Springing Covenants Sample Clauses

A Springing Covenants clause establishes certain obligations or restrictions that only become effective upon the occurrence of specific triggering events. For example, a borrower in a loan agreement may not be required to maintain a particular financial ratio unless their debt exceeds a set threshold, at which point the covenant 'springs' into effect. This mechanism allows parties to tailor obligations to changing circumstances, ensuring that additional requirements are imposed only when certain risks materialize or conditions are met, thereby balancing flexibility with risk management.