Low Margin Rate Clause Samples
The Low Margin Rate clause sets a minimum threshold for the margin rate that must be maintained in a financial or trading agreement. In practice, this clause requires parties to ensure that the margin rate—often the percentage of collateral or funds required to support open positions—does not fall below a specified level. For example, if the margin rate drops due to market fluctuations or changes in asset value, the party may be required to deposit additional funds to restore the margin to the agreed minimum. This clause's core function is to mitigate credit risk by ensuring sufficient collateral is always maintained, thereby protecting parties from potential losses due to insufficient margin coverage.
Low Margin Rate. If Gross Margins calculated on a consolidated basis for the Loan Parties fall within the following ranges measured at the end of each calendar month commencing January 31, 2018 for the six month fiscal period comprised of such calendar month and the immediately preceding five calendar months, interest on the principal amount of the Obligations payable pursuant to Section 4.1 will be 14% per annum (the “Low Margin Rate”) until such time as Gross Margins equal or exceed the high end of each range:
(a) more than US $5,850,000 but less than US $6,500,000 from the Closing Date to June 30, 2018;
(b) more than US $6,300,000 but less than US $ $7,000,000 from July 1, 2018 to December 31, 2018;
(c) more than US $6,750,000 but less than US $7,500,000 from January 1, 2019 to December 31, 2019; and
(d) more than US $7,650,000 but less than US $8.500.000 from January 1, 2020 and for each calendar month thereafter.
Low Margin Rate. If, as of the last of any calendar month occurring during the periods set forth below, gross margins calculated on a consolidated basis for Borrower and its Subsidiaries for the six consecutive month period ending on such day, fall within the ranges set forth below for such periods, all outstanding Obligations shall immediately, without any further action by Lender, accrue interest at an additional rate equal to the Low Margin Rate applicable to such Obligation during the following calendar month (except to the extent that the Default Rate is in effect):
(a) more than $5,850,000 but less than $6,500,000 from the Sixth Amendment Effective Date through June 30, 2018;
(b) more than $6,300,000 but less than $7,000,000 from July 1, 2018 through December 31, 2018;
(c) more than $6,750,000 but less than $7,500,000 from January 1, 2019 through December 31, 2019; and
(d) more than $7,650,000 but less than $8,500,000 from and after January 1, 2020.