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The Company shall have the option to reduce the required Coverage Ratio to 0.80 to 1.0 for two consecutive fiscal quarters by written notice to the Banks. If such notice is given, the Company shall be irrevocably obligated to pay to each Bank a quarterly fee equal to 0.25% of such Bank\u2019s Commitment for each quarter (with the amount of such Commitment being determined on an average basis if such Commitment has changed during such quarter), payable on each date on which financial statements for the two relevant fiscal quarters are required to be delivered; provided that (i) such option may be exercised no more than once between the Effective Date and the Termination Date and (ii) such fee shall be payable in respect of any quarter only if the Coverage Ratio for such quarter is less than 1.25 to 1.0.", "size": 6, "hash": "9dd8fe2e71ad1a9be58bfb7d7ea0e71f", "id": 8}, {"snippet_links": [{"key": "at-any-time", "type": "clause", "offset": [11, 22]}, {"key": "total-collateral-coverage-ratio", "type": "definition", "offset": [39, 70]}, {"key": "appraised-value", "type": "clause", "offset": [84, 99]}, {"key": "sum-of", "type": "clause", 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"type": "clause", "offset": [1430, 1444]}, {"key": "covered-by", "type": "definition", "offset": [1460, 1470]}, {"key": "loss-payee", "type": "clause", "offset": [1533, 1543]}, {"key": "first-lien-collateral-agent", "type": "definition", "offset": [1635, 1662]}, {"key": "the-insurer", "type": "definition", "offset": [1674, 1685]}, {"key": "relevant-claim", "type": "definition", "offset": [1719, 1733]}, {"key": "made-pursuant-to", "type": "clause", "offset": [1788, 1804]}, {"key": "net-cash-proceeds", "type": "clause", "offset": [1862, 1879]}, {"key": "equal-to", "type": "definition", "offset": [2013, 2021]}, {"key": "coverage-amount", "type": "clause", "offset": [2035, 2050]}, {"key": "by-the-borrower", "type": "clause", "offset": [2066, 2081]}, {"key": "in-good-faith", "type": "clause", "offset": [2082, 2095]}, {"key": "from-time-to-time", "type": "clause", "offset": [2108, 2125]}, {"key": "agreements-reached", "type": "clause", "offset": [2141, 2159]}, {"key": "the-applicable", "type": "clause", "offset": [2165, 2179]}, {"key": "received-by", "type": "definition", "offset": [2387, 2398]}, {"key": "days-after", "type": "definition", "offset": [2493, 2503]}, {"key": "provided-that", "type": "definition", "offset": [2605, 2618]}, {"key": "prior-to", "type": "definition", "offset": [2620, 2628]}, {"key": "this-clause", "type": "clause", "offset": [2646, 2657]}, {"key": "collateral-shall", "type": "definition", "offset": [2699, 2715]}, {"key": "the-total", "type": "clause", "offset": [2740, 2749]}, {"key": "it-is-understood-and-agreed-that", "type": "definition", "offset": [2763, 2795]}, {"key": "in-respect-of", "type": "clause", "offset": [2883, 2896]}, {"key": "at-the-time", "type": "clause", "offset": [2938, 2949]}, {"key": "default-shall", "type": "definition", "offset": [2983, 2996]}, {"key": "receipt-of", "type": "clause", "offset": [3114, 3124]}, {"key": "agent-shall", "type": "definition", "offset": [3165, 3176]}, {"key": "to-the-borrower", "type": 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21.0, "published": true}], "snippet": "(a) Permit at any time the ratio (the \u201cTotal Collateral Coverage Ratio\u201d) of (i) the Appraised Value of the Eligible Collateral to (ii) the sum of the aggregate outstanding principal amount of the First Lien Obligations plus the outstanding principal amount of the Second Lien Term Loans (such sum the \u201cTotal Obligations\u201d) to be less than 125%, provided, that if, (A) upon (i) delivery of an Appraisal Report or a Field Audit (as applicable) pursuant to Section 5.09 hereof or (2) the establishment of reserves pursuant to clause (B) of the definition of \u201cAppraised Value\u201d contained herein and (B) solely with respect to determining compliance with this Section as a result thereof, it is determined that the Borrower shall not be in compliance with this Section 6.06(a), the Borrower shall, within forty-five (45) days of the date of such Appraisal Report, Field Audit or establishment of reserves (as applicable), (I) designate Cure Collateral as additional Eligible Collateral in accordance with clause (d) of the definition of Eligible Collateral in Section 1.01 or (II) prepay the Loans, in each case in an amount sufficient to enable the Borrower to comply with this Section 6.06(a).\n(b) Notwithstanding anything to the contrary contained herein, if the Borrower shall fail at any time to be in compliance with Section 6.06(a) solely as a result of an Event of Loss (as defined in the Second Lien Aircraft Mortgage) or other Recovery Event, in each case, covered by insurance (pursuant to which the Collateral Agent is named as loss payee and with respect to which payments are to be delivered directly to the Collateral Agent or First Lien Collateral Agent) for which the insurer thereof has been notified of the relevant claim and has not challenged such coverage, any calculation made pursuant to Section 6.06(a) shall deem the Borrower to have received Net Cash Proceeds (and to have taken all steps necessary to designate, and to have designated, such Net Cash Proceeds as Cure Collateral) in an amount equal to the expected coverage amount (as determined by the Borrower in good faith and updated from time to time to reflect any agreements reached with the applicable insurer and net of any amounts required to be paid out of such proceeds and secured by a Lien permitted pursuant to Section 6.01(l)) until the earlier of (i) the date any such Net Cash Proceeds are actually received by the Collateral Agent or First Lien Collateral Agent, as applicable, (ii) the date that is 270 days after such Event of Loss or Recovery Event and (iii) the date on which any such insurer denies such claim; provided that, prior to giving effect to this clause (c), the Appraised Value of the Eligible Collateral shall be no less than 100% of the Total Obligations. It is understood and agreed that if the Collateral Agent should receive any Net Cash Proceeds directly from the insurer in respect of an Event of Loss or a Recovery Event and at the time of such receipt, (A) no Event of Default shall have occurred and be continuing and the Borrower is in compliance with Section 6.06(a) (without giving effect to the receipt of such Net Cash Proceeds), the Collateral Agent shall promptly cause such proceeds to be paid to the Borrower or the applicable Guarantor and (B) an Event of Default shall have occurred and be continuing or the Borrower fails to be in compliance with Section 6.06(a) (without giving effect to the receipt of such Net Cash Proceeds), the Collateral Agent shall promptly cause such proceeds to be deposited into the account of the Borrower or the applicable Guarantor maintained for such purpose with the Administrative Agent that is subject to a Full Control Agreement and such proceeds shall be applied or released from such account in accordance with Section 2.10(a).\n(c) At the Borrower\u2019s request, (i) the Lien on an operating asset constituting Collateral in connection with any financing permitted pursuant to (x) Section 6.03(l) secured by such operating asset or (y) Section 6.03(y) or (ii) the Lien on an asset constituting Eligible Collateral will be promptly released, provided, in each case, that the following conditions are satisfied or waived: (A) no Event of Default or event which upon notice or lapse of time or both would constitute an Event of Default shall have occurred and be continuing, (B) either (x) after giving effect to such release, the remaining Eligible Collateral shall continue to satisfy this Section 6.06, (y) the Borrower shall prepay the Loans in an amount required to comply with this Section 6.06, or (z) the Borrower shall deliver to the Collateral Agent Cure Collateral in an amount required to comply with this Section 6.06, and (C) the Borrower shall deliver an Officer\u2019s Certificate demonstrating compliance with this Section 6.06 following such release. In connection herewith, the Collateral Agent agrees to promptly provide any documents or releases reasonably requested by the Borrower to evidence such release.", "size": 6, "hash": "5dd8a9d9c703a122975d20479d0830b8", "id": 9}], "next_curs": "ClcSUWoVc35sYXdpbnNpZGVyY29udHJhY3RzcjMLEhZDbGF1c2VTbmlwcGV0R3JvdXBfdjU2Ihdjb3ZlcmFnZS1yYXRpbyMwMDAwMDAwYQyiAQJlbhgAIAA=", "clause": {"parents": [["financial-covenants", "Financial Covenants"], ["negative-covenants", "NEGATIVE COVENANTS"], ["covenants", "Covenants"], ["affirmative-covenants", "Affirmative Covenants"], ["covenants-of-the-borrower", "Covenants of the Borrower"]], "title": "Coverage Ratio", "children": [["events-of-default", "Events of Default"], ["", ""], ["collateral-coverage-ratio", "Collateral Coverage Ratio"], ["coverage-deficiency", "Coverage Deficiency"], ["borrowers-title-liens-and-encumbrances", "Borrower's Title; Liens and Encumbrances"]], "size": 425, "id": "coverage-ratio", "related": [["interest-coverage-ratio", "Interest Coverage Ratio", "Interest <strong>Coverage Ratio</strong>"], ["total-leverage-ratio", "Total Leverage Ratio", "Total Leverage Ratio"], ["leverage-ratios", "Leverage Ratios", "Leverage Ratios"], ["cash-flow-coverage-ratio", "Cash Flow Coverage Ratio", "Cash Flow <strong>Coverage Ratio</strong>"], ["cash-flow-leverage-ratio", "Cash Flow Leverage Ratio", "Cash Flow Leverage Ratio"]], "related_snippets": [], "updated": "2026-03-07T04:27:53+00:00", "also_ask": ["What are the most negotiable elements of the Coverage Ratio definition?", "Which financial metrics must be included to ensure the Coverage Ratio is robust and enforceable?", "What are the main risks if the Coverage Ratio is calculated using EBITDA versus cash flow?", "How do Coverage Ratio standards in this agreement compare to market norms or similar deals?", "What arguments have courts accepted or rejected regarding the enforceability of Coverage Ratio covenants?"], "drafting_tip": "Define the calculation method and required threshold for the coverage ratio to ensure clarity and enforceability; specify reporting frequency to facilitate monitoring.", "explanation": "The Coverage Ratio clause defines a financial metric that measures the ability of a borrower to meet certain financial obligations, typically by comparing cash flow or earnings to debt service requirements. In practice, this clause sets a minimum ratio\u2014such as EBITDA to interest payments\u2014that the borrower must maintain throughout the term of a loan or financing agreement. By establishing this requirement, the clause helps lenders monitor the borrower's financial health and provides an early warning mechanism if the borrower's ability to service debt deteriorates, thereby allocating risk and protecting the lender's interests."}, "json": true, "cursor": ""}}