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Exhibit 10.8
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") is made and entered
into as of
this ____ day of December 2007, by and among BEACON ENTERPRISE
SOLUTIONS GROUP
INC., an Indiana corporation (the "Buyer"), and CETCON
INCORPORATED ("CETCON"),
an Ohio corporation (the "Secured Party").
R E C I T A L S
A. The Buyer and the Secured Party have executed an Asset
Purchase
Agreement dated October 15, 2007 (the "Purchase Agreement"),
pursuant to which
the Buyer has agreed to purchase substantially all of the assets
of the Secured
Party and has issued Secured Promissory Notes (the "Secured
Notes") in partial
payment therefor. The Purchase Agreement and the Secured Notes
are referred to
herein as the "Related Agreements." Capitalized terms used
herein but which are
not otherwise defined shall have the meanings given to them in
the Purchase
Agreement.
B. As a condition to the Secured Party's consummation of the
transactions
contemplated by the Purchase Agreement, the Buyer has agreed to
grant to the
Secured Party a security interest in the Collateral (as defined
in Section 2) to
secure the Buyer's obligations pursuant to the terms of the
Secured Notes.
A G R E E M E N T
In consideration of the foregoing recitals and the mutual
covenants
and agreements contained in this Agreement, the parties,
intending to be legally
bound, agree as follows:
1. Obligations Secured. This Agreement secures the payment by
Buyer of its
obligations to the Secured Party under the Secured Notes issued
to the Secured
Party. The security interest granted hereby shall not extend to
any other
obligations of the Buyer to the Secured Party or their
affiliates and shall
terminate upon the payment in full, release, cancellation or
satisfaction of the
Secured Notes.
2. Grant of Security Interest. Buyer grants to the Secured Party
a
security interest in the contracts and accounts representing the
revenue stream
acquired from CETCON under the Purchase Agreement and in any
additional
commissions generated by the Buyer (the "Collateral"), as
described in more
detail on Schedule 1 attached hereto.
3. Buyer's Warranties and Representations. Buyer warrants and
represents
that:
(a) Except for the security interest granted above and any
security
interest granted pursuant to bank or other institutional
financing under which
the assets of the Buyer
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become subject (collectively, "Permitted Encumbrances"), the
Collateral is free
from and will be kept free from all liens, claims, security
interests, and
encumbrances;
(b) except as filed in connection with any Permitted
Encumbrance, no
financing statement covering the Collateral or any proceeds is
on file in favor
of anyone other than Secured Party, but if such other financing
statement is on
file, it will be terminated or subordinated.
4. Buyer's Agreements. The Buyer agrees:
(a) to defend at the Buyer's own cost any action, proceeding,
or
claim affecting the Collateral;
(b) to pay reasonable attorneys' fees and other expenses
incurred by
the Collateral Agent (as defined in Section 9) in enforcing the
rights of the
Secured Parties against the Buyer under this Agreement;
(c) to pay promptly all taxes, assessments, license fees and
other
public or private charges when levied or assessed against the
Collateral or this
Agreement, and this obligation shall survive the termination of
this Agreement;
(d) that if a certificate of title shall be required or
permitted by
law, at the request of the Collateral Agent, the Buyer shall
obtain such
certificate with respect to the Collateral, showing the security
interest of the
Secured Party and do everything necessary or expedient to
preserve or perfect
the security interest of the Secured Party;
(e) that the Buyer will not misuse, fail to keep in good
repair,
secrete, or without the prior written consent of the Collateral
Agent, and
notwithstanding the Secured Party's claim to proceeds, sell,
rent, lend,
encumber or transfer any of the Collateral other than sales of
inventory in the
ordinary course of the Buyer's business;
(f) that the Collateral Agent or his or her designees may enter
upon
the Buyer's premises or wherever the Collateral may be located
at any reasonable
time to inspect the Collateral, and Buyer's books and records
pertaining to the
Collateral, and the Buyer shall assist the Secured Party in
making such
inspection; and
(g) that the security interest granted by the Buyer to the
Secured
Party shall continue to be effective so long as there are any
obligations owed
to the Secured Party under the Secured Notes.
5. Events of Default; Acceleration. The following are events of
default
under this Agreement which will allow the Collateral Agent to
take such action
under this Agreement as it, he or she deems necessary:
(a) the Buyer materially breaches any warranty or provision of
this
Agreement;
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(b) the Buyer becomes insolvent or ceases to do business as a
going
concern; and
(c) an "Event of Default" (as defined in the Secured Notes)
shall
have occurred and be continuing under any of the Secured
Notes.
6. Remedies After Default. Upon the occurrence of any event of
default,
the Secured Party shall have all rights, privileges, powers and
remedies of a
secured party under the Uniform Commercial Code and any other
applicable laws,
including without limitation, the right to contact all persons
obligated to the
Buyer on any account and to instruct such person to deliver all
payments
directly to the Secured Party, which rights, privileges, powers
and remedies may
be exercised with the consent of the Collateral Agent.
The Collateral Agent will give the Buyer reasonable notice of
the
time and place of any public sale of the Collateral or of the
time after which
any private sale or any other intended disposition of the
Collateral is to be
made. Unless otherwise provided by law, the requirement of
reasonable notice
shall be met if such notice is mailed, postage prepaid, to the
address of the
Buyer shown herein at least ten (10) calendar days before the
time of the sale
or disposition. The Buyer shall pay to the Collateral Agent all
expenses
incurred by the Collateral Agent, directly or indirectly, in the
enforcement of
this Agreement, including expenses of collection, retaking,
holding, preparing
for sale, selling and the like and shall include reasonable
attorneys' fees and
other legal expenses. The Buyer understands that the Secured
Party's rights are
cumulative and not alternative.
7. Waiver of Defaults; Agreement Inclusive. The Collateral Agent
may in
its, his or her sole discretion waive a default, or cure, at the
Buyer's
expense, a default. Any such waiver in a particular instance or
of a particular
default shall not be a waiver of other defaults or the same kind
of default at
another time. No modification or change in this Agreement or any
related note,
instrument or agreement shall bind the Secured Party unless in
writing signed by
the Secured Party. No oral agreement shall be binding.
8. Financing Statements; Expenses. The Buyer authorizes the
Collateral
Agent to file one or more financing statements with respect to
the Collateral.
At the request of the Collateral Agent, the Buyer will execute
any agreements or
documents, in form satisfactory to the Collateral Agent which
the Collateral
Agent may deem necessary or advisable to establish and maintain
a perfected
security interest in the Collateral, and will pay the cost of
filing or
recording the same in all public offices deemed necessary or
advisable by the
Collateral Agent.
9. Collateral Agent. THE SECURED PARTY HEREBY ELECTS AND
APPOINTS KENNETH
E. KERR TO ACT AS THE EXCLUSIVE AGENT ("COLLATERAL AGENT") FOR
THE SECURED PARTY
FOR THE PURPOSES OF (A) EXERCISING THE RIGHTS AND REMEDIES OF
THE SECURED PARTY
UNDER THIS AGREEMENT, (B) RECEIVING AND MANAGING THE COLLATERAL
INCLUDING THE
EXECUTION OF ALL INSTRUMENTS, THE MAKING OF ALL FILINGS AND
CONTINUATION
STATEMENTS AND SIMILAR INSTRUMENTS IN ANY APPLICABLE
JURISDICTION
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AND THE TAKING OF ALL ACTIONS, AS SHALL, IN THE REASONABLE
JUDGMENT OF THE
COLLATERAL AGENT, BE NECESSARY TO CONTINUE THE EFFECTIVENESS,
FOR THE BENEFIT OF
THE SECURED PARTY, AS SECURITY FOR THE RESPECTIVE OBLIGATIONS
VALID, PERFECTED
LIENS ON ALL OF THE COLLATERAL, AND (C) RECEIVING NOTICES AND
OTHER
COMMUNICATIONS FROM THE BUYER AND PROVIDING NOTICES TO THE
SECURED PARTY, ALL
UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH HEREIN.
THE COLLATERAL
AGENT MAY BE REMOVED, AND A NEW COLLATERAL AGENT ELECTED, BY THE
WRITTEN CONSENT
OF THE SECURED PARTY.
10. Miscellaneous.
(a) Entire Agreement; Amendments and Waivers. This Agreement,
the
Purchase Agreement and each of the Related Agreements constitute
the full and
entire understanding and agreement among the parties with regard
to the subjects
hereof and thereof, and no party shall be liable or bound to any
other party in
any manner by any warranties, representations, or covenants,
except as
specifically set forth herein or therein. Any term of this
Agreement may be
amended and the observance of any term of this Agreement may be
waived (either
generally or in a particular instance and either retroactively
or
prospectively), only with the written consent of the Company and
the Secured
Party. Any amendment or waiver effected in accordance with this
paragraph shall
be binding upon each Secured Party.
(b) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of
Kentucky, without
giving effect to principles of conflict of laws.
(c) Successors and Assigns. Each of the terms, provisions
and
obligations of this Agre
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