EXHIBIT 10.8
TRINITY LEARNING CORPORATION AND CERTAIN OF ITS SUBSIDIARIES
MASTER SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Ltd.
P.O. Box 309GT
Xxxxxx House
South Church Street
Xxxxxx Town
Grand Cayman, Cayman Islands
Date: August 31, 2004
To Whom It May Concern:
To secure the payment of all Obligations (as hereafter defined), Trinity
Learning Corporation, a Utah corporation (the "Company"), each of the other
undersigned parties (other than Laurus Master Fund, Ltd, "Laurus")) and each
other entity that is required to enter into this Master Security Agreement (each
an "Assignor" and, collectively, the "Assignors") hereby assigns and grants to
Laurus a continuing security interest in all of the following property now owned
or at any time hereafter acquired by any Assignor, or in which any Assignor now
have or at any time in the future may acquire any right, title or interest (the
"Collateral"): all cash, cash equivalents, accounts, accounts receivable,
deposit accounts (including, without limitation, (x) the Restricted Account (the
"Restricted Account") maintained at North Fork Bank (Account Name: Trinity
Learning Corporation, Account Number: 2704051990) referred to in the Restricted
Account Agreement) and (y) the Lockbox Deposit Accounts (as defined below)),
inventory, equipment, goods, documents, instruments (including, without
limitation, promissory notes), contract rights, general intangibles (including,
without limitation, payment intangibles and an absolute right to license on
terms no less favorable than those current in effect among our affiliates),
chattel paper, supporting obligations, investment property (including, without
limitation, all equity interests owned by any Assignor, but excluding the equity
interests of any Subsidiary of the Company in existence on the date hereof other
than Touchvision, Inc. (but, in any event, Subsidiaries of the Company that are
acquired or formed after the date hereof)), letter-of-credit rights, trademarks,
trademark applications, tradestyles, patents, patent applications, copyrights,
copyright applications and other intellectual property in which any Assignor now
have or hereafter may acquire any right, title or interest, all proceeds and
products thereof (including, without limitation, proceeds of insurance) and all
additions, accessions and substitutions thereto or therefore. In the event any
Assignor wishes to finance the acquisition in the ordinary course of business of
any hereafter acquired equipment and have obtained a commitment from a financing
source to finance such equipment from an unrelated third party, Laurus agrees to
release its security interest on such hereafter acquired equipment so financed
by such third party financing source. Except as otherwise defined herein, all
capitalized terms used herein shall have the meaning provided such terms in the
Securities Purchase Agreement referred to below.
1. The term "Obligations" as used herein shall mean and include all debts,
liabilities and obligations owing by each Assignor to Laurus arising under, out
of, or in connection with: (i) that certain Securities Purchase Agreement dated
as of the date hereof by and between the Company and Laurus (the "Securities
Purchase Agreement") and (ii) the Related Agreements referred to in the
Securities Purchase Agreement (the Securities Purchase Agreement and each
Related Agreement, as each may be amended, modified, restated or supplemented
from time to time, are collectively referred to herein as the "Documents"), and
in connection with any documents, instruments or agreements relating to or
executed in connection with the Documents or any documents, instruments or
agreements referred to therein or otherwise, and in connection with any other
indebtedness, obligations or liabilities of any Assignor to Laurus, whether now
existing or hereafter arising, direct or indirect, liquidated or unliquidated,
absolute or contingent, due or not due and whether under, pursuant to or
evidenced by a note, agreement, guaranty, instrument or otherwise, in each case,
irrespective of the genuineness, validity, regularity or enforceability of such
Obligations, or of any instrument evidencing any of the Obligations or of any
collateral therefor or of the existence or extent of such collateral, and
irrespective of the allowability, allowance or disallowance of any or all of the
Obligations in any case commenced by or against any Assignor under Xxxxx 00,
Xxxxxx Xxxxxx Code, including, without limitation, obligations or indebtedness
of each Assignor for post-petition interest, fees, costs and charges that would
have accrued or been added to the Obligations but for the commencement of such
case.
2. Each Assignor hereby jointly and severally represents, warrants and
covenants to Laurus that:
(a) it is a corporation, partnership or limited liability company,
as the case may be, validly existing, in good standing and organized under
the respective laws of its jurisdiction of organization set forth on
Schedule A, and each Assignor will provide Laurus thirty (30) days' prior
written notice of any change in any of its respective jurisdiction of
organization;
(b) its legal name is as set forth in its respective Certificate of
Incorporation or other organizational document (as applicable) as amended
through the date hereof and as set forth on Schedule A, and it will
provide Laurus thirty (30) days' prior written notice of any change in its
legal name;
(c) its organizational identification number (if applicable) is as
set forth on Schedule A hereto, and it will provide Laurus thirty (30)
days' prior written notice of any change in any of its organizational
identification number;
(d) it is the lawful owner of the respective Collateral and it has
the sole right to grant a security interest therein and will defend the
Collateral against all claims and demands of all persons and entities;
(e) it will keep its respective Collateral free and clear of all
attachments, levies, taxes, liens, security interests and encumbrances of
every kind and nature ("Encumbrances"), except (i) Encumbrances securing
the Obligations and (ii) to the extent said Encumbrance does not secure
indebtedness in excess of $50,000 and such
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Encumbrance is removed or otherwise released within ten (10) days of the
creation thereof;
(f) it will, at its and the other Assignors joint and several cost
and expense keep the Collateral in good state of repair (ordinary wear and
tear excepted) and will not waste or destroy the same or any part thereof
other than ordinary course discarding of items no longer used or useful in
its or such other Assignors' business;
(g) it will not without Laurus' prior written consent, sell,
exchange, lease or otherwise dispose of the Collateral, whether by sale,
lease or otherwise, except for the sale of inventory in the ordinary
course of business and for the disposition or transfer in the ordinary
course of business during any fiscal year of obsolete and worn-out
equipment or equipment no longer necessary for its ongoing needs, having
an aggregate fair market value of not more than $25,000 and only to the
extent that:
(i) the proceeds of any such disposition are used to acquire
replacement Collateral which is subject to Laurus' first priority
perfected security interest, or are used to repay Obligations or to
pay general corporate expenses; and
(ii) following the occurrence of an Event of Default which
continues to exist the proceeds of which are remitted to Laurus to
be held as cash collateral for the Obligations;
(h) it will insure or cause the Collateral to be insured in Laurus'
name against loss or damage by fire, theft, burglary, pilferage, loss in
transit and such other hazards as Laurus shall specify in amounts and
under policies by insurers acceptable to Laurus and all premiums thereon
shall be paid by such Assignor and the policies delivered to Laurus. If
any such Assignor fails to do so, Laurus may procure such insurance and
the cost thereof shall be promptly reimbursed by the Assignors, jointly
and severally, and shall constitute Obligations;
(i) it will at all reasonable times allow Laurus or Laurus'
representatives free access to and the right of inspection of the
Collateral;
(j) such Assignor (jointly and severally with each other Assignor)
hereby indemnifies and saves Laurus harmless from all loss, costs, damage,
liability and/or expense, including reasonable attorneys' fees, that
Laurus may sustain or incur to enforce payment, performance or fulfillment
of any of the Obligations and/or in the enforcement of this Master
Security Agreement or in the prosecution or defense of any action or
proceeding either against Laurus or any Assignor concerning any matter
growing out of or in connection with this Master Security Agreement,
and/or any of the Obligations and/or any of the Collateral except to the
extent caused by Laurus' own gross negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final and
nonappealable decision);
(k) On or prior to the 30th day following the Closing Date, each
Assignor will (x) irrevocably direct all of its present and future Account
Debtors (as defined below)
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and other persons obligated to make payments constituting Collateral to
make such payments directly to the lockboxes maintained by the Assignors
(the "Lockboxes") with North Fork Bank, with its principal place of
business at 000 Xxxxx Xxxxxx, Xxxxx 0, Xxx Xxxx, Xxx Xxxx 00000 or such
other financial institution accepted by Laurus in writing as may be
selected by the Company (the "Lockbox Bank") (each such direction pursuant
to this clause (x), a "Direction Notice") and (y) provide Laurus with
copies of each Direction Notice, each of which shall be agreed to and
acknowledged by the respective Account Debtor. Upon receipt of such
payments, the Lockbox Bank has agreed to deposit the proceeds of such
payments in a deposit account maintained at the Lockbox Bank which deposit
account has been approved by Laurus in writing (collectively, the "Lockbox
Deposit Accounts"). On or prior to 30 days following the Closing Date, the
Company shall and shall cause the Lockbox Bank to enter into all such
documentation acceptable to Laurus pursuant to which, among other things,
the Lockbox Bank agrees to, following notification by Laurus (which
notification Laurus shall only give following the occurrence and during
the continuance of an Event of Default), comply only with the instructions
or other directions of Laurus concerning the Lockbox and the Lockbox
Deposit Account. All of each Assignor's invoices, account statements and
other written or oral communications directing, instructing, demanding or
requesting payment of any Account of any such person or any other amount
constituting Collateral shall conspicuously direct that all payments be
made to the Lockbox or such other address as Laurus may direct in writing.
If, notwithstanding the instructions to Account Debtors, any Assignor
receives any payments, such person shall immediately remit such payments
to the Lockbox Deposit Account in their original form with all necessary
endorsements. Until so remitted, the Assignors shall hold all such
payments in trust for and as the property of Laurus and shall not
commingle such payments with any of its other funds or property. For the
purpose of this Master Security Agreement, (x) "Accounts" shall mean all
"accounts", as such term is defined in the Uniform Commercial Code as in
effect in the State of New York on the date hereof, now owned or hereafter
acquired by any Assignor and (y) "Account Debtor" shall mean any person or
entity who is or may be obligated with respect to, or on account of, an
Account; and
3. The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Master Security Agreement:
(a) any covenant, warranty, representation or statement made or
furnished to Laurus by the Assignor or on the Assignor's behalf was
breached in any material respect or false in any material respect when
made or furnished, as the case may be, and, in the case of a covenant, if
subject to cure, shall not be cured for a period of fifteen (15) days;
(b) the loss, theft, substantial damage, destruction, sale or
encumbrance to or of any of the Collateral or the making of any levy,
seizure or attachment thereof or thereon except to the extent:
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(i) such loss is covered by insurance proceeds which are used
to replace the item or repay Laurus; or
(ii) said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 and such levy, seizure or
attachment has not been removed or otherwise released within ten
(10) days of the creation or the assertion thereof;
(b) any Assignor shall become insolvent, cease operations, dissolve,
terminate our business existence, make an assignment for the benefit of
creditors, suffer the appointment of a receiver, trustee, liquidator or
custodian of all or any part of Assignors' property;
(c) any proceedings under any bankruptcy or insolvency law shall be
commenced by or against any Assignor;
(d) the Company shall repudiate, purport to revoke or fail to
perform any or all of its obligations under any Note (after passage of
applicable cure period, if any); or
(e) an Event of Default shall have occurred under and as defined in
any Document.
4. Upon the occurrence of any Event of Default and at any time thereafter,
Laurus may declare all Obligations immediately due and payable and Laurus shall
have the remedies of a secured party provided in the Uniform Commercial Code as
in effect in the State of New York, this Agreement and other applicable law.
Upon the occurrence of any Event of Default and at any time thereafter, Laurus
will have the right to take possession of the Collateral and to maintain such
possession on our premises or to remove the Collateral or any part thereof to
such other premises as Laurus may desire. Upon Laurus' request, each of the
Assignors shall assemble or cause the Collateral to be assembled and make it
available to Laurus at a place designated by Laurus. If any notification of
intended disposition of any Collateral is required by law, such notification, if
mailed, shall be deemed properly and reasonably given if mailed at least ten
(10) days before such disposition, postage prepaid, addressed to any Assignor
either at such Assignor's address shown herein or at any address appearing on
Laurus' records for such Assignor. Any proceeds of any disposition of any of the
Collateral shall be applied by Laurus to the payment of all expenses in
connection with the sale of the Collateral, including reasonable attorneys' fees
and other legal expenses and disbursements and the reasonable expense of
retaking, holding, preparing for sale, selling, and the like, and any balance of
such proceeds may be applied by Laurus toward the payment of the Obligations in
such order of application as Laurus may elect, and each Assignor shall be liable
for any deficiency. [For the avoidance of doubt, following the occurrence and
during the continuance of an Event of Default, Laurus shall have the immediate
right to withdraw any and all monies contained in the Restricted Account or any
other deposit accounts in the name of the Assignor and controlled by Laurus and
apply same to the repayment of the Obligations (in such order of application as
Laurus may elect).]
5. If any Assignor defaults in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties on such
Assignor's part to be performed or fulfilled under or pursuant to this Master
Security Agreement, Laurus may, at its
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option without waiving its right to enforce this Master Security Agreement
according to its terms, immediately or at any time thereafter and without notice
to any Assignor, perform or fulfill the same or cause the performance or
fulfillment of the same for each Assignor's joint and several account and at
each Assignor's joint and several cost and expense, and the cost and expense
thereof (including reasonable attorneys' fees) shall be added to the Obligations
and shall be payable on demand with interest thereon at the highest rate
permitted by law[, or, at Laurus' option, debited by Laurus from the Restricted
Account or any other deposit accounts in the name of the Assignor and controlled
by Laurus].
6. Each Assignor appoints Laurus, any of Laurus' officers, employees or
any other person or entity whom Laurus may designate as our attorney, with power
to execute such documents in each of our behalf and to supply any omitted
information and correct patent errors in any documents executed by any Assignor
or on any Assignor's behalf; to file financing statements against us covering
the Collateral (and, in connection with the filing of any such financing
statements, describe the Collateral as "all assets and all personal property,
whether now owned and/or hereafter acquired" (or any substantially similar
variation thereof)); to sign our name on public records; and to do all other
things Laurus deem necessary to carry out this Master Security Agreement. Each
Assignor hereby ratifies and approves all acts of the attorney and neither
Laurus nor the attorney will be liable for any acts of commission or omission,
nor for any error of judgment or mistake of fact or law other than gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and non-appealable decision). This power being coupled
with an interest, is irrevocable so long as any Obligations remains unpaid.
7. No delay or failure on Laurus' part in exercising any right, privilege
or option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in
writing, signed by Laurus and then only to the extent therein set forth, and no
waiver by Laurus of any default shall operate as a waiver of any other default
or of the same default on a future occasion. Laurus' books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon each Assignor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof. Laurus shall have the right to enforce any one or
more of the remedies available to Laurus, successively, alternately or
concurrently. Each Assignor agrees to join with Laurus in executing financing
statements or other instruments to the extent required by the Uniform Commercial
Code in form satisfactory to Laurus and in executing such other documents or
instruments as may be required or deemed necessary by Laurus for purposes of
affecting or continuing Laurus' security interest in the Collateral.
8. This Master Security Agreement shall be governed by and construed in
accordance with the laws of the State of New York and cannot be terminated
orally. All of the rights, remedies, options, privileges and elections given to
Laurus hereunder shall inure to the benefit of Laurus' successors and assigns.
The term "Laurus" as herein used shall include Laurus, any parent of Laurus',
any of Laurus' subsidiaries and any co-subsidiaries of Laurus' parent, whether
now existing or hereafter created or acquired, and all of the terms, conditions,
promises, covenants, provisions and warranties of this Agreement shall inure to
the benefit of each of the foregoing, and shall bind the representatives,
successors and assigns of each Assignor. Laurus and each Assignor hereby (a)
waive any and all right to trial by jury in litigation relating to this
Agreement and the transactions contemplated hereby and each Assignor
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agrees not to assert any counterclaim in such litigation, (b) submit to the
nonexclusive jurisdiction of any New York State court sitting in the borough of
Manhattan, the city of New York and (c) waive any objection Laurus or each
Assignor may have as to the bringing or maintaining of such action with any such
court.
9. It is understood and agreed that any person or entity that desires to
become an Assignor hereunder, or is required to execute a counterpart of this
Master Security Agreement after the date hereof pursuant to the requirements of
any Document, shall become an Assignor hereunder by (x) executing a Joinder
Agreement in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as Laurus shall
reasonably request and (z) taking all actions as specified in this Agreement as
would have been taken by such Assignor had it been an original party to this
Agreement, in each case with all documents required above to be delivered to
Laurus and with all documents and actions required above to be taken to the
reasonable satisfaction of Laurus.
10. This Master Security Agreement and the security interests granted by
the Assignors hereunder shall terminate upon the provision by Laurus of written
confirmation to the Company that (x) all indebtedness obligations owed by any
Assignor to Laurus have been repaid in full (including, without limitation, all
principal, interest and fees related to the Note and any other indebtedness
outstanding at such time and owed to Laurus) and (y) all commitments by Laurus
to fund any indebtedness have been terminated in their entirety.
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11. All notices from Laurus to any Assignor shall be sufficiently given if
mailed or delivered to such Assignor's address set forth below.
Very truly yours,
TRINITY LEARNING CORPORATION
By: _____________________
Name:
Title:
Address: 0000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
TOUCHVISION, INC.
By: _____________________
Name:
Title:
Address: 0000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:______________________
Name:
Title:
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SCHEDULE A
Entity
Jurisdiction of Organization
Organization Identification Number
[Assignors]
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