Inventory Covenants With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Agent, keeping correct and accurate records itemizing and describing the kind, type, quality and quantity of such Borrower’s or Guarantor’s Inventory, such Borrower’s or Guarantor’s cost therefor and daily withdrawals therefrom and additions thereto; (b) each Borrower and Guarantor shall conduct a physical count of its Inventory either through periodic cycle counts or wall to wall counts, so that all Inventory is subject to such counts at least once each year, but at any time or times as Agent may request on or after an Event of Default, and promptly following such physical inventory (whether through periodic cycle counts or wall to wall counts) shall supply Agent with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical count; (c) no Borrower or Guarantor shall remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales of Inventory in the ordinary course of such Borrower’s or Guarantor’s business and except to move Inventory directly from one location set forth or permitted herein to another such location and except for Inventory shipped from the manufacturer thereof to such Borrower or Guarantor which is in transit to the locations set forth or permitted herein; (d) upon Agent’s request, Borrowers and Guarantors shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request at Agent’s expense, or at any time or times as Agent may reasonably request at Borrowers’ expense during an Additional Appraisal/Field Exam Period, deliver or cause to be delivered to Agent written reports or appraisals as to the Inventory in form, scope and methodology acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and upon which Agent and Lenders are expressly permitted to rely; (e) upon Agent’s request, Borrowers and Guarantors shall, at their expense, conduct through RGIS Inventory Specialists, Inc. or another inventory counting service acceptable to Agent, a physical count of the Inventory in form, scope and methodology acceptable to Agent no more than one (1) time in any twelve (12) month period, and at a time to coincide with Borrowers’ and or Guarantors’ physical count of the Inventory, so long as no Availability Compliance Period exists, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers and Guarantors shall promptly deliver confirmation in a form reasonably satisfactory to Agent that appropriate adjustments have been made to the inventory records of Borrowers and Guarantors to reconcile the inventory count to Borrowers’ and Guarantors’ inventory records; (f) each Borrower and Guarantor shall produce, use, store and maintain the Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (g) none of the Inventory or other Collateral constitutes farm products or the proceeds thereof; (h) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory; (i) no Borrower or Guarantor shall sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate such Borrower or Guarantor to repurchase such Inventory except for the right of return given to retail customers of any Borrower or Guarantor in the ordinary course of the business of such Borrower or Guarantor in accordance with the then current return policy of such Borrower; (j) each Borrower and Guarantor shall keep the Inventory in good and marketable condition; and (k) no Borrower or Guarantor shall, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by such Borrower or Guarantor to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.
Company Covenants Until all of Company’s obligations (other than contingent and indemnification obligations) under all of the Transaction Documents are paid in full, or within the timeframes otherwise specifically set forth below, Company will at all times comply with the following covenants: (i) so long as the Interest is outstanding and for at least twenty (20) Business Days (as defined in the Interest) thereafter, Company will timely file on the applicable deadline (including any extensions thereof) all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act that would otherwise impact the availability of Rule 144 of the 1933 Act, and will take all reasonable action under its control to ensure that adequate current public information with respect to Company, as required in accordance with Rule 144 of the 1933 Act, is publicly available, and until a Fundamental Transaction (as defined in the Interest) will not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination; (ii) until a Fundamental Transaction, the Common Stock shall be listed or quoted for trading on any of (a) NYSE, (b) NASDAQ, (c) OTCQX, or (d) OTCQB; (iii) until a Fundamental Transaction, trading in Company’s Common Stock will not be suspended, halted, chilled, frozen, reach zero bid or otherwise cease on Company’s principal trading market; (iv) unless an acquiring party specifically agrees to assume all rights and obligations associated with the Interest and, in Investor’s discretion is capable of fulfilling such obligations, Company may not consummate any sale or liquidation of all or substantially all of its business or any material asset outside the ordinary course of business without the prior written consent of Investor; (v) Company will not grant a security or royalty interest in any of the Included Products (as defined in the Interest) for the primary purpose of raising capital without Investor’s prior written consent, which for the avoidance of doubt, shall exclude any of the Included Products with one or more business development partners in connection with a licensing transaction or collaboration; and (vi) for so long as the Interest remains outstanding, Company shall deliver to Investor quarterly reports summarizing all Included Products revenues and Net Sales (as defined in the Interest) and shall further hold with Investor a quarterly call with Company’s management to discuss such report, provided that Company will not disclose any material non-public information to Investor without Investor’s prior written consent.
REPORTING COVENANTS The Borrower agrees with the Lenders, the Issuers and the Administrative Agent to each of the following, as long as any Obligation or any Revolving Credit Commitment remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing:
Subsidiary Covenants The Borrower will not, and will not permit any Subsidiary to, create or otherwise cause to become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary to pay dividends or make any other distribution on its stock, or make any other Restricted Payment, pay any Indebtedness or other Obligation owed to the Borrower or any other Subsidiary, make loans or advances or other Investments in the Borrower or any other Subsidiary, or sell, transfer or otherwise convey any of its property to the Borrower or any other Subsidiary.
Specific Covenants The Borrower fails to perform or observe any term, covenant or agreement contained in any of Section 6.01, 6.02, 6.03, 6.05, 6.10, 6.11 or 6.12 or Article VII; or
Nonpetition Covenants (a) Notwithstanding any prior termination of this Agreement, the Servicer and the Seller shall not, prior to the date which is one year and one day after the termination of this Agreement with respect to the Issuer, acquiesce, petition or otherwise invoke or cause the Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Issuer under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement, the Servicer shall not, prior to the date that is one year and one day after the termination of this Agreement with respect to the Seller, acquiesce to, petition or otherwise invoke or cause the Seller to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Seller under any federal or state bankruptcy, insolvency or similar law, appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator, or other similar official of the Seller or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Seller.
Operating Covenants From the Execution Date until the Closing or, if earlier, the termination of this Agreement as contemplated hereby, except (t) as required by this Agreement or any other Transaction Document, (u) as required by any lease, Contract, or instrument listed on any Annex, Disclosure Schedule or Schedule, as applicable, (v) as required by any Applicable Law or any Governmental Authority (including by order or directive of the Bankruptcy Court or fiduciary duty of the board of managers of any Seller or its Affiliates) or any requirements or limitations resulting from the Bankruptcy Cases, (w) to the extent related solely to Excluded Assets and/or Excluded Liabilities, (x) for renewal of expiring insurance coverage in the Ordinary Course of Business, (y) for emergency operations or (z) as otherwise consented to in writing by Buyer (which consent shall not be unreasonably withheld, conditioned or delayed):
(a) Sellers will:
(i) subject to any Bankruptcy Court order to the contrary, operate the Assets in the Ordinary Course of Business;
(ii) maintain or cause its Affiliates to maintain the books of account and records relating to the Assets in the usual, regular and ordinary manner, in accordance with its usual accounting practices;
(iii) give written notice to Buyer as soon as is practicable of any material damage or casualty to or destruction or condemnation of any Asset of which Sellers have Knowledge;
(iv) use reasonable best efforts to maintain insurance coverage on the Assets in the amounts and types described on Disclosure Schedule 3.10; and
(v) use commercially reasonable efforts to maintain or cause its Affiliates to maintain all Permits (including Environmental Permits) required for the operation of the Assets as presently conducted; and
(b) no Seller shall:
(i) sell, lease or otherwise transfer any Asset, or otherwise voluntarily divest or relinquish any right or asset, other than (A) sales or other dispositions of materials, supplies, machinery, equipment, improvements or other personal property or fixtures in the Ordinary Course of Business which have been replaced with an item of substantially equal suitability and (B) dispositions of Excluded Assets;
(ii) enter into any material Contract that if entered into prior to the Execution Date would be required to be listed in Disclosure Schedule 3.05(a) other than (A) Contracts of the type described in Section 3.05(a)(iii) and Section 3.05(a)(viii) entered into in the Ordinary Course of Business (provided that Sellers shall use commercially reasonable efforts to notify Buyer of the terms of any such Contract prior to the execution thereof), (B) confidentiality agreements entered into in accordance with the Bid Procedures Order, (C) contracts or agreements entered into in connection with the Bankruptcy Cases (including any in connection with an Alternative Transaction) and (D) Contracts that would not adversely affect the Assets in any material respect;
(iii) amend or modify in any material respect or terminate any Purchased Contract (other than termination or expiration in accordance with its terms) or any Permits (including Environmental Permits) required for the operation of the Assets as presently conducted;
(iv) change the methods of accounting or accounting practice by Sellers, except as required by concurrent changes in Applicable Law or GAAP as agreed to by its independent public accountants; or
(v) to the extent any of the following would reasonably have the effect of increasing the Non-Income Tax liability of Buyer for any period after the Closing Date, (A) make any settlement of or compromise any Non-Income Tax liability with respect to the Assets, (B) change any Non-Income Tax election or Non-Income Tax method of accounting or make any new Non-Income Tax election or adopt any new Non-Income Tax method of accounting with respect to the Assets; (C) surrender any right to claim a refund of Non-Income Taxes with respect to the Assets; or (D) consent to any extension or waiver of the limitation period applicable to any Non-Income Tax claim or assessment with respect to the Assets.
Separateness Covenants Each Originator hereby acknowledges that this Agreement and the other Transaction Documents are being entered into in reliance upon the Buyer’s identity as a legal entity separate from such Originator and its Affiliates. Therefore, from and after the date hereof, each Originator shall take all reasonable steps necessary to make it apparent to third Persons that the Buyer is an entity with assets and liabilities distinct from those of such Originator and any other Person, and is not a division of such Originator, its Affiliates or any other Person. Without limiting the generality of the foregoing and in addition to and consistent with the other covenants set forth herein, such Originator shall take such actions as shall be required in order that:
(a) such Originator shall not be involved in the day to day management of the Buyer;
(b) such Originator shall maintain separate records and books of account from the Buyer and otherwise will observe corporate formalities and have a separate area from the Buyer for its business (which may be located at the same address as the Buyer, and, to the extent that it and the Buyer have offices in the same location, there shall be a fair and appropriate allocation of overhead costs between them, and each shall bear its fair share of such expenses);
(c) the financial statements and books and records of such Originator shall be prepared after the date of creation of the Buyer to reflect and shall reflect the separate existence of the Buyer; provided, that the Buyer’s assets and liabilities may be included in a consolidated financial statement issued by an Affiliate of the Buyer; provided, however, that any such consolidated financial statement or the notes thereto shall make clear that the Buyer’s assets are not available to satisfy the obligations of such Affiliate;
(d) except as permitted by the Receivables Financing Agreement, (i) such Originator shall maintain its assets (including, without limitation, deposit accounts) separately from the assets (including, without limitation, deposit accounts) of the Buyer and (ii) such Originator’s assets, and records relating thereto, have not been, are not, and shall not be, commingled with those of the Buyer;
(e) such Originator shall not act as an agent for the Buyer (except in the capacity of Servicer or a Sub-Servicer);
(f) such Originator shall not conduct any of the business of the Buyer in its own name (except in the capacity of Servicer or a Sub-Servicer);
(g) such Originator shall not pay any liabilities of the Buyer out of its own funds or assets;
(h) such Originator shall maintain an arm’s-length relationship with the Buyer;
(i) such Originator shall not assume or guarantee or become obligated for the debts of the Buyer or hold out its credit as being available to satisfy the obligations of the Buyer;
(j) such Originator shall not acquire obligations of the Buyer (other than the Intercompany Loan Agreement and the Intercompany Loans);
(k) such Originator shall allocate fairly and reasonably overhead or other expenses that are properly shared with the Buyer, including, without limitation, shared office space;
(l) such Originator shall identify and hold itself out as a separate and distinct entity from the Buyer;
(m) such Originator shall correct any known misunderstanding respecting its separate identity from the Buyer;
(n) such Originator shall not enter into, or be a party to, any transaction with the Buyer, except in the ordinary course of its business and on terms which are intrinsically fair and not less favorable to it than would be obtained in a comparable arm’s-length transaction with an unrelated third party;
(o) such Originator shall not pay the salaries of the Buyer’s employees, if any; and
(p) to the extent not already covered in paragraphs (a) through (o) above, such Originator shall comply and/or act in accordance with all of the other separateness covenants set forth in Section 8.03 of the Receivables Financing Agreement.
Interim Covenants (a) Except with the prior written consent of Purchaser (which consent shall not be unreasonably withheld, delayed or conditioned), as otherwise contemplated or permitted by this Agreement or as required by the Bankruptcy Code or other applicable Law, during the period prior to and up to Closing, Seller shall operate the Yu-Gi-Oh! Business in compliance in all material respects with all Laws applicable to the operation of its business. From the date hereof through the Closing Date, or as otherwise required by applicable Law, Seller shall use commercially reasonable efforts to:
(i) maintain the Purchased Assets in a manner consistent with past practices, reasonable wear and tear excepted and maintain the types and levels of insurance currently in effect in respect of the Purchased Assets;
(ii) preserve intact the Yu-Gi-Oh! Business, to keep available the services of its current employees and agents and to maintain its relations and goodwill with its suppliers, customers, distributors and any others with whom or with which it has business relations;
(iii) upon any damage, destruction or loss to any Purchased Asset, apply any insurance proceeds received with respect thereto to the prompt repair, replacement and restoration thereof to the condition of such Purchased Asset before such event or, if required, to such other (better) condition as may be required by applicable Law;
(iv) promptly advise Purchaser in writing of the occurrence of any event that has had, or would reasonably be expected to have, a Material Adverse Change; and
(v) consult with Purchaser on all material aspects of the Yu-Gi-Oh! Business as may be reasonably requested from time to time by Purchaser, including, but not limited to, personnel, accounting and financial functions.
(b) Except as otherwise contemplated or permitted by this Agreement or by applicable Law, during the period prior to and up to Closing, Seller shall not, without the prior written consent of Purchaser:
(i) enter into, terminate or amend or reject any of the Transferred Agreements, or cancel, modify or waive any material claims held in respect of the Purchased Assets or waive any material rights of value;
(ii) do any act or fail to do any act that will cause a material breach or default under any of the Transferred Agreements;
(iii) sell, transfer or otherwise dispose of any of the Purchased Assets;
(iv) modify any of its sales practices or receivables collections practices from those in place on the date hereof, including offering any discounts, incentives or other accommodations for early payment;
(v) conduct any “going out of business,” liquidation, bankruptcy, or similar sales or take any action to fashion its business as going out of business, liquidating or closing;
(vi) dispose of or fail to keep in effect any material rights in, to, or for the use of any of the Intellectual Property, except for rights which expire or terminate in accordance with their terms;
(vii) subject any Purchased Assets to any Liens;
(viii) enter into, or negotiate any licenses or grant any party any rights or license in any of the Purchased Assets; or
(ix) authorize any of the foregoing, or commit or agree to take actions, whether in writing or otherwise, to do any of the foregoing.
(c) Seller take all action to properly and timely (i) exercise its option for the next season of Yu-Gi-Oh! such that the expiration dates of the Yu-Gi-Oh! Grant Agreements at Closing shall be August 31, 2019 for broadcast and home video rights in the United States, August 31, 2020 for broadcast and home video rights in the territory described therein outside of the United States, and August 31, 2019 with respect to merchandising rights and (ii) make any required payments under the Yu-Gi-Oh Grant Agreements.
CONTINUING COVENANTS The Competitive Supplier agrees and covenants to perform each of the following obligations during the term of this ESA.
