Baskets and thresholds Clause Samples
The "Baskets and thresholds" clause sets minimum limits on the amount or value of claims that can be made under a contract before a party is liable for damages. In practice, a threshold (or deductible) requires that losses must exceed a certain amount before any compensation is owed, while a basket aggregates smaller claims until they collectively surpass the threshold. This mechanism prevents parties from being burdened by numerous minor claims and ensures that only significant losses trigger liability, thereby allocating risk more efficiently and reducing administrative burdens.
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Baskets and thresholds. (a) Any amounts incurred or paid on the basis of any basket, test or permission set by reference to a percentage of Consolidated EBITDA shall (provided that such amounts are, at the time of incurrence or payment, duly and properly incurred or paid in accordance with the relevant basket, test or permission) continue to be treated as duly and properly incurred or paid and shall not trigger a Default notwithstanding any subsequent decrease in such basket, test or permission by operation of the calculation of such basket, test or permission.
(b) Subject, in the case of Indebtedness, to paragraph 3.4 of Schedule 14 (Restrictive Covenants), in the event that any Permitted Debt, Permitted Payment, Permitted Lien, Permitted Investment or other investment meets the criteria of more than one of the baskets or exceptions set out in this Agreement, the Company, in its sole discretion, will classify and may from time to time reclassify that amount or transaction to a particular basket or exception and will only be required to include that amount or transaction in one of those baskets or exceptions (and, for the avoidance of doubt, an amount or transaction may at the option of the Company be split between different baskets or exceptions) provided that at the time of such reclassification, the relevant member of the Group would be permitted to incur such indebtedness, make such investor payment, grant such security or enter into such acquisition or other investment under such exception.
(c) If any basket or threshold is exceeded as a result of fluctuations in such basket or threshold (including due to fluctuations in Consolidated EBITDA of the Group or the relevant target company) or fluctuations in exchange rates or currency values subsequent to such date of determination and at or prior to the consummation of the relevant transaction, such baskets or thresholds will not be deemed to have been exceeded as a result of such fluctuations solely for purposes of determining whether transactions are permitted hereunder.