governmental body necessary in connection with
the valid execution, delivery and performance of the Loan Documents, or
presently necessary for the development of the Project, have been obtained, are
valid, adequate and in full force and effect or will be obtained prior to the
commencement of any Project Activities for which a permit, consent, approval or
authorization is necessary. Development of the Project will in all respects
conform to and comply with all covenants, conditions, restrictions and
reservations affecting the Project Site and with all applicable zoning,
environmental protection, use and building codes, laws, regulations and
ordinances.
2.5 Creation of Jobs. Lender has relied upon representations made by
Borrower that the Project is expected to create a specific number of permanent
new job opportunities, including a specific number of new permanent job
opportunities for Low and Moderate-Income Persons. By its execution of the Loan
Documents, Borrower acknowledges its previous representation, as stated in the
Loan Agreement dated September 8, 1997 by and between the City of Oklahoma City
and Tower Tech (Prior Agreement), pertaining to the creation of jobs and
obligation to create approximately 200 new permanent jobs. Borrower agrees to
use its best efforts to ensure that at least 51 percent of all new permanent
jobs resulting from the Project are made available to Low and Moderate income
Persons.
2.6 Compliance With Documents. As of the date hereof and for so long as
this Agreement remains in effect, Borrower is and shall remain in full
compliance with all of the terms and conditions of the Loan Documents, and no
Event of Default has or shall have occurred and be continuing, which, with the
lapse of time or the giving of notice, or both, would constitute such an Event
of Default under the foregoing.
2.7 Incorporation of Re-presentations and Warranties. The request by
Borrower for any payment of Loan funds under the Loan Documents shall constitute
a certification by Borrower that the aforesaid representations and warranties
are true and correct as of the date of such request.
ARTICLE III
CONDITIONS PRECEDENT TO LOAN CLOSING
The Lender's obligation to enter into and perform its duties under the
Loan Documents shall be subject to the full and complete satisfaction of the
following conditions precedent:
3.1 Documents. The Lender shall have received and approved fully
executed originals of this Loan Agreement, the Note, the Mortgage, the Uniform
Commercial Code Financing Statement, and the non-recourse personal guarantee, in
a form approved by Lender, Harold Curtis, Chief Executive Officer; Robert Brink,
President; Micah Curtis, Vice President; and Charles Whitsitt, Chief Finance
Officer secured by a pledge of their common stock in Tower Tech Inc. all of
which shall have been duly authorized, executed and delivered by Borrower.
3.2 Evidence of Authority. The Lender shall, upon written request,
receive evidence satisfactory to it that Borrower and the persons signing on
behalf of Borrower have the capacity and authority to. execute and deliver the
Loan Documents on behalf of Borrower.
3.3 Insurance. Borrower shall, for so long as the Loan Documents remain
in effect, at its cost and expense, carry and maintain general public liability
insurance against claims for bodily injury, personal injury, death and property
damage occurring or arising out of the Project, which insurance shall cover such
claims as may be occasioned by any act, omission, or negligence of Borrower or
its officers ' agents, representatives, assigns or servants relating to the
Project. The limits of liability insurance, which may be required to be
increased from time to time as deemed necessary by the Lender, with the approval
of Borrower, which shall not be unreasonably withheld, shall be not less than
One Million Dollars ($ 1,000,000.00) combined single limit personal injury and
property damage insurance. The insurance required above shall be issued by an
insurance company or companies authorized to do business within the State of
Oklahoma or by such other similar insurance coverage approved by the Insurance
Commissioner of the State of Oklahoma. The Lender shall be specifically named as
an additional insured on all such policies, and any such policy or policies
shall be primary to any other valid and collectible insurance.
ARTICLE IV
CONDITIONS PRECEDENT TO LOAN DISBURSAL
4.1 Conditions Precedent to Disbursal of Loan Funds. The Lender's
obligation to disburse Loan Funds pursuant to the terms hereof shall, in
addition to compliance with the terms of Article III hereof, be subject to
satisfaction of the following condition precedent:
(a) The Lender shall have received and have in its possession
sufficient proceeds from HUD to fund the disbursal request of Borrower.
Borrower acknowledges that it has no right to the Loan funds other than
to have them disbursed by the Lender in accordance with the terms of
this Loan Agreement and in accordance with the Act and then only to the
extent the Lender has received funds from HUD.
(b) Receipt by Lender of an Appropriate Draw Request covering
the sum to be reimbursed for eligible expenses incurred to
develop the Project.
4.2 Conditions Precedent to Subsequent Disbursals. In addition to
compliance with the conditions set forth in Section 4.1 hereof, Lender's
obligation to make any dispersal of Loan Funds after the initial dispersal shall
be subject to satisfaction of the following conditions precedent:
(a) Borrower shall be in full compliance and shall not be in default
hereunder or under any of the Loan Documents, provided, however, that Lender
may, in its sole discretion, elect to make advances notwithstanding the
existence of a default, and any advance so made shall be deemed to have been
made pursuant to the Loan Documents;
(b) Neither the Project nor the Project Site nor any part thereof shall
have been materially damaged, destroyed, condemned or threatened with
condemnation unless Borrower shall show to Lender's satisfaction that the
Project remains viable; and
(c) No order or notice shall been made by, or received from, any
governmental agency having jurisdiction, stating that the development of the
Project is or will be in violation of any law, ordinance, code or regulation
affecting the Project Site.
4.3 Borrower's Draw Requests. Subject to the conditions precedent in
Section 4. 1 (a), Lender agrees that it will make every reasonable effort to
disburse the Loan installments within ten (10) days after receipt of each
Appropriate Draw Request from Borrower provided said Draw Request is submitted
on any Monday work day.
4.4 Collateral. Borrower has executed a Promissory Note of even date
with this Loan Agreement to evidence its promise to repay the Loan. The
Promissory Note will be secured by a Mortgage on the Project Site.
ARTICLE V
BORROWER'S LOAN COVENANTS
5.1 General. From and after the date hereof and during the Term, Borrower
covenants and agrees that it will: (a) Accomplish the project and provide for
the "Creation of Jobs" as set forth in Section 2.5. (b) Obtain and maintain the
insurance required herein.
5.2 Payment of Obligations. Borrower shall pay all indebtedness, taxes
and other obligations pertaining to the Project or Project Site for which it is
liable before they shall become delinquent; provided, however, Borrower shall
have the right to contest any such obligations in good faith, and shall not be
obligated to pay any such obligation so long as such contest has not been
finally determined.
5.3 Changes to Project . There shall be no material change to the
Project without the prior written approval of the Lender, and, to the extent
that such approvals may be required, the appropriate governmental authorities.
5.4 Compliance with Laws. All work performed in connection with
Borrower's development of the Project and Borrower's use of the proceeds of the
Loan shall comply with the Act and all other applicable laws, ordinances, rules
and regulations of federal, state, county or municipal governments or agencies.
5.5 Inspections. The Lender and the Secretary or their representatives
shall have the right at all reasonable times during regular business hours (and
at any time in the event of an emergency) to enter upon the Project Site and
inspect the Project to determine that the same is in conformity with this Loan
Agreement and all laws, ordinances, rules and regulations applicable to
Borrower's use of the Loan Funds. The Lender and the Secretary or their
representatives shall have the further right, from time to time, to inspect
Borrower's books and records relating to Borrower's use of the Loan Funds.
Without limiting the foregoing, Borrower shall permit the Lender and the
Secretary or their representatives to examine and copy all books, records and
other papers relating to Borrower's use of the Loan Funds to insure Borrower's
compliance with the Act and applicable provisions of 24 CFR Part 570. The Lender
agrees that subject to provisions of the Oklahoma Open Records Act, 51 Okla.
Stat. 1991, ss. 24. A. 1 et seq. and any other applicable law, to keep all
information regarding Borrower and its operations confidential, and to provide
Borrower with prior notice and an opportunity to object to any request for
disclosure of such information, other than to the Secretary or as otherwise
required by law.
5.6 Notify the Lender of Litigation or Complaints. Borrower shall
immediately notify the Lender in writing, of all material proceedings,
litigations or claims which may adversely affect Borrower's rights hereunder or
any part of the Project or Project Site, and of all material complaints or
charges made by any governmental authority affecting Borrower, the Project, or
the Project Site which may require material changes in the development of the
Project.
5.7 Indemnify the Lender. Borrower shall indemnify and hold the Lender,
its elected and appointed officials and any employees, harmless from all claims
and causes of actions of any person or entity which results in damages or injury
incurred by the Lender of whatsoever nature (excluding any consequential or
incidental damages or damages, claims or causes of action due to the Lender's
negligence or the Lender's breach of this Loan Agreement), caused by any acts or
omissions of Borrower and arising out of or in any way connected with this Loan
Agreement, the Project Site and or the development of the Project or arising out
of Borrower's breach of the provisions of this Loan Agreement, including the
cost and defense thereof using counsel approved by the Lender. Notwithstanding
anything contained herein to the contrary, the foregoing indemnification given
by Borrower to the Lender shall not be effective or enforceable against Borrower
unless the Lender gives Borrower written notice of any such claims or causes of
action of said person or entity made against the Lender within ten (10) working
days of the Lender's knowledge of such claims or causes of action, and the
Lender does not commence or enter into any settlements or negotiations of
settlement with any person or entity relating to the matters covered by
Borrower's indemnification without Borrower's prior written consent. If Borrower
fails to defend or perform its obligations under this indemnification within
twenty (20) days after written request by the Lender, the Lender may settle,
commence, or defend any action or proceeding purporting to affect the rights,
duties or liabilities of the Lender, the parties to the Loan Document, or the
Project Site or the Project and Borrower shall pay all of the Lender's costs and
expense incurred thereby on demand. This section shall survive execution,
delivery and performance of the Loan Documents.
5.8 Further Assistance. Borrower shall at any time and from time to
time upon request of the Lender take or cause to be taken any action or execute,
acknowledge, deliver or record any further documents, opinions, or other
instruments which the Lender is required to do or obtain by HUD or by any other
federal, state or county regulatory agency or which the Lender feels are
required to carry out the intent of the Lender and Borrower under the Loan
Documents.
5.9 Upon failure of Borrower to comply with any of the foregoing Loan
Covenants, the Lender may declare an Event of Default hereunder and exercise its
rights and remedies pursuant to Article VI of this Agreement.
ARTICLE VI
DEFAULT AND REMEDIES
6.1 Event of Default. The occurrence of any of the following events and
failure to cure such occurrence within stated periods shall constitute an Event
of Default hereunder:
(a) Any breach by Borrower of any of the covenants and
conditions of the Loan Documents, which breach is not cured by Borrower
to the Lender's reasonable satisfaction within twenty (20) days from
the receipt of written notice thereof, provided, however, that in the
event of a breach or default by Borrower which is outside of the
control of Borrower and which cannot be cured within said twenty (20)
days, Borrower shall have commenced to cure its breach or default
within said twenty (20) days and thereafter diligently proceed to cure
its breach or default; or
b) Any written representation, warranty or disclosure made to
the Lender by Borrower that proves to be materially false or misleading
as of the date when made, whether or not such representation or
disclosure appears in this Loan Agreement; or
(c) Any material change in the development of the Project
without the prior written approval of the Lender which change is not
corrected or substantially corrected within twenty (20) days after
receipt of written notice thereof from the Lender to Borrower; or
(d) Failure by Borrower to defend, indemnify and/or hold
harmless the Lender pursuant to Section 5.7 to this Loan Agreement.
(e) Notwithstanding anything to the contrary contained herein,
any violation by Borrower of the Act-or any other laws, ordinances,
rules or regulations applicable to the
Project or Borrower's use of the Loan Funds shall immediately constitute an
Event of Default hereunder.
6.2 Remedies. Upon the occurrence of any Event of Default not timely
cured as provided herein, all of the outstanding principle balance and interest
accrued thereon, if any, shall be immediately due and payable and the Lender
shall have recourse against the collateral pledged as described in Section 4.4
hereof to the extent such amount remains unpaid.
6.3 Penalties. In the event of a default, interest at the per annum
rate established in the Note shall accrue on the total principal amount of the
Loan then outstanding, from the date of the occurrence of such default until
payment as required hereunder shall have been made in full.
ARTICLE VU
MISCELLANEOUS
7.1 No Waiver. No waiver of any default or breach by Borrower under the
Loan Documents shall be implied from any failure by Lender to take action on
account of such default if such default persists or is repeated, and no express
waiver shall be operative only for the time and to the extent therein stated.
Waivers of any covenant, term or condition contained herein shall not be
construed as a waiver of any subsequent breach of the same covenant, term or
condition. The consent or approval by Lender to, or of, any act by Borrower
requiring further consent or approval shall not be deemed to waive or render
unnecessary the consent or approval to, or of, any subsequent similar act.
7.2 Successors and Assigns. This Loan Agreement is made and entered
into for the sole protection and benefit of the Lender and Borrower, their
successors and assigns, and no other person or persons shall have any right of
action hereunder. The terms hereof shall inure to the benefit of the successors
and assigns of the parties hereto; provided, however, that Borrower's interest
hereunder cannot be assigned or otherwise transferred without the prior written
consent of the Lender.
7.3 Notices. Any notice, demand or request required under the Loan
Document shall be given in writing at the addresses set forth below by personal
service, overnight courier providing a receipt, or registered or certified first
class mail, return receipt requested. The addresses may be changed by notice to
the other party given in the same manner as provided above. If notice is given
by mail, it shall be deemed received on the earlier of: (I) receipt as shown on
the return receipt, or (ii) three (3) days after its deposit in the U.S. Mail.
To Borrower:
Attention:
Tower Tech Inc.
P.O. Box 891810
Oklahoma City, OK 73189
Charles D. Whitsitt,
Chief Financial Officer
To The Lender:
The City of Oklahoma City
Planning Department
420 West Main
Oklahoma City, OK 73102
Attention: Garner Stoll, Planning Director
7.4 Time. Time is of the essence of the Loan Document.
7.5 Amendments. No amendment, modification, or termination of any
provisions of any of the Loan Document shall in any event be effective unless
the same shall be in writing and signed by parties.
7.6 Headings. The article and section headings in no way define, limit,
extend or interpret the scope of the Loan Document or of any particular article
or section thereof.
7.7 Number and Gender. When the context in which the words are used in
the Loan Documents indicate that such is the intent, words in the singular
number shall include the plural and vice-versa. References to any gender shall
also include the other gender if applicable under the circumstances
7.8 Validity. The provisions of this Loan Agreement are severable and
if any word, sentence, clause, phrase, or other portion of this Loan Agreement
is, for any reason, held invalid by any court of competent jurisdiction, such
portion shall be deemed a separate, distinct and independent provision and such
holding shall not affect the validity of the remaining portions of this Loan
Agreement.
7.9 Governing Law. This Loan Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma, except to the
extent federal law applies.
7.10 Survival of Warranties. All agreements, representations and
warranties made herein survive the execution and delivery of the Loan Document
and the making of the Loan hereunder and continue in full force and effect until
the obligations of Borrower under the Loan Documents are satisfied in full.
7. 11 Venue and Forum. In the event that any legal action should be
filed by either party against the other, the venue and forum for such action
shall be the District Court of Oklahoma County, Oklahoma.
7.12 Attorney's Fees. In the event Lender shall bring an action to
enforce the terms and conditions of the Loan Documents, Lender, if prevailing,
shall be entitled to recover all of its costs and expenses, including, but not
limited to, reasonable attorney's fees as determined by the court.
7.13 Duplicate Originals. The Loan Document shall be executed in more
than one counterpart, each of the parties hereto shall receive an original
counterpart; provided, however, that all originals together shall constitute one
and the same agreement.
7.14 Other Federal Provisions. This Loan is subject to applicable
provisions contained in 24 CFR 570.
IN WITNESS WHEREOF, Borrower and the Lender have executed this Loan
Agreement as of the date first written above by and through their duly
authorized representatives.
THE CITY OF OKLAHOMA CITY
ss/KIRK HUMPHREYS
--------------
Mayor
ATTEST:
ss/THOMAS P. HURLEY
- -------------------
City Clerk
APPROVED as to form and legality this 7th day of November 1999.
ss/DARRELL SIMMONS
-------------------
Assistant Municipal Counselor
ATTEST:
TOWER TECH, INC.
By:ss/CHARLES D. WHITSITT
---------------------
Chief Financial Officer
CORPORATE ACKNOWLEDGMENT
STATE OF OKLAHOMA
COUNTY OF OKLAHOMA
On this 1st day of November, 1999, before me personally appeared Charles D.
Whitsitt known to be the CFO of Tower Tech, Inc., that executed the within and
foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that he/she was authorized to execute said
instrument and that the seal affixed is the corporate seal of said corporation.
In Witness Whereof I have hereunto set my hand the day and year first above
written.
ss/PATTY LEWIS POAG
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NOTARY PUBLIC
MY COMMISSION EXPIRES: March 9, 2002
ATTACHMENT "A"
Exhibit 10.39
SECURITY AGREEMENT
This Security Agreement (the "Agreement") is made as of
December 2nd, 1999, by Harold Curtis ("Pledgor") in favor of the City of
Oklahoma City ("Pledgee").
RECITALS
WHEREAS, at the time of execution of this Agreement, Pledgee loaned (the
"Loan") Tower Tech, Inc., an Oklahoma corporation ("Tower Tech Inc.), Two
Million Dollars ($2,000,000.00), as evidenced by Tower Tech's Promissory Note
for such amount;
WHEREAS, Pledgor has executed a non-recourse guaranty of the Loan and
intends for this Agreement to secure his non-recourse guaranty; and
WHEREAS, in order to induce Pledgee to make the Loan, Pledgor has
agreed to pledge certain of his common stock of Tower Tech as security for the
repayment of the Loan:
NOW, THEREFORE, it is agreed as follows:
1. Pledge. For value received, Pledgor hereby grants a security
interest to Pledgee in all common stock of Tower Tech currently owned by Pledgor
(the "Pledged Shares"). This pledge is given to secure only the current
obligations of Tower Tech under the Note.
2. Dividends. During the term of this pledge, all dividends and other
amounts received by Pledgee as a result of his record ownership of the Pledged
Shares may be retained by him.
3. Rights of Pledgor. Notwithstanding anything to the contrary herein,
Pledgor shall at all times retain and have the full and absolute right to
exercise all rights and indicia of ownership of, including, without limitation,
voting and consensual rights, including the right to receive dividends and other
distributions in respect of, and, upon approval of the Pledgee, the right to
transfer or otherwise dispose of, the Pledged Shares.
4. Representations. Pledgor warrants and represents that there are no other
restrictions upon the transfer of any Pledged Shares, other than under
applicable securities laws or as may appear on the face of the certificates, and
that Pledgor has the right to transfer the Pledged Shares without obtaining the
consent of the other Tower Tech shareholders
5. Adjustments. If, during the term of this pledge, any share dividend,
reclassification, readjustment, or other change is declared or made in the
capital structure of Tower Tech, all new, substituted, and additional shares, or
other securities, issued by reason of any such change shall be held by Pledgee
under the terms of this Agreement in the same manner as the Pledged Shares
originally pledged hereunder.
6. Payment of the Loan. Upon payment of the Loan, less amounts received
and applied by Pledgee in reduction thereof, Pledgee shall release its pledge
and transfer to Pledgor all of the Pledged Shares, free and clear of all liens,
encumbrances or other restrictions
7. Default. If Tower Tech defaults in the payment of any principal or
interest due under the Note, Pledgee shall have the tights and remedies provided
in the Uniform Commercial Code in force in the State of Oklahoma at the date of
this Agreement. Notwithstanding any other term or provision of this Agreement,
Pledgor shall not have any personal liability whatsoever for repayment of Tower
Tech's obligation under the Note, and Pledgee shall look solely to the Pledged
Shares for satisfaction of the obligations of Pledgor.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written
ss/HAROLD CURTIS
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