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 


 


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                        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 shall be appropriately increased so that the
number of shares of Common 


 


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                        Stock issuable on conversion hereof shall be decreased in
proportion to such decrease in outstanding shares of Common Stock.


vii.        The Borrower shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of this Note, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of this Note; and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of the entire
current Conversion Principal of this Note, in addition to such other remedies
as shall be available to Holder, the Borrower will use its best efforts to take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.


viii.      The Borrower shall use its best efforts to ensure that any
future acquisitions of Common Stock by Holder upon the conversion, in whole or
in part, of the outstanding principal balance of this Note shall not be subject
to the provisions of any anti-takeover laws and regulations of any governmental
authority, including without limitation, the applicable provisions of the
Nevada Revised Statutes, and any provisions of an anti-takeover nature adopted
by the Borrower or any of its subsidiaries or contained in the Borrower’s
Articles of Incorporation, Bylaws, or the organizational documents of any of
its subsidiaries, each as amended.


7.                                       No Security.  This Note is an unsecured
obligation of the Borrower and no collateral accompanies the obligations
hereunder.


8.                                       Subordination.  The indebtedness of the Borrower evidenced by
this Note, including the principal and interest, is subordinated and junior in
right of payment to all Senior Indebtedness under and as defined in the Debt
Subordination Agreement between the original Holder of this Note and LaSalle
Bank National Association, dated of even date herewith (the “Debt Subordination
Agreement”), as more fully set forth in the Debt Subordination Agreement.


9.                                       Treatment of Notes.  Each Note issued pursuant to the Purchase
Agreement or subsequently issued in replacement thereof shall rank pari passu with each other as to the payment of principal
and interest.  Further, the Notes and any
notes subsequently issued in replacement thereof shall rank senior as to the
payment of principal and interest with all present and future indebtedness for
money borrowed of the Borrower other than the Senior Indebtedness.


10.                                 Events of Default.  Each of the following acts, events or circumstances
shall constitute an Event of Default (each an “Event of Default”) hereunder:


i.                  the Borrower shall default in the payment when due (in
accordance with the terms of the Notes) of any principal, including PIK
Interest, interest or other amounts 


 


4

















                        owing hereunder or under any other Note, and such default is
not cured within three (3) business days of the due date;


ii.               any representation or warranty made by the Borrower in the
Purchase Agreement shall have been false or misleading in any material respect
on the date as of which such representation or warranty was made;


iii.            the Borrower shall fail to perform or observe any material
agreement, covenant or obligation arising under any provision hereof, under any
other Note or the Purchase Agreement for more than thirty (30) days following
receipt by the Borrower of a notice from Holder indicating any such violation;


iv.           the Borrower’s failure to deliver certificates for the
Conversion Shares in accordance with Section 6(iii)


v.              any default by the Borrower under the terms of any other
indebtedness of the Borrower or any subsidiary of the Borrower that is not
cured or waived within any grace period applicable thereto;


vi.           the Borrower shall commence a voluntary case concerning
itself under any bankruptcy, insolvency or similar laws or statutes (including
Title 11 of the United States Code, as amended, supplemented or replaced)
(collectively, the “Bankruptcy Code”);
or (b) an involuntary case is commenced against the Borrower and is not
dismissed within ninety (90) days; or (c) a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of the Borrower or the Borrower commences any other proceedings
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower or there is
commenced against the Borrower any such proceeding; or (d) any order of relief
or other order approving any such case or proceeding is entered; or (e) the
Borrower is adjudicated insolvent or bankrupt; or (f) the Borrower makes a
general assignment for the benefit of creditors; or (g) the Borrower shall call
a meeting of its creditors with a view to arranging a composition or adjustment
of its debts; or (h) the Borrower shall by any act or failure to act consent
to, approve of or acquiesce in any of the foregoing; and


vii.        this Note or any other Note shall cease to be in full force
and effect, or shall cease to provide the rights, powers and privileges
purported to be created hereby.


Subject to the Debt Subordination Agreement, if an Event of Default,
other than an Event of Default described in Section 10(vi), occurs, Holder by
written notice to the Borrower may declare the principal of and accrued
interest on this Note to be immediately due and payable.  Upon a declaration of acceleration, such
principal and interest will become immediately due and payable.  If an Event of Default described in Section
10(vi) occurs, the principal of and accrued interest on this Note then


 


5

















outstanding will become immediately due and payable without any
declaration or other act on the part of Holder.


11.                                 Remedies; Cumulative Rights.  In addition to the rights provided under
Section 9, Holder shall also have any other rights that Holder may have been
afforded under any contract or agreement at any time, including the Purchase
Agreement, and any other rights that Holder may have pursuant to applicable
law.  No delay on the part of Holder in
the exercise of any power or right under this Note or under any other instrument
executed pursuant hereto shall operate as a waiver thereof, nor shall a single
or partial exercise of any power or right preclude other or further exercise
thereof or the exercise of any other power or right.


No
extensions of time of the payment of this Note or any other modification, amendment
or forbearance made by agreement with any person now or hereafter liable for
the payment of this Note shall operate to release, discharge, modify, change or
affect the liability of any co-borrower, endorser, guarantor or any other
person with regard to this Note, either in part or in whole.  No failure on the part of Holder or any
holder hereof to exercise any right or remedy hereunder, whether before or
after the occurrence of a default, shall constitute a waiver thereof, and no
waiver of any past default shall constitute a waiver of any future default or
of any other default.  No failure to
accelerate the debt evidenced hereby by reason of an Event of Default hereunder
or acceptance of a past due installment, or indulgence granted from time to
time shall be construed to be a waiver of the right to insist upon prompt
payment thereafter, or to impose late payment charges, or shall be deemed to be
a novation of this Note or any reinstatement of the debt evidenced hereby, or a
waiver of such right of acceleration or any other right, or be construed so as
to preclude the exercise of any right which Holder or any holder hereof may
have, whether by the laws of the State of Wisconsin, by agreement or otherwise,
and none of the foregoing shall operate to release, change or affect the
liability of the Borrower of this Note, and the Borrower hereby expressly
waives (to the extent allowed by law) the benefit of any statute or rule of law
or equity which would produce a result contrary to or in conflict with the foregoing.


12.                                 Waivers.  Except for the notices expressly required by
the terms of this Note (which rights to notice are not waived by the Borrower),
the Borrower, for itself and its successors and assigns, hereby forever waives
presentment, protest and demand, notice of protest, demand, dishonor and
non-payment of this Note, and all other notices in connection with the
delivery, acceptance, performance, default or enforcement of the payment of
this Note, and waives and renounces (to the extent allowed by law), all rights
to the benefits of any statute of limitations and any moratorium, appraisement,
and exemption now allowed or which may hereby be provided by any federal or
state statute or decisions against the enforcement and collection of the
obligations evidenced by this Note and any and all amendments, substitutions,
extensions, renewals, increases, and modifications hereof.


 


 


6

















13.                                 Attorneys’ Fees.  The Borrower agrees to pay all reasonable
costs and expenses of collection and enforcement of this Note when incurred,
including Holder’s reasonable attorneys’ fees and legal and court costs,
including any incurred on appeal or in connection with bankruptcy or
insolvency, whether or not any lawsuit or proceeding is ever filed with respect
hereto.


14.                                 Severability; Invalidity.  The Borrower and Holder intend and believe
that each provision in this Note comports with all applicable local, state and
federal laws and judicial decisions. 
However, if any provisions, provision, or portion of any provision in
this Note is found by a court of competent jurisdiction to be in violation of
any applicable local, state or federal ordinance, statute, law, or
administrative or judicial decision, or public policy, and if such court would
declare such portion, provision or provisions of this Note to be illegal,
invalid, unlawful, void or unenforceable as written, then it is the intent of
all parties hereto that such portion, provision or provisions shall be given
force and effect to the fullest possible extent they are legal, valid and
enforceable, and the remainder of this Note shall be construed as if such
illegal, invalid, unlawful, void or unenforceable portion, provision or
provisions were severable and not contained herein, and the rights, obligations
and interest of the Borrower and Holder hereof under the remainder of this Note
shall continue in full force and effect.


15.                                 Usury.  All terms, conditions and agreements herein
are expressly limited so that in no contingency or event whatsoever, whether by
acceleration of maturity of the unpaid principal balance hereof, or otherwise,
shall the amount paid or agreed to be paid to the holders hereof for the use,
forbearance or detention of the money advanced hereunder exceed the highest
lawful rate permissible under applicable laws. 
If, from any circumstances whatsoever, fulfillment of any provision
hereof shall involve transcending the limit of validity prescribed by law which
a court of competent jurisdiction may deem applicable hereto, then ipso facto, the obligation to be fulfilled shall be reduced
to the limit of such validity, and if under any circumstances the holder hereof
shall ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to
reduction of the unpaid principal balance due hereunder and not to the payment
of interest.


16.                                 Assignment.  The Borrower may not transfer, assign or
delegate any of its rights or obligations hereunder.  This Note shall accrue to the benefit of
Holder and its successors and shall be binding upon the undersigned and its
successors.  Holder shall have the right,
without the consent of the Borrower, to transfer or assign, in whole or in
part, its rights and interests in and to this Note, provided such transfer
complies with all applicable state and federal securities laws.  As used herein, the term “Holder” shall mean and include such
successors and assigns.


17.                                 Notices.  Any notices required or permitted to be given
under the terms of this Note shall be sent or delivered personally or by
courier (including a recognized, receipted overnight delivery service) or by
facsimile (with a copy sent by a recognized, receipted overnight delivery
service) and shall be effective upon receipt, if delivered personally 


 


7

















                                                or by courier
(including a recognized overnight delivery service) or by facsimile, in each
case addressed to a party.  The addresses
for such communications shall be:




	
  If to the
  Borrower:

  
	
   

  
	
  Tower Tech Holdings Inc.

  
	
  100 Maritime Drive, Suite 3C

  
	
  Manitowoc, Wisconsin 54220

  
	
  Telephone: (920) 684-5531

  
	
  Facsimile: (920) 684-5579

  
	
  Attention: Mr. Raymond L.
  Brickner, III

  
	
   

  
	
  If to
  Holder:

  
	
   

  
	
  Tontine Overseas Fund, Ltd.

  
	
  55 Railroad Avenue, 1st Floor

  
	
  Greenwich, Connecticut 06830

  
	
  Attention: Mr. Jeffrey L.
  Gendell

  
	
  Telephone: (203) 769-2000

  
	
  Facsimile: (203) 769-2010

  
	
   

  






Each
party shall provide notice to the other party of any change in address.


18.                                 Amendment.  The provisions of this Note may be amended
only by a written instrument signed by the Borrower and Holder.


19.                                 Governing Law.  THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF
ALL PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF WISCONSIN.


20.                                 Jurisdiction; Waiver of Jury
Trial.  ALL ACTIONS OR PROCEEDINGS
ARISING IN CONNECTION WITH THIS NOTE SHALL BE FILED, TRIED AND LITIGATED IN THE
STATE AND FEDERAL COURTS LOCATED IN WISCONSIN. 
THE BORROWER WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS NOTE, INCLUDING CONTRACT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  THE BORROWER HAS REVIEWED THIS WAIVER AND
KNOWINGLY AND VOLUNTARILY WAIVES THE AFORESAID TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.  IN THE
EVENT OF LITIGATION, A COPY OF THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.


[Signature
page follows]


 


 


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EXECUTED AND
DELIVERED at Manitowoc, Wisconsin as of the date written below.


 


                                                                                                                TOWER
TECH HOLDINGS INC.




	
  Dated as of October 19, 2007 

  	
  By:

  	
  /s/ Steven A. Huntington

  
	
   

  	
  Name:

  	
  Steven A. Huntington

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  






 


 


 


 


 


[Signature page Tontine Capital
Oversees Fund Ltd. Senior Subordinated Convertible Promissory Note]


9