asset acquisitions - Jackson Walker LLP

Such a provision may be appropriate if the buyer expects to incur substantial expenses beforethe buyer’s right to indemnification has been established, and also lessens the seller’sincentive to dispute the claim for purposes of delay.If the acquisition agreement contains post-closing adjustment mechanisms, the sellershould ensure that the indemnification provisions do not require the seller and theshareholders to compensate the buyer for matters already rectified in the post-closingadjustment process. This can be done by providing that the damages subject toindemnification shall be reduced by the amount of any corresponding post-closing purchaseprice reduction.Generally, indemnification is not available for claims made that later prove to begroundless. Thus, the buyer could incur substantial expenses in investigating and litigating aclaim without being able to obtain indemnification. In this respect, the indemnificationprovisions of the Model Agreement, and most acquisition agreements, provide lessprotection than indemnities given in other situations such as securities underwritingagreements.One method of providing additional, if desired, protection for the buyer would be toinsert “defend,” immediately before “indemnify” in the first line of Section 11.2. Someattorneys would also include any allegation, for example, of a breach of a representation as abasis for invoking the seller’s indemnification obligations. Note the use of “alleged” inSection 11.2(d). “Defend” has not been included in the first line of Section 11.2 for severalreasons: (i) Sections 11.2, 11.3 and 11.4 address the monetary allocation of risk; (ii) Section11.9 deals specifically with the procedures for handling the defense of Third Party Claims;and (iii) perhaps most importantly, the buyer does not always want the seller to beresponsible for the actual defense of a third party claim, as distinguished from the issue ofwho bears the cost of defense. Note that Section 11.10 provides that a claim forindemnification not involving a third party claim must be paid promptly by the party fromwhom indemnification is sought.11.3 INDEMNIFICATION AND REIMBURSEMENT BY SELLER — ENVIRONMENTALMATTERSIn addition to the other indemnification provisions in this Article 11, Seller and eachShareholder, jointly and severally, will indemnify and hold harmless Buyer and the other BuyerIndemnified Persons, and will reimburse Buyer and the other Buyer Indemnified Persons, for anyDamages (including costs of cleanup, containment, or other remediation) arising from or inconnection with:(a) any Environmental, Health and Safety Liabilities arising out of or relating to: (i) theownership or operation by any Person at any time on or prior to the Closing Date of any ofthe Facilities, Assets, or the business of Seller, or (ii) any Hazardous Materials or othercontaminants that were present on the Facilities or Assets at any time on or prior to theClosing Date; or(b) any bodily injury (including illness, disability and death, and regardless of when anysuch bodily injury occurred, was incurred, or manifested itself), personal injury, propertydamage (including trespass, nuisance, wrongful eviction, and deprivation of the use of realproperty), or other damage of or to any Person or any Assets in any way arising from or3148166v1- 161 -