asset acquisitions - Jackson Walker LLP

per week and number of days or weeks) the seller must devote to such services, and thecompensation, if any, they will receive for performing such services. Because sucharrangements are highly dependent on the circumstances of each acquisition, theseprovisions are not included in the Model Agreement.11. INDEMNIFICATION; REMEDIESCOMMENTArticle 11 of the Model Agreement provides for indemnification and other remedies.Generally, the buyer of a privately-held company seeks to impose not only on the seller, butalso on its shareholders, financial responsibility for breaches of representations andcovenants in the acquisition agreement and for other specified matters that may not be thesubject of representations. The conflict between the buyer’s desire for that protection and theshareholders’ desire not to have continuing responsibility for a business that they no longerown often results in intense negotiations. Thus, there is no such thing as a set of “standard”indemnification provisions. There is, however, a standard set of issues to be dealt with in theindemnification provisions of an acquisition agreement. Article 11 of the Model Agreementaddresses these issues in a way that favors the Buyer. The Comments identify areas in whichthe Seller may propose a different resolution.The organization of Article 11 of the Model Agreement is as follows. Section 11.1provides that the parties’ representations survive the closing and are thus available as thebasis for post-closing monetary remedies. It also attempts to negate defenses based onknowledge and implied waiver. Section 11.2 defines the matters for which the Seller and theShareholders will have post-closing monetary liability. It is not limited to matters arisingfrom inaccuracies in the Seller’s representations. Section 11.3 provides a specific monetaryremedy for environmental matters. It is included as an example of a provision that dealsspecifically with contingencies that may not be adequately covered by the more generalindemnification provisions. The types of contingencies that may be covered in this mannervary from transaction to transaction. Section 11.4 defines the matters for which the Buyerwill have post-closing monetary liability. In a cash acquisition, the scope of this provision isvery limited; indeed, it is often omitted entirely. Sections 11.5 and 11.6 set forth levels ofdamage for which post-closing monetary remedies are not available. Section 11.7 specifiesthe time periods during which post-closing monetary remedies may be sought. Section 11.8provides setoff rights against the promissory note delivered as part of the purchase price asan alternative to claims under the escrow. Section 11.9 provides procedures to be followedfor, and in the defense of, third party claims. Section 11.10 provides the procedure formatters not involving third party claims. Section 11.11 provides that the indemnificationprovided for in Article 11 is applicable notwithstanding the negligence of the indemnitee orthe strict liability imposed on the indemnitee.11.1 SURVIVALAll representations, warranties, covenants, and obligations in this Agreement, the DisclosureLetter, the supplements to the Disclosure Letter, the certificates delivered pursuant to Section 2.7,and any other certificate or document delivered pursuant to this Agreement shall survive the Closingand the consummation of the Contemplated Transactions, subject to Section 11.7. The right toindemnification, reimbursement, or other remedy based on such representations, warranties,covenants and obligations shall not be affected by any investigation (including any environmental3148166v1- 151 -