THE BOURNE FIRM
Intellectual property transfer. Credit agreements often prohibit transfer of intellectual property. Indeed, a seemingly simple license for promotional use of a trademark can violate such a prohibition. To avoid default, verify before transferring.
Shareholder agreement amendment. Amendments to shareholder agreements also can trigger credit agreement consent requirements. Before you amend, be sure to check.
Additional equity issuance. On a related note, the issuance of equity commonly can be restricted by a covenant in a credit agreement. If you, for example, are issuing equity for services, be certain not only that you are satisfying securities law requirements, but also confirm that you comply with your credit agreement.
Distributions to owners. Distributions to owners frequently can be controlled by credit agreements. If, for instance, the operating agreement for your limited liability company contemplates at least quarterly distributions, definitively determine whether they fall within the parameters of your credit agreement's restrictions.
Incurring additional debt. Incurring additional debt, including in the form of a capital lease, also can be dictated by detailed definitions and related credit agreement requirements. Review before undertaking additional debt.
Opening more locations. Do you intend to open more locations for your business, whether stores or offices through leases or otherwise? This, too, can be the subject of restrictive covenants in your credit agreement. Observe and undertake to operate within the scope of these covenants as an additional risk management measure.