Mulligan clause

Accor­din­gly, a first breach of finan­cial covenants does not yet lead to the far-reaching legal conse­quen­ces of an event of default. Rather, the borrower is gran­ted a grace period in which compli­ance with the covenants in the subse­quent period will cure the breach. With other Words: a loan agree­ment viola­tion under the mulligan clause occurs only if the borrower has viola­ted the finan­cial covenants for two conse­cu­tive test periods.