Exhibit 10.12
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") is made and entered into as of
this 20th day of December, 2007, by and between Beacon Enterprise Solutions
Group Inc., an Indiana corporation (the "Buyer"), and RFK Communications, LLC
("RFK"), a Kentucky limited liability company.
R E C I T A L S
A. The Buyer and RFK 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 RFK and has issued Secured
Promissory Note (the "Secured Note") in partial payment therefor. The Purchase
Agreement and the Secured Note 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 RFK's consummation of the transactions contemplated
by the Purchase Agreement, the Buyer has agreed to grant to RFK 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 RFK under the Secured Notes issued to RFK. The security interest
granted hereby shall not extend to any other obligations of the Buyer to RFK or
its 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 RFK a security interest in
the contracts and accounts representing the carrier revenue stream acquired from
RFK under the Purchase Agreement and in any additional carrier 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 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 Parties, 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 RFK
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 RFK
and do everything necessary or expedient to preserve or perfect the security
interest of RFK;
(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 RFK'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 RFK in making such inspection; and
(g) that the security interest granted by the Buyer to RFK shall
continue to be effective so long as there are any obligations owed to RFK 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;
(b) the Buyer becomes insolvent or ceases to do business as a going
concern; and
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(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,
RFK 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 RFK,
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 RFK'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 RFK unless in writing signed by RFK. 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. RFK HEREBY ELECTS AND APPOINTS ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ TO
ACT AS THE EXCLUSIVE AGENT ("COLLATERAL AGENT") FOR EACH OF RFK FOR THE PURPOSES
OF (A) EXERCISING THE RIGHTS AND REMEDIES OF RFK 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 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 RFK, AS SECURITY FOR THE
RESPECTIVE OBLIGATIONS VALID, PERFECTED LIENS ON ALL OF THE COLLATERAL, AND (C)
RECEIVING NOTICES AND OTHER COMMUNICATIONS
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FROM THE BUYER AND PROVIDING NOTICES TO RFK, 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 RFK.
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 RFK. 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 Agreement shall be binding upon, shall inure to the benefit
of, and shall be enforceable by the parties and their respective legal
representatives, successors and permitted assigns.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single agreement.
(e) Assignment. RFK may not assign this Agreement, or assign the
rights or delegate its duties hereunder, without the prior written consent of
the Buyer.
(f) Notices. All notices, requests, demands and other communications
made by a party to another party under this Agreement shall be provided to such
other party in the manner set forth in Section 10.7 of the Purchase Agreement.
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IN WITNESS WHEREOF, the parties have executed this Security Agreement as
of the date first above written.
BUYER:
BEACON ENTERPRISE SOLUTIONS GROUP INC.,
an Indiana corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Executive Officer
[Remainder of Page Intentionally Left Blank -
Secured Parties' Signature Pages Follow]
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INVESTOR COUNTERPART SIGNATURE PAGES
TO
SECURITY AGREEMENT
The undersigned Secured Party agrees to be bound by the terms of the
Security Agreement of Beacon Enterprise Solutions Group Inc., an Indiana
corporation, to which this signature page is attached, and agrees to all of the
terms thereof.
RFK COMMUNICATIONS, LLC
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇, its Member
STRATEGIC TECHNOLOGY INVESTMENTS,
LLC, as Member
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, its Manager
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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By: ▇▇▇▇▇ ▇. ▇▇▇▇▇, its Manager
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SCHEDULE 1
[ATTACHMENT]
Exhibit 10.12
Beacon Enterprise Solutions Group Inc.
SECURED PROMISSORY NOTE
$562,500.00 December 20, 2007
FOR VALUE RECEIVED, Beacon Enterprise Solutions Group Inc., an Indiana
corporation (the "Buyer"), promises to pay to the order of RFK COMMUNICATIONS,
LLC (the "Holder") the principal sum of Five Hundred Sixty-Two Thousand Five
Hundred Dollars ($562,500.00) (the "Principal Amount"), together with interest
accruing on the unpaid portion of the Principal Amount from the date hereof
until the Maturity Date (as defined in Section 2(a)), at the rate of eight
percent (8%) per annum, compounded annually (the "Interest Rate").
1. Terms. This Note is issued and delivered by the Buyer pursuant to
Section 1.3 of that certain Asset Purchase Agreement dated October 15, 2007 (as
the same may be amended, restated, supplemented or otherwise modified from time
to time, the "Purchase Agreement"), by and between the Buyer and the Holder.
Unless otherwise set forth herein, all capitalized terms used herein without
definition shall have the meanings given to such terms in the Purchase
Agreement. This Note is secured by certain Collateral, as described in that
certain Security Agreement of even date herewith (the "Security Agreement"), by
and between the Buyer and the Holder.
2. Payments.
(a) Subject to the adjustments provided for in Section 2(b) below
and any rights of set-off that the Buyer may have under the terms of the
Purchase Agreement, the Buyer shall make monthly payments of principal and
interest, in the amortized amount of $11,405.00, to the Holder on the 15th of
each month, commencing January 15, 2008 and ending on December 15, 2012 (the
"Maturity Date").
(b) In the event that on December 31, 2008, the actual revenue
generated by the Collateral and revenues of the business assets of Strategic
Communications, LLC, during the period commencing January 1, 2008 and ending on
December 31, 2008 (the "Actual Revenue") is less than $4,500,000 (the "Minimum
Revenue"), then the Principal Amount hereunder shall be deemed to be reduced to
a principal amount equal to the initial Principal Amount set forth above,
multiplied by a fraction the numerator of which is equal to the Actual Revenue
and the denominator of which is equal to the Minimum Revenue. No such adjustment
shall take place in the event that the Actual Revenue exceeds the Minimum
Revenue. To the extent that the monthly amounts previously paid exceed the
amount of such recalculated monthly payments, the aggregate amount of such
excess payments prior to the time of the recalculation shall be a credit against
further payments due hereunder, to be applied ratably against future payment
amounts hereunder. If the aggregate amount of excess payments prior to the time
of the recalculation exceeds the aggregate of future payments hereunder, then
the Holder shall refund the appropriate
difference to the Buyer. The Buyer shall recalculate the monthly payments for
the remainder of the term of this Note and shall send the Holder a statement of
its computations in support of the recalculated monthly payment amount.
(c) The Buyer may apply any rights of set-off that the Buyer may
have under the terms of the Purchase Agreement or as agreed from time to time by
the Buyer and the Holder by providing notice of its exercise of such rights of
set-off to the Holder (and, if applicable, the members of the Holder) with the
Claim Notice described in the Purchase Agreement. The amount of the set-off
shall be treated as a prepayment of the amounts otherwise due and payable under
the Note.
(d) All payments due and payable from the Buyer to Holder under this
Note shall be made in lawful currency of the United States of America at the
address of Holder as set forth in Section 10.7 of the Purchase Agreement, or
such other place as Holder shall designate in writing, and, at Holder's option,
shall be payable by check or wire transfer.
3. Prepayments. The Buyer may prepay all or any portion of the outstanding
Principal Amount, or any accrued and unpaid interest thereon, of this Note.
4. Events of Default.
(a) An "Event of Default" under this Note shall mean the occurrence
of any of the following:
(i) Failure to Make Payments When Due. Failure of the Buyer to
pay any principal, interest or other amount due under this Note when due,
whether at stated maturity, by declaration, acceleration, demand or otherwise,
and the failure of the Buyer to cure such default within ten (10) business days
thereafter;
(ii) Breach of Covenants. Any other material failure by the
Buyer to perform its obligations under this Note, and the failure of the Buyer
to cure such default within ten (10) business days of written notice of such
default by Holder to the Buyer, in each case as determined by the Collateral
Agent (as defined in the Security Agreement);
(iii) Acceleration of Other Indebtedness. Any event or
condition shall occur which results in the acceleration of the maturity of any
indebtedness (other than this Note) of the Buyer or enables the holder of such
indebtedness or any person acting on such holder's behalf to accelerate the
maturity thereof, if the aggregate principal amount of indebtedness (regardless
of whether such indebtedness arises in one or more related or unrelated
transactions) with respect to which such events or conditions shall have
occurred exceeds $500,000;
(iv) Judgments or Court Orders. Judgments or orders for the
payment of money in excess of $500,000 (net of any amount (x) covered by
insurance or (y) covered by a third-party indemnity from a solvent third party
financially capable of making such payments) shall be rendered and properly
entered against the Buyer, and such judgments or orders shall continue
unsatisfied and unstayed for a period of sixty (60) days, unless being contested
in good
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faith by appropriate legal or administrative proceedings, and in any such case
as to which the Buyer shall have set aside adequate cash reserves in accordance
with generally accepted accounting principles;
(v) Involuntary Bankruptcy, Etc. (A) Any involuntary case or
other proceeding shall be commenced against the Buyer or a subsidiary thereof
seeking liquidation, reorganization or other relief under Title 11 of the United
States Code entitled "Bankruptcy" (as now and hereinafter in effect, or any
successor thereto, the "Bankruptcy Code"), or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a period of
ninety (90) days, or an order for relief shall be entered against the Buyer or a
subsidiary thereof under the Bankruptcy Code or any other domestic or foreign
bankruptcy laws as now or hereafter in effect, or a warrant of attachment,
execution or similar process shall have been issued against any substantial part
of the property of the Buyer; or
(vi) Voluntary Bankruptcy, Etc. An order for relief shall be
entered with respect to the Buyer or a subsidiary thereof shall commence a
voluntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or shall consent to
the entry of an order for relief in an involuntary case, or to the conversion of
an involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property, or the Buyer or a
subsidiary thereof shall make an assignment for the benefit of creditors; or the
Buyer or a subsidiary thereof shall admit in writing its inability to pay its
debts as such debts become due; or the Board of Directors of the Buyer shall
adopt any resolution or otherwise authorize action to approve any of the
foregoing.
(b) Upon the occurrence of an Event of Default under Sections
4(a)(i) through (iv), inclusive, of this Note, the entire unpaid portion of the
Principal Amount, all accrued but unpaid interest and all other amounts due
Holder hereunder shall become due and payable at the option of the Collateral
Agent upon notice to the Buyer of such acceleration. Upon the occurrence of an
Event of Default under Section 4(a)(v) or (vi) of this Note, the entire unpaid
portion of the Principal Amount, all accrued but unpaid interest and all other
amounts due Holder hereunder shall immediately become due and payable.
(c) Upon the occurrence and during the continuation of any Event of
Default as determined by the Collateral Agent, subject to Section 5 of this
Note, the per annum rate of interest on the Principal Amount shall increase from
the Interest Rate to eleven percent (11%).
(d) The Buyer hereby agrees that it will, upon demand, pay to the
Collateral Agent the amount of any and all reasonable advances, charges, costs
and expenses, including the fees and expenses of counsel and of any experts or
agents engaged by the Collateral Agent, that the Collateral Agent may incur in
connection with the failure by the Buyer to perform or observe any of the
provisions of this Note.
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5. Usury. Regardless of any other provision of this Note or the Purchase
Agreement to the contrary, if for any reason the effective rate of interest
under this Note should exceed the maximum lawful rate of interest, after giving
effect to any applicable exemption to applicable usury laws, then the effective
rate of interest under this shall be deemed reduced to, and shall be, such
maximum lawful rate of interest, and (a) the amount which would otherwise be
excessive interest shall be deemed applied to the reduction of the outstanding
Principal Amount and not the payment of interest, and (b) if the loan evidenced
by this Note has been or is hereby paid in full, the excess principal payment
under the foregoing clause (a) shall be returned to the Buyer. The parties agree
that any such application of excessive interest to the outstanding Principal
Amount or the refunding of such excess interest shall be a complete settlement
and acquittance thereof.
6. Replacement of Lost Note. Upon receipt of evidence satisfactory to the
Buyer of the loss, theft, destruction or mutilation of this Note and, in the
case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Buyer, or, in the case of any such mutilation,
upon surrender and cancellation of this Note, the Buyer will make and deliver,
in lieu of such lost, stolen, destroyed or mutilated Note, a new Note of like
tenor dated as of the date from which unpaid interest has then accrued on the
lost, stolen, destroyed or mutilated Note.
7. Miscellaneous.
7.1 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the Commonwealth of Kentucky.
7.2 Entire Agreement; Amendment. This Note, together with all of the
other documents executed in connection herewith, constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
7.3 Amendments. No term of this Note may be amended, waived,
discharged or terminated except by a written instrument signed by the Buyer and
the Holder. Any amendment, waiver, discharge or termination effected in
accordance with this paragraph shall be binding upon the Holder.
7.4 Notices, etc. All notices, requests, demands and other
communications made under this Note shall be made in accordance with Section
10.7 of the Purchase Agreement.
7.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to Holder upon any breach or default of the Buyer under
this Note shall impair any such right, power or remedy of Holder nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of the Holder of any
breach or default under this Note, or any waiver on the part of the Holder of
any provision or condition of this Note must be made in writing and shall be
effective as to Holder only to the extent specifically set forth in such
writing. All remedies, either under this Note or by law or otherwise afforded to
Holder, shall be cumulative and not alternative.
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7.6 Severability. In case any provision of this Note shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.7. Titles. The titles of the Sections and subsections of this Note
are for convenience or reference only and are not to be considered in construing
this Note.
IN WITNESS WHEREOF, this Note is executed as of the date first above
written.
BUYER:
BEACON ENTERPRISE SOLUTIONS GROUP INC.
an Indiana corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Executive Officer
[Remainder of Page Intentionally Left Blank - Holder's Signature Page Follows]
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HOLDER'S COUNTERPART SIGNATURE PAGE
TO
SECURED PROMISSORY NOTE
The undersigned Holder agrees to be bound by the terms of the Secured
Promissory Note of Beacon Enterprise Solutions Group Inc., an Indiana
corporation, executed by the Buyer in favor of the undersigned Holder, and
agrees to all of the terms thereof.
Dated: December 20, ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, LLC
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇, its Member
STRATEGIC TECHNOLOGY INVESTMENTS,
LLC, as Member
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, its Manager
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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By: ▇▇▇▇▇ ▇. ▇▇▇▇▇, its Manager
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