Exhibit 10.1

 
EXECUTION COPY

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CREDIT AGREEMENT
 
dated as of April 8, 2009
 
among
 
J. C. PENNEY COMPANY, INC.,
J. C. PENNEY CORPORATION, INC.,
J. C. PENNEY PURCHASING CORPORATION,
 
The Lenders Party Hereto,
 
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
 
and
 
WACHOVIA BANK, NATIONAL ASSOCIATION,
as LC Agent
___________________________
 
J.P. MORGAN SECURITIES INC.,
BANC OF AMERICA SECURITIES LLC,
BARCLAYS CAPITAL and
WACHOVIA BANK, NATIONAL ASSOCIATION
as Joint Bookrunners and Co-Lead Arrangers,
 
JPMORGAN CHASE BANK, N.A.,
as Syndication Agent
 
and
 
BANK OF AMERICA, N.A.,
BARCLAYS BANK PLC and
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Joint Documentation Agents
 
 

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[CS&M Reference No. 6701-806]
 
 
 
 
 
 
TABLE OF CONTENTS
 
 

 
ARTICLE I
Definitions
 
   SECTION 1.01.   Defined Terms     1  SECTION 1.02. Classification of Loans
and Borrowings   22  SECTION 1.03.  Terms Generally   22  SECTION 1.04. 
Accounting Terms; GAAP   23  
 
ARTICLE II
The Credits
 
   SECTION 2.01. Commitments   23  SECTION 2.02.  Loans and Borrowings   23
 SECTION 2.03.  Requests for Revolving Borrowings  24  SECTION 2.04.  Swingline
Loans  25  SECTION 2.05. Letters of Credit  26  SECTION 2.06. Funding of
Borrowings  32  SECTION 2.07. Interest Elections  33  SECTION 2.08. Termination
and Reduction of Commitments  34  SECTION 2.09.  Repayment of Loans; Evidence of
Debt  34  SECTION 2.10.  Prepayment of Loans  35  SECTION 2.11.  Fees   36
 SECTION 2.12.  Interest  37  SECTION 2.13. Alternate Rate of Interest  37
 SECTION 2.14.  Increased Costs  38  SECTION 2.15.  Break Funding Payments  39
 SECTION 2.16.  Taxes  40  SECTION 2.17.  Payments Generally; Pro Rata
Treatment; Sharing of Set-offs  43  SECTION 2.18. Mitigation Obligations;
Replacement of Lenders  44  SECTION 2.19. Reserved.  47  SECTION 2.20. 
Borrowing Subsidiaries  47  SECTION 2.21.  Defaulting Lenders  47  
 
 ARTICLE III
Representations and Warranties
 
   SECTION 3.01. Organization; Powers  50  SECTION 3.02.  Authorization;
Enforceability  50  SECTION 3.03. Governmental Approvals; No Conflicts  50
 SECTION 3.04. Financial Condition; No Material Adverse Change  50  SECTION
3.05. Properties   51

i
 
 
 
 
 
 

 SECTION 3.06.  Litigation and Environmental Matters   51  SECTION 3.07. 
Compliance with Laws and Agreements   51  SECTION 3.08.  Investment Company
Status  51  SECTION 3.09. Taxes  51  SECTION 3.10. ERISA  52  SECTION 3.11.
Disclosure  52  SECTION 3.12.  Material Subsidiaries   52  
 
ARTICLE IV
Conditions
 
   SECTION 4.01.  Effective Date  52  SECTION 4.02.  Each Credit Event   54
 SECTION 4.03. Borrowing Subsidiaries   54  
 
ARTICLE V
Affirmative Covenants
 
   SECTION 5.01.  Financial Statements; Ratings Change and Other Information  55
 SECTION 5.02. Notices of Material Events  56  SECTION 5.03. Information
Regarding Collateral   57  SECTION 5.04.  Existence; Conduct of Business  58
 SECTION 5.05. Payment of Obligations  58  SECTION 5.06. Maintenance of
Properties  58  SECTION 5.07.  Insurance  58  SECTION 5.08.   Books and Records;
Inspection Rights; Inventory Audits   58  SECTION 5.09. Compliance with Laws 
 59  SECTION 5.10. Use of Proceeds and Letters of Credit   59  SECTION 5.11.
Additional Guarantee Parties   59  SECTION 5.12. Further Assurances  60  SECTION
5.13.  Maintenance of Ratings   60  SECTION 5.14. Prepayment Avoidance   60  
 
ARTICLE VI
Negative Covenants
 
   SECTION 6.01.  Indebtedness   60  SECTION 6.02. Liens   61  SECTION 6.03. 
Fundamental Changes   63  SECTION 6.04.  Investments, Loans, Advances,
Guarantees and Acquisitions  63  SECTION 6.05. Asset Sales   64  SECTION 6.06. 
Sale and Leaseback Transactions   65  SECTION 6.07. Restricted Payments   65
 SECTION 6.08.  Restrictive Agreements   66

ii
 
 
 
 
 

 SECTION 6.09.  Leverage Ratio  66  SECTION 6.10.  Fixed Charge Coverage Ratio
 67  SECTION 6.11.   Asset Coverage Ratio   67  SECTION 6.12.  Restriction on
Non-Material Subsidiaries   67  
 
 ARTICLE VII
 Events of Default
 
   SECTION 7.01. Events of Default   67  SECTION 7.02.  Exclusion of Immaterial
Subsidiaries   70  
 
 ARTICLE VIII
The Administrative Agent
 
         
 ARTICLE IX
Miscellaneous
 
   SECTION 9.01. Notices  72  SECTION 9.02.  Waivers; Amendments  73  SECTION
9.03.  Expenses; Indemnity; Damage Waiver  74  SECTION 9.04. Successors and
Assigns   76  SECTION 9.05.  Survival   79  SECTION 9.06.   Counterparts;
Integration; Effectiveness   79  SECTION 9.07. Severability  79  SECTION 9.08.
Right of Setoff   79  SECTION 9.09. Governing Law; Jurisdiction; Consent to
Service of Process   80  SECTION 9.10. WAIVER OF JURY TRIAL   81  SECTION 9.11.
Headings  81  SECTION 9.12.  Confidentiality  81  SECTION 9.13.  Interest Rate
Limitation   82  SECTION 9.14. USA Patriot Act   82  SECTION 9.15.  Waiver Under
Existing Credit Agreement  82      

 

 SCHEDULES:    Schedule 2.01 -- Commitments    Schedule 2.05 -- Issuing Banks  
 Schedule 3.06 -- Disclosed Matters    Schedule 3.12 -- Material Subsidiaries  
 Schedule 6.01 -- Existing Indebtedness    Schedule 6.02 -- Existing Liens  
 Schedule 6.04 -- Existing Investments  

 
iii

 
 
 
 
 
 
Schedule 6.08 -- Existing Restrictions

       EXHIBITS:          
Exhibit A  --
Form of Assignment and Assumption
  Exhibit B  -- Forms of Opinion of Counsel to the Loan Parties   Exhibit C  --
Form of Guarantee and Collateral Agreement  
Exhibit D  --
Form of U.S. Tax Compliance Certificate
 

 
iv
 
 
 
 
 
 
 
CREDIT AGREEMENT dated as of April 8, 2009, among J. C. PENNEY COMPANY, INC., J.
C. PENNEY CORPORATION, INC., J. C. PENNEY PURCHASING CORPORATION, the LENDERS
party hereto, JPMORGAN CHASE BANK, N.A., as Administrative Agent, and
WACHOVIA BANK, NATIONAL ASSOCIATION, as LC Agent.
 
The parties hereto agree as follows:
 
ARTICLE I
 
 
Definitions
 
SECTION 1.01. Defined Terms.  As used in this Agreement, the following terms
have the meanings specified below:
 
“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.
 
“Account Parties” means the Parent Borrower and Purchasing.
 
“Additional Costs” has the meaning assigned to such term in Section 2.14(c).
 
“Additional Grantor” means any Subsidiary of the Parent Borrower that is
designated by the Parent Borrower, with the prior written consent of the
Administrative Agent, to become a party to the Collateral Agreement for the
purpose of granting a security interest in such Subsidiary’s inventory; provided
that the Parent Borrower shall cause the Collateral and Guarantee Requirement to
be satisfied with respect to such Subsidiary immediately upon such Subsidiary
becoming an Additional Grantor.
 
“Additional Inventory” means, with respect to any Additional Grantor, any
inventory owned by such Additional Grantor that the Parent Borrower and the
Administrative Agent agree, in writing, shall be deemed to be “Collateral” under
the Collateral Agreement.
 
“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
 
“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as
administrative agent for the Lenders hereunder.
 
“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.
 
“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
 
 
 
 
 
2
“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus½ of 1% and (c) the Adjusted LIBO Rate for a
one-month Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1%; provided that, for the avoidance of
doubt, for purposes of calculating the Alternate Base Rate, the Adjusted LIBO
Rate for any day shall be based on the Reuters BBA Libor Rates Page 3750 (or on
any successor or substitute page of such page) at approximately 11:00 a.m.
London time on such day.  Any change in the Alternate Base Rate due to a change
in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate
shall be effective from and including the effective date of such change in the
Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate,
respectively.
 
“Applicable Lending Office” means, for each Issuing Bank or Lender, the office
or branch of such Issuing Bank or Lender (or an affiliate of such Issuing Bank
or Lender) designated in an Administrative Questionnaire delivered by such
Issuing Bank or Lender to the Administrative Agent or such other office or
branch of such Issuing Bank or Lender as such Issuing Bank or Lender may, from
time to time, in accordance with the terms of this Agreement, specify to the
Administrative Agent, the Borrowers and the Account Parties as the office or
branch by which its Letters of Credit, Loans or Commitments, as applicable, are
to be made and maintained.
 
“Applicable Percentage” means, with respect to any Lender, the percentage of the
total Commitments represented by such Lender’s Commitment; provided that in the
case of Section 2.21 when a Defaulting Lender shall exist, “Applicable
Percentage” shall mean the percentage of the total Commitments (disregarding any
Defaulting Lender’s Commitment) represented by such Lender’s Commitment.  If the
Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
 
“Applicable Rate” means, for any day, with respect to any ABR Loan or Eurodollar
Revolving Loan, or with respect to the participation fees in respect of Stand-by
Letters of Credit or the commitment fees payable hereunder, as the case may be,
the applicable rate per annum set forth below under the caption “ABR Spread”,
“Eurodollar Spread”, “Stand-by Letter of Credit Fee Rate” or “Commitment Fee
Rate”, as the case may be, based upon the Credit Rating of Holdings assigned by
Moody’s and S&P, respectively, applicable on such date:
 
Credit Ratings
Moody’s/S&P:
ABR
Spread
Eurodollar Spread
Stand-by Letter of Credit
 Fee Rate
Commitment Fee Rate
Category 1
≥Baa2/BBB
2.00%
3.00%
3.00%
0.50%
Category 2
Baa3/BBB-
2.50%
3.50%
3.50%
0.50%
Category 3
Ba1/BB+
3.00%
4.00%
4.00%
0.50%
Category 4
≤Ba2/BB
3.50%
4.50%
4.50%
0.75%

 
For purposes of the foregoing, (a) if either Moody’s or S&P shall not have in
effect a Credit Rating (other than by reason of the circumstances referred to in
the last sentence of this definition) the Applicable Rate shall be determined on
the basis of the rating agency that
 
 
 
 
 
3
does then have a Credit Rating in effect; (b) if the Credit Ratings established
or deemed to be established by Moody’s and S&P shall fall within different
Categories, the Applicable Rate shall be based on the lower of the two Credit
Ratings; (c) if neither Moody’s nor S&P has in effect a Credit Rating (other
than by reason of the circumstances referred to in the last sentence of this
definition) the Credit Ratings shall be deemed to be those set forth in Category
4; (d) the Applicable Rate shall be deemed to be the Applicable Rate set forth
in Category 4 at any time that an Event of Default has occurred and is
continuing and (e) if the Credit Ratings established or deemed to have been
established by Moody’s and S&P shall be changed (other than as a result of a
change in the rating system of Moody’s or S&P), such change shall be effective
as of the date on which it is first announced by the applicable rating agency,
irrespective of when notice of such change shall have been furnished by Holdings
or the Parent Borrower to the Administrative Agent and the Lenders pursuant to
Section 5.01 or otherwise.  Each change in the Applicable Rate shall apply
during the period commencing on the effective date of such change and ending on
the date immediately preceding the effective date of the next such change.  If
the rating system of Moody’s or S&P shall change, or if either such rating
agency shall cease to be in the business of rating obligors, the Parent Borrower
and the Lenders shall negotiate in good faith to amend this definition to
reflect such changed rating system or the unavailability of Credit Ratings from
such rating agency and, pending the effectiveness of any such amendment, the
Applicable Rate shall be determined by reference to the Credit Rating most
recently in effect prior to such change or cessation.
 
“Asset Coverage Certificate” means a certificate setting forth the calculation
of the Asset Coverage Ratio and signed on behalf of the Parent Borrower by a
Financial Officer.
 
“Asset Coverage Ratio” means, on any date, the ratio of (a) the book value of
all Eligible Inventory as of the last day of the fiscal month ended on or most
recently prior to such date, determined in accordance with GAAP as applied on a
consistent basis (including the deduction of any marked-down inventory reserves
in accordance with GAAP), to (b) the sum of (i) the total amount that Holdings
and the Subsidiaries would be required to pay (taking into account any netting
agreements) if all Swap Agreements to which they are parties were terminated as
of the last day of the fiscal month ended on or most recently prior to such date
(but only to the extent that such payment obligations constitute Obligations)
plus (ii) total Revolving Credit Exposures as of such date.
 
“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 9.04), and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.
 
“Availability Period” means the period from and including the Effective Date to
but excluding the earlier of the Maturity Date and the date of termination of
the Commitments.
 
“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.
 
“Borrowers” means the Parent Borrower and, if eligible to be a Borrower at the
time in accordance with Section 2.20, each Borrowing Subsidiary.
 
 
 
 
 
4
“Borrowing” means (a) Revolving Loans of the same Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect or (b) a Swingline Loan.
 
“Borrowing Request” means a request by a Borrower for a Revolving Borrowing in
accordance with Section 2.03.
 
“Borrowing Subsidiary” means any Subsidiary with respect to which a Subsidiary
Borrower Election shall have been executed and delivered as provided in Section
2.20 and with respect to which a Subsidiary Borrower Termination has not been
executed as provided in Section 2.20.
 
“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
 
“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.
 
“Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person other than Holdings or a
wholly owned Subsidiary of Holdings of any Equity Interest in the Parent
Borrower; (b) the acquisition of ownership, directly or indirectly, beneficially
or of record, by any Person or group (within the meaning of the Securities
Exchange Act of 1934 and the rules of the Securities and Exchange Commission
thereunder as in effect on the date hereof) other than any retirement or savings
plan for employees of Holdings and its Subsidiaries, of Equity Interests
representing more than 40% of either the aggregate ordinary voting power or the
aggregate equity value represented by the issued and outstanding Equity
Interests in Holdings, other than pursuant to a Permitted Holding Company
Reorganization; or (c) occupation of a majority of the seats (other than vacant
seats) on the board of directors of Holdings by Persons who were neither (i)
nominated by the board of directors of Holdings nor (ii) appointed by directors
so nominated.
 
“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or any Issuing Bank (or,
for purposes of Section 2.14(b), by any lending office of such Lender or by such
Lender’s or such Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
 
“Charges” has the meaning assigned to such term in Section 9.13.
 
 
 
 
 
5
“Class”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are Revolving Loans or Swingline
Loans.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
 
“Collateral” means any and all “Collateral”, as defined in the Collateral
Agreement.
 
“Collateral Agreement” means the Guarantee and Collateral Agreement among the
Guarantee Parties, the Additional Grantors and the Administrative Agent,
substantially in the form of Exhibit C.
 
“Collateral and Guarantee Requirement” means the requirement that:
 
(a)  the Administrative Agent shall have received from each Loan Party either
(i) a counterpart of the Collateral Agreement duly executed and delivered on
behalf of such Loan Party or (ii) in the case of any Person that becomes a Loan
Party after the Effective Date, a supplement to the Collateral Agreement, in the
form specified therein, duly executed and delivered on behalf of such Loan
Party;
 
(b)  at any time other than during a Release Period, all documents and
instruments, including Uniform Commercial Code financing statements, required by
law or reasonably requested by the Administrative Agent to be filed, registered
or recorded to create the Liens intended to be created by the Collateral
Agreement and perfect such Liens to the extent required by, and with the
priority required by, the Collateral Agreement, shall have been filed,
registered or recorded or delivered to the Administrative Agent for filing,
registration or recording; and
 
(c)  each Loan Party shall have obtained all consents and approvals required to
be obtained by it in connection with the execution and delivery of the
Collateral Agreement, the performance of its obligations thereunder and, at any
time other than during a Release Period, the granting by it of the Liens
thereunder.
 
“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Revolving Loans and to acquire participations in Letters of Credit and
Swingline Loans hereunder, expressed as an amount representing the maximum
aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b)
reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04.  The initial amount of each Lender’s Commitment
is set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to
which such Lender shall have assumed its Commitment, as applicable.  The initial
aggregate amount of the Lenders’ Commitments is $750,000,000.
 
“Consolidated EBITDA” means, for any period, Consolidated Net Income for such
period (disregarding any non-cash charges or credits related to any Plan, any
non-qualified supplemental pension plan maintained, sponsored or contributed to
by Holdings or any ERISA Affiliate, or any Multiemployer Plan) plus (a) without
duplication and to the extent deducted in determining such Consolidated Net
Income, the sum of (i) consolidated interest expense for such
 
 
 
 
 
6
period plus (ii) consolidated financing costs associated with securitization
programs for such period plus (iii) consolidated income tax expense for such
period plus (iv) all amounts attributable to depreciation and amortization for
such period plus (v) any extraordinary or other non-recurring non-cash charges
(it being understood that the write-down or write-off of any inventory or
accounts receivable shall not be construed to be a non-recurring non-cash
charge) for such period, provided that in the event Holdings or any Subsidiary
makes any cash payment in respect of any such non-cash charge, such cash payment
shall be deducted from Consolidated EBITDA in the period in which such payment
is made, and minus (b) without duplication and to the extent included in
determining such Consolidated Net Income, any extraordinary or other
non-recurring gains for such period, all determined on a consolidated basis in
accordance with GAAP.
 
“Consolidated Interest Expense” means, for any period, the excess of (a) the
interest expense (including imputed interest expense in respect of Capital Lease
Obligations) of Holdings and the Subsidiaries for such period, including any
interest that is capitalized rather than expensed for such period minus (b)
interest income of Holdings and the Subsidiaries for such period, all determined
on a consolidated basis in accordance with GAAP.
 
“Consolidated Net Income” means, for any period, the net income or loss of
Holdings and the Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP; provided that there shall be excluded (a) the income of
any Person (other than Holdings) in which any other Person (other than Holdings
or any Subsidiary or any director holding qualifying shares in compliance with
applicable law) owns an Equity Interest, except to the extent of the amount of
dividends or other distributions actually paid to Holdings or any of the
Subsidiaries during such period, and (b) the income or loss of any Person
accrued prior to the date it becomes a Subsidiary or is merged into or
consolidated with Holdings or any Subsidiary or the date that such Person’s
assets are acquired by Holdings or any Subsidiary.
 
“Consolidated Rent Expense” means, for any period, the rental expense in respect
of stores and other real property (other than Capital Lease Obligations)
deducted in determining Consolidated Net Income for such period.
 
“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or
otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.
 
“Credit Rating” means, in the case of Moody’s, the “Corporate Family Rating” (or
its equivalent) assigned by Moody’s to Holdings and, in the case of S&P, the
“Issuer Credit Rating” assigned by S&P to Holdings.
 
“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.
 
“Defaulting Lender” means any Lender, as determined by the Administrative Agent,
that has (a) failed to fund any portion of its Loans or participations in
Letters of Credit or
 
 
 
 
 
7
Swingline Loans within three Business Days of the date required to be funded by
it hereunder, (b) notified the Parent Borrower, the Administrative Agent, the
Issuing Bank, the Swingline Lender or any Lender in writing that it does not
intend to comply with any of its funding obligations under this Agreement or has
made a public statement to the effect that it does not intend to comply with its
funding obligations generally under other agreements in which it commits to
extend credit, (c) failed, within three Business Days after request by the
Administrative Agent, to confirm that it will comply with the terms of this
Agreement relating to its obligations to fund prospective Loans and
participations in then outstanding Letters of Credit and Swingline Loans, (d)
otherwise failed to pay over to the Administrative Agent or any other Lender any
other amount required to be paid by it hereunder within three Business Days of
the date when due, unless the subject of a good faith dispute, or (e)(i) become
or is insolvent or has a parent company that has become or is insolvent or (ii)
become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment or has a parent company that
has become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment.
 
“Disclosed Matters” means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
 
“Disqualified Equity Interest” means any Equity Interest in Holdings that by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable, either mandatorily or at the option of the holder thereof),
or upon the happening of any event or condition:
 
(a) matures or is mandatorily redeemable (other than solely for Equity Interests
in Holdings that do not constitute Disqualified Equity Interests and cash in
lieu of fractional shares of such Equity Interests), whether pursuant to a
sinking fund obligation or otherwise, prior to the Specified Date;
 
(b) is convertible or exchangeable at the option of the holder thereof for
Indebtedness or Equity Interests (other than solely for Equity Interests in
Holdings that do not constitute Disqualified Equity Interests and cash in lieu
of fractional shares of such Equity Interests), prior to the Specified Date; or
 
(c) is redeemable (other than solely for Equity Interests in Holdings that do
not constitute Disqualified Equity Interests and cash in lieu of fractional
shares of such Equity Interests) or is required to be repurchased by Holdings or
any of its Affiliates, in whole or in part, at the option of the holder thereof,
prior to the Specified Date; provided that this clause (c) shall not apply to
any requirement of mandatory redemption or repurchase that is contingent upon an
asset disposition or the incurrence of Indebtedness if such mandatory redemption
or repurchase can be avoided through repayment or prepayment of Loans or through
investments by Holdings in assets to be used in their businesses.
 
“dollars” or “$” refers to lawful money of the United States of America.
 
 
 
 
 
8
“Effective Date” means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
 
“Eligible In-Transit Inventory” means all import inventory of the Loan Parties
that is in transit from a location outside of the United States of America for
which title remains with a Loan Party and which is fully insured; provided that
the aggregate book value of all Eligible In-Transit Inventory shall not exceed
5% of the aggregate book value of all Eligible Inventory.
 
“Eligible Inventory” means (a) all inventory of the Loan Parties located in the
United States of America and all Eligible In-Transit Inventory, other than
consignment inventory (including inventory subject to “sale or return”
arrangements), and (b) all Additional Inventory located in the United States of
America, other than consignment inventory (including inventory subject to “sale
or return” arrangements); provided that, unless and until the Liens granted
under the Collateral Agreement are released as provided in Section 6.15(d) of
the Collateral Agreement, any such inventory, Eligible In-Transit Inventory or
Additional Inventory shall constitute “Eligible Inventory” only if such
inventory is subject to a perfected first-priority Lien securing the Obligations
pursuant to the terms of the Collateral Agreement.
 
“Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.
 
“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of Holdings or any Subsidiary directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of any
Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.
 
“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
equity interest.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the final rules and regulations promulgated thereunder,
as from time to time in effect.
 
“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with Holdings, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under Section
414 of the Code.
 
 
 
 
 
9
“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) a failure by any Plan
to satisfy the minimum funding standard (as defined in Section 412 of the Code
or Section 302 of ERISA) applicable to such Plan, whether or not waived; (c) the
filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) a determination that any Plan is, or is expected to be, in “at-risk”
status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the
Code); (e) the incurrence by Holdings or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(f) the receipt by Holdings or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans (other than a termination initiated by Holdings or an ERISA Affiliate) or
to appoint a trustee to administer any Plan; (g) the incurrence by Holdings or
any of its ERISA Affiliates of any liability with respect to the withdrawal or
partial withdrawal from any Plan or Multiemployer Plan; (h) the receipt by
Holdings or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from Holdings or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA or in “endangered” or “critical” status
(within the meaning of Section 432 of the Code or Section 305 of ERISA); (i) the
occurrence of a non-exempt “prohibited transaction” (as defined in Section 4975
of the Code or Section 406 of ERISA) with respect to which Holdings or any ERISA
Affiliate is a “disqualified person” (within the meaning of Section 4975 of the
Code) or a “party in interest” (within the meaning of Section 406 of ERISA) or
could otherwise be liable; or (j) any other event or condition with respect to a
Plan or Multiemployer Plan that could result in liability of Holdings or any
ERISA Affiliate.
 
“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.
 
“Event of Default” has the meaning assigned to such term in Section 7.01.
 
“Excluded Subsidiary” means, at any date, any Realty Company that is not a
Material Subsidiary as of such date.  For purposes of determining whether a
Realty Company is a Material Subsidiary, the computations required by the
definition of the term “Material Subsidiary” shall be made including the
accounts of all Excluded Subsidiaries.
 
“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
any Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of any Loan Party under this Agreement or any other
Loan Document, any (a) Other Connection Taxes, (b) U.S. federal withholding Tax
imposed by a requirement of law in effect at the time a Foreign Lender (other
than an assignee under Section 2.18(b)) becomes a party to this Agreement (or
designates a new lending office), with respect to any payment made by or on
account of any obligation of a Borrower to such Foreign Lender, except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrowers with respect to such
 
 
 
 
 
10
withholding Tax under Section 2.16(a) or (c) Taxes attributable to a Lender’s
failure to comply with Section 2.16(g).
 
“Existing Credit Agreement” means the Credit Agreement dated as of April 7,
2005, as amended, among Holdings, the Account Parties, the financial
institutions named therein as lenders, JPMorgan Chase Bank, N.A., as
administrative agent, and Wachovia Bank, National Association, as LC Agent.
 
“Existing Indentures” means (a) the Indenture dated as of October 1, 1982, as
amended, between the Parent Borrower and U.S. Bank National Association
(successor to Bank of America National Trust and Savings Association), as
trustee and (b) the Indenture dated as of April 1, 1994, as amended, between the
Parent Borrower and U.S. Bank National Association (successor to Bank of America
National Trust and Savings Association), as trustee.
 
“Existing Letter of Credit” means any letter of credit that is outstanding under
the Existing Credit Agreement on the Effective Date.
 
“Extended Letter of Credit” has the meaning assigned to such term in Section
2.05(k).
 
“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.
 
“Fee Receiver” means any Person for whose account any payments of fees are made
under Section 2.11(a) or Section 2.11(b) of this Agreement.
 
“Financial Officer” means the chief financial officer, principal accounting
officer, vice president-chief accountant, treasurer, assistant treasurer or
controller of Holdings or the Parent Borrower.
 
“Fitch” means Fitch, Inc.
 
“Fixed Charge Coverage Ratio” means, for any period, the ratio of (a)
Consolidated EBITDA plus Consolidated Rent Expense to (b) Consolidated Interest
Expense plus Consolidated Rent Expense, in each case for such period.
 
“Foreign Lender” means any Lender or Issuing Bank with respect to any Borrower,
that (a) is not a “United States person” as defined by Section 7701(a)(30) of
the Code (a “U.S. Person”), or (b) is a partnership or other entity treated as a
partnership for U.S. federal income tax purposes which is a U.S. Person, but
only to the extent the beneficial owners (including indirect partners if its
direct partners are partnerships or other entities treated as partnerships for
U.S. federal income tax purposes are U.S. Persons) are not U.S. Persons.
 
 
 
 
 
11
“Foreign Subsidiary” means any Subsidiary that is organized under the laws of a
jurisdiction other than the United States of America or any State thereof or the
District of Columbia.
 
“Funded Indebtedness” of any Person means, at any date for the determination
thereof, without duplication, the sum of (a) the outstanding aggregate principal
amount of all Indebtedness of such Person for borrowed money or of a type
described in clause (c) or (d) of the definition of the term “Indebtedness” and
(b) the outstanding aggregate principal amount of all Indebtedness of others of
the type described in the preceding clause (a) for the payment of which such
Person is responsible or liable pursuant to a Guarantee or otherwise; provided
that Funded Indebtedness shall not include (i) any obligations under leases or
any guarantees of obligations of others under leases, (ii) any obligations of
such Person in respect of letters of credit, (iii) except as provided in clause
(b) above, any contingent obligations of such Person and (iv) any Indebtedness
of Holdings to any Subsidiary or of any Subsidiary to Holdings or any other
Subsidiary.  It is understood that for the purposes of this definition the term
“principal” when used at any date with respect to any Indebtedness issued at a
discount shall mean the amount of principal of such Indebtedness that could be
declared due and payable on that date upon the occurrence of one or more events
permitting the acceleration of such Indebtedness pursuant to the terms of such
Indebtedness.
 
“GAAP” means generally accepted accounting principles in the United States of
America.
 
“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.
 
“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the “primary obligor”) in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.
 
“Guarantee Parties” means Holdings, the Parent Borrower, Purchasing, the
Material Subsidiaries and each Non-Material Subsidiary that is required to
satisfy the Collateral
 
 
 
 
 
12
and Guarantee Requirement in order for Holdings and the Parent Borrower to
remain in compliance with the provisions of Section 6.12.
 
“Hazardous Materials”  means all explosive or radioactive materials, substances
or wastes and all hazardous or toxic materials, substances, wastes or other
pollutants, including petroleum or petroleum distillates or by-products,
asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other materials, substances or wastes of
any nature regulated pursuant to any Environmental Law.
 
“Holdings” means J. C. Penney Company, Inc., a Delaware corporation.
 
“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, (c) all obligations of such Person under conditional
sale or other title retention agreements relating to property acquired by such
Person, (d) all obligations of such Person in respect of the deferred purchase
price of property or services (excluding current accounts payable incurred in
the ordinary course of business), (e) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed,
(f) all Guarantees by such Person of Indebtedness of others, (g) all Capital
Lease Obligations of such Person, (h) all obligations, contingent or otherwise,
of such Person as an account party in respect of letters of credit and letters
of guaranty, (i) all obligations, contingent or otherwise, of such Person in
respect of bankers’ acceptances and (j) all Off-Balance Sheet Liabilities.  The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person’s ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
 
“Indemnified Taxes” means Taxes other than Excluded Taxes.
 
“Information Memorandum” means the Confidential Information Memorandum dated
March 2009 relating to the Parent Borrower and the Transactions.
 
“Intercreditor Agreement” means an intercreditor agreement among the Loan
Parties, the Administrative Agent and the trustee, agent or other representative
for holders of any Indebtedness secured by second-priority Liens contemplated by
clause (k) of Section 6.02, which intercreditor agreement shall be consistent
with the then existing market practice and reasonably acceptable to the Required
Lenders (it being understood that (i) any such intercreditor agreement shall be
considered approved by a Lender if made available to such Lender by the
Administrative Agent (through Intralinks or similar facility) and such Lender is
informed that such intercreditor agreement shall be considered approved by it if
there is no objection within three Business Days, and no such objection is made
and (ii) such intercreditor agreement shall be deemed accepted if approved or
deemed approved by the Required Lenders).
 
 
 
 
 
13
“Interest Election Request” means a request by a Borrower to convert or continue
a Revolving Borrowing in accordance with Section 2.07.
 
“Interest Payment Date” means (a) with respect to any ABR Loan (other than a
Swingline Loan), the last day of each March, June, September and December, (b)
with respect to any Eurodollar Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a
Eurodollar Borrowing with an Interest Period of more than three months’
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months’ duration after the first day of such Interest Period
and (c) with respect to any Swingline Loan, the day that such Loan is required
to be repaid.
 
“Interest Period” means, with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
(or, with the consent of each Lender, nine or twelve months) thereafter, as the
applicable Borrower may elect; provided that (a) if any Interest Period would
end on a day other than a Business Day, such Interest Period shall be extended
to the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (b) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period.  For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and, in
the case of a Revolving Borrowing, thereafter shall be the effective date of the
most recent conversion or continuation of such Borrowing.
 
“Issuing Bank” means any Lender or Affiliate of a Lender that agrees (as
provided in Section 2.05(i)) to issue Letters of Credit, in its capacity as an
issuer of Letters of Credit, and its respective successors and assigns in such
capacity as provided in Section 2.05(i).  The initial Issuing Banks are
identified in Schedule 2.05.  Subject to the consent of the Parent Borrower,
which consent shall not be unreasonably withheld, any Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit to be issued by one or
more of its Affiliates, in which case the term “Issuing Bank” shall include any
such Affiliate with respect to Letters of Credit issued by such Affiliate.
 
“LC Agent” means Wachovia Bank, National Association.
 
“LC Disbursement” means a payment made by an Issuing Bank pursuant to a Letter
of Credit.
 
“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the
Account Parties at such time.  The LC Exposure of any Lender at any time shall
be its Applicable Percentage of the total LC Exposure at such time.
 
 
 
 
 
14
“Lenders” means the Persons listed on Schedule 2.01 and any other Person that
shall have become a party hereto pursuant to an Assignment and Assumption, other
than any such Person that ceases to be a party hereto pursuant to an Assignment
and Assumption.  Unless the context otherwise requires, the term “Lenders”
includes the Swingline Lenders.
 
“Letter of Credit” means any letter of credit issued pursuant to this
Agreement.  Each Existing Letter of Credit shall be deemed to constitute a
Letter of Credit as of the Effective Date.  Each Letter of Credit shall be
either a Trade Letter of Credit or a Stand-by Letter of Credit.
 
“Leverage Ratio” means, on any date, the ratio of (a) Funded Indebtedness of
Holdings and its Subsidiaries (on a consolidated basis) as of such date to (b)
Consolidated EBITDA for the period of four consecutive fiscal quarters of
Holdings ended on such date.
 
“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Reuters BBA Libor Rates Page 3750 (or on any
successor or substitute page of such service, or any successor to or substitute
for such service, providing rate quotations comparable to those currently
provided on such page of such service, as determined by the Administrative Agent
from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London interbank market) at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, as the rate for dollar deposits with a maturity comparable to
such Interest Period.  In the event that such rate is not available at such time
for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing
for such Interest Period shall be the rate at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period.
 
“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset and (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset.
 
“Loan” means a loan made by a Lender to a Borrower pursuant to this Agreement.
 
“Loan Documents” means this Agreement and the Collateral Agreement.
 
“Loan Parties” means Holdings, the Parent Borrower, the Borrowing Subsidiaries,
the Account Parties, the Additional Grantors and each Material Subsidiary that
is a Guarantee Party.
 
“Material Adverse Effect” means (a) a materially adverse effect on the business,
assets, operations or condition of Holdings and its Subsidiaries, taken as a
whole, (b) a material impairment of the ability of the Loan Parties to perform
any of their obligations under the Loan Documents or (c) a material impairment
of the rights of or benefits available to the Lenders or
 
 
 
 
 
15
the Administrative Agent under any Loan Document (except the Collateral
Agreement during a Release Period) (other than any such impairment of rights or
benefits that is primarily attributable to (i) action taken by one or more
Lenders or the Administrative Agent (excluding any action against one or more
Lenders or the Administrative Agent taken by Holdings, the Parent Borrower, any
Borrowing Subsidiary, any Account Party, their subsidiaries or their affiliates)
or (ii) circumstances that are unrelated to Holdings, the Parent Borrower, any
Borrowing Subsidiary, any Account Party, their Subsidiaries or their
Affiliates).
 
“Material Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of any one or
more of Holdings and its Subsidiaries in an aggregate principal amount exceeding
$50,000,000.  For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of Holdings or any Subsidiary in respect of any Swap
Agreement at any time shall be the maximum aggregate amount (giving effect to
any netting agreements) that Holdings or such Subsidiary would be required to
pay if such Swap Agreement were terminated at such time.
 
“Material Subsidiary” means, at any date of determination, any Subsidiary of
Holdings then having Net Tangible Assets representing more than 3% of the total
Net Tangible Assets of Holdings and its Subsidiaries.
 
“Maturity Date” means April 8, 2012.
 
“Maximum Rate” has the meaning assigned to such term in Section 9.13.
 
“Merger” has the meaning assigned to such term in the definition of the term
“Permitted Holding Company Reorganization”.
 
“Merger Subsidiary” has the meaning assigned to such term in the definition of
the term “Permitted Holding Company Reorganization”.
 
“Moody’s” means Moody’s Investors Service, Inc.
 
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA maintained, sponsored or contributed to by Holdings, the Parent
Borrower, Purchasing or any ERISA Affiliate.
 
“Net Tangible Assets” means the aggregate amount at which the assets of Holdings
and its Subsidiaries are reflected, in accordance with GAAP as in effect on the
date hereof, on the asset side of the consolidated balance sheet, as at the
close of a monthly accounting period (selected by the Parent Borrower) ending
within the 65 days next preceding the date of determination, of Holdings and its
Subsidiaries (after deducting all valuation and qualifying reserves relating to
such assets), except any of the following described items that may be included
among such assets:
 
(a)  trademarks, patents, goodwill and similar intangibles;
 
(b)  investments in and advances to Subsidiaries; and
 
 
 
 
 
16
(c)  capital lease property rights,
 
after deducting from such amount current liabilities (other than deferred Tax
effects) as reflected, in accordance with GAAP as in effect on the date hereof,
on such balance sheet.
 
“New Holdco” has the meaning assigned to such term in the definition of the term
“Permitted Holding Company Reorganization”.
 
“Non-Material Subsidiary” means, at any date of determination, any Subsidiary of
Holdings that is not a Material Subsidiary.
 
“Obligations” has the meaning assigned to such term in the Collateral Agreement.
 
“Off-Balance Sheet Liability” of a Person means (a) any repurchase obligation or
liability of such Person with respect to accounts or notes receivable sold by
such Person, (b) any indebtedness, liability or obligation under any so-called
“synthetic lease” transaction entered into by such Person, or (c) any
indebtedness, liability or obligation arising with respect to any other
transaction which is the functional equivalent of or takes the place of
borrowing but which does not constitute a liability on the balance sheets of
such Person (other than operating leases).
 
“Other Connection Taxes” means, with respect to the Administrative Agent, any
Lender, any Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of any Loan Party hereunder or under any other Loan
Document, Taxes imposed as a result of a present or former connection between
such recipient and the jurisdiction imposing such Tax (other than connections
arising from such recipient having executed, delivered, or become a party to,
performed its obligations or received payments under, received or perfected a
security interest under, sold or assigned an interest in any Loan or Loan
Document, engaged in any other transaction pursuant to, or enforced any Loan
Documents).
 
“Other Taxes” means any and all present or future stamp, court or documentary
Taxes or any excise, property, intangible, recording, filing or similar Taxes
that arise from the execution, delivery, performance enforcement of,
registration of, receipt or perfection of a security interest under, any payment
made under, or otherwise with respect to, any Loan Document.
 
“Parent Borrower” means J. C. Penney Corporation, Inc., a Delaware corporation.
 
“Participant” has the meaning assigned to such term in Section 9.04.
 
“Participant Register” has the meaning assigned to such term in Section
9.04(c)(i).
 
“Participation Amount” has the meaning assigned to such term in Section 2.05(e).
 
“Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)).
 
 
 
 
 
17
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.
 
“Perfection Certificate” means a certificate in the form of Exhibit C to the
Collateral Agreement or any other form approved by the Administrative Agent.
 
“Permitted Encumbrances” means:
 
(a)  Liens imposed by law for Taxes, assessments or governmental charges or
levies that are not yet due or are being contested in compliance with
Section 5.05;
 
(b)  carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s,
repairmen’s and other like Liens imposed by law, arising in the ordinary course
of business and securing obligations that are not overdue by more than 30 days
or are being contested in compliance with Section 5.05;
 
(c)  pledges and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other social security
laws or regulations;
 
(d)  deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;
 
(e)  judgment liens in respect of judgments that do not constitute an Event of
Default under clause (k) of Section 7.01;
 
(f)  easements, zoning restrictions, rights-of-way and similar encumbrances on
real property imposed by law or arising in the ordinary course of business that
do not secure any monetary obligations and do not materially detract from the
value of the affected property or interfere with the ordinary conduct of
business of Holdings or any Subsidiary; and
 
(g)  the special property interest of a consignor in respect of goods subject to
consignment;
 
provided that the term “Permitted Encumbrances” shall not include any Lien
securing Indebtedness.
 
“Permitted Fee Receiver” means any Fee Receiver that, with respect to any fees
paid under Section 2.11(a) or Section 2.11(b), delivers to the Parent Borrower
and the Administrative Agent, on or prior to the date on which such Fee Receiver
becomes a party hereto (and from time to time thereafter upon the request of the
Parent Borrower and the Administrative Agent, unless such Fee Receiver becomes
legally unable to do so solely as a result of a Change in Law after becoming a
party hereto), accurate and duly completed copies (in such number as requested
by the recipient) of one or more of Internal Revenue Service Forms W-9, W-8ECI,
W-8EXP, W-8BEN or W-8IMY (together with, if applicable, one of the
aforementioned forms duly completed from each direct or indirect beneficial
owner of such Fee Receiver) or any successor
 
 
 
 
 
18
form thereto that entitles such Fee Receiver to a complete exemption from U.S.
withholding Tax on such payments (provided that, in the case of the Internal
Revenue Service Form W-8BEN, a Fee Receiver providing such form shall qualify as
a Permitted Fee Receiver only if such form establishes such exemption on the
basis of the “business profits” or “other income” articles of a tax treaty to
which the United States is a party and provides a U.S. taxpayer identification
number), in each case together with such supplementary documentation as may be
prescribed by applicable law to permit the Parent Borrower or the Administrative
Agent to determine whether such Fee Receiver is entitled to such complete
exemption.
 
“Permitted Holding Company Reorganization” means a transaction pursuant to which
(a) a new subsidiary (“New Holdco”) is organized as a direct or indirect wholly
owned Subsidiary of Holdings, (b) New Holdco organizes a new subsidiary (the
“Merger Subsidiary”), which subsidiary is a wholly owned Subsidiary of New
Holdco and (c) the Merger Subsidiary merges with and into Holdings (the
“Merger”), pursuant to which (i) each outstanding share of capital stock of any
class in Holdings is converted into one share of capital stock of the same class
of New Holdco so that each Person that beneficially owned, directly or
indirectly, capital stock of Holdings immediately prior to the consummation of
the Merger continues to beneficially own, directly or indirectly, the same
percentage of capital stock of the same class in New Holdco following the
consummation of the Merger, (ii) each share of capital stock of New Holdco owned
by the Parent Borrower immediately prior to the consummation of the Merger is
cancelled and ceases to exist immediately following the consummation of the
Merger,  (iii) Holdings becomes a direct wholly owned subsidiary of New Holdco
and (iv) no other Person receives any consideration; provided that no such
transaction shall constitute a “Permitted Holding Company Reorganization”
unless, at or prior to the consummation of the Merger, (A) New Holdco shall
become a Guarantee Party and shall take all actions necessary to satisfy the
Collateral and Guarantee Requirement as a Guarantee Party and (B) New Holdco,
Holdings, the Parent Borrower and the Administrative Agent shall enter into an
amendment to this Agreement, in form and substance reasonably satisfactory to
the Administrative Agent, providing for (1) the addition of New Holdco as a
party to this Agreement as a Loan Party subject to the same obligations and
provisions as are applicable to Holdings hereunder, (2) the substitution of New
Holdco for Holdings in the definition of the term “Change in Control” and in all
contexts applicable to consolidated financial calculations and reporting
requirements (including in the definition of the term “Leverage Ratio”) and (3)
the addition of a new paragraph in Section 6.03 to the effect that New Holdco
shall not engage in any business or activity other than the ownership of all the
outstanding shares of capital stock of Holdings and activities incidental
thereto and that New Holdco will not acquire any assets (other than shares of
capital stock of Holdings, cash and Permitted Investments) or incur any
liabilities (other than liabilities under the Loan Documents and other
Indebtedness permitted by this Agreement, liabilities imposed by law, including
Tax liabilities, and other liabilities incidental to its existence and permitted
business and activities).
 
“Permitted Investments” means:
 
(a)  direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (or by any
agency or instrumentality thereof);
 
 
 
 
 
19
(b)  investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, a credit rating of
at least A1 from S&P, P1 from Moody’s or F1 from Fitch;
 
(c)  investments in certificates of deposit, banker’s acceptances and time
deposits issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, (i) any domestic or offshore office of any
commercial bank organized under the laws of the United States of America or any
State thereof, (ii) any office located within the United States of America or in
a foreign jurisdiction that has a tax treaty with the United States of America
of a commercial bank organized under the laws of another country or (iii) any
office located in London of any commercial bank organized under the laws of the
United States of America, any Asian country or any European country, in each
case which has a combined capital and surplus and undivided profits of not less
than $500,000,000; provided, however, that investments with any bank that has a
combined capital and surplus and undivided profits of less than $500,000,000 are
permitted if the Parent Borrower maintains a banking relationship with such
bank;
 
(d)  fully collateralized repurchase agreements with a term of not more than 30
days for securities described in clause (a) above and entered into with a
financial institution satisfying the criteria described in clause (c) above; and
 
(e)  money market funds that (i) comply with the criteria set forth in
Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of
1940 and (ii) have portfolio assets of at least $3,000,000,000; provided, that
investments in any money market fund with portfolio assets of less than
$3,000,000,000 are permitted if such fund has received a rating of AAA from S&P
or Aaa from Moody’s.
 
“Permitted Long-Term Indebtedness” means unsecured Indebtedness for borrowed
money of Holdings or the Parent Borrower; provided that such Indebtedness shall
mature later than, and shall not be subject to any scheduled payment of
principal, mandatory sinking fund requirement or similar repayment obligation
prior to, the Maturity Date.
 
“Person” means any individual, corporation, limited liability company, trust,
joint venture, association, company, partnership, unincorporated organization,
Governmental Authority or other entity.
 
“Plan” means any pension plan (other than a Multiemployer Plan) subject to the
provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of
ERISA that is maintained, sponsored or contributed to by Holdings or any ERISA
Affiliate.
 
“Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
 
“Purchasing” means J. C. Penney Purchasing Corporation, a New York corporation.
 
 
 
 
 
20
“Realty Company” means each of JCP Realty Inc. and its Subsidiaries that is
principally engaged in the business of managing and owning real estate and real
estate-related interests.
 
“Register” has the meaning assigned to such term in clause (iv) of
Section 9.04(b).
 
“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.
 
“Release Period” means a period (a) commencing upon the release and termination
of the security interests in the Collateral pursuant to Section 6.15(d) of the
Collateral Agreement and (b) ending when Holdings and the Parent Borrower are
required to satisfy the Collateral and Guarantee Requirement as provided in
Section 5.11(b).
 
“Relevant Date” has the meaning assigned to such term in Section 2.16.
 
“Required Lenders” means, at any time, Lenders having Revolving Credit Exposures
and unused Commitments representing more than 50% of the sum of the total
Revolving Credit Exposures and unused Commitments at such time.
 
“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interests in Holdings
or any Subsidiary, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of
any Equity Interests in Holdings or any Subsidiary; provided that a dividend,
distribution or payment payable solely in Equity Interests (other than
Disqualified Equity Interests) in Holdings shall not constitute a Restricted
Payment.
 
“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender’s Revolving Loans and its
LC Exposure and Swingline Exposure at such time.
 
“Revolving Loan” means a Loan made pursuant to Section 2.01.
 
“S&P” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill
Companies, Inc.
 
“Specified Date” means the date that is 180 days after the Maturity Date.
 
“Stand-by Letter of Credit” means any Letter of Credit that is not a Trade
Letter of Credit.
 
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the
 
 
 
 
 
21
Administrative Agent is subject for eurocurrency funding (currently referred to
as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve
percentages shall include those imposed pursuant to such
Regulation D.  Eurodollar Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable regulation.  The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
 
“subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.
 
“Subsidiary” means any subsidiary of Holdings, including the Parent Borrower but
excluding any Excluded Subsidiary.
 
“Subsidiary Borrower Election” means an agreement executed by the Parent
Borrower and a Subsidiary, and delivered to and acknowledged by the
Administrative Agent, pursuant to which the Parent Borrower designates such
Subsidiary to be, and such Subsidiary agrees to be, a Borrower hereunder, in
accordance with Section 2.20.  Each Subsidiary Borrower Election shall be in a
form reasonably satisfactory to the Administrative Agent.
 
“Subsidiary Borrower Termination” means a notice executed by the Parent Borrower
and delivered to the Administrative Agent terminating a Subsidiary’s status as a
Borrower hereunder in accordance with Section 2.20.
 
“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement involving, or settled
by reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of Holdings or the
Subsidiaries shall be a Swap Agreement.
 
“Swingline Exposure” means, at any time, the aggregate principal amount of all
Swingline Loans outstanding at such time.  The Swingline Exposure of any Lender
at any time shall be its Applicable Percentage of the total Swingline Exposure
at such time.
 
 
 
 
 
22
“Swingline Lender” means JPMorgan Chase Bank, N.A., and each other Lender that
agrees to be a Swingline Lender hereunder as provided in Section 2.04, in each
case in its capacity as a lender of Swingline Loans hereunder.
 
“Swingline Loan” means a Loan made pursuant to Section 2.04.
 
“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority,
including any interest, additions to tax or penalties applicable thereto.
 
“Trade Letter of Credit” means any Letter of Credit issued for the purpose of
providing the primary payment mechanism in connection with the purchase of any
materials, goods or services by an Account Party in the ordinary course of
business of such Account Party.
 
“Transactions” means the execution, delivery and performance by each Loan Party
of the Loan Documents to which it is or is to be a party, the borrowing of Loans
and the issuance of Letters of Credit hereunder.
 
“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
 
“U.S. Tax Compliance Certificate” has the meaning assigned to such term in
Section 2.16(g).
 
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
 
SECTION 1.02. Classification of Loans and Borrowings.  For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving
Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a
“Eurodollar Revolving Loan”).  Borrowings also may be classified and referred to
by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar
Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving Borrowing”).
 
SECTION 1.03. Terms Generally.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.  Whenever the
context may require, any pronoun shall include the corresponding mascu­line,
feminine and neuter forms.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  The word
“will” shall be construed to have the same meaning and effect as the word
“shall”.  Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person’s successors and assigns, (c) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not
 
 
 
 
 
23
to any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
 
SECTION 1.04. Accounting Terms; GAAP.  Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if Holdings
or the Parent Borrower notifies the Administrative Agent that Holdings or the
Parent Borrower requests an amendment to any provision hereof to eliminate the
effect of any change occurring after the date hereof in GAAP or in the
application thereof on the operation of such provision (or if the Administrative
Agent notifies Holdings or the Parent Borrower that the Required Lenders request
an amendment to any provision hereof for such purpose), regardless of whether
any such notice is given before or after such change in GAAP or in the
application thereof, then such provision shall be interpreted on the basis of
GAAP as in effect and applied immediately before such change shall have become
effective until such notice shall have been withdrawn or such provision amended
in accordance herewith.  It is understood that all financial computations
hereunder with respect to Holdings and the Subsidiaries (including computations
of Consolidated EBITDA and Net Tangible Assets and compliance with Sections 6.09
and 6.10) shall be made excluding the accounts of all Excluded Subsidiaries.
 
ARTICLE II
 
The Credits
 
SECTION 2.01. Commitments.  Subject to the terms and conditions set forth
herein, each Lender agrees to make Revolving Loans to the Borrowers from time to
time during the Availability Period in an aggregate principal amount that will
not result in (a) such Lender’s Revolving Credit Exposure exceeding such
Lender’s Commitment or (b) the sum of the total Revolving Credit Exposures
exceeding the total Commitments.  Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrowers may borrow, prepay and
reborrow Revolving Loans.
 
SECTION 2.02. Loans and Borrowings.  (a)  Each Revolving Loan shall be made as
part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in
accordance with their respective Commitments.  The failure of any Lender to make
any Loan required to be made by it shall not relieve any other Lender of its
obligations hereunder; provided that the Commitments of the Lenders are several
and no Lender shall be responsible for any other Lender’s failure to make Loans
as required.
 
(b) Subject to Section 2.13, each Revolving Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the applicable Borrower may request
in accordance herewith.  Each Swingline Loan shall be an ABR Loan.  Each Lender
at its option may make any Eurodollar Loan by causing any domestic or foreign
branch or Affiliate of such Lender to make such Loan; provided that any exercise
of such option shall not affect the
 
 
 
 
 
24
obligation of the relevant Borrower to repay such Loan in accord­ance with the
terms of this Agreement.
 
(c) At the commencement of each Interest Period for any Eurodollar Revolving
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $5,000,000 and not less than $10,000,000.  At the time that each ABR
Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that
is an integral multiple of $5,000,000 and not less than $10,000,000; provided
that an ABR Revolving Borrowing may be in an aggregate amount that is equal to
the entire unused balance of the total Commitments or that is required to
finance the reimbursement of an LC Disbursement as contemplated by Section
2.05(e).  Each Swingline Loan shall be in an amount that is an integral multiple
of $1,000,000 and not less than $5,000,000.  Borrowings of more than one Type
and Class may be outstanding at the same time; provided that there shall not at
any time be more than a total of 12 Eurodollar Revolving Borrowings outstanding.
 
(d) Notwithstanding any other provision of this Agreement, no Borrower shall be
entitled to request, or to elect to convert or continue, any Borrowing if the
Interest Period requested with respect thereto would end after the Maturity
Date.
 
SECTION 2.03. Requests for Revolving Borrowings.   To request a Revolving
Borrowing, a Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m.,
New York City time, three Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New
York City time, on the day of the proposed Borrowing; provided that any such
notice given by the Parent Borrower of an ABR Revolving Borrowing to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.05(e) may be
given not later than 10:00 a.m., New York City time, on the date of the proposed
Borrowing.  Each such telephonic Borrowing Request shall be irrevocable and
shall be confirmed promptly by hand delivery, telecopy or electronic
transmission to the Administrative Agent of a written Borrowing Request in a
form approved by the Administrative Agent and signed by the relevant
Borrower.  Each such telephonic and written Borrowing Request shall specify the
following information in compliance with Section 2.02:
 

 
(i)
the aggregate amount of the requested Borrowing;

 

 
(ii)
the date of such Borrowing, which shall be a Business Day;

 

 
(iii)
 whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

 

 
(iv)
 in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto,

which shall be a period contemplated by the definition of the term “Interest
Period”; and
 

 
(v)
 the location and number of the relevant Borrower’s account to which funds are
to be

disbursed, which shall comply with the requirements of Section 2.06
 
 
 
 
25
If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing.  If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing, then
the relevant Borrower shall be deemed to have selected an Interest Period of one
month’s duration.  Promptly following receipt of a Borrowing Request in
accordance with this Section, the Administrative Agent shall advise each Lender
of the details thereof and of the amount of such Lender’s Loan to be made as
part of the requested Borrowing.
 
SECTION 2.04. Swingline Loans.  (a)  Subject to the terms and conditions set
forth herein, the Swingline Lenders agree to make Swingline Loans to the
Borrowers from time to time during the Availability Period, in an aggregate
principal amount at any time outstanding that will not result in (i) the
aggregate principal amount of outstanding Swingline Loans exceeding $50,000,000
or (ii) the sum of the total Revolving Credit Exposures exceeding the total
Commitments; provided that no Swingline Lender shall be required to make a
Swingline Loan to refinance an outstanding Swingline Loan.  Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrowers
may borrow, prepay and reborrow Swingline Loans.
 
(b) To request a Swingline Loan, a Borrower shall notify the Administrative
Agent and the applicable Swingline Lender of such request by telephone
(confirmed by telecopy or electronic transmission), not later than 12:00 noon,
New York City time, on the day of a proposed Swingline Loan.  Each such notice
shall be irrevocable and shall specify the requested date (which shall be a
Business Day) and amount of the requested Swingline Loan.  The applicable
Swingline Lender shall make each Swingline Loan available to the relevant
Borrower by means of a credit to the general deposit account of such Borrower
with such Swingline Lender (or, in the case of a Swingline Loan made to finance
the reimbursement of an LC Disbursement as provided in Section 2.05(e), by
remittance to the applicable Issuing Bank) by 3:00 p.m., New York City time, on
the requested date of such Swingline Loan.
 
(c) A Swingline Lender may by written notice given to the Administrative Agent
not later than 10:00 a.m., New York City time, on any Business Day require the
Lenders to acquire participations on such Business Day in all or a portion of
such Swingline Lender’s Swingline Loans outstanding.  Such notice shall specify
the aggregate amount of Swingline Loans in which Lenders will
participate.  Promptly upon receipt of such notice, the Administrative Agent
will give notice thereof to each Lender, specifying in such notice such Lender’s
Applicable Percentage of such Swingline Loan or Loans.  Each Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the Administrative Agent, for the account of the applicable Swingline
Lender, such Lender’s Applicable Percentage of such Swingline Loan or
Loans.  Each Lender acknowledges and agrees that its obligation to acquire
participations in Swingline Loans pursuant to this paragraph is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.  Each Lender shall
comply with its obligation under this paragraph by wire transfer of immediately
available funds, in the same manner as provided in Section 2.06 with respect to
Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to
the payment obligations of the Lenders), and the Administrative Agent shall
promptly pay to the
 
 
 
 
 
26
applicable Swingline Lender the amounts so received by it from the Lenders.  The
Administrative Agent shall notify the relevant Borrower of any participations in
any Swingline Loan acquired pursuant to this paragraph, and thereafter payments
in respect of such Swingline Loan shall be made to the Administrative Agent and
not to the applicable Swingline Lender.  Any amounts received by a Swingline
Lender from a Borrower (or other party on behalf of such Borrower) in respect of
a Swingline Loan of such Borrower after receipt by such Swingline Lender of the
proceeds of a sale of participations therein shall be promptly remitted to the
Administrative Agent; any such amounts received by the Administrative Agent
shall be promptly remitted by the Administrative Agent to the Lenders that shall
have made their payments pursuant to this paragraph and to such Swingline
Lender, as their interests may appear; provided that any such payment so
remitted shall be repaid to such Swingline Lender or to the Administrative
Agent, as applicable, if and to the extent such payment is required to be
refunded to such Borrower for any reason.  The purchase of participations in a
Swingline Loan pursuant to this paragraph shall not relieve the relevant
Borrower of any default in the payment thereof.
 
(d) The Parent Borrower may designate any Lender to be a Swingline Lender
hereunder subject to the prior written consent of the Administrative Agent
(which consent shall not be unreasonably withheld) and such Lender.  Any such
designation shall not be effective until confirmed in a written agreement signed
by the Parent Borrower, the Administrative Agent and the applicable Lender.
 
SECTION 2.05. Letters of Credit.  (a)  General.  Subject to the terms and
conditions set forth herein, (i) any Account Party may request the issuance of
Letters of Credit for its own account, in a form reasonably acceptable to the
applicable Issuing Bank, at any time and from time to time during the
Availability Period, and (ii) the Issuing Banks agree to issue Letters of
Credit.  In the event of any inconsistency between the terms and conditions of
this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by an Account Party to, or entered into
by an Account Party with, any Issuing Bank relating to any Letter of Credit, the
terms and conditions of this Agreement shall control.
 
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.  To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), an Account Party shall hand
deliver or telecopy (or transmit by electronic communication, if arrangements
for doing so have been approved by the applicable Issuing Bank) to the
applicable Issuing Bank (reasonably in advance of the requested date of
issuance, amendment, renewal or extension) a notice requesting the issuance of a
Letter of Credit, or identifying the Letter of Credit to be amended, renewed or
extended, and specifying the date of issuance, amendment, renewal or extension
(which shall be a Business Day), the date on which such Letter of Credit is to
expire (which shall comply with paragraph (c) of this Section), the amount of
such Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
Letter of Credit.  If requested by the applicable Issuing Bank, such Account
Party also shall submit a letter of credit application on such Issuing Bank’s
standard form in connection with any request for a Letter of Credit.  A Letter
of Credit shall be issued, amended, renewed or extended only if (and upon
issuance, amendment, renewal or extension of each Letter of Credit the
applicable Account Party shall be deemed to represent and warrant that), after
giving effect to such
 
 
 
 
 
27
issuance, amendment, renewal or extension, (i) the LC Exposure shall not exceed
$500,000,000 and (ii) the sum of the total Revolving Credit Exposures shall not
exceed the total Commitments.
 
Each Issuing Bank shall provide to the LC Agent and the Administrative Agent not
later than 3:00 p.m. (or promptly thereafter, if unable to do so by 3:00 p.m.),
New York City time, on the first Business Day of each calendar week a report of
such Issuing Bank setting forth (i) the aggregate amount of all Letters of
Credit issued by such Issuing Bank that are outstanding as of 3:00 p.m. on the
last Business Day of the preceding calendar week, (ii) the average daily undrawn
amount of all Letters of Credit issued by such Issuing Bank for each calendar
day during the period since the last calendar day covered by the preceding
weekly report (or, in the case of the first weekly report, during the period
from and including the Effective Date) and (iii) the aggregate amount of LC
Disbursements made by such Issuing Bank and not reimbursed as of the time of
such report.  In addition to providing such weekly reports, each Issuing Bank
shall, from time to time upon request of the LC Agent or the Administrative
Agent, provide the LC Agent and the Administrative Agent with information of the
type referred to in the immediately preceding sentence on a more frequent basis.
 
The LC Agent shall provide to each Lender not later than 3:00 p.m. (or promptly
thereafter, if unable to do so by 3:00 p.m.), New York City time, on the first
Business Day of each calendar month a report setting forth the aggregate amount
of all Letters of Credit that are outstanding as of the date of the most recent
weekly reports delivered by the Issuing Banks to the Administrative Agent
pursuant to clause (i) of the immediately preceding paragraph.
 
Neither the LC Agent nor the Administrative Agent nor any Issuing Bank shall
have any duty or obligation at any time to monitor the LC Exposure relative to
the total Commitments and neither the LC Agent nor the Administrative Agent nor
any Issuing Bank shall have any liability in respect of the issuance, amendment,
renewal or extension of a Letter of Credit to the extent that such issuance,
amendment, renewal or extension results in the total Revolving Credit Exposures
exceeding the total Commitments.  It shall be the responsibility of the
Borrowers and the Account Parties to ensure that, after giving effect to the
issuance, amendment, renewal or extension of each Letter of Credit, the sum of
the total Revolving Credit Exposures does not exceed the total Commitments.
 
(c) Expiration Date.  Except for Extended Letters of Credit issued in accordance
with Section 2.05(k), each Letter of Credit shall expire at or prior to the
close of business on the date that is five Business Days prior to the Maturity
Date.
 
(d) Participations.  By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action
on the part of the applicable Issuing Bank or the Lenders, the Issuing Bank in
respect of such Letter of Credit hereby grants to each Lender, and each Lender
hereby acquires from such Issuing Bank, a participation in such Letter of Credit
equal to such Lender’s Applicable Percentage of the aggregate amount available
to be drawn under such Letter of Credit.  In consideration and in furtherance of
the foregoing, each Lender hereby absolutely and unconditionally agrees to pay
to the Administrative Agent, for the account of the applicable Issuing Bank,
such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing
Bank and not reimbursed by the applicable Account Party on the date due as
provided in paragraph (e) of this Section, or
 
 
 
 
 
28
of any reimbursement payment required to be refunded to an Account Party for any
reason.  Each Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
 
(e) Reimbursement.  If an Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit, (i) the applicable Account Party shall reimburse such LC
Disbursement by paying to such Issuing Bank an amount equal to such LC
Disbursement not later than 12:00 noon, New York City time, on the date that
such LC Disbursement is made, if such Account Party shall have received notice
of such LC Disbursement prior to 10:00 a.m., New York City time, on such date,
or, if such notice has not been received by such Account Party prior to such
time on such date, then not later than 12:00 noon, New York City time, on (A)
the Business Day that such Account Party receives such notice, if such notice is
received prior to 10:00 a.m., New York City time, on the day of receipt, or (B)
the Business Day immediately following the day that such Account Party receives
such notice, if such notice is not received prior to such time on the day of
receipt; provided that, if such LC Disbursement is not less than $10,000,000,
the Parent Borrower may, subject to the conditions to borrowing set forth
herein, request in accordance with Section 2.03 or 2.04 that such payment be
financed with an ABR Revolving Borrowing by the Parent Borrower or a Swingline
Loan to the Parent Borrower in an equivalent amount and, to the extent so
financed, such Account Party’s obligation to make such payment shall be
discharged and replaced by the resulting ABR Revolving Borrowing or Swingline
Loan; or (ii) such Issuing Bank may, if arrangements to do so have been agreed
upon in writing by the Parent Borrower, a Borrowing Subsidiary or an Account
Party and such Issuing Bank, obtain reimbursement of such LC Disbursement by
debiting directly from an account of the Parent Borrower, such Borrowing
Subsidiary or such Account Party maintained with such Issuing Bank (or one of
its Affiliates) an amount equal to such LC Disbursement; provided that the
foregoing shall not be construed to prevent the applicable Account Party from
reimbursing LC Disbursements of an Issuing Bank in accordance with alternate
procedures agreed upon with such Issuing Bank, so long as such reimbursements
are made no later than required under clause (i) above.  If such Account Party
fails to make such payment when due or the applicable Issuing Bank is unable to
debit the designated account of the Parent Borrower, the relevant Borrowing
Subsidiary or the relevant Account Party for the full amount of the LC
Disbursement, in each case as provided in the preceding sentence, the applicable
Issuing Bank shall notify the LC Agent (and upon receipt of such notice the LC
Agent shall notify each Lender and the Administrative Agent) of the applicable
LC Disbursement, the payment then due from such Account Party in respect thereof
and (in the case of such notice from the LC Agent to each Lender) such Lender’s
Applicable Percentage thereof.  Promptly following receipt of such notice, each
Lender shall pay to the Administrative Agent its Applicable Percentage of the
payment then due from such Account Party (the “Participation Amount”), in the
same manner as provided in Section 2.06 with respect to Loans made by such
Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment
obligations of the Lenders), and the Administrative Agent shall promptly pay to
the applicable Issuing Bank the amounts so received by it from the
Lenders.  Promptly following receipt by the Administrative Agent of any payment
from such Account Party pursuant to this paragraph, the Administrative Agent
shall distribute such
 
 
 
 
 
29
payment to the applicable Issuing Bank or, to the extent that Lenders have made
payments pursuant to this paragraph to reimburse such Issuing Bank, then to such
Lenders and such Issuing Bank as their interests may appear.  Any payment made
by a Lender pursuant to this paragraph to reimburse an Issuing Bank for any LC
Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan
as contemplated above) shall not constitute a Loan and shall not relieve such
Account Party of its obligation to reimburse such LC Disbursement.
 
(f) Obligations Absolute.  An Account Party’s obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by an Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, such Account Party’s obligations
hereunder.  Neither the LC Agent, the Administrative Agent, the Lenders nor any
Issuing Bank, nor any of their respective Related Parties, shall have any
liability or responsibility by reason of or in connection with the issuance or
transfer of any Letter of Credit or any payment or failure to make any payment
thereunder (irrespective of any of the circumstances referred to in the
preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of any Issuing Bank; provided
that the foregoing shall not be construed to excuse the applicable Issuing Bank
from liability to the applicable Account Party to the extent of any direct
damages (as opposed to consequential damages, claims in respect of which are
hereby waived by such Account Party to the extent permitted by applicable law)
suffered by such Account Party that are caused by the applicable Issuing Bank’s
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof.  The parties
hereto expressly agree that, in the absence of gross negligence or willful
misconduct on the part of the applicable Issuing Bank (as finally determined by
a court of competent jurisdiction) or such other standard of care as shall be
separately agreed to in writing by such Issuing Bank and the applicable Account
Party, such Issuing Bank shall be deemed to have exercised care in each such
determination.  In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the applicable Issuing Bank may, in its sole discretion,
either accept and make payment upon such documents without responsibility for
further investigation, regardless of any notice or information to the contrary,
or refuse to accept and make payment upon such documents if such documents are
not in strict compliance with the terms of such Letter of Credit.
 
(g) Disbursement Procedures.  The applicable Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit.  Such Issuing Bank shall promptly
notify the LC Agent, the
 
 
 
 
 
30
Administrative Agent and the applicable Account Party by telephone (confirmed by
telecopy or electronic transmission), or by such other means of communication
(if any) as have been agreed upon by such Account Party and such Issuing Bank,
of such demand for payment and whether such Issuing Bank has made or will make
an LC Disbursement thereunder; provided that any failure to give or delay in
giving such notice shall not relieve such Account Party of its obligation to
reimburse such Issuing Bank and the Lenders with respect to any such LC
Disbursement.
 
(h) Interim Interest.  If an Issuing Bank shall make any LC Disbursement, then,
unless the applicable Account Party shall reimburse such LC Disbursement in full
on the date such LC Disbursement is made, the unpaid amount thereof shall bear
interest, for each day from and including the date such LC Disbursement is made
to but excluding the date that such Account Party reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
provided that, if such Account Party fails to reimburse such LC Disbursement
when due pursuant to paragraph (e) of this Section, then Section 2.12(c) shall
apply.  Interest accrued pursuant to this paragraph shall be for the account of
the applicable Issuing Bank, except that interest accrued on and after the date
of payment by any Lender pursuant to paragraph (e) of this Section to reimburse
an Issuing Bank shall be for the account of such Lender to the extent of such
payment.
 
(i) Designation and Replacement of Issuing Banks.  An Account Party may
designate any Lender (or Affiliate of a Lender) to be an Issuing Bank hereunder,
subject to such Lender’s (or Affiliate of such Lender’s) agreement, in its sole
discretion, to become an Issuing Bank.  Such Account Party shall notify the
Administrative Agent of any such designation.  An Issuing Bank may be replaced
at any time by written agreement among the applicable Account Party, the
Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank
(which must be a Lender or an Affiliate of a Lender).  The Administrative Agent
shall notify the Lenders of any such replacement of an Issuing Bank.  At the
time any such replacement shall become effective, the applicable Account Party
shall pay all unpaid fees accrued for the account of the replaced Issuing Bank
pursuant to Section 2.11(b).  From and after the effective date of any such
replacement, (i) the successor Issuing Bank shall have all the rights and
obligations of an Issuing Bank under this Agreement with respect to Letters of
Credit to be issued thereafter and (ii) references herein to the term “Issuing
Bank” shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall
require.  After the replacement of an Issuing Bank hereunder, the replaced
Issuing Bank shall remain a party hereto and shall continue to have all the
rights and obligations of an Issuing Bank under this Agreement with respect to
Letters of Credit issued by it prior to such replacement, but shall not be
required to issue additional Letters of Credit.
 
(j) Cash Collateralization.  If (i) any Event of Default shall occur and be
continuing, (ii) the Administrative Agent has declared the Loans outstanding
hereunder due and payable pursuant to Section 7.01 or (iii) in the case of a
Defaulting Lender, there shall exist any LC Exposure that cannot be reallocated
among the non-Defaulting Lenders pursuant to Section 2.21(c) then, on the
Business Day that an Account Party receives notice from the Administrative Agent
or the Required Lenders demanding the deposit of cash collateral pursuant to
this paragraph, such Account Party shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders (or, in the case of clause
 
 
 
 
 
31
(iii), the non-Defaulting Lenders), an amount in cash equal to the LC Exposure
(or, in the case of clause (iii), the LC Exposure of the Defaulting Lender that
cannot be fully reallocated pursuant to
Section 2.21(c)(i)) as of such date attributable to Letters of Credit issued for
the account of such Account Party plus any accrued and unpaid interest thereon;
provided that the obligation to deposit such cash collateral shall become
effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to Holdings, any Borrower or any Account Party
described in clause (h) or (i) of Section 7.01.  Such deposit shall be held by
the Administrative Agent as collateral for the payment and performance of the
obligations of such Account Party under this Agreement.  The Administrative
Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over such account.  Other than any interest earned on the
investment of such deposits, which investments shall be made at the option and
sole discretion of the Administrative Agent and at such Account Party’s risk and
expense, such deposits shall not bear interest.  Interest or profits, if any, on
such investments shall accumulate in such account.  Moneys in such account shall
be applied by the Administrative Agent to reimburse any Issuing Bank  that is
not a Defaulting Lender for LC Disbursements in respect of Letters of Credit
issued for the account of such Account Party for which such Issuing Bank has not
been reimbursed and, to the extent not so applied, shall be held for the
satisfaction of the reimbursement obligations of such Account Party for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated, be
applied to satisfy the other Obligations.
 
(k) Extended Letters of Credit.  An Account Party may request that an Issuing
Bank allow, and an Issuing Bank may (in its sole discretion) agree to allow, one
or more Letters of Credit issued by it to expire later than the date that is
five Business Days prior to the Maturity Date.  Any such Letter of Credit is
referred to herein as an “Extended Letter of Credit”.  The following provisions
shall apply to any Extended Letter of Credit, notwithstanding any contrary
provision set forth herein.
 
(i) The participations of each Lender in each Extended Letter of Credit shall
terminate at the close of business on the date that is five Business Days prior
to the Maturity Date, with the effect that Lenders shall not have any
obligations to acquire participations in any LC Disbursement made thereafter or
otherwise with respect to such Extended Letter of Credit, except with respect to
demands for drawings submitted on or prior to such date.
 
(ii) On or prior to the date that is fifteen days prior to the Maturity Date (or
on the date of any earlier termination of the Commitments), each Account Party
shall deposit with each Issuing Bank an amount in cash equal to the LC Exposure
as of such date attributable to the Extended Letters of Credit issued by such
Issuing Bank for the account of such Account Party.  Each such deposit shall be
held by the applicable Issuing Bank in an account maintained by it as collateral
for the obligations of such Account Party in respect of such Extended Letters of
Credit.  Each applicable Issuing Bank shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account.  Other than any
interest earned on the investment of such deposits, which investments shall be
made at the option and sole discretion of the relevant Issuing Bank and at such
Account Party's risk and expense, such deposits shall not bear
interest. Interest or profits, if any, on such investments shall accumulate in
such account.  Moneys
 
 
 
 
 
32
in such account shall be applied by the relevant Issuing Bank to reimburse LC
Disbursements in respect of such Extended Letters of Credit issued for the
account of such Account Party for which such Issuing Bank has not been
reimbursed and, to the extent not so applied, shall be held for the satisfaction
of any reimbursement obligations of such Account Party for such Issuing Bank’s
LC Exposure at such time.
 
(iii) After the close of business on the date that is five Business Days prior
to the Maturity Date, the fees that would have accrued pursuant to clause (i) of
Section 2.11(b) (if the participations of the Lenders in the Extended Letters of
Credit had not terminated) shall continue to accrue on the LC Exposure in
respect of each Extended Letter of Credit and shall be payable to each
applicable Issuing Bank for its own account.
 
SECTION 2.06. Funding of Borrowings.  (a)  Each Lender shall make each Loan to
be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 1:00 p.m., New York City time, to the account of
the Administrative Agent most recently designated by it for such purpose by
notice to the Lenders; provided that Swingline Loans shall be made as provided
in Section 2.04.  The Administrative Agent will make such Loans available to the
applicable Borrower by promptly crediting the amounts so received, in like
funds, to an account of such Borrower maintained with the Administrative Agent
in New York City and designated by such Borrower in the applicable Borrowing
Request; provided that ABR Revolving Loans made to finance the reimbursement of
an LC Disbursement as provided in Section 2.05(e) shall be remitted by the
Administrative Agent to the applicable Issuing Bank.
 
(b) Unless the Administrative Agent shall have received notice from a Lender
prior to the proposed date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender’s share of such Borrowing (or,
in respect of the reimbursement of an LC Disbursement under Section 2.05(e),
such Lender’s Participation Amount), the Administrative Agent may assume that
such Lender has made such share (or such Lender’s Participation Amount, as
applicable) available on such date in accordance with paragraph (a) of this
Section and may, in reliance upon such assumption, make available to the
applicable Borrower (or the applicable Issuing Bank, as applicable) a
corresponding amount.  In such event, if a Lender has not in fact made its share
of the applicable Borrowing (or such Lender’s Participation Amount, as
applicable) available to the Administrative Agent, then the applicable Lender
and the applicable Borrower (or the applicable Issuing Bank, as applicable)
severally agree to pay to the Administrative Agent forthwith on demand such
corresponding amount with interest thereon, for each day from and including the
date such amount is made available to such Borrower (or such Issuing Bank, as
applicable) to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender or such Issuing Bank, the greater of the Federal
Funds Effective Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation or (ii) in the
case of such Borrower, the interest rate applicable to ABR Loans.  If (x) with
respect to such Borrowing, such Lender pays such amount to the Administrative
Agent, then such amount shall constitute such Lender’s Loan included in such
Borrowing or (y) with respect to such reimbursement of such LC Disbursement, the
applicable Account Party shall reimburse the applicable LC Disbursement before
the applicable Lender or Issuing Bank reimburses the Administrative Agent as
provided in this paragraph, then the Administrative Agent shall be entitled to
receive or retain the amount due to it as provided above together with interest
payable by such Account Party with respect to
 
 
 
 
 
33
the period commencing on the date that the Administrative Agent funded its
payment to the applicable Issuing Bank.
 
SECTION 2.07. Interest Elections.  (a)  Each Revolving Borrowing initially shall
be of the Type specified in the applicable Borrowing Request and, in the case of
a Eurodollar Revolving Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request.  Thereafter, the applicable Borrower may
elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect
Interest Periods therefor, all as provided in this Section.  Such Borrower may
elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing.  This Section shall
not apply to Swingline Borrowings, which may not be converted or continued.
 
(b) To make an election pursuant to this Section, the relevant Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if such Borrower were
requesting a Revolving Borrowing of the Type resulting from such election to be
made on the effective date of such election.  Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery, telecopy or electronic transmission to the Administrative Agent of a
written Interest Election Request in a form approved by the Administrative Agent
and signed by such Borrower.
 
(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:
 
(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii) and (iv) below shall
be specified for each resulting Borrowing);
 
(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;
 
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and
 
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
to be applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period”.
 
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the relevant Borrower shall be deemed to
have selected an Interest Period of one month’s duration.
 
 
 
 
 
34
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender’s portion of each resulting Borrowing.
 
(e) If the relevant Borrower fails to deliver a timely Interest Election Request
with respect to a Eurodollar Revolving Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing.  Notwithstanding any contrary provision hereof,
if an Event of Default has occurred and is continuing and the Administrative
Agent, at the request of the Required Lenders, so notifies the Parent Borrower,
then, so long as an Event of Default is continuing (i) no outstanding Revolving
Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii)
unless repaid, each Eurodollar Revolving Borrowing shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto.
 
SECTION 2.08. Termination and Reduction of Commitments.  (a)  Unless previously
terminated, the Commitments shall termi­nate on the Maturity Date.
 
(b) The Parent Borrower may at any time terminate, or from time to time reduce,
the Commitments; provided that (i) each reduction of the Commitments shall be in
an amount that is an integral multiple of $1,000,000 and not less than
$5,000,000 and (ii) the Parent Borrower shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the Loans in
accordance with Section 2.10, the sum of the Revolving Credit Exposures would
exceed the total Commitments.
 
(c) The Parent Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Commitments under paragraph (b) of this Section at least
three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof.  Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof.  Each notice delivered by the Parent Borrower
pursuant to this Section shall be irrevocable; provided that a notice of
termination of the Commitments delivered by the Parent Borrower may state that
such notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Parent Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied.  Any termination or reduction of the Commitments
shall be permanent.  Each reduction of the Commitments shall be made ratably
among the Lenders in accordance with their respective Commitments.
 
SECTION 2.09. Repayment of Loans; Evidence of Debt.  (a)  Each Borrower hereby
unconditionally promises to pay (i) to the Administrative Agent for the account
of each Lender the then unpaid principal amount of each Revolving Loan owed by
such Borrower to such Lender on the Maturity Date and (ii) to each Swingline
Lender the then unpaid principal amount of each Swingline Loan owed to such
Swingline Lender by such Borrower on the earlier of the Maturity Date and the
first date after such Swingline Loan is made that is the 15th or last day of a
calendar month and is at least two Business Days after such Swingline Loan is
made; provided that on each date that a Revolving Borrowing is made, such
Borrower shall repay all Swingline Loans of such Borrower then outstanding.
 
 
 
 
 
35
(b) Each Lender shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness of each Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
 
(c) The Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Class and Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from each Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender’s share thereof.
 
(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c)
of this Section shall be prima facie evidence of the existence and amounts of
the obligations recorded therein; provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not in
any manner affect the obligation of each Borrower to repay its Loans in
accordance with the terms of this Agreement.
 
(e) Any Lender may request that Loans made by it be evidenced by a promissory
note.  In such event, the applicable Borrower shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in a
form approved by the Administrative Agent.  Thereafter, the Loans evidenced by
such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more promissory
notes in such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).
 
SECTION 2.10. Prepayment of Loans.  (a)  Each Borrower shall have the right at
any time and from time to time to prepay any of its Borrowings in whole or in
part, subject to prior notice in accordance with paragraph (c) of this Section.
 
(b) In the event and on each occasion that the sum of the Revolving Credit
Exposures exceeds the maximum amount of Revolving Credit Exposures permitted by
Section 6.11, the Borrowers shall prepay Borrowings (or, if no such Borrowings
are outstanding, each Account Party shall deposit cash collateral in an account
with the Administrative Agent pursuant to Section 2.05(j)) in an aggregate
amount equal to such excess.
 
(c) The applicable Borrower shall notify the Administrative Agent (and, in the
case of prepayment of a Swingline Loan, the applicable Swingline Lender) by
telephone (confirmed by telecopy or electronic transmission) of any prepayment
hereunder (i) in the case of prepayment of a Eurodollar Revolving Borrowing, not
later than 11:00 a.m., New York City time, three Business Days before the date
of prepayment, (ii) in the case of prepayment of an ABR Revolving Borrowing, not
later than 11:00 a.m., New York City time, one Business Day before the date of
prepayment or (iii) in the case of prepayment of a Swingline Loan, not later
than 12:00 noon, New York City time, on the date of prepayment.  Each such
notice shall be irrevocable and shall specify the prepayment date and the
principal amount of each Borrowing or portion thereof to be prepaid; provided
that, if a notice of prepayment is given in connection with
 
 
 
 
 
36
a conditional notice of termination of the Commitments as contemplated by
Section 2.08, then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.08.  Promptly following
receipt of any such notice relating to a Revolving Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof.  Each partial prepayment
of any Revolving Borrowing shall be in an amount that would be permitted in the
case of an advance of a Revolving Borrowing of the same Type as provided in
Section 2.02.  Each prepayment of a Revolving Borrowing shall be applied ratably
to the Loans included in the prepaid Borrowing.  Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.12.
 
SECTION 2.11. Fees.  (a)  The Parent Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee, which
shall accrue at the Applicable Rate on the daily unused amount of the Commitment
of such Lender during the period from and including Effective Date to but
excluding the date on which such Commitment terminates.  Accrued commitment fees
shall be payable in arrears on the last day of March, June, September and
December of each year and on the date on which the Commitments terminate,
commencing on the first such date to occur after the date hereof.  All
commitment fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day).  For purposes of computing commitment fees, the
Commitment of a Lender shall be deemed to be used to the extent of the
outstanding Revolving Loans and LC Exposures of such Lender (and the Swingline
Exposure of such Lender shall be disregarded for such purposes).
 
(b) The Parent Borrower agrees to pay (i) to the Administrative Agent for the
account of each Lender a participation fee with respect to its participations in
(A) Stand-by Letters of Credit, which shall accrue at the Applicable Rate, and
(B) Trade Letters of Credit, which shall accrue at a rate equal to 50% of the
Applicable Rate used to determine the participation fees applicable to Stand-by
Letters of Credit on the determination date, in each case on the average daily
amount of such Lender’s LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, and (ii) to each Issuing Bank a fronting fee, which shall accrue at
the rate of 0.125% per annum, on the average daily amount of the LC Exposure in
respect of Stand-by Letters of Credit issued by such Issuing Bank (excluding any
portion thereof attributable to unreimbursed LC Disbursements) during the period
from and including the Effective Date to but excluding the later of the date of
termination of the Commitments and the date on which there ceases to be any LC
Exposure, as well as such Issuing Bank’s standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or processing
of drawings thereunder.  Participation fees and fronting fees accrued through
and including the last day of March, June, September and December of each year
shall be payable in arrears on the third Business Day following such last day,
commencing on the first such date to occur after the Effective Date; provided
that all such fees shall be payable on the date on which the Commitments
terminate and any such fees accruing after the date on which the Commitments
terminate shall be payable on demand.  Any other fees payable to any Issuing
Bank pursuant to this paragraph shall be payable within 10 days after
demand.  All participation fees and fronting fees shall be computed on the basis
of a year of 360 days and shall
 
 
 
 
 
37
be payable for the actual number of days elapsed (including the first day but
excluding the last day).
 
(c) The Parent Borrower agrees to pay to the Administrative Agent, for its own
account, fees payable in the amounts and at the times separately agreed upon
between the Parent Borrower and the Administrative Agent.
 
(d) All fees payable hereunder shall be paid on the dates due, in immediately
available funds, to the Administrative Agent (or to the applicable Issuing Bank,
in the case of fees payable to it) for distribution, in the case of commitment
fees and participation fees, to the Lenders.  Fees paid shall not be refundable
under any circumstances.
 
SECTION 2.12. Interest.  (a)  The Loans comprising each ABR Borrowing (including
each Swingline Loan) shall bear interest at the Alternate Base Rate plus the
Applicable Rate.
 
(b) The Loans comprising each Eurodollar Borrowing shall bear interest at the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Rate.
 
(c) Notwithstanding the foregoing, if any principal of or interest on any Loan
or any fee or other amount payable by any Borrower or any Account Party
hereunder is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the
preceding paragraphs of this Section or (ii) in the case of any other amount, 2%
plus the rate applicable to ABR Loans as provided in paragraph (a) of this
Section.
 
(d) Accrued interest on each Loan shall be payable in arrears on each Interest
Payment Date for such Loan and, in the case of Revolving Loans, upon termination
of the Commitments; provided that (i) interest accrued pursuant to paragraph (c)
of this Section shall be payable on demand, (ii) in the event of any repayment
or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan
prior to the end of the Availability Period), accrued interest on the principal
amount repaid or prepaid shall be payable on the date of such repayment or
prepayment and (iii) in the event of any conversion of any Eurodollar Revolving
Loan prior to the end of the current Interest Period therefor, accrued interest
on such Loan shall be payable on the effective date of such conversion.
 
(e) All interest hereunder shall be computed on the basis of a year of 360 days,
except that interest computed by reference to the Alternate Base Rate at times
when the Alternate Base Rate is based on the Prime Rate shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and in each case shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day).  The applicable Alternate Base Rate or Adjusted LIBO
Rate shall be determined by the Administrative Agent, and such determination
shall be conclusive absent manifest error.
 
SECTION 2.13. Alternate Rate of Interest.  If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:
 
 
 
 
 
38
(a)  the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or
 
(b) the Administrative Agent is advised by the Required Lenders that the
Adjusted LIBO Rate for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (or Lender) of making or maintaining their
Loans (or its Loan) included in such Borrowing for such Interest Period;
 
then the Administrative Agent shall give notice thereof to the Parent Borrower
and the Lenders by telephone, telecopy or electronic transmission as promptly as
practicable thereafter and, until the Administrative Agent notifies the Parent
Borrower and the Lenders that the circumstances giving rise to such notice no
longer exist, (i) any Interest Election Request that requests the conversion of
any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a
Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request
requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an
ABR Borrowing.
 
SECTION 2.14. Increased Costs.  (a)  Subject to Section 2.18, if any Change in
Law shall:
 
(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate) or any Issuing Bank;
 
(ii) subject any Lender or the Issuing Bank to any (or any increase in any)
Other Connection Taxes with respect to this Agreement or any other Loan
Document, any Letter of Credit, or any participation in a Letter of Credit or
any Loan made or Letter of Credit Issued by it, except any such Taxes imposed on
or measured by its net income or profits (however denominated) or franchise
Taxes imposed in lieu of net income or profits Taxes; or
 
(iii) impose on any Lender or any Issuing Bank or the London interbank market
any other condition affecting this Agreement or Eurodollar Loans made by such
Lender or any Letter of Credit or participation therein;
 
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan, or in the case of clause
(ii), any Loan, (or of maintaining its obligation to make any such Loan) or to
increase the cost to such Lender or such Issuing Bank of participating in,
issuing or maintaining any Letter of Credit or to reduce the amount of any sum
received or receivable by such Lender or such Issuing Bank hereunder (whether of
principal, interest or otherwise), then the relevant Borrower will pay to such
Lender and the relevant Account Party will pay to such Issuing Bank, as the case
may be, such additional amount or amounts as will compensate such Lender or such
Issuing Bank, as the case may be, for such additional costs incurred or
reduction suffered in accordance with Section 2.18.
 
(b) Subject to Section 2.18, if any Lender or any Issuing Bank determines that
any Change in Law regarding capital requirements has or would have the effect of
reducing the
 
 
 
 
 
39
rate of return on such Lender’s or such Issuing Bank’s capital or on the capital
of such Lender’s or such Issuing Bank’s holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in Letters
of Credit held by, such Lender, or the Letters of Credit issued by such Issuing
Bank, to a level below that which such Lender or such Issuing Bank or such
Lender’s or such Issuing Bank’s holding company could have achieved but for such
Change in Law (taking into consideration such Lender’s or such Issuing Bank’s
policies and the policies of such Lender’s or such Issuing Bank’s holding
company with respect to capital adequacy), then from time to time the relevant
Borrower will pay to such Lender and the relevant Account Party will pay to such
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or such Issuing Bank or such Lender’s or such Issuing
Bank’s holding company for any such reduction suffered in accordance with
Section 2.18.
 
(c) A certificate of a Lender or an Issuing Bank setting forth the amount or
amounts necessary to compensate such Lender or such Issuing Bank or its holding
company, as the case may be, as specified in paragraph (a) or (b) of this
Section shall be delivered to the Parent Borrower and shall be conclusive absent
manifest error.  The relevant Borrower shall pay such Lender and the relevant
Account Party shall pay such Issuing Bank, as the case may be, the amount shown
as due on any such certificate (such amount hereinafter referred to as the
“Additional Costs”) within 30 days after receipt thereof.
 
(d) Subject to Section 2.18, failure or delay on the part of any Lender or any
Issuing Bank to demand compensation pursuant to this Section shall not
constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such
compensation.
 
SECTION 2.15. Break Funding Payments.  In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section
2.10(c) and is revoked in accordance therewith) or (d) the assignment of any
Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Parent Borrower pursuant to
Section 2.18, then, in any such event, the relevant Borrower shall compensate
each Lender for the loss, cost and expense attributable to such event.  In the
case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be
deemed to include an amount determined by such Lender to be the excess, if any,
of (i) the amount of interest which would have accrued on the principal amount
of such Loan had such event not occurred, at the Adjusted LIBO Rate that would
have been applicable to such Loan, for the period from the date of such event to
the last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been the
Interest Period for such Loan), over (ii) the amount of interest which would
accrue on such principal amount for such period at the interest rate which such
Lender would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the eurodollar
market.  A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section shall be delivered
to the Parent Borrower and shall be conclusive absent manifest error.  The
relevant Borrower shall pay such Lender the amount shown as due on any such
certificate within 30 days after receipt thereof.
 
 
 
 
 
40
SECTION 2.16. Taxes.  (a)  Each payment on account of any obligation of a
Borrower or Account Party hereunder to any Person, including the Administrative
Agent, any Lender or Issuing Bank or its beneficial owner, to which any such
obligation is owed (each of the foregoing being referred to as a “Recipient”)
shall be made free and clear of and without deduction for any Indemnified Taxes
or Other Taxes; provided that if any applicable law (as determined in the good
faith discretion of an applicable Withholding Agent (as defined below)) requires
the deduction or withholding of any Indemnified Tax or Other Tax from any such
payment (including, for the avoidance of doubt, any such deduction or
withholding required to be made by the applicable Borrower or Account Party or
the Administrative Agent, or in the case of any Lender that is treated as a
partnership for U.S. federal income tax purposes, by such Lender for the account
of any of its direct or indirect beneficial owners), the applicable Borrower or
Account Party, the Administrative Agent, the Lender or the applicable direct or
indirect beneficial owner of a Lender (any such person, a “Withholding Agent”)
shall make such deductions and timely pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law and, if such
Tax is an Indemnified Tax, then the sum payable by the applicable Borrower or
Account Party shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.16) the Recipient receives an amount equal to the sum it would
have received had no such deductions been made.
 
(b) In addition, the Borrowers and the Account Parties shall pay, or at the
option of the Administrative Agent timely reimburse it for, the payment of any
Other Taxes to the relevant Governmental Authorities in accordance with
applicable law other than any Other Taxes imposed upon any assignment or
participation of a Lender’s rights, interests and obligations hereunder or under
any other Loan Document; provided that the amount such Borrower or such Account
Party (as the case may be) shall be required to pay to a particular Lender in
respect of Other Taxes shall not exceed 1% of the aggregate amount of the
Commitment of such Lender on which such Other Taxes are imposed; provided
further that if a Lender is actually aware of the application of any Other Tax
to any such payment, execution, delivery or registration, such Lender shall
promptly notify the Parent Borrower of such Other Tax and the relevant Borrower
or the relevant Account Party (as the case may be) shall thereafter have the
benefit of the provisions of Section 2.18(b).
 
(c) Each Borrower and each Account Party shall indemnify each Recipient, within
30 days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section 2.16) payable
by such Recipient on or with respect to any payment by or on account of any
obligation of such Borrower or Account Party hereunder and expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority.  A certificate as to the amount of such payment or
liability delivered to such Borrower or Account Party by the Recipient, or by
the Administrative Agent on behalf of the Recipient, shall be conclusive absent
manifest error.
 
(d) Each Lender shall indemnify the Administrative Agent within 10 days after
demand therefor for the full amount of any Excluded Taxes attributable to such
Lender that are payable or paid by the Administrative Agent, and reasonable
expenses arising therefrom or with
 
 
 
 
 
41
respect thereto, whether or not such Excluded Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority.  A certificate as to
the amount of such payment or liability delivered to any Lender by the
Administrative Agent shall be conclusive absent manifest error.
 
(e) Within 30 days after the date of any payment of Indemnified Taxes or Other
Taxes by the relevant Borrower or the relevant Account Party (as the case may
be) in respect of any payment to any Recipient, such Borrower or such Account
Party (as the case may be) will furnish to the Administrative Agent, at its
address referred to in Section 9.01, the original or a certified copy of a
receipt evidencing payment thereof or, if such a receipt is not available, a
certificate of the treasurer or any assistant treasurer of such Borrower or such
Account Party (as the case may be) setting forth the amount of such payment and
the date on which such payment was made.
 
(f) Each Fee Receiver shall deliver the documentation necessary for it to be a
Permitted Fee Receiver and agrees to update Internal Revenue Service Form W-9
(or its successor form) or the applicable Internal Revenue Service Form W-8 (or
its successor form) upon any change in such Fee Receiver’s circumstances or if
such form expires or becomes inaccurate or obsolete, and to promptly notify the
Parent Borrower and the Administrative Agent if such Fee Receiver becomes
legally ineligible to provide such form.
 
(g) Any Foreign Lender that is entitled to an exemption from or reduction of any
applicable withholding Tax with respect to payments under this Agreement shall
deliver to the Parent Borrower (with a copy to the Administrative Agent), at the
time or times reasonably requested by the Parent Borrower or the Administrative
Agent, such properly completed and executed documentation prescribed by
applicable law or reasonably requested by the Parent Borrower as will permit
such payments to be made without withholding or at a reduced rate.  Each Foreign
Lender shall promptly notify the Parent Borrower at any time it determines that
it is no longer in a position to provide any such previously delivered
documentation to the Parent Borrower.  Notwithstanding anything to the contrary
in the preceding two sentences, the completion, execution and submission of such
documentation (other than such documentation set forth below in this paragraph
(g)) shall not be required if in the Foreign Lender’s judgment such completion,
execution or submission would subject such Foreign Lender to any material
unreimbursed cost or expense or would materially prejudice the legal or
commercial position of such Foreign Lender.
 
Without limiting the generality of the foregoing, any Foreign Lender shall, to
the extent it is legally entitled to do so, deliver to the Parent Borrower and
the Administrative Agent (in such number of copies as shall be requested by the
recipient) on or prior to the date on which such Foreign Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the request of the
Parent Borrower or the Administrative Agent), whichever of the following is
applicable:
 
(i) duly completed copies of Internal Revenue Service Form W-8BEN, claiming
eligibility for benefits of an income tax treaty to which the United States of
America is a party,
 
 
 
 
 
42
(ii) duly completed copies of Internal Revenue Service Form W-8ECI,
 
(iii) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code, (x) a certificate
substantially in the form of Exhibit D to the effect that such Foreign Lender is
not (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a
“10 percent shareholder” of any Borrower within the meaning of Section
871(h)(3)(B) of the Code, (C) a “controlled foreign corporation” described in
Section 881(c)(3)(C) of the Code and (D) the interest payments in question are
not effectively connected with a U.S. trade or business conducted by such Lender
(a “U.S. Tax Compliance Certificate”) and (y) duly completed copies of Internal
Revenue Service Form W-8 BEN,
 
(iv) to the extent a Foreign Lender is not the beneficial owner of payments made
under any Loan Document (for example, where the Foreign Lender is a partnership
or participating Lender granting a typical participation), an Internal Revenue
Service Form W-8IMY, accompanied by a Form W-8ECI, W-8BEN, U.S. Tax Compliance
Certificate, Form W-9, and/or other certification documents from each beneficial
owner, as applicable; provided that, if the Foreign Lender is a partnership (and
not a participating Lender) and one or more beneficial owners of such Foreign
Lender are claiming the portfolio interest exemption, such Foreign Lender may
provide a U.S. Tax Compliance Certificate on behalf of such beneficial owners,
or
 
(v) any other form prescribed by applicable law as a basis for claiming
exemption from or a reduction in U.S. federal withholding tax duly completed
together with such supplementary documentation as may be prescribed by
applicable law to permit the Parent Borrower to determine the withholding or
deduction required to be made.
 
Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Parent Borrower and the
Administrative Agent in writing of its legal inability to do so.
 
(h) If any Recipient shall become aware that it is entitled to receive a refund
in respect of any Indemnified Taxes or Other Taxes as to which it has been
indemnified pursuant to this Section 2.16, such Recipient shall promptly notify
the Parent Borrower of the availability of such refund and shall, within 30 days
after receipt of a request by the Parent Borrower, apply for such refund at the
Parent Borrower’s expense.  If any Recipient receives a refund in respect of any
Taxes for which such Recipient has received payment from a Borrower or an
Account Party hereunder, it shall within 30 days after the receipt thereof repay
the lesser of such refund and the amount paid by such Borrower or such Account
Party (as the case may be) with respect to such Taxes to the applicable Borrower
or the applicable Account Party, as applicable, in each case net of all
reasonable out-of-pocket expenses of such Recipient and with interest received
by such Recipient from the relevant taxing authority attributable to such
refund; provided that such Borrower or such Account Party (as the case may be),
upon the request of such Recipient, as applicable, agree to return any such
refund (plus interest, penalties and other charges) to such Recipient, as
applicable, in the event  such Issuing Bank, Lender or the Administrative Agent
is required to pay such refund to any Governmental Authority. 
Notwithstanding anything to the
 
 
 
 
 
43
contrary in this paragraph (h), in no event will any Issuing Bank or Lender be
required to pay any amount to any Loan Party the payment of which would place
the Issuing Bank or such Lender in a less favorable net after-Tax position than
the Issuing Bank or such Lender would have been if the indemnification payments
or additional amounts giving rise to such refund had never been paid.  This
Section shall not be construed to require any Recipient to make available its
Tax returns (or any other information relating to its Taxes that it deems
confidential) to the Loan Parties or any other Person.
 
SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs.  (a)  Each Borrower and each Account Party shall make each payment
required to be made by it hereunder (whether of principal, interest, fees or
reimbursement of LC Disbursements, or of amounts payable under Section 2.14,
2.15 or 2.16, or otherwise) prior to the time expressly required hereunder for
such payment (or, if no such time is expressly required, prior to 12:00 noon,
New York City time, on the date when due), in immediately available funds,
without set-off or counterclaim.  Any amounts received after such time on any
date may, in the discretion of the Administrative Agent, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon.  All such payments shall be made to the Administrative Agent
at its offices at 270 Park Avenue, New York, New York, except payments to be
made directly to an Issuing Bank or a Swingline Lender as expressly provided
herein and except that payments pursuant to Sections 2.14, 2.15, 2.16 and 9.03
shall be made directly to the Persons entitled thereto.  The Administrative
Agent shall distribute any such payments received by it for the account of any
other Person to the appropriate recipient promptly following receipt
thereof.  If any payment under any Loan Document shall be due on a day that is
not a Business Day, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension.  All
payments under each Loan Document shall be made in dollars.
 
(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i) first, towards payment of interest and fees then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal
and unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements then due to such parties.
 
(c) If any Lender shall, by exercising any right of set-off or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of
its Revolving Loans or participations in LC Disbursements or Swingline Loans
resulting in such Lender receiving payment of a greater proportion of the
aggregate amount of its Revolving Loans and participations in LC Disbursements
and Swingline Loans and accrued interest thereon than the proportion received by
any other Lender, then the Lender receiving such greater proportion shall
purchase (for cash at face value) participations in the Revolving Loans and
participations in LC Disbursements and Swingline Loans of other Lenders to the
extent necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Revolving Loans and participations in LC
Disbursements and Swingline Loans; provided that (i) if any such
 
 
 
 
 
44
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by any Borrower or any Account Party pursuant to and in accordance with the
express terms of this Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Loans or participations in LC Disbursements to any assignee or participant,
other than to Holdings or any Subsidiary or Affiliate thereof (as to which the
provisions of this paragraph shall apply).  Each of the Borrowers and each of
the Account Parties consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against such
Borrower or such Account Party (as the case may be) rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of such Borrower or such Account Party (as the case may be) in
the amount of such participation.
 
(d) Unless the Administrative Agent shall have received notice from a Borrower
or an Account Party prior to the date on which any payment is due to the
Administrative Agent from such Borrower or such Account Party (as the case may
be) for the account of the Lenders or an Issuing Bank hereunder that such
Borrower or such Account Party (as the case may be) will not make such payment,
the Administrative Agent may assume that such Borrower or such Account Party (as
the case may be) has made such payment on such date in accordance herewith and
may, in reliance upon such assumption, distribute to the Lenders or the
applicable Issuing Bank, as the case may be, the amount due.  In such event, if
the relevant Borrower or the relevant Account Party (as the case may be) has not
in fact made such payment, then each of the Lenders or the applicable Issuing
Bank, as the case may be, severally agrees to repay to the Administrative Agent
forthwith on demand the amount so distributed to such Lender or such Issuing
Bank with interest thereon, for each day from and including the date such amount
is distributed to it to but excluding the date of payment to the Administrative
Agent, at the greater of the Federal Funds Effective Rate and a rate determined
by the Administrative Agent in accordance with banking industry rules on
interbank compensation.
 
(e) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b) or 2.17(d), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender’s obligations under
such Sections until all such unsatisfied obligations are fully paid.
 
SECTION 2.18. Mitigation Obligations; Replacement of Lenders.  (a)  If, with
respect to any Lender or the Administrative Agent, an event or circumstance
occurs that would entitle such Lender or the Administrative Agent to exercise
any of the rights or benefits afforded by Section 2.14 or 2.16(a), such Lender
or the Administrative Agent, promptly upon becoming aware of the same, shall
take all steps as may be reasonably available (including designating a different
Applicable Lending Office for funding or booking its Loans hereunder or
participating in Letters of Credit or assigning its rights and obligations
hereunder to another of its offices, or furnishing the proper certificates under
any applicable Tax laws, Tax treaties, conventions and governmental regulations
to the extent that such certificates are legally available to such Lender or to
the Administrative Agent) to eliminate or mitigate the effects of any event
resulting in the
 
 
 
 
 
45
ability of such Lender or the Administrative Agent to exercise rights under any
of such Sections; provided that neither any Lender nor the Administrative Agent
shall be under any obligation to take any step that, in its reasonable judgment,
would (i) result in its incurring Additional Costs or Taxes in performing its
obligations hereunder unless the Borrowers and the Account Parties have
expressly agreed to reimburse it therefor or (ii) be materially disadvantageous
to such Lender or to the Administrative Agent.  Within 60 days after the
occurrence of any event giving rise to any rights or benefits provided by
Sections 2.14 and 2.16(a) in favor of any Lender or the Administrative Agent,
such Lender or the Administrative Agent (i) will notify the Parent Borrower of
such event or circumstance and (ii) provide the Parent Borrower with a
certificate setting forth in reasonable detail (x) the event or circumstance
giving rise to any benefit under Sections 2.14 and 2.16(a), (y) the effective
date of, and the time period during which, compensation for any Additional Costs
or Taxes are being claimed and (z) the determination of amount or amounts
claimed thereby and detailed calculations with respect thereto; provided that,
if such Lender or the Administrative Agent does not give the Parent Borrower
such notice and certificate within the 60-day period set forth in this sentence,
the relevant Borrower or the relevant Account Party (as the case may be) shall
be required to indemnify such Lender or the Administrative Agent only for such
Additional Costs and Taxes as are attributable to the period from and after the
first date as of which such notice and certificate have been received by the
Parent Borrower.  Such Lender or the Administrative Agent shall notify the
Parent Borrower of any change in circumstances with respect to the event
specified in the above-described notice and certificate as promptly as
practicable after such Lender or the Administrative Agent obtains knowledge
thereof.  Such certificate shall be conclusive absent manifest
error.  Notwithstanding the foregoing, neither any Lender nor the Administrative
Agent shall deliver the notice and certificate described in this paragraph (a)
to the Parent Borrower in respect of any Additional Costs or Taxes unless it is
then the general policy of such Lender or the Administrative Agent to pursue
similar rights and remedies in similar circumstances under comparable provisions
of other credit agreements.
 
(b) With respect to Sections 2.14 and 2.16, the Parent Borrower shall have the
right, should any Lender request any compensation or indemnity thereunder, or if
any Lender becomes a Defaulting Lender, to (i) unless an Event of Default shall
have occurred and be continuing, (A) promptly terminate such Lender’s Commitment
by irrevocable written notice of such termination to such Lender and the
Administrative Agent without the necessity of complying with Sections 2.08(b)
and (c) hereof, (B) reduce the total Commitments by the amount of such Lender’s
Commitment and (C) pay or prepay in immediately available funds all Loans owing
to such Lender, accrued and unpaid interest thereon, accrued fees and all other
amounts payable to it hereunder, or (ii) require such Lender to assign all its
interests, rights and obligations under this Agreement, without recourse to or
representation or warranty by such Lender, to an assignee in accordance with
Section 9.04; provided that (x) such assignment shall not conflict with any
statute, law, rule, regulation, order or decree of any Governmental Authority
and (y) the assigning Lender shall have received from the relevant Borrower and
the relevant Account Party and/or such assignee full payment in immediately
available funds of the principal of and interest accrued on the Loans to the
date of such assignment made by it hereunder and all other amounts owed to it
hereunder that are subject to such assignment, provided that amounts payable
under this clause (y) to any assigning Lender that is a Defaulting Lender shall
be applied in accordance with Section 2.21(e).
 
 
 
 
 
46
(c) With respect to Section 2.14 or 2.16, (i) other than with respect to Section
2.16(b), neither any Lender nor the Administrative Agent shall be entitled to
exercise any right or benefit afforded thereby and neither the Borrowers nor the
Account Parties shall be obligated to reimburse any Lender or the Administrative
Agent pursuant to such Sections unless (x) such Lender or the Administrative
Agent has delivered to the Parent Borrower in accordance with Section 9.01 the
notice and the certificate described in Section 2.18(a) hereof and (y) the
Parent Borrower has had a 30-Business Day period following the receipt of such
notice and certificate (if the Parent Borrower in good faith disagrees with the
assertion that any payment under such Sections is due or with the amount shown
as due on such certificate and so notifies the Lender or the Administrative
Agent of such disagreement within 10 Business Days following receipt of the
notice and certificate) to negotiate with the requesting Lender or the
Administrative Agent, which negotiations shall be conducted by the respective
parties in good faith, and to agree upon another amount that will adequately
compensate such Lender or the Administrative Agent, it being expressly
understood that if the Parent Borrower does not provide the required notice of
its disagreement as provided above, the relevant Borrower or the relevant
Account Party (as the case may be) shall pay the amount shown as due on the
certificate on the tenth Business Day following receipt thereof and further if
the Parent Borrower does provide such required notice, and negotiations are
entered into but do not result in agreement by the Parent Borrower and such
Lender or the Administrative Agent within the 30-Business Day period, then the
relevant Borrower or the relevant Account Party (as the case may be) shall pay
the amount shown as due on the certificate on the last day of such period, but
in either event not earlier than the date as of which the relevant Additional
Costs or Taxes are incurred, (ii) other than with respect to Other Taxes, unless
the appropriate notice and certificate are delivered to the Parent Borrower
within the 60-day period described in Section 2.18(a), the relevant Borrower or
the relevant Account Party (as the case may be) shall be liable only for
Additional Costs, Taxes or amounts required to be paid which are attributable to
the period from and after the date such notice and certificate have been
received by such Borrower or such Account Party, as applicable, (iii) neither
the Borrowers nor the Account Parties shall be liable for any amounts incurred
as a result of any change in an Applicable Lending Office of any Issuing Bank or
Lender to the extent that such Issuing Bank or Lender shall have had knowledge
at the time of such change in Applicable Lending Office that reimbursement or
recoupment under Section 2.14 would arise as a result of such change, (iv) each
Lender or the Administrative Agent shall in good faith allocate all Additional
Costs, Taxes and payments required to be made fairly among all its commitments
(whether or not it seeks compensation from all affected Borrowers or Account
Parties), (v) neither any Lender nor the Administrative Agent shall be entitled
to exercise any right or benefit afforded hereby or receive any payment
otherwise due under Sections 2.14 and 2.16 (including, without limitation, any
repayment by any Borrower or any Account Party (as the case may be) of any
refund of Taxes pursuant to Section 2.16(h)) which arises from any gross
negligence, fraud or willful misconduct of any Lender or the Administrative
Agent, or the failure of such Lender or the Administrative Agent to comply with
the terms of this Agreement, (vi) if any Lender or the Administrative Agent
shall have recouped any amount or received any offsetting Tax benefit (other
than a refund of Taxes as described in Section 2.16(h)) or reserve or capital
benefits theretofore paid to it by any Borrower or any Account Party (as the
case may be), such Lender or the Administrative Agent shall promptly pay to such
Borrower or such Account Party (as the case may be) an amount equal to the
amount of the recoupment received by such Lender or the Administrative Agent
reduced by any reasonable out-of-pocket expenses of such
 
 
 
 
 
47
Lender or the Administrative Agent attributable to such recoupment, as
determined in good faith by such Lender or the Administrative Agent, and
(vii) the liability of the Borrowers and the Account Parties to any Lender or
the Administrative Agent with respect to any Indemnified Taxes shall be reduced
to the extent that such Lender or the Administrative Agent receives an
offsetting Tax benefit (or could have received such a benefit by taking
reasonable measures to receive it); provided that there shall not be any
reductions pursuant to this clause (vii) with respect to any Tax benefit (x) the
existence of which such Lender or Administrative Agent is unaware, (y) the
claiming of which would result in any cost or Tax to such Lender or the
Administrative Agent (unless the relevant Borrower or the relevant Account Party
(as the case may be) shall have agreed to pay its reasonably allocable portion
of such cost or Tax) and (z) unless the relevant Borrower or the relevant
Account Party (as the case may be) shall agree to indemnify the Lender or the
Administrative Agent to the extent any Tax benefit taken into account under this
clause (vii) is thereafter lost or becomes unavailable.
 
(d) In addition to their obligations under Section 2.14 hereof, each of the
Lenders and the Administrative Agent hereby agrees to execute and deliver, and
to make any required filings of, all certificates, agreements, documents,
reports, statements and other instruments as are reasonably necessary to
effectuate the purposes of this Section 2.18 and Sections 2.14 and 2.16.  The
Parent Borrower agrees to pay all filing fees incurred by any Lender or the
Administrative Agent in performing its obligations under this Section 2.18.
 
SECTION 2.19. Reserved.
 
SECTION 2.20. Borrowing Subsidiaries.  The Parent Borrower may, at any time and
from time to time so long as no Default has occurred and is continuing,
designate any Material Subsidiary (other than any Foreign Subsidiary) to be a
Borrowing Subsidiary hereunder by delivering to the Administrative Agent a
Subsidiary Borrowing Election with respect to such Material Subsidiary.  The
eligibility of any Borrowing Subsidiary to borrow hereunder shall terminate when
the Administrative Agent receives a Subsidiary Borrower Termination with respect
to such Material Subsidiary.  Each Subsidiary Borrower Election delivered to the
Administration Agent shall be duly executed on behalf of the relevant Material
Subsidiary and the Parent Borrower, and each Subsidiary Borrower Termination
delivered to the Administrative Agent shall be duly executed on behalf of the
Parent Borrower.  The delivery of a Subsidiary Borrower Termination shall not
affect any obligation of the relevant Material Subsidiary incurred in its
capacity as a Borrower, and such Material Subsidiary shall continue to
constitute a Borrowing Subsidiary for all purposes hereof (other than the right
to borrow Loans) until all its obligations hereunder as a Borrower have been
discharged and paid in full.  The Administrative Agent shall promptly give
notice to the Lenders and the Issuing Banks of its receipt of any Subsidiary
Borrower Election or Subsidiary Borrower Termination.
 
SECTION 2.21. Defaulting Lenders.  Notwithstanding any provision of this
Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the
following provisions shall apply for so long as such Lender is a Defaulting
Lender:
 
(a) fees shall cease to accrue on the unfunded portion of the Commitment of such
Defaulting Lender pursuant to Section 2.11(a);
 
 
 
 
 
48
(b) the Commitment and Revolving Credit Exposure of such Defaulting Lender shall
not be included in determining whether all Lenders or the Required Lenders have
taken or may take any action hereunder (including any consent to any amendment
or waiver pursuant to Section 9.02), provided that any waiver, amendment or
modification requiring the consent of all Lenders or each affected Lender which
affects such Defaulting Lender differently than other affected Lenders, or any
waiver, amendment or modification that has the effect of increasing the
Commitment of such Defaulting Lender, shall require the consent of such
Defaulting Lender;
 
(c) if any Swingline Exposure or LC Exposure exists at the time a Lender becomes
a Defaulting Lender then:
 
(i) all or any part of such Swingline Exposure and LC Exposure shall be
reallocated among the non-Defaulting Lenders in accordance with their respective
Applicable Percentages but only to the extent (x) the sum of all non-Defaulting
Lenders’ Revolving Credit Exposures plus such Defaulting Lender’s Swingline
Exposure and LC Exposure does not exceed the total of all non-Defaulting
Lenders’ Commitments (it being understood that in no event shall any
non-Defaulting Lender’s Revolving Credit Exposure exceed such Lender’s
Commitment as a result of such reallocation) and (y) the conditions set forth in
Section 4.02 are satisfied at such time; and
 
(ii) if the reallocation described in clause (i) above cannot, or can only
partially, be effected, the Borrowers or the Account Parties shall within one
Business Day following notice by the Administrative Agent (x) first, prepay such
Swingline Exposure and (y) second, cash collateralize such Defaulting Lender’s
LC Exposure (after giving effect to any partial reallocation pursuant to clause
(i) above) in accordance with the procedures set forth in Section 2.05(j) for so
long as such LC Exposure is outstanding;
 
(iii) if the Borrowers or the Account Parties cash collateralize any portion of
such Defaulting Lender’s LC Exposure pursuant to this paragraph (c),
the Borrowers shall not be required to pay any fees to such Defaulting Lender
pursuant to Section 2.11(b) with respect to such Defaulting Lender’s LC Exposure
during the period such Defaulting Lender’s LC Exposure is cash collateralized;
 
(iv) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to
this paragraph (c), then the fees payable to the Lenders pursuant to Section
2.11(a) and Section 2.11(b) shall be adjusted in accordance with such
non-Defaulting Lenders’ Applicable Percentages; or
 
(v) if any Defaulting Lender’s LC Exposure is neither cash collateralized nor
reallocated pursuant to this paragraph (c), then, without prejudice to any
rights or remedies of the Issuing Bank or any Lender hereunder, all facility
fees that otherwise would have been payable to such Defaulting Lender (solely
with respect to the portion of such Defaulting Lender’s Commitment that was
utilized by such LC Exposure) and Letter of Credit fees payable under Section
2.11(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to
the Issuing Bank until such LC Exposure is cash collateralized and/or
reallocated;
 
 
 
 
 
49
(d) so long as any Lender is a Defaulting Lender, the Swingline Lender shall not
be required to fund any Swingline Loan and the Issuing Bank shall not be
required to issue, amend or increase any Letter of Credit, unless it is
satisfied that the related exposure will be 100% covered by the Commitments of
the non-Defaulting Lenders and/or cash collateral will be provided by the
Borrowers or the Account Parties in accordance with Section 2.21(c), and
participating interests in any such newly issued or increased Letter of Credit
or newly made Swingline Loan shall be allocated among non-Defaulting Lenders in
a manner consistent with Section 2.21(c)(i) (and Defaulting Lenders shall not
participate therein); and
 
(e) any amount payable to such Defaulting Lender hereunder (whether on account
of principal, interest, fees or otherwise and including any amount that would
otherwise be payable to such Defaulting Lender pursuant to Section 2.17(c), but
excluding Section 2.18(b)) shall, in lieu of being distributed to such
Defaulting Lender, be retained by the Administrative Agent in a segregated
account and, subject to any applicable requirements of law, be applied at such
time or times as may be determined by the Administrative Agent (i) first, to the
payment of any amounts owing by such Defaulting Lender to the Administrative
Agent hereunder, (ii) second, pro rata, to the payment of any amounts owing by
such Defaulting Lender to the Issuing Bank or Swingline Lender hereunder, (iii)
third, to the funding of any Loan or the funding or cash collateralization of
any participating interest in any Swingline Loan or Letter of Credit in respect
of which such Defaulting Lender has failed to fund its portion thereof as
required by this Agreement, as determined by the Administrative Agent, (iv)
fourth, if so determined by the Administrative Agent and the Borrowers or the
Account Parties, held in such account as cash collateral for future funding
obligations of the Defaulting Lender under this Agreement, (v) fifth, pro rata,
to the payment of any amounts owing to the Borrowers, the Account Parties or the
Lenders as a result of any judgment of a court of competent jurisdiction
obtained by the Borrowers, the Account Parties or any Lender against such
Defaulting Lender as a result of such Defaulting Lender’s breach of its
obligations under this Agreement and (vi) sixth, to such Defaulting Lender or as
otherwise directed by a court of competent jurisdiction; provided that if such
payment is (x) a prepayment of the principal amount of any Loans or
reimbursement obligations in respect of LC Disbursements which a Defaulting
Lender has funded its participation obligations and (y) made at a time when the
conditions set forth in Section 4.02 are satisfied, such payment shall be
applied solely to prepay the Loans of, and reimbursement obligations owed to,
all non-Defaulting Lenders pro rata prior to being applied to the prepayment of
any Loans, or reimbursement obligations owed to, any Defaulting Lender.
 
           In the event that the Administrative Agent, the Borrowers, the
Account Parties, the Issuing Bank and the Swingline Lender each agrees that a
Defaulting Lender has adequately remedied all matters that caused such Lender to
be a Defaulting Lender, then the Swingline Exposure and LC Exposure of the
Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment
and on such date such Lender shall purchase at par such of the Loans of the
other Lenders (other than Swingline Loans) as the Administrative Agent shall
determine may be necessary in order for such Lender to hold such Loans in
accordance with its Applicable Percentage.
 
 
 
 
 
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ARTICLE III
 
Representations and Warranties
 
Each of Holdings, the Parent Borrower and Purchasing represents and warrants to
the Lenders that:
 
SECTION 3.01. Organization; Powers.  Each of the Loan Parties is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and is qualified to do business in, and is in good standing in,
every jurisdiction where such qualification is required, except, in each case,
where the failure to do so, individually or in the aggregate, would not result
in a Material Adverse Effect.
 
SECTION 3.02. Authorization; Enforceability.  The Transactions to be entered
into by each Loan Party are within such Loan Party’s corporate powers and have
been duly authorized by all necessary corporate and, if required, stockholder
action.  This Agreement has been duly executed and delivered by each of
Holdings, the Parent Borrower and Purchasing and constitutes, and each other
Loan Document to which any Loan Party is to be a party, when executed and
delivered by such Loan Party, will constitute, a legal, valid and binding
obligation of Holdings, the Parent Borrower, Purchasing or such Loan Party (as
the case may be), enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
 
SECTION 3.03. Governmental Approvals; No Conflicts.  The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority, except (i) such as have been obtained or
made and are in full force and effect or as to which the failure to be made or
obtained and to be in full force and effect would not result in a Material
Adverse Effect, (ii) filings necessary to perfect Liens created under the
Collateral Agreement and (iii) filings of periodic reports with the Securities
and Exchange Commission, (b) will not violate any applicable law or material
regulation or the charter, by-laws or other organizational documents of Holdings
or any Subsidiary or any material order of any Governmental Authority, (c) will
not violate or result in a default under any material provision of any
indenture, agreement or other instrument binding upon Holdings or any of its
Subsidiaries or its assets, or give rise to a right thereunder to require any
payment to be made by Holdings or any Subsidiary, and (d) will not result in the
creation or imposition of any Lien on any asset of Holdings or any of its
Subsidiaries, except Liens created under the Collateral Agreement.
 
SECTION 3.04. Financial Condition; No Material Adverse Change.  (a)  Holdings
has heretofore furnished to the Lenders its consolidated balance sheet and
statements of income, stockholders equity and cash flows as of and for the
fiscal year ended January 31, 2009, reported on by KPMG LLP, independent public
accountants.  Such financial statements present fairly, in all material
respects, the financial position and results of operations and cash flows of
Holdings and its consolidated Subsidiaries as of such dates and for such periods
in accordance with GAAP.
 
 
 
 
 
51
(b) Since January 31, 2009, there has been no material adverse change in the
business, assets, operations or condition of Holdings and its Subsidiaries,
taken as a whole.
 
SECTION 3.05. Properties.  (a)  Each of Holdings and its Subsidiaries has good
title to, or valid leasehold interests in, all its real and personal property
material to the business of Holdings and its Subsidiaries (taken as a whole),
except for minor defects in title and leases being contested, in each case, that
do not materially interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended purposes.
 
(b) Each of Holdings and its Subsidiaries owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by Holdings and its Subsidiaries
does not infringe upon the rights of any other Person, except for any defects in
ownership or licenses and any such infringements that, individually or in the
aggregate, would not result in a Material Adverse Effect.
 
SECTION 3.06. Litigation and Environmental Matters.  (a)  There are no actions,
suits or proceedings by or before any arbitrator or Governmental Authority
pending against or, to the knowledge of Holdings, the Parent Borrower or
Purchasing, threatened against or affecting Holdings or any of its Subsidiaries
(i) as to which there is a reasonable possibility of an adverse determination
and that, if adversely determined, would, individually or in the aggregate,
result in a Material Adverse Effect (other than the Disclosed Matters) or
(ii) that involve any of the Loan Documents or the Transactions.
 
(b) Except for the Disclosed Matters and except with respect to any other
matters that, individually or in the aggregate, would not result in a Material
Adverse Effect, neither Holdings nor any of its Subsidiaries (i) has failed to
comply with any Environmental Law or to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law, (ii) has
become subject to any Environmental Liability, (iii) has received notice of any
claim with respect to any Environmental Liability or (iv) knows of any basis for
any Environmental Liability.
 
(c) Since the date of this Agreement, there has been no change in the status of
the Disclosed Matters that, individually or in the aggregate, has resulted in,
or materially increased the likelihood of, a Material Adverse Effect.
 
SECTION 3.07. Compliance with Laws and Agreements.  Each of Holdings and its
Subsidiaries is in compliance with all laws, regulations and orders of any
Governmental Authority applicable to it or its property and all indentures,
material agreements and other material instruments binding upon it or its
property, except where the failure to do so, individually or in the aggregate,
would not result in a Material Adverse Effect.  No Default has occurred and is
continuing.
 
SECTION 3.08. Investment Company Status.  No Loan Party is an “investment
company” as defined in, or subject to regulation under, the Investment Company
Act of 1940.
 
SECTION 3.09. Taxes.  Each of Holdings and its Subsidiaries has timely filed or
caused to be filed all Tax returns and reports required to have been filed and
has paid or caused to be paid all Taxes shown to be due and payable on such
returns, except (a) Taxes that are being
 
 
 
 
 
52
contested in good faith by appropriate proceedings and for which Holdings or
such Subsidiary, as applicable, has set aside on its books adequate reserves or
(b) to the extent that the failure to do so would not result in a Material
Adverse Effect.
 
SECTION 3.10. ERISA.  (a)  No ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, would result in a Material Adverse
Effect.
 
(b) The present value of all accumulated benefit obligations under each Plan
(based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed the fair market value of the assets
of such Plan by a material amount, and the present value of all accumulated
benefit obligations of all underfunded Plans (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did not, as of
the date of the most recent financial statements reflecting such amounts, exceed
the fair market value of the assets of all such underfunded Plans by a material
amount.
 
SECTION 3.11. Disclosure.  Neither the Information Memorandum nor any of the
other reports, financial statements, certificates or other information furnished
by or on behalf of any Loan Party to the Administrative Agent, any Issuing Bank
or any Lender in connection with the negotiation of this Agreement or any other
Loan Document or delivered hereunder (as modified or supplemented by other
information so furnished and taken as a whole with such other information)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to
projected financial information, Holdings, the Parent Borrower and Purchasing
represent only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time.
 
SECTION 3.12. Material Subsidiaries.  Schedule 3.12 sets forth the name and
jurisdiction of organization of each Subsidiary of Holdings that is a Material
Subsidiary as of the Effective Date.
 
ARTICLE IV
 
Conditions
 
SECTION 4.01. Effective Date.  The obligations of the Lenders to make Loans and
of each Issuing Bank to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 9.02):
 
(a) The Administrative Agent (or its counsel) shall have received from each
party hereto either (i) a counterpart of this Agreement signed on behalf of such
party or (ii) written evidence satisfactory to the Administrative Agent (which
may include telecopy or electronic transmission of a signed signature page of
this Agreement) that such party has signed a counterpart of this Agreement.
 
 
 
 
 
53
(b) The Administrative Agent shall have received a favorable written opinion
(addressed to the Administrative Agent, the Issuing Banks and the Lenders and
dated the Effective Date) of each of Sullivan & Cromwell LLP, special New York
counsel for the Loan Parties, and Janet L. Dhillon, General Counsel of Holdings,
substantially in the form of Exhibits B-1 and B-2, and covering such other
matters relating to the Loan Parties, the Loan Documents or the Transactions as
the Required Lenders shall reasonably request.  Each of Holdings, the Parent
Borrower and Purchasing hereby requests such counsel to deliver such opinions.
 
(c) The Administrative Agent shall have received such documents and certificates
as the Administrative Agent or its counsel may reasonably request relating to
the organization, existence and good standing of each Loan Party, the
authorization of the Transactions and any other legal matters relating to the
Loan Parties, the Loan Documents or the Transactions, all in form and substance
satisfactory to the Administrative Agent and its counsel.
 
(d) The Administrative Agent shall have received a certificate, dated the
Effective Date and signed by the President, a Vice President or a Financial
Officer of the Parent Borrower, confirming compliance with the conditions set
forth in paragraphs (a) and (b) of Section 4.02.
 
(e) The Administrative Agent shall have received all fees and other amounts due
and payable on or prior to the Effective Date, including, to the extent invoiced
at least two Business Days prior to the Effective Date, reimbursement or payment
of all out-of-pocket expenses required to be reimbursed or paid by any Loan
Party hereunder.
 
(f) The Collateral and Guarantee Requirement shall have been satisfied and the
Administrative Agent shall have received a completed Perfection Certificate
dated the Effective Date and signed by an executive officer or Financial Officer
of the Parent Borrower, together with all attachments contemplated thereby, and
the Administrative Agent shall have received the results of a search of the
Uniform Commercial Code (or equivalent) filings made with respect to the Loan
Parties in the jurisdictions contemplated by the Perfection Certificate and
copies of the financing statements (or similar documents) disclosed by such
search and evidence reasonably satisfactory to the Administrative Agent that the
Liens indicated by such financing statements (or similar documents) are
permitted by Section 6.02 or have been released.
 
(g) The Administrative Agent shall have received evidence that the insurance
required by the Collateral Agreement is in effect.
 
(h) Prior to or concurrently with the effectiveness of the Commitments, the
commitments under the Existing Credit Agreement shall be terminated and all
loans and other amounts accrued or owing thereunder shall be paid.
 
(i) The Administrative Agent shall have received an initial Asset Coverage
Certificate calculating the Asset Coverage Ratio as of the last day of the most
recent fiscal month ended at least 10 days prior to the Effective Date, giving
pro forma effect to any Loans being made or Letters of Credit being issued (or,
in the case of Existing Letters of Credit, outstanding) on the Effective Date as
if such Loans were made or such Letters of Credit were issued on the last day of
such calendar month.
 
 
 
 
 
54
(j) The Lenders shall have received all documentation and other information
required by regulatory authorities under applicable “know your customer” and
anti-money laundering rules and regulations, including the Patriot Act.
 
The Administrative Agent shall notify the Parent Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and
binding.  Notwithstanding the foregoing, the obligations of the Lenders to make
Loans and of each Issuing Bank to issue Letters of Credit hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on April
30, 2009 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).
 
SECTION 4.02. Each Credit Event.  The obligation of each Lender to make a Loan
on the occasion of any Borrowing, and of each Issuing Bank to issue, amend,
renew or extend any Letter of Credit, is subject to the satisfaction of the
following conditions:
 
(a) The representations and warranties of the Loan Parties set forth in the Loan
Documents (except (i) in the case of Borrowings made solely to refinance
maturing commercial paper issued by any of the Borrowers, the representations
and warranties made under Sections 3.04(b), 3.06(a)(i) and 3.06(c) and (ii) in
the case of any issuance, amendment, renewal or extension of a Trade Letter of
Credit, the representations and warranties made under Section 3.10(b)) shall be
true and correct on and as of the date of such Borrowing or the date of
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable.
 
(b) At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.
 
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by Holdings
and the relevant Borrower or the relevant Account Party, as applicable, on the
date thereof as to the matters specified in paragraphs (a) and (b) of this
Section.
 
SECTION 4.03. Borrowing Subsidiaries.  The obligation of each Lender to make a
Loan on the occasion of the first Borrowing by a Borrowing Subsidiary is subject
to receipt by the Administrative Agent of a Subsidiary Borrower Election with
respect to such Borrowing Subsidiary in accordance with Section 2.20 and to the
satisfaction of the following further conditions:
 
(a) The Administrative Agent shall have received one or more favorable written
opinions of counsel for such Borrowing Subsidiary reasonably acceptable to the
Administrative Agent, with respect to (i) the organization and existence of such
Borrowing Subsidiary, (ii) the due authorization, execution and delivery of the
Subsidiary Borrower Election, (iii) the legality, validity and binding effect on
such Borrowing Subsidiary of the Subsidiary Borrower Election and this Agreement
and (iv) such other
 
 
 
 
 
55
matters relating to such Borrowing Subsidiary as the Administrative Agent shall
reasonably request.
 
(b) The Administrative Agent shall have received such documents and certificates
as the Administrative Agent or its counsel may reasonably request relating to
the organization, existence and good standing of such Borrowing Subsidiary and
its authorization to be a Borrower, all in form and substance reasonably
satisfactory to the Administrative Agent and its counsel.
 
(c) The Lenders shall have received all documentation and other information
required by regulatory authorities under applicable “know your customer” and
anti-money laundering rules and regulations, including the Patriot Act, with
respect to such Borrowing Subsidiary.
 
The Administrative Agent shall promptly provide to each Lender any documentation
with respect to any Borrowing Subsidiary that was delivered to the
Administrative Agent pursuant to this Section.
 
ARTICLE V
 
Affirmative Covenants
 
Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, each of Holdings, the Parent Borrower
and Purchasing covenants and agrees with the Lenders that:
 
SECTION 5.01. Financial Statements; Ratings Change and Other Information.  The
Parent Borrower will furnish to the Administrative Agent for distribution to
each Lender:
 
(a) as soon as available and, in any event, within 90 days after the end of each
fiscal year of Holdings, its audited consolidated balance sheets and related
statements of operations, stockholders’ equity and cash flows as of the end of
and for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, all reported on by KPMG LLP or other independent
public accountants of recognized national standing (without a “going concern” or
like qualification or exception and without any qualification or exception as to
the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition and
results of operations of Holdings and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
 
(b) as soon as available and, in any event, within 45 days after the end of each
of the first three fiscal quarters of each fiscal year of Holdings, its
consolidated balance sheets and related statements of operations, stockholders’
equity and cash flows as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all
 
 
 
 
 
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certified by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of Holdings and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;
 
(c) concurrently with any delivery of financial statements under clause (a) or
(b) above, a certificate of a Financial Officer of Holdings or the Parent
Borrower (i) certifying as to whether a Default has occurred and, if a Default
has occurred, specifying the details thereof and any action taken or proposed to
be taken with respect thereto, (ii) setting forth reasonably detailed
calculations demonstrating compliance with Sections 6.09 and 6.10 and
(iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 3.04 and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate;
 
(d) within 30 days after the end of each fiscal year, an annual financial
forecast (in a form consistent with forecasts previously provided) for Holdings
and its Subsidiaries for the subsequent fiscal year (including a consolidated
balance sheet of Holdings and its Subsidiaries as of the end of the prior fiscal
year and consolidated statements of income and cash flows of Holdings and its
Subsidiaries for such fiscal year);
 
(e) promptly after the same become publicly available, copies of all periodic
and other reports, proxy statements and other materials filed by Holdings or any
Subsidiary with the Securities and Exchange Commission, or any Governmental
Authority succeeding to any or all of the functions of said Commission, or with
any national securities exchange, or distributed by Holdings to its shareholders
generally, as the case may be;
 
(f) promptly after (i) Moody’s or S&P shall have announced a change in the
Credit Rating established or deemed to have been established by such rating
agency, written notice of such Credit Rating change and (ii) Moody’s, S&P or
Fitch shall have announced a change in the credit rating established by such
rating agent with respect to this facility, written notice of such rating
change;
 
(g) within 20 days after the end of each fiscal month, an Asset Coverage
Certificate (together with any other supplemental reporting and supporting
documentation reasonably requested by the Administrative Agent) calculating the
Asset Coverage Ratio as of the last day of such fiscal month; and
 
(h) promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of Holdings or any
Subsidiary, or compliance with the terms of any Loan Document, as the
Administrative Agent or any Lender may reasonably request.
 
SECTION 5.02. Notices of Material Events.  The Parent Borrower will furnish to
the Administrative Agent for distribution to each Lender prompt written notice
of the following:
 
 
 
 
 
57
(a) the occurrence of any Default;
 
(b) the filing or commencement of any action, suit or proceeding by or before
any arbitrator or Governmental Authority against or affecting Holdings, the
Parent Borrower or any Subsidiary thereof that, if adversely determined, would
result in a Material Adverse Effect;
 
(c) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, would result in liability of Holdings and its
Subsidiaries in an aggregate amount exceeding $100,000,000; and
 
(d) any other development that results in, or would reasonably be expected to
result in, a Material Adverse Effect.
 
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Parent Borrower setting
forth the details of the event or development requiring such notice and any
action taken or proposed to be taken with respect thereto.
 
SECTION 5.03. Information Regarding Collateral.  (a)  The Parent Borrower will
furnish to the Administrative Agent prompt written notice of any change (i) in
the legal name of any Loan Party, (ii) in the identity or type of organization
or corporate structure of any Loan Party, (iii) in the Federal Taxpayer
Identification Number or other identification number of any Loan Party, (iv) in
the jurisdiction of organization of any Loan Party or (v) in the address set
forth in the Uniform Commercial Code financing statement filed with respect to
any Loan Party.  Holdings and the Parent Borrower agree not to effect or permit
any change referred to in the preceding sentence unless all filings have been
made under the Uniform Commercial Code or otherwise that are required in order
for the Administrative Agent to continue at all times following such change to
have a valid, legal and perfected security interest in all the Collateral.  The
Parent Borrower also agrees promptly to notify the Administrative Agent if any
material portion of the Collateral is damaged or destroyed.
 
(b) Each year, at the time of delivery of annual financial statements with
respect to the preceding fiscal year pursuant to clause (a) of Section 5.01, the
Parent Borrower shall deliver to the Administrative Agent a certificate of a
Financial Officer and the chief legal officer of the Parent Borrower (i) setting
forth the information required pursuant to the Perfection Certificate or
confirming that there has been no change in such information since the date of
the Perfection Certificate delivered on the Effective Date or the date of the
most recent certificate delivered pursuant to this Section and (ii) certifying
that all Uniform Commercial Code financing statements or other appropriate
filings, recordings or registrations, including all refilings, rerecordings and
reregistrations, containing a description of the Collateral have been filed of
record (or delivered to the Administrative Agent for filing or recording) in
each governmental, municipal or other appropriate office in each jurisdiction
identified pursuant to clause (i) above to the extent necessary to protect and
perfect the security interests under the Collateral Agreement for a period of
not less than 18 months after the date of such certificate (except as noted
therein with respect to any continuation statements to be filed within such
period).
 
 
 
 
 
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(c) At any time during a Release Period, the provisions of paragraphs (a) and
(b) of this Section 5.03 shall not apply.
 
SECTION 5.04. Existence; Conduct of Business.  Each of Holdings and the Parent
Borrower will, and will cause each of its Material Subsidiaries to, do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of the business of Holdings and its
Subsidiaries (taken as a whole); provided that the foregoing shall not prohibit
any merger, consolidation, liquidation, transfer of assets or dissolution
permitted under Section 6.03.
 
SECTION 5.05. Payment of Obligations.  Each of Holdings and the Parent Borrower
will, and will cause each of its Subsidiaries to, pay its obligations, including
Tax liabilities, that, if not paid, would result in a Material Adverse Effect
before the same shall become delinquent or in default, except where (a) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, (b) Holdings, the Parent Borrower or such Subsidiary has set aside
on its books adequate reserves with respect thereto in accordance with GAAP and
(c) the failure to make payment pending such contest would not result in a
Material Adverse Effect.
 
SECTION 5.06. Maintenance of Properties.  Each of Holdings and the Parent
Borrower will, and will cause each of its Subsidiaries to, keep and maintain all
property material to the conduct of the business of Holdings and its
Subsidiaries (taken as a whole) in good working order and condition, ordinary
wear and tear excepted; provided that nothing in this Section shall prevent
Holdings or any Subsidiary from discontinuing the operations or maintenance of
any of its properties no longer deemed by Holdings or such Subsidiary, as
applicable, to be useful in the conduct of its business.
 
SECTION 5.07. Insurance.  Each of Holdings and the Parent Borrower will, and
will cause each of its Material Subsidiaries to, maintain, with financially
sound and reputable insurance companies (a) insurance in such amounts (with no
greater risk retention) and against such risks as are customarily maintained by
companies of established repute engaged in the same or similar businesses
operating in the same or similar locations and (b) all insurance required to be
maintained pursuant to the Collateral Agreement.  The Parent Borrower will
furnish to the Lenders, upon request of the Administrative Agent, information in
reasonable detail as to the insurance so maintained.
 
SECTION 5.08. Books and Records; Inspection Rights; Inventory Audits.  Each of
Holdings and the Parent Borrower will, and will cause each of its Subsidiaries
to, keep proper books of record and account in accordance with GAAP.  Each of
Holdings and the Parent Borrower will, and will cause each of its Subsidiaries
to, permit any representatives designated by the Administrative Agent or any
Lender, upon reasonable prior notice and without disruption of the normal and
ordinary conduct of the business of Holdings, the Parent Borrower or any such
Subsidiary, to visit and inspect its properties, to examine and make extracts
from its books and records, and to discuss its affairs, finances and condition
with its officers and independent accountants, all at such reasonable times and
as often as reasonably requested.  Each of Holdings and the Parent Borrower
will, and will cause each of its Subsidiaries to, permit the
 
 
 
 
 
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Administrative Agent or any auditor that is satisfactory to the Administrative
Agent, at any time upon reasonable prior notice (but, unless an Event of Default
has occurred and is continuing, no more than once during any calendar year), to
perform audits of, conduct independent appraisals of and/or monitor the
inventory of Holdings and its Subsidiaries, provided that at any time that at
least two of Moody’s, S&P and Fitch issue ratings with respect to this facility,
of Ba2, BB and BB, respectively, or worse, then (x) the Administrative Agent or
any auditor satisfactory to the Administrative Agent will be permitted to (i)
perform audits and conduct independent appraisals of the inventory of Holdings
and its Subsidiaries but, except as provided in clause (ii), not more frequently
than once in any 365-day period, and (ii) for so long as the aggregate Revolving
Credit Exposures are more than 50% of the total Commitments, perform ongoing
audits, conduct ongoing appraisals and/or continuously monitor the inventory of
Holdings and its Subsidiaries and (y) Holdings will furnish to the
Administrative Agent for distribution to each Lender within 20 days after the
end of each fiscal month, a consolidated report of accounts payable for Holdings
and its Subsidiaries (including aging details) as of the last day of such fiscal
month and other information reasonably requested by the Administrative Agent in
form and substance satisfactory to the Administrative Agent.
 
SECTION 5.09. Compliance with Laws.  Each of Holdings and the Parent Borrower
will, and will cause each of its Subsidiaries to, comply with all laws, rules,
regulations and orders of any Governmental Authority applicable to it or its
property, except where the failure to do so, individually or in the aggregate,
would not result in a Material Adverse Effect.
 
SECTION 5.10. Use of Proceeds and Letters of Credit.  The proceeds of the Loans
will be used only for general corporate purposes, including working capital
requirements, liquidity and the repayment of maturing commercial paper and other
Indebtedness of the Parent Borrower and Purchasing (including Indebtedness under
the Existing Credit Agreement).  No part of the proceeds of any Loan will be
used, whether directly or indirectly, for any purpose that entails a violation
of any of the Regulations of the Board, including Regulations T, U and
X.  Letters of Credit will be issued to support obligations of the Account
Parties in respect of purchases of inventory in the ordinary course of business,
as well as other obligations of Holdings and its Subsidiaries incurred without
violation of this Agreement.
 
SECTION 5.11. Additional Guarantee Parties.  (a)  If any Subsidiary (other than
any Foreign Subsidiary) becomes a Material Subsidiary or otherwise becomes a
Guarantee Party after the Effective Date, Holdings and the Parent Borrower
shall, within three Business Days after such Subsidiary becomes a Material
Subsidiary or a Guarantee Party (as applicable), notify the Administrative Agent
and the Lenders thereof and cause the Collateral and Guarantee Requirement to be
satisfied with respect to such Subsidiary; provided that the requirements of
this paragraph shall not apply during a Release Period.
 
(b) If a Release Period commences, Holdings and the Parent Borrower agree that
at any time thereafter, if either rating agency shall then have a Credit Rating
in effect that is worse than Baa2 or BBB, as applicable, then Holdings and the
Parent Borrower will promptly, but in no event later than five Business Days
thereafter, cause the Collateral and Guarantee Requirement to be satisfied.
 
 
 
 
 
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SECTION 5.12. Further Assurances.  Each of Holdings and the Parent Borrower
will, and will cause each Guarantee Party and each Additional Grantor to,
execute any and all further documents, financing statements, agreements and
instruments, and take all such further actions, which may be required under any
applicable law, or which the Administrative Agent or the Required Lenders may
reasonably request, to cause the Collateral and Guarantee Requirement to be and
remain satisfied, all at the expense of the Guarantee Parties and the Additional
Grantors.  At any time other than during a Release Period, Holdings and the
Parent Borrower also agree to provide to the Administrative Agent, from time to
time upon request, evidence reasonably satisfactory to the Administrative Agent
as to the perfection and priority of the Liens created or intended to be created
by the Collateral Agreement.
 
SECTION 5.13. Maintenance of Ratings.  Holdings will use commercially reasonable
efforts to maintain continuously in effect (i) a Credit Rating from each of
Moody’s and S&P in respect of Holdings and (ii) a credit rating of this facility
from each of Moody’s, S&P and Fitch.
 
SECTION 5.14. Prepayment Avoidance.  Holdings and the Parent Borrower will, and
will cause each Subsidiary to, either repay or prepay Loans, or make investments
in assets to be used in their businesses, in each case as necessary to avoid any
mandatory redemption, repurchase or prepayment referred to in the proviso to
clause (c) of the definition of “Disqualified Equity Interest” or the proviso to
clause (h) of Section 6.01.
 
ARTICLE VI
 
Negative Covenants
 
Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees   payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, each of Holdings, the Parent Borrower and Purchasing
covenants and agrees with the Lenders that:
 
SECTION 6.01. Indebtedness.  Neither Holdings nor the Parent Borrower will, nor
will they permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:
 
(a) Indebtedness created under the Loan Documents;
 
(b) Indebtedness existing on the date hereof and set forth in Schedule 6.01 and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof (other than in respect of any
premium or fee payable in connection with such extension, renewal or
replacement) or result in an earlier maturity date or decreased weighted average
life thereof; provided that Indebtedness in respect of which the holders thereof
have the unconditional right to require the issuer thereof to effect a
redemption of such Indebtedness for cash prior to the stated maturity date of
such Indebtedness shall be treated as maturing on the nearest such redemption
date for purposes of the foregoing calculations;
 
 
 
 
 
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(c) Indebtedness of Holdings to any Subsidiary and of any Subsidiary to Holdings
or any other Subsidiary;
 
(d) Guarantees by Holdings of Indebtedness of any Subsidiary and by any
Subsidiary of Indebtedness of (i) so long as such Subsidiary also guarantees the
Obligations on a pari passu basis, any Loan Party or (ii) any other Subsidiary;
 
(e) Indebtedness of Holdings or any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and extensions, renewals and replacements of
any such Indebtedness that do not increase the outstanding principal amount
thereof; provided that (i) such Indebtedness is incurred prior to or within 90
days after such acquisition or the completion of such construction or
improvement and (ii) the aggregate principal amount of Indebtedness permitted by
this clause (e) shall not exceed $500,000,000 at any time outstanding;
 
(f) Indebtedness of any Person that becomes a Subsidiary after the date hereof;
provided that (i) such Indebtedness exists at the time such Person becomes a
Subsidiary and is not created in contemplation of or in connection with such
Person becoming a Subsidiary and (ii) the aggregate principal amount of
Indebtedness permitted by this clause (f) shall not exceed $150,000,000 at any
time outstanding;
 
(g) Permitted Long-Term Indebtedness;
 
(h) Indebtedness in an aggregate principal amount not to exceed $750,000,000 and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof (other than in respect of any
premium or fee payable in connection with such extension, renewal or
replacement), provided that such Indebtedness (i) shall be secured on a
second-priority basis only by Collateral of the Loan Parties and shall be
subject to the Intercreditor Agreement, (ii) shall not mature on or prior to the
Specified Date, (iii) shall not have terms more restrictive, taken as a whole,
than those set forth in this Agreement and (iv) shall be subject only to
mandatory prepayments, if any, that can be avoided through repayment or
prepayment of Loans or through investments by Holdings and its consolidated
Subsidiaries in assets to be used in their businesses, provided, further, that
no such Indebtedness may be incurred, extended, renewed or replaced at any time
during a Release Period; and
 
(i) other unsecured Indebtedness in an aggregate principal amount not exceeding
$150,000,000 at any time outstanding.
 
SECTION 6.02. Liens.  Neither Holdings nor the Parent Borrower will, nor will
they permit any Subsidiary to, create, incur, assume or permit to exist any Lien
on any property or asset now owned or hereafter acquired by it, or assign or
sell any income or revenues (including accounts receivable) or rights in respect
of any thereof, except:
 
(a) Liens created under the Loan Documents;
 
 
 
 
 
62
(b) Permitted Encumbrances;
 
(c) any Lien on any property or asset of Holdings or any Subsidiary existing on
the date hereof and set forth in Schedule 6.02; provided that (i) such Lien
shall not apply to any other property or asset of Holdings or any Subsidiary and
(ii) such Lien shall secure only those obligations which it secures on the date
hereof and extensions, renewals and replacements thereof that do not increase
the outstanding principal amount thereof, other than in respect of any premium
or fee payable in connection with such extension, renewal or replacement;
 
(d) any Lien existing on any property or asset prior to the acquisition thereof
by Holdings or any Subsidiary or existing on any property or asset of any Person
that becomes a Subsidiary after the date hereof prior to the time such Person
becomes a Subsidiary; provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition or such Person becoming
a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other
property or assets of Holdings or any Subsidiary and (iii) such Lien shall
secure only those obligations which it secures on the date of such acquisition
or the date such Person becomes a Subsidiary, as the case may be and extensions,
renewals and replacements thereof that do not increase the outstanding principal
amount thereof, other than in respect of any premium or fee payable in
connection with such extension, renewal or replacement;
 
(e) Liens on fixed or capital assets acquired, constructed or improved by
Holdings or any Subsidiary; provided that (i) such security interests secure
Indebtedness permitted by clause (e) of Section 6.01, (ii) such security
interests and the Indebtedness secured thereby are incurred prior to or within
90 days after such acquisition or the completion of such construction or
improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the
cost of acquiring, constructing or improving such fixed or capital assets and
(iv) such security interests shall not apply to any other property or assets of
Holdings or any Subsidiaries;
 
(f) Liens in respect of leases or subleases granted to other Persons in the
ordinary course of business and not materially interfering with the conduct of
business of Holdings and its Subsidiaries;
 
(g) Liens arising out of conditional sale, title retention, consignment
(including “sale or return” arrangements) or similar arrangements for the sale
of goods entered into by the Parent Borrower or any of its Subsidiaries in the
ordinary course of business in accordance with the past practices of the Parent
Borrower and its Subsidiaries, provided that the aggregate amount of such goods
shall not exceed $200,000,000;
 
(h) Liens in favor of customs and revenue authorities arising as a matter of law
securing payment of customs duties in connection with the importation of goods;
 
(i) Liens on accounts receivable of the Parent Borrower or any of its
Subsidiaries that arise from the securitization of such accounts receivable;
 
 
 
 
 
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(j) Liens (other than Liens on any inventory constituting Collateral) securing
Indebtedness of a Subsidiary to the Parent Borrower;
 
(k) second-priority Liens on the Collateral securing Indebtedness permitted
pursuant to Section 6.01(h), provided that such second-priority Liens shall not
be permitted during a Release Period; and
 
(l) other Liens (other than Liens on any inventory constituting Collateral)
securing monetary obligations, provided that (i) the sum of the aggregate amount
of all monetary obligations secured by Liens pursuant to this clause (l), plus
the aggregate amount of all cash consideration received on or after the
Effective Date in respect of sale leaseback transactions made in reliance on
clause (b) of Section 6.06, shall not exceed 7.50% of Net Tangible Assets at any
time and (ii) the aggregate book value of all assets subject to Liens pursuant
to this clause (l) shall not at any time exceed $225,000,000.
 
SECTION 6.03. Fundamental Changes.  (a)  Neither Holdings nor the Parent
Borrower will, nor will they permit any Subsidiary to, merge into or consolidate
with any other Person, or permit any other Person to merge into or consolidate
with it, or sell, transfer, lease or otherwise dispose of (in one transaction or
in a series of transactions) all or substantially all of the assets of the
Parent Borrower and its Subsidiaries, taken as a whole, or liquidate or
dissolve, except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing (i) any Person
may merge into the Parent Borrower in a transaction in which the Parent Borrower
is the surviving corporation, (ii) any Person may merge into or consolidate with
any Subsidiary in a transaction in which the surviving entity is a Subsidiary
and (if any party to such merger or consolidation is a Loan Party) is a Loan
Party and (iii) any Subsidiary (other than a Loan Party) may liquidate or
dissolve if the Parent Borrower determines in good faith that such liquidation
or dissolution is in the best interests of the Parent Borrower and is not
materially disadvantageous to the Lenders; provided that any such merger
involving a Person that is not a wholly owned Subsidiary immediately prior to
such merger shall not be permitted unless also permitted by Section 6.04.
 
(b) Holdings will not, and will not permit any of its Subsidiaries to, engage to
any extent material to Holdings and its Subsidiaries (taken as a whole) in any
business other than businesses of the type conducted by Holdings and its
Subsidiaries on the date of execution of this Agreement and businesses
reasonably related, ancillary or complementary to the business or businesses of
Holdings or any Subsidiary.
 
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions.  Neither Holdings nor the Parent Borrower will, nor will they
permit any Subsidiary to, purchase, hold or acquire (including pursuant to any
merger with any Person that was not a wholly owned Subsidiary prior to such
merger) any Equity Interests, evidences of Indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing)
of, make or hold any loans or advances to, Guarantee any obligations of, or make
or hold any investment or any other interest in, any other Person, or purchase
or otherwise acquire (in one transaction or a series of transactions) any assets
of any other Person constituting a business unit, except:
 
(a) Permitted Investments;
 
 
 
 
 
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(b) investments existing on the date hereof and set forth on Schedule 6.04;
 
(c) investments by Holdings and its Subsidiaries in Equity Interests in their
respective Subsidiaries;
 
(d) loans or advances made by Holdings to any Subsidiary and made by any
Subsidiary to Holdings or any other Subsidiary;
 
(e) Guarantees, subject to the limitations of Section 6.01 in the case of
Indebtedness of Subsidiaries that are not Guarantee Parties;
 
(f) investments received in connection with the bankruptcy or reorganization of,
or settlement of delinquent accounts and disputes with, customers and suppliers,
in each case in the ordinary course of business; and
 
(g) other investments; provided that at the time of and after giving effect to
any such investment, (i) Holdings and the Parent Borrower will be in compliance
on a pro forma basis with (A) the covenants contained in Sections 6.09 and 6.10,
recomputed as of the last day of the most recently ended fiscal quarter of the
Parent Borrower for which financial statements are available and (B) the
covenant contained in Section 6.11, recomputed as of the last day of the most
recently ended fiscal month of the Parent Borrower, as if such investment and
all other investments made in reliance on this clause (g) had occurred on the
first day of each relevant period for testing such compliance and (ii) no
Default shall have occurred and be continuing.
 
SECTION 6.05. Asset Sales.  Neither Holdings nor the Parent Borrower will, nor
will they permit any Subsidiary to, sell, transfer, lease or otherwise dispose
of any asset, including any Equity Interest owned by it, nor will Holdings and
the Parent Borrower permit any Subsidiary to issue any additional Equity
Interest in such Subsidiary, except:
 
(a) sales of inventory, used or surplus equipment and Permitted Investments, in
each case in the ordinary course of business;
 
(b) disposals of inventory pursuant to promotional or similar activities in the
ordinary course of business;
 
(c) sales, transfers and dispositions to the Parent Borrower or a Subsidiary;
 
(d) transfers and dispositions of interests in real property (including
leasehold interests) in exchange for consideration that constitutes interests in
real property (including leasehold interests) to the extent that any such
transfer or disposition qualifies as a “like-kind” exchange under Section 1031
of the Code;
 
(e) sales of fixed or capital assets pursuant to Section 6.06(a); and
 
(f) sales, transfers and other dispositions of assets (other than Equity
Interests in a Subsidiary) that are not permitted by any other clause of this
Section, provided that (i) Holdings and the Parent Borrower will be in
compliance on a pro forma basis with the
 
 
 
 
 
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covenants contained in Sections 6.09, 6.10 and 6.11, recomputed as of the last
day of the most recently ended fiscal quarter of the Parent Borrower for which
financial statements are available as if such sale, transfer or disposition and
all other sales, transfers or dispositions made in reliance on this clause (f)
had occurred on the first day of each relevant period for testing such
compliance and (ii) no Default shall have occurred and be continuing;
 
provided that all sales, transfers, leases and other dispositions permitted
hereby (other than those permitted by clauses (b) and (c) above) shall be made
for fair value.  This Section shall not be construed to prohibit transfers of
cash by Holdings or any of its Subsidiaries that are not prohibited by any other
provision of this Agreement.
 
SECTION 6.06. Sale and Leaseback Transactions.  Neither Holdings nor the Parent
Borrower will, nor will they permit any Subsidiary to, enter into any
arrangement, directly or indirectly, whereby it shall sell or transfer any
property (real or personal) used or useful in its business, whether now owned or
hereinafter acquired, and thereafter rent or lease such property, or other
property that it intends to use for substantially the same purpose or purposes
as the property sold or transferred, except for any such sale of fixed or
capital assets that (a) is made for cash consideration in an amount not less
than the cost of such fixed or capital asset and is consummated within 90 days
after Holdings, the Parent Borrower or such Subsidiary, as applicable, acquires
or completes the construction of such fixed or capital asset or (b) is made for
cash consideration in an amount not less than the fair value of such fixed or
capital asset; provided that (i) any such sale or transfer made in reliance on
clause (b) is permitted by Section 6.05(f) and (ii) the sum of the aggregate
amount of all cash consideration received on or after the Effective Date in
respect of all sale and leaseback transactions made in reliance on clause (b),
plus the aggregate amount of all monetary obligations secured by Liens pursuant
to clause (l) of Section 6.02, shall not exceed 7.50% of Net Tangible Assets at
any time.
 
SECTION 6.07. Restricted Payments.  Neither Holdings nor the Parent Borrower
will, nor will they permit any Subsidiary to, declare or make, or agree to pay
or make, directly or indirectly, any Restricted Payment, except:
 
(a) any wholly-owned Subsidiary may distribute any cash, property or assets to
Holdings, the Parent Borrower or any other Subsidiary that is its direct or
indirect parent;
 
(b) any Subsidiary may declare and pay dividends ratably with respect to its
Equity Interests;
 
(c) Holdings may make Restricted Payments in cash in an aggregate amount not to
exceed $250,000,000 during any fiscal year; provided that, at the time of
declaration (in the case of a dividend) or payment (in all other cases) and
after giving effect thereto, (i) no Default has occurred and is continuing and
(ii) Holdings would be in compliance with Sections 6.09 and 6.11 after giving
effect to such Restricted Payment and any Indebtedness being incurred in
connection therewith; and
 
(d) Holdings may make any additional Restricted Payment in cash; provided that
(i) the amount of such Restricted Payment, together with the aggregate amount of
all other
 
 
 
 
 
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Restricted Payments made by Holdings after the Effective Date (other than those
made pursuant to clause (c) above), does not exceed the sum, without
duplication, of (A) 50% of Consolidated Net Income for the period (taken as one
accounting period) from the beginning of the first fiscal quarter ending after
the Effective Date to the end of Holdings’ most recently ended fiscal quarter
for which financial statements are publicly available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, minus 100% of such deficit); plus (B) 100% of the aggregate net cash
proceeds received by Holdings, during the period from the Effective Date to the
date of such Restricted Payment, from the issuance by Holdings of additional
Equity Interests (other than Disqualified Equity Interests or Equity Interests
issued to a Subsidiary or to an employee stock ownership plan or trust), and
(ii) at the time of declaration (in the case of a dividend) or payment (in all
other cases) and after giving effect thereto, (i) no Default has occurred and is
continuing and (ii) Holdings would be in compliance with Sections 6.09 and 6.11
after giving effect to such Restricted Payment and any Indebtedness being
incurred in connection therewith.
 
Notwithstanding the foregoing, this Section 6.07 shall not apply at any time
that (i) if both rating agencies shall then have a Credit Rating in effect, the
Credit Ratings are Baa2 and BBB, respectively, with stable outlook or better or
(ii) if only one rating agency shall then have a Credit Rating in effect, such
Credit Rating is Baa2 or BBB, as applicable, with stable outlook or better.
 
SECTION 6.08. Restrictive Agreements.  Neither Holdings nor the Parent Borrower
will, nor will they permit any Subsidiary to, directly or indirectly, enter
into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon the ability of Holdings or
any Subsidiary to create, incur or permit to exist any Lien upon any of its
property or assets to secure the Obligations (or any Indebtedness incurred to
refinance or replace the Obligations); provided that (a) the foregoing shall not
apply to restrictions and conditions imposed by law or by any Loan Document, (b)
the foregoing shall not apply to restrictions and conditions existing on the
date hereof identified on Schedule 6.08 or to any refinancing, extension or
renewal of, or any amendment or modification of, any Indebtedness or other
agreement existing on the date hereof containing any such restriction or
condition (but without expanding the scope of any such restriction or
condition), (c) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided that such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is permitted hereunder, (d) the
foregoing shall not apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness and (e) the foregoing shall not apply to customary provisions in
leases and other contracts restricting the assignment, pledge or mortgage
thereof.
 
SECTION 6.09. Leverage Ratio.  The Leverage Ratio as of the last day of any
fiscal quarter ending during any period set forth below shall not exceed the
ratio set forth below opposite such period:
 
 
 
 
 
67

 
Period
Ratio
Effective Date through and including the
last day of the fiscal quarter ending on or
about January 30, 2010
 
4.00 to 1.00
 
Thereafter through and including the last
day of the fiscal quarter ending on or
about October 30, 2010
 
3.50 to 1.00
 
Thereafter
3.00 to 1.00

 
SECTION 6.10. Fixed Charge Coverage Ratio.  The Fixed Charge Coverage Ratio for
any period of four consecutive fiscal quarters of Holdings ending during any
period set forth below shall not be less than the ratio set forth below opposite
such period:
 
Periods Ending
Ratio
Effective Date through and including the
last day of the fiscal quarter ending on or
about October 30, 2010
 
2.25 to 1.00
 
Thereafter through and including the
last day of the fiscal quarter ending on or
about October 29, 2011
 
2.50 to 1.00
 
Thereafter
3.00 to 1.00

 
SECTION 6.11. Asset Coverage Ratio.  The Asset Coverage Ratio as of any date
shall not be less than 3.00 to 1.00.
 
SECTION 6.12. Restriction on Non-Material Subsidiaries.  Neither Holdings nor
the Parent Borrower will permit, at any time, the Non-Material Subsidiaries that
have not satisfied the Collateral and Guarantee Requirement to have, in the
aggregate, Net Tangible Assets representing in excess of 5% of the total Net
Tangible Assets of Holdings and its Subsidiaries.
 
ARTICLE VII
 
Events of Default
 
SECTION 7.01. Events of Default.  If any of the following events (“Events of
Default”) shall occur:
 
 
 
 
 
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(a) any Borrower shall fail to pay any principal of any Loan of such Borrower or
any Account Party shall fail to reimburse any LC Disbursement made in respect of
a Letter of Credit issued for the account of such Account Party, in each case
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise;
 
(b) any Borrower or any Account Party shall fail to pay any interest or any fee
or any other amount (other than an amount referred to in clause (a) of this
Article) payable by it under this Agreement or any other Loan Document, when and
as the same shall become due and payable, and such failure shall continue
unremedied for a period of five days;
 
(c) any representation or warranty made or deemed made by or on behalf of any
Loan Party in or pursuant to any Loan Document or any amendment or modification
thereof or waiver thereunder, or any material representation or warranty in any
report, certificate, financial statement or other document furnished pursuant to
or in connection with any Loan Document or any amendment or modification thereof
or waiver thereunder, shall prove to have been incorrect in any material respect
when made or deemed made;
 
(d) Holdings, the Parent Borrower or Purchasing shall fail to observe or perform
any covenant, condition or agreement contained in Section 5.02, 5.04 (with
respect to the existence of Holdings, the Parent Borrower or Purchasing) or 5.10
or in Article VI;
 
(e) any Loan Party shall fail to observe or perform any covenant, condition or
agreement contained in any Loan Document (other than those specified in clause
(a), (b) or (d) of this Article), and such failure shall continue unremedied for
a period of 30 days after notice thereof from the Administrative Agent to the
Parent Borrower (which notice will be given at the request of any Lender);
 
(f) Holdings or any Subsidiary shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material
Indebtedness, when and as the same shall become due and payable;
 
(g) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of any Material Indebtedness or any trustee or agent on its or their behalf to
cause any Material Indebtedness to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled maturity;
provided that this clause (g) shall not apply to (i) secured Indebtedness that
becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Indebtedness and (ii) Indebtedness in respect of which the
holders thereof have the unconditional right to require the issuer thereof to
effect a redemption of such Indebtedness prior to the stated maturity of such
Indebtedness, solely as a result of the exercise by such holders of such right;
 
 
 
 
 
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(h) subject to Section 7.02, an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of Holdings or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for Holdings or any Subsidiary or for a substantial part of its
assets, and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;
 
(i) subject to Section 7.02, Holdings or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Article, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Holdings or any Subsidiary or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
 
(j) subject to Section 7.02, Holdings or any Subsidiary shall become unable,
admit in writing its inability or fail generally to pay its debts as they become
due;
 
(k) one or more judgments for the payment of money in an aggregate amount in
excess of $100,000,000 (to the extent not covered by independent third party
insurance as to which the insurer is rated at least “A” by A.M. Best Company,
has been notified of the potential claim and does not dispute coverage) shall be
rendered against Holdings, any Subsidiary or any combination thereof and the
same shall remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to attach or levy upon any assets of Holdings or any
Subsidiary to enforce any such judgment;
 
(l) an ERISA Event shall have occurred that, in the opinion of the Required
Lenders, when taken together with all other ERISA Events that have occurred,
would result in a Material Adverse Effect;
 
(m) at any time other than during a Release Period, any Lien purported to be
created under the Collateral Agreement shall cease to be, or shall be asserted
by any Loan Party not to be, a valid and perfected Lien on any Collateral having
an aggregate fair value of $10,000,000 or more, with the priority required by
the Collateral Agreement, except as a result of the sale or other disposition of
the applicable Collateral in a transaction not prohibited under the Loan
Documents; or
 
(n) a Change in Control shall occur;
 
 
 
 
 
70
then, and in every such event (other than an event with respect to Holdings, a
Borrower or an Account Party described in clause (h) or (i) of this Article),
and at any time thereafter during the continuance of such event, the
Administrative Agent may, with the consent of the Required Lenders, and shall,
at the request of the Required Lenders, by notice to the Parent Borrower, take
either or both of the following actions, at the same or different
times:  (i) terminate the Commitments, and thereupon the Commitments shall
terminate immediately, and (ii) declare the Loans then outstanding to be due and
payable in whole (or in part, in which case any principal not so declared to be
due and payable may thereafter be declared to be due and payable), and thereupon
the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and all fees and other obligations of the Borrowers and
the Account Parties accrued hereunder, shall become due and payable immediately,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Borrower and each Account Party; and in case of any
event with respect to Holdings, a Borrower or an Account Party described in
clause (h) or (i) of this Article, the Commitments shall automatically terminate
and the principal of the Loans then outstanding, together with accrued interest
thereon and all fees and other obligations of the Borrowers and the Account
Parties accrued hereunder, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Borrower and each Account Party.
 
SECTION 7.02. Exclusion of Immaterial Subsidiaries.  At any time during a
Release Period, solely for purposes of determining whether a Default has
occurred under clause (h), (i) or (j) of Section 7.01, any reference in any such
clause to any “Subsidiary” shall be deemed to exclude any Subsidiary that is not
a Material Subsidiary affected by any event or circumstance referred to in any
such clause; provided, that if it is necessary to exclude more than one
Subsidiary from clause (h), (i) or (j) of Section 7.01 pursuant to this Section
in order to avoid a Default thereunder, all excluded Subsidiaries shall be
considered to be a single consolidated Subsidiary for purposes of determining
whether any excluded Subsidiary is a Material Subsidiary.
 
ARTICLE VIII
 
The Administrative Agent
 
Each of the Lenders and the Issuing Banks hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms of the Loan Documents, together with such
actions and powers as are reasonably incidental thereto.
 
The bank serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with Holdings, the Parent Borrower or any other
Subsidiary or Affiliate thereof as if it were not the Administrative Agent
hereunder.
 
 
 
 
 
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The Administrative Agent shall not have any duties or obligations except those
expressly set forth in the Loan Documents.  Without limiting the generality of
the foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) the Administrative Agent shall not have any duty to take
any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Loan Documents
that the Administrative Agent is required to exercise in writing as directed by
the Required Lenders (or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided in Section 9.02), and (c)
except as expressly set forth in the Loan Documents, the Administrative Agent
shall not have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to Holdings or any of its Subsidiaries that
is communicated to or obtained by the bank serving as Administrative Agent or
any of its Affiliates in any capacity.  The Administrative Agent shall not be
liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 9.02) or in the absence of its own gross negligence or willful
misconduct.  The Administrative Agent shall be deemed not to have knowledge of
any Default unless and until written notice thereof is given to the
Administrative Agent by Holdings, the Parent Borrower, Purchasing or a Lender,
and the Administrative Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with any Loan Document, (ii) the contents of any certificate,
report or other document delivered thereunder or in connection therewith,
(iii) the performance or observance of any of the covenants, agreements or other
terms or conditions set forth in any Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of any Loan Document or any other
agreement, instrument or document, or (v) the satisfaction of any condition set
forth in Article IV or elsewhere in any Loan Document, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent.
 
The Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person.  The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon.  The Administrative Agent may consult with legal counsel (who
may be counsel for the Parent Borrower), independent accountants and other
experts selected by it, and shall not be liable for any action taken or not
taken by it in accordance with the advice of any such counsel, accountants or
experts.
 
The Administrative Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by the
Administrative Agent.  The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through their
respective Related Parties.  The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.
 
 
 
 
 
72
Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by
notifying the Lenders, each Issuing Bank and the Parent Borrower.  Upon any such
resignation, the Required Lenders shall have the right, with the consent of the
Parent Borrower, to appoint a successor (provided, that such Parent Borrower
consent (i) shall not be unreasonably withheld and (ii) shall not be required
if, at the time of such appointment, an Event of Default has occurred and is
continuing).  If no successor shall have been so appointed by the Required
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Lenders and the Issuing Banks,
appoint a successor Administrative Agent which shall be a bank with an office in
New York, New York, or an Affiliate of any such bank.  Upon the acceptance of
its appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder.  The fees
payable by the Parent Borrower to a successor Administrative Agent shall be the
same as those payable to its predecessor unless otherwise agreed between the
Parent Borrower and such successor.  After the Administrative Agent’s
resignation hereunder, the provisions of this Article and Section 9.03 shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as Administrative
Agent.
 
Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement.  Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document or
related agreement or any document furnished hereunder or thereunder.  The Joint
Bookrunners, Co-Lead Arrangers and Syndication Agent (each as identified on the
cover page of this Agreement), in their capacities as such, shall have no
rights, powers, duties, liabilities, fiduciary relationships or obligations
under this Agreement or any other documents related thereto.
 
Each of the Lenders hereby (a) authorizes and instructs the Administrative Agent
to enter into an Intercreditor Agreement if Indebtedness is incurred that is
secured by Liens contemplated by clause (k) of Section 6.02 and (b) agrees that
it will be bound by and will take no actions contrary to the provisions of such
Intercreditor Agreement.
 
ARTICLE IX
 
Miscellaneous
 
SECTION 9.01. Notices.  (a)  Except in the case of notices and other
communications expressly permitted to be given by telephone (and subject to
paragraph (b) below), all notices and other communications provided for herein
shall be in writing and shall be
 
 
 
 
 
73
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
 
(i) if to Holdings, the Parent Borrower or Purchasing, to it at J. C. Penney
Corporation, Inc., 6501 Legacy Drive, Mail Code 1304, Plano, TX 75024, Attention
of the Treasurer (Telecopy No. (972) 431-2044), with a copy to the General
Counsel of the Parent Borrower;
 
(ii) if to the Administrative Agent, to JPMorgan Chase Bank, N.A., Loan and
Agency Services Group, 1111 Fannin Street, Floor 10, Houston, Texas 77002-6925,
Attention of Thai Pham, Loan & Agency Services (Telecopy No. (713) 750-2956),
with a copy to JPMorgan Chase Bank, N.A., 270 Park Avenue, Floor 4, New York,
New York 10017, Attention of Barry Bergman (Telecopy No. (212) 270-3279); and
 
(iii) if to any other Lender, any Issuing Bank or any Swingline Lender, to it at
its address (or telecopy number) set forth in its Administrative Questionnaire.
 
(b) Notices and other communications to the Issuing Banks and Lenders hereunder
may be delivered or furnished by electronic communications pursuant to
procedures approved by the Administrative Agent; provided that the foregoing
shall not apply to notices pursuant to Article II unless otherwise agreed by the
Administrative Agent and the applicable Issuing Bank or Lender.  The
Administrative Agent, Holdings, the Parent Borrower or Purchasing may, in its
discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or
communications.
 
(c) Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto.  All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.
 
SECTION 9.02. Waivers; Amendments.  (a)  No failure or delay by the
Administrative Agent, any Issuing Bank or any Lender in exercising any right or
power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.  The rights and remedies of the Administrative Agent, each
Issuing Bank and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have.  No waiver of any provision of any Loan Document or consent to
any departure by any Loan Party therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) of this Section, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.  Without limiting the generality of the foregoing, the
making of a Loan or issuance of a Letter of Credit shall not be construed as a
waiver of any Default, regardless of whether the Administrative Agent, any
Lender or any Issuing Bank may have had notice or knowledge of such Default at
the time.
 
 
 
 
 
74
(b) Except with respect to any amendment to this Agreement contemplated by the
definition of “Permitted Holding Company Reorganization” (which amendment shall
be permitted if entered into by the parties referred to therein), neither this
Agreement nor any other Loan Document nor any provision hereof or thereof may be
waived, amended or modified except, in the case of this Agreement, pursuant to
an agreement or agreements in writing entered into by Holdings, the Borrowers,
the Account Parties and the Required Lenders or, in the case of any other Loan
Document, pursuant to an agreement or agreements in writing entered into by the
Administrative Agent and the Loan Party or Loan Parties that are parties
thereto, in each case with the consent of the Required Lenders; provided that no
such agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender, (ii) reduce the principal amount of any Loan or
LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan
or LC Disbursement, or any interest thereon, or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of any Commitment, without the written consent of
each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a manner
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, (v) change any of the provisions of this Section
or the definition of “Required Lenders” or any other provision of any Loan
Document specifying the number or percentage of Lenders required to waive, amend
or modify any rights thereunder or make any determination or grant any consent
thereunder, without the written consent of each Lender, (vi) release all or
substantially all of the Loan Parties from their Guarantees under the Collateral
Agreement (except as expressly provided in the Collateral Agreement), or limit
their liability in respect of such Guarantees, without the written consent of
each Lender, (vii) release all or substantially all of the Collateral from the
Liens of the Collateral Agreement (except as expressly provided in Section
6.15(d) of the Collateral Agreement) without the written consent of each Lender
or (viii) change Section 2.05(k)(i) in a manner that would alter the
participation obligation of any Lender, without the written consent of such
Lender; provided further that no such agreement shall amend, modify or otherwise
affect the rights or duties of the Administrative Agent, any Issuing Bank or any
Swingline Lender hereunder without the prior written consent of the
Administrative Agent, such Issuing Bank or such Swingline Lender, as the case
may be.
 
SECTION 9.03. Expenses; Indemnity; Damage Waiver.  (a)  The Parent Borrower and
the other Loan Parties, jointly and severally, shall pay (i) all reasonable
out-of-pocket expenses incurred by the Administrative Agent and its Affiliates,
including the reasonable fees, charges and disbursements of counsel for the
Administrative Agent, in connection with the syndication of the credit
facilities provided for herein, the preparation and administration of the Loan
Documents or any amendments, modifications or waivers of the provisions thereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by each
Issuing Bank in connection with the issuance, amendment, renewal or extension of
any Letter of Credit or any demand for payment thereunder, (iii) all reasonable
out-of-pocket expenses incurred by the Administrative Agent, any Issuing Bank or
any Lender, including the reasonable fees, charges and disbursements of any
counsel for the Administrative Agent, any Issuing Bank or any Lender, in
connection with the enforcement or protection of its rights in connection with
the Loan Documents, including its rights under this Section, or in connection
with the Loans made or Letters of Credit issued hereunder, including all such
reasonable out-of-pocket expenses incurred
 
 
 
 
 
75
during any workout, restructuring or negotiations in respect of such Loans or
Letters of Credit and (iv) all fees associated with, and all reasonable
out-of-pocket expenses incurred by the Administrative Agent in connection with,
any inventory audit performed by the Administrative Agent or any auditor that is
satisfactory to the Administrative Agent on behalf of the Administrative Agent,
as well as any such expenses incurred by the Administrative Agent in connection
with the monitoring and independent appraisals of such inventory, in each case
as contemplated by Section 5.08.
 
(b) The Parent Borrower and the other Account Parties, jointly and severally,
shall indemnify the Administrative Agent, each Issuing Bank and each Lender, and
each Related Party of any of the foregoing Persons (each such Person being
called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including the
reasonable fees, charges and disbursements of any counsel for any Indemnitee,
incurred by or asserted against any Indemnitee arising out of, in connection
with, or as a result of (i) the execution or delivery of any Loan Document or
any other agreement or instrument contemplated hereby, the performance by the
parties to the Loan Documents of their respective obligations thereunder or the
consummation of the Transactions or any other transactions contemplated hereby,
(ii) any Loan or Letter of Credit or the use of the proceeds therefrom
(including any refusal by an Issuing Bank to honor a demand for payment under a
Letter of Credit if the documents presented in connection with such demand do
not strictly comply with the terms of such Letter of Credit), or (iii) any
actual or prospective claim, litigation, investigation or proceeding relating to
any of the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses (x) arise in connection
with any judgment rendered by a court of competent jurisdiction in favor of any
Borrower or Account Party against such Indemnitee, (y) result from the gross
negligence or willful misconduct of such Indemnitee (as finally determined by a
court of competent jurisdiction) or (z) result from any dispute among the
Lenders and the Administrative Agent, or any of them, other than disputes
resulting from the fault of any Loan Party.  This Section 9.03(b) shall not
apply with respect to Taxes other than any Taxes that represent losses or
damages arising from any non-Tax claim.
 
(c) To the extent that the Parent Borrower or any other Account Party fails to
pay any amount required to be paid by it to the Administrative Agent, any
Issuing Bank or any Swingline Lender under paragraph (a) or (b) of this Section,
each Lender severally agrees to pay to the Administrative Agent, the applicable
Issuing Bank or the applicable Swingline Lender, as the case may be, such
Lender’s Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent, the applicable Issuing Bank or the applicable
Swingline Lender in its capacity as such.
 
(d) To the extent permitted by applicable law, neither Holdings, any Borrower
nor any Account Party shall assert, and each hereby waives, any claim against
any Indemnitee, on any theory of liability, for special, indirect, consequential
or punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement or
 
 
 
 
 
76
any agreement or instrument contemplated hereby, the Transactions, any Loan or
Letter of Credit or the use of the proceeds thereof.
 
(e) All amounts due under this Section shall be payable not later than 30 days
after written demand therefor.
 
SECTION 9.04. Successors and Assigns.  (a)  The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
any Issuing Bank that issues any Letter of Credit), except that (i) neither
Holdings, any Borrower nor any Account Party may assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
each Lender (and any attempted assignment or transfer by Holdings, any Borrower
or any Account Party without such consent shall be null and void) and (ii) no
Lender may assign or otherwise transfer its rights or obligations hereunder
except in accordance with this Section.  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby (including any
Affiliate of any Issuing Bank that issues any Letter of Credit), Participants
(to the extent provided in paragraph (c) of this Section) and, to the extent
expressly contemplated hereby, the Related Parties of each of the Administrative
Agent, any Issuing Bank and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.
 
(b) (i)  Subject to the conditions set forth in paragraph (b)(ii) below, any
Lender may assign to one or more assignees (other than Holdings or any
Subsidiary or Affiliate thereof) all or a portion of its rights and obligations
under this Agreement (including all or a portion of its Commitment and the Loans
at the time owing to it); with the prior written consent (such consent not to be
unreasonably withheld) of:
 
(A) the Parent Borrower, provided that no consent of the Parent Borrower shall
be required for an assignment to a Lender, an Affiliate of a Lender or, if an
Event of Default has occurred and is continuing, any other assignee; and
 
(B) the Administrative Agent, provided that no consent of the Administrative
Agent shall be required for an assignment to an assignee that is a Lender or an
Affiliate of a Lender immediately prior to giving effect to such assignment.
 
(ii) Assignments shall be subject to the following conditions:
 
(A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender’s
Commitment, the amount of the Commitment of the assigning Lender subject to each
such assignment (determined as of the date the Assignment and Assumption with
respect to such assignment is delivered to the Administrative Agent) shall not
be less than $5,000,000 unless each of the Parent Borrower and the
Administrative Agent otherwise consent, provided that no such consent of the
Parent Borrower shall be required if an Event of Default under clause (a), (b),
(h) or (i) of Section 7.01 has occurred and is continuing;
 
 
 
 
 
77
(B) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement;
 
(C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; provided that such fee shall not apply to any
assignment made by a Lender to an Affiliate of such Lender;
 
(D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire; and
 
(E) any Person that is a Fee Receiver but not a Permitted Fee Receiver shall not
be an assignee without the written consent of the Administrative Agent (whether
or not an Event of Default has occurred) (which consent may be withheld in the
Administrative Agent’s sole discretion).
 
(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv)
of this Section, from and after the effective date specified in each Assignment
and Assumption the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning
Lender’s rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of
Sections 2.14, 2.15, 2.16 and 9.03).  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
Section 9.04 shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (c) of this Section.
 
(iv) The Administrative Agent, acting for this purpose as an agent of the
Borrowers and the Account Parties, shall maintain at one of its offices a copy
of each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”).  The entries in
the Register shall be conclusive, and Holdings, the Borrowers, the Account
Parties, the Administrative Agent, the Issuing Banks and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding notice
to the contrary.  The Register shall be available for inspection by the Parent
Borrower, any Issuing Bank and any Lender, at any reasonable time and from time
to time upon reasonable prior notice.
 
(v) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and
 
 
 
 
 
78
Assumption and record the information contained therein in the Register.  No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
 
(vi) In the case of any assignment for which the Parent Borrower’s consent is
not required, the Administrative Agent shall provide the Parent Borrower with
notice promptly upon receipt of an Assignment and Assumption with respect to
such assignment.
 
(c) (i)  Any Lender may, without the consent of Holdings, any Borrower, any
Account Party, the Administrative Agent, any Issuing Bank or any Swingline
Lender, sell participations to one or more banks or other entities (other than
any bank or entity that would be a Fee Receiver but not a Permitted Fee
Receiver, unless such Fee Receiver receives written consent of the
Administrative Agent (which consent may be withheld in the Administrative
Agent’s sole discretion)) (a “Participant”) in all or a portion of such Lender’s
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (A) such Lender’s
obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (C) Holdings, the Borrowers, the Account Parties, the
Administrative Agent, each Issuing Bank and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under this Agreement.  For any avoidance of doubt, such
Lender shall be responsible for the indemnity under Section 2.16(d) with respect
to any payments made to such Participant.  Any agreement or instrument pursuant
to which a Lender sells such a participation shall provide that such Lender
shall retain the sole right to enforce the Loan Documents and to approve any
amendment, modification or waiver of any provision of the Loan Documents;
provided that such agreement or instrument may provide that such Lender will
not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the first proviso to Section 9.02(b) that
affects such Participant.  Subject to paragraph (c)(ii) of this Section,
Holdings, the Borrowers and the Account Parties agree that each Participant
shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to paragraph (b) of this Section.  To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 9.08 as though it
were a Lender, provided that such Participant agrees to be subject to Sections
2.17(c) and 2.18 as though it were a Lender.  Each Lender that sells a
participation, acting for this purpose as an agent of the Borrowers and the
Account Parties, shall maintain a register on which it enters the name and
address of each Participant and the principal amounts (and stated interest) of
each Participant’s interest in the Loans or other obligations under this
Agreement (the “Participant Register”).  The entries in the Participant Register
shall be conclusive absent manifest error, and such Lender shall treat each
Person whose name is recorded in the Participant Register as the owner of such
participation for all purposes of this Agreement notwithstanding any notice to
the contrary.
 
(ii) A Participant shall not be entitled to receive any greater payment under
Section 2.14 or 2.16 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the prior written
consent of the Parent Borrower (not to be unreasonably withheld or delayed),
provided that the Participant shall be subject to the provisions of Sections
2.17(c) and 2.18.
 
 
 
 
 
79
(d) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section shall not apply to any such pledge or assignment
of a security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.
 
SECTION 9.05. Survival.  All covenants, agreements, representations and
warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Administrative Agent, any Issuing
Bank or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Commitments have not expired or terminated.  The provisions of
Sections 2.14, 2.15, 2.16 and 9.03 and Article VIII shall survive and remain in
full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the Letters of Credit and the Commitments or the termination of this
Agreement or any provision hereof.
 
SECTION 9.06. Counterparts; Integration; Effectiveness.  This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract.  This Agreement, the other
Loan Documents and any separate letter agreements with respect to fees payable
to the Administrative Agent constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.  Except as provided in Section 4.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy or electronic
transmission shall be effective as delivery of a manually executed counterpart
of this Agreement.
 
SECTION 9.07. Severability.  Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.
 
SECTION 9.08. Right of Setoff.  If an Event of Default shall have occurred and
be continuing, each Issuing Bank and Lender and each of its Affiliates is hereby
authorized at
 
 
 
 
 
80
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Issuing Bank or Lender or Affiliate to or for the credit or the account
of any Borrower or any Account Party against any of and all the obligations of
such Borrower or such Account Party (as the case may be) now or hereafter
existing under this Agreement held by such Issuing Bank or Lender, irrespective
of whether or not such Issuing Bank or Lender shall have made any demand under
this Agreement and although such obligations may be unmatured.  The rights of
each Issuing Bank and Lender under this Section are in addition to other rights
and remedies (including other rights of setoff) which such Issuing Bank or
Lender may have.  Any Lender or Issuing Bank exercising its rights under this
Section shall give notice thereof to the relevant Borrower and the relevant
Account Party on or prior to the day of the exercise of such rights.
 
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
Process.  (a)  This Agreement shall be construed in accordance with and governed
by the laws of the State of New York.
 
(b) Each of Holdings, the Borrowers and the Account Parties hereby irrevocably
and unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to any Loan Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court.  Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this Agreement or any other Loan Document shall
affect any right that the Administrative Agent, any Issuing Bank or any Lender
may otherwise have to bring any action or proceeding relating to this Agreement
or any other Loan Document against Holdings, a Borrower or an Account Party or
any of their respective properties in the courts of any jurisdiction.
 
(c) Each of Holdings, the Borrowers and the Account Parties hereby irrevocably
and unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this Agreement
or any other Loan Document in any court referred to in paragraph (b) of this
Section.  Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
 
(d) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 9.01.  Nothing in this Agreement or
any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
 
 
 
 
 
81
SECTION 9.10. WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN  ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
 
SECTION 9.11. Headings.  Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
 
SECTION 9.12. Confidentiality.  (a) Each of the Administrative Agent, the
Issuing Banks and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (i) to
its and its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (ii) to the extent requested by any regulatory authority,
(iii) to the extent  required by applicable laws or regulations or by any
subpoena or similar legal process, (iv) to any other party to this Agreement,
(v) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (vi) subject to an agreement
containing provisions substantially the same as those of this Section, to (A)
any assignee of or Participant in, or any prospective assignee of or Participant
in, any of its rights or obligations under this Agreement or (B) any actual or
prospective counterparty (or its advisors) to any Swap Agreement relating to the
Loan Parties and their Obligations, (vii) with the consent of the Parent
Borrower or (viii) to the extent such Information (A) becomes publicly available
other than as a result of a breach of this Section or (B) becomes available to
the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential
basis from a source other than Holdings, a Borrower or an Account Party.  For
the purposes of this Section, “Information” means all information received from
Holdings, any Borrower or any Account Party relating to Holdings, any Borrower,
any Account Party or their respective business, other than any such information
that is available to the Administrative Agent, any Issuing Bank or any Lender on
a nonconfidential basis prior to disclosure by Holdings, any Borrower or any
Account Party.  Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
 
 
 
 
 
82
(b) Each Lender acknowledges that Information as defined in Section 9.12(a)
furnished to it pursuant to this Agreement may include material non-public
Information concerning the Loan Parties and their securities, and confirms that
it has developed compliance procedures regarding the use of material non-public
Information and that it will handle such material non-public Information in
accordance with those procedures, applicable law, including Federal and state
securities laws, and the terms hereof.
 
(c) All information, including waivers and amendments, furnished by the Loan
Parties, their representatives or the Administrative Agent pursuant to, or in
the course of administering, this Agreement will be syndicate-level information,
which may contain material non-public Information about the Loan Parties and
their securities.  Accordingly, each Lender represents to Holdings (on behalf of
the Loan Parties) and the Administrative Agent that it has identified in its
Administrative Questionnaire a credit contact who may receive Information that
may contain material non-public Information in accordance with its compliance
procedures, applicable law and the terms hereof.
 
SECTION 9.13. Interest Rate Limitation.  Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
 
SECTION 9.14. USA Patriot Act.  Each Lender hereby notifies each of the Loan
Parties that pursuant to the requirements of the Patriot Act, it is required to
obtain, verify and record information that identifies Loan Parties, which
information includes the name and address of such Loan Parties and other
information that will allow such Lender to identify such Loan Parties in
accordance with the Patriot Act.
 
SECTION 9.15. Waiver Under Existing Credit Agreement.  Each of the Lenders party
hereto that is a “Lender” under the Existing Credit Agreement hereby waives
advance notice of the termination of the commitments and prepayment of the loans
under the Existing Credit Agreement; provided that notice thereof is provided on
the Effective Date.
 
[The remainder of this page has been left blank intentionally.]

 
 
 
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
 
 
J. C. PENNEY COMPANY, INC.,
 
 
by: /s/ R. B. Cavanaugh   
 
Name: R. B. Cavanaugh                  
 
Title: Executive Vice President and
Chief Financial Officer

 
          J. C. PENNEY CORPORATION, INC.,
 
 
by: /s/ M. D. Porter   
 
Name: M. D. Porter                  
 
Title: Vice President, Treasurer

 
                         J. C. PENNEY PURCHASING CORPORATION,
 
 
by: /s/ M. D. Porter   
 
Name: M. D. Porter                  
 
Title: Vice President, Treasurer of
         J. C. Penney Corporation, Inc.

 
                         JPMORGAN CHASE BANK, N.A., individually
and as Administrative Agent,        

 

 
by: /s/ Barry Bergman   
 
Name: Barry Bergman               
 
Title: Managing Director

 
 
 
 
 

WACHOVIA BANK, NATIONAL
 ASSOCIATION, individually and as  LC Agent,
 
 
by: /s/ Susan T. Gallagher   
 
Name: Susan T. Gallagher                  
 
Title: Director

 
 
 
 
 
                                                                                
 
 
 
   
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: Bank of America, N. A.
 
by: /s/ Michael B. Delaney   
 
Name: Michael B. Delaney                  
 
Title: Vice President

 
 
 
 
 
                                                                                
 
 
 
    
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: Barclays Bank PLC
 
by: /s/ Russell C. Johnson   
 
Name: Russell C. Johnson                 
 
Title: Director

 
 
 
 
 
                                                                                
 
 
 
    
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: Compass Bank 
 
by: /s/ Randall L. Morrison   
 
Name: Randall L. Morrison                  
 
Title: Managing Director

 
 
 
 
 
                                                                                
 
 
 
    
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: HSBC Bank USA, N.A.
  452 FIFTH AVENUE
  TOWER 4
NEW YORK, NY 10018
 
by: /s/ Elizabeth R. Peck   
 
Name: Elizabeth R. Peck                   
 
Title: SVP

 
 
 
 
 
                                                                                
 
 
 
    
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: U.S. Bank National Association
 
by: /s/ Veronica Morrissette   
 
Name: Veronica Morrissette                 
 
Title: Vice President

 
 
 
 
 
                                                                                
 
 
 
    
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: Bank of New York Mellon
 
by: /s/ Timothy J. Glass   
 
Name: Timothy J. Glass                  
 
Title: Vice-President

 
 
 
 
 
                                                                                
 
 
 
    
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: Standard Chartered Bank
 
by: /s/ James Hughes   
 
Name: James Hughes                  
 
Title: Director         
      by: /s/ Robert K. Reddington      Name: Robert K. Reddington   Title:
AVP/Credit Documentation            Credit Risk Control            Standard
Chartered Bank N.Y.    

 
 
 
 
 
                                                                                
 
 
 
    
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: State Street Bank and Trust Company
 
by: /s/ Juan G. Sierra   
 
Name: Juan G. Sierra                   
 
Title: Vice President

 
 
 
 
 
                                                                                
 
 
 
    
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: UMB Bank n.a. 
 
by: /s/ David A. Proffitt   
 
Name: David A. Proffitt                  
 
Title: Senior Vice President

 
 
 
 
 
                                                                                
 
 
 
    
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: KeyBank National Association 
 
by: /s/ Marianne T. Meil   
 
Name: Marianne T. Meil                  
 
Title: Senior Vice President

 
 
 
 
 
                                                                                
 
 
 
   
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: PNC Bank, National Association
 
by: /s/ Dale A. Stein   
 
Name: Dale A. Stein                  
 
Title: Senior Vice President

 
 
 
 
 
                                                                                
 
 
 
    
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: Union Bank, N.A.
 
by: /s/ Donald Smith    
 
Name: Donald Smith                   
 
Title: Credit Executive

 
 
 
 
 
                                                                                
 
 
 
   
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: Banco Popular de Puerto Rico  
 
by: /s/ Hector  J. Gonzalez   
 
Name: Hector J. Gonzalez                  
 
Title: Vice President

 
 
 
 
 
                                                                                
 
 
 
    
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: The Northern Trust Company
 
by: /s/ Morgan A. Lyons   
 
Name: Morgan A. Lyons                  
 
Title: Vice President

 
 
 
 
 
                                                                                
 
 
 
   
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: Citibank, N.A.
 
by: /s/ John McQuiston    
 
Name: John McQuiston                 
 
Title: Vice President & Director

 
 
 
 
 
                                                                                
 
 
 
   
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: The Bank of Tokyo-Mitsubishi UFJ, LTD.
 
by: /s/ D. Barnell   
 
Name: D. Barnell                  
 
Title: Authorized Signatory

 
 
 
 
 
                                                                                
 
 
 
   
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: Capital One, N.A.
 
by: /s/ Mary Jo Hoch   
 
Name: Mary Jo Hoch                  
 
Title: SVP

 
 
 
 
 
                                                                                
 
 
 
   
SIGNATURE PAGE TO J.C. PENNEY COMPANY, INC.
CREDIT AGREEMENT, DATED AS OF THE DATE
FIRST WRITTEN ABOVE
 
LENDER: Chang Hwa Commercial, Ltd., New York Branch 
 
by: /s/ Jim C.Y. Chen    
 
Name: Jim C.Y. Chen        
 
Title: V. P. and General Manager

 
 
 
 

SCHEDULE 2.01

Commitments

INSTITUTION
COMMITMENT
JP Morgan Chase Bank, N.A.
$75,000,000
Bank of America, N.A.
75,000,000
Barclays Bank, PLC
75,000,000
Wachovia Bank, National Association
75,000,000
Compass Bank
50,000,000
HSBC Bank USA, N.A.
50,000,000
U.S. Bank National Association
50,000,000
Bank of New York Mellon
40,000,000
Standard Chartered Bank
40,000,000
State Street Bank and Trust Company
35,000,000
UMB Bank, n.a.
30,000,000
KeyBank National Association
25,000,000
PNC Bank, National Association
25,000,000
Union Bank, N.A.
25,000,000
Banco Popular de Puerto Rico
20,000,000
The Northern Trust Company
20,000,000
Citibank, N.A.
15,000,000
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
10,000,000
Capital One, N.A.
10,000,000
Chang Hwa Commercial Bank, Ltd.
5,000,000
Total
$750,000,000

 
 
 
 
 

SCHEDULE 2.05

Issuing Banks

Bank of America, N.A.

Bank of New York Mellon

Barclays Bank, PLC

Compass Bank

HSBC Bank USA, N.A.

JPMorgan Chase Bank, N.A.

KeyBank National Association

PNC Bank, National Association

Standard Chartered Bank

U.S. Bank National Association

UMB Bank, n.a.

Wachovia Bank, National Association

 
 
 
 
 

SCHEDULE 3.06

Disclosed Matters

None.

 
 
 
 
 

SCHEDULE 3.12

Material Subsidiaries

             Material Subsidiary
Jurisdiction of Organization
             J. C. Penney Corporation, Inc.
                  Delaware
             JCP Real Estate Holdings, Inc.
                  Delaware
             J. C. Penney Properties, Inc.
                  Delaware

 
 
 
 
 

SCHEDULE 6.01

Existing Indebtedness

 
 
Name of Issuer*
 
 
Title of Securities of Issuer
Amount of Such
Securities Outstanding
(in millions)
J. C. Penney Corporation, Inc.
5.75%   Senior Notes Due 2018
$300.0
J. C. Penney Corporation, Inc.
6.375% Senior Notes Due 2036
  700.0
J. C. Penney Corporation, Inc.
6.875% Medium-Term Notes Due 2015
  200.0
J. C. Penney Corporation, Inc.
6.9%     Notes Due 2026
      2.0
J. C. Penney Corporation, Inc.
7.125% Debentures Due 2023
  255.0
J. C. Penney Corporation, Inc.
7.4%     Debentures Due 2037
  326.0
J. C. Penney Corporation, Inc.
7.625% Notes Due 2097
  500.0
J. C. Penney Corporation, Inc.
7.65%   Debentures Due 2016
  200.0
J. C. Penney Corporation, Inc.
7.95%   Debentures Due 2017
  285.0
J. C. Penney Corporation, Inc.
8.0%     Notes Due 2010
  506.0
J. C. Penney Corporation, Inc.
9.0%     Notes Due 2012
  230.0
    Total
 
             $3,504.0
     
*J. C. Penney Company, Inc. is a co-obligor (or guarantor, as appropriate) for
these outstanding debt securities.
     
Other Debt:
   
Capital lease obligations
 
             $       1.0

Existing Letters of Credit outstanding under the Existing Credit Agreement that
will become Letters of Credit outstanding hereunder on the Effective Date.

 
 
 
 

SCHEDULE 6.02

Existing Liens

Capital lease obligations
$1.0 million
   

 

 
 
 
 

SCHEDULE 6.04

Existing Investments

JCP Realty, Inc. and its subsidiaries
100% of common stock
Leveraged lease investments
$140.0 million (as of  Feb. 2009)

 

 
 
 
 

SCHEDULE 6.08

Existing Restrictions

1.  
Restrictions which appear in the Existing Indentures as they are defined in the
Credit Agreement.

2.  
Restrictions which appear in JCPenney leases which prevent the use of that
leasehold interest
itself as security for any obligation.

 

 
 
 
 
EXHIBIT A

[FORM OF]
 
ASSIGNMENT AND ASSUMPTION
 
This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”).  Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee.  The Standard Terms and Conditions set forth in Annex 1 attached
hereto are hereby agreed to and incorporated herein by reference and made a part
of this Assignment and Assumption as if set forth herein in full.
 
For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit, guarantees, and swingline
loans included in such facilities) and (ii) to the extent permitted to be
assigned under applicable law, all claims, suits, causes of action and any other
right of the Assignor (in its capacity as a Lender) against any Person, whether
known or unknown, arising under or in connection with the Credit Agreement, any
other documents or instruments delivered pursuant thereto or the loan
transactions governed thereby or in any way based on or related to any of the
foregoing, including contract claims, tort claims, malpractice claims, statutory
claims and all other claims at law or in equity related to the rights and
obligations sold and assigned pursuant to clause (i) above (the rights and
obligations sold and assigned pursuant to clauses (i) and (ii) above being
referred to herein collectively as the “Assigned Interest”).  Such sale and
assignment is without recourse to the Assignor and, except as expressly provided
in this Assignment and Assumption, without representation or warranty by the
Assignor.
 
 
1.
Assignor:
 

 
 
2.
Assignee:
 

 
[and is an Affiliate/Approved Fund of [Identify Lender]]1

 
 
3.
Borrowers: J.C. Penney Corporation, Inc. and each Borrowing Subsidiary.
 

 

--------------------------------------------------------------------------------

1 Select as applicable
 
 
 
 
 
2
 
 
4.
Administrative Agent: JPMorgan Chase Bank, N.A., as the Administrative Agent
under the Credit Agreement.

 
 
5.
Credit Agreement:  The Credit Agreement dated as of April [●], 2009 among J.C.
Penney Company, Inc., J.C. Penney Corporation, Inc., J.C. Penney Purchasing
Corporation, the Lenders parties thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent and Wachovia Bank, National Association, as LC Agent.

 
 
6.
Assigned Interest:

 
Facility Assigned2
Aggregate Amount of Commitment/Loans for all Lenders
Amount of Commitment/Loans Assigned
Percentage Assigned of Commitment/ Loans3
 
$
$
%
 
$
$
%
 
$
$
%

Effective Date:                                 , 20     [TO BE INSERTED BY
ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF
TRANSFER IN THE REGISTER THEREFOR].
 
 
 

--------------------------------------------------------------------------------

2 Fill in the appropriate terminology for the types of facilities under the
Credit Agreement that are being assigned under this Assignment (e.g. “Revolving
Commitment”, “Revolving Loan”, “Swingline Loan”, etc.)
 
3 Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders
thereunder.

 
 
 
 
3
The terms set forth in this Assignment and Assumption are hereby agreed to:
 
 
ASSIGNOR [NAME OF ASSIGNOR],
 

 
by                                                    
Title:
 
ASSIGNEE [NAME OF ASSIGNEE],
 

 
by                                                   
Title:
 

 
Consented to:

 
J.C. PENNEY CORPORATION, INC.,
 
 
by                                                   
Title:
 
Consented to and Accepted:

 
JPMORGAN CHASE BANK, N.A., as Administrative Agent,
 
by                                                   
Title:

 
 
 
 
 
 
ANNEX 1

J.C. PENNEY COMPANY, INC.
J.C. PENNEY CORPORATION, INC.
J.C. PENNEY PURCHASING CORPORATION
CREDIT AGREEMENT

STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

 
1.  Representations and Warranties.
 
1.1  Assignor.  The Assignor (a) represents and warrants that (i) it is the
legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest
is free and clear of any lien, encumbrance or other adverse claim and (iii) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other agreement, instrument or document related thereto
(each, a “Loan Document”), (ii) the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Documents,
(iii) the financial condition of the Borrower, any of its Subsidiaries or
Affiliates or any other Person obligated in respect of any Loan Document or
(iv) the performance or observance by the Borrower, any of its Subsidiaries or
Affiliates or any other Person of any of their respective obligations under any
Loan Document.
 
1.2.  Assignee.  The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be
satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 5.01 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if it is a Foreign Lender,
attached to this Assignment and Assumption is any documentation required to be
delivered by it pursuant to the terms of the Credit Agreement, duly completed
and executed by the Assignee; and (b) agrees that (i) it will, independently and
without reliance on the Administrative Agent, the Assignor or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, and (ii) it will perform in accordance with their
terms all of the
 
 
 
 
 
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.
 
2.  Payments.  From and after the Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.
 
3.  General Provisions.  This Assignment and Assumption shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and assigns.  This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument.  Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption.  This Assignment and Assumption shall be
governed by, and construed in accordance with, the law of the State of New York.
 

 
 
 
 

EXHIBIT B-1

[FORM OF OPINION OF SPECIAL NEW YORK COUNSEL TO LOAN PARTIES]

April 8, 2009

JPMorgan Chase Bank, N.A.,
as administrative agent on behalf of the lenders referred to below,
270 Park Avenue,
New York, New York 10017.

Each of the lenders listed on the signature pages
of the Credit Agreement and referred to below.

Ladies and Gentlemen:

We have acted as special New York counsel to J.C. Penney Company, Inc.
("JCPenney") in connection with (i) the Credit Agreement, dated as of April 8,
2009 (the "Credit Agreement"), among JCPenney, J.C. Penney Corporation, Inc.
("Parent Borrower"), and J.C. Penney Purchasing Corporation ("Purchasing"),
JPMorgan Chase Bank, N.A., as administrative agent (the "Administrative Agent"),
Wachovia Bank, National Association, as LC Agent, and each of the lenders and
arrangers listed on the signature pages thereof, and (ii) the Guarantee and
Collateral Agreement dated as of April 8, 2009 (the "Collateral Agreement"),
among JCPenney, Parent Borrower, Purchaser and the subsidiaries of J. C. Penney
Company, Inc. identified therein (the "Guarantors"), and the Administrative
Agent.

In our capacity as special New York counsel, we have examined executed
counterparts of each of the following documents:

(a) the Credit Agreement;

(b) the Collateral Agreement;

(c) the Perfection Certificate, dated as of April 8, 2009, as executed by Robert
B.
Cavanaugh, executive vice president and chief financial officer of JCPenney;

 
 
 
 

JPMorgan Chase, N.A.
-2-
Each of the lenders listed on the signature pages
of the Loan Agreement

(d) the Indenture, dated as of October 1, 1982 as supplemented by the First
Supplemental Indenture dated as of March 15, 1983, the Second Supplemental
Indenture dated as of May 1, 1984, the Third Supplemental Indenture dated as of
March 7, 1986, the Fourth Supplemental Indenture dated as of June 7, 1991 and
the Fifth Supplemental Indenture dated as of January 27, 2002 (the "1982
Indenture"), between the Parent Borrower and U.S. Bank National Association
(successor to Bank of America National Trust and Savings Association), as
Trustee;

(e) the Indenture, dated as of April 1, 1994 and as supplemented by the First
Supplemental Indenture dated as of January 27, 2002, and the Second Supplemental
Indenture dated as of July 26, 2002 (the "1994 Indenture" and, together with the
1982 Indenture, the "Indentures"), between the Parent Borrower and U.S. Bank
National Association (successor to Bank of America National Trust and Savings
Association), as Trustee; and

(f) such certificates and other documents, and such questions of law, as we have
considered necessary or appropriate for the purposes of this opinion.

Upon the basis of such examination, it is our opinion that:

  (1)   
Each of the Credit Agreement and the Collateral Agreement constitutes the valid
and legally binding obligation of each of JCPenney, Parent Borrower, Purchasing
and the Guarantors party thereto, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.

  (2)   
No consents, authorizations or approvals of, or filings or registrations with,
governmental authorities are required under the Federal laws of the United
States or the laws of the State of New York for the execution or delivery of the
Credit Agreement or the Collateral Agreement by JCPenney, Parent Borrower,
Purchasing or the Guarantors, or the performance by such parties of their
respective obligations thereunder, provided, however, that insofar as
performance by such parties of their respective obligations is concerned, we
express no opinion as to bankruptcy, insolvency,

 
 
 
 

JPMorgan Chase, N.A.
-3-
Each of the lenders listed on the signature pages
of the Loan Agreement

fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights.

  (3)    
Neither the execution nor delivery of the Credit Agreement or the Collateral
Agreement by JCPenney, Parent Borrower, Purchasing or the Guarantors, nor the
performance by such parties of their respective obligations thereunder, in
accordance with the terms thereof, will violate any Federal law of the United
States or laws of the State of New York applicable to such party; provided,
however, that we express no opinion with respect to Federal or state securities
laws, other antifraud laws, fraudulent transfer law and laws that restrict
transactions between United States persons and citizens or residents of certain
foreign countries; and provided, further, that insofar as performance by such
parties of their respective obligations is concerned, we express no opinion as
to bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights.

  (4)     
The Parent Borrower is not an "investment company" as defined in the Investment
Company Act of 1940, as amended.

  (5)     
Neither the execution nor delivery of the Credit Agreement or the Collateral
Agreement by JCPenney, Parent Borrower, Purchasing or the Guarantors, nor the
performance by such parties of their respective obligations thereunder, in
accordance with the terms thereof, will constitute a default under the 1982
Indenture or the 1994 Indenture so long as JCPenney is at the time of, and after
giving effect to, the incurrence of any loan or guarantee pursuant to the Credit
Agreement or the Collateral Agreement in compliance with the covenants set forth
in Sections 5.10 and 5.11 of the 1982 Indenture.

  (6)    
Upon the giving of value by the Lenders (as defined in the Credit Agreement),
the Collateral Agreement is effective under the Uniform Commercial Code of the
State of New York as in effect on the date hereof (the "New York UCC"), where
applicable, to create in favor of the Secured Parties (as defined in the
Collateral

 
 
 
 

JPMorgan Chase, N.A.
-4-
Each of the lenders listed on the signature pages
of the Loan Agreement

Agreement) a security interest (the ''New York Security Interest") in the right,
title and interest of each Grantor (as defined in the Collateral Agreement), if
any, in the applicable collateral described in the Collateral Agreement (the
''New York Collateral").

  (7)    
Upon filing of a UCC-1 financing statement with the New York Secretary of State,
the New York Security Interest in that portion of the New York Collateral in
which a security interest may be perfected by filing a UCC-1 financing statement
under the New York UCC, where applicable, will be perfected.

  (8)    
Upon the giving of value by the Lenders (as defined in the Credit Agreement),
the Collateral Agreement is effective under the Uniform Commercial Code of the
State of Delaware as in effect on the date hereof (the "Delaware UCC"), where
applicable, to create in favor of the Secured Parties (as defined in the
Collateral Agreement) a security interest (the "Delaware Security Interest") in
the right, title and interest of each Grantor (as defined in the Collateral
Agreement), if any, in the applicable collateral described in the Collateral
Agreement (the "Delaware Collateral").

  (9)    
Upon filing of a UCC-1 financing statement with the Delaware Secretary of State,
the Delaware Security Interest in that portion of the Collateral in which a
security interest may be perfected by filing a UCC-1 financing statement under
the Delaware UCC, where applicable, will be perfected.

We express no opinion as to:

(i) any provision of any agreement referred to in paragraph (1) purporting to
provide indemnification to any person to the extent inconsistent with public
policy or otherwise contrary to law;

(ii) the security interest purported to be granted for the benefit of the
Secured Parties (as defined in the Collateral Agreement) in the collateral
referred to in paragraph (6) or paragraph (8) to the extent such property is
excluded form the scope of Article 9 of the New York UCC or the Delaware UCC, in
each case pursuant to Section 9-109 thereof;

 
 
 
 

JPMorgan Chase, N.A.
-5-
Each of the lenders listed on the signature pages
of the Loan Agreement

(iii) the priority of any security interest in or to any of the collateral and,
other than as specifically set forth in paragraph (7) or paragraph (9), the
creation, attachment, perfection, effect of perfection or nonperfection of any
security interest in or to any collateral or any other property;
 
(iv) the right, title and interest in any of the collateral of any person
granting a security interest therein;
 
(v) the accuracy of the description of the collateral contained in the
Collateral Agreement.

We note that provisions in the Credit Agreement or the Collateral Agreement that
permit parties to take action or make determinations may be subject to a
requirement that such action be taken or such determinations be made on a
reasonable basis and in good faith.

We also note that:

A.     In the case of property that becomes collateral after the date hereof,
(i) the security interests therein will not attach or be enforceable until the
debtor or other grantor has rights in such property, (ii) Section 552 of the
Bankruptcy Code of the United States limits the extent to which property
acquired by a debtor or other grantor after the commencement of a case under the
Bankruptcy Code of the United States may be subject to a security interest
arising from a security agreement entered into by a debtor before the
commencement of such case and (iii) the acquisition after the initial incurrence
of any loan or guarantee pursuant to the Credit Agreement or the Collateral
Agreement, of any interest in any property that becomes subject to a security
interest created by the Collateral Agreement may constitute a voidable
preference under Section 547 of the Bankruptcy Code of the United States.

B.    Perfection of the security interests referred to in paragraphs (7) and (9)
generally will be terminated or will become unperfected under the circumstances
described in Sections 9-312, 9-314, and 9-316 of the New York UCC and, with
respect to proceeds, Section 9-315 of the New York UCC or comparable provisions
of the Delaware UCC, unless appropriate action is taken as provided therein.

C.    A filed financing statement will become ineffective to perfect the
security interests referred to in paragraphs (7) and (9) to be perfected by
filing a financing

 
 
 
 

JPMorgan Chase, N.A.
-6-
Each of the lenders listed on the signature pages
of the Loan Agreement

statement under the circumstances described in Sections 9-315(e), 9-507, 9-508,
9-510, 9-512,9-513,9-515 and 9-516 of the New York UCC or comparable provisions
of the Delaware UCC.

D.    Certain remedial provisions the Collateral Agreement (A) to the extent
affecting the obligations of an account debtor, may be subject to the rights of
such account debtor, the terms of the contracts with such account debtor and any
claims or defenses of such account debtor arising under or outside such
contracts and (B) may be unenforceable in whole or in part under applicable law,
provided that the inclusion of such provisions does not, in our opinion (but
subject to the other comments and qualifications set forth in this opinion
letter), make the remedies and procedures that will be afforded to the Lenders
(as defined in the Credit Agreement) inadequate for the practical realization of
the benefits purported to be provided to Lenders (as defined in the Credit
Agreement) by the Collateral Agreement.

E.    The foregoing opinion is limited to the Federal laws of the United States
and the laws of the State of New York. Our opinions in paragraphs (6) and (7)
are limited to Article 9 New York UCC and in the case of paragraphs (8) and (9)
to Article 9 of the Delaware UCC. With your approval, in connection with the
opinions in paragraphs (8) and (9), we have reviewed and relied solely upon the
official compilation of the Delaware UCC, Title 6 of the Delaware Code, and our
general familiarity with the Uniform Commercial Code in effect in other
jurisdictions, and we have not reviewed and do not purport to be expert in
Delaware commercial law more generally.

F.   In addition, with your approval, we have relied as to certain matters upon
information obtained from public officials, officers of JCPenney and other
sources believed by us to be responsible, including with respect to the absence
of defaults under the Credit Agreement, the Collateral Agreement, the 1982
Indenture and the 1994 Indenture. We have assumed, without independent
verification, that each of the parties to the Credit Agreement and the
Collateral Agreement is dully incorporated and is an existing corporation in
good standing under the laws of the jurisdiction of its incorporation, that the
Credit Agreement and the Collateral Agreement have been duly authorized,
executed and delivered by each of the parties thereto, and that the signatures
on all documents examined by us are genuine, assumptions which we have not
independently verified. With certain matters, we note that you have received the
opinion of Janet L. Dhillon, executive vice president and general counsel for
JCPenney.

 
 
 
 

JPMorgan Chase, N.A.
-7-
Each of the lenders listed on the signature pages
of the Loan Agreement

This opinion is delivered pursuant to Section 4.01(b) of the Credit Agreement.
This opinion is furnished by us to you and is solely for your benefit and is not
to be made available to, nor may it be relied upon by, any other person, firm or
entity.

Very truly yours,

 
 
 
 
 

EXHIBIT B-2

[FORM OF OPINION OF GENERAL COUNSEL]
 
April 8, 2009

To the Issuing Banks and Lenders listed on Schedule A hereto
and to JPMorgan Chase Bank, N.A., as Administrative Agent
for such Issuing Banks and Lenders

RE:           Credit Agreement of J. C. Penney Company, Inc., J. C. Penney
Corporation, Inc.,
J. C. Penney Purchasing Corporation and the other Material
Subsidiaries referred to below

Ladies and Gentlemen:

As the Executive Vice President, General Counsel and Secretary of J. C. Penney
Company, Inc., a Delaware corporation (“JCPenney”) and J. C. Penney Corporation,
Inc., a Delaware corporation (the “Parent Borrower”) and as General Counsel of
J. C. Penney Purchasing Corporation, a New York corporation (“Purchasing” and,
together with JCPenney, the Parent Borrower and the other Subsidiaries of
JCPenney named on Schedule I hereto, the “Loan Parties”), I have been asked to
render an opinion pursuant to Section 4.01(b) of the Credit Agreement dated as
of April 8, 2009 (the “Credit Agreement”) among the Loan Parties and each of
you.  Capitalized terms not otherwise defined in this opinion letter have the
meanings specified in the Credit Agreement.

In rendering the opinions set forth below, I have examined originals,
photostatic, or certified copies of the Credit Agreement, the Collateral
Agreement, respective corporate records and documents of the Loan Parties,
copies of public documents, certificates of the officers or representatives of
the Loan Parties, and such other instruments and documents, and have made such
inquiries, as I have deemed necessary as a basis for such opinions.  In making
such examinations, I have assumed with your consent the genuineness of all
signatures (other than the signatures of the Loan Parties) and the authenticity
of all documents submitted to me as originals, the conformity to original
documents of all documents submitted to me as certified or photostatic copies,
and the authenticity of the originals of such latter documents.  As to questions
of fact material to such opinions, to the extent I deemed necessary, I have
relied upon the representations and warranties of the Loan Parties made in the
Credit Agreement and upon certificates of the officers of the Loan Parties.

Based upon the foregoing I am of the opinion that:

1. Each of the Loan Parties has been duly incorporated and is validly existing
and in good standing under the laws of the States of Delaware and New York, as
the case may be, and is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where the failure to so qualify
would have a Material Adverse Effect.  Each of the Loan Parties has the
requisite corporate power and authority to own,
 
 
 
 
 
pledge, and operate its properties and assets, to lease the property it operates
under lease, and to conduct its business as now conducted.

2. The execution, delivery and performance by the Loan Parties of the Credit
Agreement and the Collateral Agreement and the consummation of the Transactions
thereunder (i) are within the corporate power of each of the Loan Parties; (ii)
have been duly authorized by each of the Loan Parties by all necessary corporate
action; (iii) are not in contravention of any Loan Party’s certificate of
incorporation or bylaws; (iv) do not conflict with or result in the breach of,
or constitute a default under, the material agreements or other instruments of
any of the Loan Parties; and (v) do not result in the creation or imposition of
any Lien upon any of the property or assets of any of the Loan Parties other
than any Lien created by the Collateral Agreement.

3. The Credit Agreement and the Collateral Agreement have been duly executed and
delivered by each Loan Party that is party thereto.

4. To the best of my knowledge after due inquiry, no litigation by or before any
Governmental Authority is now pending or threatened against any Loan Party (i)
which involves the Credit Agreement or the issuance of Letters of Credit under
the Credit Agreement or (ii) as to which there is a reasonable possibility of an
adverse determination and which, if adversely determined, would, individually or
in the aggregate, result in a Material Adverse Effect.

With respect to the opinion in paragraph 2(iv), I express no opinion with
respect to any conflict with, breach of, or default under the Indenture, dated
as of October 1, 1982 as supplemented by the First Supplemental Indenture dated
as of March 15, 1983, the Second Supplemental Indenture dated as of May 1, 1984,
the Third Supplemental Indenture dated as of March 7, 1986, the Fourth
Supplemental Indenture dated as of June 7, 1991 and the Fifth Supplemental
Indenture dated as of January 27, 2002 between the Parent Borrower and U.S. Bank
National Association (successor to Bank of America National Trust and Savings
Association), as Trustee, or  the Indenture, dated as of April 1, 1994 and as
supplemented by the First Supplemental Indenture dated as of January 27, 2002,
and the Second Supplemental Indenture dated as of July 26, 2002 between the
Parent Borrower and U.S. Bank National Association (successor to Bank of America
National Trust and Savings Association), as Trustee.

The opinions expressed herein are limited to the laws of the State of Delaware
with respect to the opinions in paragraph 1 (except as to due qualification as a
foreign corporation and good standing under the laws of other jurisdictions and
except as to due incorporation and valid existence of Purchasing), and clauses
(i), (ii), and (iii) of paragraph 2 (except as such clauses relate to
Purchasing).  The other opinions expressed are limited to the laws of the State
of New York and the laws of the United States.  I do not express any opinion
herein concerning any laws of any other jurisdiction.  A copy of this opinion
letter may be delivered by any of you to any Person that becomes an Issuing Bank
or Lender in accordance with the provisions of the Credit Agreement.  Any such
Issuing Bank or Lender may rely on the opinions expressed above as if this
opinion letter
2
 
 
 
 
were addressed and delivered to such Issuing Bank or Lender on the date
hereof.  The opinion is furnished to you in connection with the transactions
contemplated by the Credit Agreement, and except as otherwise provided herein
may not be relied upon by any other person, firm, or corporation for any purpose
or by you in any other context without my prior written consent.

This opinion letter speaks only as of the date hereof.  I expressly disclaim any
responsibility to advise you or any other Issuing Bank or Lender who is
permitted to rely on the opinions expressed herein as specified in the next
preceding paragraph of any development or circumstance of any kind including any
change in law or fact that may occur after the date of this opinion letter even
though such development, circumstance or change may affect the legal analysis, a
legal conclusion or any other matter set forth in or relating to this opinion
letter.  Accordingly, any Issuing Bank or Lender relying on this opinion letter
at any time should seek advice of its counsel as to the proper application of
this opinion letter at such time.

Very truly yours,

Janet L. Dhillon
Executive Vice President
General Counsel and Secretary
 
 
 
3
 
 
 
 
 

Schedule A

Addressees

JPMorgan Chase Bank, N. A.
Wachovia Bank, National Association
Bank of America, N.A.
Barclays Bank PLC
Compass Bank
HSBC Bank USA, N.A.
U.S. Bank National Association
Bank of New York Mellon
Standard Chartered Bank
State Street Bank and Trust Company
UMB Bank, n.a.
KeyBank National Association
PNC Bank, National Association
Union Bank, N.A.
Banco Popular de Puerto Rico
The Northern Trust Company
Citibank, N.A.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Capital One, N.A.
Chang Hwa Commercial Bank, Ltd.

 
 
 
 

Schedule I

Subsidiary Loan Parties

JCP Real Estate Holdings, Inc.
J. C. Penney Properties, Inc.
 
 
 
 
 
 
 
 
 
EXHIBIT C
 
FORM OF GUARANTEE AND COLLATERAL AGREEMENT
 
dated as of
 
April [●], 2009,
 
among
 
J. C. PENNEY COMPANY, INC.,
J. C. PENNEY CORPORATION, INC.,
J. C. PENNEY PURCHASING CORPORATION,

the Subsidiaries of J. C. Penney Company, Inc.
identified herein,
 
and
 
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
 
 
 
 
 
 
 
 

   Table of Contents        Page  
ARTICLE I
 Definitions
 
   SECTION 1.01. Credit Agreement  1  SECTION 1.02. Other Defined Terms  1  
 
 ARTICLE II
Guarantee
 
   SECTION 2.01. Guarantee   3  SECTION 2.02. Guarantee of Payment; Continuing
Guarantee  3  SECTION 2.03. No Limitations, Etc.  3  SECTION 2.04.  
Reinstatement   4  SECTION 2.05. Agreement To Pay; Subrogation  4  SECTION 2.06.
Information  5  
 
ARTICLE III
Security Interest
 
   SECTION 3.01. Security Interest   5  SECTION 3.02.  Representations and
Warranties  6  SECTION 3.03.  Covenants  7  
 
ARTICLE IV
Remedies
 
   SECTION 4.01. Remedies upon Default   9  SECTION 4.02.  Application of
Proceeds   10  
 
ARTICLE V
Indemnity, Subrogation and Subordination
 
   SECTION 5.01.  Indemnity and Subrogation  11  SECTION 5.02. Contribution and
Subrogation  11  SECTION 5.03.  Subordination   12  
 
ARTICLE VI
Miscellaneous
       

 
 
 
 
 
 
 
 

 SECTION 6.01.  Notices  12  SECTION 6.02.  Rights Absolute   12  SECTION 6.03. 
Survival of Agreement   12  SECTION 6.04.  Binding Effect; Several Agreement  13
 SECTION 6.05. Successors and Assigns  13  SECTION 6.06.  Administrative Agent’s
Fees and Expenses; Indemnification  13  SECTION 6.07. Administrative Agent
Appointed Attorney-in-Fact  14  SECTION 6.08. Applicable Law  15  SECTION 6.09. 
Waivers; Amendment   15  SECTION 6.10. WAIVER OF JURY TRIAL   15  SECTION 6.11.
Severability   16  SECTION 6.12.  Counterparts  16  SECTION 6.13.  Headings  16
 SECTION 6.14.   Jurisdiction; Consent to Service of Process  16  SECTION 6.15. 
Termination or Release  17  SECTION 6.16.  Additional Guarantors  17  SECTION
6.17. Additional Grantors  18  SECTION 6.18. Right of Setoff   18      
 SCHEDULE I  Subsidiary Grantors    SCHEDULE II   Subsidiary Guarantors  
 SCHEDULE III   Insurance Requirements          EXHIBIT A  Form of Guarantee
Supplement    EXHIBIT B    Form of Grantor Supplement    EXHIBIT C Form of
Perfection Certificate  

 
                                    
ii
 
 
 
 
 

GUARANTEE AND COLLATERAL AGREEMENT dated as of April [●], 2009, among J. C.
PENNEY COMPANY, INC. (“Holdings”), J. C. PENNEY CORPORATION, INC. (the “Parent
Borrower”), J. C. PENNEY PURCHASING CORPORATION (“Purchasing”), the Subsidiaries
of J. C. Penney Company, Inc. identified herein and JPMORGAN CHASE BANK, N.A.,
as Administrative Agent.
 
 
ARTICLE I
 
Definitions
 
SECTION 1.01.  Credit Agreement.  (a)  Capitalized terms used in this Agreement
and not otherwise defined herein have the meanings specified in the Credit
Agreement (as defined herein).  All terms defined in the New York UCC (as
defined herein) and not defined in this Agreement have the meanings specified
therein; the term “instrument” shall have the meaning specified in Article 9 of
the New York UCC.
 
(b) The rules of construction specified in Section 1.03 of the Credit Agreement
also apply to this Agreement.
 
SECTION 1.02. Other Defined Terms.  As used in this Agreement, the following
terms have the meanings specified below:
 
“Collateral” has the meaning assigned to such term in Section 3.01.
 
“Credit Agreement” means the Credit Agreement dated as of April [●], 2009, among
Holdings, the Parent Borrower, Purchasing, the Lenders party thereto, JPMorgan
Chase Bank, N.A., as Administrative Agent and Wachovia Bank, National
Association, as LC Agent.
 
“Grantors” means Holdings, the Parent Borrower, Purchasing and the Subsidiary
Grantors.
 
“Guarantors” means Holdings, the Parent Borrower, Purchasing and the Subsidiary
Guarantors.
 
“Inventory” means all inventory of any Grantor other than consignment inventory.
 
“Loan Document Obligations” means (a) the due and punctual payment by each
Borrower and each Account Party of (i) the principal of and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (ii) each payment required to be made by any Borrower or any Account
Party under the Credit Agreement in respect of any Letter of
 
 
 
 
 
Credit, when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral, and
(iii) all other monetary obligations of any Borrower or any Account Party to any
of the Secured Parties under the Credit Agreement and each of the other Loan
Documents, including obligations to pay fees, expense and reimbursement
obligations and indemnification obligations, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary obligations incurred during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), (b)
the due and punctual performance of all other obligations of each Borrower and
each Account Party under or pursuant to the Credit Agreement and each of the
other Loan Documents and (c) the due and punctual payment and performance of all
the obligations of each other Loan Party under or pursuant to this Agreement and
each of the other Loan Documents.
 
“New York UCC” means the Uniform Commercial Code as from time to time in effect
in the State of New York.
 
“Obligations” means (a) Loan Document Obligations, (b) the due and punctual
payment and performance of all obligations of each Loan Party under each Swap
Agreement that (i) is in effect on the Effective Date with a counterparty that
is a Lender or an Affiliate of a Lender as of the Effective Date or (ii) is
entered into after the Effective Date with any counterparty that is a Lender or
an Affiliate of a Lender at the time such Swap Agreement is entered into and (c)
the due and punctual payment of all monetary obligations and other liabilities
of any Loan Party in respect of overdrafts and related liabilities and
obligations arising from or in connection with Treasury Services, to the extent,
in the case of clauses (b) and (c) above, the documentation for such obligations
specifically provides that such Lender or Affiliate of a Lender is entitled to
the benefit of the Security Interest hereunder.
 
“Parties” means the Grantors and the Guarantors.
 
“Perfection Certificate” means a certificate substantially in the form of
Exhibit C, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Financial Officer of the Parent
Borrower.
 
“Proceeds” has the meaning specified in Section 9-102 of the New York UCC.
 
“Secured Parties” means (a) the Lenders, (b) the Administrative Agent, (c) the
LC Agent, (d) the Issuing Banks, (e) each counterparty to any Swap Agreement
with a Loan Party the obligations under which constitute Obligations, (f) the
beneficiaries of each indemnification obligation undertaken by any Loan Party
under any Loan Document, (g) any Lender to which obligations in respect of
Treasury Services are owed and (h) the successors and assigns of each of the
foregoing.
 
“Security Interest” has the meaning assigned to such term in Section 3.01.
2
 
 
 
 
“Subsidiary Grantors” means (a) the Subsidiaries identified on Schedule I and
(b) each Additional Grantor that becomes a party to this Agreement as
contemplated by Section 6.17.
 
“Subsidiary Guarantors” means (a) the Subsidiaries identified on Schedule II and
(b) each other Subsidiary that becomes a party to this Agreement as contemplated
by Section 6.16.
 
“Subsidiary Parties” means the Subsidiary Grantors and the Subsidiary
Guarantors.
 
“Treasury Services” means treasury, depositary or cash management services
(including purchasing cards and stored value cards) from, or any automated
clearinghouse transfer of funds to, any entity that is a Lender.
 
ARTICLE II
 
Guarantee
 
SECTION 2.01. Guarantee.  Each Guarantor unconditionally guarantees, jointly
with the other Guarantors and severally, as a primary obligor and not merely as
a surety, the due and punctual payment and performance of the Obligations.  Each
Guarantor further agrees that the Obligations may be extended or renewed, in
whole or in part, without notice to or further assent from it, and that it will
remain bound upon its guarantee notwithstanding any extension or renewal of any
Obligation.  Each of the Guarantors waives presentment to, demand of payment
from and protest to any Loan Party of any of the Obligations, and also waives
notice of acceptance of its guarantee and notice of protest for nonpayment.
 
SECTION 2.02. Guarantee of Payment.  Each of the Guarantors further agrees that
its guarantee hereunder constitutes a guarantee of payment when due and not of
collection, and waives any right to require that any resort be had by the
Administrative Agent or any other Secured Party to any security held for the
payment of the Obligations or to any balance of any deposit account or credit on
the books of the Administrative Agent or any other Secured Party in favor of any
Borrower, any Account Party or any other Person.
 
SECTION 2.03. No Limitations, Etc.  (a)  Except for termination of a Guarantor’s
obligations hereunder as expressly provided in Section 6.15, the obligations of
each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense or setoff, counterclaim, recoupment or termination whatsoever by reason
of the invalidity, illegality or unenforceability of the Obligations or
otherwise, other than the defense of payment of such obligations in accordance
with the terms thereof.  Without limiting the generality of the foregoing, the
obligations of each Guarantor hereunder shall not be discharged or impaired or
otherwise affected by (i) the failure of the Administrative Agent or any other
 
3
 
 
 
 
Secured Party to assert any claim or demand or to enforce any right or remedy
under the provisions of any Loan Document or otherwise; (ii) any rescission,
waiver, amendment or modification of, or any release from any of the terms or
provisions of, any Loan Document or any other agreement, including with respect
to any other Guarantor under this Agreement; (iii) the release of any security
held by the Administrative Agent or any other Secured Party for the Obligations
or any of them; (iv) any default, failure or delay, wilful or otherwise, in the
performance of the Obligations; or (v) any other act or omission that may or
might in any manner or to any extent vary the risk of any Guarantor or otherwise
operate as a discharge of any Guarantor as a matter of law or equity (other than
the payment in full in cash of all the Obligations).  Each Guarantor expressly
authorizes the Secured Parties to take and hold security for the payment and
performance of the Obligations, to exchange, waive or release any or all such
security (with or without consideration), to enforce or apply such security and
direct the order and manner of any sale thereof in their sole discretion or to
release or substitute any one or more other guarantors or obligors upon or in
respect of the Obligations, all without affecting the obligations of any
Guarantor (in its capacity as such) hereunder.
 
(b) To the fullest extent permitted by applicable law, each Guarantor waives any
defense based on or arising out of any defense of any Loan Party or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of any Loan Party, other than the
payment in full in cash of all the Obligations.  The Administrative Agent and
the other Secured Parties may, at their election, foreclose on any security held
by one or more of them by one or more judicial or nonjudicial sales, accept an
assignment of any such security in lieu of foreclosure, compromise or adjust any
part of the Obligations, make any other accommodation with any Loan Party or
exercise any other right or remedy available to them against any Loan Party,
without affecting or impairing in any way the liability of any Guarantor (in its
capacity as such) hereunder except to the extent the Obligations have been paid
in full in cash.  To the fullest extent permitted by applicable law, each
Guarantor (in its capacity as such) waives any defense arising out of any such
election even though such election operates, pursuant to applicable law, to
impair or to extinguish any right of reimbursement or subrogation or other right
or remedy of such Guarantor against any Loan Party, as the case may be, or any
security.
 
SECTION 2.04. Reinstatement.  Each of the Guarantors agrees that its guarantee
hereunder shall continue to be effective or be reinstated, as the case may be,
if at any time payment, or any part thereof, of any Obligation is rescinded or
must otherwise be restored to any Loan Party by the Administrative Agent or any
other Secured Party upon the bankruptcy or reorganization of any Loan Party or
otherwise.
 
SECTION 2.05. Agreement To Pay; Subrogation.  In furtherance of the foregoing
and not in limitation of any other right that the Administrative Agent or any
other Secured Party has at law or in equity against any Guarantor by virtue
hereof, upon the failure of any Loan Party to pay any Obligation when and as the
same shall become due, whether at maturity, by acceleration, after notice of
prepayment or otherwise, each Guarantor hereby promises to and will forthwith
pay, or cause to be paid, to the Administrative Agent for distribution to the
applicable Secured Parties in cash the
 
4
 
 
 
 
amount of such unpaid Obligation.  Upon payment by any Guarantor of any sums to
the Administrative Agent as provided above, all rights of such Guarantor against
such Loan Party or any other Guarantor arising as a result thereof by way of
right of subrogation, contribution, reimbursement, indemnity or otherwise shall
in all respects be subject to Article V.
 
SECTION 2.06. Information.  Each Guarantor assumes all responsibility for being
and keeping itself informed of each Loan Party’s financial condition and assets,
and of all other circumstances bearing upon the risk of nonpayment of the
Obligations and the nature, scope and extent of the risks that such Guarantor
assumes and incurs hereunder, and agrees that none of the Administrative Agent
or the other Secured Parties will have any duty to advise such Guarantor of
information known to it or any of them regarding such circumstances or risks.
 
ARTICLE III
 
Security Interest
 
SECTION 3.01. Security Interest.  (a)  As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor hereby
assigns and pledges to the Administrative Agent, its successors and assigns, for
the ratable benefit of the Secured Parties, and hereby grants to the
Administrative Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest (the “Security Interest”) in, all its
right, title or interest in or to (i) any and all of the Inventory now owned or
at any time hereafter acquired by such Grantor or in which such Grantor now has
or at any time in the future may acquire any right, title or interest and (ii)
all Proceeds and products of any and all of the foregoing and all collateral
security and guarantees given by any Person with respect to the foregoing
(collectively, the “Collateral”).
 
(b) Each Grantor hereby irrevocably authorizes the Administrative Agent at any
time and from time to time to file in any relevant jurisdiction any initial
financing statements with respect to the Collateral or any part thereof and
amendments thereto that contain the information required by Article 9 of the
Uniform Commercial Code of each applicable jurisdiction for the filing of any
financing statement or amendment, including whether such Grantor is an
organization, the type of organization and any organizational identification
number issued to such Grantor.  Each Grantor agrees to provide such information
to the Administrative Agent promptly upon request.
 
(c) Each Grantor also ratifies its authorization for the Administrative Agent to
file in any relevant jurisdiction any initial financing statements or amendments
thereto if filed prior to the date hereof.
 
(d) The Security Interest is granted as security only and shall not subject the
Administrative Agent or any other Secured Party to, or in any way alter or
modify, any obligation or liability of any Grantor with respect to or arising
out of the Collateral.
 
5
 
 
 
 
 
SECTION 3.02. Representations and Warranties.  The Grantors jointly and
severally represent and warrant to the Administrative Agent and the other
Secured Parties that:
 
(a) Each Grantor has good and valid rights in and title to the Collateral with
respect to which it has purported to grant a Security Interest hereunder and has
full power and authority to grant to the Administrative Agent the Security
Interest in such Collateral pursuant hereto and to execute, deliver and perform
its obligations in accordance with the terms of this Agreement, without the
consent or approval of any other Person other than any consent or approval that
has been obtained.
 
(b) The Perfection Certificate has been duly prepared, completed and executed
and the information set forth therein, including the exact legal name of each
Grantor, is correct and complete as of the Effective Date.  The Uniform
Commercial Code financing statements or other appropriate filings, recordings or
registrations containing a description of the Collateral that have been prepared
by the Administrative Agent based upon the information provided to the
Administrative Agent in the Perfection Certificate for filing in each
governmental, municipal or other office specified in Schedule 6 to the
Perfection Certificate, as modified, delivered, prepared or supplemented from
time to time pursuant to the Credit Agreement (or specified by notice from the
Parent Borrower to the Administrative Agent after the Effective Date in the case
of filings, recordings or registrations required by
Section 5.03(a) or 5.12 of the Credit Agreement), are all the filings,
recordings and registrations that are necessary to establish a legal, valid and
perfected security interest in favor of the Administrative Agent (for the
ratable benefit of the Secured Parties) in respect of all Collateral in which
the Security Interest may be perfected by filing, recording or registration in
the United States (or any political subdivision thereof), and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements.
 
(c) The Security Interest constitutes (i) a legal and valid security interest in
all the Collateral securing the payment and performance of the Obligations and
(ii) subject to the filings described in Section 3.02(b), a perfected security
interest in all Collateral in which a security interest may be perfected by
filing, recording or registering a financing statement or analogous document in
the United States (or any political subdivision thereof) pursuant to the Uniform
Commercial Code or other applicable law in such jurisdictions.  The Security
Interest is and shall be prior to any other Lien on any of the Collateral, other
than Permitted Encumbrances that have priority as a matter of law and Liens
expressly permitted pursuant to clause (c) of Section 6.02 of the Credit
Agreement.
 
(d) The Collateral is owned by the Grantors free and clear of any Lien, other
than Permitted Encumbrances and Liens expressly permitted pursuant to clause (c)
of Section 6.02 of the Credit Agreement.  None of the Grantors has filed or
consented to the filing of any financing statement or analogous document under
the Uniform Commercial Code or any other applicable laws covering any
Collateral, which financing statement or analogous document, assignment,
security agreement or similar instrument
6
 
 
 
 
is still in effect, except, in each case, for Permitted Encumbrances and Liens
expressly permitted pursuant to clause (c) of Section 6.02 of the Credit
Agreement.
 
(e) Notwithstanding the foregoing, the representations and warranties set forth
in this Section as to perfection and priority of the Security Interest in
Proceeds are limited to the extent provided in Section 9-315 of the Uniform
Commercial Code.
 
SECTION 3.03. Covenants.  (a)  Each Grantor agrees to maintain, at its own cost
and expense, such complete and accurate records with respect to the Collateral
owned by it as is consistent with its current practices and in accordance with
such prudent and standard practices used in industries that are the same as or
similar to those in which such Grantor is engaged, but in any event to include
accounting records indicating all payments and proceeds received with respect to
any part of the Collateral, and, at such time or times as the Administrative
Agent may reasonably request, promptly to prepare and deliver to the
Administrative Agent a duly certified schedule or schedules in form and detail
reasonably satisfactory to the Administrative Agent showing the identity, amount
and location of any and all Inventory.
 
(b) Each Grantor shall, at its own expense, take any and all actions necessary
to defend title to the Collateral against all Persons and to defend the Security
Interest of the Administrative Agent in the Collateral and the priority thereof
against any Lien that is not expressly permitted pursuant to clause (c) of
Section 6.02 of the Credit Agreement.
 
(c) Each Grantor agrees, at its own expense, to execute, acknowledge, deliver
and cause to be duly filed all such further instruments and documents and take
all such actions as the Administrative Agent may from time to time reasonably
request to better assure, preserve, protect and perfect the Security Interest
and the rights and remedies created hereby, including the payment of any fees
and taxes required in connection with the execution and delivery of this
Agreement, the granting of the Security Interest and the filing of any financing
statements or other documents in connection herewith or therewith.
 
(d) The Administrative Agent and such Persons as the Administrative Agent may
reasonably designate shall have the right, upon reasonable prior notice and
without disruption of the normal and ordinary conduct of business of Holdings or
the Parent Borrower, to inspect the Collateral, all records related thereto (and
to make extracts and copies from such records) and the premises upon which any
of the Collateral is located, to discuss the Grantors’ affairs with the officers
of the Grantors and their independent accountants and to verify under reasonable
procedures, in accordance with Section 5.03 of the Credit Agreement, the
validity, amount, quality, quantity, value, condition and status of, or any
other matter relating to, the Collateral.  The Administrative Agent shall have
the absolute right to share any information it gains from such inspection or
verification with any Secured Party.
 
(e) At its option, the Administrative Agent may discharge past due taxes,
assessments, charges, fees, Liens, security interests or other encumbrances at
any time
7
 
 
 
 
levied or placed on the Collateral and not permitted pursuant to Section 6.02 of
the Credit Agreement or this Agreement, and may pay for the maintenance and
preservation of the Collateral to the extent any Grantor fails to do so as
required by the Credit Agreement or this Agreement, and each Grantor jointly and
severally agrees to reimburse the Administrative Agent on demand for any payment
made or any expense incurred by the Administrative Agent pursuant to the
foregoing authorization; provided that nothing in this paragraph shall be
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on the Administrative Agent or any Secured Party to cure or perform,
any covenants or other promises of any Grantor with respect to taxes,
assessments, charges, fees, Liens, security interests or other encumbrances and
maintenance as set forth herein or in the other Loan Documents.
 
(f) Each Grantor shall remain liable to observe and perform all the conditions
and obligations to be observed and performed by it under each contract,
agreement or instrument relating to the Collateral, all in accordance with the
terms and conditions thereof, and each Grantor jointly and severally agrees to
indemnify and hold harmless the Administrative Agent and the Secured Parties
from and against any and all liability for such performance.
 
(g) None of the Grantors shall (i) make or permit to be made a pledge or
hypothecation of the Collateral or (ii) grant any other Lien in respect of the
Collateral, except as expressly permitted by the Credit Agreement.  None of the
Grantors shall make or permit to be made any transfer of the Collateral, except
that, unless and until the Administrative Agent shall notify the Grantors that
an Event of Default shall have occurred and be continuing and that during the
continuance thereof the Grantors shall not sell, convey, lease, assign, transfer
or otherwise dispose of any Collateral (which notice may be given by telephone
if promptly confirmed in writing), the Grantors may use and dispose of the
Collateral in any lawful manner not inconsistent with the provisions of this
Agreement, the Credit Agreement or any other Loan Document; provided that, on or
prior to the date of any transfer or any other disposition of Inventory
permitted by the Credit Agreement by any Grantor to any Subsidiary, the Parent
Borrower shall deliver to the Administrative Agent an Asset Coverage
Certificate.
 
(h) The Grantors, at their own expense, shall maintain or cause to be maintained
insurance covering physical loss or damage to the Collateral in accordance with
the requirements set forth in Schedule III hereto and Section 5.07 of the Credit
Agreement.  Each Grantor irrevocably makes, constitutes and appoints the
Administrative Agent (and all officers, employees or agents designated by the
Administrative Agent) as such Grantor’s true and lawful agent (and
attorney-in-fact) for the purpose, during the continuance of an Event of
Default, of (i) making, settling and adjusting claims in respect of Collateral
under policies of insurance, endorsing the name of such Grantor on any check,
draft, instrument or other item of payment for the proceeds of such policies of
insurance and (ii) making all determinations and decisions with respect
thereto.  In the event that any Grantor at any time or times shall fail to
obtain or maintain any of the policies of insurance required hereby or to pay
any premium in whole or part relating thereto, the Administrative Agent may,
without waiving or releasing any obligation or liability of the Grantors
hereunder or any Event of Default, in its sole discretion, obtain
8
 
 
 
 
and maintain such policies of insurance and pay such premium and take any other
actions with respect thereto as the Administrative Agent reasonably deems
advisable.  All sums disbursed by the Administrative Agent in connection with
this paragraph, including reasonable attorneys’ fees, court costs, expenses and
other charges relating thereto, shall be payable, upon demand, by the Grantors
to the Administrative Agent and shall be additional Obligations secured hereby.
 
ARTICLE IV
 
Remedies
 
SECTION 4.01. Remedies upon Default.  Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees, upon the demand of the
Administrative Agent, to make the Collateral available to the Administrative
Agent, and it is agreed that the Administrative Agent shall have the right, with
or without legal process and with or without prior notice or demand for
performance, to take possession of the Collateral and without liability for
trespass to enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral and, generally, to
exercise any and all rights afforded to a secured party under the Uniform
Commercial Code or other applicable law.  Without limiting the generality of the
foregoing, each Grantor agrees that the Administrative Agent shall have the
right, subject to the mandatory requirements of applicable law, to sell or
otherwise dispose of all or any part of the Collateral at a public or private
sale, for cash, upon credit or for future delivery as the Administrative Agent
shall deem appropriate.  Upon consummation of any such sale the Administrative
Agent shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold.  Each such purchaser at any sale of
the Collateral shall hold the property sold absolutely, free from any claim or
right on the part of any Grantor, and each Grantor hereby waives (to the extent
permitted by law) all rights of redemption, stay and appraisal which such
Grantor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
 
The Administrative Agent shall give the applicable Grantors 10 days’ written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of
the Administrative Agent’s intention to make any sale of Collateral.  Such
notice, in the case of a public sale, shall state the time and place for such
sale.  Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Administrative Agent may fix
and state in the notice (if any) of such sale.  At any such sale, the
Collateral, or any portion thereof, to be sold may be sold in one lot as an
entirety or in separate parcels, as the Administrative Agent may (in its sole
and absolute discretion) determine.  The Administrative Agent shall not be
obligated to make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have been
given.  The Administrative Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may,
 
9
 
 
 
 
 
without further notice, be made at the time and place to which the same was so
adjourned.  In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Administrative Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Administrative Agent shall not incur any liability in case any
such purchaser or purchasers shall fail to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may be sold again upon
like notice.  At any public (or, to the extent permitted by law, private) sale
made pursuant to this Agreement, any Secured Party may bid for or purchase, free
(to the extent permitted by law) from any right of redemption, stay, valuation
or appraisal on the part of any Grantor (all said rights being also hereby
waived and released to the extent permitted by law), the Collateral or any part
thereof offered for sale and may (with the consent of the Administrative Agent)
make payment on account thereof by using any Obligation then due and payable to
such Secured Party from any Grantor as a credit against the purchase price, and
such Secured Party may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to any Grantor
therefor.  For purposes hereof, a written agreement to purchase the Collateral
or any portion thereof shall be treated as a sale thereof; the Administrative
Agent shall be free to carry out such sale pursuant to such agreement and no
Grantor shall be entitled to the return of the Collateral or any portion thereof
subject thereto, notwithstanding the fact that after the Administrative Agent
shall have entered into such an agreement all Events of Default shall have been
remedied and the Obligations paid in full, in which case any excess proceeds
thereof shall be disposed of as set forth in Section 4.02 hereof.  As an
alternative to exercising the power of sale herein conferred upon it, the
Administrative Agent may proceed by a suit or suits at law or in equity to
foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.  Any
sale pursuant to the provisions of this Section 4.01 shall be deemed to conform
to the commercially reasonable standards as provided in Section 9-610(b) of the
New York UCC or its equivalent in other jurisdictions.
 
SECTION 4.02. Application of Proceeds.  The Administrative Agent shall apply the
proceeds of any collection or sale of Collateral, including any Collateral
consisting of cash, as follows:
 
FIRST, to the payment of all costs and expenses incurred by the Administrative
Agent in connection with such collection or sale or otherwise in connection with
this Agreement, any other Loan Document or any of the Obligations, including all
court costs and the fees and expenses of its agents and legal counsel, the
repayment of all advances made by the Administrative Agent hereunder or under
any other Loan Document on behalf of any Grantor and any other costs or expenses
incurred in connection with the exercise of any right or remedy hereunder or
under any other Loan Document;
 
SECOND, to the payment in full of the Obligations (the amounts so applied to be
distributed among the Secured Parties pro rata in accordance with the amounts of
the Obligations owed to them on the date of any such distribution); and
 
10
 
 
 
 
THIRD, to the Grantors, their successors or assigns, or as a court of competent
jurisdiction may otherwise direct.
 
The Administrative Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement.  Upon any sale of Collateral by the Administrative Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Administrative Agent or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the Collateral so
sold and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Administrative
Agent or such officer or be answerable in any way for the misapplication
thereof.
 
ARTICLE V
 
Indemnity, Subrogation and Subordination
 
SECTION 5.01. Indemnity and Subrogation.  In addition to all such rights of
indemnity and subrogation as the Guarantors may have under applicable law (but
subject to Section 5.03), each of the Borrowers and each of the Account Parties
agrees that (a) in the event a payment shall be made by any Guarantor under this
Agreement in respect of any Obligation of a Borrower or an Account Party, such
Borrower or such Account Party (as the case may be) shall indemnify such
Guarantor for the full amount of such payment and such Guarantor shall be
subrogated to the rights of the Person to whom such payment shall have been made
to the extent of such payment and (b) in the event any assets of any Grantor
shall be sold pursuant to this Agreement to satisfy in whole or in part an
Obligation of a Borrower or an Account Party, such Borrower or Account Party (as
the case may be) shall indemnify such Grantor in an amount equal to the greater
of the book value or the fair market value of the assets so sold.
 
SECTION 5.02. Contribution and Subrogation.  Each Guarantor and Grantor (a
“Contributing Party”) agrees (subject to Section 5.03) that, in the event a
payment shall be made by any other Guarantor hereunder in respect of any
Obligation or assets of any other Grantor (other than Holdings or the Parent
Borrower) shall be sold pursuant to this Agreement to satisfy any Obligation of
a Borrower or an Account Party  and such other Guarantor or Grantor (the
“Claiming Party”) shall not have been fully indemnified by the Borrowers or the
Account Parties as provided in Section 5.01, the Contributing Party shall
indemnify the Claiming Party in an amount equal to the amount of such payment or
the greater of the book value or the fair market value of such assets, as the
case may be, in each case multiplied by a fraction of which the numerator shall
be the net worth of the Contributing Party on the date hereof and the
denominator shall be the aggregate net worth of all the Guarantors and Grantors
on the date hereof (or, in the case of any Guarantor or Grantor becoming a party
hereto pursuant to Section 6.16 or Section 6.17, respectively, the date of the
supplement hereto executed and delivered by such Guarantor or Grantor).  Any
Contributing Party making any payment to a Claiming
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Party pursuant to this Section 5.02 shall (subject to Section 5.03) be
subrogated to the rights of such Claiming Party under Section 5.01 to the extent
of such payment.
 
SECTION 5.03. Subordination.  (a)  Notwithstanding any provision of this
Agreement to the contrary, all rights of the Guarantors and Grantors under
Sections 5.01 and 5.02 and all other rights of the Guarantors and Grantors of
indemnity, contribution or subrogation under applicable law or otherwise shall
be fully subordinated to the indefeasible payment in full in cash of the
Obligations.  No failure on the part of any Borrower, any Account Party or any
Guarantor or Grantor to make the payments required by Sections 5.01 and 5.02 (or
any other payments required under applicable law or otherwise) shall in any
respect limit the obligations and liabilities of any Guarantor or Grantor with
respect to its obligations hereunder, and each Guarantor and Grantor shall
remain liable for the full amount of the obligations of such Guarantor or
Grantor hereunder.
 
(b) Each of the Guarantors and Grantors hereby agrees that all Indebtedness and
other monetary obligations owed by it to, or to it by, any other Guarantor,
Grantor or any other Subsidiary shall be fully subordinated to the payment in
full in cash of the Obligations.
 
ARTICLE VI
 
Miscellaneous
 
SECTION 6.01. Notices.  All communications and notices hereunder shall (except
as otherwise expressly permitted herein) be in writing and given as provided in
Section 9.01 of the Credit Agreement.  All communications and notices hereunder
to any Subsidiary Party shall be given to it in care of the Parent Borrower as
provided in Section 9.01 of the Credit Agreement.
 
SECTION 6.02. Rights Absolute.  All rights of the Administrative Agent
hereunder, the Security Interest and all obligations of each Guarantor and
Grantor hereunder shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Credit Agreement, any other Loan
Document, any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Credit Agreement, any other Loan Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Guarantor or Grantor in respect of
the Obligations or this Agreement.
 
SECTION 6.03. Survival of Agreement.  All covenants, agreements, representations
and warranties made by the Loan Parties in the Loan Documents and in
12
 
 
 
 
 
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any Lender or on its
behalf and notwithstanding that the Administrative Agent, any Issuing Bank or
any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended under the Credit
Agreement, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan or any fee or any other amount payable
under any Loan Document is outstanding and unpaid or any Letter of Credit is
outstanding and so long as the Commitments have not expired or terminated.
 
SECTION 6.04. Binding Effect; Several Agreement.  This Agreement shall become
effective as to any Party when a counterpart hereof executed on behalf of such
Party shall have been delivered to the Administrative Agent and a counterpart
hereof shall have been executed on behalf of the Administrative Agent, and
thereafter shall be binding upon such Party and the Administrative Agent and
their respective permitted successors and assigns, and shall inure to the
benefit of such Party, the Administrative Agent and the other Secured Parties
and their respective successors and assigns, except that no Party shall have the
right to assign or transfer its rights or obligations hereunder or any interest
herein or in the Collateral (and any such assignment or transfer shall be void)
except as expressly contemplated by this Agreement or the Credit
Agreement.  This Agreement shall be construed as a separate agreement with
respect to each Party and may be amended, modified, supplemented, waived or
released with respect to any Party without the approval of any other Party and
without affecting the obligations of any other Party hereunder.
 
SECTION 6.05. Successors and Assigns.  Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
permitted successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Guarantor or Grantor or the Administrative
Agent that are contained in this Agreement shall bind and inure to the benefit
of their respective successors and assigns.
 
SECTION 6.06. Administrative Agent’s Fees and Expenses;
Indemnification.  (a)  The parties hereto agree that the Administrative Agent
shall be entitled to reimbursement of its expenses incurred hereunder as
provided in Section 9.03 of the Credit Agreement.
 
(b) Without limitation of its indemnification obligations under the other Loan
Documents, each Guarantor and Grantor jointly and severally agrees to indemnify
the Administrative Agent and the other Indemnitees (as defined in Section 9.03
of the Credit Agreement) against, and hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses, including the
fees, charges and disbursements of any counsel for any Indemnitee, incurred by
or asserted against any Indemnitee arising out of, in connection with, or as a
result of, the execution, delivery or performance of this Agreement or any
claim, litigation, investigation or proceeding
13
 
 
 
 
relating hereto, or to the Collateral, whether or not any Indemnitee is a party
thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses (x) arise in connection with any judgment rendered by a court
of competent jurisdiction in favor of any Guarantor or Grantor against such
Indemnitee, (y) result from the gross negligence or wilful misconduct of such
Indemnitee or (z) result from any dispute among the Lenders and the
Administrative Agent, or any of them, other than disputes resulting from the
fault of any Loan Party.
 
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby.  The provisions of this Section 6.06 shall remain
operative and in full force and effect regardless of the termination of this
Agreement or any other Loan Document, the consummation of the transactions
contemplated hereby, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the Administrative Agent
or any other Secured Party.  All amounts due under this Section 6.06 shall be
payable not later than 30 days after written demand therefor.
 
SECTION 6.07. Administrative Agent Appointed Attorney-in-Fact.  Each Guarantor
and Grantor hereby appoints the Administrative Agent the attorney-in-fact of
such Guarantor or Grantor during the continuance of an Event of Default for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing any instrument that the Administrative Agent may reasonably deem
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest.  Without limiting the generality of
the foregoing, the Administrative Agent shall have the right, upon the
occurrence and during the continuance of an Event of Default, with full power of
substitution either in the Administrative Agent’s name or in the name of such
Guarantor or Grantor (a) to receive, endorse, assign and/or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of payment
relating to the Collateral or any part thereof; (b) to demand, collect, receive
payment of, give receipt for and give discharges and releases of all or any of
the Collateral; (c) to sign the name of any Grantor on any invoice or bill of
lading relating to any of the Collateral; (d) to commence and prosecute any and
all suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Collateral or
to enforce any rights in respect of any Collateral; (e) to settle, compromise,
compound, adjust or defend any actions, suits or proceedings relating to all or
any of the Collateral; and (f) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the Collateral,
and to do all other acts and things necessary to carry out the purposes of this
Agreement, as fully and completely as though the Administrative Agent were the
absolute owner of the Collateral for all purposes; provided that nothing herein
contained shall be construed as requiring or obligating the Administrative Agent
to make any commitment or to present or file any claim or notice, or to take any
action with respect to the Collateral or any part thereof or the moneys due or
to become due in respect thereof or any property covered thereby, other than to
exercise commercially reasonable care in the custody and preservation of any
Collateral in its possession.  The Administrative Agent and the Parent Borrower
14
 
 
 
 
 
acknowledge that the exercise of the powers granted to the Administrative Agent
herein to deal with or dispose of the Collateral on a basis in keeping with
orderly business proceedings designed to preserve the value of the Collateral to
customers of the Grantor would be commercially reasonable.
 
SECTION 6.08. Applicable Law.  This Agreement shall be construed in accordance
with and governed by the laws of the State of New York.
 
SECTION 6.09. Waivers; Amendment.  (a)  No failure or delay by the
Administrative Agent, any Issuing Bank or any Lender in exercising any right or
power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.  The rights and remedies of the Administrative Agent, the
Issuing Banks and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have.  No waiver of any provision of this Agreement or consent to any
departure by any Party therefrom shall in any event be effective unless the same
shall be permitted by paragraph (b) of this Section, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.  Without limiting the generality of the foregoing, the making of a
Loan or issuance of a Letter of Credit shall not be construed as a waiver of any
Default, regardless of whether the Administrative Agent, any Lender or any
Issuing Bank may have had notice or knowledge of such Default at the time.  No
notice or demand on any Party in any case shall entitle any Party to any other
or further notice or demand in similar or other circumstances.
 
(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Administrative Agent and the Parties with respect to which such waiver,
amendment or modification is to apply, subject to any consent required in
accordance with Section 9.02 of the Credit Agreement.
 
SECTION 6.10. WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
15
 
 
 
 
SECTION 6.11. Severability.  Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.
 
SECTION 6.12. Counterparts.  This Agreement may be executed in counterparts (and
by different parties hereto on different counterparts), each of which shall
constitute a single contract (subject to Section 6.04), and shall become
effective as provided in Section 6.04.  Delivery of an executed signature page
to this Agreement by telecopy or electronic transmission shall be effective as
delivery of a manually executed counterpart of this Agreement.
 
SECTION 6.13. Headings.  Article and Section headings used herein are for the
purpose of reference only, are not part of this Agreement and are not to affect
the construction of, or to be taken into consideration in interpreting, this
Agreement.
 
SECTION 6.14. Jurisdiction; Consent to Service of Process.  (a)  Each of the
Parties hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to any Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court.  Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.  Nothing in this Agreement or any other
Loan Document shall affect any right that the Administrative Agent, any Issuing
Bank or any Lender may otherwise have to bring any action or proceeding relating
to this Agreement or any other Loan Document against any Guarantor or Grantor or
its respective properties in the courts of any jurisdiction.
 
(b) Each of the Parties hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Loan Document in any
court referred to in paragraph (a) of this Section.  Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
 
(c) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 6.01.  Nothing in this Agreement or
any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
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SECTION 6.15. Termination or Release.  (a)  This Agreement, the Guarantees made
herein, the Security Interest and all other security interests granted hereby
shall terminate when all the Loan Document Obligations have been paid in full
and the Lenders have no further commitment to lend under the Credit Agreement,
the LC Exposure has been reduced to zero and no Issuing Bank has any further
obligations to issue Letters of Credit under the Credit Agreement.
 
(b) A Subsidiary Party shall automatically be released from its obligations
hereunder and, in the case of a Subsidiary Party that is a Subsidiary Grantor,
the Security Interest in the Collateral of such Subsidiary Grantor shall be
automatically released upon the consummation of any transaction not prohibited
by the Credit Agreement as a result of which such Subsidiary Party ceases to be
a Subsidiary of Holdings; provided that the Required Lenders shall have
consented to such transaction (to the extent required by the Credit Agreement)
and the terms of such consent did not provide otherwise; provided further that,
after giving effect to such release, there is no Default under the Credit
Agreement.
 
(c) Upon any sale or other transfer by any Grantor of any Collateral that is not
prohibited by the Credit Agreement to any Person that is not a Grantor, or upon
the effectiveness of any written consent to the release of the Security Interest
granted hereby in any Collateral pursuant to Section 9.02 of the Credit
Agreement, the Security Interest in such Collateral shall be automatically
released; provided that after giving effect to such release, there is no Default
under the Credit Agreement.
 
(d) Notwithstanding anything herein to the contrary, the Security Interest shall
be released at any time when (i) Holdings has a Credit Rating of (A) Baa1 with
stable outlook or better from Moody’s or (B) BBB+ with stable outlook or better
from S&P; provided that if the Credit Ratings are not at the same level, the
lower Credit Rating is not more than one notch worse than the higher Credit
Rating, (ii) no Default has occurred and is continuing or would result from such
release and (iii) the Administrative Agent shall have received a certificate
from a Financial Officer of Holdings or the Parent Borrower confirming that the
conditions in this paragraph (d) are satisfied.
 
(e) In connection with any termination or release pursuant to paragraph (a),
(b), (c) or (d) above, the Administrative Agent shall execute and deliver to any
Grantor at such Grantor’s expense, all documents that such Grantor shall
reasonably request to evidence such termination or release.  Any execution and
delivery of documents pursuant to this Section 6.15 shall be without recourse to
or warranty by the Administrative Agent.
 
SECTION 6.16. Additional Guarantors.  (a)  Pursuant to, and to the extent
provided in, Section 5.11 of the Credit Agreement, additional Subsidiaries may
be required to enter into this Agreement as Guarantors.  Upon execution and
delivery by the Administrative Agent and any such Subsidiary of an instrument in
the form of Exhibit A hereto, such Subsidiary shall become a Subsidiary
Guarantor hereunder with the same force and effect as if originally named as a
Subsidiary Guarantor herein.
17
 
 
 
 
(b) In the event of a Permitted Holding Company Reorganization, New Holdco is
required to enter in this Agreement as a Guarantor.  Upon execution and delivery
by the Administrative Agent and New Holdco of an instrument in form and
substance similar to Exhibit A hereto, New Holdco shall become a Guarantor
hereunder with the same force and effect as if originally named a Guarantor
herein.
 
(c) The execution and delivery of any such instrument described in paragraph (a)
or (b) above shall not require the consent of any other party hereto.  The
rights and obligations of each party hereunder shall remain in full force and
effect notwithstanding the addition of any new Guarantee Party as a party to
this Agreement.
 
SECTION 6.17. Additional Grantors.  Pursuant to the terms of the Credit
Agreement, Additional Grantors may enter into this Agreement as Subsidiary
Grantors.  Upon execution and delivery by the Administrative Agent and any such
Additional Grantor of an instrument in the form of Exhibit B hereto, such
Additional Grantor shall become an a Subsidiary Grantor hereunder with the same
force and effect as if originally named as an Subsidiary Grantor herein.  The
execution and delivery of any such instrument shall not require the consent of
any other party hereto.  The rights and obligations of each party hereto shall
remain in full force and effect notwithstanding the addition of any new
Subsidiary Grantor as a party to this Agreement.
 
SECTION 6.18. Right of Setoff.  If an Event of Default shall have occurred and
be continuing and the Loans have become due and payable, each Issuing Bank and
Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other obligations at any time owing by such Issuing Bank or Lender
or Affiliate to or for the credit or the account of any Guarantor against any of
and all the obligations of such Guarantor now or hereafter existing under this
Agreement owed to such Issuing Bank or Lender, irrespective of whether or not
such Issuing Bank or Lender shall have made any demand under this Agreement and
although such obligations may be unmatured.  The rights of each Issuing Bank and
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Issuing Bank or Lender may
have.  Any Lender or Issuing Bank exercising its rights under this Section shall
give notice thereof to the relevant Guarantor on or prior to the day of the
exercise of such rights.
 
[The remainder of this page has been left blank intentionally.]
 
18
 
 
 
 
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
 
 
 
 
J. C. PENNEY COMPANY, INC.,
 
by               
           Name:
           Title:
               

 
 
J. C. PENNEY CORPORATION, INC.,
 
by            
      Name:
      Title:

 
 
J. C. PENNEY PURCHASING CORPORATION,
 
by              
      Name:
      Title:

 
 
EACH OF THE SUBSIDIARIES LISTED ON SCHEDULES I AND II HERETO,
 
by              
      Name:
      Title:

 
 
JPMORGAN CHASE BANK, N.A., as
Administrative Agent,
 
by               
       Name:
       Title:

 
     
      

19
 
 
 
 
 
SCHEDULE I
to the Guarantee and
Collateral Agreement
 
Subsidiary Grantors
 
[To be provided by JCP]
 
 
 
 
 
 
SCHEDULE II
to the Guarantee and
Collateral Agreement
 
Subsidiary Guarantors
 
[To be provided by JCP]
 
 
 
 
 
SCHEDULE III
to the Guarantee and
Collateral Agreement
 
 
Insurance Requirements
 
(a)  Each Grantor will maintain (or cause to be maintained on its behalf), with
financially sound and reputable insurance companies, insurance with respect to
all Inventory constituting Collateral, in such amounts as are customarily
maintained by companies in the same or similar business operating in the same or
similar locations.
 
(b)  Policies maintained with respect to any Collateral shall be endorsed or
otherwise amended to include (i) a lenders’ loss payable clause in favor of the
Administrative Agent and providing for losses thereunder to be payable to the
Administrative Agent or its designee and (ii) such other provisions as the
Administrative Agent may reasonably require from time to time to protect the
interests of the Lenders.  Each such policy referred to in this paragraph also
shall provide that it shall not be canceled, modified or not renewed (i) by
reason of nonpayment of premium except upon not less than 10 days’ prior written
notice thereof by the insurer to the Administrative Agent (giving the
Administrative Agent the right to cure defaults in the payment of premiums) or
(ii) for any other reason except upon not less than 30 days’ prior written
notice thereof by the insurer to the Administrative Agent.  Each Grantor shall
deliver to the Administrative Agent a copy of a certificate of insurance
evidencing the required coverage on or prior to the Effective Date and upon each
renewal or replacement of such policies thereafter.

 
 
 
 
EXHIBIT A
to the Guarantee and
Collateral Agreement
 

GUARANTEE SUPPLEMENT NO. __ dated as of [•], to the Guarantee and Collateral
Agreement dated as of April [•], 2009, among J. C. PENNEY COMPANY, INC., a
Delaware corporation (“Holdings”), J. C. PENNEY CORPORATION, INC., a Delaware
corporation (the “Parent Borrower”), J. C. PURCHASING CORPORATION, a New York
corporation (“Purchasing”), each subsidiary of Holdings listed on Schedule I
thereto (together with Holdings, the Parent Borrower and Purchasing, the
“Parties”)), and JPMORGAN CHASE BANK, N.A., (“JPMCB”), as administrative agent
(in such capacity, the “Administrative Agent”) for the Secured Parties (as
defined therein).
 
A.  Reference is made to the Credit Agreement dated as of April [•], 2009 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Holdings, the Parent Borrower, Purchasing, the lenders from
time to time party thereto (the “Lenders”), the Administrative Agent and
Wachovia Bank, National Association, as LC Agent.
 
B.  Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to such terms in the Credit Agreement and the Collateral
Agreement referred to therein.
 
C.  The Parties have entered into the Collateral Agreement in order to induce
the Lenders to make Loans and the Issuing Banks to issue Letters of
Credit.  Section 6.16 of the Collateral Agreement provides that additional
Subsidiaries of Holdings may become Subsidiary Guarantors under the Collateral
Agreement by execution and delivery of an instrument in the form of this
Supplement.  The undersigned Subsidiary (the “New Subsidiary”) is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Subsidiary Guarantor under the Collateral Agreement in order to induce the
Lenders to make additional Loans and the Issuing Banks to issue additional
Letters of Credit and as consideration for Loans previously made and Letters of
Credit previously issued.
 
Accordingly, the Administrative Agent and the New Subsidiary agree as follows:
 
SECTION 1.  In accordance with Section 6.16 of the Collateral Agreement, the New
Subsidiary by its signature below becomes a Subsidiary Guarantor (and
accordingly, becomes a Guarantor) under the Collateral Agreement with the same
force and effect as if originally named therein as a Guarantor and the New
Subsidiary hereby (a) agrees to all the terms and provisions of the Collateral
Agreement applicable to it as a Guarantor thereunder and (b) represents and
warrants that the representations and warranties made by it as a Guarantor
thereunder are true and correct on and as of the date hereof.  Each reference to
a “Guarantor” in the Collateral Agreement shall be
 
 
 
 
 
deemed to include the New Subsidiary.  The Collateral Agreement is hereby
incorporated herein by reference.
 
SECTION 2.  The New Subsidiary represents and warrants to the Administrative
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
 
SECTION 3.  This Supplement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.  This Supplement shall become effective when (a) the Administrative
Agent shall have received a counterpart of this Supplement that bears the
signature of the New Subsidiary and (b) the Administrative Agent has executed a
counterpart hereof.  Delivery of an executed signature page to this Supplement
by facsimile or electronic transmission shall be as effective as delivery of a
manually signed counterpart of this Supplement.
 
SECTION 4.  Except as expressly supplemented hereby, the Collateral Agreement
shall remain in full force and effect.
 
SECTION 5.  THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
 
SECTION 6.  In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Collateral Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
 
SECTION 7.  All communications and notices hereunder shall be in writing and
given as provided in Section 6.01 of the Collateral Agreement.
 
SECTION 8.  The New Subsidiary agrees to reimburse the Administrative Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Administrative Agent.
 

 
 
 
 
 

IN WITNESS WHEREOF, the New Subsidiary and the Administrative Agent have duly
executed this Supplement to the Collateral Agreement as of the day and year
first above written.
 

 
[Name Of New Subsidiary],
by 
       Name:
       Title:
 
Legal Name:
Jurisdiction of Formation:
Location of Chief Executive Office:
 
 
JPMORGAN CHASE BANK, N.A., as Administrative Agent,
by 
Name:
Title:
 
 

 
 
 
 
 
EXHIBIT B
to the Guarantee and
Collateral Agreement
 

GRANTOR SUPPLEMENT NO. __ dated as of [•], to the Guarantee and Collateral
Agreement dated as of April [•], 2009, among J. C. PENNEY COMPANY, INC., a
Delaware corporation (“Holdings”), J. C. PENNEY CORPORATION, INC., a Delaware
corporation (the “Parent Borrower”), J. C. PURCHASING CORPORATION, a New York
corporation (“Purchasing”), each subsidiary of Holdings listed on Schedule I
thereto (together with Holdings, the Parent Borrower and Purchasing, the
“Parties”)), and JPMORGAN CHASE BANK, N.A., (“JPMCB”), as administrative agent
(in such capacity, the “Administrative Agent”) for the Secured Parties (as
defined therein).
 
A.  Reference is made to the Credit Agreement dated as of April [•], 2009 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Holdings, the Parent Borrower, Purchasing, the lenders from
time to time party thereto (the “Lenders”), the Administrative Agent and
Wachovia Bank, National Association, as LC Agent.
 
B.  Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to such terms in the Credit Agreement and the Collateral
Agreement referred to therein.
 
C.  The Parties have entered into the Collateral Agreement in order to induce
the Lenders to make Loans and the Issuing Banks to issue Letters of
Credit.  Section 6.17 of the Collateral Agreement provides that Additional
Grantors may become Subsidiary Grantors under the Collateral Agreement by
execution and delivery of an instrument in the form of this Supplement.  The
undersigned Additional Grantor (the “New Subsidiary”) is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Subsidiary Grantor under the Collateral Agreement in order to induce the
Lenders to make additional Loans and the Issuing Banks to issue additional
Letters of Credit and as consideration for Loans previously made and Letters of
Credit previously issued.
 
Accordingly, the Administrative Agent and the New Subsidiary agree as follows:
 
SECTION 1.  In accordance with Section 6.17 of the Collateral Agreement, the New
Subsidiary by its signature below becomes a Subsidiary Grantor (and accordingly,
becomes a Grantor) under the Collateral Agreement with the same force and effect
as if originally named therein as a Grantor and the New Subsidiary hereby (a)
agrees to all the terms and provisions of the Collateral Agreement applicable to
it as a Subsidiary Grantor thereunder and (b) represents and warrants that the
representations and warranties made by it as a Subsidiary Grantor thereunder are
true and correct on and as of the date hereof.  In furtherance of the foregoing,
the New Subsidiary, as security for the payment and performance in full of the
Obligations (as defined in the
 
 
 
 
 
 
Collateral Agreement), does hereby create and grant to the Administrative Agent,
its successors and assigns, for the ratable benefit of the Secured Parties,
their successors and assigns, a security interest in and lien on all of the New
Subsidiary’s right, title and interest in and to the Collateral set forth on
Schedule I attached hereto of the New Subsidiary.  Each reference to a “Grantor”
in the Collateral Agreement shall be deemed to include the New Subsidiary.  The
Collateral Agreement is hereby incorporated herein by reference.
 
SECTION 2.  The New Subsidiary represents and warrants to the Administrative
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
 
SECTION 3.  This Supplement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.  This Supplement shall become effective when (a) the Administrative
Agent shall have received a counterpart of this Supplement that bears the
signature of the New Subsidiary and (b) the Administrative Agent has executed a
counterpart hereof.  Delivery of an executed signature page to this Supplement
by facsimile or electronic transmission shall be as effective as delivery of a
manually signed counterpart of this Supplement.
 
SECTION 4.  The New Subsidiary hereby represents and warrants that (a)
Schedule II attached hereto is a completed Perfection Certificate in the form of
Exhibit C to the Collateral Agreement dated the date hereof and signed by an
executive officer or Financial Officer of the New Subsidiary and (b) set forth
under its signature hereto is the true and correct legal name of the New
Subsidiary, its jurisdiction of formation and the location of its chief
executive office.
 
SECTION 5.  Except as expressly supplemented hereby, the Collateral Agreement
shall remain in full force and effect.
 
SECTION 6.  THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
 
SECTION 7.  In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Collateral Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
2
 
 
 
 
SECTION 8.  All communications and notices hereunder shall be in writing and
given as provided in Section 6.01 of the Collateral Agreement.
 
SECTION 9.  The New Subsidiary agrees to reimburse the Administrative Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Administrative Agent.
 
 
 
 
3

 
 
 
 

IN WITNESS WHEREOF, the New Subsidiary and the Administrative Agent have duly
executed this Supplement to the Collateral Agreement as of the day and year
first above written.
 

 
[Name Of New Subsidiary],
by 
       Name:
       Title:
 
Legal Name:
Jurisdiction of Formation:
Location of Chief Executive Office:
 
 
JPMORGAN CHASE BANK, N.A., as Administrative Agent,
by 
Name:
Title:
 
 

 
 
 
4

 
 
 
 
SCHEDULE I
to Grantor Supplement No. ­­__
to the Guarantee and
Collateral Agreement
 

SCHEDULE I

 
 
 
 
SCHEDULE II
to Grantor Supplement No. ­­__
to the Guarantee and
Collateral Agreement
 

SCHEDULE II

 
 
 
 
EXHIBIT C
to the Guarantee and
Collateral Agreement
 

PERFECTION CERTIFICATE
 
Reference is made to the Credit Agreement dated as of April [•], 2009 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among J. C. Penney Company, Inc. (“Holdings”), J. C. Penney
Corporation, Inc. (the “Parent Borrower”), J. C. Penney Purchasing Corporation
(“Purchasing”), the lenders from time to time party thereto (the “Lenders”),
JPMorgan Chase Bank, as administrative agent (the “Administrative Agent”), and
Wachovia Bank, National Association, as LC Agent.  Capitalized terms used but
not defined herein have the meanings assigned in the Credit Agreement or the
Collateral Agreement referred to therein, as applicable.  As used herein the
term “Grantors” shall mean Holdings, the Parent Borrower, Purchasing, the
Subsidiary Grantors and, to the extent there are any Additional Grantors, such
Additional Grantors.

The undersigned, a Financial Officer of the Parent Borrower, hereby certifies to
the Administrative Agent and each other Secured Party as follows:

1.           Names.  (a)  The exact legal name of each Grantor, as such name
appears in its respective certificate of formation, is as follows:
 
Exact Legal Name of Each Grantor
       

 
(b)  Set forth below is each other legal name each Grantor has had in the past
five years, together with the date of the relevant change:
 
Grantor
Other Legal Name in Past 5 Years
Date of Name Change
                       

 
 
 
 
 
(c)  Except as set forth in Schedule 1, no Grantor has changed its identity or
corporate structure in any way within the past five years. Changes in identity
or corporate structure would include mergers, consolidations and acquisitions,
as well as any change in the form, nature or jurisdiction of corporate
organization. If any such change has occurred, include in Schedule 1 the
information required by Sections 1 and 2 of this certificate as to each acquiree
or constituent party to a merger or consolidation.
 
(d)  The following is a list of all other names (including trade names or
similar appellations) used by each Grantor or any of its divisions or other
business units in connection with the conduct of its business or the ownership
of its properties at any time during the past five years:
 
Grantor
Other Name Used
               

 
(e)  Set forth below is the organizational identification number, if any, issued
by the jurisdiction of formation of each Grantor:
 
Grantor
Organizational Identification Number
               

 
(f)  Set forth below is the Federal Taxpayer Identification Number of each
Grantor:
 
Grantor
Federal Taxpayer Identification Number
               

2
 
 
 
 
2.  Current Locations.  (a)  The chief executive office of each Grantor is
located at the address set forth opposite its name below:

Grantor
Mailing Address
County
State
                               

(b) The jurisdiction of formation of each Grantor is set forth opposite its name
below:

Grantor
Jurisdiction
               

(c) Set forth below opposite the name of each Grantor are all the locations
where the Grantor maintains any Inventory not identified above:

Grantor
Mailing Address
County
State
                               

3.  Unusual Transactions.  All Inventory has been acquired by the Grantors in
the ordinary course of business.
 
4.  File Search Reports.  File search reports have been obtained from each
Uniform Commercial Code filing office identified with respect to each Grantor in
Section 2 hereof, and such search reports reflect no liens against any of the
Collateral other than those permitted under the Credit Agreement.
 
5.  UCC Filings.  UCC financing statements in substantially the form of Schedule
5 hereto have been prepared for filing in the proper Uniform Commercial Code
filing office
3
 
 
 
 
 in the jurisdiction in which each Grantor is organized as set forth with
respect to such Grantor in Section 2 hereof.
 
6.  Schedule of Filings.  Attached hereto as Schedule 6 is a schedule setting
forth, with respect to the filings described in Section 5 above, each filing and
the filing office in which such filing is to be made.
 
 
4

 
 
 
 

IN WITNESS WHEREOF, the undersigned has duly executed this certificate on this
_____ day of ______, 2009.
 
J. C. PENNEY CORPORATION, INC.,
 
by
__________________________
Name:
Title:
 
 
 
 
5

 
 
 
 

SCHEDULE 1

Changes in Identity or Corporate Structure Within Past Five Years

 
 
 
 

SCHEDULE 5

UCC Financing Statements

 
 
 
 

SCHEDULE 6

UCC Filings and Filing Offices

 
 
 
 
EXHIBIT D-1

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of April 8, 2009 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among J.C. Penney Company, Inc., J.C. Penney Corporation, Inc.,
J.C. Penney Purchasing Corporation, the Lenders parties thereto, JPMorgan Chase
Bank, N.A., as Administrative Agent and Wachovia Bank, National Association, as
LC Agent.
 
Pursuant to the provisions of Section 2.16(g) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan(s) (as well as any note(s) evidencing such Loan(s)) in respect of
which it is providing this certificate, (ii) it is not a bank within the meaning
of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the
“Code”), (iii) it is not a ten percent shareholder of any Borrower within the
meaning of Code Section 871(h)(3)(B), (iv) it is not a controlled foreign
corporation related to any Borrower as described in Section 881(c)(3)(C) of the
Code and (v) the interest payments in question are not effectively connected
with the undersigned’s conduct of a U.S. trade or business.
 
The undersigned has furnished the Administrative Agent and the Parent Borrower
with a certificate of its non-U.S. person status on Internal Revenue Service
Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if
the information provided on this certificate changes, the undersigned shall
promptly so inform the Parent Borrower and the Administrative Agent and (2) the
undersigned shall have at all times furnished the Parent Borrower and the
Administrative Agent with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.
 
Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
 
[NAME OF LENDER],
by
     
Name:
 
Title:

 

 
 
 
 
 
EXHIBIT D-2

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Credit Agreement dated as of April 8, 2009 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among J.C. Penney Company, Inc., J.C. Penney Corporation, Inc.,
J.C. Penney Purchasing Corporation, the Lenders parties thereto, JPMorgan Chase
Bank, N.A., as Administrative Agent and Wachovia Bank, National Association, as
LC Agent.
 
Pursuant to the provisions of Section 2.16(g) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the Loan(s)
(as well as any note(s) evidencing such Loan(s)) in respect of which it is
providing this certificate, (ii) its partners/members are the sole beneficial
owners of such Loan(s) (as well as any note(s) evidencing such Loan(s)), (iii)
with respect to the extension of credit pursuant to this Credit Agreement or any
other Loan Document, neither the undersigned nor any of its partners/members is
a bank extending credit pursuant to a loan agreement entered into in the
ordinary course of its trade or business within the meaning of Section
881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “Code”),
(iv) none of its partners/members is a ten percent shareholder of any Borrower
within the meaning of Code Section 871(h)(3)(B), (v) none of its
partners/members is a controlled foreign corporation related to any Borrower as
described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments in
question are not effectively connected with the undersigned’s or its
partners/members’ conduct of a U.S. trade or business.
 
The undersigned has furnished the Administrative Agent and the Parent Borrower
with Internal Revenue Service Form W-8IMY accompanied by an Internal Revenue
Service Form W-8BEN from each of its partners/members claiming the portfolio
interest exemption. By executing this certificate, the undersigned agrees that
(1) if the information provided on this certificate changes, the undersigned
shall promptly so inform the Parent Borrower and the Administrative Agent and
(2) the undersigned shall have at all times furnished the Parent Borrower and
the Administrative Agent with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.
 
Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
 
[NAME OF LENDER],
by
     
Name:
 
Title:

 
 
 
 
EXHIBIT D-3
[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of April 8, 2009 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among J.C. Penney Company, Inc., J.C. Penney Corporation, Inc.,
J.C. Penney Purchasing Corporation, the Lenders parties thereto, JPMorgan Chase
Bank, N.A., as Administrative Agent and Wachovia Bank, National Association, as
LC Agent.
 
Pursuant to the provisions of Section 2.16(g) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate, (ii)
it is not a bank within the meaning of Section 881(c)(3)(A) of the Internal
Revenue Code of 1986, as amended, (the “Code”), (iii) it is not a ten percent
shareholder of any Borrower within the meaning of Code Section 871(h)(3)(B),
(iv) it is not a controlled foreign corporation related to any Borrower as
described in Section 881(c)(3)(C) of the Code, and (v) the interest payments in
question are not effectively connected with the undersigned’s conduct of a U.S.
trade or business.
 
The undersigned has furnished its participating Foreign Lender with a
certificate of its non-U.S. person status on Internal Revenue Service Form
W-8BEN. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Foreign Lender in writing and (2) the undersigned shall have at
all times furnished such Foreign Lender with a properly completed and currently
effective certificate in either the calendar year in which each payment is to be
made to the undersigned, or in either of the two calendar years preceding such
payments.
 
Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
 
[NAME OF PARTICIPANT],
by
     
Name:
 
Title:

 
 
 
 
 
EXHIBIT D-4

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of April 8, 2009 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among J.C. Penney Company, Inc., J.C. Penney Corporation, Inc.,
J.C. Penney Purchasing Corporation, the Lenders parties thereto, JPMorgan Chase
Bank, N.A., as Administrative Agent and Wachovia Bank, National Association, as
LC Agent.
 
Pursuant to the provisions of Section 2.16(g) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
partners/members are the sole beneficial owners of such participation, (iii)
with respect such participation, neither the undersigned nor any of its
partners/members is a bank extending credit pursuant to a loan agreement entered
into in the ordinary course of its trade or business within the meaning of
Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the
“Code”), (iv) none of its partners/members is a ten percent shareholder of any
Borrower within the meaning of Code Section 871(h)(3)(B), (v) none of its
partners/members is a controlled foreign corporation related to any Borrower as
described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments in
question are not effectively connected with the undersigned’s or its
partners/members’ conduct of a U.S. trade or business.
 
The undersigned has furnished its participating Foreign Lender with Internal
Revenue Service Form W-8IMY accompanied by an Internal Revenue Service Form
W-8BEN from each of its partners/members claiming the portfolio interest
exemption. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Foreign Lender and (2) the undersigned shall have at all times
furnished such Foreign Lender with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.
 
Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
 
[NAME OF PARTICIPANT],
by
     
Name:
 
Title: