Document:

Exhibit 10.3

 

LETTER
AGREEMENT MODIFYING THE TERMS OF CERTAIN

LOAN
DOCUMENTS BY AND AMONG GREAT WESTERN BANK,

LENDER,
TOWER TECH SYSTEMS INC., BORROWER,

AND
BROADWIND ENERGY, INC., GUARANTOR

 

This Letter Agreement (“Agreement”) dated April 28,
2009, by and among Great Western Bank (“Lender”), Tower Tech Systems Inc.
(“Borrower”) and Broadwind Energy, Inc. (“Guarantor”) is intended to
modify certain terms, provisions, and conditions of certain loan documents (the
“Loan Documents”), each dated of even date herewith, executed in connection
with that certain construction loan (the “Loan”) being made by Lender to
Borrower for the purpose of constructing a manufacturing facility in Brandon,
South Dakota (the “Project”) on land legally described on Exhibit A attached
hereto. Repayment of the Loan is to be guarantied by Guarantor to the extent
provided in the Guaranty.

 

The Loan Documents being hereby modified, each dated of even date
herewith, are as follows:

 

·        
Promissory Note

·        
Construction Loan Agreement between the Borrower and
the Lender (the “Loan Agreement”);

·        
Mortgage —  Collateral
Real Estate Mortgage — 180 Day Redemption from the Borrower to the Lender (the
“Mortage”);

·        
Commercial Guaranty from the Guarantor to the Lender
(“Guaranty”); and

·        
Commercial Security Agreement from the Borrower to the
Lender (the “Security Agreement”).

 

Modification to Promissory Note

 

The sentence headed Change in
Ownership on page 1 is deleted in its entirety.

 

Modifications to Construction Loan Agreement

 

1.    The paragraph on page 1
headed NO CONSTRUCTION PRIOR TO RECORDING OF
SECURITY DOCUMENT is deleted in its entirety and replaced with the
following:

 

Borrower represents and warrants to Lender that as
of the date of this Construction Loan Agreement, there are no unpaid invoices
in Borrower’s possession from any party which could claim a mechanic’s or
materialman’s lien in connection with the Project or the Property. Borrower
further covenants and agrees that it shall pay when due all such invoices which
are later received by it and shall cooperate with and assist Lender in
obtaining lien waivers from any such party which could claim a mechanic’s or
materialman’s lien in connection with the Project or the Property.

 

2.     The representations by
Borrower on page 1 in the paragraph under the heading Properties is limited to Borrower’s
properties in Brandon, South Dakota.

 

 

3.     The first line on page 1
in the paragraph under the heading Hazardous
Substances is revised to read as follows:

 

Except as disclosed to and acknowledged by Lender in
writing, and except in compliance with Environmental Laws, Borrower represents
and warrants that: (1) During the

 

The remainder of that
paragraph remains the same.

 

4.     Under the paragraph headed CONDITIONS PRECEDENT TO EACH ADVANCE on
page 2, Lender and Borrower acknowledge there is no Architect or
Architect’s Contract.

 

5.     The last line of the
paragraph headed Project Claims and Litigation shall
have added to it the words “in each case, of which the Borrower has actual
knowledge.”

 

6.     On page 5, the paragraphs
under the headings Indebtedness and Liens
and Loans, Acquisitions and Guaranties are
deleted in their entirety.

 

7.     On page 5, under the
heading Purchase of Materials; Conditional Sales
Contracts, Lender agrees that it will subordinate its interest in the
Security Agreement, as evidenced by an amendment to the Financing Statement,
with respect to specific items of equipment, adequately described and not
financed by Lender and used in the Project.

 

8.     On page 5, under the
heading Indemnity, Borrower’s obligation to
indemnify under this paragraph shall not apply to claims arising as a result of
or due to Lender’s negligence or willful misconduct.

 

9.     The sentence headed Change in Ownership on page 6 is
deleted in its entirety.

 

Modifications to Mortgage

 

1.     All references on page 2
of the Mortgage to “Personal Property” are deleted.

 

2.     Each of the clauses under
the heading Compliance With Environmental Laws
is modified to provide that such actions are only a violation of the
requirements under that heading if they are or were in violation of
Environmental Laws.

 

3.     Lender agrees that the
requirement to provide Annual Reports, and the form thereof, as required on page 12
of the Mortgage, shall be fulfilled by providing Lender with public filings
made on behalf of the Borrower with the Securities and Exchange Commission.

 

Modifications
to Commercial Guaranty

 

1.     On page 1 of the
Guaranty, under the heading GUARANTOR’S
REPRESENTATIONS AND WARRANTIES, in clause E, the words at the end “,
or any interest therein” are deleted.

 

2

 

2.     On page 1 of the
Guaranty, under the heading GUARANTOR’S
REPRESENTATIONS AND WARRANTIES, the requirements of clause F shall
be satisfied by providing Lender with public filings made by the Guarantor with
the Securities and Exchange Commission.

 

Modifications
to Security Agreement

 

1.     On page 1, under the heading All Fixtures, the clause labeled B is
hereby deleted.

 

2.     On page 1, at the end
of the section under the heading All Fixtures,
the final sentence shall read “All of the Collateral will be located
on the following described real estate.”

 

Miscellaneous

 

Lender and Borrower agree that Borrower may convert up to $6,500,000 of
the outstanding balance of the Loan to a term loan, at its sole option, upon
written notice (the “Conversion Notice”) to Lender given prior to January 5,
2010, provided Borrower is not in default under the Note or any of the other
Loan Documents. The Conversion Notice shall state the date upon which the
conversion shall be effective, which date shall be no later than January 1,
2010. Such term loan shall provide for a maturity date not less than
seventy-eight (78) months from the date on which the term loan is originated.
The new note shall be fully amortized over the term of the note and shall bear
interest at an annual rate not to exceed 8.5%. Any outstanding balance of the
Loan in excess of $6,500,000 shall be repaid in full prior to its conversion to
a term loan. Following the conversion to a term loan, Lender shall retain its
security position in regard to the Collateral given as security for the Loan,
except for the sum of $2,000,000 in the Deposit Account held by Lender, which
sum and the assignment of the deposit account therefor shall be released by Lender
to Borrower. At the time of originating the term loan, Borrower shall pay
Lender a 1.0% origination fee. All such other terms and conditions as are usual
and customary in transactions of this sort shall be mutually agreed upon by
Borrower and Lender.

 

The loan commitment dated January 21, 2009, from Lender to
Borrower and accepted by Borrower on February 6, 2009, is hereby merged
into the Loan Documents and shall not survive the execution thereof.

 

IN WITNESS WHEREOF, Lender, Borrower and
Guarantor have entered into this Letter Agreement this 28 day of April, 2009.

 

The
remainder of this page is intentionally left blank.

 

Signature page follows.

 

3

 

	
  LENDER:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GREAT
  WESTERN BANK

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:  

  	
  /s/ Gerald E.
  Kruger

  	
   

  	
   

  
	
  Gerald E. Kruger  

  	
   

  	
   

  
	
  Senior
  Vice President

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BORROWER:

  	
   

  	
  GUARANTOR:

  
	
   

  	
   

  	
   

  
	
  TOWER
  TECH SYSTEMS INC.

  	
   

  	
  BROADWIND
  ENERGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:  

  	
  /s/ Steve
  Huntington

  	
   

  	
  By:  

  	
  /s/ J. Cameron
  Drecoll

  
	
  Steven
  Huntington, Chief Financial Officer

  	
   

  	
  J.
  Cameron Drecoll, Chief Executive Officer

  

 

4Exhibit 10.4

 

COMMERCIAL SECURITY AGREEMENT

 

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call / Coll 1

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  	
   

  
	
  $ 10,000,000.00

  	
   

  	
  04-28-2009

  	
   

  	
  01-05-2010

  	
   

  	
  15525078252

  	
   

  	
  1A2
  /101

  	
   

  	
   

  	
   

  	
  Krugeg

  	
   

  	
   

  	
   

  

 

	
  References
  in the boxes above are for Lender’s use only and do not limit the
  applicability of this document to any particular loan or item. Any item above
  containing “***” has been omitted due to text length limitations.

  

 

	
  Grantor:

  	
  TOWER TECH SYSTEMS INC

  	
  Lender:

  	
  GREAT WESTERN BANK

  
	
   

  	
  101 S 16TH ST PO BOX 1957

  	
   

  	
  Sioux Falls

  
	
   

  	
  MANITOWOC, Wl 54221-1957

  	
   

  	
  200 E 10th Street 

  Sioux Falls, SD 57104

  

 

THIS COMMERCIAL SECURITY AGREEMENT dated April 28, 2009,
is made and executed between TOWER TECH SYSTEMS INC (“Grantor”) and GREAT
WESTERN BANK (“Lender”).

 

GRANT OF SECURITY INTEREST. For valuable consideration,
Grantor grants to Lender a security interest in the Collateral to secure the Indebtedness
and agrees that Lender shall have the rights stated in this Agreement with
respect to the Collateral, in addition to all other rights which Lender may
have by law.

 

COLLATERAL DESCRIPTION. The word “Collateral” as used in this
Agreement means the following described property, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and wherever located,
in which Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:

 

All Fixtures

 

In addition, the word “Collateral”
also includes all the following, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located:

 

(A)  All accessions, attachments, accessories, tools, parts,
supplies, replacements of and additions to any of the collateral described
herein, whether added now or later.

 

(B)  All products and produce of any of the property described
in this Collateral section.

 

(C)  All accounts, general intangibles, instruments, rents,
monies, payments, and all other rights, arising out of a sale, lease, consignment
or other disposition of any of the property described in this Collateral
section.

 

(D)  All proceeds (including insurance proceeds) from the
sale, destruction, loss, or other disposition of any of the property described
in this Collateral section, and sums due from a third party who has damaged or
destroyed the Collateral or from that party’s insurer, whether due to judgment,
settlement or other process.

 

(E)  All records and data relating to any
of the property described in this Collateral section, whether in the form of a
writing, photograph, microfilm, microfiche, or electronic media, together with
all of Grantor’s right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or data on
electronic media.

 

Some or all of the Collateral
may be located on the following described real estate:

 

LOT 3 IN BLOCK 1 OF CORSON DEVELOPMENT PARK ADDITION TO
THE CITY OF BRANDON, MINNEHAHA COUNTY, SOUTH DAKOTA, ACCORDING TO THE RECORDED
PLAT THEREOF.

 

CROSS-COLLATERALIZATION. In addition to the Note, this Agreement
secures all obligations, debts and liabilities, plus interest thereon, of
Grantor to Lender, or any one or more of them, as well as all claims by Lender
against Grantor or any one or more of them, whether now existing or hereafter arising,
whether related or unrelated to the purpose of the Note, whether voluntary or
otherwise, whether due or not due, direct or indirect, determined or
undetermined, absolute or contingent, liquidated or unliquidated, whether
Grantor may be liable individually or jointly with others, whether obligated as
guarantor, surety, accommodation party or otherwise, and whether recovery upon
such amounts may be or hereafter may become barred by any statute of
limitations, and whether the obligation to repay such amounts may be or
hereafter may become otherwise unenforceable.

 

FUTURE ADVANCES. In addition to the Note, this Agreement secures all future advances made
by Lender to Grantor regardless of whether the advances are made a) pursuant to
a commitment or b) for the same purposes.

 

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of
setoff in all Grantor’s accounts with Lender (whether checking, savings, or
some other account). This includes all accounts Grantor holds jointly with
someone else and all accounts Grantor may open in the future. However, this
does not include any IRA or Keogh accounts, or any trust accounts for which
setoff would be prohibited by law. Grantor authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.

 

GRANTOR’S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:

 

Perfection of Security Interest. Grantor agrees to take whatever actions are
requested by Lender to perfect and continue Lender’s security interest in the
Collateral. Upon request of Lender, Grantor will deliver to Lender any and all
of the documents evidencing or constituting the Collateral, and Grantor will
note Lender’s interest upon any and all chattel paper and instruments if not
delivered to Lender for possession by Lender. This
is a continuing Security Agreement and will continue in effect even though all
or any part of the Indebtedness is paid in full and even though for a period of
time Grantor may not be indebted to Lender.

 

Notices to Lender. Grantor will promptly notify Lender in writing at Lender’s address shown
above (or such other addresses as Lender ma designate from time to time) prior
to any (1) change in Grantor’s name; (2) change in Grantor’s
assumed business name(s); (3) change in the management of the
Corporation Grantor; (4) change in the authorized signer(s); (5)
change in Grantor’s principal office address; (6) change in Grantor’s
state of organization; (7) conversion of Grantor to a new or
different type of business entity; or (8) change in any other
aspect of Grantor that directly or indirectly relates to any agreements between
Grantor and Lender. No change in Grantor’s name or state of organization will
take effect until after Lender has received notice.

 

No Violation. The execution and delivery of this Agreement will not violate any law or
agreement governing Grantor or to which Grantor is a party, and its certificate
or articles of incorporation and bylaws do not prohibit any term or condition
of this Agreement.

 

Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, as defined by the Uniform
Commercial Code, the Collateral is enforceable in accordance with its terms, is
genuine, and fully complies with all applicable laws and regulations concerning
form, content and manner of preparation and execution, and all persons
appearing to be obligated on the Collateral have authority and capacity to
contract and are in fact obligated as they appear to be on the Collateral.
There shall be no setoffs or counterclaims against any of the Collateral, and
no agreement shall have been made under which any deductions or discounts may
be claimed concerning the Collateral except those disclosed to Lender in
writing.

 

Location of the Collateral. Except in the ordinary course of Grantor’s
business, Grantor agrees to keep the Collateral at Grantor’s address shown
above or at such other locations as are acceptable to Lender. Upon Lender’s
request, Grantor will deliver to Lender in form satisfactory to Lender a
schedule of real properties and Collateral locations relating to Grantor’s
operations, including without limitation the following: (1) all real
property Grantor owns or is purchasing; (2) all real property Grantor is
renting or leasing; (3) all storage facilities Grantor owns, rents, leases, or
uses; and (4) all other properties where Collateral is or may be located.

 

Removal of the Collateral. Except in the ordinary course of Grantor’s
business, Grantor shall not remove the Collateral from its existing location
without Lender’s prior written consent. Grantor shall, whenever requested,
advise Lender of the exact location of the Collateral.

 

Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor’s business, or as otherwise
provided for in this Agreement, Grantor shall not sell, offer to sell, or
otherwise transfer or dispose of the Collateral. Grantor shall not pledge, mortgage,
encumber or otherwise permit the Collateral to be subject to any lien, security
interest, encumbrance, or charge, other than the security interest provided for
in this Agreement, without the prior written consent of Lender. This includes
security interests even if junior in right to the security interests granted
under this Agreement. Unless waived by Lender, all proceeds from any
disposition of the Collateral (for whatever.reason)
shall be held in trust for Lender and shall not be commingled with any other
funds; provided however, this requirement shall not constitute consent by
Lender to any sale or other disposition. Upon receipt, Grantor shall
immediately deliver any such proceeds to Lender.

 

Title. Grantor represents and warrants to Lender that Grantor holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender’s rights in the Collateral
against the claims and demands of all other persons.

 

Repairs and Maintenance. Grantor agrees to keep and maintain, and to
cause others to keep and maintain, the Collateral in good order, repair

 

 

COMMERCIAL SECURITY AGREEMENT

(Continued)

 

and
condition at all times while this Agreement remains in effect. Grantor further
agrees to pay when due all claims for work done on, or services rendered or
material furnished in connection with the Collateral so that no lien or
encumbrance may ever attach to or be filed against the Collateral.

 

Inspection of Collateral. Lender and Lender’s designated representatives
and agents shall have the right at all reasonable times to examine and inspect
the Collateral wherever located.

 

Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this Agreement,
upon any promissory note or notes evidencing the Indebtedness, or upon any of
the other Related Documents. Grantor may withhold any such payment or may elect
to contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender’s interest in
the Collateral is not jeopardized in Lender’s sole opinion. If the Collateral
is subjected to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety bond or
other security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys’ fees or other
charges that could accrue as a result of foreclosure or sale of the Collateral.
In any contest Grantor shall defend itself and Lender and shall satisfy any
final adverse judgment before enforcement against the Collateral. Grantor shall
name Lender as an additional obligee under any surety bond furnished in the
contest proceedings. Grantor further agrees to furnish Lender with evidence
that such taxes, assessments, and governmental and other charges have been paid
in full and in a timely manner. Grantor may withhold any such payment or may
elect to contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender’s interest in
the Collateral is not jeopardized.

 

Compliance with Governmental Requirements. Grantor shall comply promptly with all laws, ordinances,
rules and regulations of all governmental authorities, now or hereafter in
effect, applicable to the ownership, production, disposition, or use of the
Collateral, including all laws or regulations relating to the undue erosion of
highly-erodible land or relating to the conversion of wetlands for the
production of an agricultural product or commodity. Grantor may contest in good
faith any such law, ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Lender’s interest in the
Collateral, in Lender’s opinion, is not jeopardized.

 

Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement remains
a lien on the Collateral, used in violation of any Environmental Laws or for
the generation, manufacture, storage, transportation, treatment, disposal, release
or threatened release of any Hazardous Substance. The representations and
warranties contained herein are based on Grantor’s due diligence in
investigating the Collateral for Hazardous Substances. Grantor hereby (1) releases
and waives any future claims against Lender for indemnity or contribution in
the event Grantor becomes liable for cleanup or other costs under any
Environmental Laws, and (2) agrees to indemnify, defend, and hold harmless
Lender against any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify and defend shall
survive the payment of the Indebtedness and the satisfaction of this Agreement.

 

Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks insurance,
including without limitation fire, theft and liability coverage together with
such other insurance as Lender may require with respect to the Collateral, in
form, amounts, coverages and basis reasonably acceptable to Lender and issued
by a company or companies reasonably acceptable to Lender. Grantor, upon
request of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days’ prior written notice to Lender and not including any
disclaimer of the insurer’s liability for failure to give such a notice. Each
insurance policy also shall include an endorsement providing that coverage in
favor of Lender will not be impaired in any way by any act, omission or default
of Grantor or any other person. In connection with all policies covering assets
in which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require. If
Grantor at any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such
insurance as Lender deems appropriate, including if Lender so chooses “single
interest insurance,” which will cover only Lender’s interest in the Collateral.

 

Application of Insurance Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Collateral, whether or not such casualty or  loss is covered by insurance. Lender may
make proof of loss if Grantor fails to do so within fifteen (15) days of the
casualty. All proceeds of any insurance on the Collateral, including accrued
proceeds thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse Grantor
from the proceeds for the reasonable cost of repair or restoration. If Lender
does not consent to repair or replacement of the Collateral, Lender shall
retain a sufficient amount of the proceeds to pay all of the Indebtedness, and
shall pay the balance to Grantor. Any proceeds which have not been disbursed
within six (6) months after their receipt and which Grantor has not
committed to the repair or restoration of the Collateral shall be used to
prepay the Indebtedness.

 

Insurance Reserves. Lender may require Grantor to maintain with Lender reserves for payment
of insurance premiums, which reserves shall be created by monthly payments from
Grantor of a sum estimated by Lender to be sufficient to produce, at least
fifteen (15) days before the premium due date, amounts at least equal to the
insurance premiums to be paid. If fifteen (15) days before payment is due, the
reserve funds are insufficient, Grantor shall upon demand pay any deficiency to
Lender. The reserve funds shall be held by Lender as a general deposit and
shall constitute a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor as they become
due. Lender does not hold the reserve funds in trust for Grantor, and Lender is
not the agent of Grantor for payment of the insurance premiums required to be
paid by Grantor. The responsibility for the payment of premiums shall remain
Grantor’s sole responsibility.

 

Insurance Reports.
Grantor, upon request of Lender, shall furnish to Lender reports on each
existing policy of insurance showing such information as Lender may reasonably
request including the following (1) the name of the insurer; (2) the risks
insured; (3) the amount of the policy; (4) the property insured; (5) the then
current value on the basis of which insurance has been obtained and the manner
of determining that value; and (6) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.

 

Financing Statements.
Grantor authorizes Lender to file a UCC financing statement, or alternatively,
a copy of this Agreement to perfect Lender’s security interest. At Lender’s
request, Grantor additionally agrees to sign all other documents that are
necessary to perfect, protect, and continue Lender’s security interest in the
Property. This includes making sure Lender is shown as the first and only
security interest holder on the title covering the Property. Grantor will pay
all filing fees, title transfer fees, and other fees and costs involved unless
prohibited by law or unless Lender is required by law to pay such fees and
costs. Grantor irrevocably appoints Lender to execute documents necessary to transfer
title if there is a default. Lender may file a copy of this Agreement as a
financing statement. If Grantor changes Grantor’s name or address, or the name
or address of any person granting a security interest under this Agreement
changes, Grantor will promptly notify the Lender of such change.

 

GRANTOR’S RIGHT TO POSSESSION.
Until default, Grantor may have possession of the tangible personal property
and beneficial use of all the Collateral and may use it in any lawful manner
not inconsistent with this Agreement or the Related Documents, provided that
Grantor’s right to possession and beneficial use shall not apply to any
Collateral where possession of the Collateral by Lender is required by law to
perfect Lender’s security interest in such Collateral. If Lender at any time
has possession of any Collateral, whether before or after an Event of Default,
Lender shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if Lender takes such action for that purpose as
Grantor shall request or as Lender, in Lender’s sole discretion, shall deem
appropriate under the circumstances, but failure to honor any request by Grantor
shall not of itself be deemed to be a failure to exercise reasonable care.
Lender shall not be required to take any steps necessary to preserve any rights
in the Collateral against prior parties, nor to protect, preserve or maintain
any security interest given to secure the Indebtedness.

 

LENDER’S EXPENDITURES. If any
action or proceeding is commenced that would materially affect Lender’s
interest in the Collateral or if Grantor fails to comply with any provision of
this Agreement or any Related Documents, including but not limited to Grantor’s
failure to discharge or pay when due any amounts Grantor is required to
discharge or pay under this Agreement or any Related Documents, Lender on
Grantor’s behalf may (but shall not be obligated to) take any action that
Lender deems appropriate, including but not limited to discharging or paying
all taxes, liens, security interests, encumbrances and other claims, at any
time levied or placed on the Collateral and paying all costs for insuring,
maintaining and preserving the Collateral. All such expenditures incurred or
paid by Lender for such purposes will then bear interest at the rate charged under
the Note from the date incurred or paid by Lender to the date of repayment by
Grantor. All such expenses will become a part of the Indebtedness and, at Lender’s
option, will (A) be payable on demand; (B) be added to the balance of the Note
and be apportioned among and be payable with any installment payments to become
due during either (1) the term of any applicable insurance policy; or (2) the
remaining term of the Note; or (C) be treated as a balloon payment which will
be due and payable at the Note’s maturity. The Agreement also will secure
payment of these amounts. Such right shall be in addition to all other rights
and remedies to which Lender may be entitled upon Default.

 

DEFAULT. Each of the following
shall constitute an Event of Default under this Agreement

 

Payment Default.
Grantor fails to make any payment when due under the Indebtedness.

 

Other Defaults.
Grantor fails to comply with or to perform any other term, obligation, covenant
or condition contained in this Agreement or in any of the Related Documents or
to comply with or to perform any term, obligation, covenant or condition
contained in any other agreement between Lender and Grantor.

 

False Statements.
Any warranty, representation or statement made or furnished to Lender by
Grantor or on Grantor’s behalf under this Agreement or the Related Documents is
false or misleading in any material respect, either now or at the time made or
furnished or becomes false or misleading at any time thereafter.

 

Defective Collateralization.
This Agreement or any of the Related Documents ceases to be in full force and
effect (including failure of any

 

2

 

COMMERCIAL SECURITY AGREEMENT

(Continued)

 

collateral
document to create a valid and perfected security interest or lien) at any time
and for any reason.

 

Insolvency. The dissolution or termination of Grantor’s existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor’s property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.

 

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
any collateral securing the Indebtedness. This includes a garnishment of any of
Grantor’s accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Grantor as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

 

Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or Guarantor dies or
becomes incompetent or revokes or disputes the validity of, or liability under,
any Guaranty of the Indebtedness.

 

Adverse Change. A material adverse change occurs in Grantor’s financial condition, or
Lender believes the prospect of payment or performance of the Indebtedness is
impaired.

 

Cure Provisions. If any default, other than a default in
payment is curable and if Grantor has not been given a notice of a breach of
the same  provision of this
Agreement within the preceding twelve (12) months, it may be cured if Grantor,
after receiving written notice from Lender demanding cure of such default: (1) cures
the default within fifteen (15) days; or (2) if the cure requires more than
fifteen (15) days, immediately initiates steps which Lender deems in Lender’s
sole discretion to be sufficient to cure the default and thereafter continues
and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.

 

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the South Dakota Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following rights
and remedies:

 

Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice of any kind to Grantor.

 

Assemble Collateral. Lender may require Grantor to deliver to
Lender all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral. Lender may require
Grantor to assemble the Collateral and make it available to Lender at a place
to be designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other goods, provided that
Lender makes reasonable efforts to return them to Grantor after repossession.

 

Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in Lender’s
own name or that of Grantor. Lender may sell the Collateral at public auction
or private sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, Lender will give
Grantor, and other persons as required by law, reasonable notice of the time
and place of any public sale, or the time after which any private sale or any
other disposition of the Collateral is to be made. However, no notice need be
provided to any person who, after Event of Default occurs, enters into and
authenticates an agreement waiving that person’s right to notification of sale.
The requirements of reasonable notice shall be met if such notice is given at
least ten (10) days before the time of the sale or disposition. All expenses
relating to the disposition of the Collateral, including without limitation the
expenses of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the Indebtedness secured by this Agreement
and shall be payable on demand, with interest at the Note rate from date of
expenditure until repaid.

 

Appoint Receiver. Lender shall have the right to have a receiver appointed to take
possession of all or any part of the Collateral, with the power to protect and
preserve the Collateral, to operate the Collateral preceding foreclosure or
sale, and to collect the Rents from the Collateral and apply the proceeds, over
and above the cost of the receivership, against the Indebtedness. The receiver
may serve without bond if permitted by law. Lender’s right to the appointment
of a receiver shall exist whether or not the apparent value of the Collateral
exceeds the Indebtedness by a substantial amount. Employment by Lender shall
not disqualify a person from serving as a receiver.

 

Collect Revenues, Apply Accounts. Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the.Collateral. Lender may at any time in Lender’s discretion transfer any
Collateral into Lender’s own name or that of Lender’s nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as security
for the Indebtedness or apply it to payment of the Indebtedness in such order
of preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance  policies,
instruments, chattel paper, choses in action, or similar property, Lender may
demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose,
or realize on the Collateral as Lender may determine, whether or not
Indebtedness or Collateral is then due. For these purposes, Lender may, on behalf
of and in the name of Grantor, receive, open and dispose of mail addressed to
Grantor; change any address to which mail and payments are to be sent; and
endorse notes, checks, drafts, money orders, documents of title, instruments
and items pertaining to payment, shipment, or storage of any Collateral. To
facilitate collection, Lender may notify account debtors and obligors on any
Collateral to make payments directly to Lender.

 

Obtain Deficiency.
If Lender chooses to sell any or all of the Collateral, Lender may obtain a
judgment against Grantor for any deficiency remaining on the Indebtedness due
to Lender after application of all amounts received from the exercise of the
rights provided in this Agreement. Grantor shall be liable for a deficiency even
if the transaction described in this subsection is a sale of accounts or
chattel paper.

 

Other Rights and Remedies.
Lender shall have all the rights and remedies of a secured creditor under the
provisions of the Uniform Commercial Code, as may be amended from time to time.
In addition, Lender shall have and may exercise any or all other rights and
remedies it may have available at law, in equity, or otherwise.

 

Election of Remedies.
Except as may be prohibited by applicable law, all of Lender’s rights and remedies,
whether evidenced by this Agreement, the Related Documents, or by any other
writing, shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement, after Grantor’s failure to perform,
shall not affect Lender’s right to declare a default and exercise its remedies.

 

MISCELLANEOUS PROVISIONS. The following
miscellaneous provisions are a part of this Agreement:

 

Amendments.
This Agreement, together with any Related Documents, constitutes the entire
understanding and agreement of the parties as to the matters set forth in this
Agreement. No alteration of or amendment to this Agreement shall be effective
unless given in writing and signed by the party or parties sought to be charged
or bound by the alteration or amendment.

 

Attorneys’ Fees; Expenses. Grantor
agrees to pay upon demand all of Lender’s costs and expenses, including
Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection
with the enforcement of this Agreement. Lender may hire or pay someone else to
help enforce this Agreement, and Grantor shall pay the costs and expenses of
such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal
expenses whether or not there is a lawsuit, including attorneys’ fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Grantor also shall pay all court costs and such additional
fees as may be directed by the court.

 

Caption Headings.
Caption headings in this Agreement are for convenience purposes only and are
not to be used to interpret or define the provisions of this Agreement.

 

Governing Law. This Agreement
will be governed by federal law applicable to Lender and, to the extent not
preempted by federal law, the laws of the State of South Dakota without regard
to its conflicts of law provisions. This Agreement has been accepted by Lender
in the State of South Dakota.

 

Choice of Venue.
If there is a lawsuit, Grantor agrees upon Lender’s request to submit to the
jurisdiction of the courts of Minnehaha County, State of South Dakota.

 

No Waiver by Lender.
Lender shall not be deemed to have waived any rights under this Agreement
unless such waiver is given in writing and signed by Lender. No delay or
omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender’s right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender’s rights or of
any of Grantor’s obligations as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of such
consent by Lender in any instance shall not constitute continuing consent to
subsequent instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of Lender.

 

Notices. Any
notice required to be given under this Agreement shall be given in writing, and
shall be effective when actually delivered, when actually received by telefacsimile
(unless otherwise required by law), when deposited with a nationally recognized
overnight courier, or, if mailed,

 

3

 

COMMERCIAL SECURITY AGREEMENT

(Continued)

 

when
deposited in the United States mail, as first class, certified or registered
mail postage prepaid, directed to the addresses shown near the beginning of
this Agreement. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties, specifying that
the purpose of the notice is to change the party’s address. For notice
purposes, Grantor agrees to keep Lender informed at all times of Grantor’s
current address. Unless otherwise provided or required by law, if there is more
than one Grantor, any notice given by Lender to any Grantor is deemed to be
notice given to all Grantors.

 

Power of Attorney. Grantor hereby appoints Lender as Grantor’s irrevocable attorney-in-fact
for the purpose of executing any documents necessary to perfect amend, or to
continue the security interest granted in this Agreement or to demand
termination of filings of other secured parties. Lender may at any time, and
without further authorization from Grantor, file a carbon, photographic or
other reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender’s security interest
in the Collateral.

 

Severability. If  a court of competent jurisdiction finds any
provision of this Agreement to be illegal, invalid, or unenforceable as to any
circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other circumstance. If feasible, the
offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so modified, it
shall be considered deleted from this Agreement. Unless otherwise required by
law, the illegality, invalidity, or unenforceability of any provision of this
Agreement shall not affect the legality, validity or enforceability of any
other provision of this Agreement.

 

Successors and Assigns. Subject to any limitations stated in this
Agreement on transfer of Grantor’s interest, this Agreement shall be binding
upon and inure to the benefit of the parties, their successors and assigns. If
ownership of the Collateral becomes vested in a person other than Grantor,
Lender, without notice to Grantor, may deal with Grantor’s successors with
reference to this Agreement and the Indebtedness by way of forbearance or
extension without releasing Grantor from the obligations of this Agreement or
liability under the Indebtedness.

 

Survival of Representations and Warranties. All representations, warranties, and
agreements made by Grantor in this Agreement shall survive the execution and
delivery of this Agreement, shall be continuing in nature, and shall remain in
full force and effect until such time as Grantor’s Indebtedness shall be paid
in full.

 

Time is of the Essence. Time is of the essence in the performance of
this Agreement.

 

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money
of the United States of America. Words and terms used in the singular shall
include the plural, and the plural shall include the singular, as the context
may require. Words and terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code: 

 

Agreement. The word “Agreement” means this Commercial Security Agreement, as this
Commercial Security Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Commercial Security
Agreement from time to time.

 

Borrower. The word “Borrower” means TOWER TECH SYSTEMS INC and includes all
co-signers and co-makers signing the Note and all their successors and assigns.

 

Collateral. The word “Collateral” means all of Grantor’s right, title and interest
in and to all the Collateral as described in the Collateral Description section
of this Agreement.

 

Default. The word “Default” means the Default set forth in this Agreement in the
section titled “Default”.

 

Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local
statutes, regulations and ordinances relating to the protection of human health
or the environment, including without limitation the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601,
et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986,
Pub. L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal
laws, rules, or regulations adopted pursuant thereto.

 

Event of Default. The words “Event of Default” mean any of the events of default set forth
in this Agreement in the default section of this Agreement.

 

Grantor. The word “Grantor” means TOWER TECH SYSTEMS INC.

 

Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party
of any or all of the Indebtedness.

 

Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or part of the Note.

 

Hazardous Substances. The words “Hazardous Substances” mean
materials that, because of their quantity, concentration or physical, chemical
or infectious characteristics, may cause or pose a present or potential hazard
to human health or the environment when improperly used, treated, stored,
disposed of, generated, manufactured, transported or otherwise handled. The
words “Hazardous Substances” are used in their very broadest sense and include
without limitation any and all hazardous or toxic substances, materials or
waste as defined by or listed under the Environmental Laws. The term “Hazardous
Substances” also includes, without limitation, petroleum and petroleum
by-products or any fraction thereof and asbestos.

 

Indebtedness.
The word “Indebtedness” means the indebtedness evidenced by the Note or Related
Documents, including all principal and interest together with all other
indebtedness and costs and expenses for which Grantor is responsible under this
Agreement or under any of the Related Documents. Specifically, without
limitation, Indebtedness includes the future advances set forth in the Future
Advances provision, together with all interest thereon and all amounts that may
be indirectly secured by the Cross-Collateralization provision of this
Agreement.

 

Lender. The
word “Lender” means GREAT WESTERN BANK, its successors and assigns.

 

Note. The word “Note’
means the Note executed by TOWER TECH SYSTEMS INC in the principal amount of
$10,000,000.00 dated April 28, 2009, together with all renewals of, extensions
of, modifications of, refinancings of, consolidations of, and substitutions for
the note or credit agreement. 

 

Property. The
word “Property” means all of Grantor’s right, title and interest in and to all
the Property as described in the “Collateral Description” section of this
Agreement.

 

Related Documents.
The words “Related Documents” mean all promissory notes, credit agreements,
loan agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, security deeds, collateral mortgages, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.

 

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS COMMERCIAL SECURITY AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT
IS DATED APRIL 27, 2009.

 

	
  GRANTOR:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  TOWER TECH SYSTEMS INC

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Steve Huntington

  	
   

  
	
   

  	
  STEVE HUNTINGTON, CHIEF
  FINANCIAL OFFICER

  of TOWER TECH SYSTEMS INC

  	
   

  
	
   

  	
   

  	
   

  
	
  LENDER:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  GREAT WESTERN BANK

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  X

  	
  /s/ Gerald
  E. Kruger

  	
   

  
	
   

  	
  Authorized Signer

  	
   

  
	
   

  	
   

  	
   

  
	
  This document was prepared by:

  	
   

  

 

4

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