EXHIBIT 2.3
EXECUTION COPY
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT dated as of the 23rd day of June, 2003
A M O N G:
A. Xxxxx XxXxxxxx, an individual resident in the City of Toronto
("ABM")
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1234512 ONTARIO INC., a corporation incorporated under the laws of
Ontario
("1234512")
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GOLCONDA INC., a company managed and controlled in the United Kingdom
("Golconda")
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CDI EDUCATION CORPORATION, a corporation incorporated under the laws of
Ontario
("Company")
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CORINTHIAN COLLEGES, INC, a corporation incorporated under the laws of
Delaware
("Parent")
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CORINTHIAN CANADA ACQUISITION INC., a corporation incorporated under
the laws of Ontario
("Offeror")
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WHEREAS ABM, 1234512, 2020584 Ontario Limited ("2020584"), Parent and
the Offeror have entered into a lock-up agreement dated the date hereof (the
"Lock-up Agreement");
AND WHEREAS the shareholders of 2020584 wish elect the Holdco
Alternative as defined in such Lock-Up Agreement in respect of the Subject
Shares held by Holdco so as to sell all of the shares of Holdco instead of the
Subject Shares;
AND WHEREAS, ABM, 1234512, and Golconda have agreed to provide an
indemnity in favour of Parent, the Offeror and the Company regarding (i) the
truth and accuracy of the representations and warranties of ABM, 1234512 and
2020584 set forth in the Lock-up Agreement; (ii) the theoretical exposure of the
Company to United States and/or United Kingdom taxation; and (iii) the
theoretical risk that the Company will be held to be jointly and severally
liable for any Canadian tax liability of the Barynia Trust ("The Barynia
Trust");
NOW THEREFORE WITNESSETH THAT in consideration of the premises and
covenants herein contained and other good and valuable consideration, the
receipt and adequacy of which consideration is hereby acknowledged, the parties
hereto agree as follows:
ARTICLE 1
INTERPRETATION AND DEFINITIONS
1.1 In this Agreement, capitalized terms not defined herein shall have the
meaning ascribed thereto in the Lock-up Agreement.
1.2 All dollar amounts referred to in this Agreement are expressed in
Canadian dollars.
ARTICLE 2
INDEMNITY
2.1 Subject to sections 2.2, 2.3 and 2.5 hereof, each of ABM, 1234512 and
Golconda (collectively, the "Indemnifying Parties" and each an
"Indemnifying Party") hereby jointly and severally covenants and
agrees, to pay, satisfy, discharge, observe, perform, fulfil, indemnify
and save harmless Parent, the Offeror and the Company and their
respective directors, officers, agents, employees and shareholders
(collectively, the "Indemnified Parties" and each an "Indemnified
Party") from and against the amount of (i) any claim, demand, action,
cause of action, demand, loss, cost, liability or expense (including,
without limitation, reasonable professional fees and all costs incurred
in
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investigating or pursuing any of the foregoing or any proceeding
relating to the foregoing) (a "Claim") which may be made or brought
against the Indemnified Parties or which the Indemnified Parties may
suffer or incur, directly or indirectly, as a result of or in
connection with:
(a) any incorrectness in or breach of any representation or
warranty of ABM, 1234512 and 2020584 contained in the Lock-up
Agreement;
(b) any incorrectness in or breach of the representation and
warranty set out in Section 3.1(b) of this Agreement or any
Canadian tax liability or Canadian tax obligation of The
Barynia Trust for which the Company becomes responsible
(including, without limitation, any joint and several Canadian
tax liability attributed to the Company); and
(c) any tax liability or obligation of the Company or any of its
Subsidiaries, whenever arising, as a result of the activities
of the Company or one or more of its Subsidiaries in the
United States and/or the United Kingdom prior to the Expiry
Time, net of the amount of any actual reduction in Canadian
tax payable in the period in question as a direct result of
foreign tax credits that the Company and/or its Subsidiaries
are able to claim in respect of the tax liability or
obligation for which an indemnity payment is made by the
Sellers under this Subsection 2.1 (c).
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2.2 The obligation of indemnification set out in subsection 2.1(a) hereof
shall be subject to (i) the limitations contained in Section 4.2 of the
Lock-up Agreement respecting the survival of the representations and
warranties; (ii) the limitation that the Indemnifying Parties shall not
be required to pay any amount until the aggregate of the Claims made
under subsection 2.1(a) hereof exceeds $500,000; and (iii) the
limitation that the aggregate of all amounts that the Indemnifying
Parties shall be required to pay in respect of all Claims made pursuant
to Subsection 2.1(a) hereof and Subsection 2.1(c) hereof above the
respective limits contained in Section 2.2 and Section 2.3 shall be
limited to a maximum of the lesser of (A) $5,161,840.02, or (B)
fifty-five percent (55%) of any losses, costs, damages and liabilities
incurred by Parent and the Offeror.
2.3 The obligation of indemnification set out in subsection 2.1(c) hereof
shall be subject to (i) the limitation that the Indemnifying Parties
shall not be required to pay any amount until the aggregate of such
Claims exceeds $1.8 million, and (ii) the limitation that the aggregate
of all amounts that the Indemnifying Parties shall be required to pay
in respect of all Claims made pursuant to Subsection 2.1(a) hereof and
Subsection 2.1(c) hereof above the respective limits contained in
Section 2.2 and Section 2.3 shall be limited to a maximum of the lesser
of (A) $5,161,840.02, or (B) fifty-five percent (55%) of any losses,
costs, damages and liabilities incurred by Parent and the Offeror.
2.4 For greater certainty, the limitations set out in Section 2.2 and
Section 2.3 hereof are not applicable with respect to the obligation of
indemnification set out in subsection 2.1(b) above.
2.5 (a) The Indemnified Parties shall notify the Indemnifying Parties
of any Claims which are covered by the indemnities set forth
in section 2.1 hereof within 30 days of the date on which the
Indemnified Parties become aware that they may be liable in
respect of any such Claims, provided that in the event of a
failure to give such notice, such failure shall not preclude
the Indemnified Parties from seeking and obtaining
indemnification; provided, however, that the indemnities in
section 2.1 hereof shall not extend to any additional amount
of any Claim arising directly from the failure of the
Indemnified Parties to give such notice on a timely basis. If
any Claim is of a nature such that the Indemnified Parties are
required by
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applicable law to make a payment to any person (a "Third
Party") with respect to the Claim before the completion of
settlement negotiations or related legal proceedings, the
Indemnified Parties may make such payment and the Indemnifying
Parties shall, forthwith after demand by the Indemnified
Parties, reimburse the Indemnified Parties for such payment.
If the amount of any liability of the Indemnified Parties
under the Claim in respect of which such payment was made, as
finally determined, is less than the amount that was paid by
the Indemnifying Parties to the Indemnified Parties, the
Indemnified Parties shall, forthwith after receipt of the
difference from the Third Party, pay the amount of such
difference to the Indemnifying Parties.
(b) Subject to Subsection 2.5(c), the Indemnifying Party shall
have the right, but not the obligation, to assume the defence
of any Claim in any jurisdiction with legal counsel of
reputable standing in order to protect the rights and interest
of the Indemnified Parties; provided that (i) the Indemnifying
Parties acknowledge in writing their obligation to indemnify
the Indemnified Parties in accordance with this Agreement in
respect of that Claim; (ii) the Indemnifying Party shall
require the consent of the Indemnified Parties to the choice
of legal counsel in connection with the Claim, which consent
shall not be unreasonably withheld or delayed; (iii) without
prejudice to the rights of the Indemnified Parties to retain
counsel and to participate in the negotiation, settlement or
defence of such Claim; and (iv) the Indemnifying Parties shall
not settle any such Claim without the written consent of the
Indemnified Parties, which consent shall not be unreasonably
withheld or delayed. The Indemnifying Party and the
Indemnified Parties shall make all reasonable efforts to
co-ordinate their course of action in connection with the
defence of such Claim. If the Indemnifying Party fails to
assume or ceases the defence of the Claim, the Indemnified
Parties will have the right to undertake, at the expense of
the Indemnifying Party, the defence, compromise or settlement
of the Claim on behalf and for the account and risk of the
Indemnifying Party. Notwithstanding the foregoing, in the
event that both the Indemnified Parties and the Indemnifying
Parties are defendants to the same Third Party Claim, and in
the opinion of reputable counsel there exists a potential
conflict of interest between such parties due to differing
defences, rights or otherwise then the Indemnified
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Parties are entitled to appoint their own counsel. The costs
and the expenses sustained by the Indemnified Parties shall be
at the expense of the Indemnifying Party provided that the
Indemnifying Party shall only be liable for the costs and
expenses of one firm of separate counsel, in addition to the
costs of any local counsel that may be required.
(c) The Indemnified Parties shall have the right, at the election
of the Indemnified Parties, and at the expense of the
Indemnifying Parties to contest, settle or pay the amount
claimed and to retain counsel and other experts or advisors
selected by the Indemnified Parties (and acceptable to the
Indemnifying Party acting reasonably) in connection with
Claims under Subsection 2.1(a) or Subsection 2.1 (c) involving
(the "Third Party Claims"):
(i) the Company's customers, distributors, suppliers with
whom it has an ongoing business relationship;
(ii) a claim that may materially adversely affect the
Company's reputation;
(iii) any license or permit relating to the operation of
the Schools or the ongoing business of the Company;
(iv) title to the Subject Shares; or
(v) any matter where the Indemnified Parties are
responsible for in excess of 50% of the amount of the
Claim by virtue of the thresholds and limitations on
the indemnities provided hereunder,
provided, however, that the Indemnified Parties shall not settle any
such Third Party Claim without the written consent of the Indemnifying
Parties, which consent shall not be unreasonably withheld or delayed.
If the Indemnified Parties have not made an election to have the
Indemnifying Parties defend the matter within 30 days of providing
notice to the Indemnifying Parties, the Indemnified Parties shall be
deemed to have elected to assume control of the Third Party Claim. If
the Indemnified Parties elects to assume such control, the Indemnifying
Parties shall have the right, at the Indemnifying Parties sole expense,
to participate in the negotiation, settlement or defence of such Third
Party Claim.
2.6 Each Indemnifying Party hereby unconditionally and irrevocably
guarantees the indemnity obligations of each other Indemnifying Party
hereunder, and such guarantee
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shall survive the liquidation, winding-up or bankruptcy of an
Indemnifying Party (whether voluntary or involuntary).
2.7 Parent, the Offeror and the Company hereby acknowledge and agree that
absent intentional misrepresentation or fraud, the rights and remedies
of the Parent, the Offer and the Company pursuant to Section 2.1 hereof
shall be the sole and exclusive remedy of the Offeror, the Parent and
the Company with respect to any Claims arising out of any incorrectness
in or breach of any representation or warranty of ABM, 1234512 and
2020584 contained in the Lock-up Agreement.
2.8 ABM, 1234512 and Golconda covenant and agree that in connection with
the indemnity obligation set out in subsection 2.1(b) hereof, they will
within 5 days from the execution of this Agreement deliver to Parent,
the Company and the Offeror an escrow agreement substantially in the
form attached hereto at Schedule A.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Each Indemnifying Party hereby represents and warrants to the
Indemnified Parties that:
(a) each of them has good and sufficient power, authority and
right to provide the indemnities set forth in section 2.1
hereof and that the indemnities are valid and binding
indemnities enforceable by the Indemnified Parties against
each of them in accordance with their terms, except as may be
limited by bankruptcy, insolvency and other laws affecting the
enforcement of creditors' rights generally and subject to the
qualification that equitable remedies may only be granted in
the discretion of a court of competent jurisdiction; and
(b) Section 94 of the Income Tax Act (Canada), as it currently
reads, is not applicable to the Barynia Trust.
ARTICLE 4
MISCELLANEOUS
4.1 Parent and the Offeror covenant and agree that they will take such
reasonable actions from time to time as may be required or necessary to
permit ABM, at his sole cost and
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expense, to obtain such insurance as ABM may deem necessary or
advisable for his indemnity obligations under subsection 2.1(a) hereof.
4.2 Any notice given pursuant to this Agreement shall be in writing and
shall be sufficiently given or made if served personally, or
telecopied, in the case of:
(a) the Indemnified Parties, addressed as follows:
c/o Corinthian Colleges, Inc.
0 Xxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxx Xxx, XX
00000
Attention: Xxxx Xxxxxxxxx, Senior Vice President and General
Counsel
Facsimile: (000) 000-0000
with a copy to:
Osler, Xxxxxx & Xxxxxxxx XXX
Xxx 00, 0 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX X0X 0X0
Attention: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
(b) the Indemnifying Parties, other than Golconda, addressed as
follows:
c/o Xxxxx XxXxxxxx
00 Xxxx Xxxx Xxxxxxxx
Xxxxxxx, XX X0X 0X0
Attention: Xxxxx XxXxxxxx
Facsimile: (000) 000-0000
with a copy to:
Stikeman Elliott
0000 Xxxxxxxx Xxxxx Xxxx
000 Xxx Xxxxxx, X.X. Xxx 00
Xxxxxxx, XX X0X 0X0
Attention: Xxxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
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(c) Golconda, addressed as follows:
4 St. Anthony's
00 Xxxxxxxxxxxx Xxxx
Xxxxxxxxxx, XX
XX0X 0XX
or such other address as the relevant party may from time to time
advise by notice in writing given pursuant to this section 4.1. The
date of receipt of any such notice, request, consent, agreement or
approval if served personally shall be deemed to be the date of
delivery thereof or, if sent by facsimile, shall be deemed to be the
next business day following the date on which such communication was
sent.
4.3 With the exception of the indemnity set forth in subsection 2.1(a)
(which indemnity shall survive for a period of two years from the date
that the Offeror takes up and pays for the Subject Shares), the
indemnities in section 2.1 hereof shall survive for an unlimited period
of time after the date hereof, but subject to applicable laws. The
indemnities shall enure to the benefit of and be binding on the parties
to this Agreement and their respective successors, transferees and
assigns. Furthermore, for a period of three years from the take up and
payment by the Offeror of Common Shares under the Offer or if a
material Claim is then outstanding until such Claim is indemnified or
withdrawn, 1234512 and ABM shall not amalgamate, merge, enter into a
plan of arrangement or sell, distribute or otherwise dispose of, all or
substantially all of the assets of, wind-up, dissolve or otherwise
effect a fundamental change or other event in respect to 1234512 which
might have a material adverse effect on the value of the indemnities to
the Indemnified Parties, unless the other parties to such transaction
or event also assume the obligations of the Indemnifying Party to the
Parent, the Offeror and the Company that is so affected and provided
that prior to any such transaction or event, written notice thereof is
provided to the Indemnified Parties together with a copy of the
documentation evidencing the assumption of the obligations of the
Indemnifying Party hereunder.
Furthermore, for a period of three years from the take up and payment
by the Offeror of Common Shares under the Offer or if a material Claim
is then outstanding until such Claim is indemnified or withdrawn,
1234512, Golconda and ABM shall not amalgamate, merge, enter into a
plan of arrangement or sell, distribute or otherwise dispose of, all or
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substantially all of the assets of, wind-up, dissolve or otherwise
effect a fundamental change or other event in respect to Golconda which
(i) might have a material adverse effect on the value of the
indemnities to the Indemnified Parties, and (ii) which would result in
the direct or indirect distribution by Golconda to Xxxxx XxXxxxxx or
any entity controlled by her of all or any of the assets of Golconda,
unless Xxxxx XxXxxxxx assumes the obligations of Golconda hereunder
(but only to the extent of the assets received by her or entities
controlled by her from Golconda) to the Parent, the Offeror and the
Company that is so affected and provided that prior to any such
transaction or event, written notice thereof is provided to the
Indemnified Parties together with a copy of the documentation
evidencing the assumption of the obligations of the Indemnifying Party
hereunder.
Furthermore, for a period of three years from the take up and payment
by the Offeror of Common Shares under the Offer or if a material Claim
is then outstanding until such Claim is indemnified or withdrawn, ABM
shall not settle or transfer an amount of assets to a trust if such
settlement or transfer might have a material adverse effect on the
value of the indemnities provided hereunder to the Indemnified Parties,
unless the trust shall assume the obligations of ABM to the Parent, the
Offeror and the Company that is so affected and provided that prior to
any such sale or distribution, written notice thereof is provided to
the Indemnified Parties together with a copy of the documentation
evidencing the assumption of the obligations of the Indemnifying Party
hereunder.
The parties hereby agree that a violation of the covenants under this
Section 4.3 shall constitute a fraudulent conveyance.
4.4 This Agreement may be terminated by notice in writing (i) at any time
by mutual consent of the parties hereto, or (ii) by any Indemnifying
Party if the Lock-up Agreement is terminated.
4.4 This Agreement may not be assigned, in whole or in part, by any party
without the express written consent of the other parties hereto.
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4.5 This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and of Canada applicable therein.
4.6 Time shall be of the essence of this Agreement.
4.7 This Agreement may not be modified, amended, altered or supplemented,
except upon the execution and delivery of a written agreement executed
by each of the parties.
4.8 This Agreement may be signed in counterparts and by facsimile and each
of such counterparts shall constitute an original document and such
counterparts, taken together, shall constitute one and the same
instrument
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IN WITNESS WHEREOF the parties hereto have duly executed and delivered
this Agreement effective as of the day first above written.
SIGNED, SEALED & DELIVERED
In the presence of:
(illegible) /s/ A. Xxxxx XxXxxxxx
------------------------------------ ------------------------------------
Witness A. Xxxxx XxXxxxxx
12345212 ONTARIO INC.
By: /s/ A. Xxxxx XxXxxxxx
________________________________
By:
________________________________
GOLCONDA INC.
By: /s/ Xxxxx Xxxxx
________________________________
Xxxxx Xxxxx - Director
By:
________________________________
CDI EDUCATION CORPORATION
By: /s/ B Xxxxxxxx
________________________________
By: ________________________________
CORINTHIAN COLLEGES, INC.
By: /s/ Xxxxxx X. Xxxx
________________________________
Xxxxxx X. Xxxx,
Executive Vice President
By: ________________________________
CORINTHIAN CANADA ACQUISITION INC.
By: /s/ Xxxxx X. Xxxxx
________________________________
Xxxxx X. Xxxxx,
Senior Vice President
