OFTEN THAN ONCE EVERY FISCAL YEAR OF BORROWER UNLESS A DEFAULT OR AN
EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING.
PROVIDED THAT AN EVENT OF
DEFAULT HAS NOT OCCURRED AND IS NOT CONTINUING, BANK AND BORROWER AGREE THAT THE
COST OF SUCH AUDITS SHALL NOT EXCEED $750 PER DAY PER AUDITOR, PLUS REASONABLE
AND DOCUMENTED OUT-OF-POCKET EXPENSES INCURRED BY THE AUDITORS.
NOTWITHSTANDING
THE FOREGOING, NO CREDIT EXTENSION MAY BE REQUESTED PRIOR TO THE INITIAL AUDIT.
6.3
INVENTORY; RETURNS.
KEEP ALL INVENTORY IN GOOD AND MARKETABLE
CONDITION, FREE FROM MATERIAL DEFECTS.
RETURNS AND ALLOWANCES BETWEEN BORROWER
AND ITS ACCOUNT DEBTORS SHALL FOLLOW BORROWER'S CUSTOMARY PRACTICES AS THEY
EXIST AT THE EFFECTIVE DATE.
BORROWER MUST PROMPTLY NOTIFY BANK OF ALL RETURNS,
RECOVERIES, DISPUTES AND CLAIMS THAT INVOLVE MORE THAN ONE HUNDRED THOUSAND
DOLLARS ($100,000).
7
6.4
TAXES; PENSIONS.
MAKE, AND CAUSE EACH OF ITS SUBSIDIARIES TO MAKE,
TIMELY PAYMENT OF ALL FOREIGN, FEDERAL, STATE, AND LOCAL TAXES OR ASSESSMENTS
(OTHER THAN (I) TAXES OR ASSESSMENTS BEING CONTESTED IN GOOD FAITH WITH ADEQUATE
RESERVES UNDER GAAP OR (II) TO THE EXTENT THAT FAILURE TO MAKE SUCH PAYMENTS
COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON BORROWER'S
BUSINESS) AND SHALL DELIVER TO BANK, AT BANK'S REASONABLE REQUEST, APPROPRIATE
CERTIFICATES ATTESTING TO SUCH PAYMENTS, AND PAY ALL AMOUNTS NECESSARY TO FUND
ALL PRESENT PENSION, PROFIT SHARING AND DEFERRED COMPENSATION PLANS IN
ACCORDANCE WITH THEIR TERMS.
6.5
INSURANCE.
KEEP ITS BUSINESS AND THE COLLATERAL INSURED FOR RISKS
AND IN AMOUNTS STANDARD FOR COMPANIES IN BORROWER'S INDUSTRY AND LOCATION AND AS
BANK MAY REASONABLY REQUEST.
INSURANCE POLICIES SHALL BE IN A FORM, WITH
COMPANIES, AND IN AMOUNTS THAT ARE REASONABLY SATISFACTORY TO BANK.
ALL
PROPERTY POLICIES SHALL HAVE A LENDER'S LOSS PAYABLE ENDORSEMENT SHOWING BANK AS
THE SOLE LENDER LOSS PAYEE AND WAIVE SUBROGATION AGAINST BANK, AND ALL LIABILITY
POLICIES SHALL SHOW, OR HAVE ENDORSEMENTS SHOWING, BANK AS AN ADDITIONAL
INSURED.
ALL POLICIES (OR THE LOSS PAYABLE AND ADDITIONAL INSURED ENDORSEMENTS)
SHALL PROVIDE THAT THE INSURER MUST GIVE BANK AT LEAST TWENTY (20) DAYS NOTICE
BEFORE CANCELING, AMENDING, OR DECLINING TO RENEW ITS POLICY.
AT BANK'S
REASONABLE REQUEST, BORROWER SHALL DELIVER CERTIFIED COPIES OF POLICIES AND
EVIDENCE OF ALL PREMIUM PAYMENTS.
PROCEEDS PAYABLE UNDER ANY POLICY SHALL, AT
BANK'S OPTION, BE PAYABLE TO BANK ON ACCOUNT OF THE OBLIGATIONS.
NOTWITHSTANDING THE FOREGOING, (A) SO LONG AS NO EVENT OF DEFAULT HAS OCCURRED
AND IS CONTINUING, BORROWER SHALL HAVE THE OPTION OF APPLYING THE PROCEEDS OF
ANY CASUALTY POLICY UP TO $150,000, IN THE AGGREGATE, TOWARD THE REPLACEMENT OR
REPAIR OF DESTROYED OR DAMAGED PROPERTY; PROVIDED THAT ANY SUCH REPLACED OR
REPAIRED PROPERTY (I) SHALL BE OF EQUAL OR LIKE VALUE AS THE REPLACED OR
REPAIRED COLLATERAL AND (II) SHALL BE DEEMED COLLATERAL IN WHICH BANK HAS BEEN
GRANTED A FIRST PRIORITY SECURITY INTEREST, AND (B) AFTER THE OCCURRENCE AND
DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, ALL PROCEEDS PAYABLE UNDER SUCH
CASUALTY POLICY SHALL, AT THE OPTION OF BANK, BE