How to Track an Indemnity Basket After Close

How to track an indemnity basket is a claim-tally versus threshold ledger after the purchase agreement closes, not the survival clock and not the remaining escrow balance. For each deal, log the basket type (deductible, tipping, or partial), the threshold copied from the agreement, any per-claim mini-basket, each claim that counts toward the basket, the running aggregate, whether the basket is met, and remaining room under the threshold. Raziel's indemnification survival tracking page is how long each clock stays open. Raziel's escrow holdback tracking page is remaining dollars versus claims. This page is the arithmetic that decides whether a general claim pays at all.

This is not legal, tax, or investment advice. Raziel does not provide it. Copy the signed indemnity article. Do not invent a deductible.

What this indemnity-basket ledger is (and is not)

An indemnification basket is a minimum amount of losses that must be exceeded before the seller is required to indemnify the buyer on covered claims. Morse's September 25, 2024 market note, citing the ABA Private Target M&A Deal Points Study (transactions in full-year 2022 and the first quarter of 2023), describes three common structures. A deductible pays only the excess above the threshold. A tipping (first-dollar / dollar-one) basket pays from dollar one once the threshold is crossed. A partial tipping basket, the least common, pays only a stated proportion of the excess. Morse reports that most deals with survival provisions included a basket, a majority structured as a deductible (67%), and that all deals in that study that referenced representations and warranties insurance had deductible baskets. Most baskets were 1% or less of transaction value, with 56% at 0.5% or less. Those figures are a study snapshot. They are not your threshold.

Seven columns on one indemnity-basket row

Open one row per purchase agreement (child rows if general, fundamental, and special indemnities use different baskets). Attach the indemnity article.

• Basket type copied. Deductible, tipping / first-dollar, partial tipping, or none. Morse's deductible example: a $1 million deductible with $1.5 million of losses pays $500,000. Morse's tipping example: a $2 million tipping basket with $4 million of losses pays $4 million. Copy the signed type. Store silent if the deal used a no-basket structure.

• Threshold copied. Dollar amount or percentage of purchase price. Morse: most baskets in the cited ABA study were 1% or less of transaction value. Your number is the only number that belongs here.

• Mini-basket / de minimis (if any). A per-claim floor below which a claim does not count toward the basket. Copy it, or store none. Do not invent one from a blog default.

• Claims that count. Date, amount asserted, whether the claim is a general representation claim that runs against the basket, and whether a carve-out applies. Morse notes that baskets in the ABA study almost always applied to seller representation breaches, and only rarely to covenant breaches (6%) or other indemnification matters (6%). Fraud and several fundamental representation categories were commonly carved out of baskets in that study (fraud carve-out 90%). Copy your carve-outs.

• Running aggregate toward the basket. Sum of counting claims. Keep this separate from the indemnity cap and from the escrow balance.

• Basket met (yes / no). Whether the aggregate has crossed the threshold. On a deductible, payment is still only the excess. On a tipping basket, payment (subject to the cap and exclusions) includes amounts below the threshold once it is crossed.

• Remaining room / linked cap. Dollars still needed to meet the basket, and the general cap on a linked row. Morse: nearly all deals with survival provisions in the cited ABA study included a cap, and a substantial portion (86%) had caps below the purchase price. Insured deals in that study most often had caps of less than 1% of purchase price. Copy yours.

Copy the signed type, not a 67 percent market default

Do not paste "everyone uses a deductible at 0.5 percent." Insured deals in the ABA snapshot Morse cites were deductibles. Uninsured deals were not uniform. A survival-period row that merely names "basket type" is not a running tally. When a claim notice arrives, update this row first, then the survival clock, then the escrow reserve. Mixing those three is how a "we have escrow left" note hides a basket that has not been met.

When the ledger holds

The row holds if the seven cells are copied from the PDFs (or marked missing). It fails when you invent a deductible, treat escrow release as basket satisfaction, or fold a fundamental-rep carve-out into the general tally. Raziel's MOIC calculator is only honest if indemnity recoveries (and shortfalls) have a date and a label. Raziel does not interpret your indemnity article. Copy the seven columns.