Exhibit 10.2
 
EXECUTION COPY
 
 
 
 
 
 
GUARANTEE AND COLLATERAL AGREEMENT
 
dated as of
 
April 8, 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 8, 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 8, 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.
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“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
11

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.
16

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 /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.

 

 
 
 
EACH OF THE SUBSIDIARIES LISTED ON SCHEDULES I AND II HERETO,
 
by /s/ M. D. Porter    
     Name: M. D. Porter
     Title: Vice President, Treasurer of
                J. C. Penney Corporation, Inc. 

 

19

 
 
JPMORGAN CHASE BANK, N.A., as
Administrative Agent,
 
by  /s/ Barry Bergman    
     Name: Barry Bergman
     Title: Managing Director

 
     
      

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20

 

SCHEDULE I
to the Guarantee and
Collateral Agreement
 
Subsidiary Grantors
 
JCP Real Estate Holdings, Inc.

J. C. Penney Properties, Inc.
 

SCHEDULE II
to the Guarantee and
Collateral Agreement
 
Subsidiary Guarantors
 
JCP Real Estate Holdings, Inc.

J. C. Penney Properties, Inc.
 
 
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.