- basket
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USAThis term has a number of meanings. In the context of:• Finance, business jargon used to refer to a maximum dollar amount for a specific exception to a covenant restriction in a financing agreement. For example, a loan agreement may limit the borrower's ability to incur debt but permit it to incur up to $5 million in letters of credit. The $5 million is referred to as a debt "basket".• Mergers and acquisitions, an indemnification concept limiting a party's obligation with respect to small claims. A basket provides that an indemnifying party does not have an obligation to indemnify until the amount of the indemnified party's losses exceed a certain agreed amount. Baskets can be structured in two different ways. They can be structured as a threshold so that once the agreed amount is reached, the indemnifying party is liable for the total amount of losses (sometimes referred to as a "tipping" or "dollar one" basket). Alternatively, they can be structured as a deductible so that once the agreed amount is reached, the indemnifying party is only liable for the amount of losses in excess of the agreed amount (sometimes referred to as an "excess liability" basket).
Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010.