ESCROW AGREEMENT
This Escrow Agreement (the " Escrow Agreement") is made and entered
into as of February 12, 2004, by and among Trinity Learning Corporation, a
Utah corporation ("Trinity" or the "Acquirer"), the shareholders of Virtual
Learning Partners AS, a company incorporated in accordance with the laws of
Norway ("Vilpas" or the "Shareholders") set forth on Annex A attached
hereto (collectively, the "Shareholders"), Jan-▇▇▇▇ ▇▇▇▇▇▇▇ (referred to
herein as "Willums" and "Shareholder Representative") and Heritage Bank of
Commerce, a California corporation, as escrow agent (the "Escrow Agent").
A. WHEREAS, Trinity and the Shareholders have executed a Securities
Purchase Agreement dated February 12, 2004 pursuant to which Trinity has
agreed to deposit 3,320,600 ordinary shares of nominal value of 1.00 NOK of
representing all of the issued and outstanding capital stock of Virtual
Learning Partners AS (the "Vilpas Shares") into an escrow account with the
Escrow Agent pursuant to the terms of this Escrow Agreement and the
aforesaid Securities Purchase Agreement (the "Purchase Agreement").
B. WHEREAS, the Shareholders have agreed, pursuant to the terms of
the Purchase Agreement, that, upon conversion of the Convertible Note (as
that term is defined in the Purchase Agreement), twenty percent (20%) of
all shares that the Shareholders and/or their agent are entitled to receive
upon such conversion(s) (the "Trinity Shares") shall be deposited in an
escrow account with the Escrow Agent pursuant to the terms of this Escrow
Agreement, the Purchase Agreement and the Convertible Note;
C. WHEREAS, the Shareholders have agreed to appoint Willums as the
Shareholder Representative under this Agreement; and
D. WHEREAS, Heritage Bank of Commerce is willing to serve as Escrow
Agent pursuant to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and agreements
contained herein, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by each party hereto, it
is hereby agreed by and among Trinity, Shareholder Representative, the
Shareholders and the Escrow Agent as follows:
1. The Vilpas Shares
(a) On the date hereof, the Shareholders have delivered to the
Escrow Agent all of the issued and outstanding stock of Virtual Learning
Partners, AS (the "Vilpas Escrow Shares"). The Escrow Agent shall not be
required to inquire into the propriety of the Vilpas Escrow Shares
deposited hereunder nor shall the Escrow Agent be required to investigate
any other matter or arrangement between Trinity and the Shareholders.
(b) The Vilpas Escrow Shares shall be available to secure
Trinity's obligations pursuant to the terms of the Convertible Note. In
the event Vilpas issues any Additional Vilpas Escrow Shares (as defined
below), such shares will be issued in the name of Trinity and delivered to
the Escrow Agent in the same manner as the Vilpas Escrow Shares delivered
upon the execution hereof.
(c) Except for dividends paid in stock declared with respect to
the Vilpas Escrow Shares ("Additional Vilpas Escrow Shares"), which shall
be treated as Vilpas Escrow Shares hereunder, dividends payable in
securities or other distributions of any kind (including cash) made in
respect of the Vilpas Escrow Shares will be delivered to Trinity. The term
"Vilpas Escrow Shares" as used herein shall also be deemed to include
Additional Vilpas Escrow Shares. Trinity will have all voting rights with
respect to the Vilpas Escrow Shares so long as such Vilpas Escrow Shares
are held in escrow, and the Shareholders will take all reasonable steps
necessary to allow the exercise of such rights. While the Vilpas Escrow
Shares remain in the Escrow Agent's possession pursuant to this Escrow
Agreement, Trinity will retain and will be able to exercise all other
incidents of ownership of the Vilpas Escrow Shares that are not
inconsistent with the terms and conditions of this Escrow Agreement
(d) Escrow Period; Release From Escrow.
(i) Except as otherwise set forth herein, the Vilpas Escrow
Shares shall be subject to escrow only until eighteen months from the date
hereof (the "Termination Date"); provided, however, that if Vilpas delivers
an Officer's Certificate (defined below) to the Escrow Agent prior to the
Release Date (defined below) with respect to facts and circumstances
existing prior to the Termination Date, the Vilpas Escrow Shares (the
"Vilpas Retained Shares") shall remain in escrow unless and until Escrow
Agent has received either: (A) written instructions signed by all of
Trinity and the Shareholder Representative instructing Escrow Agent how the
Vilpas Retained Shares should be disbursed; or (B) an order from a court of
competent jurisdiction or award from an arbitral authority instructing the
Escrow Agent as to how the Vilpas Retained Shares should be disbursed.
Promptly following Escrow Agent's receipt of either of the foregoing,
Escrow Agent shall make the disbursement specified therein.
(ii) Within seven (7) business days after the Termination
Date (the "Release Date"), the Escrow Agent shall release from escrow to
Trinity the Vilpas Escrow Shares, unless there are any pending or
unresolved issues pursuant to Section 1(d)(i), above. Any Vilpas Retained
Shares held as a result of the prior sentence shall be released to Trinity
or released to the Shareholder Representative (as appropriate) promptly
upon resolution such pending or unresolved issues. Certificates
representing Vilpas Escrow Shares that are subject to resale restrictions
under applicable securities laws will bear a legend to that effect.
(iii) The Escrow Agent is hereby granted the power to
effect any transfer of Vilpas Escrow Shares contemplated by this Escrow
Agreement. The Shareholders will cooperate with the Escrow Agent in
promptly issuing stock certificates to effect such transfers.
(e) Officer's Certificate. The Escrow Agent shall be required
to treat some or all Vilpas Escrow Shares as Vilpas Retained Shares only
upon delivery to the Escrow Agent on or before the Release Date of a
certificate signed by the Shareholder Representative (an "Officer's
Certificate") stating that Trinity has breached its obligations under the
Convertible Note and the nature of such breach or claim.
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2. Trinity Shares.
(a) On the date(s) of conversion of the Convertible Note,
Trinity will deliver to the Escrow Agent the Trinity Shares (the "Trinity
Escrow Shares"). The Escrow Agent shall not be required to inquire into
the propriety of the Trinity Escrow Shares deposited hereunder.
(b) The Trinity Escrow Shares shall be available to compensate
Trinity pursuant to the indemnification obligations of the Shareholders set
forth in Section 12 of the Purchase Agreement. In the event Trinity issues
any Additional Trinity Escrow Shares (as defined below), such shares will
be issued in the name of the Shareholder Representative, and delivered to
the Escrow Agent in the same manner as the Escrow Shares delivered upon the
execution hereof.
(c) Except for dividends paid in stock declared with respect to
the Trinity Escrow Shares ("Additional Trinity Escrow Shares"), which shall
be treated as Trinity Escrow Shares hereunder, dividends payable in
securities or other distributions of any kind (including cash) made in
respect of the Trinity Escrow Shares will be delivered to the Shareholder
Representative. The term "Trinity Escrow Shares" as used herein shall also
be deemed to include Additional Trinity Escrow Shares. The Shareholder
Representative will have all voting rights with respect to the Trinity
Escrow Shares so long as such Trinity Escrow Shares are held in escrow, and
Trinity will take all reasonable steps necessary to allow the exercise of
such rights. While the Trinity Escrow Shares remain in the Escrow Agent's
possession pursuant to this Escrow Agreement, the Shareholder
Representative will retain and will be able to exercise all other incidents
of ownership of the Trinity Escrow Shares that are not inconsistent with
the terms and conditions of this Escrow Agreement.
(d) Escrow Period; Release From Escrow.
(i) Except as otherwise set forth herein, the Escrow Shares
shall be subject to escrow only until eighteen months from the date hereof
(the "Termination Date"); provided, however, that if Trinity delivers an
Officer's Certificate (defined below) to the Escrow Agent prior to the
Release Date (defined below) with respect to facts and circumstances
existing prior to the Termination Date, a number of shares equal in value
to the Damages (as defined in the Purchase Agreement) claimed thereunder
(the "Trinity Retained Shares") shall remain in escrow unless and until
Escrow Agent has received either: (A) written instructions signed by all
of Trinity and the Shareholder Representative instructing Escrow Agent how
the Trinity Retained Shares should be disbursed; or (B) an order from a
court of competent jurisdiction or award from an arbitral authority
instructing the Escrow Agent as to how the Trinity Retained Shares should
be disbursed. Promptly following Escrow Agent's receipt of either of the
foregoing, Escrow Agent shall make the disbursement specified therein. For
purposes of determining the number of Trinity Retained Shares, each share
shall be valued as "Fair Market Value." Fair Market Value shall mean:
(a) if the Acquirer's Common Stock is traded on
an exchange or are quoted on the NASDAQ
National Market, the closing or last sale
price reported on the date of issuance;
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(b) if the Acquirer's Common Stock is not traded
on an exchange or on the NASDAQ National
market, but is traded in the over-the-counter
market, the average of the closing bid and
asked price reported for the date of
issuance; and,
(c) in all other cases, the fair market value as
determined in good faith by the Acquirer's
Board of Directors.
(ii) Within seven (7) business days after the
Termination Date (the "Release Date"), the Escrow Agent shall release from
escrow to Shareholder Representative the Trinity Escrow Shares, except for
any Trinity Retained Shares with respect to any pending but unresolved
indemnification claims of Trinity. Any Trinity Retained Shares held as a
result of the prior sentence shall be released to Shareholder
Representative or released to Trinity (as appropriate) promptly upon
resolution of each specific indemnification claim involved. Certificates
representing Trinity Escrow Shares that are subject to resale restrictions
under applicable securities laws will bear a legend to that effect.
(iii) The Escrow Agent is hereby granted the power to
effect any transfer of Trinity Escrow Shares contemplated by this Escrow
Agreement. Trinity will cooperate with the Escrow Agent in promptly
issuing stock certificates to effect such transfers.
(e) Officer's Certificate. The Escrow Agent shall be required
to treat some or all Trinity Escrow Shares as Trinity Retained Shares only
upon delivery to the Escrow Agent on or before the Release Date of a
certificate signed by any officer of Trinity (an "Officer's Certificate")
stating that with respect to the indemnification obligations set forth in
Section 12 of the Purchase Agreement, Damages exist and specifying in
reasonable detail the individual items of such Damages included in the
amount so stated, the date each such item was paid, or properly accrued or
arose, and the nature of the misrepresentation, breach of warranty,
covenant or claim to which such item is related.
3. Duties and Responsibilities of Escrow Agent.
(a) Trinity and the Shareholders acknowledge and agree that the
Escrow Agent: (i) shall not be responsible for any of the agreements
referred to herein but shall be obligated only for the performance of such
duties as are specifically set forth in this Escrow Agreement; (ii) shall
not be obligated to take any legal or other action hereunder which might in
its judgment involve any expense or liability unless it shall have been
furnished with acceptable indemnification; (iii) may rely on and shall be
protected in acting or refraining from acting upon any written notice,
instruction, instrument, statement, request or document furnished to it
hereunder and believed by it to be genuine and to have been signed or
presented by the proper person, and shall have no responsibility for
determining the accuracy thereof; and (iv) may consult counsel satisfactory
to it, including house counsel, and the opinion of such counsel shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in accordance
with the opinion of such counsel.
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(b) Neither the Escrow Agent nor any of its directors, officers
or employees shall be liable to anyone for any action taken or omitted to
be taken by it or any of its directors, officers or employees hereunder
except in the case of negligence or willful misconduct.
(c) Trinity and the Shareholders each agree to pay half of the
fees of, and to reimburse all expenses (including the reasonable fees and
expenses of counsel) incurred by, the Escrow Agent in performing its duties
and responsibilities hereunder, including the Escrow Agent's reasonable
compensation for its normal services hereunder in accordance with the fee
schedule attached as an exhibit hereto. The Escrow Agent shall be entitled
to reimbursement on demand for all expenses incurred in connection with the
administration of the escrow created hereby which are in excess of its
compensation for normal services here under, including without limitation,
payment of any legal fees incurred by the Escrow Agent in connection with
resolution of any claim by any party hereunder.
(d) The Escrow Agent may at any time resign as Escrow Agent
hereunder by giving thirty (30) days' prior written notice of resignation
to Trinity and Shareholder Representative. Prior to the effective date of
the resignation as specified in such notice, Trinity and the Shareholder
Representative will issue to the Escrow Agent a written instruction
authorizing redelivery of the Trinity Escrow Shares and the Vilpas Escrow
Shares, respectively, to a bank or trust company that Trinity selects
subject to the reasonable consent of the Shareholder Representative. Such
bank or trust company shall have a principal office in San Francisco,
California, shall have capital, surplus and undivided profits in excess of
$50,000,000, and shall have agreed to act as Escrow Agent hereunder and
upon such additional terms and conditions as it, Trinity and Shareholder
Representative shall have agreed, if any, provided that the original Escrow
Agent shall have no responsibility therefor nor any responsibility for the
compensation of such successor Escrow Agent. If, however, Trinity shall
fail to name such a successor escrow agent within twenty (20) days after
the notice of resignation from the Escrow Agent, then Shareholder
Representative shall be entitled to name such successor escrow agent. If
no successor escrow agent is named by either Trinity or Shareholder
Representative pursuant to the foregoing provisions by the effective date
of the Escrow Agent's resignation, then the Escrow Agent shall deliver the
Vilpas Escrow Shares and the Trinity Escrow Shares to Trinity for the
benefit of Trinity and the Shareholders, as provided herein, whereupon all
obligations of the Escrow Agent shall be deemed fulfilled, and the Escrow
Agreement shall terminate, provided that the provisions of paragraphs (b)
and (c) of this Section 3 shall survive the termination of this Escrow
Agreement.
(e) This Escrow Agreement sets forth exclusively the duties of
the Escrow Agent with respect to any and all matters pertinent thereto and
no implied duties or obligations shall be read into this Escrow Agreement
against the Escrow Agent.
4. Dispute Resolution. It is understood and agreed that should any
dispute arise with respect to the delivery, ownership, right of possession,
and/or disposition of the Vilpas Escrow Shares and/or the Trinity Escrow
Shares (collectively the "Escrow Shares"), or should any claim be made upon
any such Escrow Shares by a third party, the Escrow Agent upon receipt of
written notice of such dispute or claim by the parties hereto or by a third
party, is authorized and directed to retain in its possession without
liability to anyone, all or any of the Escrow Shares until such dispute
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shall have been settled either by the mutual agreement of the parties
involved or by a final order, decree judgment of a court in the United
States of America or an arbitrator, the time for perfection of an appeal of
such order, decree judgment or arbitration award having expired. The
Escrow Agent may, but shall be under no duty whatsoever to, institute or
defend any legal proceedings which relate to the Escrow Shares. The Escrow
Agent shall have the right to retain counsel of its choice in case it
becomes involved in any disagreement, dispute or litigation related to the
Escrow Agreement, the Escrow Shares, or otherwise determines that it is
necessary or desirable to consult counsel, and the reasonable fees and
expenses of such counsel shall be reimbursed to the Escrow Agent as
provided in Section 3 hereof.
5. Consent to Jurisdiction and Service. Trinity, the Shareholder
Representative and the Shareholders hereby absolutely and irrevocably
consent and submit to the jurisdiction of the courts of the State of
California and of any Federal court located in said state in connection
with any actions or proceedings brought against any of them by the Escrow
Agent arising out of or relating to this Escrow Agreement. In any such
action or proceeding, the parties hereby absolutely and irrevocably waive
personal service of any summons, complaint, declaration or other process
and hereby absolutely and irrevocably agree that the service thereof may be
made by certified or registered first-class mail directed to Trinity, the
Shareholder Representative and/or the Shareholders, as the case may be, at
their respective addresses in accordance with Section 7 hereof.
6. Force Majeure. Neither Trinity, Shareholder Representative, the
Shareholders nor the Escrow Agent shall be responsible for delays or
failures in performance resulting from acts beyond its control. Such acts
shall include but not be limited to acts of God, strikes, lockouts, riots,
acts of war, epidemics, governmental regulations superimposed after the
fact, fire, communication line failures, power failures, computer viruses,
earthquakes or other disasters.
7. Notices. Any notice permitted or required hereunder shall be
deemed to have been duly given if delivered personally, or if telecopied to
the parties at their fax number set forth below (with receipt confirmed by
telephone) or if mailed certified or registered mail, postage prepaid, to
their address set forth below or to such other address as they may
hereafter designate.
If to Trinity:
Trinity Learning Corporation
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: ▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
If to Shareholder Representative:
Jan-▇▇▇▇ ▇▇▇▇▇▇▇
▇/▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇, ▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
Telephone: ▇▇▇ ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇ ▇▇▇▇ ▇▇▇▇
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If to Shareholders:
To the address set forth in the Purchase Agreement
If to the Escrow Agent:
Heritage Bank of Commerce
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chloe Flowers, SVP/Escrow Department Manager
Escrow Number 161301
8. Binding Effect. This Escrow Agreement shall be binding upon the
respective parties hereto and their heirs, executors, successors and
assigns.
9. Modifications. This Escrow Agreement may not be altered or
modified without the express written consent of the parties hereto. No
course of conduct shall constitute a waiver of any of the terms and
conditions of this Escrow Agreement, unless such waiver is specified in
writing, and then only to the extent so specified. A waiver of any of the
terms and conditions of this Escrow Agreement on one occasion shall not
constitute a waiver of the other terms of this Escrow Agreement, or of such
terms and conditions on any other occasion.
10. Governing Law. This Escrow Agreement shall be governed by and
construed under the laws of the State of California without regard to
principles of conflicts of law.
11. Judgments. The Escrow Agent is hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court. In case
the Escrow Agent obeys or complies with any such order, judgment or decree
of any court, the Escrow Agent shall not be liable to any of the parties
hereto or to any other person, firm, corporation or entity by reason of
such compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
12. Counterparts. This Escrow Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
13. Termination of Escrow. This Escrow Agreement shall terminate and
the Escrow Agent shall have no further duties hereunder upon the
distribution of all of the Escrow Funds and Escrow Shares.
14. Agency of Shareholder Representative. Each Shareholder hereby
irrevocably appoints Shareholder Representative and his successors as the
agent of such Shareholder with respect to the Vilpas Escrow Shares and the
Trinity Escrow Shares or as otherwise provided in this Escrow Agreement and
all of such Shareholder's rights and obligations relating thereto in
accordance with the terms of this Agreement. A majority of the
Shareholders may replace the current Shareholder Representative provided
such replacement Shareholder Representative executes a copy of this Escrow
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
TRINITY LEARNING CORPORATION,
a Utah corporation
By: _____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Its: Chief Executive Officer
SHAREHOLDER REPRESENTATIVE:
_________________________________________
Jan-▇▇▇▇ ▇▇▇▇▇▇▇
SHAREHOLDERS:
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
Heritage Bank of Commerce,
a California corporation,
as Escrow Agent
By:_______________________________________
Its:______________________________________
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ANNEX A TO ESCROW AGREEMENT
SHAREHOLDERS
Inspire AS
EcoSystems AS
Nordic Enterprises AS
Corpco AS / ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, Baerum
Jan-▇▇▇▇ ▇▇▇▇▇▇▇
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ANNEX B TO ESCROW AGREEMENT
Fee Schedule
Initial Set-Up Fee $1,400
Annual Maintenance
Half of fees shall be paid by Trinity and the other half shall be paid by
the Shareholders and not deducted from the Escrow Funds.
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