1. The covenants clause is composed of sub-clauses such as negative pledge, pari passu, financial covenant and so on.

2. Negative Pledge Clause A negative covenant in an indenture, it states that the corporation will not pledge any of its assets if doing so would give the lenders less security.

3. This clause is the combination of negative pledge and pari passu clause. It insures that the lender has the priority second to no other secured creditor and non-secured creditor to gather repayment.