Private M & A - Survival Clause and Placeholder Claims - Potential (but not Actual) Claims

See IMx Information Management Solutions v. Multiplan, C.A. No. 7786-VCP (Del. Ch. Ct. March 27, 2014); Albert A. Gore v. Al Jazeera America Holdings, C. A. No. 10040-VCG (Del. Ch. Ct. Aug. 13, 2015); and  Prairie Capital III, LP. v. Double E Holding Corp., C. A. No. 10127-VCL (Del. Ch. Ct. Nov. 24, 2015).  A placeholder claim, as defined by the Gore case, is a demand for indemnification that does not arise from a hard third-party demand made during the escrow period.

Three takeaways:

One, if you want the ability to bring a placeholder claim, then say so and say it clearly. For example, try drafting, "a representation survives to the extent a timely claim notice is given in good faith based on facts reasonably expected to establish a valid claim," or "indemnifiable losses include those that buyer expects in good faith that it could reasonably be expected to incur."

Two as always, words matter. Words like "may incur" really do mean something different from "will incur," especially in the placeholder claim context.

Three, take care to clearly define what constitutes an indemnifiable claim, and especially allow for the possibility of third-party claims when the survival clock is ticking or when subsequent similar claims are about to go on the rampage. For example, instead of the plain-vanilla indemnification for a breach of representation, how about seller indemnifying for any third-party claims that, if true, would constitute a breach of the representation? Or simply language like, "Seller indemnifies for all third-party claims"?