THEREOF).
5.7
OFFICERS' CERTIFICATES.
(A)
THE LEAD BORROWER SHALL CAUSE ITS AUTHORIZED OFFICER TO CERTIFY, IN THE
FORM ATTACHED HERETO AS EXHIBIT 5.7 (THE "OFFICER'S COMPLIANCE CERTIFICATE") IN
CONNECTION WITH THOSE MONTHLY, QUARTERLY AND ANNUAL STATEMENTS TO BE FURNISHED
PURSUANT TO THIS AGREEMENT THAT:
(I)
SUCH STATEMENT WAS PREPARED IN
ACCORDANCE WITH GAAP CONSISTENTLY APPLIED AND PRESENTS FAIRLY THE FINANCIAL
CONDITION OF THE BORROWERS AT THE CLOSE OF, AND THE RESULTS OF THE BORROWERS'
OPERATIONS AND CASH FLOWS FOR, THE PERIOD(S) COVERED, SUBJECT, HOWEVER TO THE
FOLLOWING:
(A)
USUAL YEAR END ADJUSTMENTS (THIS EXCEPTION
SHALL NOT BE INCLUDED IN THE CERTIFICATE WHICH ACCOMPANIES SUCH ANNUAL
STATEMENT).
(B)
MATERIAL ACCOUNTING CHANGES (IN WHICH EVENT,
SUCH CERTIFICATE SHALL INCLUDE A SCHEDULE (IN REASONABLE DETAIL) OF THE EFFECT
OF EACH SUCH MATERIAL ACCOUNTING CHANGE) NOT PREVIOUSLY SPECIFICALLY TAKEN INTO
ACCOUNT IN THE DETERMINATION OF THE FINANCIAL PERFORMANCE COVENANTS IMPOSED
PURSUANT TO SECTION 5.10.
70
(II)
NO DEFAULT OR EVENT OF DEFAULT HAS
OCCURRED WHICH IS CONTINUING, OR IF SUCH EVENT HAS OCCURRED, ITS NATURE (IN
REASONABLE DETAIL) AND THE STEPS (IF ANY) BEING TAKEN OR CONTEMPLATED BY THE
BORROWERS TO BE TAKEN ON ACCOUNT THEREOF.
(III)
THE BORROWERS WERE IN COMPLIANCE (OR HAD
FAILED TO COMPLY) AS OF THE DATE OF THE APPLICABLE STATEMENT WITH EACH OF THE
FINANCIAL PERFORMANCE COVENANTS INCLUDED IN SECTION 5.10 HEREOF; SUCH
CERTIFICATION TO BE ACCOMPANIED BY CALCULATIONS DEMONSTRATING SUCH COMPLIANCE OR
FAILURE TO COMPLY.
5.8
INVENTORIES, APPRAISALS, AND AUDITS.
(A)
THE TERM COLLATERAL AGENT MAY, AT THE EXPENSE OF THE BORROWERS,
PARTICIPATE IN AND/OR OBSERVE EACH INVENTORY AND ANY CYCLE COUNT OF THE
COLLATERAL WHICH IS UNDERTAKEN ON BEHALF OF THE BORROWERS (PROVIDED THAT ANY
EXPENSES OF TERM COLLATERAL AGENT FOR WHICH TERM COLLATERAL AGENT SEEKS
REIMBURSEMENT SHALL BE REASONABLE EXPENSES).
NO BORROWER MAY, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE TERM COLLATERAL AGENT, CHANGE THE METHODOLOGY TO BE
FOLLOWED IN CONNECTION WITH THE CONDUCT OF AND REPORTING ON THE RESULTS OF SUCH
INVENTORY FROM THE METHODOLOGY EMPLOYED BY THE BORROWERS AS OF THE DATE OF THIS
AGREEMENT.
(B)
THE BORROWERS, AT THEIR EXPENSE, SHALL CAUSE EACH STORE LOCATION,
WAREHOUSE, AND DISTRIBUTION CENTER TO HAVE NOT LESS THAN ONE (1) PHYSICAL
INVENTORY OR CYCLE COUNT IN EACH TWELVE (12) MONTH PERIOD TO BE UNDERTAKEN
CONSISTENT WITH CURRENT PRACTICE, WHILE THIS AGREEMENT IS IN EFFECT (THE
SCHEDULING OF WHICH SHALL BE SUBJECT TO THE TERM COLLATERAL AGENT'S REASONABLE
DISCRETION, SUBJECT TO REASONABLE COORDINATION WITH THE REVOLVING LOAN
COLLATERAL AGENT SO AS TO NOT CAUSE DUPLICATION), CONDUCTED BY SUCH INVENTORY
TAKERS AS ARE REASONABLY SATISFACTORY TO THE TERM COLLATERAL AGENT AND FOLLOWING
SUCH METHODOLOGY AS MAY BE REASONABLY SATISFACTORY TO THE TERM AGENT.
(I)
THE LEAD BORROWER SHALL PROVIDE THE TERM
COLLATERAL AGENT WITH A COPY OF THE PRELIMINARY RESULTS OF EACH SUCH INVENTORY
(AS WELL AS OF ANY OTHER PHYSICAL INVENTORY UNDERTAKEN BY THE BORROWERS) WITHIN
TEN (10) DAYS AFTER ITS COMPLETION.
(II)
THE LEAD BORROWER SHALL PROVIDE THE TERM
COLLATERAL AGENT WITH A RECONCILIATION OF THE