Exhibit 10.5
NEITHER THESE SECURITIES NOR
THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE BORROWER.
THE INDEBTEDNESS REPRESENTED
BY THIS INSTRUMENT IS SUBORDINATED TO THE PAYMENT OF SENIOR
INDEBTEDNESS IN ACCORDANCE WITH AND TO THE EXTENT PROVIDED
HEREIN.
SENIOR SUBORDINATED CONVERTIBLE PROMISSORY
NOTE
$8,091,482.04
Manitowoc, Wisconsin
FOR
VALUE RECEIVED, TOWER TECH HOLDINGS INC., a Nevada corporation
(hereinafter referred to as the “ Borrower ”),
hereby promises to pay to the order of TONTINE OVERSEAS FUND, LTD.,
and its successors and assigns (hereinafter referred to as “
Holder ”), in the manner hereinafter provided, the
principal sum of EIGHT MILLION, NINETY-ONE THOUSAND, FOUR HUNDRED
EIGHTY-TWO DOLLARS AND FOUR CENTS ($8,091,482.04), as it may be
increased herein, in immediately available funds and in lawful
money of the United States of America, together with interest
thereon, all in accordance with the provisions hereinafter
specified. This Note is one of approximately $25,000,000 in
aggregate principal amount of Senior Subordinated Convertible
Promissory Notes (each a “ Note ” and
collectively, the “ Notes ”) issued pursuant to the Securities
Purchase Agreement dated August 22, 2007, by and among the Borrower
and the original purchasers of the Notes (the “ Purchase
Agreement ”), and is subject to the provisions set forth
therein.
1.
Accrual of
Interest . Interest shall accrue on the
outstanding principal amount hereof (including any PIK Interest, as
hereafter defined) at (i) a rate equal to nine and one-half percent
(9.50%) per annum for the period beginning on the date hereof and
ending on the date that is nine months from the date hereof (the
“ Initial Period ”) and (ii) a rate equal to
thirteen and one-half percent (13.50%) per annum for the period
following the Initial Period. Interest shall be calculated
hereunder on the basis of the actual number of days
elapsed.
2.
Payment of
Interest . Commencing on December 31, 2007, the
Borrower shall pay interest on this Note semi-annually in arrears
on each June 30 and December 31 of each calendar year and on the
Maturity Date (as hereafter defined), or if any such day is not a
business day, on the next succeeding business day (each an “
Interest Payment Date ”), to Holder. Interest
payable on this Note shall be paid on each Interest
Payment Date, at the
election of the Borrower, (i) in cash or (ii) in kind, in which
event, the amount of the principal outstanding under this Note
shall be increased by the amount of such interest payment (“
PIK Interest ”) on such Interest Payment Date and
interest shall then accrue on the increased principal amount.
During the continuance of an Event of Default,
notwithstanding anything else to the contrary contained in this
Note, interest payable on the outstanding principal hereunder,
including any PIK Interest, shall bear interest at the then
applicable interest rate set forth in Section 1 plus two percent
(2%) per annum and such interest shall be payable upon
demand.
3.
Scheduled Principal
Payments . The Borrower shall make payments of
principal to Holder as follows: (i) on the first anniversary of
this Note, the sum of $809,148.2, which represents 10% of original
principal amount of this Note, (ii) on the second anniversary of
this Note, the sum of $3,236,592.82, which represents 40% of
original principal amount of this Note, and (iii) on the third
anniversary of this Note (the “ Maturity Date
”), a final payment of the sum of the outstanding principal
balance of this Note, including the amount of any PIK Interest,
together with accrued and unpaid interest thereon, and all other
obligations and indebtedness owing hereunder, if not sooner
paid.
4.
Prepayment
. This Note may be
prepaid in whole or in part at any time without premium or penalty;
provided, however , that the Borrower may not prepay the
Note or any portion of the outstanding principal balance of the
Note if Holder has surrendered the Note to the Borrower and
provided written notice to the Borrower of its election to convert
the Note or such portion of the outstanding principal balance of
the Note into Conversion Shares pursuant to Section 6. Any
prepayment of principal shall be accompanied by payment of any
interest, if any, accrued and unpaid through the date of such
prepayment.
5.
Manner and Application
of Payments . All amounts payable hereunder shall be payable
to Holder by wire transfer of immediately available funds.
Payments hereunder
shall be applied first to interest and then to principal
outstanding hereunder, except that if Holder has incurred any cost
or expense in connection with the enforcement or collection of the
obligations of the Borrower hereunder, Holder shall have the option
of applying any monies received from the Borrower to payment of
such costs or expenses plus interest thereon before applying any of
such monies to any interest or principal then due.
6.
Conversion
. This Note is
convertible into common stock, $0.001 par value per share of the
Borrower (“ Common Stock ”) in accordance with
this Section 6.
i.
Except as set forth below,
Holder has the unrestricted right, at Holder’s option, to
convert, in whole or in part, the outstanding principal balance of
this Note, including the amount of any PIK Interest, together with
accrued and unpaid interest thereon (the “ Conversion
Principal ”), into fully paid and nonassessable shares of
Common Stock. The right to convert may be exercised by Holder
at any time after three (3) months following the date hereof;
provided, however , that Holder’s right
2
to convert may not be
exercised for the six (6) month period (the “
Non-Conversion Period ”) following the date on which
the Borrower files a registration statement with the Securities and
Exchange Commission for the purpose of registering shares to be
offered by the Borrower in a rights offering to its stockholders,
so long as at all times during the Non-Conversion Period, the
Borrower is taking all reasonable steps to effectuate the
consummation of the rights offering. The number of shares of
Common Stock into which this Note may be converted (the “
Conversion Shares ”) shall be determined by dividing
the Conversion Principal (as determined on the date that Holder
exercises this conversion right) by the Conversion Price. The
initial Conversion Price shall be $7.50.
ii.
Holder shall be entitled
to convert this Note by surrendering this Note at the office of the
Borrower and shall give written notice to the Borrower of the
election to convert this Note and shall state therein the name or
names in which the certificate or certificates for Conversion
Shares are to be issued.
iii.
Such certificate or
certificates shall bear such legends as are required, in the
opinion of counsel to the Borrower, by applicable state and federal
securities laws. The Borrower shall, as soon as practicable
thereafter, but no later than seven (7) business days, issue and
deliver to Holder a certificate or certificates for the number of
Conversion Shares to which Holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of surrender
of this Note, and the person or persons entitled to receive the
Conversion Shares issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such Conversion
Shares as of such date.
iv.
No fractional shares of
Common Stock shall be issued on conversion of this
Note.
v.
In the event the Borrower
should at any time or from time to time after the date hereof fix a
record date for the split or subdivision of the outstanding shares
of Common Stock or the determination of holders of Common Stock to
receive dividends or other distributions payable in additional
shares of Common Stock or other securities or rights convertible
into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (“Common Stock
Equivalents”) without payment of any consideration by such
holder for the additional shares of Common Stock or the Common
Stock Equivalents, then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date
is fixed), the Conversion Price of this Note shall be appropriately
decreased so that the number of Conversion Shares issuable upon
conversion of this Note shall be increased in proportion to such
increase or potential increase of outstanding shares of Common
Stock.
vi.
If the number of shares of
Common Stock outstanding at any time after the date hereof is
decreased by a combination of the outstanding shares of Common
Stock, then, following the record date of such combination, the
Conversion Price for this Note s
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