EXHIBIT 10.42
-------------
SECURITY AGREEMENT
SECURITY AGREEMENT ("Agreement") made this 15th day of
September, 2000 by and between TOWER TECH, INC., an Oklahoma corporation
("Pledgor"), with an address at 11935 South I-44 Service, Oklahoma City 73173
and Taglich Brothers, Inc., as collateral agent (the"Pledgee") with an address
at 1370 Avenue of the Americas, New York, New York 10019.
W I T N E S S E T H :
---------------------
WHEREAS, Pledgee has entered into a letter agreement (the
"Loan Agreement") with Pledgee whereby Pledgee has agreed to use its best
efforts to locate third parties (collectively, the "Lenders") that will loan in
the aggregate up to $500,000 to Pledgor (the "Loan"); and
WHEREAS, the Loan will be made in one or more tranches from
the Lenders, with each tranche being evidenced by a separate promissory note
issued by the Pledgor to the Lender (each a "Note" and collectively, the
"Notes"), and concurrent with funding part of the Loan, each Lender will enter
into an agreement with Pledgee appointing Pledgee as collateral agent under this
Agreement; and
WHEREAS, to induce Lenders to make the Loan, Pledgor has
agreed to grant to Pledgee a security interest in all of its right, title and
interest in and to that certain license agreement, dated as of December 4, 1998
(the "License Agreement"), by and between Aggreko, Inc. ("Aggreko") and Pledgor,
including, without limitation, the right to receive all license, royalty and
other payments thereunder (hereinafter, collectively the "Pledged Interest"),
and Pledgor acknowledges that the Lenders would not make the Loan but for the
Pledgor delivering this Agreement.
NOW, THEREFORE, as an inducement to Lenders to make the Loan
and as a condition thereof, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by Pledgor, to secure
repayment of the Loan pursuant to the Notes and of all other obligations of
Pledgor to the Lenders under the Notes and this Agreement, including any costs
and expenses which may be incurred in connection with the enforcement of the
foregoing (including reasonable attorneys fees and legal costs and
disbursements) and the realization on the security provided for by this
Agreement, Pledgor hereby grants, bargains, sells, assigns, transfers and
pledges to Pledgee, its successors and assigns, and hereby gives to Pledgee, its
successors and assigns, a security interest in the Pledged Interests, together
with any and all proceeds thereof.
TO HAVE AND TO HOLD the Pledged Interests unto the Pledgee,
its
-1-
<PAGE>
successors and assigns forever, provided, however, that upon repayment in full
of all amounts due under the Notes (including accrued interest and costs of
collection, if any) and this Agreement, this Agreement and the estate and rights
hereby granted shall be of no further force or effect and any and all Pledged
Interests held by the Pledgee or Pledgee's successors or assigns shall be
returned to Pledgor and Pledgee shall deliver all reasonably necessary documents
to Pledgor to confirm such discharge.
Pledgor hereby represents, warrant and covenant to Pledgee as
follows:
(a) The execution, delivery and performance by Pledgor of
this Agreement and each of the Notes has been approved by
the board of directors of Pledgor and does not contravene
any restriction of any kind or character binding upon or
affecting Pledgor and, when delivered pursuant hereto, is
and will continue to be the legal, valid binding
obligation and undertaking of Pledgor, enforceable
against Pledgor in accordance with its terms;
(b) The Pledged Interests have not been assigned,
transferred, or otherwise encumbered, except that the
Pledgor has previously granted a security interest in the
Pledged Interests to the People First Bank;
(c) Pledgor will reimburse Pledgee promptly for any and all
expenditures which Pledgee may make (although Pledgee has
no obligation to make any expenditures) from time to time
to defend the security granted hereunder (in the event of
Pledgor's failure so to do), and any such payment made by
Pledgee shall be for the account of Pledgor and the
making thereof by Pledgee shall not cure Pledgor's
default or constitute a waiver of any right or remedy
granted to Pledgee hereunder, and all sums so expended by
Pledgee or any liability incurred by Pledgee shall be
deemed to be an indebtedness of Pledgor and secured by
this Agreement, and Pledgee is hereby irrevocably
authorized to reimburse itself for any such expenditures,
payments or sums, out of and from the money evidenced by
said Pledged Interests;
(d) In the event this Agreement or the Notes shall be deemed
invalid in whole or in part by any present or future law
of the United States or of the State of New York or any
decision of any court, Pledgor will execute and deliver
such other and further instruments and do such things as
in the reasonable opinion of counsel for Pledgee, it
successors and assigns, will carry out the intent of this
Agreement. From time to time Pledgor will execute and
deliver such further documents and assurances as in the
reasonable opinion of counsel for Pledgee may be required
more effectively to secure the Pledgee with respect to
the Pledged Interests and the performance of each and all
the terms, covenants and conditions
-2-
<PAGE>
of this Agreement to be performed in or observed by
Pledgor;
(e) The Pledgor will promptly notify the Pledgee of the
imposition at any time of any lien, claim or encumbrance
upon any of the Pledged Interests and the Pledgor will
defend the Pledged Interests against all claims and
demands of all persons at any time claiming the same or
any interest therein adverse to the Pledgee;
(f) Pledgor will keep accurate and complete books and records
concerning each item and category of the Pledged
Interests. Pledgor will furnish to the Pledgee, at such
times and in such form and substance as may be reasonably
requested, information adequate to enable the Pledgee to
identify the Pledged Interests and components thereof;
(g) The principal place of business of the Pledgor is as
follows:
Tower Tech, Inc.
11935 South I-44 Service
Oklahoma City, Oklahoma 73173
Pledgor will not move its principal place of business
except to such new location as may be established in
accordance with subparagraph (i) below;
(h) Pledgor's only original books of account and records
relating to the Pledged Interests are, and will continue
to be, kept at its principal place of business identified
in subparagraph (h) above. Pledgor will not permit any
original books of account or records concerning the
Pledged Interests or the principal place of business to
be located at any other address except such new locations
as it may establish in accordance with subparagraph (i)
below;
(i) If Pledgor desires to establish a new location or
locations for its principal place of business or to
establish a new name or names in which it may invoice
account debtors or maintain records concerning the
Pledged Interests, then it shall first, with respect to
each such new location or name:
(1) give Pledgee written notice of its
intention to do so and provide Pledgee with such
information in connection therewith as Pledgee may
reasonably request; and
(2) take such action satisfactory to Pledgee as
may be necessary to maintain at all times the
perfection and priority of the security interest
granted to the Pledgee under this Agreement;
-3-
<PAGE>
(j) Pledgee shall have the right, at its cost and expense, at
any reasonable time from time to time and upon reasonable
notice to examine and make copies or extracts from the
books and records of the Pledgor concerning the Pledged
Interests; and
(k) Pledgee may at any time, upon prior notice to Pledgor,
verify with Aggreko the status of, and anything relating
to, the License Agreement. Pledgor from time to time will
execute and deliver such instruments and take all such
action as Pledgee may reasonably request in order to
effectuate the purposes of this subparagraph (k).
(l) The License Agreement is in full force and effect and has
not been terminated, superceded, modified, changed,
altered or amended in any manner, whether orally, in
writing, and/or by custom and practice. No event of
default exists under the License Agreement nor has any
event occurred which with notice and/or the passage of
time is likely to result in an event of default.
(m) Throughout the entire term of the License Agreement up to
and including the date hereof, Pledgor has neither given
nor received any notice regarding a breach or default
under the License Agreement, and Pledgor is not aware of
any event that, by virtue of occurring or not occurring,
would give either party under the License Agreement the
right to provide such notice.
(n) All payments previously due under the License Agreement
were paid on time and Pledgor knows of no reason why all
future payments under the License Agreement would not be
paid on time.
The occurrence of any of the following shall constitute an
event of default ("Event of Default") hereunder:
(a) The failure to pay when due any and all sums of money due
under and of the Notes or any other default thereunder
and the continuance of such default for a period of ten
(10) days;
(b) If any representation or warranty contained herein shall
prove to be inaccurate in any material respect;
(c) If any of the covenants or agreements contained herein
are not complied with for a period of ten (10) days after
notice from Pledgee;
(d) Any amendment of the certificate of incorporation of
Pledgor without Pledgee's prior written consent which
shall not be unreasonably
-4-
<PAGE>
withheld, delayed or conditioned;
(e) commencement of any proceeding, procedure, or remedy
supplementary to or in enforcement of any judgment for
the payment of money in excess of $10,000, issuance of
any writ or order of attachment or garnishment for the
payment of money in excess of $10,000, or the existence
of any other lien against or with respect to any property
of Pledgor other than liens existing the date hereof;
(f) dissolution, liquidation or other termination of
existence, or adoption of any resolution for the
dissolution, liquidation or other termination of
existence, of Pledgor;
(g) suspension of the usual business of Pledgor;
(h) commission of any act of bankruptcy by or insolvency or
business failure of Pledgor, application for or
appointment of a trustee or receiver for Pledgor or of
any part of Pledgor's property, assignment for the
benefit of creditors by Pledgor, filing of a petition in
bankruptcy by or against Pledgor, or commencement by or
against Pledgor of any proceeding under any bankruptcy or
insolvency law or any other law relating to the relief of
debtors, readjustment of indebtedness, reorganization,
receivership, composition or extension;
(i) making or sending notice of any intended bulk transfer by
Pledgor;
(j) the acceleration against Pledgor of any obligation to pay
money under any agreement, instrument or arrangement
evidencing or securing indebtedness of Pledgor to Pledgee
or any other party; or
(k) if an event of default occurs under any of the loan
documents between the People First Bank and the Company
and/or if the People First Bank exercises any of its
rights as to any of the Company's assets under any of the
documents between it and the Company.
then, and in every such case, unless the Event of Default shall have theretofore
been remedied, Pledgee may, upon ten (10) days prior notice, by its agent,
nominee or otherwise, in addition to all rights that it may have at law or in
equity, and without either demand, advertisement or further notice of any kind,
all of which are hereby waived, sell, assign or deliver all or any part of the
Pledged Interests at any public or private sale, as Pledgee may elect, either
for cash or on credit and for present or future delivery, in any one or more
sales and at such price or prices as Pledgee shall deem satisfactory, and in
connection therewith may grant options to buy all or any part of the Pledged
Interests. Upon such sale, Pledgee or nominees or parties designated by Pledgee,
may purchase and hold the same either as a whole or in part, free from any
rights of redemption on the part of Pledgor, which rights are hereby waived and
released.
-5-
<PAGE>
Notwithstanding the above, Pledgee shall give to Pledgor five days written
notice of any sale and shall permit Pledgor to attend such sale. The Pledgee
shall transfer the Pledged Interests to the purchaser at such sale, and the
recitals in such transfer shall be prima facie evidence of the truth of the
matters therein stated and all prerequisites to such sale required hereunder and
under the laws of any applicable State shall be presumed to have been performed.
The purchaser at any such sale (whether it be Pledgee, a nominee, or any third
party or parties), shall thereafter hold such Pledged Interests thus purchased,
absolutely, free from any rights or claims of any kind of Pledgor. The Pledgee,
without notice or publication, may adjourn any public sale or cause it to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may be made at any time or place to which the same may be so
adjourned. At any sale, Pledgee may pay part or all of the purchase price by
setting off against such price part or all of the obligations of Pledgor to
Pledgee. The cash proceeds of any sale after deducting all costs and expenses of
every kind for collection, sale, or delivery (including reasonable counsel fees
and disbursements, brokerage commissions, transfer fees and taxes), shall be
applied, without any marshalling of assets, to the payment of the Note and any
other amounts due to Pledgee, including accrued interest and costs of
collection. If there is any surplus after payment of such amounts, it will be
promptly forwarded to Pledgor or such other party as shall be entitled to
receive same. Any sale (or surrender) conducted upon the foregoing terms shall
be deemed commercially reasonable.
All rights of Pledgee with respect to the Pledged Interests
shall not be affected, impaired, released, terminated or discharged, in whole or
in part, by:
(a) any amendment or modification of the Note or any other
instrument executed by Pledgor in relation to the
transactions described herein;
(b) any extensions of time for performance of any of said
documents or under this Agreement;
(c) any exchange, surrender or release, in whole or in part,
of any security which may be held by Pledgee at any time
for or under any of the instruments hereinabove referred
to;
(d) any enforcement or failure to enforce any claims or
remedies which Pledgee may at any time have under this
Agreement or any of the aforementioned instruments; or
(e) the compromise, release, waiver and/or adjustment of any
claim that Pledgee may have at any time against any
person, firm, corporation or entity, however the same may
be accomplished and whether made with or without notice
to Pledgor.
The Pledgee's rights hereunder shall not be affected or
impaired, in whole or in part, by reason of any invalidity of this Agreement or
any document referred to herein.
-6-
<PAGE>
The Pledgee shall have all the rights and remedies of a
secured party under the New York Uniform Commercial Code, and be entitled to
avail itself of all such other rights or remedies as shall now or may hereafter
exist at law or in equity for the satisfaction of the obligations of Pledgor to
Pledgee and the foreclosure of the security interest created hereby, and resort
to any remedies provided hereunder or by the New York Uniform Commercial Code or
by any other law, and shall not prevent the concurrent employment of any other
appropriate remedy or remedies.
In any litigation or legal proceeding arising out of, or
relating to, this Agreement or the Pledged Interests, in which the Pledgee and
the undersigned shall be adverse parties, the undersigned waives the right to
interpose any defense, set-off or counterclaim of any kind not directly arising
herefrom or therefrom, as the case may be, and also waives the right to a trial
by jury.
This Agreement shall be construed and enforced in accordance
with the internal laws of the State of New York.
This Agreement may not be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No delays on the part of Pledgee in exercising any power or right
hereunder shall operate as a waiver of any such power or right nor shall any
single or partial exercise of any such power or right exclude any further
exercise thereof.
Pledgor shall at any time or from time to time upon request of
Pledgee, at their own cost and expense, execute, deliver, file or record in such
manner as Pledgee may require, financing statements, security agreements, or
other instruments that may be necessary or reasonably desirable or that Pledgee
may reasonably request in order to create, preserve, or validate the security
interest hereby granted or to enable Pledgee to exercise and enforce its rights
hereunder. Upon the failure of Pledgor to comply promptly with any such request,
Pledgee is hereby authorized as the agent of Pledgor, and Pledgor hereby appoint
Pledgee as their attorney-in-fact to execute any such instrument on their
behalf. Pledgee shall not exercise said appointment so as to subject the Pledgor
to any personal liability contrary to the provisions of this Agreement and the
Note. Notwithstanding the foregoing, the Pledgee shall have no obligation to
comply with any recording, rerecording, filing, refiling or other legal
requirements necessary to establish or maintain the validity, priority or
enforceability of, or the Pledgee's right in or to, the Pledged Interests or any
part thereof.
From and after maturity (whether by acceleration or otherwise)
of any of the obligations secured hereby, any unpaid balance remaining shall
bear interest at the rate of twenty (20%) percent per annum. Anything in this
Agreement or any other agreement, instrument or document to the contrary
notwithstanding, in no event shall interest on any obligation exceed the maximum
rate permitted under any applicable law or regulation, and if any provision of
this Agreement or any other agreement, instrument or document is in
contravention of any such law or regulation, such provision shall be deemed
amended to
-7-
<PAGE>
provide for interest at said maximum rate.
Pledgor agrees that the refusal of Pledgee to permit any
person to bid for and to buy the Pledged Interests, or any part thereof, at any
sale thereof, shall be commercially reasonable if Pledgee is of the reasonable
opinion that an offer or sale to any such person cannot comply with any and all
requirements of applicable state and federal securities laws.
-8-
<PAGE>
All notices and other communications required or permitted
hereunder, shall be in writing and personally delivered or, if mailed, shall be
deemed to be given on the third business day after the date when deposited in
the United States mail, by registered or certified mail, postage prepaid,
addressed as follows:
If to Pledgor: 11935 South I-44 Service
Oklahoma City, Oklahoma 73173
If to Pledgee: Michael Taglich
1370 Avenue of the Americas
New York, New York 10019
Attn: Michael Taglich, President
or to such other person or address as either party shall designate by written
notice in like manner to the other.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective personal representatives, successors and
permitted assigns.
Pledgor agrees to pay all costs and expenses, including reasonable
attorneys fees and disbursements incurred by Pledgee in enforcing its rights
hereunder.
IN WITNESS WHEREOF, Pledgor have caused this Agreement to be duly
executed and delivered as of the date first above written.
TOWER TECH, INC.
By: /s/ Robert C. Brink
------------------------------
Name: Robert C. Brink
----------------------------
Title: President
---------------------------
TAGLICH BROTHERS, INC.
as collateral agent
STATE OF ) Oklahoma By: /s/ Michael Taglich
)ss: ------------------------------
COUNTY OF ) Cleveland Name: Michael Taglich
----------------------------
Title: President
On the __ day of September, 2000, before me personally came Robert C.
Brink, being by me duly sworn, did depose and say that he resides at No. Okla.
City, Oklahoma; that he is the President of TOWER TECH, INC., the corporation
described in and which executed the foregoing instrument; and that he signed
thereto by order of the board of
-9-
<PAGE>
directors of said corporation.
/s/ Patty Lewis Paog
----------------------
Notary Public
My Commission Expires 3-9-2002.
-10-
