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refer to agreements between an investor and management that outline undertakings management agrees to perform after the investor provides funding. They are typically made preconditions to the making of an investment. Sometimes called "affirmative covenants" and "negative covenants," these agreements commonly include the obligation to provide the investor with regular financial reports, to maintain the company’s corporate status, and to continue pursuing the company’s main business objectives. Operating covenants can also require management to achieve specified goals or to refrain from engaging in specified activities. Failure to fulfill the obligations of an operating covenant can result in penalties to management. See: Affirmative Covenants, Management Agreements, Negative Covenants, Reps and Warranties, Take Away Provisions. |
