Additional Covenants of Borrowers. Until payment or satisfaction in full of all Liabilities and termination of this Agreement, unless Borrowers obtain Agent's prior written consent (which consent will not be given without Requisite Lenders' prior written consent) waiving or modifying any of Borrowers' covenants hereunder in any specific instance, each Borrower agrees as follows: (a) such Borrower shall at all times keep accurate and complete books, records and accounts with respect to all of such Borrower's business activities, in accordance with sound accounting practices and generally accepted accounting principles consistently applied, and shall keep such books, records and accounts, and any copies thereof, only at the addresses indicated for such purpose on Exhibit B; (b) Intentionally omitted; (c) such Borrower shall promptly advise Agent in writing of any material adverse change in the business, assets or condition, financial or otherwise, of such Borrower, the occurrence of any Event of Default hereunder or the occurrence of any event which, if uncured, will become an Event of Default hereunder after notice or lapse of time (or both); (d) Agent, or any Persons designated by it (including without limitation any Lender that has notified Agent of its desire to accompany Agent), shall have the right, to call at such Borrower's places of business at any reasonable times, and, without hindrance or delay, to inspect the Collateral and to inspect, audit, check and make extracts from such Borrower's books, records, journals, orders, receipts and any correspondence and other data relating to such Borrower's business, the Collateral or any transactions between the parties hereto, and shall have the right to make such verification concerning such Borrower's business as Agent may consider reasonable under the circumstances (without limiting the foregoing, Agent, through its officers, employees or agents shall have the right, at any time and from time to time request. Each Borrower authorizes Agent to discuss the affairs, finances and business of such Borrower with any officers, employees or directors of such Borrower or with any Affiliate or the officers, employees or directors of any Affiliate, and to discuss the financial condition of such Borrower with such Borrower's independent public accountants. Any such discussions shall be without liability to Agent or to such Borrower's independent public accountants. Each Borrower shall pay to Agent all customary fees and out-of-pocket expenses incurred by Agent in the exercise of its rights hereunder including, but not limited to, an auditing fee of Six Hundred Dollars ($600) per auditor per day, and all of such fees and expenses shall constitute Loans hereunder, payable on demand and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder; (e) such Borrower shall: (i) keep the Collateral of such Borrower properly housed and shall keep the Collateral insured for the full insurable value thereof against loss or damage by fire, theft, explosion, sprinklers, collision (in the case of motor vehicles) and such other risks as are customarily insured against by Persons engaged in businesses similar to that of such Borrower with such companies, in such amounts and under policies in such form as shall be reasonably satisfactory to Agent. Original (or certified) copies of such policies of insurance have been or shall be delivered to Agent within fifteen (15) days after the date hereof, together with evidence of payment of all premiums therefor, and shall contain an endorsement, in form and substance reasonably acceptable to Agent, showing loss under such insurance policies payable to Agent. Such endorsement, or an independent instrument furnished to Agent, shall provide that the insurance company shall give Agent at least thirty (30) days written notice before any such policy of insurance is altered or canceled and that no act, whether willful or negligent, or default of such Borrower or any other Person shall affect the right of Agent to recover under such policy of insurance in case of loss or damage. Each Borrower hereby directs all insurers under such policies of insurance to pay all proceeds payable thereunder directly to Agent. Each Borrower irrevocably, makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent) as such Borrower's true and lawful attorney (and agent-in-fact) for the purpose of making, settling and adjusting claims under such policies of insurance, endorsing the name of such Borrower on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and making all determinations and decisions with respect to such policies of insurance; provided, that so long as no Event of Default shall have occurred, such Borrower shall be entitled to make, settle and adjust claims under its policies of insurance if the total amount of any such claims is less than One Hundred Thousand Dollars ($100,000) in the aggregate for all claims of such Borrower during the immediately preceding twelve (12) month period; and Agent agrees that if it receives proceeds of insurance with respect to any loss of or damage to Collateral in an amount less than or equal to One Hundred Thousand Dollars ($100,000) in the aggregate for all claims of such Borrower during the immediately preceding twelve (12) month period, it will, at such Borrower's request, promptly make such proceeds available to such Borrower for repair or replacement of the lost or damaged Collateral of such Borrower. (ii) maintain, at its expense, such public liability and third party property damage insurance as is customary for Persons engaged in businesses similar to that of such Borrower with such companies and in such amounts, with such deductibles and under policies in such form as shall be reasonably satisfactory to Agent and original (or certified) copies of such policies have been or shall be delivered to Agent within fifteen (15) days after the date hereof, together with evidence of payment of all premiums therefor; each such policy shall contain an endorsement showing Agent and Lenders as additional insured thereunder and providing that the insurance company shall give Agent at least thirty (30) days written notice before any such policy shall be altered or canceled. If such Borrower at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay any premium in whole or in part relating thereto, then Agent, without waiving or releasing any obligation or default by such Borrower hereunder, may (but shall be under no obligation to) obtain and maintain such policies of insurance and pay such premiums and take such other actions with respect thereto as Agent deems advisable. All sums disbursed by Agent in connection with any such actions, including, without limitation, court costs, expenses, other charges relating thereto and reasonable attorneys' fees, shall constitute Loans hereunder and shall be payable on demand by such Borrower to Agent and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder; (f) such Borrower shall not use the Collateral of such Borrower, or any part thereof, in any unlawful business or for any unlawful purpose or use or maintain any of the Collateral in any manner that does or could result in material damage to the environment or a violation of any applicable environmental laws, rules or regulations, shall keep the Collateral of such Borrower in good condition, repair and order; shall permit Agent to examine any of the Collateral at any reasonable time and wherever the Collateral may be located; shall not permit the Collateral of such Borrower, or any part thereof, to be levied upon under execution, attachment, distraint or other legal process, shall not sell, lease, grant a security Interest in or otherwise dispose of any of the Collateral of such Borrower except as expressly permitted by this Agreement; and shall not secrete or abandon any of the Collateral of such Borrower, or remove or permit removal of any of the Collateral of such Borrower from any of the locations listed on Exhibit B or in any written notice to Agent pursuant to Paragraph 10(b) hereof, except for the removal of Inventory sold in the ordinary course of such Borrower's business and the disposition of obsolete, defective or unnecessary Equipment of such Borrower, in each case as permitted herein; (g) all monies and other property obtained by such Borrower from Lenders pursuant to this Agreement will be used solely for business purposes of such Borrower; (h) such Borrower shall, at the request of Agent, indicate on its records concerning the Collateral a notation, in form satisfactory to Agent, of the security interest of Agent hereunder, and such Borrower shall not maintain duplicates or copies of such records at any address other than such Borrower's principal place of business set forth on the first page of this Agreement; (i) such Borrower shall file all required tax returns and pay all of its taxes when due, including, without limitation, taxes imposed by federal, state or municipal agencies, and shall cause any liens for taxes to be promptly released; provided, that such Borrower shall have the right to contest the payment of such taxes in good faith by appropriate proceedings so long as (i) the amount so contested is shown on such Borrower's financial statements, (ii) the contesting of any such payment does not give rise to a lien for taxes, (iii) such Borrower keeps on deposit with Agent (such deposit to be held without interest) or as a reserve against revolving Loans provided for herein, an amount of money which, in the sole judgment of Agent, is sufficient to pay such taxes and any interest or penalties that may accrue thereon, and (iv) if such Borrower fails to prosecute such contest with reasonable diligence, Agent may apply the money so deposited in payment of such taxes. If such Borrower falls to pay any such taxes and in the absence of any such contest by such Borrower, Agent may (but shall be under no obligation to) advance and pay any sums required to pay any such taxes and/or to secure the release of any lien therefor, and any sums so advanced by Agent shall constitute Loans hereunder, shall be payable by such Borrower to Agent on demand, and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder; (j) other than a guaranty by GDC of up to One Hundred Fifty Thousand ($150,000) of credit extended to Chicago Medical Equipment and Supply Co., such Borrower shall not assume, guarantee or endorse, or otherwise become liable in connection with, the obligations of any Person, except by endorsement of instruments for deposit or collection or similar transactions in the ordinary course of business; (k) such Borrower shall not enter into any merger or consolidation, or sell, lease or otherwise dispose of all or substantially all of its assets, or enter into any transaction outside the ordinary course of such Borrower's business, including, without limitation, any purchase, redemption or retirement of any shares of any class of its stock, and any issuance of any shares of, or warrants or other rights to receive or purchase any shares of, any class of its stock; except, (A) a Borrower shall be permitted, without the approval of Lenders, to acquire companies (whether by acquisition of stock or assets or by merger) so long as the following conditions are satisfied to the satisfaction of Agent: (i) the acquired company is an operating company that engages in a line of business substantially similar to the line of business of Borrowers and has annual sales of not more than Twenty Million Dollars ($20,000,000); (ii) the aggregate consideration (including without limitation cash purchase price, liabilities assumed (excluding trade payables and ordinary course accruals of expenses), deferred or financed purchase price and purchase price characterized as consulting agreements, non-competition
Appears in 1 contract
Additional Covenants of Borrowers. Until payment or satisfaction in full of all Liabilities and termination of this Agreement, unless Borrowers obtain Agent's the prior written consent (which consent will not be given without of the Requisite Lenders' prior written consent) Lenders waiving or modifying any of Borrowers' covenants hereunder in any specific instance, each Borrower agrees as follows:
(a) such each Borrower shall at all times keep accurate and complete books, records and accounts with respect to all of such Borrower's business activities, in accordance with sound accounting practices and generally accepted accounting principles consistently applied, and shall keep such books, records and accounts, and any copies thereof, only at the addresses indicated for such purpose on Exhibit B;
(b) Intentionally omittedeach Borrower agrees to deliver to Agent and each Lender the following financial information, all of which shall be prepared in accordance with generally accepted accounting principles consistently applied: (i) no later than twenty (20) days after each calendar month, copies of internally prepared financial statements, including, without limitation, balance sheets and statements of income, retained earnings and cash flow of Borrowers, each on a consolidated and consolidating basis, certified by the Chief Financial Officer of each Borrower; (ii) no later than thirty (30) days after the end of each of the first three quarters of each Borrower's fiscal year a balance sheet, operating statement and reconciliation of surplus of each Borrower, each on a consolidated and consolidating basis, which quarterly financial statements may be unaudited but shall be certified by the Chief Financial Officer of each Borrower; and (iii) no later than seventy-five (75) days after the end of each of each Borrower's fiscal years, annual financial statements on a consolidated and consolidating basis with an unqualified opinion by independent certified public accountants selected by each Borrower and reasonably satisfactory to Agent, which financial statements shall be accompanied by a letter from such accountants acknowledging that they are aware that a primary intent of such Borrower in obtaining such financial statements is to influence Agent and Lenders and that Agent and Lenders are relying upon such financial statements in connection with the exercise of its rights hereunder and copies of any management letters sent to the Borrower by such accountants;
(c) such each Borrower shall promptly advise Agent and each Lender in writing of any material adverse change in the business, assets or condition, financial or otherwise, of such Borrower, the occurrence of any Event of Default hereunder or the occurrence of any event which, if uncured, will become an Event of Default hereunder after notice or lapse of time (or both);
(d) Agent, or any Persons designated by it (including without limitation any Lender that has notified Agent of its desire to accompany Agent)it, shall have the right, at any time, to call at such each Borrower's places of business at any reasonable times, and, without hindrance or delay, to inspect the Collateral and to inspect, audit, check and make extracts from such Borrower's books, records, journals, orders, receipts and any correspondence and other data relating to such Borrower's business, the Collateral or any transactions between the parties hereto, and shall have the right to make such verification concerning such Borrower's business as Agent may consider reasonable under the circumstances (without limiting the foregoingcircumstances. Any Lender may, at such Lender's expense, accompany Agent in any such inspection. Each Borrower shall furnish to Agent such information relevant to Agent, through its officers, employees 's or agents any Lender's rights under this Agreement as Agent shall have the right, at any time and from time to time request. Each Borrower authorizes Agent to discuss the affairs, finances and business of such Borrower with any officers, employees or directors of such Borrower or with any Affiliate or the officers, employees or directors of any Affiliate, and to discuss the financial condition of such Borrower with such Borrower's independent public accountants. Any such discussions shall be without liability to Agent Agent, any Lender or to such Borrower's independent public accountants. Each Borrower shall Borrowers shall, jointly and severally, pay to Agent all customary fees and out-of-pocket expenses incurred by Agent in the exercise of its rights hereunder including, but not limited to, an auditing fee of Six Hundred Dollars ($600) per auditor per dayhereunder, and all of such fees and expenses shall constitute Loans hereunder, shall be payable on demand and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder;
(e) such each Borrower shall:
(i) keep the Collateral of such Borrower properly housed and shall keep the Collateral insured for the full insurable value thereof against loss or damage by fire, theft, explosion, sprinklers, collision (in the case of motor vehicles) and such other risks as are customarily insured against by Persons engaged in businesses similar to that of such Borrower Borrower, with such companies, in such amounts amounts, with such deductibles and under policies in such form as shall be reasonably satisfactory to Agent. Original (or certified) copies of such policies of insurance have been or shall be delivered to Agent within fifteen ninety (1590) days after the date hereof, together with evidence of payment of all premiums therefor, and shall contain an endorsement, in form and substance reasonably acceptable to Agent, showing loss under such insurance policies payable to Agent. Such endorsement, or an independent instrument furnished to Agent, shall provide that the insurance company shall give Agent at least thirty (30) days days' written notice before any such policy of insurance is altered or canceled and that no act, whether willful or negligent, or default of such Borrower or any other Person shall affect the right of Agent to recover under such policy of insurance in case of loss or damage. In addition, each Borrower shall cause to be executed and delivered to Agent, for the benefit of Agent and Lenders, an assignment of proceeds of its business interruption insurance policies. Each Borrower hereby directs all insurers under such all policies of insurance to pay all proceeds payable thereunder directly to Agent, for the benefit of Agent and Lenders. Each Borrower irrevocably, makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent) as such Borrower's true and lawful attorney (and agent-in-fact) for the purpose of making, settling and adjusting claims under such policies of insurance, endorsing the name of such Borrower on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and making all determinations and decisions with respect to such policies of insurance; , provided, however, that so long as if no Event of Default shall have occurredoccurred and is continuing, such Borrower shall be entitled to Borrowers may make, settle and adjust claims under its policies of insurance if the total amount of any such claims is involving less than One Hundred Thousand Dollars ($100,000) 50,000 in the aggregate for all claims of such Borrower during the immediately preceding twelve (12) month periodwithout Agent's consent; and Agent agrees that if it receives proceeds of insurance with respect to any loss of or damage to Collateral in an amount less than or equal to One Hundred Thousand Dollars ($100,000) in the aggregate for all claims of such Borrower during the immediately preceding twelve (12) month period, it will, at such Borrower's request, promptly make such proceeds available to such Borrower for repair or replacement of the lost or damaged Collateral of such Borrower.and
(ii) maintain, at its expense, such public liability and third party property damage insurance as is customary for Persons engaged in businesses similar to that of such Borrower with such companies and in such amounts, with such deductibles and under policies in such form as shall be reasonably satisfactory to Agent and original (or certified) copies of such policies have been or shall be delivered to Agent within fifteen ninety (1590) days after the date hereof, together with evidence of payment of all premiums therefor; each such policy shall contain an endorsement showing Agent and Lenders each Lender as additional insured thereunder and providing that the insurance company shall give Agent at least thirty (30) days days' written notice before any such policy shall be altered or canceled. If such any Borrower at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay any premium in whole or in part relating thereto, then Agent, without waiving or releasing any obligation or default by such Borrower Borrowers hereunder, may (but shall be under no obligation to) obtain and maintain such policies of insurance and pay such premiums and take such other actions with respect thereto as Agent deems advisable. All sums disbursed by Agent in connection with any such actions, including, without limitation, court costs, expenses, other charges relating thereto and reasonable attorneys' fees, shall constitute Loans hereunder hereunder, and shall be payable on demand by such Borrower Borrowers to Agent and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder;
(f) such no Borrower shall not use the Collateral of such BorrowerCollateral, or any part thereof, in any unlawful business or for any unlawful purpose or use or maintain any of the Collateral in any manner that does or could result in material damage to the environment or a violation of any applicable environmental laws, rules or regulations, ; each Borrower shall keep the Collateral of such Borrower in good condition, repair and order, ordinary wear and tear excepted; shall permit Agent and any Lender accompanying Agent to examine any of the Collateral at any reasonable time and wherever the Collateral may be located; shall not permit the Collateral of such BorrowerCollateral, or any part thereof, to be levied upon under execution, attachment, distraint or other legal process, ; shall not sell, lease, grant a security Interest interest in or otherwise dispose of any of the Collateral of such Borrower except as expressly permitted by this Agreement; shall not settle or adjust any Account identified by a Borrower as an Eligible Account or with respect to which the Account Debtor is an Affiliate, without the consent of Agent, provided, that following the occurrence of an Event of Default, no Borrower shall settle or adjust any Account without the consent of Agent; and shall not secrete or abandon any of the Collateral of such BorrowerCollateral, or remove or permit removal of any of the Collateral of such Borrower from any of the locations listed on Exhibit B or in any written notice to Agent pursuant to Paragraph 10(bsubparagraph 11(b) hereof, except for the removal of Inventory sold in the ordinary course of such Borrower's business and the disposition of obsolete, defective or unnecessary Equipment of such Borrower, in each case as permitted herein;
(g) all monies and other property obtained by such each Borrower from Lenders Agent and/or any Lender pursuant to this Agreement will be used solely for business purposes of such Borrower;
(h) such each Borrower shall, at the request of Agent, indicate on its records concerning the Collateral a notation, in form satisfactory to Agent, of the security interest of Agent hereunder, and such Borrower shall not maintain duplicates or copies of such records at any address other than such Borrower's principal place of business set forth on the first page of this Agreement;
(i) such each Borrower shall file all required tax returns and pay all of its taxes when due, subject to any extensions granted by the applicable taxing authority, including, without limitation, taxes imposed by federal, state or municipal agencies, and shall cause any liens for taxes to be promptly released; provided, that such Borrower shall have the right to contest the payment of such taxes in good faith by appropriate proceedings so long as (i) the amount so contested is shown on such Borrower's financial statements, (ii) the contesting of any such payment does not give rise to a lien for taxes, (iii) such Borrower keeps on deposit with Agent (such deposit to be held without interest) or as a reserve against revolving Loans provided for herein, an amount of money which, in the sole judgment of Agent, is sufficient to pay such taxes and any interest or penalties that may accrue thereonthereon or such Borrower maintains adequate reserves on its balance sheet in accordance with generally accepted accounting principles, and (iv) if such Borrower fails to prosecute such contest with reasonable diligence, Agent may apply the money so deposited in payment of such taxes. If such any Borrower falls fails to pay any such taxes and in the absence of any such contest by such Borrower, Agent may (but shall be under no obligation to) advance and pay any sums required to pay any such taxes and/or to secure the release of any lien therefor, and any sums so advanced by Agent shall constitute Loans hereunder, shall be payable by such Borrower Borrowers to Agent on demand, and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder;
(j) other than a guaranty by GDC of up to One Hundred Fifty Thousand ($150,000) of credit extended to Chicago Medical Equipment and Supply Co., such no Borrower shall not assume, guarantee or endorse, or otherwise become liable in connection with, the obligations of any Person, except by endorsement of instruments for deposit or collection or similar transactions in the ordinary course of business;
(k) such no Borrower shall not (i) enter into any merger or consolidation, or consolidation (ii) sell, lease or otherwise dispose of any of its assets other than in the ordinary course of business, (iii) purchase all or substantially all of its assets, the assets of any Person or division of such Person or (iv) enter into any transaction outside the ordinary course of such Borrower's business, including, without limitation, any purchase, redemption or retirement of any shares of any class of its stockstock or any other equity interest, and any issuance of any shares of, or warrants or other rights to receive or purchase any shares of, any class of its stock; except, stock or any other equity interest;
(Al) a no Borrower shall be permitted, without the approval of Lenders, to acquire companies declare or pay any dividend or other distribution (whether in cash or in kind) on any class of its stock (if such Borrower is a corporation) or on account of any equity interest in such Borrower (if such Borrower is a partnership, limited liability company or other type of entity);
(m) no Borrower shall purchase or otherwise acquire, or contract to purchase or otherwise acquire, the obligations or stock of any Person, other than direct obligations of the United States;
(n) no Borrower shall amend its organizational documents or change its fiscal year unless such actions would not have an adverse effect on such Borrower's business, property, assets, operations or condition, financial or otherwise, as determined by acquisition Agent in its sole discretion, and Agent has received ten (10) days prior written notice of stock such amendment or assets change or by mergerenter into a new line of business materially different from Borrower's current business;
(o) so long Borrowers' Tangible Net Worth shall not at any time be less than "Minimum Tangible Net Worth;" Minimum Tangible Net Worth being defined for purposes of this subparagraph as $8,308,000 (with any appropriate adjustments based on preparation of final December 31, 1998 financial statements) at all times from December 31, 1998 through December 30, 1999. Thereafter, from December 31 of each year through December 30 of the following conditions are satisfied year (the "Measurement Period"), Minimum Tangible Net Worth shall be equal to the satisfaction greater of Agent: (i) Borrowers' Tangible Net Worth as shown on Borrowers' fiscal year end statement as of the acquired company is an operating company that engages in a line first day of business substantially similar to the line of business of Borrowers Measurement Period, and has annual sales of not more than Twenty Million Dollars ($20,000,000); (ii) the aggregate consideration Minimum Tangible Net Worth during the immediately preceding Measurement Period, plus $250,000. "Tangible Net Worth" being defined for purposes of this subparagraph as such Borrower's shareholders' equity (including without limitation cash purchase priceretained earnings) less the book value of all intangible assets as determined solely by Agent on a consistent basis plus the amount of any LIFO reserve plus the amount of any debt subordinated to Agent and Lenders, liabilities assumed (excluding trade payables and ordinary course accruals of expenses)all as determined under generally accepted accounting principles applied on a basis consistent with the financial statement dated July 31, deferred or financed purchase price and purchase price characterized 1998 except as consulting agreements, non-competitionset forth herein;
Appears in 1 contract
Sources: Loan and Security Agreement (Empire of Carolina Inc)