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CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the 52 weeks ended January 29, 1994 Commission file number 1-4947-1
J. C. Penney Funding Corporation
(Exact name of registrant as specified in its charter)
DELAWARE 51-0101524
(State of incorporation) (I.R.S. Employer ID No.)
6501 LEGACY DRIVE, PLANO, TEXAS 75024-3698
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 431-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
State the aggregate market value of the voting stock held by
non-affiliates of the registrant: None
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 500,000 shares of
Common Stock of $100 par value, as of March 21, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's 1993 Annual Report ("1993 Annual Report") are
incorporated into Parts I, II, and IV. Portions of J. C. Penney Company,
Inc.'s 1993 Annual Report to Stockholders ("JCPenney's 1993 Annual Report") are
incorporated into Part I.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
J(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
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PART I
1. BUSINESS.
J. C. Penney Funding Corporation ("Funding"), which was incorporated
in Delaware in 1964, is a wholly-owned subsidiary of J. C. Penney Company, Inc.
("JCPenney"), also incorporated in Delaware. Funding's executive offices are
located in JCPenney's offices in Plano, Texas. Its business consists of
financing a portion of JCPenney's operations through loans to JCPenney, the
purchase of customer receivable balances that arise from the retail credit
sales of JCPenney, or a combination of both. No receivables have been
purchased by Funding since 1985.
JCPenney is a major department store retailer with stores in all 50
states and Puerto Rico. The dominant portion of JCPenney's business consists
of providing merchandise and services to consumers through department stores
that include catalog departments. JCPenney markets predominantly family
apparel, shoes, jewelry, accessories, and home furnishings. JCPenney's total
revenues for the 52 weeks ended January 29, 1994 were $19.6 billion and net
income was $940 million. Pursuant to the terms of financing agreements between
Funding and JCPenney, payments from JCPenney to Funding are designed to produce
earnings sufficient to cover Funding's fixed charges, principally interest on
borrowings, at a coverage ratio mutually agreed upon between Funding and
JCPenney. (See "Loan Agreement" and "Receivables Agreement", below.) The
earnings to fixed charges coverage ratio has historically been, and in fiscal
1993 was, at least 1.5 to 1.
Operations of Funding. To finance the operations of JCPenney as
described under "Business" above, Funding sells its short-term notes
(commercial paper) to investors through dealer-placed programs. The short-term
notes are guaranteed on a subordinated basis by JCPenney. Funding has, from
time to time, issued long-term debt in public and private markets in the United
States and abroad. Prior to April 3, 1992, Funding issued commercial paper and
master notes to investors on a direct issue basis. Funding also has in place
arrangements for short-term bank borrowings. Short-term debt in fiscal 1993
averaged $1,347 million compared to $1,146 million in fiscal 1992 and $754
million in fiscal 1991. Short-term debt rates averaged 3.2 percent in fiscal
1993, compared to 3.7 percent in fiscal 1992 and 5.6 percent in fiscal 1991.
Interest expense decreased in fiscal 1993 compared to fiscal 1992 and 1991
largely due to lower short-term interest rates.
Credit Operations of JCPenney. Virtually all types of merchandise and
services sold by JCPenney in the United States and Puerto Rico may be purchased
on JCPenney's revolving credit card. In addition, JCPenney accepts American
Express, Discover, MasterCard, and Visa at JCPenney stores, catalog, and drug
stores
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throughout the 50 states and in Puerto Rico. For additional information
respecting the credit card operations of JCPenney, see "Net interest expense
and credit costs" (page 11) and "Financial position" (page 12) which appear in
the section of JCPenney's 1993 Annual Report entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations", "Receivables"
(page 19), which appear in the section of JCPenney's 1993 Annual Report
entitled "Notes to the Financial Statements", and "Credit Operations", "Pre-tax
cost of JCPenney credit card", "Credit sales", and "Key JCPenney credit card
information" (page 30), which appear in the section of JCPenney's Annual Report
entitled "Supplemental Information (Unaudited)", on the pages indicated in the
parenthetical references, which are incorporated by reference herein.
Funding has never incurred any losses from JCPenney's retail credit
operation since, pursuant to the Receivables Agreement, JCPenney itself
administers the customer receivables when sold to Funding, receives all finance
charge revenue on those customer receivables, and bears all related costs.
Loan Agreement. Funding and JCPenney are parties to a Loan Agreement,
dated as of January 28, 1986, as amended ("Loan Agreement"), which provides for
unsecured loans to be made from time to time by Funding to JCPenney for the
general business purposes of JCPenney, subject to the terms and conditions of
the Loan Agreement. The loans may be either senior loans or subordinated
loans, at the election of JCPenney, provided that, without the consent of the
Board of Directors of Funding, the principal amount of loans outstanding at any
time under the Loan Agreement may not exceed specified limits. Currently such
limits may not exceed $4 billion in the aggregate for all loans and $500
million in the aggregate for all subordinated loans. The terms of each loan
under the Loan Agreement shall be as agreed upon at the time of such loan by
Funding and JCPenney, provided that Funding may require upon demand that any
loan be paid, and JCPenney may prepay without premium any loan, in whole or in
part at any time. Under the terms of the Loan Agreement, JCPenney and Funding
agree from time to time upon a mutually-acceptable earnings coverage of
Funding's interest and other fixed charges. If at the end of each fiscal
quarter during which a loan was outstanding, the earnings coverage of Funding's
interest and other fixed charges is less than the agreed upon ratio, JCPenney
will pay to Funding an additional amount sufficient to provide for such
coverage to be not less than the agreed upon ratio. In the event that JCPenney
and Funding have not agreed upon a mutually acceptable ratio for any fiscal
quarter, that applicable quarterly payment with respect to such period will
include an amount equal to the excess, if any, of one and one-half percent of
the daily average of the aggregate principal amount outstanding on all loans
during such period, over the aggregate amount of interest accrued on all such
loans during such period.
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Receivables Agreement. Since December 1, 1985, JCPenney has not sold
an undivided interest in any of its customer receivables to Funding. The
Receivables Agreement between Funding and JCPenney, as amended ("Receivables
Agreement"), continues to be in full force and effect and while no purchases of
JCPenney customer receivables by Funding are presently contemplated, JCPenney
may again commence sales of its customer receivables to Funding.
The Receivables Agreement sets forth the terms and provisions
governing sales of customer receivables (other than specified types of customer
receivables immaterial in amount) by JCPenney to Funding. At the end of each
monthly accounting period, JCPenney may sell to Funding an undivided interest
in its undefaulted customer receivables which are not sold or contracted to be
sold by JCPenney to anyone other than Funding. Settlements are made as of the
end of each such monthly accounting period with respect to collections,
defaults, and other adjustments to customers' accounts occurring during that
month.
The purchase price for the customer receivables acquired by Funding
from JCPenney is equal to the aggregate dollar amount of such customer
receivables. JCPenney pays to Funding at the end of each monthly accounting
period a discount in an amount agreed upon from time to time. In the event of
a failure to agree as to the amount of the discount, the amount to be paid is
one-half of one percent of the average daily closing balance of conveyed
customer receivables held by Funding during such monthly accounting period less
the average daily closing balance of the Contract Reserve Account during such
period.
In addition, at the time of purchase of customer receivables from
JCPenney, Funding withholds from the purchase price, and adds to the Contract
Reserve Account, the lesser of (i) five percent of the amount of customer
receivables then being purchased, or (ii) the amount, if any, by which the
amount in the Contract Reserve Account is less than five percent of the total
amount of customer receivables then owned by Funding. If the amount in the
Contract Reserve Account should exceed five percent of the total amount of
customer receivables owned by Funding at the end of any monthly accounting
period, such excess is to be paid to JCPenney in accordance with the
Receivables Agreement. If any portion of a customer receivable becomes more
than 180 days past due or if the customer is, in the judgment of JCPenney,
unable to make further payment, such customer receivable is considered to be in
default for the purposes of the Receivables Agreement and is charged against
the Contract Reserve Account. Collections with respect to any such defaulted
customer receivable are credited to the Contract Reserve Account. As described
above, all bad debts written off to date have been covered by the Contract
Reserve Account.
Funding acquires all of JCPenney's right, title, and interest in and
to the undivided portion of the customer receivables being
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conveyed to it. All sales of customer receivables to Funding are without
recourse to JCPenney. However, in the event of returned, rejected, or
repossessed merchandise to which any previously conveyed undefaulted customer
receivable relates, or in the event of a breach of a warranty made by JCPenney
in the Receivables Agreement to which any previously conveyed undefaulted
customer receivable relates, JCPenney is obligated to pay to Funding the amount
by which Funding has been damaged. Either party has the right at any time to
terminate the further sale or purchase, as the case may be, of customer
receivables under the Receivables Agreement.
Certain state laws provide for recording or other notice formalities
in connection with the assignment of accounts receivable. Funding does not
deem it appropriate to utilize such procedures in connection with customer
receivables purchased from JCPenney. In the event of the bankruptcy or
receivership of JCPenney, it is possible that creditors of JCPenney might be
deemed to have superior rights to some or all of the customer receivables
previously purchased by Funding.
Committed Bank Credit Facilities. Committed bank credit facilities
available to Funding as of January 29, 1994, amounted to $1.25 billion. In
1993, Funding entered into two syndicated revolving credit facility agreements.
These facilities include a $450 million, one-year revolver and an $800 million,
five-year revolver with a group of 39 domestic and international banks. These
facilities, which replaced the $500 million confirmed lines of credit and the
$750 million International Revolving Credit Facility, support commercial paper
borrowing arrangements. Neither of the borrowing facilities was in use as of
January 29, 1994. (See page 8 of Funding's 1993 Annual Report which is
incorporated herein by reference.)
Employment. Funding has had no employees since April 30, 1992.
General. Legislation regulating consumer credit has been enacted in
all states and federally. Funding's operations have not been affected by such
legislation since Funding does not deal directly with consumers.
2. PROPERTIES.
Funding owns no physical properties.
3. LEGAL PROCEEDINGS.
Funding has no material legal proceedings pending against it.
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PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
JCPenney owns all of Funding's outstanding common stock. Funding's
common stock is not traded, and no dividends have been, or are currently
intended to be, declared by Funding on its common stock.
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Balance Sheets of Funding as of January 29, 1994, January 30,
1993, and January 25, 1992, and the related statements of income, reinvested
earnings, and cash flows for the years then ended, appearing on pages 3 through
5 of Funding's 1993 Annual Report, together with the related notes and the
Independent Auditors' Report of KPMG Peat Marwick, independent certified public
accountants, appearing on page 6 of Funding's 1993 Annual Report, the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing on page 2 thereof, the section of Funding's 1993 Annual
Report entitled "Five Year Financial Summary" appearing on page 7 thereof, and
the unaudited quarterly financial highlights ("Quarterly Data") appearing on
page 8 thereof, are incorporated herein by reference in response to Item 8 of
Form 10-K.
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Funding has had no change in or disagreements with its independent
certified public accountants on accounting and financial disclosure.
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
(a)(1) All Financial Statements.
See Item 8 of this Form 10-K for financial statements
incorporated by reference to Funding's 1993 Annual Report.
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(a)(2) Financial Statement Schedules.
All schedules have been omitted as they are inapplicable or
not required under the rules, or the information has been
submitted in the financial statements or in the notes to the
financial statements and related material incorporated by
reference to Funding's 1993 Annual Report.
(a)(3) Exhibits.
See separate Exhibit Index on pages G-1 through G-4.
(b) Reports on Form 8-K filed during the fourth quarter of fiscal
1993.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
J. C. PENNEY FUNDING CORPORATION
(Registrant)
By /s/ D. A. MCKAY
D. A. McKay
Chairman of the Board
Dated: April 6, 1994
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Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ D. A. MCKAY
- ------------------
D. A. McKay Chairman of the Board April 6, 1994
(principal executive
officer); Director
S. F. Walsh* President April 6, 1994
(principal financial
officer); Director
L. A. Gispanski* Controller (principal April 6, 1994
accounting officer);
Director
R. B. Cavanaugh* Director April 6, 1994
R. E. Northam* Director April 6, 1994
</TABLE>
*By /s/ D. A. MCKAY
----------------
D. A. McKay
Attorney-in-fact
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EXHIBIT INDEX
Exhibit
3. Articles of Incorporation and By-laws
(a) Copy of Certificate of Incorporation of Funding, effective April 13,
1964.
(b) Copy of Certificate of Amendment of Certificate of Incorporation,
effective January 1, 1969.
(c) Copy of Certificate of Amendment of Certificate of Incorporation,
effective August 11, 1987.
(d) Copy of Certificate of Amendment of Certificate of Incorporation,
effective April 10, 1988.
(e) Copy of By-laws of Funding, as amended to September 1, 1976.
4. Instruments defining the rights of security holders, including
indentures
(a) Issuing and Paying Agency Agreement dated as of March 16, 1992,
between J. C. Penney Funding Corporation and Morgan Guaranty Trust
Company of New York (incorporated by reference to Exhibit 4(a) to
Funding's Current Report on Form 8-K, Date of Report - April 3,
1992*).
(b) Guaranty dated as of February 13, 1992, executed by J. C. Penney
Company, Inc. (incorporated by reference to Exhibit 4(b) to Funding's
Current Report on Form 8-K, Date of Report - April 3, 1992*).
G-1
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EXHIBIT INDEX
Exhibit
(c) Conformed copies of Revolving Credit Agreements, dated as of December
16, 1993, among J. C. Penney Company, Inc., J. C. Penney Funding
Corporation, Morgan Guaranty Trust Company of New York, as Agent, and
Bankers Trust Company, Chemical Bank, and Credit Suisse, as
Co-Agents, and Bank of America National Trust and Savings Association
and NationsBank of Texas, N.A., as Lead Managers.
(d) Commercial Paper Dealer Agreement dated March 16, 1992 between J. C.
Penney Funding Corporation and J. P. Morgan Securities Inc.
(incorporated by reference to Exhibit 10(a) to Funding's Current
Report on Form 8-K, Date of Report - April 3, 1992*).
(e) Commercial Paper Dealer Agreement dated March 16, 1992 between J. C.
Penney Funding Corporation and The First Boston Corporation
(incorporated by reference to Exhibit 10(b) to Funding's Current
Report on Form 8-K, Date of Report - April 3, 1992*).
Instruments evidencing long-term debt, previously issued but now
fully prepaid, have not been filed as exhibits hereto because none of
the debt authorized under any such instrument exceeded 10 percent of
the total assets of the Registrant. The Registrant agrees to furnish
a copy of any of its long-term debt instruments to the Securities and
Exchange Commission upon request.
G-2
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EXHIBIT INDEX
Exhibit
10. Material Contracts
THE CORPORATION HAS NO COMPENSATORY PLANS OR ARRANGEMENTS REQUIRED TO
BE FILED AS EXHIBITS TO THIS REPORT PURSUANT TO ITEM 14(c) OF THIS
REPORT.
(a) Conformed copy of Amended and Restated Receivables Agreement dated as
of January 29, 1980 between J. C. Penney Company, Inc. and J. C.
Penney Financial Corporation.
(b) Conformed copy of Amendment No. 1 to Amended and Restated Receivables
Agreement dated as of January 25, 1983 between J. C. Penney Company,
Inc. and J. C. Penney Financial Corporation.
(c) Conformed copy of Loan Agreement dated as of January 28, 1986 between
J. C. Penney Company, Inc. and J. C. Penney Financial Corporation
(incorporated by reference to Exhibit 1 to Funding's Current Report
on Form 8-K, Date of Report - January 28, 1986*).
(d) Conformed copy of Amendment No. 1 to Loan Agreement dated as of
January 28, 1986 between J. C. Penney Company, Inc. and J. C. Penney
Financial Corporation (incorporated by reference to Exhibit 1 to
Funding's Current Report on Form 8-K, Date of Report - December 31,
1986*).
* SEC file number 1-4947-1
G-3
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EXHIBIT INDEX
Exhibit
13. Annual Report to Security Holders
Excerpt from Funding's 1993 Annual Report.
23. Consent of Independent Certified Public Accountants
24. Powers of Attorney
99. Additional Exhibits
Excerpt from JCPenney's 1993 Annual Report to Stockholders.
G-4
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Exhibit 3(a)
CONFORMED COPY
================================================================================
J. C. PENNEY CREDIT CORPORATION
___________________
Organized under the Laws of the State of Delaware
____________________
CERTIFICATE OF INCORPORATION
____________________
================================================================================
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CERTIFICATE OF INCORPORATION
OF
J. C. PENNEY CREDIT CORPORATION
_______________
We, the undersigned, for the purpose of associating to establish a
corporation for the transaction of the business and the promotion and conduct
of the objects and purposes hereinafter stated, under the provisions and
subject to the requirements of the laws of the State of Delaware (particularly
Chapter 1 of Title 8 of the Delaware Code of 1953, and the acts amendatory
thereof and supplemental thereto, and known as the "General Corporation Law of
the State of Delaware"), do make and file this certificate of incorporation in
writing and do hereby certify as follows, to wit:
FIRST: The name of the corporation (hereinafter called the
Corporation) is
J. C. PENNEY CREDIT CORPORATION
SECOND: The respective names of the County and of the City
within the County in which the principal office of the Corporation is to be
located in the State of Delaware are the County of New Castle and the City of
Wilmington. The name of the
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2
resident agent of the Corporation is The Corporation Trust Company. The street
and number of said principal office and the address by street and number of
said resident agent are No. 100 West Tenth Street, in the City of Wilmington,
State of Delaware.
THIRD: The nature of the business of the Corporation and the
objects or purposes to be transacted, promoted or carried on by it are as
follows:
(1) To purchase or in any other manner acquire, invest in,
finance, handle, own, hold, discount, make loans and borrow money
upon, realize upon, sell, pledge, mortgage, exchange, and generally
trade and deal in and with, in any manner whatsoever, whether as
principal, agent, factor, or broker, either upon commission or
otherwise, accounts receivable, revolving credit agreements, open
accounts, claims, book debts, commercial accounts, notes, drafts,
acceptances, bills of exchange, warehouse receipts, trust receipts,
bills of lading, installment contracts of all kinds, leases, real
estate mortgages, chattel mortgages, conditional sales contracts, lien
notes, commercial paper and evidences of indebtedness, contracts,
agreements, and negotiable or non-negotiable paper or instruments of
every kind and character (now known or hereafter originated)
evidencing or connected with the purchase, sale, exchange, or
otherwise dealing with personal property, choses in action, chattels,
things of value, and other property of all kinds, real, personal, or
mixed, and to realize upon and to exercise any and all the rights,
powers, and privileges of ownership or of any interest in respect of
any of the foregoing or the properties securing the foregoing.
(2) To lend money, with or without security therefor and on
such other terms as the Board of Directors of the Corporation may
determine, to any person, firm, association, corporation, or
government or subdivision, agency, or instrumentality there of and, in
connection therewith, if the Corporation shall so elect, retain or
accept payment of the interest on such loans at the time the loans are
made and in advance of the accrual of such interest; and to promote,
organize, reorganize, finance, procure capital or credit for, or
assist financially or otherwise any person, firm, association, or
corporation in any manner or by any method whatsoever.
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3
(3) To make, manufacture, produce, process, purchase or
otherwise acquire, and to sell, use, import, export, or otherwise
trade or deal in and with, machines, machinery, appliances, apparatus,
goods, wares, products, and merchandise of every kind, nature, and
description; and to engage or participate in any manufacturing,
mercantile, or trading business of any kind or character whatsoever.
(4) To purchase, lease, or otherwise acquire, to own, hold,
use, develop, maintain, and operate, and to sell, transfer, lease,
assign, convey, exchange, or otherwise turn to account or dispose of,
and generally to deal in and with, personal and real property,
tangible or intangible, of every kind and description, wheresoever
situated, and any and all rights, concessions, interests, and
privileges therein.
(5) To adopt, apply for, obtain, register, purchase, lease,
or otherwise acquire, to maintain, protect, hold, use, own, exercise,
develop, manufacture or sell under, operate, or introduce, and to sell
or grant licenses or other rights in respect of, assign, or otherwise
dispose of, turn to account, or in any manner deal with and contract
with reference to, any trademarks, trade names, patents, patent
rights, concessions, franchises, designs, copyrights and distinctive
marks and rights analogous thereto, and inventions, devices,
improvements, processes, recipes, formulae, and the like, including
such thereof as may be covered by, used in connection with, or secured
or received under, Letters Patent of the United States of America or
elsewhere or otherwise, and any licenses and rights in respect
thereof, in connection therewith, or appertaining thereto.
(6) To purchase or otherwise acquire, and to hold, pledge,
sell, exchange, or otherwise dispose of, securities (which term, for
the purpose of this Article THIRD, includes, without limitation of the
generality thereof, any shares of stock, bonds, debentures, notes,
mortgages, or other obligations, and any certificates, receipts, or
other instruments representing rights to receive, purchase, or
subscribe for the same, or representing any other rights or interests
therein or in any property or assets) created or issued by any person,
firm, association, corporation, or government or subdivision, agency,
or instrumentality thereof; to make payment therefor in any lawful
manner; and to exercise, as owner or holder of any securities, any and
all rights, powers, and privileges in respect thereof.
(7) To make, enter into, perform, and carry out contracts of
every kind and description with any person, firm, association,
corporation, or government or subdivision,
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4
agency, or instrumentality thereof; and to endorse or guarantee the
payment of principal of, interest or dividends upon, and to guarantee
the performance of sinking fund or other obligations of, any
securities, and to guarantee in any way permitted by law the
performance of any of the contracts or other undertakings in which the
Corporation may otherwise be or become interested, of any one or more
persons, firms, associations, corporations, or governments or
subdivisions, agencies, or instrumentalities thereof.
(8) To acquire, by purchase, exchange, or otherwise, all, or
any part of, or any interest in, the properties, assets, business, and
good will of any one or more persons, firms, associations, or
corporations heretofore or hereafter engaged in any business for which
a corporation may now or hereafter be organized under the laws of the
State of Delaware; to pay for the same in cash, property, or its own
or other securities; to hold, operate, lease, reorganize, liquidate,
sell, or in any manner dispose of the whole or any part thereof; and
in connection therewith, to assume or guarantee performance of any
liabilities, obligations, or contracts of such persons, firms,
associations, or corporations, and to conduct the whole or any part of
any business thus acquired.
(9) To borrow money for any of the purposes of the
Corporation, from time to time, and without limit as to amount; from
time to time to issue and sell its own securities in such amounts, on
such terms and conditions, for such purposes, and for such prices, now
or hereafter permitted by the laws of the State of Delaware and by
this certificate of incorporation, as the Board of Directors of the
Corporation may determine; and to secure such securities by mortgage
upon, or the pledge of, or the conveyance or assignment in trust of,
the whole or any part of the properties, assets, business, and good
will of the Corporation, then owned or thereafter acquired.
(10) To purchase, hold, cancel, reissue, sell, exchange,
transfer, or otherwise deal in its own securities from time to time to
such an extent and in such a manner and upon such terms as the Board
of Directors of the Corporation may determine; provided that the
Corporation shall not use its funds or property for the purchase of
its own shares of capital stock when such use would cause any
impairment of its capital, except to the extent permitted by law; and
provided further that shares of its own capital stock belonging to
the Corporation shall not be voted upon directly or indirectly.
(11) To promote, organize, manage, aid, or assist,
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5
financially or otherwise, persons, firms, associations or corporations
engaged in any business whatsoever, to such extent as a corporation
organized under the General Corporation Law of the State of Delaware
may now or hereafter lawfully do; and to a like extent, to assume,
guarantee, or underwrite their securities as to principal, interest,
dividends, or sinking fund obligations in respect thereof or all or
any thereof, or the performance of all or any of their other
obligations.
(12) To conduct its business in any and all of its branches
and maintain offices both within and without the State of Delaware, in
any and all States of the Unites States of America, in the District of
Columbia, in any and all territories, dependencies, colonies, or
possessions of the United States of America, and in foreign countries.
(13) To such extent as a corporation organized under the
General Corporation Law of the State of Delaware may now or hereafter
lawfully do, to do, either as principal or agent and either alone or
through subsidiaries or in connection with other persons, firms,
associations, or corporations, all and everything necessary, suitable,
convenient, or proper for, or in connection with, or incident to, the
accomplishment of any of the purposes or the attainment of any one or
more of the objects herein enumerated, or designed directly or
indirectly to promote the interests of the Corporation or to enhance
the value of its properties; and in general to do any and all things
and exercise any and all powers, rights, and privileges which a
corporation may now or hereafter be organized to do or to exercise
under the General Corporation Law of the State of Delaware or under
any act amendatory thereof, supplemental thereto, or substituted
therefor.
The foregoing provisions of this Article THIRD shall be
construed both as purposes and powers and each as an independent purpose and
power. The foregoing enumeration of specific purposes and powers shall not be
held to limit or restrict in any manner the purposes and powers of the
Corporation, and the purposes and powers herein specified shall, except when
otherwise provided in this Article THIRD, be in no wise limited or restricted
by reference to, or inference from, the terms of any provision of this or any
other
<PAGE> 7
6
Article of this certificate of incorporation; provided that nothing herein
contained shall be construed as authorizing the Corporation to issue bills,
notes, or other evidences of debt for circulation as money, or to carry on the
business of receiving deposits of money or the business of buying gold or
silver bullion or foreign coins, or as authorizing the Corporation to engage in
the business of banking or insurance or to carry on the business of
constructing, maintaining, or operating public utilities in the State of
Delaware; and provided, further, that the Corporation shall not carry on any
business or exercise any power in any state, territory, or country which under
the laws thereof the Corporation may not lawfully carry on or exercise.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 750,000, and the par value of each
of such shares shall be $100. All such shares shall be of one class and shall
be designated Common Stock.
The minimum amount of capital with which the Corporation will
commence business is $1,000.
FIFTH: The names and places of residence of each of the
incorporators are as follows:
Name Place of Residence
---- ------------------
Albert W. Driver, Jr. Westfield, N. J.
Charles T. Stewart Irvington, N. Y.
Calvin C. Wallace New York, N. Y.
SIXTH: The Corporation is to have perpetual existence.
<PAGE> 8
7
SEVENTH: The private property of the stockholders of the
Corporation shall not be subject to the payment of corporate debts to any
extent whatever.
EIGHTH: For the management of the business and for the
conduct of the affairs of the Corporation, and in further definition,
limitation, and regulation of the powers of the Corporation and of its
directors and stockholders, it is further provided:
1. The number of directors of the Corporation shall be such
as from time to time shall be fixed in the manner provided in its
by-laws, but in no case shall the number be less than three, except
that when all the shares of the Corporation are owned beneficially and
of record by either one or two stockholders, the number of directors
may be less than three but not less than the number of stockholders.
In case of any increase in the number of directors of the Corporation,
any additional directorship created may be filled in the first
instance in the same manner as a vacancy in the Board of Directors.
The directors need not be stockholders. The election of directors of
the Corporation need not be by ballot unless the by-laws so require.
The directors may hold their meetings and have an office or offices
outside the State of Delaware if the by-laws so provide.
2. A majority of the directors in office shall constitute a
quorum for the transaction of business, unless
<PAGE> 9
8
the by-laws shall provide that a different number shall constitute a
quorum, which in no case shall be less than one-third of the total
number of directors in office nor less than two directors, except that
when a board of one director is authorized under the provisions of the
General Corporation Law of the State of Delaware, and such board has
been appointed, then one director shall constitute a quorum.
3. In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of Directors
is expressly authorized and empowered:
(a) To make, alter, amend, or repeal the by-laws in
any manner not inconsistent with the laws of the State of
Delaware or this certificate of incorporation, subject to the
power of the stockholders to alter, amend, or repeal the
by-laws made by the Board of Directors or to limit or restrict
the power of the Board of Directors so to make, alter, amend,
or repeal the by-laws.
(b) Subject to the applicable provisions of the
by-laws, to determine, from time to time, whether and to what
extent and at what times and places and under what conditions
and regulations the accounts and books and documents of the
Corporation, or any of them, shall be open to the inspection
of the stockholders, and no stock holder shall have any right
to inspect any account or book or document of the Corporation,
except as conferred
<PAGE> 10
9
by the laws of the State of Delaware, unless and until
authorized so to do by resolution of the Board of Directors or
of the stockholders of the Corporation.
(c) Without the assent or vote of the stockholders,
to authorize and issue obligations of the Corporation, secured
or unsecured, and to include therein such provisions as to
redemption, conversion, or other terms thereof, as the Board
of Directors in its sole discretion may determine, and to
authorize the mortgaging or pledging, as security therefor, of
any property of the Corporation, real or personal, including
after-acquired property.
(d) To determine whether any, and if any, what part,
of the net profits of the Corporation or of its net assets in
excess of its capital shall be declared in dividends and paid
to the stockholders, and to direct and determine the use and
disposition of any such net profits or such net assets in
excess of capital.
(e) To fix from time to time the amount of net
profits of the Corporation or of its net assets in excess of
its capital to be reserved as working capital or for any other
lawful purpose.
In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon it, the Board of Directors may
exercise all such powers and do all such acts and things
<PAGE> 11
10
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the laws of the State of Delaware, of this
certificate of incorporation, and of the by-laws of the Corporation.
4. Any director or any officer elected or appointed by the
stockholders or by the Board of Directors may be removed at any time
in such a manner as shall be provided in the by-laws of the
Corporation.
5. No contract or other transaction between the Corporation
and any other corporation and no act of the Corporation in connection
therewith shall, in the absence of fraud, in any way be affected or
invalidated by the fact that any of the directors of the Corporation
are pecuniarily or otherwise interested in, or are directors,
officers, or stockholders of, such other corporation. Any director of
the Corporation individually, or any firm or association of which any
director may be a member, may be a party to, or may be pecuniarily or
otherwise interested in, any contract or transaction of the
Corporation, provided that the fact that he individually or such firm
or association is so interested shall be disclosed or shall have been
known to the Board of Directors or such members thereof (not less than
a majority of the directors then in office) as shall be present at any
meeting of the Board of Directors at which action upon any such
contract or transaction shall be taken. Any director of
<PAGE> 12
11
the Corporation who is also a director, officer, or stockholder of, or
is so interested in, such other corporation or who is so interested or
who is a member of a firm or association which is so interested in any
such contract or transaction may be counted in determining the
existence of a quorum at any meeting of the Board of Directors or any
committee thereof which shall authorize any such contract or
transaction, and may vote thereat to authorize any such contract or
transaction, with like force and effect as if he were not such
director, officer, or stockholder of, or not so interested in, such
other corporation or not so interested or not a member of such firm or
association so interested in such contract or transaction. Any
director of the Corporation may vote upon any contract or other
transaction between the Corporation and any parent, subsidiary, or
affiliated corporation without regard to the fact that he is also a
director of such parent, subsidiary, or affiliated corporation. In
the absence of fraud, no director shall be liable to account to the
Corporation for any profit realized by him from or through any such
contract or transaction of the Corporation authorized as aforesaid by
reason of the fact that he or any firm or association of which he is a
member shall have been interested in any such contract or transaction.
Any contract, transaction, or act of the Corporation or of the
directors, which shall be ratified by a majority of a
<PAGE> 13
12
quorum of the stockholders of the Corporation at any annual meeting,
or at any special meeting called for such purpose, shall, in so far as
permitted by law, be as valid and as binding as though ratified by
every stockholder of the Corporation; provided, however, that any
failure of the stockholders to approve or ratify any such contract,
transaction, or act, when and if submitted, shall not be deemed in any
way to invalidate the same or deprive the Corporation, its directors,
officers, or employees, of its or their right to proceed with such
contract, transaction, or act.
6. From time to time any of the provisions of this
certificate of incorporation may be altered, amended, or repealed, and
other provisions authorized by the laws of the State of Delaware at
the time in force may be added or inserted, in the manner and at the
time prescribed by said laws, and all rights at any time conferred
upon the stockholders of the Corporation by this certificate of
incorporation are granted subject to the provisions of this Paragraph
6.
<PAGE> 14
13
IN WITNESS WHEREOF, we, the undersigned, being all the
incorporators hereinabove named, do hereby further certify that the
facts hereinabove stated are truly set forth and accordingly have
hereunto set our respective hands and seals as of the 10th day of
April, 1964.
/s/ ALBERT W. DRIVER, JR.(L.S.
/s/ CHARLES T. STEWART (L.S.
/s/ CALVIN C. WALLACE (L.S.
<PAGE> 15
STATE OF NEW YORK, )
) ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that on the 10th day of April, 1964,
personally appeared before me, Joseph T. Zarcone, a Notary Public in and for
the County and State aforesaid, ALBERT W. DRIVER, JR., CHARLES T. STEWART, and
CALVIN C. WALLACE, all the incorporators who signed the foregoing certificate
of incorporation, known to me personally to be such, and I having made known to
them and each of them the contents of said certificate of incorporation, they
did severally acknowledge the same to be the act and deed of the signers,
respectively, and that the facts therein stated are truly set forth.
GIVEN under my hand and seal of office the day and year
aforesaid.
/s/ JOSEPH T. ZARCONE
JOSEPH T. ZARCONE JOSEPH T. ZARCONE
NOTARY PUBLIC Notary Public, State of New York
STATE OF NEW YORK No. 30-4380468
Qualified in Nassau County
Cert. Filed in New York County
Commission Expires March 30, 1965
<PAGE> 1
Exhibit 3(b)
CONFORMED COPY
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
*****
J. C. PENNEY CREDIT CORPORATION (hereinafter called the Corporation),
a corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by the
unanimous written consent of the Board of Directors without a meeting, dated
November 25, 1968, adopted a resolution proposing and declaring advisable the
following amendment, effective January 1, 1969, to the Certificate of
Incorporation of the Corporation:
"FIRST: The name of the corporation (hereinafter called the
Corporation) is
J. C. PENNEY FINANCIAL CORPORATION."
SECOND: That in lieu of a meeting and vote of stockholders, the
holder of record of all the issued and outstanding shares of Common Stock of
the Corporation has, by its written consent, dated November 25, 1968, consented
to said amendment, in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the provisions of Sections 228 and 242 of the General Corporation Law of
the State of Delaware.
<PAGE> 2
FOURTH: That this Certificate of Amendment of the Certificate of
Incorporation shall be effective on January 1, 1969.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be hereunto affixed and this instrument to be signed by Arthur Jacobsen, its
President, and attested by C. T. Stewart, its Secretary, this 5th day of
December, 1968.
J. C. PENNEY CREDIT CORPORATION
J. C. PENNEY CREDIT CORPORATION
CORPORATE SEAL
1964
DELAWARE By /s/ ARTHUR JACOBSEN
President
ATTEST:
by /s/ C. T. STEWART
<PAGE> 3
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
BE IT REMEMBERED that on this 5th day of December, 1968, personally
came before me, a Notary Public in and for the County and State aforesaid,
Arthur Jacobsen, President of J. C. PENNEY CREDIT CORPORATION, a corporation of
the State of Delaware, and he duly executed said certificate before me and
acknowledged the said certificate to be the act and deed of said corporation
and that the facts stated therein are true; and that the seal affixed to said
certificate and attested by the Secretary of said corporation is the common or
corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the
day and year aforesaid.
/s/ J. DAVID SILVERS
Notary Public
(SEAL)
J. DAVID SILVERS J. DAVID SILVERS
NOTARY PUBLIC Notary Public, State of New York
STATE OF NEW YORK No. 30-9005250
Qualified in Nassau County
Certificate Filed in New York
Commission Expires March 30, 1970
<PAGE> 1
Exhibit 3(c)
CONFORMED COPY
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
J. C. PENNEY FINANCIAL CORPORATION, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (herein referred to as the Corporation), does hereby certify:
First: That the Board of Directors of the Corporation, by unanimous
written consent in lieu of meeting dated May 28, 1987, duly adopted a
resolution setting forth a proposed amendment to the Certificate of
Incorporation of the Corporation, declaring said amendment to be advisable, and
directing that said amendment be submitted for consideration by the
stockholders at the Annual Meeting of Stockholders of the Corporation to be
held on May 29, 1987. The resolution setting forth the proposed amendment is
as follows:
"RESOLVED that the Board of Directors hereby declares it
advisable that a new Article NINTH of the Certificate of Incorporation
of the Corporation be adopted to read as follows:
'NINTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section
174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is
hereafter amended to permit further limitation on or
elimination of the personal liability of the Corporation's
directors for breach of fiduciary duty, then a director of the
Corporation shall be exempt from such liability for any such
breach to the full extent permitted by the Delaware General
Corporation Law as so amended from time to time. Any repeal
or modification of the foregoing provisions of this Article
NINTH, or the adoption of any provision inconsistent herewith,
shall not adversely affect any right or protection of a
director of the Corporation hereunder in respect of any
<PAGE> 2
act or omission of such director occurring prior to such
repeal, modification, or adoption of an inconsistent
provision.'"
Second: That thereafter, the stockholders of said corporation, by
unanimous written consent in lieu of annual meeting dated May 29, 1987, in
accordance with the General Corporation Law of the State of Delaware, adopted
the amendment.
Third: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
Fourth: That the capital of the Corporation will not be reduced under
or by reason of said amendment.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be hereunto affixed and this Certificate to be signed in its name by its
Chairman of the Board and attested by its Secretary, as of the 29th day of May,
1987.
J. C. PENNEY FINANCIAL CORPORATION
/s/ D. A. MCKAY
Chairman of the Board
Attest:
/s/ A. W. DRIVER
Secretary
<PAGE> 1
Exhibit 3(d)
CONFORMED COPY
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
*****
J. C. PENNEY FINANCIAL CORPORATION (hereinafter called the
Corporation), a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by the
unanimous written consent of the Board of Directors without a meeting, dated
March 21, 1988, adopted a resolution proposing and declaring advisable the
following amendment, effective April 10, 1988, to the Certificate of
Incorporation of the Corporation:
"FIRST: The name of the corporation (hereinafter called the
Corporation) is
J. C. PENNEY FUNDING CORPORATION."
SECOND: That in lieu of a meeting and vote of stockholders, the
holder of record of all the issued and outstanding shares of Common Stock of
the Corporation has, by its written consent, dated March 21, 1988, consented to
said amendment, in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the provisions of Sections 228 and 242 of the General Corporation Law of
the State of Delaware.
FOURTH: That this Certificate of Amendment of the
<PAGE> 2
Certificate of Incorporation shall be effective on April 10, 1988.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be hereunto affixed and this instrument to be signed by its President, and
attested by its Assistant Secretary, this 5 day of April, 1988.
J. C. PENNEY FINANCIAL CORPORATION
By /s/ T. A. CLERKIN
President
ATTEST:
By /s/ ROBERT S. GORIN
Assistant Secretary
<PAGE> 3
STATE OF Texas )
) ss:
COUNTY OF Dallas )
BE IT REMEMBERED that on this 5 day of April, 1988, personally came
before me, a Notary Public in and for the County and State aforesaid, T. A.
Clerkin, President of J. C. PENNEY FUNDING CORPORATION, a corporation of the
State of Delaware, and he duly executed said certificate before me and
acknowledged the said certificate to be the act and deed of said corporation
and that the facts stated therein are true; and that the seal affixed to said
certificate and attested by the Assistant Secretary of said corporation is the
common or corporate seal of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and seal of office the day
and year aforesaid.
/s/ IZONIA BRASHER
Notary Public
(SEAL)
<PAGE> 1
Exhibit 3(e)
J. C. PENNEY FINANCIAL CORPORATION
(A Delaware Corporation)
BY-LAWS
As amended to September 1, 1976
- 1 -
<PAGE> 2
J. C. PENNEY FINANCIAL CORPORATION
(A Delaware Corporation)
BY-LAWS
___________________________________________
ARTICLE I
OFFICES
SECTION 1.Principal Office. The principal office of J. C. Penney
Financial Corporation (hereinafter called the Corporation) in the State of
Delaware shall be at No. 100 West Tenth Street, City of Wilmington, County of
New Castle. The name of the resident agent in charge thereof is The
Corporation Trust Company.
SECTION 2.Other Offices. The Corporation may also have an office or
offices at such other place or places either within or without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1.Annual Meetings. The annual meeting of the stockholders
for, the election of directors and for the transaction of such other business
as may come before meeting shall be held at such place in the Borough of
Manhattan, City of New York, State of New York, as shall be fixed by the Board
of Directors and specified in the notice or waiver of notice of such meeting,
on the third Tuesday in May in each year, commencing in the year 1965, if not a
legal holiday at the place where such meeting is to be held, and, if a legal
holiday, then on the next succeeding business day not a legal holiday. In
respect of the annual meeting for any particular year, the Board of Directors
may, by resolution adopted not less than sixty days prior to the third Tuesday
in May in such year, fix a day or place (either within or without the State of
Delaware) for such meeting, different from those fixed in the next preceding
sentence of this Section 1. Notice of any such change in the day or place of
such meeting shall be given to each stockholder, in person or by letter mailed
to his last known post office address, at least twenty days before said third
Tuesday in May or the day fixed, by the Board for such meeting, whichever,
shall be the earlier. If the election of directors shall not be held on the
day designated herein or the day fixed by the Board, as the case may be, for
any annual meeting, or on the day of any adjourned session thereof, the Board
of Directors shall cause the election to be held at a special meeting as soon
thereafter as conveniently may be. At such special meeting the stockholders
may elect the directors and transact other business with the same force and
effect as at an annual meeting duly called and held.
SECTION 2.Special Meetings. A special meeting of the stockholders for
any purpose or purposes, unless otherwise prescribed by the laws of the State
of Delaware or by the certificate of incorporation, may be called at any time
by the Chairman of the Board or the President or by order of the Board of
Directors and must be called by the Secretary if requested in writing by a
stockholder or stockholders holding of record at least one-fourth of the
outstanding stock of the Corporation entitled to vote at such meeting. Special
meetings of stockholders may be held either within or without the State of
Delaware.
SECTION 3. Notice of Meetings. Except as otherwise required by the
laws of the State of Delaware, the certificate of incorporation, or these
by-laws, notice of each annual or special meeting of the stockholders shall be
given not less than ten days before the day on which the meeting is to be held
to each stockholder of record entitled to vote at such meeting by delivering a
written or printed notice thereof to him personally, or by mailing a copy of
such notice, postage prepaid, addressed to him at his post office address last
known to the
- 2 -
<PAGE> 3
Secretary of the Corporation, or by transmitting notice thereof to him at such
address by telegraph, cable, or radio. Except where expressly required by the
laws of the State of Delaware, no publication of any notice of a meeting of
stockholders shall be required. Every such notice shall state the time and
place of the meeting, and in case of a special meeting, shall state briefly the
purposes thereof. Notice of any meeting of stockholders shall not be required
to be given to any stockholder who shall attend such meeting in person or by
proxy, or who shall, in person or by attorney thereunto authorized, waive such
notice in writing or by telegraph, cable, or radio either before or after such
meeting. Notice of any adjourned session of a meeting of the stockholders
shall not be required to be given, except when expressly required by the laws
of the State of Delaware.
SECTION 4.List of Stockholders. It shall be the duty of the Secretary
or other officer who shall have charge of the stock ledger of the Corporation
to prepare and make, at least ten days before every election of directors, a
complete list of the stockholders entitled to vote at such election, arranged
in alphabetical order and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall
be open, at the place where such election is to be held for such ten days, to
the examination of any stockholder, and shall be produced and kept at the time
and place of the election during the whole time thereof, and subject to the
inspection of any stockholder who may be present. The original or duplicate
stock ledger shall be the only evidence as to who are the stockholders entitled
to examine such list or the books of the Corporation, or to vote in person or
by proxy at such election.
SECTION 5.Quorum. At each meeting of the stockholders, the holders of
a majority of the issued and outstanding shares of stock of the Corporation
entitled to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum for the transaction of business. In the absence of a
quorum at any meeting, or any adjourned session thereof, the stockholders of
the Corporation present in person or represented by proxy and entitled to vote,
by majority vote, or in the absence of all the stockholders, any officer
entitled to preside or act as secretary at such meeting may adjourn the meeting
from time to time until a quorum shall be present. At any such adjourned
meeting at which a quorum shall be present, any business may be transacted
which might have been transacted at the meeting as originally called.
SECTION 6.Organization. At each meeting of the stockholders, the
Chairman of the Board or in his absence, the President or in his absence, a
chairman chosen by a majority vote of the stockholders present in person or by
proxy and entitled to vote thereat shall act as chairman; and the Secretary or
in his absence, an Assistant Secretary or in the absence of the Secretary and
all Assistant Secretaries, a person whom the chairman of such meeting shall
appoint shall act as secretary of such meeting and keep the minutes thereof.
SECTION 7.Voting; Proxies; Ballots. Except as otherwise provided in
the laws of the State of Delaware, the certificate of incorporation, or these
by-laws, at every meeting of the stockholders, each stockholder of the
Corporation shall be entitled to one vote at such meeting in person or by proxy
for each share of stock having voting rights registered in his name on the
books of the Corporation:
(1) on the date fixed pursuant to Section 3 of Article VIII of
these by-laws as the record date for the determination of stockholders
entitled to vote at such meeting; or
(2) if no such record date shall have been fixed, then at the
date and time of such meeting; provided that in such event, no share
of stock of the Corporation shall be voted at any election of
directors which shall have been transferred on the books of the
Corporation within twenty days next preceding such election of
directors.
Shares of its own stock belonging to the Corporation shall not be
voted upon directly or indirectly. The vote of any stockholder entitled
thereto may be cast in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto
authorized, or by a telegram, cable, or radiogram delivered to the secretary of
the meeting; provided, however, that no proxy shall be voted after three
- 3 -
<PAGE> 4
years from its date, unless such proxy provides for a longer period. At all
meetings of the stockholders, all questions (except where other provision is
made in the laws of the State of Delaware, in the certificate of incorporation,
or in these by-laws) shall be decided by the vote of a majority in interest of
the stockholders present in person or represented by proxy at such meeting and
entitled to vote thereon, a quorum being present. Except where other provision
is made in the laws of the State of Delaware, the vote on any question need not
be by ballot unless demanded by a stockholder present in person or represented
by proxy at any meeting and entitled to vote thereon or so directed by the
chairman of the meeting. Upon a demand by any such stockholder, or a direction
by the chairman of the meeting for a vote by ballot upon any question, such
vote by ballot shall be taken. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
SECTION 8.Inspectors. If at any meeting of the stockholders a vote
by ballot shall be taken on any question, the chairman of such meeting shall
appoint two inspectors to act with respect to such vote. Each inspector so
appointed shall first subscribe an oath faithfully to execute the duties of an
inspector at such meeting with strict impartiality and according to the best of
his ability. Such inspector shall decide upon the qualifications of voters and
shall report the number of shares represented at the meeting and entitled to
vote on the question, shall conduct and accept the votes, and when the voting
is completed, shall ascertain and report the number of shares voted
respectively for and against the question. Reports of inspectors shall be in
writing and subscribed and delivered by them to the secretary of the meeting.
The inspectors need not be stockholders of the Corporation, and any officer of
the Corporation may be an inspector on any question other than a vote for or
against his election to any position with the Corporation or on any other
question in which he may be directly interested.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1.General Powers. The business, property, and affairs of the
Corporation shall be managed by the Board of Directors.
SECTION 2.Number, Qualification, and Term of Office. The number of
directors of the Corporation which shall constitute the whole Board of
Directors shall be such number, not less than three, as initially shall be
determined by the Incorporators of the Corporation and thereafter as from time
to time shall be fixed by the Board of Directors, except that when all the
shares of the Corporation are owned beneficially and of record by either one or
two stockholders, the number of directors may be less than three but not less
than the number of stockholders. Directors need not be stockholders. Each
director shall hold office until the annual meeting of the stockholders held
next after his election and until his successor shall have been duly elected
and qualified, or until his death or until he shall resign or shall have been
removed in the manner herein provided.
SECTION 3.Election of Directors. The Incorporators of the
Corporation shall elect the initial directors of the Corporation. Thereafter,
at each meeting of the stockholders for the election of directors at which a
quorum is present, the persons receiving the greatest number of votes of the
stockholders present in person or by proxy and entitled to vote thereon shall
be the directors. Unless an election by ballot shall be demanded as provided
in Section 7 of Article II of these by-laws, election of directors may be
conducted in any manner approved at such meeting.
SECTION 4.Quorum and Manner of Acting. A majority of the directors at
the time in office shall constitute a quorum for the transaction of business at
any meeting, which in no case shall be less than two directors, except that
when a board of one director is authorized under the provisions of the General
Corporation Law of the State of Delaware, and such board has been appointed,
then one director shall constitute a quorum. Except as otherwise provided in
the laws of the State of Delaware or in the certificate of incorporation, and
except as otherwise provided in Section 13 of this Article III, Sections 1, 4,
and 6 of Article
- 4 -
<PAGE> 5
IV, Article V, and Article XV of these by-laws, the affirmative vote of a
majority of the directors present at any meeting at which a quorum is present
shall be required for the taking of any action by the Board of Directors. In
the absence of a quorum at any meeting of the Board, such meeting, unless it be
the first meeting of the Board, need not be held, or a majority of the
directors present thereat or, if no director be present, the Secretary may
adjourn such meeting from time to time until a quorum shall be present. Notice
of any adjourned meeting need not be given.
SECTION 5.Offices; Place of Meeting. The Board of Directors may hold
meetings and have an office or offices at such place or places within or
without the State of Delaware as the Board may from time to time determine,
and, in the case of meetings, as shall be specified or fixed in the respective
notices or waivers of notice thereof, except where other provision is made in
the laws of the State of Delaware the certificate of incorporation, or these
by-laws.
SECTION 6.First Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers, and the transaction of other
business, as soon as practicable following the first and each annual election
of directors. Such meeting shall be called and held at the place and time
specified in the notice or waiver of notice thereof as in the case of a special
meeting of the Board of Directors.
SECTION 7.Regular Meetings. Regular meetings of the Board of
Directors shall be held at such places and at such times as the Board shall
from time to time by resolution determine. If any day fixed for a regular
meeting shall be a legal holiday at the place where the meeting is to be held,
then the meeting which would otherwise be held on that day shall be held at
such place at the same hour on the next succeeding business day not a legal
holiday. Notice of regular meetings need not be given.
SECTION 8.Special Meetings; Notice. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board or the
President or by any two of the directors, except that when a board of one
director is authorized under the provisions of the General Corporation Law of
the State of Delaware, and such board has been appointed, then one director may
call a special meeting. Notice of each such meeting shall be mailed to each
director, addressed to him at his residence or usual place of business, at
least two days before the day on which the meeting is to be held, or shall be
sent to him at his residence or at such place of business by telegraph, cable,
or radio, or delivered personally or by telephone, not later than the day
before the day on which the meeting is to be held. Each such notice shall
state the time and place of the meeting but need not state the purposes thereof
except as otherwise herein expressly provided. Notice of any such meeting need
not be given to any director, however, if waived by him in writing or by
telegraph, cable, or radio, whether before or after such meeting shall be held,
or if he shall be present at such meeting; and any meeting of the Board shall
be a legal meeting without any notice thereof having been given if all of the
directors shall be present thereat.
SECTION 9.Organization. At each meeting of the Board of Directors
the Chairman of the Board or in his absence, the President (if a director) or
in the absence of the President (if a director), a director chosen by a
majority of the directors present shall act as chairman. The Secretary or in
his absence, an Assistant Secretary of the Corporation or in the absence of the
Secretary and all Assistant Secretaries, a person whom the chairman of such
meeting shall appoint shall act as secretary of such meeting and keep the
minutes thereof.
SECTION 10.Order of Business. At all meetings of the Board of
Directors, business shall be transacted in the order determined by the Board.
SECTION 11. Resignation. Any director of the Corporation may resign
at any time by giving written notice of his resignation to the Board of
Directors or to the Chairman of the Board, the President, or the Secretary.
Such resignation shall take effect at the date of receipt of such notice by the
Chairman of the Board,
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<PAGE> 6
the President, or the Secretary, or at any later time specified therein; and
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
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<PAGE> 7
SECTION 12. Removal of Directors. Any director may be removed,
either with or without cause, at anytime, by the affirmative vote of the
holders of record of a majority of the issued and outstanding stock entitled to
vote for the election of directors of the Corporation given at a special
meeting of the stockholders called and held for the purpose; and the vacancy in
the Board of Directors caused by any such removal may be filled by such
stockholders at such meeting, or if the stockholders shall fail to fill such
vacancy, as in these by-laws provided.
SECTION 13. Vacancies. Any vacancy in the Board of Directors caused
by death, resignation, removal, disqualification, an increase in the number of
directors, or any other cause, may be filled by a majority vote of the
remaining directors then in office (including any director who has submitted a
resignation which is to be effective at a future date), although less than a
quorum, or by the stockholders of the Corporation at any special meeting called
for that purpose, and each director so elected shall hold office until the next
annual election of directors and until his successor shall have been duly
elected and qualified, or until his death or until he shall resign or shall
have been removed in the manner herein provided.
SECTION 14. Remuneration. Directors and members of any committee may
receive such fixed sum per meeting attended, or such annual sum or sums, as may
be determined from time to time by resolution of the Board of Directors. All
directors and members of any such committee shall receive their expenses, if
any, for attendance at meetings of the Board of Directors or of such committee.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving proper compensation
therefor.
ARTICLE IV
COMMITTEES
SECTION 1. Executive Committee. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate directors of the
Corporation in such number as the Board shall see fit, but not less than two,
as an Executive Committee which shall have and may exercise, during intervals
between meetings of the Board, the Powers of the Board of Directors in the
management of the business and affairs of the Corporation (including, without
limiting the generality of the foregoing, the powers of the Board of Directors
as specified in these by-laws; provided however, that it shall not have power
to fill vacancies in its membership, to authorize the issuance of shares of the
capital stock of the Corporation, or to make or amend these by-laws, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. The Board of Directors shall designate one of the members of the
Executive Committee to be the Chairman of said Committee. Each member of the
Executive Committee shall continue to act as such only so long as he shall be a
director of the Corporation and only during the pleasure of a majority of the
total number of directors of the Corporation at the time in office.
SECTION 2. Meetings. Regular meetings of the Executive Committee, of
which no notice shall be necessary, shall be held on such days and at such
places, within or without the State Of Delaware, as shall be fixed by
resolution adopted by a majority of, and communicated to all, the members of
the Executive Committee. Special meetings of said Committee may be called at
the request of any member. Notice of each special meeting of said Committee
shall be mailed to each member thereof, addressed to him at his residence or
usual place of business, at least two days before the day on which the meeting
is to be held, or shall be sent to him at his residence or at such place of
business by telegraph, cable, or radio, or delivered personally or by
telephone, not later than the day before the day on which the meeting is to be
held. Each such notice shall state the time and place of the meeting but need
not state the purposes thereof except as otherwise herein expressly provided.
Subject to the provisions of this Article IV, the Executive Committee, by
resolution of a majority of all its members, shall fix its own rules of
procedure and keep a record of its proceedings and report them to the Board of
Directors at the next regular meeting thereof after such proceedings shall have
been taken.
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<PAGE> 8
SECTION 3.Quorum and Manner of Acting. Not less than a majority of
the members of the Executive Committee then in office shall constitute a quorum
for the transaction of business, and the act of a majority of those present at
a meeting thereof shall be the act of the Executive Committee. The directors
comprising said Committee shall act only as a committee, and such directors,
individually, shall have no power as such.
SECTION 4.Vacancies. The Board of Directors, by vote of a majority of
the whole Board, shall have power to fill any vacancy in the Executive
Committee due to death, resignation, removal, or any other cause.
SECTION 5.Resignation. Any director may resign from the Executive
Committee at any time by giving written notice of his resignation to the
Chairman of the Board, the Chairman of the Executive Committee, the President,
or the Secretary. Such resignation shall take effect at the date of receipt of
such notice by the Chairman of the Board, the Chairman of the Executive
Committee, the President, or the Secretary, or at any later time specified
therein; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 6.Other Committees. The Board of Directors may, by resolution
or resolutions passed by a majority of the whole Board, designate one or more
other committees, each such committee to consist of two or more directors of
the Corporation, which shall have and may exercise such powers as the Board of
Directors may determine and specify in such resolution or resolutions, such
committee or committees to have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. A majority of
all the members of any such committee may fix its rules of procedure, determine
its actions and fix the time and place (whether within or without the State of
Delaware) of its meetings and specify what notice thereof, if any, shall be
given, unless the Board of Directors shall otherwise by resolution provide.
The Board of Directors shall have the power to change the members of any such
committee at any time, to fill vacancies, and to discharge any such committee,
either with or without cause, at any time.
ARTICLE V
ACTION BY CONSENT
Any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting
if prior to such action a written consent thereto is signed by all members of
the Board or of such committee, as the case may be, and such written consent is
filed with the minutes of the proceedings of the Board or such committee.
Any action required or permitted to be taken at any meeting of the
stockholders may be taken without a meeting if all of the stockholders who
would have been entitled to vote upon the action if such meeting were held
shall consent in writing to the action being taken; provided, however, that
such consent in writing may be by less than all such stockholders to the extent
specifically permitted by the laws of the State of Delaware.
ARTICLE VI
OFFICERS
SECTION 1. Numbers The Principal Officers of the Corporation shall
be a Chairman of the Board, who shall be elected from among the members of the
Board, a President, one or more Vice Presidents (the number thereof to be
determined by the Board of Directors), a Secretary, a Treasurer, and a
Controller. In addition there may be such subordinate officers, agents, and
employees as may be appointed in accordance with the provisions of Section 3 of
this Article VI. Any two or more offices, except those of President and
Secretary, may be held by the same person.
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<PAGE> 9
SECTION 2.Election and Term of Office. The officers of the
Corporation, except such officers as may be appointed in accordance with the
provisions of Section 3 of this Article VI, shall be elected annually by the
Board of Directors. Each officer, except such officers as may be appointed in
accordance with the provisions of Section 3 of this Article VI, shall hold
office until his successor shall have been duly elected and qualified, or until
his death or until he shall resign or shall have been removed in the manner
herein provided.
SECTION 3. Subordinate Officers. In addition to the principal
officers enumerated in Section 1 of this Article VI, the Corporation may have
such other officers agents, and employees as the Board of Directors may deem
necessary, including one or more Assistant Vice Presidents, one or more
Assistant Secretaries, and one or more Assistant Treasurers, each of whom shall
hold office for such period, have such authority, and perform such duties as
the Board of Directors, the Chairman of the Board, or the President may from
time to time determine. The Board of Directors may delegate to any principal
officer the power to appoint or remove any such subordinate officers, agents,
or employees.
SECTION 4.Removal. Any officer may be removed either with or without
cause, by the vote of a majority of the directors present at a special meeting
called for the purpose or except in case of any officer elected by the Board of
Directors, by any officer upon whom the power of removal may be conferred by
the Board of Directors.
SECTION 5.Resignation. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Chairman of the Board, the
President, or the Secretary. Such resignation shall take effect at the date of
receipt of such notice or at any later time specified therein; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 6.Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed in these by-laws for
regular election or appointment to such office.
SECTION 7.Chairman of the Board. The Chairman of the Board shall be
the chief executive officer of the Corporation. The Chairman of the Board
shall preside at all meetings of the Board of Directors and of the stockholders
at which he is present. He shall have the general supervision of the affairs
of the Corporation, and perform all such duties as are incident to his office
or as are properly required of him by the Board of Directors or by the
Executive Committee. He shall have authority to enter into any contract or
execute or deliver any instrument in the name and on behalf of the Corporation,
when authorized by the Board of Directors or by the Executive Committee, except
in cases where the signing and execution thereof shall be expressly delegated
by the Board of Directors, by the Executive Committee, or by these by-laws to
some other officer, official, or agent of the Corporation.
SECTION 8.The President. The President shall be the chief operating
officer of the Corporation. Under the supervision of the Chairman of the
Board, the President shall be in charge of the operations of the Corporation.
In the absence or disability of the Chairman of the Board, the President shall
perform the duties and exercise the powers of the Chairman of the Board, except
that the President, if not a director, shall not act as chairman at a meeting
of the Board of Directors. The President shall have authority to enter into
any contract or execute and deliver any instrument in the name and on behalf of
the Corporation, when authorized by the Board of Directors or by the Executive
Committee, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors, by the Executive Committee, or
by these by-laws to some other officer, official, or agent of the Corporation.
In addition, the President shall have such further powers and perform such
further duties as may from time to time be assigned to him by the Board of
Directors, by the Executive Committee, or by the Chairman of the Board, or as
may be prescribed by these by-laws.
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<PAGE> 10
SECTION 9.Vice Presidents. Each Vice President shall have such powers
and perform such duties as shall, from time to time, be assigned to him by the
Board of Directors, by the Executive Committee, by the Chairman of the Board,
or by the President.
SECTION 10. The Secretary. The Secretary shall record or cause to be
recorded in books provided for the purpose the minutes of the meetings of the
stockholders, the Board of Directors, and all committees, if any; shall see
that all notices are duly given in accordance with the provisions of these
by-laws and as required by law; shall be custodian of all corporate records
(other than financial) and of the seal of the Corporation; shall keep the list
of stockholders as required by Section 4 of Article II of these by-laws, which
shall include the post office address of each stockholder, and make all proper
changes therein, retaining and filing his authority for all such entries; shall
see that the books, reports, statements, certificates, and all other documents
and records required by law are properly kept and filed; and in general, shall
perform all duties incident to the office of Secretary and such other duties as
may, from time to time, be assigned to him by the Board of Directors, by the
Executive Committee, by the Chairman of the Board, or by the President.
SECTION 11. The Treasurer. The Treasurer shall have charge and
custody of, and be responsible for, all funds and securities of the
Corporation, and shall deposit all such funds in the name of the Corporation in
such banks, trust companies, or other depositories as shall be selected in
accordance with the provisions of these by-laws; shall render to the Board of
Directors, whenever the Board may require him so to do, and shall present at
the annual meeting of the stockholders if called upon so to do, a report of all
his transactions as Treasurer; and in general, shall perform all duties
incident to the office of Treasurer and such other duties as may, from time to
time, be assigned to him by the Board of Directors, by the Executive Committee,
by the Chairman of the Board, or by the President. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
SECTION 12.The Controller. The Controller shall have charge of the
books and records of account of the Corporation; shall keep or cause to be
kept, and shall be responsible for the keeping of; correct and adequate records
of the assets, liabilities, business, and transactions of the Corporation;
shall at all reasonable times exhibit his books and records of account to any
director of the Corporation upon application at the office of the Corporation
where such books and records are kept; shall be responsible for the preparation
and filing of all reports and returns relating to or based upon the books and
records of the Corporation kept by him or under his direction; and in general,
shall perform all duties incident to the office of Controller and such other
duties as may, from time to time be assigned to him by the Board of Directors,
by the Executive Committee, by the Chairman of the Board, or by the President.
SECTION 13. Salaries. The salaries of the officers shall be fixed
from time to time by the Board of Directors, and none of such officers shall be
prevented from receiving a salary by reason of the fact that he is also a
director of the Corporation.
ARTICLE VII
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1.Execution of Contracts. The Board of Directors, except as
otherwise provided in these by-laws, may authorize any officer or officers,
agent or agents, or employee or employees of the Corporation to enter into any
contract or execute and deliver any instrument in the name and on behalf of the
Corporation, and such authority may be general or confined to specific
instances, and unless so authorized by the Board of Directors or by the
provisions of these by-laws, no officer, agent, or employee shall have any
power or authority to bind the Corporation by any contract or engagement or to
pledge its credit or to render it liable pecuniarily for any purpose or to any
amount.
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<PAGE> 11
SECTION 2.Loans. No loan shall be contracted on behalf of the
Corporation, and no negotiable papers shall be issued in name, except by such
officer or officers or other person or persons as may be designated by the
Board of Directors from time to time. If and to the extent authorized by the
Board of Directors, the power to contract loans or issue negotiable papers may
be delegated by any such officer or officers or other person or persons.
SECTION 3.Checks, Drafts etc. All checks, drafts, bills of exchange,
and other orders for the payment of money, letters of credit, acceptances,
obligations, notes, and other evidences of indebtedness, bills of lading,
warehouse receipts, and insurance certificates of the Corporation shall be
signed or endorsed by such officer or officers or other person or persons as
may be designated by the Board of Directors from time to time. If and to the
extent authorized by the Board of Directors, the power to sign or endorse any
such instrument may be delegated by any such-officer or officers or other
person or persons.
SECTION 4.Bank Accounts. The Board of Directors may from time to time
authorize the opening and maintenance of general and special bank and custodial
accounts with such banks, trust companies, and other depositories as it may
select. Rules, regulations, and agreements applicable to such accounts may be
made, and changed from time to time, by the Board of Directors, including, but
without limitation, rules, regulations, and agreements with respect to the use
of facsimile and printed signatures. Any of such powers of the Board of
Directors with respect to bank and custodial accounts may be delegated by the
Board of Directors to any officer or officers or other person or persons as may
be designated by the Board of Directors, and if and to the extent authorized by
the Board of Directors, any such power may be further delegated by any such
officer or officers or other person or persons.
SECTION 5.General and Special Bank Accounts. The Board of Directors
may from time to time authorize the opening and keeping of general and special
bank accounts with such banks, trust companies, or other depositories as it may
designate or as may be designated by any officer or officers, agent or agents,
or attorney or attorneys of the Corporation to whom power in that respect shall
have been delegated by the Board of Directors. The Board may make such special
rules and regulations with respect to such bank accounts, not inconsistent with
the provisions of these by-laws, as it may deem expedient.
ARTICLE VIII
BOOKS AND RECORDS
SECTION 1.Location. The books and records of the Corporation may be
kept at such places within or without the State of Delaware as the Board of
Directors may from time to time determine. The stock record books and the
blank stock certificate books shall be kept by the Secretary or by any other
officer or agent designated by the Board of Directors. The original or a
duplicate stock ledger containing the names and addresses of the stockholders
and the number of shares held by them, respectively, shall be kept at the
principal office or place of business of the Corporation in the State of
Delaware.
SECTION 2.Addresses of Stockholders. Each stockholder shall designate
to the Secretary an address at which notices of meetings and all other
corporate notices may be served upon or mailed to him, and if any stockholder
shall fail to designate such address, corporate notices may be served upon him
by mail, postage prepaid, to him at his post office address last known to the
Secretary.
SECTION 3.Closing of Transfer Books; Record Date. The Board of
Directors may, by resolution, direct that the stock transfer books of the
Corporation be closed for a period not exceeding 50 days preceding the date of
any meeting of stockholders or the date for the payment of any dividend or the
date for the allotment of rights or the date when any change or conversion or
exchange of capital stock of the Corporation shall go into effect, or for a
period not exceeding 50 days in connection with obtaining the consent of
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stockholders for any purpose; provided, however, that, in lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date, not exceeding 50 days preceding the date of any meeting of stockholders,
or the date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital stock
of the Corporation shall go into effect, or a date in connection with obtaining
such consent, as a record date for the determination of the stockholders
entitled to notice of, and to vote at, any such meeting and any adjournment
thereof, or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any such change,
conversion, or exchange of capital stock of the Corporation, or to give such
consent, and in each such case such stockholders and only such stockholders as
shall be stockholders of record on the date so fixed shall be entitled to
notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid.
ARTICLE IX
SHARES OF STOCK AND THEIR TRANSFER
SECTION 1.Certificates of Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate in such form as the Board
of Directors shall prescribe. Each such certificate shall be signed by, or in
the name of the Corporation by, the Chairman of the Board, the President, or a
Vice President and the Treasurer or an Assistant Treasurer or the Secretary or
an Assistant Secretary of the Corporation.
SECTION 2.Record, etc. A record shall be kept of the name of the
person, firm, or corporation owning the stock represented by each certificate
of stock of the Corporation issued, the number of shares represented by each
such certificate, and the date thereof, and in the case of cancellation, the
date of cancellation. The person in whose name shares of stock stand on the
books of the Corporation shall be deemed the owner thereof for all purposes as
regards the Corporation.
SECTION 3.Transfer of Stock. Transfers of shares of the stock of the
Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation, and on
the surrender of the certificate or certificates for such shares properly
endorsed and the payment of all taxes thereon.
ARTICLE X
DIVIDENDS AND RESERVES
The Board of Directors may, from time to time, determine whether any,
and if any, what part of the net profits of the Corporation or of its net
assets in excess of its capital, available therefor pursuant to law and to the
certificate of incorporation, shall be declared by it as dividends on the stock
of the Corporation. The Board of Directors may, in its discretion, in lieu of
declaring any such dividend, use and apply any of such net profits or net
assets as a reserve for working capital, to meet contingencies, for the purpose
of maintaining or increasing the property or business of the Corporation, or
for any other lawful purpose which it may think conducive to the best interests
of the Corporation.
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ARTICLE XI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS
The Corporation may indemnify, in accordance with and to the full
extent permitted by the laws of the State of Delaware as in effect at the time
of the adoption of this Article XI or as such laws may be amended from time to
time, and shall so indemnify to the full extent required by such laws, any
person (and the heirs and legal representatives of such person) made or
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
by reason of the fact that he is or was a director, officer, employee, or agent
of the Corporation or any constituent corporation absorbed in a consolidation
or merger, or serves or served as such with another corporation, partnership,
joint venture trust, or other enterprise at the request of the Corporation or
any such constituent corporation.
ARTICLE XII
SEAL
The Board of Directors shall provide a corporate seal, which shall be
in the form of a circle and shall bear the name of the Corporation and the
words and figures "Corporate Seal 1964 Delaware."
ARTICLE XIII
FISCAL YEAR
The fiscal year of the Co#oration shall end at the close of business
on the last Saturday in January and shall, in each case, begin at the opening
of business on the day next succeeding the last day of the preceding fiscal
year.
ARTICLE XIV
WAIVER OF NOTICE
Whenever any notice whatever is required to be given by these by-laws
or the certificate of incorporation or the laws of the State of Delaware, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE XV
AMENDMENTS
All by-laws of the Corporation shall be subject to alteration,
amendment, or repeal, in whole or in part, and new by-laws not inconsistent
with the laws of the State of Delaware or any provision of the certificate of
incorporation may be made, either by the affirmative vote of a majority of the
whole Board of Directors at any regular or special meeting of the Board, or by
the affirmative vote of the holders of record of a majority of the outstanding
stock of the Corporation present in person or represented by proxy and entitled
to vote in respect thereof, given at an annual meeting or at any special
meeting at which a quorum shall be present, provided that in each case notice
of the proposed alteration, or repeal or the proposed new by-laws be included
in the notice of such meeting of the Board of the stockholders, as the case may
be.
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<PAGE> 1
EXHIBIT 4(C)
CONFORMED COPY
================================================================================
J. C. PENNEY COMPANY, INC.
J. C. PENNEY FUNDING CORPORATION
____________________
REVOLVING CREDIT AGREEMENT
Dated as of December 16, 1993
____________________
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent
and
BANKERS TRUST COMPANY, CHEMICAL BANK, and
CREDIT SUISSE
as Co-Agents
and
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION and NATIONSBANK OF TEXAS, N.A.,
as Lead Managers
================================================================================
(CS&M Ref. No. 1385-280)
<PAGE> 2
TABLE OF CONTENTS
Page
Article Section ----
- ------- -------
I. DEFINITIONS
1.01 Defined Terms .......................... 1
1.02 Terms Generally ........................ 21
II. THE CREDITS
2.01 Commitments ............................ 21
2.02 Loans .................................. 22
2.03 Competitive Bid Procedure .............. 24
2.04 Standby Borrowing Procedure ............ 28
2.05 Refinancings ........................... 29
2.06 Fees ................................... 29
2.07 Repayment of Loans; Evidence of the
Borrowers' Obligations .............. 30
2.08 Interest on Loans ...................... 30
2.09 Default Interest ....................... 31
2.10 Alternate Rate of Interest ............. 32
2.11 Termination and Reduction
of Commitments ...................... 33
2.12 Prepayment ............................. 33
2.13 Reserve Requirements;
Change in Circumstances ............. 34
2.14 Change in Legality ..................... 35
2.15 Indemnity .............................. 37
2.16 Pro Rata Treatment ..................... 38
2.17 Sharing of Setoffs ..................... 39
2.18 Payments ............................... 40
2.19 Taxes .................................. 40
2.20 Mitigation; Duties of Lenders
and the Agent ....................... 43
III. REPRESENTATIONS AND WARRANTIES
3.01 Organization; Powers ................... 47
3.02 Authorization .......................... 47
3.03 Enforceability ......................... 48
3.04 Governmental Approvals ................. 48
3.05 Financial Statements ................... 48
3.06 No Material Adverse Change ............. 48
3.07 Title to Properties; Possession
Under Leases ........................ 49
3.08 Restricted Subsidiaries ................ 49
<PAGE> 3
Contents, p. 2
Article Section Page
- ------- ------- ----
3.09 Litigation; Compliance with
Laws ................................ 50
3.10 Agreements ............................. 50
3.11 Federal Reserve Regulations ............ 50
3.12 Investment Company Act;
Public Utility Holding Company
Act ................................. 51
3.13 Use of Proceeds ........................ 51
3.14 Tax Returns ............................ 51
3.15 No Material Misstatements .............. 51
3.16 Employee Benefit Plans ................. 51
3.17 Support Agreements ..................... 51
IV. CONDITIONS OF LENDING
4.01 All Borrowings ......................... 52
4.02 First Borrowing ........................ 52
V. AFFIRMATIVE COVENANTS
5.01 Existence; Businesses and Properties ... 54
5.02 Insurance .............................. 55
5.03 Obligations and Taxes .................. 55
5.04 Financial Statements, Reports, etc. .... 55
5.05 Litigation and Other Notices ........... 56
5.06 ERISA .................................. 56
5.07 Maintaining Records; Access to
Properties and Inspections .......... 58
5.08 Use of Proceeds ........................ 58
5.09 Pari-Passu ............................. 58
5.10 Support Agreements ..................... 59
VI. NEGATIVE COVENANTS
6.01 Limitation on Liens--JCPenney .......... 59
6.02 Limitations on Senior Funded
Indebtedness ........................ 60
6.03 Limitations with Respect to
Restricted Subsidiaries ............. 61
6.04 Mergers, Consolidations, Sales of
Assets and Acquisitions ............. 65
6.05 Limitations on Liens--Funding .......... 66
6.06 Conduct of Funding's Business .......... 68
VII. EVENTS OF DEFAULT ................................ 70
VIII. THE AGENT ........................................ 73
<PAGE> 4
Contents, p. 3
Article Section Page
- ------- ------- ----
IX. MISCELLANEOUS
9.01 Notices ................................ 77
9.02 Survival of Agreement .................. 78
9.03 Binding Effect ......................... 78
9.04 Successors and Assigns ................. 78
9.05 Expenses; Indemnity .................... 81
9.06 Right of Setoff ........................ 82
9.07 Applicable Law ......................... 83
9.08 Waivers; Amendment ..................... 83
9.09 Interest and Charges ................... 84
9.10 Entire Agreement ....................... 85
9.11 Severability ........................... 85
9.12 Counterparts ........................... 85
9.13 Headings ............................... 85
9.14 Jurisdiction; Consent to Service
of Process .......................... 85
9.15 Confidentiality ........................ 86
9.16 Liability of Borrowers ................. 87
Exhibit A-1 Form of Competitive Bid Request
Exhibit A-2 Form of Notice of Competitive Bid Request
Exhibit A-3 Form of Competitive Bid
Exhibit A-4 Form of Standby Borrowing Request
Exhibit B Form of Opinion
Exhibit C Form of Guaranty
Schedule 2.01 Commitments
Schedule 3.08 Restricted Subsidiaries
Schedule 3.09 Material Litigation
<PAGE> 5
CONFORMED COPY
REVOLVING CREDIT AGREEMENT dated as of
December 16, 1993, among J. C. PENNEY COMPANY, INC. a
Delaware corporation ("JCPenney"), J. C. PENNEY
FUNDING CORPORATION, a Delaware corporation
("Funding"), the lenders listed in Schedule 2.01 (as
of any date, together with any permitted assigns
hereunder on such date, the "Lenders"), MORGAN
GUARANTY TRUST COMPANY OF NEW YORK ("Morgan"), as
agent for the Lenders (in such capacity, the "Agent")
and BANKERS TRUST COMPANY, CHEMICAL BANK and CREDIT
SUISSE, as co-agents for the Lenders (in such
capacity, the "Co-Agents").
The Borrowers (as herein defined) have requested the Lenders
to extend credit to the Borrowers in order to enable them to borrow on a
standby revolving credit basis on and after the date hereof and at any time and
from time to time prior to the Maturity Date (as herein defined) an aggregate
principal amount not in excess of $450,000,000 at any time outstanding. The
Borrowers have also requested the Lenders to provide a procedure pursuant to
which the Borrowers may invite the Lenders to bid on an uncommitted basis on
borrowings by the Borrowers scheduled to mature on or prior to the Maturity
Date. The proceeds of such borrowings are to be used for general corporate
purposes, including, without limitation, working capital requirements,
liquidity and the repayment of maturing commercial paper and other indebtedness
of the Borrowers. The Lenders will extend such credit to the Borrowers on the
terms and subject to the conditions herein set forth.
Accordingly, the Borrowers, the Lenders, the Agent and the
Co-Agents agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
<PAGE> 6
2
"ABR Loan" shall mean any Standby Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Adjusted CD Rate" shall mean, with respect to any CD
Borrowing requested by any Borrower pursuant to Section 2.03(a) for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100 of 1%) equal to the sum of (a) a rate per annum equal to the
product of (i) the Fixed CD Rate in effect for such Interest Period and (ii)
Statutory Reserves, plus (b) the Assessment Rate. For purposes hereof, the
term "Fixed CD Rate" shall mean the arithmetic average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the prevailing rates per annum bid at or
about 10:00 a.m., New York City time, to the Agent on the first Business Day of
the Interest Period applicable to such CD Borrowing by three New York City
negotiable certificate of deposit dealers of recognized standing selected by
the Agent for the purchase at face value of negotiable certificates of deposit
of major United States money center banks in a principal amount approximately
equal to the product of (x) the aggregate principal amount of such CD Borrowing
as specified in the related Competitive Bid Request and (y) the percentage
which the Agent's Commitment represents of the Total Commitment and with a
maturity comparable to such Interest Period.
"Additional Costs" shall mean, with respect to any Lender, any
increased costs or reduction in amounts received or receivable or reduction in
return on capital incurred or suffered by such Lender and in respect of which
such Lender is entitled to request compensation in accordance with Section
2.13.
"Administrative Fees" shall have the meaning assigned to such
term in Section 2.06(c).
"Affiliate" shall mean, when used 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.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greater of (a) the Prime Rate on such day as announced by Morgan Guaranty Trust
Company of New York, and (b) the Federal Funds Effective Rate in effect
<PAGE> 7
3
on such day plus 0.50%. For purposes hereof, "Federal Funds Effective Rate"
shall mean, for any day, the weighted average 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 which is a Business Day, the average of the rates quoted to the Agent on
such day for such transactions by three Federal funds brokers of recognized
standing selected by it. If for any reason the Agent shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate for any reason, including
the inability or failure of the Agent to obtain sufficient quotations in
accordance with the terms hereof, the Alternate Base Rate shall be determined
without regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate shall be effective on the
date such change is announced publicly.
"Applicable Lending Office" shall mean, for each Lender and
for each Type of Loan, the office or branch of such Lender (or of an Affiliate
of such Lender) designated for such Type of Loan opposite such Lender's name on
Schedule 2.01 or such other office or branch of such Lender (or of an Affiliate
of such Lender) as such Lender may from time to time, in accordance with the
terms of this Agreement, specify to the Agent and the Borrowers as the office
or branch by which its Loans of such Type are to be made and maintained.
"Assessment Rate" shall mean for any date the then current net
annual assessment rate (rounded upwards, if necessary, to the next 1/100 of 1%)
actually employed by the Agent in determining amounts payable by the Agent to
the Federal Deposit Insurance Corporation (or any successor) for insurance by
such Corporation (or such successor) of time deposits made in dollars at the
Agent's domestic offices.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Borrowers" shall mean JCPenney and Funding.
"Borrowing" shall mean a group of Loans of a single Type made
by the Lenders (or, in the case of a
<PAGE> 8
4
Competitive Borrowing, by the Lender or Lenders whose Competitive Bids have
been accepted pursuant to Section 2.03) to the same Borrower on a single date
and as to which a single Interest Period is in effect.
"Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York) on which banks are
open for business in New York City; provided, however, 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.
"CD Borrowing" shall mean a Competitive Borrowing comprised
of CD Loans.
"CD Loan" shall mean any Competitive Loan bearing interest at
a rate determined by reference to the Adjusted CD Rate in accordance with the
provisions of Article II.
"Closing Date" shall mean the date of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as the
same may be amended from time to time.
"Commitment" shall mean, with respect to each Lender, the
commitment of such Lender hereunder as set forth as of the Closing Date in
Schedule 2.01 hereto and, thereafter, in the Register (or as otherwise
determined by the parties hereto in the event of manifest error in the
Register), as such Lender's Commitment may be permanently terminated or reduced
from time to time pursuant to Section 2.11. The Commitment of each Lender
shall automatically and permanently terminate on the Maturity Date if not
terminated earlier pursuant to the terms hereof.
"Commitment Termination Date" shall have the meaning assigned
to such term in Section 2.11(d).
"Competitive Bid" shall mean an offer by a Lender to make a
Competitive Loan pursuant to Section 2.03.
"Competitive Bid Rate" shall mean, as to any Competitive Bid
made by a Lender pursuant to Section 2.03(b), (a) in the case of a Eurodollar
Competitive Loan or a CD Loan, the Competitive Margin, and (b) in the
<PAGE> 9
5
case of a Fixed Rate Loan, the fixed rate of interest offered by the Lender
making such Competitive Bid.
"Competitive Bid Request" shall mean a request made pursuant
to Section 2.03 in the form of Exhibit A-1.
"Competitive Borrowing" shall mean a Borrowing consisting of a
Competitive Loan or concurrent Competitive Loans from the Lender or Lenders
whose Competitive Bids for such Borrowing have been accepted under the bidding
procedure described in Section 2.03 by the Borrower requesting such Borrowing.
"Competitive Loan" shall mean a Loan from a Lender to a
Borrower pursuant to the bidding procedure described in Section 2.03. Each
Competitive Loan shall be a Eurodollar Competitive Loan, a CD Loan or a Fixed
Rate Loan.
"Competitive Margin" shall mean, as to any Eurodollar
Competitive Loan or CD Loan, the margin (expressed as a percentage rate per
annum in the form of a decimal to no more than four decimal places) to be added
to or subtracted from the LIBO Rate or the Adjusted CD Rate, as applicable, in
order to determine the interest rate applicable to such Eurodollar Competitive
Loan or CD Loan, as specified in the Competitive Bid relating to such
Eurodollar Competitive Loan or CD Loan.
"Control" shall mean 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 ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Default" shall mean any event or condition which upon notice,
lapse of time or both would constitute an Event of Default.
"dollars" or "$" shall mean lawful money of the United States
of America.
"Eligible Assignee" shall mean (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $1,000,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a
<PAGE> 10
6
political subdivision of any such country, and having total assets in excess of
$1,000,000,000, provided that such bank is acting through a branch or agency
located in the country in which it is organized or another country which is
described in this clause; and (c) the central bank of any country which is a
member of the Organization for Economic Cooperation and Development.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended from time to time, and the rules and
regulations promulgated thereunder, as from time to time in effect.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) that is a member of a group of which any Borrower is a member
and which is treated as a single employer under Section 414 of the Code.
"Eurodollar Borrowing" shall mean a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Competitive Loan" shall mean any Competitive Loan
bearing interest at a rate determined by reference to the LIBO Rate in
accordance with the provisions of Article II.
"Eurodollar Loan" shall mean any Eurodollar Competitive Loan
or Eurodollar Standby Loan.
"Eurodollar Standby Loan" shall mean any Standby Loan bearing
interest at a rate determined by reference to the LIBO Rate in accordance with
the provisions of Article II.
"Event of Default" shall have the meaning assigned to such
term in Article VII.
"Facility Fee" shall have the meaning assigned to such term in
Section 2.06(a).
"Facility Fee Percentage" shall mean on any date the
applicable percentage set forth below based upon the
<PAGE> 11
7
ratings by Moody's and S&P, respectively, applicable on such date to the Index
Debt:
Category 1 Percentage
- ---------- ----------
Moody's: A2 or better
S&P: A or better 0.0750%
Category 2
- ----------
Moody's: A3
S&P: A- 0.1000%
Category 3
- ----------
Moody's: Baa2 or better,
but lower than A3
S&P: BBB or better, but
lower than A- 0.1500%
Category 4
- ----------
Moody's: Lower than Baa2,
or unrated
S&P: Lower than BBB,
or unrated 0.2000%
For purposes of the foregoing, (i) if no rating for the Index Debt shall be
available from either rating agency, (other than because (a) such rating agency
shall no longer be in the business of rating corporate debt obligations or (b)
of any other reason outside the control of JCPenney and Funding), such rating
agency shall be deemed to have established a rating in Category 4, (ii) if the
ratings established or deemed to have been established by Moody's and S&P shall
fall within different Categories, the Facility Fee Percentage shall be based
upon the numerically higher Category (i.e. the Category corresponding to the
lower ratings) and (iii) if any rating established or deemed to have been
established by Moody's or S&P shall be changed (other than as a result of a
change in the rating system of either Moody's or S&P), such change shall be
effective as of the date on which such change is first publicly announced by
the rating agency making such change. If the rating system of either Moody's
or S&P shall change prior to the Maturity Date, or if either such rating agency
shall cease to be in the business of rating corporate debt obligations or shall
no longer have in effect a rating for any reason outside the
<PAGE> 12
8
control of JCPenney and Funding, the Borrowers and the Lenders shall negotiate
in good faith to amend the references to specific ratings in this definition to
reflect such changed rating system or the absence of such a rating. Pending
agreement on any such amendment, (i) if the rating system of one such rating
agency shall remain unchanged, or if a rating shall be available from one such
rating agency, the Facility Fee Percentage shall be determined by reference to
the rating established by such rating agency, (ii) if no rating for the Index
Debt shall be available from either rating agency then (A) for 60 days, the
Facility Fee Percentage shall be determined by reference to the rating or
ratings most recently available, (B) after 60 days, the Facility Fee Percentage
shall be determined by reference to Category 3 (or Category 4 if such
Percentage shall have been determined by reference to Category 3 under clause
(A) above) and (C) after 180 days, the Facility Fee Percentage shall be
determined by reference to Category 4.
"Fees" shall mean the Facility Fees and the Administrative
Fees.
"Fixed Rate Borrowing" shall mean a Competitive Borrowing
comprised of Fixed Rate Loans.
"Fixed Rate Loan" shall mean any Competitive Loan bearing
interest at a fixed percentage rate per annum (expressed in the form of a
decimal to no more than four decimal places) specified by the Lender making
such Loan in its related Competitive Bid.
"Funded Indebtedness" of any corporation shall mean, at any
date for the determination thereof, without duplication, the outstanding
aggregate principal amount of (a) all indebtedness created, incurred or assumed
by such corporation (including, in the case of any Borrower, the Loans made to
such Borrower) which by its terms is not payable on demand and which matures by
its terms, or which by its terms such corporation has the right at its option
to renew or extend to a date, more than one year after the date of
determination, whether outstanding on the Closing Date or thereafter created,
incurred or assumed (including the current portion of any indebtedness which
shall constitute Funded Indebtedness at the time of its incurrence), and which
is (i) for money borrowed or (ii) evidenced by a note or similar instrument
given in connection with the acquisition of any business, properties or assets,
including securities, (b) any indebtedness of others of the kinds
<PAGE> 13
9
described in the preceding clause (a) for the payment of which such corporation
is responsible or liable as guarantor or otherwise and (c) amendments, renewals
and refundings of any such indebtedness; provided, however, that such term
shall not include any obligations under leases or any guarantees of obligations
of others under leases. 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" shall mean United States generally accepted accounting
principles, applied on a consistent basis.
"Governmental Authority" shall mean any court or governmental
agency, authority, instrumentality or regulatory body, in each case whether
Federal, state, local or foreign.
"Indenture" shall mean the Indenture dated as of October 1,
1982, between JCPenney and Bank of America National Trust and Savings
Association, as trustee, as amended by a First Supplemental Indenture dated as
of March 15, 1983, a Second Supplemental Indenture dated as of May 1, 1984, a
Third Supplemental Indenture dated as of March 7, 1986, and a Fourth
Supplemental Indenture dated as of June 7, 1991.
"Index Debt" shall mean JCPenney's senior unsecured, non
credit-enhanced, publicly held long-term indebtedness.
"Interest Payment Date" shall mean, with respect to any Loan,
the last day of the Interest Period applicable thereto and, in the case of a
Eurodollar Loan with an Interest Period of more than three months' duration or
a CD Loan or Fixed Rate Loan with an Interest Period of more than 90 days'
duration, each day that would have been an Interest Payment Date for such Loan
had successive Interest Periods of three months' duration or 90 days' duration,
as the case may be, been applicable to such Loan and, in addition, the date of
any refinancing or conversion of such Loan with or to a Loan of a different
Type.
<PAGE> 14
10
"Interest Period" shall mean (a) as to any Eurodollar
Borrowing that is a Standby Borrowing, the period commencing on the date of
such Borrowing or on the last day of the immediately preceding Interest Period
applicable to such Borrowing, as the case may be, and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the
last day) in the calendar month that is 1, 2, 3, 6 or, subject to availability
from each Lender, 12 months thereafter, as the Borrower requesting such
Borrowing may elect, (b) as to any ABR Borrowing, the period commencing on the
date of such Borrowing and ending on the date specified in the related Standby
Borrowing Request (which date shall in no event be later than 5 Business Days
after the date of such Borrowing), (c) as to any Eurodollar Borrowing that is a
Competitive Borrowing, the period commencing on the date of such Borrowing and
ending on the date specified in the Competitive Bids in which the offers to
make the Eurodollar Competitive Loans comprising such Borrowing were extended
(which date shall be (A) the numerically corresponding day (or, if there is no
numerically corresponding day, the last day) in the calendar month that is 1,
2, 3, 6, 9 or 12 months after the date of such Borrowing or (B) such other date
as shall be specified in such Competitive Bids) and (d) as to any CD Borrowing
or Fixed Rate Borrowing, the period specified in the Competitive Bids in which
the offers to make the CD Loans or Fixed Rate Loans comprising such Borrowing
were extended, commencing on the date of such Borrowing (which period shall be
a period of 30, 60, 90, 180 or 360 days' duration or such other duration as
shall be specified in such Competitive Bids); provided, however, that (x) 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 Eurodollar Loans 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, (y) no Interest Period may be selected that ends
later than the Maturity Date then in effect and (z) the Interest Period for any
ABR Loan or CD Loan made in lieu of, or resulting from the conversion of, a
Eurodollar Loan pursuant to Section 2.10 or 2.14 shall be determined in
accordance with the provisions of such Section. Interest shall accrue from and
including the first day of an Interest Period to but excluding the last day of
such Interest Period.
"Investment" means, with respect to each of Funding and its
Subsidiaries only, any acquisition of any of
<PAGE> 15
11
the capital stock of any corporation, or any acquisition of indebtedness of, or
any capital contribution, loan or advance to, or any guarantee of an obligation
of, any person, except (i) any loan or advance made in connection with the
lease, purchase or construction of office space for Funding or any of its
Subsidiaries or the purchase of materials, supplies, services or equipment for
the offices of Funding or any of its Subsidiaries and (ii) any guarantee or
endorsement made in the ordinary course of business in connection with the
deposit of items for collection or any guarantee of an obligation of an agent
or an employee of Funding or any of its Subsidiaries that is required to meet
applicable legal requirements.
"LIBO Rate" shall mean, 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 the average of the rates at
which dollar deposits approximately equal in principal amount to (i) in the
case of a Standby Borrowing, each LIBO Reference Lender's portion of such
Eurodollar Borrowing and (ii) in the case of a Competitive Borrowing, the
principal amounts that would have been each LIBO Reference Lender's portion of
such Competitive Borrowing had such Competitive Borrowing been a Standby
Borrowing, and for a maturity comparable to such Interest Period are offered to
the principal London office of the applicable LIBO Reference Lender 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.
"LIBO Reference Lenders" shall mean Morgan Guaranty Trust
Company of New York, Credit Suisse and NBD Bank, N.A., or such other or
additional Lenders as the Borrowers, the Agent and the Required Lenders shall
designate in writing as "LIBO Reference Lenders".
"Lien" shall mean, with respect to any asset, any mortgage,
lien, pledge or security interest in or on such asset.
"Loan" shall mean a Competitive Loan or a Standby Loan,
whether made as a Eurodollar Loan, a CD Loan, a Fixed Rate Loan or an ABR Loan,
as permitted hereby.
"Margin Stock" shall have the meaning given such term under
Regulation U.
<PAGE> 16
12
"Material Adverse Effect" shall mean (a) a materially adverse
effect on the business, assets or financial condition of (i) JCPenney and the
Restricted Subsidiaries, taken as a whole, or (ii) Funding and its
Subsidiaries, taken as a whole, (b) a material impairment of the ability of any
Borrower to perform any of its obligations under this Agreement or (c) a
material impairment of the rights of or benefits available to the Lenders under
this Agreement (other than any such impairment of rights or benefits that is
primarily attributable to (x) action taken by or against one or more Lenders
(excluding any action against one or more Lenders taken by any Borrower or
Restricted Subsidiary) or (y) circumstances that are unrelated to any
Borrower).
"Maturity Date" shall mean December 14, 1994.
"Maximum Amount" shall mean, with respect to any amount owing
to any Lender under this Agreement or in connection herewith, the maximum
amount of interest that such Lender is permitted to charge under applicable law
on such amount.
"Moody's" shall mean Moody's Investors Service, Inc. and any
successor thereto that is a nationally recognized rating agency.
"Multiemployer Plan" shall mean a multiemployer plan as
defined in Section 4001(a)(3) of ERISA to which any Borrower or any ERISA
Affiliate (other than one considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Section 414 of the Code) is making or accruing an
obligation to make contributions, or has within any of the preceding five plan
years made or accrued an obligation to make contributions.
"Net Tangible Assets" means the aggregate amount at which the
assets of JCPenney and all Restricted 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 JCPenney) ending within the 65 days next preceding the date of
determination, of JCPenney and the Restricted Subsidiaries (after deducting all
valuation and qualifying reserves relating to said assets), except any of
<PAGE> 17
13
the following described items that may be included among said assets:
(a) trademarks, patents, goodwill and similar intangibles;
(b) investments in and advances to Non-Restricted
Subsidiaries; and
(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.
"Non-Restricted Subsidiary" shall mean any Subsidiary other
than the Restricted Subsidiaries.
"Officer's Certificate" of any corporation shall mean a
certificate signed by a Responsible Officer of such corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
referred to and defined in ERISA.
"Penney Supplier" means any person that supplies goods or
services to JCPenney or any Subsidiary.
"Penney Supplier Receivables" means the obligations of Penney
Suppliers for the payment of money for goods or services sold by JCPenney or
any Subsidiary to Penney Suppliers for use in goods or services to be supplied
to JCPenney or any Subsidiary.
"person" shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or Governmental Authority.
"Plan" shall mean any pension plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
that is maintained for employees of any Borrower or ERISA Affiliate.
"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to time as
its Prime Rate.
<PAGE> 18
14
"Principal Property" means all real property and tangible
personal property owned by JCPenney or a Restricted Subsidiary constituting a
part of any store, warehouse or distribution center located within one of the
50 states of the United States or the District of Columbia, exclusive of motor
vehicles, mobile materials-handling equipment and other rolling stock, cash
registers and other point of sale recording devices and related equipment, and
data processing and other office equipment; provided, however, that such term
shall not include any such property constituting a part of any such store,
warehouse or distribution center unless the net book value of all real property
(including leasehold improvements) and store fixtures constituting a part of
such store, warehouse or distribution center exceeds .25% of Stockholders'
Equity.
"Receivables" means the obligations of customers for the
payment of money arising under agreements between such customers and JCPenney
or any Subsidiary.
"Register" shall have the meaning assigned to such term in
Section 9.04(d).
"Regulation G" shall mean Regulation G of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation U" shall mean Regulation U of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation X" shall mean Regulation X of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Reportable Event" shall mean any reportable event as defined
in Section 4043(b) of ERISA or the regulations issued thereunder with respect
to a Plan (other than a Plan maintained by an ERISA Affiliate which is
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Code).
"Required Lenders" shall mean, at any time, (a) for the
purposes of terminating the Commitments pursuant to clause (x) of Article VII,
Lenders having Commitments representing at least 66-2/3% of the Total
Commitment, (b) for purposes of acceleration pursuant to clause (y) of Article
VII, Lenders holding Loans representing at least
<PAGE> 19
15
66-2/3% of the aggregate principal amount of the Loans outstanding and (c) for
all other purposes, Lenders having Commitments representing greater than 50% of
the Total Commitment.
"Responsible Officer" of any corporation shall mean the
chairman, vice chairman, president, chief financial officer, treasurer or
controller of such corporation or any executive or senior vice president of
such corporation.
"Restricted Subsidiary" means any Subsidiary of JCPenney
(other than Funding) which JCPenney shall, by an Officer's Certificate of
JCPenney, have designated as a Restricted Subsidiary and the designation of
which as a Restricted Subsidiary shall not have been cancelled by an Officer's
Certificate of JCPenney; provided, however, that neither the designation of a
Subsidiary as a Restricted Subsidiary nor the cancellation of such designation
shall be operative if the immediate effect of such designation or cancellation
shall be to make Net Tangible Assets less than 200% of the Senior Funded
Indebtedness of JCPenney and the Restricted Subsidiaries on a pro forma basis
(eliminating intercompany items); and provided, further, that any Officer's
Certificate designating a Subsidiary as a Restricted Subsidiary or cancelling
such designation shall set forth the Net Tangible Assets and Senior Funded
Indebtedness of JCPenney and its Restricted Subsidiaries on a pro forma basis
(eliminating intercompany items) and show compliance with the first proviso of
this paragraph. Any such designation or cancellation of such designation may
be made more than once with respect to any Subsidiary.
"S&P" shall mean Standard & Poor's Corporation and any
successor thereto that is a nationally recognized rating agency.
"SEC" shall mean the Securities and Exchange commission.
"Senior Funded Indebtedness" of JCPenney shall mean any Funded
Indebtedness of JCPenney unless in any instrument or instruments evidencing or
securing such Funded Indebtedness or pursuant to which the same is outstanding,
or in any amendment, renewal, extension or refunding of such Funded
Indebtedness, it is provided that such Funded Indebtedness is subordinate in
right of payment to the Loans (a) in the event of any dissolution or winding-up
or total or partial liquidation or reorganization of JCPenney,
<PAGE> 20
16
whether voluntary or involuntary, or any bankruptcy, insolvency, receivership
or similar proceedings relative to JCPenney and (b) in the event of any default
in the payment of principal (including any required prepayments or
amortization) of or interest on any Loans of JCPenney. "Senior Funded
Indebtedness" of any Restricted Subsidiary means any Funded Indebtedness of
such Restricted Subsidiary and the aggregate preference on involuntary
liquidation of any class of stock of such Restricted Subsidiary ranking, either
as to payment of dividends or distribution of assets, prior to any other class
of stock of such Restricted Subsidiary.
"Standby Borrowing" shall mean a Borrowing consisting of
simultaneous Standby Loans from each of the Lenders.
"Standby Borrowing Request" shall mean a request made pursuant
to Section 2.04 in the form of Exhibit A-4.
"Standby Loans" shall mean the revolving loans made by the
Lenders to the Borrowers pursuant to Section 2.04. Each Standby Loan shall be
a Eurodollar Standby Loan or an ABR Loan.
"Standby Margin" shall mean on any date, with respect to each
Standby Loan made as part of any Eurodollar Standby Borrowing or ABR Borrowing,
as the case may be, the applicable percentage, based upon the ratings
applicable on such date to the Index Debt, set forth (a) in Table A below if
the aggregate principal amount of the Loans outstanding on such date does not
exceed 50% of the Total Commitment on such date and (b) in Table B below if the
aggregate principal amount of the Loans outstanding on such date exceeds 50% of
the Total Commitment on such date:
<PAGE> 21
17
Table A:
Eurodollar ABR
Borrowing Borrowing
--------- ---------
Category 1
----------
Moody's: A2 or better 0.1750% 0%
S&P: A or better
Category 2
----------
Moody's: A3
S&P: A- 0.2750% 0%
Category 3
----------
Moody's: Baa2 or better, but
lower than A3 0.3500% 0%
S&P: BBB or
better, but
lower than A-
Category 4
----------
Moody's: Lower than
Baa2, or 0.4250% 0%
unrated
S&P: Lower than
BBB, or
unrated
<PAGE> 22
18
Table B:
Eurodollar ABR
Borrowing Borrowing
--------- ---------
Category 1
----------
Moody's: A2 or better 0.2500% 0%
S&P: A or better
Category 2
----------
Moody's: A3 0.3250% 0%
S&P: A-
Category 3
----------
Moody's: Baa2 or
better, but 0.4250% 0%
lower than A3
S&P: BBB or
better, but
lower than A-
Category 4
----------
Moody's: Lower than
Baa2, or 0.5500% 0%
unrated
S&P: Lower than
BBB, or
unrated
For purposes of the foregoing, (i) if no rating for the Index Debt shall be
available from either rating agency, (other than because (a) such rating agency
shall no longer be in the business of rating corporate debt obligations or (b)
of any other reason outside the control of JCPenney and Funding), such rating
agency shall be deemed to have established a rating in Category 4, (ii) if the
ratings established or deemed to have been established by Moody's and S&P shall
fall within different Categories, the Standby Margin shall be based upon the
numerically higher Category (i.e. the Category corresponding to the lower
ratings) and
<PAGE> 23
19
(iii) if any rating established or deemed to have been established by Moody's
or S&P shall be changed (other than as a result of a change in the rating
system of either Moody's or S&P), such change shall be effective as of the date
on which such change is first publicly announced by the rating agency making
such change. If the rating system of either Moody's or S&P shall change prior
to the Maturity Date, or if either such rating agency shall cease to be in the
business of rating corporate debt obligations or shall no longer have in effect
a rating for any reason outside the control of JCPenney and Funding, the
Borrowers and the Lenders shall negotiate in good faith to amend the references
to specific ratings in this definition to reflect such changed rating system or
the absence of such a rating. Pending agreement on any such amendment, (i) if
the rating system of one such rating agency shall remain unchanged, or if a
rating shall be available from one such rating agency, the Standby Margin shall
be determined by reference to the rating established by such rating agency,
(ii) if no rating for the Index Debt shall be available from either rating
agency then (A) for 60 days, the Standby Margin shall be determined by
reference to the rating or ratings most recently available, (B) after 60 days,
the Standby Margin shall be determined by reference to Category 3 (or Category
4 if such Margin shall have been determined by reference to Category 3 under
clause (A) above) and (C) after 180 days, the Standby Margin shall be
determined by reference to Category 4.
"Statutory Reserves" shall mean 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 actual reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board and any other banking authority to which
the Agent is subject for new negotiable nonpersonal time deposits in dollars of
over $100,000 with maturities approximately equal to the applicable Interest
Period. Statutory Reserves shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"Stockholders' Equity" means the sum, as at the close of a
monthly accounting period (selected by JCPenney) ending within the 65 days next
preceding the date of determination, of (a) the aggregate of capital, capital
stock, capital surplus, capital in excess of par value of stock, reinvested
earnings, earned surplus and net income retained
<PAGE> 24
20
for use in the business (however the foregoing may be designated), after
deducting the cost of shares of capital stock of JCPenney held in its treasury,
of JCPenney and its consolidated Subsidiaries, determined in accordance with
GAAP, plus (b) the amount reflected in such determination as deferred tax
effects.
"Subsidiary" means (a) any corporation of which JCPenney,
directly or indirectly, owns more than 50% of the outstanding stock which at
the time shall have by the terms thereof ordinary voting power to elect
directors of such corporation, irrespective of whether or not at the time stock
of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency, or (b) any such
corporation of which such percentage of shares of outstanding stock of the
character described in the foregoing clause (a) shall at the time be owned,
directly or indirectly, (i) by JCPenney and one or more Subsidiaries as defined
in the foregoing clause (a) or (ii) by one or more such Subsidiaries.
"Support Agreements" shall mean (a) the Amended and Restated
Receivables Agreement dated as of January 29, 1980, between JCPenney and
Funding (formerly J. C. Penney Financial Corporation), as amended by Amendment
No. 1 thereto dated as of January 25, 1983, and (b) the Loan Agreement dated as
of January 28, 1986, between JCPenney and Funding, as amended by Amendment No.
1 thereto dated as of December 26, 1986, in each case as amended or modified
from time to time after the Closing Date in compliance with Section 5.10, and
(c) the subordinated Guaranty of the obligations of Funding dated as of
December 16, 1993, executed by JCPenney in favor of the Lenders and attached
hereto as Exhibit C.
"Taxes" shall mean, with respect to any Lender or Agent, any
and all U.S. Federal income taxes after application of any relevant treaty or
convention and all interest and penalties with respect thereto, attributable to
any payment made by any Borrower hereunder to such Lender or Agent.
"Total Commitment" shall mean at any time the aggregate amount
of the Lenders' Commitments, as in effect at such time.
"Tranche A Credit Agreement" shall mean the $800,000,000
Revolving Credit Agreement dated the date
<PAGE> 25
21
hereof among the Borrowers, the financial institutions named therein as lenders
(which include certain of the Lenders), Morgan Guaranty Trust Company of New
York as Agent for the Lenders, and Bankers Trust Company, Chemical Bank, and
Credit Suisse as Co- Agents for the Lenders, as such agreement may be amended
from time to time.
"Transactions" shall have the meaning assigned to such term in
Section 3.02.
"Type", when used in respect of any Loan or Borrowing, shall
refer to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, "Rate" shall
include the LIBO Rate, the Adjusted CD Rate, and the Alternate Base Rate and,
in the case of any Fixed Rate Loan, the fixed percentage rate per annum
specified by the Lender making such Loan in its related Competitive Bid.
SECTION 1.02. Terms Generally. The definitions in Section
1.01 shall apply equally to both 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". All references herein to Articles, Sections, Exhibits
and Schedules shall be deemed references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. 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, however, that, for purposes of
determining compliance with any covenant set forth in Article VI, such terms
shall be construed in accordance with GAAP as in effect on the date of this
Agreement applied on a basis consistent with the application used in preparing
JCPenney's audited consolidated financial statements referred to in Section
3.05.
ARTICLE II. THE CREDITS
SECTION 2.01. Commitments. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, to make Standby Loans to the Borrowers at
any time and from time to time on and after the date hereof
<PAGE> 26
22
and until the earlier of the Maturity Date and the termination of the
Commitment of such Lender, in an aggregate principal amount at any time
outstanding not to exceed such Lender's Commitment, subject, however, to the
conditions that (a) at no time shall the outstanding aggregate principal amount
of all Loans made by all Lenders exceed the Total Commitment and (b) at all
times the outstanding aggregate principal amount of all Standby Loans made by
each Lender to a Borrower shall equal the product of (i) the percentage which
its Commitment represents of the Total Commitment times (ii) the outstanding
aggregate principal amount of all Standby Loans made to such Borrower pursuant
to Section 2.04. Subject to Section 2.03(h), any Lender may at its discretion
make Competitive Loans in an aggregate principal amount up to the amount of the
Total Commitment of the Lenders hereunder. Each Lender's Commitment as of the
Closing Date is set forth opposite its respective name in Schedule 2.01 and,
after the Closing Date, each Lender's Commitment shall be set forth opposite
its respective name in the Register. Such Commitments may be terminated,
reduced or extended from time to time pursuant to Section 2.11.
Within the foregoing limits, the Borrowers may borrow, pay or
prepay and reborrow hereunder, on and after the Closing Date and prior to the
Maturity Date, subject to the terms, conditions and limitations set forth
herein.
SECTION 2.02. Loans. (a) Each Standby Loan shall be made as
part of a Borrowing consisting of Loans made by the Lenders ratably in
accordance with their Commitments; provided, however, that the failure of any
Lender to make any Standby Loan shall not by itself relieve any other Lender of
its obligation to lend hereunder (it being understood, however, that no Lender
shall be responsible for the failure of any other Lender to make any Loan
required to be made by such other Lender). Each Competitive Loan shall be made
in accordance with the procedures set forth in Section 2.03. The Standby Loans
or Competitive Loans comprising any Borrowing shall be (i) in the case of
Competitive Loans, in an aggregate principal amount which is an integral
multiple of $5,000,000 and not less than $25,000,000 (or, if less, an aggregate
principal amount equal to the Total Commitment on the date of such Borrowing
minus the outstanding aggregate principal amount on such date of all
Competitive Loans) and (ii) in the case of Standby Loans, in an aggregate
principal amount which is an integral multiple of $5,000,000 and not less than
$25,000,000 (or an aggregate
<PAGE> 27
23
principal amount equal to the remaining available balance of the Total
Commitment).
(b) Subject to Sections 2.10 and 2.14, each Competitive
Borrowing shall be comprised entirely of Eurodollar Competitive Loans, CD Loans
or Fixed Rate Loans, and each Standby Borrowing shall be comprised entirely of
Eurodollar Standby Loans or ABR Loans, as the Borrower requesting such
Competitive Borrowing or Standby Borrowing may specify pursuant to Section 2.03
or 2.04, as the case may be.
(c) Subject to Section 2.05, each Lender shall make each Loan
to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds to the Agent in New York, New York, not later than
12:00 noon, New York City time (11:00 a.m., New York City time, in the case of
a Eurodollar Loan), and the Agent shall by 2:00 p.m., New York City time,
credit the amounts so received to the general deposit account of the Borrower
of such Loan with the Agent or, if a Borrowing shall not occur on such date
because any condition precedent herein specified shall not have been met,
return the amounts so received to the respective Lenders. Competitive Loans
shall be made by the Lender or Lenders whose Competitive Bids therefor are
accepted pursuant to Section 2.03 in the amounts so accepted and Standby Loans
shall be made by the Lenders pro rata in accordance with Section 2.16. Unless
the Agent shall have received notice from a Lender prior to the date of any
Borrowing that such Lender will not make available to the Agent such Lender's
portion of such Borrowing, the Agent may assume that such Lender has made such
portion available to it on the date of such Borrowing in accordance with this
paragraph (c) and may, in reliance upon such assumption, make a corresponding
amount available on such date to the Borrower requesting such Borrowing. If
and to the extent that such Lender shall not have made such portion available
to the Agent, such Lender and such Borrower severally agree to pay or repay to
the Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to such
Borrower until the date such amount is repaid to the Agent at (i) in the case
of such Borrower, the interest rate applicable at the time to the Loans
comprising such Borrowing and (ii) in the case of such Lender, the Federal
Funds Effective Rate; provided, however, that such Borrower shall not in any
event have any liability in respect of such repayment under Section 2.15. If
such
<PAGE> 28
24
Lender shall pay to the Agent such corresponding amount, such amount shall
constitute such Lender's Loan as part of such Borrowing for purposes of this
Agreement.
(d) Notwithstanding any other provision of this Agreement, no
Borrower shall be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity Date.
(e) The Loans of each Type made by each Lender shall be made
through and maintained at such Lender's Applicable Lending Office for Loans of
such Type. Any Lender may change its Applicable Lending Office for any Type of
Loans without the prior written consent of JCPenney so long as (i) such Lender
shall have no knowledge that such change would cause it to be unlawful for such
Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan and (ii)
such Lender shall not be entitled to recoupment, reimbursement or
indemnification in accordance with the terms and conditions of Sections 2.13
and 2.15 to the extent that such Lender shall have had knowledge at the time of
such change in Applicable Lending Office that such entitlement would arise as a
result of such change.
SECTION 2.03. Competitive Bid Procedure. (a) In order to
request Competitive Bids, a Borrower shall hand deliver, telex or telecopy to
the Agent a duly completed Competitive Bid Request in the form of Exhibit A-1
hereto, to be received by the Agent (i) in the case of a Eurodollar Borrowing
or a CD Borrowing, not later than 11:00 a.m., New York City time, four Business
Days before a proposed Competitive Borrowing and (ii) in the case of a Fixed
Rate Borrowing, not later than 11:00 a.m., New York City time, one Business Day
before a proposed Competitive Borrowing. No ABR Loan shall be requested in, or
made pursuant to, a Competitive Bid Request. A Competitive Bid Request that
does not conform substantially to the format of Exhibit A-1 shall be rejected
and the Agent shall promptly notify the appropriate Borrower of such rejection
by telex or telecopier. Such request shall in each case refer to this
Agreement and specify (x) that the Borrowing then being requested is to be a
Eurodollar Borrowing, a CD Borrowing or a Fixed Rate Borrowing, (y) the date of
such Borrowing (which shall be a Business Day) and the aggregate principal
amount thereof (which shall be, subject to the third sentence of Section
2.02(a), in a minimum principal amount of $25,000,000 and in an integral
multiple of $5,000,000 and
<PAGE> 29
25
(z) the Interest Period with respect thereto (which may not end after the
Maturity Date). Promptly after its receipt of a Competitive Bid Request that
is not rejected as aforesaid, the Agent shall invite by telex or telecopier (in
the form set forth in Exhibit A-2 hereto) the Lenders to bid, on the terms and
conditions of this Agreement, to make Competitive Loans pursuant to the
Competitive Bid Request.
(b) The Agent may, in its sole discretion, make one or more
Competitive Bids to the appropriate Borrower responsive to such Borrower's
Competitive Bid Request. Each Competitive Bid by the Agent must be submitted
to the Borrower via telex or telecopier, in the form of Exhibit A-3 hereto, (i)
in the case of a Eurodollar Borrowing or CD Borrowing, not later than 8:30
a.m., New York City time, three Business Days before a proposed Competitive
Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later than 8:30
a.m., New York City time, on the day of a proposed Competitive Borrowing. Each
Lender may, in its sole discretion, make one or more Competitive Bids to the
appropriate Borrower responsive to such Borrower's Competitive Bid Request.
Each Competitive Bid by a Lender must be received by the Agent via telex or
telecopier, in the form of Exhibit A-3 hereto, (i) in the case of a Eurodollar
Borrowing or CD Borrowing, not later than 9:00 a.m., New York City time, three
Business Days before a proposed Competitive Borrowing and (ii) in the case of a
Fixed Rate Borrowing, not later than 9:00 a.m., New York City time, on the day
of a proposed Competitive Borrowing. Multiple bids will be accepted by the
Agent. Competitive Bids that do not conform substantially to the format of
Exhibit A-3 may be rejected by the Agent after conferring with, and upon the
instruction of, the Borrower requesting such Competitive Bids, and the Agent
shall notify the Lender making such nonconforming bid of such rejection as soon
as practicable. Each Competitive Bid shall refer to this Agreement and specify
(x) the principal amount (which shall be in an integral multiple of $5,000,000
(unless such principal amount shall equal the entire principal amount of the
Competitive Borrowing requested by such Borrower) and which may equal such
entire principal amount) of the Competitive Loan or Loans that the Lender is
willing to make to the Borrower requesting such Competitive Bid, (y) the
Competitive Bid Rate or Rates at which the Lender is prepared to make the
Competitive Loan or Loans and (z) the Interest Period and the last day thereof.
If any Lender shall elect not to make a Competitive Bid, such Lender shall so
notify the Agent via telex or telecopier (A) in the case
<PAGE> 30
26
of a Eurodollar Borrowing or a CD Borrowing, not later than 9:00 a.m., New York
City time, three Business Days before a proposed Competitive Borrowing and (B)
in the case of a Fixed Rate Borrowing, not later than 9:00 a.m., New York City
time, on the day of a proposed Competitive Borrowing; provided, however, that
failure by any Lender to give such notice shall not cause such Lender to be
obligated to make any Competitive Loan as part of such Competitive Borrowing.
A Competitive Bid submitted by a Lender pursuant to this paragraph (b) shall be
irrevocable.
(c) The Agent shall notify the appropriate Borrower by telex
or telecopier not later than (i) in the case of a Eurodollar Borrowing or a CD
Borrowing, 10:00 a.m., New York City time, three Business Days before the
proposed Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing,
10:00 a.m., New York City time, on the day of the proposed Competitive
Borrowing of all the Competitive Bids made, the Competitive Bid Rate and the
principal amount of each Competitive Loan in respect of which a Competitive Bid
was made and the identity of the Lender that made each bid. The Agent shall
send a copy of all Competitive Bids to such Borrower for its records as soon as
practicable after completion of the bidding process set forth in this Section
2.03.
(d) The appropriate Borrower may in its sole and absolute
discretion, subject only to the provisions of this paragraph (d) and paragraph
(h) below, accept or reject any Competitive Bid referred to in paragraph (c)
above. Such Borrower shall notify the Agent by telex or telecopier not later
than (i) in the case of a Eurodollar Borrowing or a CD Borrowing, 11:30 a.m.,
New York City time, three Business Days before the proposed Competitive
Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later than 11:30
a.m., New York City time, on the day of the proposed Competitive Borrowing
whether and to what extent it has decided to accept or reject any of or all the
bids referred to in paragraph (c) above; provided, however, that (v) the
failure by such Borrower to give such notice shall be deemed to be a rejection
of all the bids referred to in paragraph (c) above, (w) such Borrower shall not
accept a bid made at a particular Competitive Bid Rate if it has decided to
reject a bid made at a lower Competitive Bid Rate, (x) the aggregate amount of
the Competitive Bids accepted by such Borrower shall not exceed the principal
amount specified in the related Competitive Bid Request, (y) if such Borrower
shall accept a bid or bids made at a
<PAGE> 31
27
particular Competitive Bid Rate but the amount of such bid or bids shall cause
the total amount of bids to be accepted by such Borrower to exceed the amount
specified in the related Competitive Bid Request, then such Borrower shall
accept a portion of such bid or bids in an amount equal to the amount specified
in the related Competitive Bid Request less the amount of all other Competitive
Bids accepted with respect to such Competitive Bid Request, which acceptance,
in the case of multiple bids at such Competitive Bid Rate, shall be made pro
rata in accordance with the amount of each such bid at such Competitive Bid
Rate, and (z) except pursuant to clause (y) above, no bid shall be accepted for
a Competitive Loan unless the principal amount of such Competitive Loan is in
an integral multiple of $5,000,000 or is equal to the entire principal amount
of the Competitive Borrowing being requested by such Borrower; provided
further, however, that if a Competitive Loan must be in an amount less than
$5,000,000 because of the provisions of clause (y) above, such Competitive Loan
may be for a minimum of $1,000,000 or any integral multiple thereof, and in
calculating the pro rata allocation of acceptances of portions of multiple bids
at a particular Competitive Bid Rate pursuant to clause (y) the amounts shall
be rounded to integral multiples of $1,000,000 in a manner which shall be in
the discretion of such Borrower. A notice given pursuant to this paragraph (d)
by the appropriate Borrower shall be irrevocable.
(e) The Agent shall promptly notify each bidding Lender
whether or not its Competitive Bid has been accepted (and if so, in what amount
and at what Competitive Bid Rate) by telex or telecopier sent by the Agent, and
each successful bidder will thereupon become bound, subject to the other
applicable conditions hereof, to make the Competitive Loan in respect of which
its bid has been accepted.
(f) The Borrowers shall not make more than 10 Competitive Bid
Requests during any 30-day period.
(g) All Notices required by this Section 2.03 shall be given
in accordance with Section 9.01.
(h) At no time shall the outstanding aggregate principal
amount of all Competitive Loans made by all Lenders exceed the Total Commitment
in effect at such time.
<PAGE> 32
28
(i) The Agent shall hold in confidence each Competitive Bid
received by the Agent until such Competitive Bid has been disclosed to the
appropriate Borrower pursuant to paragraph (d) above.
SECTION 2.04. Standby Borrowing Procedure. In order to
request a Standby Borrowing, a Borrower shall hand deliver, telex or telecopy a
Standby Borrowing Request in the form of Exhibit A-4 to the Agent (a) in the
case of a Standby Borrowing that is a Eurodollar Borrowing, not later than
11:00 a.m., New York City time, three Business Days before a proposed borrowing
and (b) in the case of an ABR Borrowing, not later than 10:00 a.m., New York
City time, on the day of a proposed borrowing. A Borrower shall be deemed to
have given a Standby Borrowing Request if it (i) notifies an officer of the
Agent identified in Section 9.01 by telephone of the content of such Standby
Borrowing Request not later than the relevant time set forth above for delivery
thereof and (ii) delivers such Standby Borrowing Request to Agent as soon as
practicable; provided, however, that a Borrower shall not have any right to
receive the proceeds of a Standby Borrowing unless the Agent has received the
related written Standby Borrowing Request. Such notice shall be irrevocable
and shall in each case specify (i) whether the Borrowing then being requested
is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such
Standby Borrowing (which shall be a business Day) and the amount thereof; and
(iii) the Interest Period with respect thereto. If no election as to the Type
of Standby Borrowing is specified in any such notice, then the requested
Standby Borrowing shall be an ABR Borrowing. If no Interest Period with
respect to any Standby Borrowing is specified in any such notice, then the
Borrower requesting such Borrowing shall be deemed to have selected an Interest
Period of one month's duration, in the case of a Eurodollar Borrowing, or five
days' duration, in the case of an ABR Borrowing. If a Borrower shall not have
given notice in accordance with this Section 2.04 of its election to refinance
a Standby Borrowing of such Borrower prior to the end of the Interest Period in
effect for such Borrowing, then such Borrower shall (unless such Borrowing is
repaid at the end of such Interest Period) be deemed to have given notice of an
election to refinance such Borrowing with an ABR Borrowing. The Agent shall
promptly advise the Lenders of any notice given pursuant to this Section 2.04
and of each Lender's portion of the requested Borrowing.
<PAGE> 33
29
SECTION 2.05. Refinancings. Any Borrower may refinance all
or any part of any Borrowing of such Borrower with a Borrowing of the same or a
different Type made pursuant to Section 2.03 or Section 2.04, subject to the
conditions and limitations set forth herein and elsewhere in this Agreement,
including refinancings of Competitive Borrowings with Standby Borrowings and
Standby Borrowings with Competitive Borrowings. Any Borrowing or part thereof
so refinanced shall be deemed to be repaid in accordance with Section 2.07 with
the proceeds of a new Borrowing hereunder and the proceeds of the new
Borrowing, to the extent they do not exceed the principal amount of the
Borrowing being refinanced, shall not be paid by the Lenders to the Agent or by
the Agent to the appropriate Borrower pursuant to Section 2.02(c); provided,
however, that (i) if the principal amount extended by a Lender in a refinancing
is greater than the principal amount extended by such Lender in the Borrowing
being refinanced, then such Lender shall pay such difference to the Agent for
distribution to the Lenders described in (ii) below, (ii) if the principal
amount extended by a Lender in the Borrowing being refinanced is greater than
the principal amount being extended by such Lender in the refinancing, the
Agent shall return the difference to such Lender out of amounts received
pursuant to (i) above and (iii) to the extent any Lender fails to pay to the
Agent amounts due from it pursuant to (i) above, any Loan or portion thereof
being refinanced shall not be deemed repaid in accordance with Section 2.07 and
shall be payable by the Borrower to which such Loan was made; provided,
however, that such Borrower shall not have any liability under Section 2.15 in
respect of any of its payment obligations under this clause (iii).
SECTION 2.06. Fees. (a) The Borrowers agree, jointly and
severally, to pay to each Lender, through the Agent, on each March 31, June 30,
September 30 and December 31 and on the date on which the Commitment of such
Lender shall be terminated as provided herein, a facility fee (a "Facility
Fee") at a rate per annum equal to the Facility Fee Percentage from time to
time in effect on the amount of the Commitment of such Lender, whether used or
unused, from time to time in effect during the preceding quarter (or shorter
period commencing with the date hereof and/or ending with the Maturity Date or
the Commitment Termination Date with respect to each Lender or any later date
on which the Commitment of such Lender shall be terminated). All Facility Fees
shall be computed in arrears on the basis of the actual number of days elapsed
in a year
<PAGE> 34
30
of 360 days. The Facility Fee due to each Lender shall commence to accrue on
the Closing Date (or, if later, the date on which such Lender became a Lender)
and shall cease to accrue on the earlier of the Maturity Date and the
termination of the Commitment of such Lender as provided herein.
(b) The Borrowers agree, jointly and severally, to pay to the
Agent from time to time, for its own account, agent and administrative fees
(the "Administrative Fees") at such times and in such amounts as have been
previously agreed upon in writing between the Borrowers and the Agent.
(c) All Fees shall be paid on the dates due in immediately
available funds. Once paid, none of the Fees shall be refundable, except in
the event of manifest error.
SECTION 2.07. Repayment of Loans; Evidence of the Borrowers'
Obligations. Subject to Section 4.01, the outstanding principal balance of
each Competitive Loan and Standby Loan made by any Lender shall be payable (i)
except in the case of ABR Loans, on the last day of the Interest Period
applicable to such Loan and (ii) on the Commitment Termination Date with
respect to such Lender. Each Competitive Loan and each Standby Loan shall bear
interest from the date thereof on the outstanding principal balance thereof as
set forth in Section 2.08. With respect to each Lender, the entries made in
the accounts maintained by the Agent and such Lender shall be prima facie
evidence of the existence and amounts of the monetary obligations payable by
any Borrower to such Lender in respect of the Loans made by such Lender to such
Borrower; provided that the failure to maintain any such accounts or any error
therein shall not affect the obligations of the Borrowers hereunder.
SECTION 2.08. Interest on Loans. (a) Subject to the
provisions of Section 2.09, the Loans comprising each Eurodollar Borrowing
shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 360 days) at a rate per annum on any date of determination equal
to (i) in the case of each Eurodollar Standby Loan, the LIBO Rate for the
Interest Period in effect for such Borrowing plus the Standby Margin for such
date, and (ii) in the case of each Eurodollar Competitive Loan, the LIBO Rate
for the Interest Period in effect for such Loan plus the Competitive Margin
offered by the Lender making such Loan and accepted by the Borrower requesting
such Loan pursuant to Section 2.03. The LIBO Rate for each Interest Period
<PAGE> 35
31
shall be determined by the Agent in consultation with the LIBO Reference
Lenders, and such determination shall be conclusive absent manifest error. The
Agent shall promptly advise the Borrowers and each Lender of such
determination.
(b) Subject to the provisions of Section 2.09, the Loans
comprising each ABR Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be) at a rate per annum equal to the Alternate Base Rate. The Alternate Base
Rate shall be determined by the Agent, and such determination shall be
conclusive absent manifest error. The Agent shall promptly advise the
Borrowers and each Lender of such determination.
(c) Subject to the provisions of Section 2.09, the Loans
comprising each CD Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) at a rate per annum
equal to the Adjusted CD Rate for the Interest Period in effect for such
Borrowing plus, in the case of each such Loan, the Competitive Margin offered
by the Lender making such Loan and accepted by the Borrower requesting such
Borrowing pursuant to Section 2.03, provided, however, that any CD Loan made
pursuant to Section 2.10 or 2.14 shall bear interest (computed as described in
this paragraph) at a rate per annum on any date of determination equal to the
Adjusted CD Rate for the Interest Period applicable to such CD Loan plus the
Standby Margin for such date.
(d) Subject to the provisions of Section 2.09, each Fixed
Rate Loan shall bear interest at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) equal to the fixed rate
of interest offered by the Lender making such Loan and accepted by the Borrower
requesting the applicable Fixed Rate Borrowing pursuant to Section 2.03.
(e) Interest on each Borrowing shall be payable on each
applicable Interest Payment Date.
SECTION 2.09. Default Interest. If any Borrower shall
default in the payment of the principal of or interest on any Loan or any other
amount becoming due hereunder, whether by scheduled maturity, notice of
prepayment, acceleration or otherwise, such Borrower shall on demand from time
to time from the Agent pay interest, to the extent permitted by applicable law,
on such defaulted amount from
<PAGE> 36
32
the date on which the Agent first notifies such Borrower that it will be
required to pay interest pursuant to this Section on such defaulted amount up
to (but not including) the date of actual payment (after as well as before
judgment) at a rate per annum (computed on the basis of the actual number of
days elapsed over a year of 365 or 366 days, as the case may be) equal to the
Alternate Base Rate plus 2%.
SECTION 2.10. Alternate Rate of Interest. In the event, and
on each occasion, that on the day two Business Days prior to the commencement
of any Interest Period for a Eurodollar Borrowing the LIBO Reference Lenders
shall have determined and communicated to the Agent that dollar deposits in the
principal amounts of the Eurodollar Loans comprising such Borrowing are not
generally available in the London interbank market, or that the rates at which
such dollar deposits are being offered will not adequately and fairly reflect
the cost to any Lender of making or maintaining its Eurodollar Loan during such
Interest Period, or that reasonable means do not exist for ascertaining the
LIBO Rate, the Agent shall, as soon as practicable thereafter, give written or
telex notice of such determination to the Borrowers and the Lenders. In the
event of any such determination, until the Agent shall have advised the
Borrowers and the Lenders that the circumstances giving rise to such notice no
longer exist, (i) any request by any Borrower for a Competitive Borrowing
pursuant to Section 2.03 shall be of no force and effect and shall be denied by
the Agent and (ii) any request by any Borrower for a Eurodollar Borrowing
pursuant to Section 2.04 shall be deemed to be a request for (A) an ABR
Borrowing having an Interest Period of five days' duration and (B) a
refinancing of such ABR Borrowing with an ABR Borrowing or a CD Borrowing, as
such Borrower shall elect by notice to the Agent not later than 11:00 a.m., New
York City time, one Business Day before such refinancing, comprised of Loans
having an Interest Period that is, when added to the Interest Period for the
ABR Borrowing being refinanced, equal to (in the case of an ABR Borrowing) or
as close as possible to (in the case of a CD Borrowing) the Interest Period
requested by such Borrower in connection with such Eurodollar Borrowing. The
parties hereto shall have the same rights and obligations in respect of a
deemed request for a CD Borrowing pursuant to this Section and the CD Loans
made pursuant thereto, and the Commitments shall be utilized by such CD Loans,
as if such Borrowing were a Standby Borrowing requested, and such Loans were
Standby Loans made,
<PAGE> 37
33
pursuant to Section 2.04. Each determination by the LIBO Reference Lenders
hereunder shall be conclusive absent manifest error.
SECTION 2.11. Termination and Reduction of Commitments. (a)
Any Commitment that has not been terminated prior to the Maturity Date shall be
automatically terminated on the Maturity Date.
(b) Except as provided in Section 2.20 hereof, upon at least
5 Business Days' prior irrevocable written or telex notice to the Agent,
JCPenney may at any time in whole permanently terminate, or from time to time
in part permanently reduce, the Total Commitment; provided, however, that each
partial reduction of the Total Commitment shall be in an integral multiple of
$5,000,000 and in a minimum principal amount of $25,000,000 or, if less, the
Total Commitment then in effect.
(c) Except as provided in Section 2.20, each reduction in the
Total Commitment hereunder shall be made ratably among the Lenders in
accordance with their respective Commitments. Subject to Section 9.09, the
Borrowers shall pay to the Agent for the account of the Lenders, on the date of
each termination or reduction, the Commitment Fees and Facility Fees accrued
through the date of such termination or reduction.
(d) The Commitment of each Lender shall automatically and
permanently terminate on December 14, 1994 (the "Commitment Termination Date");
provided, however, that the Commitment Termination Date with respect to any
Lender shall not be extended under any circumstances to a date later than the
Maturity Date.
SECTION 2.12. Prepayment. (a) Each Borrower shall have the
right at any time and from time to time to prepay any Standby Borrowing or any
Competitive Borrowing of such Borrower, in whole or in part, subject to the
requirements of Section 2.15 but otherwise without premium or penalty, upon
giving written or telex notice (or telephone notice promptly confirmed by
written or telex notice) to the Agent before 10:00 a.m., New York City time,
one Business Day prior to such prepayment; provided, however, that each partial
prepayment shall be in an amount which is an integral multiple of $5,000,000
and not less than $25,000,000.
<PAGE> 38
34
(b) On the date of any termination or reduction of the
Commitments pursuant to Section 2.11, the Borrowers shall pay or prepay so much
of the Standby Borrowings as shall be necessary in order that the aggregate
principal amount of the Standby Loans outstanding will not exceed the Total
Commitment after giving effect to such termination or reduction.
(c) Each notice of prepayment shall specify the prepayment
date and the principal amount of each Borrowing (or portion thereof) to be
prepaid, shall be irrevocable and shall commit the Borrower giving such notice
to prepay such Borrowing (or portion thereof) by the amount stated therein on
the date stated therein. All prepayments under this Section 2.12 shall be
subject to Section 2.15 but otherwise without premium or penalty. All
prepayments under this Section 2.12 shall be accompanied by accrued interest on
the principal amount being prepaid to the date of payment.
SECTION 2.13. Reserve Requirements; Change in Circumstances.
Subject to the procedures and limitations of Section 2.20:
(a) Notwithstanding any other provision herein, if after the
date of this Agreement any change in applicable law or regulation or in the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law) shall change the basis of taxation of payments to any Lender of
the principal of or interest on any Eurodollar Loan, CD Loan or Fixed Rate Loan
made by such Lender or any Fees or other amounts payable hereunder (other than
changes in respect of taxes imposed on such Lender by the jurisdiction in which
such Lender is organized, has its principal office or maintains its Applicable
Lending office for such Loan or by any political subdivision or taxing
authority in any such jurisdiction), or shall 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 such Lender, or shall impose
on such Lender or the London interbank market any other condition affecting
this Agreement or any Eurodollar Loan, CD Loan or Fixed Rate Loan made by such
Lender, and the result of any of the foregoing shall be to increase the cost to
such Lender of making or maintaining any Eurodollar Loan, CD Loan or Fixed Rate
Loan or to reduce the amount of any sum received or receivable by such Lender
hereunder (whether of principal, interest or otherwise) by an amount
<PAGE> 39
35
deemed by such Lender in its reasonable judgment to be material, then such
additional amount or amounts as will compensate such Lender for such additional
costs incurred or reduction suffered will be paid to such Lender in accordance
with Section 2.20 (i) if such additional costs or reduction shall relate to a
particular Loan, by the Borrower to which such Loan was made and (ii)
otherwise, by JCPenney. Notwithstanding the foregoing, no Lender shall be
entitled to request compensation under this paragraph with respect to any Loan
if it shall have been aware that the change giving rise to such request had
been adopted or enacted at the earlier of the time at which the Lender became a
party to this Agreement or, with respect to a Competitive Loan, the time of
submission of the Competitive Bid pursuant to which such Competitive Loan shall
have been made.
(b) If the adoption after the date hereof of any law, rule,
regulation or guideline regarding capital adequacy, or any change after the
date hereof in any of the foregoing or in the interpretation or administration
of any of the foregoing by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender (or any Applicable Lending Office of such Lender) with
any request or directive regarding capital adequacy (whether or not having the
force of law) made or issued after the date hereof by any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Lender's capital as a consequence of this Agreement or
the Loans made by such Lender pursuant hereto to a level below that which such
Lender could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's policies with respect to capital adequacy) by
an amount deemed by such Lender in its reasonable judgment to be material, then
subject to Section 2.20 hereof, from time to time such additional amount or
amounts as will compensate such Lender for any such reduction suffered will be
paid to such Lender in accordance with Section 2.20 (i) if such reduction shall
relate to a particular Loan, by the Borrower to which such Loan was made and
(ii) otherwise, by JCPenney.
SECTION 2.14. Change in Legality. (a) Notwithstanding any
other provision herein, if any change after the Closing Date in any law or
regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it
unlawful for any Lender to make or maintain any Eurodollar
<PAGE> 40
36
Loan or to give effect to its obligations as contemplated hereby with respect
to any Eurodollar Loan, then, by written notice to the Borrowers and to the
Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made
by such Lender hereunder, whereupon such Lender shall not submit a
Competitive Bid in response to a request for Competitive Loans and any
request by any Borrower for a Standby Borrowing comprised of
Eurodollar Loans shall, as to such Lender only, be deemed a request
for an ABR Loan or a CD Loan, as such Borrower shall elect by notice
to the Agent not later than 11:00 a.m., New York City time, one
Business Day before such Borrowing, having an Interest Period equal to
(in the case of an ABR Loan) or as close as possible to (in the case
of a CD Loan) the Interest Period applicable to such Eurodollar Loans
unless such declaration shall be subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it
be converted to ABR Loans or to CD Loans, in which event all such
Eurodollar Loans shall be automatically converted to ABR Loans or, if
JCPenney shall so notify the Agent on the date of such conversion and
the Agent shall have determined that the Adjusted CD Rate can be
determined for the Interest Period in question, to CD Loans as of the
effective date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans or CD Loans made by such Lender in lieu of, or resulting from the
conversion of, such Eurodollar Loans. The parties hereto shall have the same
rights and obligations in respect of a deemed request for a CD Loan pursuant to
clause (i) above and any CD Loan made pursuant to paragraph (a) above, and the
Commitments shall be utilized by any such CD Loan, as if such CD Loan were a
Standby Loan requested and made pursuant to Section 2.04.
(b) For purposes of this Section 2.14, a notice to the
Borrowers by any Lender shall be effective as to each Eurodollar Loan, if
lawful, on the last day of the Interest Period currently applicable to such
Eurodollar Loan; in all other cases such notice shall be effective on the date
of
<PAGE> 41
37
receipt by the Borrowers (in which case the ABR Loan or CD Loan resulting from
the conversion of such Eurodollar Loan pursuant to clause (ii) of paragraph (a)
above shall have an Interest Period equal to (in the case of an ABR Loan) or as
close as possible to (in the case of a CD Loan) the Interest Period applicable
to such Eurodollar Loan).
SECTION 2.15. Indemnity. Each Borrower agrees to indemnify
the Agent and each Lender against any reasonable out- of-pocket loss or expense
which the Agent and/or such Lender may sustain or incur as a consequence of (a)
any failure by such Borrower to fulfill on the date of any borrowing hereunder
the applicable conditions set forth in Article IV, (b) any failure by such
Borrower to borrow or to refinance or continue any Loan hereunder after
irrevocable notice of such borrowing, refinancing or continuation has been
given pursuant to Section 2.03 or 2.04, (c) any payment, prepayment or
conversion of a Eurodollar Loan, CD Loan or Fixed Rate Loan made to such
Borrower that is required by any other provision of this Agreement or otherwise
made or deemed made on a date other than the last day of the Interest Period
applicable thereto or (d) any default in payment or prepayment of the principal
amount of any Eurodollar Loan, CD Loan or Fixed Rate Loan made to such Borrower
or any part thereof or interest accrued thereon, as and when due and payable
(at the due date thereof, whether by scheduled maturity, acceleration,
irrevocable notice of prepayment or otherwise), after the expiration of the
applicable grace period, including, in each such case, any reasonable out-of-
pocket loss or expense sustained or incurred in liquidating or employing
deposits from third parties acquired to effect or maintain such Loan or any
part thereof as a Eurodollar Loan, CD Loan or Fixed Rate Loan. Such loss or
reasonable expense shall include an amount equal to the excess, if any, as
reasonably determined by the Agent and/or such Lender, of (i) its cost of
obtaining the funds for the Loan being paid, prepaid, converted or not borrowed
(based on the LIBO Rate or Adjusted CD Rate or, in the case of a Fixed Rate
Loan, the fixed rate of interest applicable thereto) for the period from the
date of such payment, prepayment or failure to borrow to the last day of the
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan which would have commenced on the date of such
failure) over (ii) the amount of interest (as reasonably determined in good
faith by the Agent and/or such Lender) that would be realized by the Agent
and/or such Lender in reemploying the funds so paid, prepaid or not borrowed
for such period or
<PAGE> 42
38
Interest Period, as the case may be; provided, however, that with respect to
any Eurodollar Loan or CD Loan for which the corresponding LIBO Rate or
Adjusted CD Rate, as the case may be, is available for the period or Interest
Period in question, the amount of interest realized in reemploying such funds
shall be computed at such LIBO Rate or Adjusted CD Rate, as the case may be, at
the time of the applicable payment, prepayment or failure to borrow. In order
to exercise its rights under this Section, the Agent and/or a Lender shall
deliver to the appropriate Borrower a certificate setting forth any amount or
amounts which the Agent and/or such Lender is entitled to receive pursuant to
this Section. Such Borrower shall have a 30-Business Day period following the
receipt of such certificate (if such Borrower in good faith disagrees with the
assertion that any payment under such section is due or with the amount shown
as due on such certificate and so notifies the Agent and/or such Lender of such
disagreement within 10 Business Days following receipt of such certificate) to
negotiate with the Agent and/or such Lender, which negotiations shall be
conducted by the respective parties in good faith, and to agree upon another
amount that will adequately compensate the Agent and/or such Lender, it being
expressly understood that if such Borrower does not provide the required notice
of its disagreement as provided above, such Borrower shall pay the amount shown
as due on the certificate on the tenth Business Day following receipt thereof
and further if such Borrower does provide such required notice, and
negotiations are entered into but do not result in agreement by such Borrower
and the Agent and/or such Lender within the 30-Business Day period, then such
Borrower shall pay the amount shown as due on the certificate on the last day
of such period.
SECTION 2.16. Pro Rata Treatment. Except as required under
Sections 2.14 and 2.20(b), each Standby Borrowing, each payment or prepayment
of principal of any Standby Borrowing, each payment of interest on the Standby
Loans, each payment of the Facility Fees and Commitment Fees, each reduction of
the Commitments and each refinancing of any Borrowing with a Standby Borrowing
of any Type, shall be allocated pro rata among the Lenders in accordance with
their respective Commitments (or, if such Commitments shall have expired or
been terminated, in accordance with the respective principal amounts of their
outstanding Standby Loans). Each payment of principal of any Competitive
Borrowing shall be allocated pro rata among the Lenders participating in such
Borrowing in accordance with the
<PAGE> 43
39
respective principal amounts of their outstanding Competitive Loans comprising
such Borrowing. Each payment of interest on any Competitive Borrowing shall be
allocated pro rata among the Lenders participating in such Borrowing in
accordance with the respective amounts of accrued and unpaid interest on their
outstanding Competitive Loans comprising such Borrowing. For purposes of
determining the available Commitments of the Lenders at any time, each
outstanding Competitive Borrowing shall be deemed to utilize the Commitments of
each of the Lenders pro rata in accordance with their respective Commitments.
Each Lender agrees that in computing such Lender's portion of any Borrowing to
be made hereunder, the Agent may, in its discretion, round each Lender's
percentage of such Borrowing to the next higher or lower whole dollar amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if
it shall, through the exercise of a right of banker's lien, setoff or
counterclaim against any Borrower, or pursuant to a secured claim under Section
506 of Title 11 of the United States Code or other security or interest arising
from, or in lieu of, such secured claim, received by such Lender under any
applicable bankruptcy, insolvency or other similar law or otherwise, or by any
other means, obtain payment (voluntary or involuntary) in respect of any
Standby Loan or Loans as a result of which the unpaid principal portion of its
Standby Loans shall be proportionately less than the unpaid principal portion
of the Standby Loans of any other Lender, it shall be deemed simultaneously to
have purchased from such other Lender at face value, and shall promptly pay to
such other Lender the purchase price for, a participation in the Standby Loans
of such other Lender, so that the aggregate unpaid principal amount of the
Standby Loans and participations in the Standby Loans held by each Lender shall
be in the same proportion to the aggregate unpaid principal amount of all
Standby Loans then outstanding as the principal amount of its Standby Loans
prior to such exercise of banker's lien, setoff or counterclaim or other event
was to the principal amount of all Standby Loans outstanding prior to such
exercise of banker's lien, setoff or counterclaim or other event; provided,
however, that, if any such purchase or purchases or adjustments shall be
made pursuant to this Section 2.17 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Borrowers expressly consent to the
foregoing
<PAGE> 44
40
arrangements and agree that, subject to Section 9.06, any Lender holding a
participation in a Standby Loan deemed to have been so purchased may exercise
any and all rights of banker's lien, setoff or counterclaim with respect to any
and all moneys owing by any Borrowers to such Lender by reason thereof as fully
as if such Lender had made a Standby Loan directly to the Borrower in the
amount of such participation.
SECTION 2.18. Payments. (a) Each Borrower shall make each
payment (including principal of or interest on any Borrowing or any Fees or
other amounts) required to be made by it hereunder not later than 12:00 (noon),
New York City time (11:00 a.m., New York City time, in the case of any payment
to be made to the Agent), on the date when due in dollars to the Agent at
account number 006-035280 (ref: JCPenney) maintained by the Agent with Chemical
Bank, 270 Park Avenue, New York, New York 10017, in each case in immediately
available funds.
(b) Whenever any payment (including principal of or interest
on any Borrowing or any Fees or other amounts) hereunder shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or Fees, if applicable.
SECTION 2.19. Taxes. (a) If any Borrower shall be required
by reason of any change occurring after the date of this Agreement in
applicable law or regulation or tax treaty or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having force of law)
(a "Change of Law") to deduct any Taxes from or in respect of any sum payable
by it hereunder to any Lender or to the Agent, then except as otherwise
provided in this Section 2.19 and subject to Section 2.20, (i) the sum payable
shall be increased by the amount necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.19) such Lender or the Agent (as the case may be) shall receive
an amount equal to the sum it would have received had no such deductions been
made, (ii) such Borrower shall make such deductions and (iii) such Borrower
shall pay the full amount deducted to the relevant taxing authority or other
Governmental Authority in accordance with applicable law.
<PAGE> 45
41
(b) In addition, the Borrowers agree, jointly and severally,
to pay any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made
hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement (hereinafter referred to as "Other Taxes") other
than any Other Taxes imposed upon any assignment or participation of a Lender's
rights, interests and obligations hereunder; provided, however, that the amount
the Borrowers shall be required to pay to a particular Lender in respect of
Other Taxes shall not exceed 1% of the aggregate amount of the Loans or, if
applicable, the Commitment of such Lender on which such Other Taxes are imposed
and provided further, however, 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 Borrowers of such Other Tax
and the Borrowers shall thereafter have the benefit of the provisions of
Section 2.20(b).
(c) Within 30 days after the date of any payment of Taxes
withheld by any Borrower in respect of any payment to any Lender or the Agent,
such Borrower will furnish to the 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 setting forth the amount of such payment
and the date on which such payment was made.
(d) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.19
shall survive the payment in full of the principal of and interest on all Loans
made hereunder.
(e) On the date hereof (or, in the case of an entity that
becomes a Lender after the date hereof, on the date such entity becomes a
Lender) and thereafter as required by applicable law, each Lender that is
organized under the laws of a jurisdiction outside the United States shall
deliver to JCPenney and the Agent such certificates, documents or other
evidence, and any amendments or supplements to such certificates, documents or
other evidence, as required by the Code or Treasury Regulations issued pursuant
thereto, including Internal Revenue Service Form 1001 or Form 4224 and any
other certificate or statement of exemption required by Treasury Regulation
<PAGE> 46
42
Section 1.1441-1, 1.1441-2, 1.441-4(a) or 1.1441-6(c) or any similar or
successor provision, properly completed and duly executed by such Lender (or
the Agent) establishing that payments made under this Agreement to such Lender
(or to the Agent) are (i) not subject to withholding under the Code because
such payments are effectively connected with the conduct by such Lender (or the
Agent) of a trade or business in the United States or (ii) totally exempt from
United States tax under a provision of an applicable tax treaty. Unless
JCPenney and the Agent have received forms or other documents satisfactory to
them indicating that payments hereunder are not subject to Taxes or are subject
to such Taxes at a rate reduced by an applicable tax treaty, the appropriate
Borrower shall withhold Taxes from such payments at the applicable statutory
rate in the case of payments to or for any Lender (or to the Agent) organized
under the laws of a jurisdiction outside the United States.
(f) The Borrowers shall not be required to pay any additional
amounts to any Lender (or to the Agent) pursuant to paragraph (a) above if the
obligation to pay such additional amounts would not have arisen but for a
failure by such Lender (or the Agent) to comply with the provisions of
paragraph (e) above unless such failure results from a change occurring after
the date of this Agreement in applicable law or regulation or tax treaty or in
the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof (whether or not
having force of law).
(g) The Borrowers shall not be liable under this Section 2.19
to any Lender or to the Agent that has changed the location of its principal
office or any of its Applicable Lending Offices after the date (the "Relevant
Date") on which it first becomes a party to this Agreement (a "Change in
Location") for any Taxes that would have not been imposed but for a Change of
Law enacted, promulgated or effective before the Relevant Date, but only to the
extent such Taxes exceed the amount the Borrowers were required to pay such
Lender or the Agent pursuant to this Section 2.19 immediately prior to such
Change in Location.
(h) If any Lender or the Agent shall become aware that it is
entitled to receive a refund in respect of Taxes indemnified and paid by the
Borrower, such Lender or the Agent shall promptly notify the Borrowers of the
availability of such refund and shall, within 30 days after receipt of a
request by JCPenney, apply for such refund at
<PAGE> 47
43
JCPenney's expense. If any Lender or the Agent receives a refund in respect of
any Taxes for which such Lender or the Agent has received payment from any
Borrower hereunder, it shall within 30 days after receipt thereof repay the
lesser of such refund and the amount paid by the Borrowers with respect to such
Taxes to the appropriate Borrower, in each case net of all reasonable out-of-
pocket expenses of such Lender or the Agent and with interest received by such
Lender or the Agent from the relevant taxing authority attributable to such
refund; provided, however, that such Borrower, upon the request of such Lender
or the Agent, agrees to return such refund (plus interest, penalties or other
charges) to such Lender or the Agent in the event such Lender or the Agent is
required to repay such refund to any Governmental Authority.
(i) Each Lender and the Agent severally (but not jointly)
represents and warrants to the Borrowers that, as of the date such person
becomes a party to this Agreement, payments made by the Borrowers to such
Lender or to the Agent in connection with the Agreement are effectively
connected with the conduct by such Lender or the Agent of a trade or business
in the United States.
SECTION 2.20. Mitigation; Duties of Lenders and Agent. (a)
If, with respect to any Lender or the Agent, an event or circumstance occurs
that would entitle such Lender or the Agent to exercise any of the rights or
benefits afforded by Section 2.13 or 2.19(a), such Lender or the Agent,
promptly upon becoming aware of the same, shall take all steps as may be
reasonably available (including, as may be applicable, designating a different
Applicable Lending Office, making the affected Type of Loan through an
Affiliate, 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 Agent) to eliminate
or mitigate the effects of any event resulting in the ability of such Lender or
the Agent to exercise rights under any of such Sections; provided, however,
that, no Lender or the 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
have expressly agreed to reimburse it therefor or (ii) be materially
disadvantageous to such Lender or to the Agent. Within 60 days after the
occurrence of any event giving rise to any rights or benefits provided by
<PAGE> 48
44
Sections 2.13 and 2.19(a) in favor of any Lender or the Agent, such Lender or
the Agent (i) will notify the Borrowers of such event or circumstance and (ii)
provide the Borrowers with a certificate setting forth in reasonable detail (x)
the event or circumstance giving rise to any benefit under Sections 2.13 and
2.19(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, however, that if such Lender or the Agent does
not give the Borrowers such notice and certificate within the 60-day period set
forth in this sentence, the Borrowers shall be required to indemnify such
Lender or the 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 Borrowers. Such Lender or the
Agent shall notify the Borrowers 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 Agent obtains knowledge thereof. Such
certificate shall be conclusive absent manifest error. Notwithstanding the
foregoing, no Lender or Agent shall deliver the notice and certificate
described in this paragraph (a) to the Borrowers in respect of any Additional
Costs or Taxes unless it is then the general policy of such Lender or the Agent
to pursue similar rights and remedies in similar circumstances under comparable
provisions of other credit agreements.
(b) With respect to Sections 2.13 and 2.19, the Borrowers
shall have the right, should any Lender request any compensation or indemnity
thereunder, to (i) unless an Event of Default shall have occurred and be
continuing, (A) promptly terminate such Lender's Commitment by irrevocable
written or telex notice of such termination to such Lender and the Agent
without the necessity of complying with Sections 2.11(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 made by such Lender
hereunder, together with accrued and unpaid interest thereon and all other
amounts owed to such Lender hereunder, including under Section 2.15 in
connection with any such prepayment or (ii) require such Lender to assign its
Commitment, without recourse to or representation or warranty by such Lender,
to another Lender or assignee acceptable to the Borrowers and with the consent
of the Agent, which consent shall not be unreasonably withheld;
<PAGE> 49
45
provided, however, 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 Borrowers and/or such
assignee full payment in immediately available funds of the principal of and
interest accrued to the date of such payment on the Loans made by it hereunder
to the extent that such Loans are subject to such assignment and all other
amounts owed to it hereunder. The Borrowers shall have the right, should the
Agent request any compensation or indemnity under such Sections, to require the
Agent to assign its rights and obligations hereunder to a successor Agent with
the consent of the Required Lenders, which consent shall not be unreasonably
withheld.
(c) With respect to Sections 2.13 or 2.19 (i) other than with
respect to Section 2.19(b), no Lender or Agent shall be entitled to exercise
any right or benefit afforded thereby and no Borrower shall be obligated to
reimburse any Lender or the Agent pursuant to such Sections unless (x) such
Lender or the Agent has delivered to the Borrowers in accordance with Section
9.01 the notice and the certificate described in Section 2.20(a) hereof and (y)
the affected Borrower has had a 30-Business Day period following the receipt of
such notice and certificate (if such 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 Agent of such
disagreement within 10 Business Days following receipt of the notice and
certificate) to negotiate with the requesting Lender or the 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
Agent, it being expressly understood that if such Borrower does not provide the
required notice of its disagreement as provided above, such Borrower shall pay
the amount shown as due on the certificate on the tenth Business Day following
receipt thereof and further if such Borrower does provide such required notice,
and negotiations are entered into but do not result in agreement by such
Borrower and such Lender or the Agent within the 30-Business Day period, then
such Borrower 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 Borrowers within the 60-day period described in Section
2.20(a), the
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46
Borrowers 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 the Borrowers, (iii) the
Borrowers' liability for any amounts incurred as a result of any change in
Applicable Lending Office shall be limited as set forth in Section 2.02(e),
(iv) in no event shall the Borrowers be liable for any taxes (other than other
Taxes) that would not have been imposed but for a connection between such
Lender or the Agent (other than by reason of the activities contemplated by
this Agreement) and the relevant taxing jurisdiction, (v) each Lender or the
Agent shall in good faith allocate all Additional Costs, Taxes, and payments
required to be made fairly among all its commitments and credit extensions
(whether or not it seeks compensation from all affected borrowers), (vi) no
Lender or Agent shall be entitled to exercise any right or benefit afforded
hereby or receive any payment otherwise due under Sections 2.13 or 2.19
(including without limitation, any repayment by a Borrower of any refund of
Taxes pursuant to Section 2.19(h)) which arises from any gross negligence,
fraud or wilful misconduct of any Lender or the Agent, or the failure of such
Lender or the Agent to comply with the terms of this Agreement, (vii) if a
Lender or the Agent shall have recouped any amount or received any offsetting
tax benefit (other than a refund of Taxes as described in Section 2.19(h)) or
reserve or capital benefits theretofore paid to it by such Borrower, such
Lender or the Agent shall promptly pay to such Borrower an amount equal to the
amount of the recoupment received by such Lender or the Agent reduced by any
reasonable out-of-pocket expenses of such Lender or the Agent attributable to
such recoupment, as determined in good faith by such Lender or the Agent, and
(viii) the liability of either Borrower to any Lender or the Agent with respect
to any taxes shall be reduced to the extent that such Lender or the Agent
receives an offsetting tax benefit (or could have received such a benefit by
taking reasonable measures to receive it); provided, however, that there shall
not be any reductions pursuant to this clause (viii) with respect to any tax
benefit (x) the existence of which such Lender or the Agent is unaware, (y) the
claiming of which would result in any cost or tax to such Lender or the Agent
(unless such Borrower shall have agreed to pay its reasonably allocable portion
of such cost or tax) and (z) unless such Borrower shall agree to indemnify the
Lender or the Agent to the extent any tax benefit taken into account under this
clause (viii) is thereafter lost or becomes unavailable.
<PAGE> 51
47
(d) In addition to their obligations under Section 2.19
hereof, each of the Lenders and the Agent hereby agree 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 2.20 and Sections 2.13 and 2.19. The
Borrowers agree, jointly and severally, to pay all filing fees incurred by any
Lender or the Agent in performing its obligations under this Section 2.20.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to each of the Lenders
that:
SECTION 3.01. Organization; Powers. Each of the Borrowers and the
Restricted Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization,
(b) has all requisite power and authority to own its property and assets and to
carry on its business as now conducted and as proposed to be conducted, (c) is
qualified to do business in every jurisdiction where such qualification is
required, except where the failure so to qualify would not result in a Material
Adverse Effect, and (d) in the case of each Borrower, has the corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and each other agreement or instrument contemplated hereby to which
it is or will be a party and to borrow hereunder.
SECTION 3.02. Authorization. The execution, delivery and
performance by each Borrower of this Agreement and the borrowings hereunder
(collectively, the "Transactions") (a) have been duly authorized by all
requisite corporate and, if required, stockholder action and (b) will not (i)
violate (A) any applicable provision of law, statute, material rule or material
regulation, or of the certificate or articles of incorporation or other
constitutive documents or by-laws of JCPenney, Funding or any Restricted
Subsidiary, (B) any applicable material order of any Governmental Authority or
(C) any provision of any indenture, agreement or other instrument to which
JCPenney, Funding or any Restricted Subsidiary is a party or by which any of
them or any of their property is or may be bound, (ii) be in conflict with,
result in a breach of or
<PAGE> 52
48
constitute (alone or with notice or lapse of time or both) a default under any
such indenture, agreement or other instrument or (iii) result in the creation
or imposition of any Lien upon or with respect to any property or assets now
owned or hereafter acquired by JCPenney, Funding or any Restricted Subsidiary.
SECTION 3.03. Enforceability. This Agreement has been duly
executed and delivered by each Borrower and constitutes a legal, valid and
binding obligation of such Borrower enforceable against such Borrower in
accordance with its terms, except as enforceability may be limited by (a) any
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer, or similar laws relating to or affecting creditors' rights generally
and (b) general principles of equity.
SECTION 3.04. Governmental Approvals. No action, consent or
approval of, registration or filing with, or any other action by, any
Governmental Authority is or will be required in connection with the
Transactions, except (a) such as have been made or obtained and are in full
force and effect or as to which the failure to be made or obtained and in full
force and effect would not result in a Material Adverse Effect and (b) such
periodic and current reports, if any, as (i) are required to disclose the
Transactions and (ii) will be filed with the SEC on a timely basis.
SECTION 3.05. Financial Statements. Each of JCPenney and
Funding has heretofore furnished to the Lenders its consolidated balance sheets
and related consolidated statements of income and cash flows (a) as of and for
the fiscal year ended January 30, 1993, audited by and accompanied by the
opinion of KPMG Peat Marwick, independent public accountants, and (b) as of and
for the fiscal quarter and the portion of the fiscal year ended October 30,
1993, as filed by JCPenney or Funding, as the case may be, with the SEC on Form
10-Q in respect of such fiscal quarter. Such financial statements fairly
present the financial position, results of operations and cash flows of
JCPenney and its Subsidiaries, or of Funding and its Subsidiaries, as the case
may be, in accordance with GAAP, subject, in the case of the financial
statements referred to in clause (b) above, to normal year-end audit
adjustments.
SECTION 3.06. No Material Adverse Change. Except as
previously disclosed to the Lenders in writing, as of the Closing Date, there
has been no material adverse change in
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49
the business, assets, operations or financial condition of JCPenney, Funding or
JCPenney and the Restricted Subsidiaries taken as a whole since January 30,
1993.
SECTION 3.07. Title to Properties; Possession Under Leases.
(a) Each of the Borrowers and the Restricted Subsidiaries has good and
marketable title to all its Principal Properties, except for minor defects in
title and other restrictions that do not interfere with its ability to conduct
its business as currently conducted or to utilize such Principal Properties for
their intended purposes. All the Principal Properties are free and clear of
Liens, other than Liens expressly permitted by Section 6.01.
(b) Each of the Borrowers and the Restricted Subsidiaries has
valid leasehold interests in all the material properties that it purports to
hold under lease, except for restrictions that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes. Each of the Borrowers and the
Restricted Subsidiaries has complied with all material obligations under all
material leases to which it is a party and all such leases are in full force
and effect, except in each case for provisions of such leases that are being
contested in good faith in the ordinary course of the Borrower's business.
Each of the Borrowers and the Restricted Subsidiaries enjoys peaceful and
undisturbed possession under all such material leases.
SECTION 3.08. Restricted Subsidiaries. Schedule 3.08 sets
forth as of the date hereof a list of all the Restricted Subsidiaries and the
percentage ownership interest of JCPenney therein. JCPenney owns, free and
clear of all Liens, all the issued and outstanding shares of the capital stock
of Funding, and all such outstanding shares are validly issued, fully paid and
nonassessable.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except
as set forth in Schedule 3.09 or as subsequently disclosed in writing to the
Lenders, there are not any actions, suits or proceedings at law or in equity or
by or before any Governmental Authority now pending or, to the knowledge of any
Borrower, threatened against or affecting JCPenney or Funding or any Restricted
Subsidiary or any business, property or rights of any such person (i) which
involve this Agreement or the Transactions or (ii) as to which there is a
reasonable possibility of an adverse determination and which, if adversely
determined, would,
<PAGE> 54
50
individually or in the aggregate, result in a Material Adverse Effect.
(b) None of the Borrowers or the Restricted Subsidiaries is
in violation of any law, rule or regulation, or in default with respect to any
judgment, writ, injunction or decree of any Governmental Authority, where such
violation or default would result in a Material Adverse Effect.
SECTION 3.10. Agreements. (a) None of the Borrowers or the
Restricted Subsidiaries is a party to any agreement or instrument or subject to
any corporate restriction that has resulted or would result in a Material
Adverse Effect.
(b) None of the Borrowers or the Restricted Subsidiaries is
in default in any manner under any provision of any indenture or other
agreement or instrument evidencing indebtedness for money borrowed, or any
other material agreement or instrument to which it is a party or by which it or
any of its material properties or material assets are bound, where such default
would result in a Material Adverse Effect.
SECTION 3.11. Federal Reserve Regulations. (a) None of the
Borrowers or the Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately,
(i) to purchase or carry Margin Stock or to extend credit to others for the
purpose of purchasing or carrying Margin Stock or to refund indebtedness
originally incurred for such purpose, or (ii) for any purpose which entails a
violation of, or which is inconsistent with, the provisions of the Regulations
of the Board, including Regulation G, U or X.
SECTION 3.12. Investment Company Act; Public Utility Holding
Company Act. None of the Borrowers is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
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51
SECTION 3.13. Use of Proceeds. The Borrowers will use the
proceeds of the Loans only for the purposes specified in the preamble to this
Agreement.
SECTION 3.14. Tax Returns. Each of the Borrowers and the
Restricted Subsidiaries has filed or caused to be filed all Federal, state and
local tax returns required to have been filed by it and has paid or caused to
be paid all taxes shown to be due and payable on such returns or on any
assessments received by it, except taxes that are being contested in good faith
by appropriate proceedings and for which the appropriate Borrower or Restricted
Subsidiary shall have set aside on its books adequate reserves.
SECTION 3.15. No Material Misstatements. No information,
report, financial statement, exhibit or schedule furnished by or on behalf of
any Borrower to the Agent or any Lender in connection with the negotiation of
this Agreement or included herein or delivered pursuant hereto contained,
contains or will contain any material misstatement of fact or omitted, omits or
will omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were, are or will be made,
not misleading.
SECTION 3.16. Employee Benefit Plans. During the immediately
preceding six-year period with respect to the Plans, there were no: (a)
violations known to the Borrowers of ERISA, or (b) Reportable Events (other
than a Reportable Event for which the PBGC has waived the 30-day notice
requirement of Section 4043(a) of ERISA), that would, individually or in the
aggregate, result in a Material Adverse Effect. The present value of all
benefit liabilities under each Plan (based on the assumptions used to fund such
Plan) does not exceed the value of the assets of such Plan. None of the
Borrowers or the ERISA Affiliates has made contributions to any Multiemployer
Plan within the past five years, and such contributions are not now being made
or expected to be required.
SECTION 3.17. Support Agreements. The Support Agreements
have been duly executed and delivered by JCPenney and, where applicable,
Funding and, as of the Closing Date, are in full force and effect in accordance
with their terms. A complete and correct copy of each Support Agreement as in
effect on the Closing Date has previously been furnished to each Lender and to
the Agent.
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52
ARTICLE IV. CONDITIONS OF LENDING
The obligations of the Lenders to make Loans hereunder are
subject to the satisfaction of the following conditions:
SECTION 4.01. All Borrowings. Subject to the provisions of
the last sentence of this Section 4.01, on the date of each Borrowing:
(a) The Agent shall have received such notice of such
Borrowing as is required by Section 2.03 or Section 2.04, as
applicable.
(b) The representations and warranties set forth in Article
III hereof (except, in the case of all Borrowings hereunder, the
representation set forth in Section 3.06) shall be true and correct in
all material respects on and as of the date of such Borrowing with the
same effect as though made on and as of such date, except to the
extent such representations and warranties expressly relate to an
earlier date.
(c) At the time of and immediately after such Borrowing, no
Event of Default or Default shall have occurred and be continuing.
Each Borrowing (other than any new Borrowing described in the last sentence of
this Section 4.01) shall be deemed to constitute a representation and warranty
by the Borrowers on the date of such Borrowing as to the matters specified in
paragraphs (b) and (c) of this Section 4.01. Notwithstanding the other
provisions of this Section 4.01, the refinancing of any Borrowing with a new
Borrowing that does not increase the outstanding aggregate principal amount of
the Loans of any Lender shall not be subject to the satisfaction of any of the
foregoing conditions.
SECTION 4.02. First Borrowing. On or prior to the first
Borrowing hereunder:
(a) The Agent shall have received a favorable written opinion
of Charles R. Lotter, General Counsel for the Borrowers, dated not
later than the date of such first Borrowing and not earlier than the
Closing Date and addressed to the Lenders, to the effect set forth in
Exhibit B hereto, and the Borrowers hereby
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53
instruct such counsel to deliver such opinion to the Agent.
(b) The Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments
thereto, of each Borrower, certified as of a date not later than the
date of such first Borrowing and not earlier than seven days prior to
the Closing Date by the Secretary of State of the state of its
organization, and a certificate as to the good standing of such
Borrower as of a date not later than the date of such first Borrowing
and not earlier than the Closing Date, from such Secretary of State;
(ii) a certificate of the Secretary or Assistant Secretary of each
Borrower dated the date of the Standby Borrowing Request or the
Competitive Bid Request relating to such first Borrowing, as the case
may be, and certifying (A) that attached thereto is a true and
complete copy of the by-laws of such Borrower as in effect on such
date and at all times since a date prior to the date of the
resolutions described in clause (B) below, (B) that attached thereto
is a true and complete copy of resolutions duly adopted by the Board
of Directors of such Borrower authorizing the execution, delivery and
performance of this Agreement and the Borrowings hereunder, and that
such resolutions have not been modified, rescinded or amended and are
in full force and effect, (C) that the certificate or articles of
incorporation of such Borrower have not been amended since the date of
the last amendment thereto shown on the certificate of good standing
furnished pursuant to clause (i) above, and (D) as to the incumbency
and signature of each officer executing this Agreement or any document
delivered in connection herewith on behalf of such Borrower; and (iii)
a certificate of another officer of each Borrower as to the incumbency
and specimen signature of the Secretary or Assistant Secretary of such
Borrower executing the certificate pursuant to (ii) above.
(c) The Agent shall have received an Officer's Certificate,
dated the date of the Standby Borrowing Request or the Competitive Bid
Request relating to such first Borrowing, as the case may be, and
signed by at least one Responsible officer of each Borrower,
confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01.
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54
(d) The Agent shall have received all Fees and other amounts
due and payable to it (whether for its own account or for the account
of the Lenders) on or prior to the date of such first Borrowing.
(e) The International Revolving Credit Agreement dated as of
June 8, 1992, among JCPenney, Funding, Credit Suisse First Boston
Limited as Administrative Agent and as Arranger, Union Bank of
Switzerland, New York Branch, as Swingline Agent and certain other
financial institutions, shall have been terminated as of the Closing
Date and all amounts outstanding thereunder shall have been paid.
ARTICLE V. AFFIRMATIVE COVENANTS
The Borrowers covenant and agree with each Lender that, so long as
this Agreement shall remain in effect or the principal of or interest on any
Loan, any Fees or any other expenses or amounts payable under this Agreement
shall be unpaid, unless the Required Lenders shall otherwise consent in
writing, each of the Borrowers will, and will cause each of the Restricted
Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence, except as would not cause a Default under
Section 6.04 or otherwise cause an Event of Default under this Agreement.
(b) Do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the rights, licenses,
permits, franchises, authorizations, patents, copyrights, trademarks and trade
names material to the conduct of its business; maintain and operate such
business in substantially the manner in which it is presently conducted and
operated; comply in all material respects with all applicable laws, rules,
regulations and orders of any Governmental Authority, whether now in effect or
hereafter enacted; except in each case where the failure to do so would not
result in a Material Adverse Effect; and at all times maintain and preserve all
property material to the conduct of its business and keep such property in good
repair, working order and condition and from time to time make, or cause to be
made, all needful and proper repairs, renewals, additions, improvements and
<PAGE> 59
55
replacements thereto necessary in order that the business carried on in
connection therewith may be properly conducted at all times; provided, however,
that nothing in this paragraph (b) shall prevent any Borrower or Restricted
Subsidiary from discontinuing the operation and maintenance of any of its
properties no longer deemed useful in the conduct of its business.
SECTION 5.02. Insurance. Maintain insurance and/or self
insurance programs in force that adequately protect the Principal Properties
and the public liability exposures of the Borrowers, as may be required by law,
and as is customary with companies in the same or similar businesses or of the
same general financial net worth.
SECTION 5.03. Obligations and Taxes. Pay and discharge
promptly when due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its properties,
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise which, if unpaid, might
give rise to a Lien upon such properties or any material part thereof;
provided, however, that such payment and discharge shall not be required with
respect to any such tax, assessment, charge, levy or claim so long as (a) the
validity or amount thereof shall be contested in good faith by appropriate
proceedings and (b) the applicable Borrower has made appropriate reserves
therefor as required by GAAP.
SECTION 5.04. Financial Statements, Reports, etc. In the
case of the Borrowers, furnish to the Agent for distribution to the Lenders:
(a) as soon as available and in any event within 120 days
after the end of each fiscal year, a copy of the reports filed by each
of JCPenney and Funding with the SEC on Form 10-K in respect of such
fiscal year, accompanied by JCPenney's annual report in respect of
such fiscal year or, if either of JCPenney or Funding is not required
to file such a report in respect of such fiscal year, the consolidated
balance sheets and related consolidated statements of income and cash
flows of JCPenney and its Subsidiaries, or of Funding and its
Subsidiaries, as the case may be, as of the close of such fiscal year,
all audited by KPMG Peat Marwick or other independent public
accountants of recognized national standing and accompanied by an
<PAGE> 60
56
opinion of such accountants (which shall be in scope and substance
reasonably satisfactory to the Required Lenders) to the effect that
such consolidated financial statements fairly present the financial
position, results of operations and cash flows of JCPenney and its
Subsidiaries or of Funding and its Subsidiaries, as the case may be,
in accordance with GAAP;
(b) as soon as available and in any event within 60 days after
the end of each of the first three quarterly periods of each fiscal
year, a copy of the quarterly reports filed by each of JCPenney and
Funding with the SEC on Form 10-Q in respect of such quarterly period,
or if either of JCPenney or Funding is not required to file such a
report in respect of such quarterly period, the consolidated balance
sheets and related consolidated statements of income and cash flows of
JCPenney and its Subsidiaries, or of Funding and its Subsidiaries, as
the case may be, as of the close of such fiscal quarter, certified by
its chief financial officer, treasurer or controller as fairly
presenting the financial position, results of operations and cash
flows of JCPenney and its Subsidiaries or of Funding and its
Subsidiaries, as the case may be, in accordance with GAAP, subject to
normal year-end audit adjustments;
(c) concurrently with any delivery of financial statements by
JCPenney or Funding under (a) above (whether contained in a report
filed with the SEC or otherwise), a certificate of its chief financial
officer, president, treasurer or controller (i) stating that no Event
of Default or Default has occurred or, if such an Event of Default or
Default has occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect thereto
and (ii) with respect to JCPenney, setting forth computations in
reasonable detail demonstrating compliance with the covenant contained
in Section 6.02;
(d) promptly after the same become publicly available, copies
of all documents and reports that any Borrower may be required to file
with the SEC pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, or with any Governmental Authority
succeeding to any of or all the functions of the SEC;
<PAGE> 61
57
(e) promptly after the execution and delivery thereof by the
parties thereto, copies of all agreements and other instruments that
have the effect of amending, modifying or waiving any provision of a
Support Agreement; and
(f) promptly, from time to time, such other documents and
information regarding the operations, business affairs and financial
condition of any Borrower or Restricted Subsidiary, or compliance with
the terms of this Agreement, as the Agent or any Lender may reasonably
request.
SECTION 5.05. Litigation and Other Notices. Furnish to the
Agent prompt written notice of the following promptly after becoming aware
thereof:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) proposed to be taken
with respect thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any
Governmental Authority, against any Borrower or Restricted Subsidiary
which, if adversely determined, would result in a Material Adverse
Effect; and
(c) any development that has resulted in, or would result in,
a Material Adverse Effect.
SECTION 5.06. ERISA. (a) Comply in all material respects
with the applicable provisions of ERISA and (b) furnish to the Agent and each
Lender (i) as soon as possible, and in any event within 30 days after any
Responsible Officer of any Borrower or ERISA Affiliate either knows or has
reason to know that any Reportable Event has occurred that alone or together
with any other Reportable Events could reasonably be expected to result in
liability of the Borrowers and/or the Restricted Subsidiaries to the PBGC in an
aggregate amount exceeding $200,000,000, a statement of a Responsible Officer
of JCPenney setting forth details as to such Reportable Event and the action
proposed to be taken with respect thereto, together with a copy of the notice,
if any, of such Reportable Event given to the PBGC, (ii) promptly after receipt
thereof, a copy of any notice that any Borrower or ERISA Affiliate receives
from
<PAGE> 62
58
the PBGC relating to the intention of the PBGC to terminate any Plan or Plans
(other than a Plan maintained by an ERISA Affiliate which is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code) or to appoint a trustee to administer any Plan or Plans and (iii) within
10 days after the due date for filing with the PBGC pursuant to Section 412(n)
of the Code of a notice of failure to make a required installment or other
payment with respect to a Plan, a statement of a Responsible Officer of
JCPenney setting forth details as to such failure and the action proposed to be
taken with respect thereto, together with a copy of such notice given to the
PBGC. Any failure to comply with applicable provisions of ERISA shall not be
deemed to be material, unless such failure or failures would result in a
Material Adverse Effect.
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Maintain all financial records in accordance with GAAP and permit
any representatives designated by any Lender to (a) visit and inspect the
financial records and the Principal Properties of any Borrower or Restricted
Subsidiary during business hours upon reasonable notice, (b) make extracts from
and copies of such financial records, (c) discuss the affairs, finances and
condition of any Borrower or Restricted Subsidiary with the chief financial
officer, treasurer or any assistant treasurer of any Borrower or Restricted
Subsidiary and (d) discuss the affairs, finances and condition of any Borrower
or Restricted Subsidiary with such person's independent accountants in the
presence of any of the chief financial officer, treasurer or any assistant
treasurer of such person. No such inspection, discussion or other right
granted under this Section 5.07 and exercised by any Lender shall disrupt the
normal and ordinary conduct of business of any Borrower or Restricted
Subsidiary, and all costs and expenses incurred in connection therewith, shall,
prior to the occurrence and continuance of an Event of Default, be borne by the
Lender exercising such right.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans
only for the purposes set forth in the preamble to this Agreement.
SECTION 5.09. Pari-Passu. Ensure that (a) the payment
obligations of any Borrower under this Agreement will at all times rank at
least equally and ratably in all respects with the claims of any other
unsecured creditor of such Borrower and (b) the proceeds of any Loan made to
<PAGE> 63
59
Funding will be used for the purpose of making either (i) Investments of the
type referred to in clause (v) of Section 6.06(c) or (ii) loans to JCPenney
constituting senior unsecured indebtedness of JCPenney, and not for any other
purpose.
SECTION 5.10. Support Agreements. Ensure that (a) each
Support Agreement remains in full force and effect in accordance with its terms
and (b) no amendment or modification is made to any Support Agreement or any of
the terms thereof, and no waiver is given or agreed to be given by or on behalf
of Funding with respect to any of its rights under any Support Agreement, which
would have a Material Adverse Effect.
ARTICLE VI. NEGATIVE COVENANTS
Each Borrower covenants and agrees with each Lender and the
Agent, so long as this Agreement shall remain in effect or the principal of or
interest on any Loan, any Fees or any other expenses or amounts payable under
this Agreement shall be unpaid, unless the Required Lenders shall otherwise
consent in writing, as follows:
SECTION 6.01. Limitation on Liens--JCPenney. JCPenney will
not, and will not permit any Restricted Subsidiary to, issue, assume or
guarantee any notes, bonds, debentures or other similar evidences of
indebtedness for money borrowed (referred to in this Section 6.01 as
"indebtedness") secured by any Lien upon any Principal Property, or shares of
capital stock or evidences of indebtedness for money borrowed issued by any
Restricted Subsidiary and owned by JCPenney or any Restricted Subsidiary,
whether owned on the Closing Date or thereafter acquired, without making
effective provision whereby the Loans made to JCPenney are secured by such Lien
equally and ratably with any and all other indebtedness thereby secured, so
long as such indebtedness shall be so secured; provided, however, that the
foregoing restriction shall not apply to indebtedness secured by any of the
following:
(i) Liens on any property existing at the time of acquisition
thereof by JCPenney or any Restricted Subsidiary;
(ii) Liens on property of a corporation existing at the time
such corporation is merged into or consoli-
<PAGE> 64
60
dated with JCPenney or any Restricted Subsidiary or at the time of a
sale, lease or other disposition of the properties of such corporation
(or a division thereof) as an entirety or substantially as an entirety
to JCPenney or any Restricted Subsidiary,provided that such Lien as a
result of such merger, consolidation, sale, lease or other disposition
is not extended to property owned by JCPenney or such Restricted
Subsidiary immediately prior thereto;
(iii) Liens on property of a corporation existing at the time
such corporation first becomes a Restricted Subsidiary;
(iv) Liens securing indebtedness of a Restricted Subsidiary
to JCPenney or to another Restricted Subsidiary;
(v) Liens on property to secure all or part of the cost of
acquiring, substantially repairing or altering, constructing,
developing or substantially improving such property, or to secure
indebtedness incurred to provide funds for any such purpose or for
reimbursement of funds previously expended for any such purpose,
provided that the commitment of the creditor to extend the credit
secured by any such Lien shall have been obtained not later than
twelve months after the later of (a) the completion of the
acquisition, substantial repair or alteration, construction,
development or substantial improvement of such property or (b) the
placing in operation of such property or of such property as so
substantially repaired or altered, constructed, developed or
substantially improved;
(vi) Liens securing indebtedness payable on demand or not
more than one year after the date as of which the determination is
made (excluding any indebtedness renewable or extendable at the option
of the debtor for a period or periods ending more than one year after
the date as of which such determination is made), which indebtedness
in accordance with GAAP would be included among current liabilities;
or
(vii) any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any
Lien referred to in the foregoing clauses (i) through (vi),
inclusive;provided, however, that the principal amount of indebt-
<PAGE> 65
61
edness secured thereby and not otherwise authorized by said clauses
(i) through (vi), inclusive, shall not exceed the principal amount of
indebtedness, plus any premium or fee payable in connection with any
such extension, renewal or replacement, so secured at the time of such
extension, renewal or replacement;
(viii) Liens arising under workmen's compensation laws,
unemployment insurance laws and old age pensions or other social
security benefits or other similar laws;
(ix) Liens securing the performance of bids, tenders, leases,
contracts, statutory obligations, surety and appeal bonds, and other
obligations of like nature, incurred in the ordinary course of
business;
(x) Liens imposed by law, such as carriers', warehouseman's,
mechanics', materialmen's and vendors' liens, incurred in good faith
in the ordinary course of business with respect to obligations not
then delinquent, or that are being contested in good faith by
appropriate proceedings for which adequate reserves have been
established;
(xi) Liens for taxes to the extent nonpayment thereof shall
be permitted by Section 5.03 hereof;
(xii) Liens incidental to the normal conduct of the business
of JCPenney and its Restricted Subsidiaries or the ownership of their
property and not securing Funded Indebtedness (including zoning
restrictions, easements, licenses, reservations, restrictions on the
use of real property or minor irregularities incident thereto and with
respect to leasehold interests, Liens that are incurred, created,
assumed or permitted to exist and arise by, through or under or are
asserted by a landlord or owner of the leased property, with or
without consent of the lessee) which do not in the aggregate
materially impair the value or use of the property used in the
business of JCPenney and its Restricted Subsidiaries taken as a whole,
or the use of such property for the purpose for which such property is
held;
(xiii) Liens arising from capitalized lease obligations, such
Liens not to extend to any other property of JCPenney;
<PAGE> 66
62
(xiv) Liens in respect of litigation or other similar
proceedings in an amount not to exceed $500,000,000 on an aggregate
basis (i) the validity of which is being currently contested on a
timely basis in good faith by appropriate proceedings (provided that
the enforcement of any Liens arising out of such proceedings shall be
stayed during such proceedings) and (ii) for which adequate reserves
shall have been established;
(xv) 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 JCPenney and its
Restricted Subsidiaries;
(xvi) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into
by JCPenney or any of its Restricted Subsidiaries in the ordinary
course of business in accordance with the past practices of JCPenney
and its Restricted Subsidiaries; or
(xvii) 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.
Notwithstanding the provisions of the immediately preceding
sentence, JCPenney or any Restricted Subsidiary may issue, assume or guarantee
indebtedness secured by Liens which would otherwise be subject to the
restrictions of this Section in an aggregate amount which, together with all
attributable debt (as defined in Section 5.09(b) of the Indenture) outstanding
pursuant to Section 5.09(b) of the Indenture, all Senior Funded Indebtedness
outstanding pursuant to the second sentence of Section 6.03(a), the capitalized
amount of all capitalized leases referred to in Section 6.05(j), and all
indebtedness outstanding pursuant to this sentence, does not exceed 5% of
Stockholders' Equity.
SECTION 6.02. Limitations on Senior Funded Indebtedness.
JCPenney will not, and will not permit any Restricted Subsidiary to, issue,
assume or guarantee any Senior Funded Indebtedness (otherwise than in
connection with any renewal, extension or refunding of Senior Funded
Indebtedness which does not, except for any premium or fee
<PAGE> 67
63
payable in connection with such renewal, extension or refunding, increase the
unpaid principal amount of Senior Funded Indebtedness outstanding), or sell,
transfer or otherwise dispose of any Senior Funded Indebtedness of a Restricted
Subsidiary, unless, after giving effect thereto and to the retirement of any
Senior Funded Indebtedness to be retired substantially concurrently therewith,
Net Tangible Assets shall be at least 200% of Senior Funded Indebtedness of
JCPenney and the Restricted Subsidiaries (eliminating intercompany items).
SECTION 6.03. Limitations with Respect to Restricted
Subsidiaries. (a) JCPenney will not permit any Restricted Subsidiary to
issue, assume or guarantee any Senior Funded Indebtedness; provided, however,
that the foregoing restriction shall not apply to any of the following:
(i) Senior Funded Indebtedness secured by a Lien permitted
under the first sentence of Section 6.01;
(ii) Senior Funded Indebtedness of a corporation existing at
the time such corporation is merged into or consolidated with a
Restricted Subsidiary or at the time of a sale, lease or other
disposition of the properties of such corporation (or a division
thereof) as an entirety or substantially as an entirety to a
Restricted Subsidiary;
(iii) Senior Funded Indebtedness of a corporation existing at
the time such corporation first becomes a Restricted Subsidiary:
(iv) Senior Funded Indebtedness of a Restricted Subsidiary to
or held by JCPenney or another Restricted Subsidiary; or
(v) any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any
Senior Funded Indebtedness referred to in the foregoing clauses (i)
through (iv), inclusive;provided, howeve, that the principal amount or
the aggregate preference on involuntary liquidation, as the case may
be, of Senior Funded Indebtedness issued pursuant to such extension,
renewal or replacement and not otherwise authorized by said clauses
(i) through (iv), inclusive, shall not exceed the principal amount or
the aggregate preference on
<PAGE> 68
64
involuntary liquidation, as the case may be, of the Senior Funded
Indebtedness so extended, renewed or replaced, plus any premium or fee
payable in connection with any such extension, renewal or replacement.
Notwithstanding the provisions of the immediately preceding
sentence, any Restricted Subsidiary may issue, assume or guarantee Senior
Funded Indebtedness which would otherwise be subject to the restrictions of
this Section 6.03(a) in an aggregate amount which, together with all
indebtedness outstanding pursuant to the second sentence of Section 6.01, all
attributable debt (as defined in Section 5.09(b) of the Indenture) outstanding
pursuant to Section 5.09(b) of the Indenture and all Senior Funded Indebtedness
of the Restricted Subsidiaries outstanding pursuant to this sentence, does not
exceed 5% of Stockholders' Equity.
(b) JCPenney will not, and will not permit any Restricted
Subsidiary to, (i) sell or transfer (except to JCPenney or a Restricted
Subsidiary) any Senior Funded Indebtedness of a Restricted Subsidiary, except
Senior Funded Indebtedness secured by a Lien permitted under the provisions of
the first sentence of Section 6.01 and except to carry out a transaction
permitted by Section 6.03(c) or (ii) sell or transfer (except, in each case, to
the extent, if any, required to qualify directors of a Restricted Subsidiary
under applicable law or to permit any person to maintain his proportionate
interest in a Restricted Subsidiary or except to effect dissolution of any such
Restricted Subsidiary or to carry out a transaction permitted by Section
6.03(c) or except to JCPenney or a Restricted Subsidiary) any shares of common
stock of a Restricted Subsidiary, unless all the common stock of such
Restricted Subsidiary at the time owned by JCPenney and the Restricted
Subsidiaries shall be sold or transferred at the same time and unless
thereafter Net Tangible Assets shall be at least 200% of Senior Funded
Indebtedness of JCPenney and the Restricted Subsidiaries (eliminating
intercompany items).
(c) JCPenney will not permit any Restricted Subsidiary to
sell or otherwise dispose of its assets substantially as an entirety or
consolidate with or merge into any other corporation, unless the corporation to
which such assets shall be sold or otherwise disposed of or which shall be
formed by or result from such consolidation or merger shall be JCPenney or any
Restricted Subsidiary or
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65
unless thereafter Net Tangible Assets shall be at least 200% of Senior Funded
Indebtedness of JCPenney and the Restricted Subsidiaries (eliminating
intercompany items).
SECTION 6.04. Mergers, Consolidations, Sales of Assets and
Acquisitions. (a) JCPenney shall not consoli- date with or merge into any
other corporation or convey or transfer its properties and assets substantially
as an entirety to any person, unless:
(i) the corporation formed by such consolidation or into which
JCPenney is merged or the person which acquires by conveyance or
transfer the properties and assets of JCPenney substantially as an
entirety shall be a corporation organized and existing under the laws
of the United States of America or any State or the District of
Columbia, and shall expressly assume, by an instrument in writing
(delivered to the Lenders) the due and punctual payment of the
principal and interest, if any, on all the Loans and all other amounts
payable by JCPenney under this Agreement and all the rights, interests
and other obligations of JCPenney under this Agreement;
(ii) immediately after giving effect to such transaction, (x)
the representations and warranties set forth in Article III shall be
true and correct in all material respects on the date of such
transaction with the same effect as if made on and as of such date,
except to the extent such representations and warranties expressly
relate to an earlier date and (y) no Event of Default or Default shall
have occurred and be continuing; and
(iii) JCPenney shall have delivered an Officer's Certificate
stating that such consolidation, merger, conveyance or transfer and
such written instrument comply with this Section 6.04(a).
(b) Funding shall not consolidate with or merge into any
other corporation or convey or transfer its properties and assets substantially
as an entirety to any person, except that Funding may merge into JCPenney or a
direct or indirect wholly- owned Subsidiary of JCPenney subject to the
satisfaction of the following conditions:
(i) the corporation formed by such consolidation or into which
Funding is merged or the person which
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66
acquires by conveyance or transfer the properties and assets of
Funding substantially as an entirety shall expressly assume, by an
instrument in writing (delivered to the Lenders) the due and punctual
payment of the principal and interest, if any, on all the Loans and
all other amounts payable by Funding under this Agreement and all the
rights, interests and other obligations of Funding under this
Agreement;
(ii) immediately after giving effect to such transaction, (x)
the representations and warranties set forth in Article III shall be
true and correct in all material respects on the date of such
transaction with the same effect as if made on and as of such date,
except to the extent such representations and warranties expressly
relate to an earlier date and (y) no Event of Default or Default shall
have occurred and be continuing; and
(iii) Funding shall have delivered an Officer's Certificate
stating that such consolidation, merger, conveyance or transfer and
such written instrument comply with this Section 6.04(b).
SECTION 6.05. Limitations on Liens--Funding. Funding will
not, and will not permit any of its Subsidiaries to, create or assume any Lien
upon any of the property of Funding or any such Subsidiary, whether now owned
or hereafter acquired, in connection with the borrowing of money or the
acquisition or construction of property; provided, however, that nothing in
this Section 6.05 shall prevent or be deemed to prohibit:
(a) Funding or any of its Subsidiaries from acquiring property
subject to a Lien existing thereon at the time of acquisition, and
assuming the same, or from creating a Lien on property being
constructed or acquired to secure a portion of the cost or purchase
price thereof, provided, however, that (i) any such Lien shall cover
solely fixed assets or other physical properties and (ii) such
property is not or shall not thereby become encumbered in an amount in
excess of two- thirds of the lesser of the cost and fair value thereof
(as determined in good faith by the board of directors of Funding);
(b) any Subsidiary of Funding from creating a Lien upon all or
any part of its property in favor of
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67
Funding or a wholly-owned Subsidiary of Funding to secure indebtedness
owed by such Subsidiary to Funding or a wholly-owned Subsidiary;
(c) Liens existing on all or any part of the assets of a
Subsidiary of Funding at the time it shall become such a Subsidiary;
(d) Funding or any of its Subsidiaries from extending,
renewing or refunding any Lien permitted by the foregoing provisions
of this Section 6.05 upon the same property theretofore subject
thereto in connection with the extension, renewal or refunding of the
indebtedness secured thereby;
(e) Liens arising under workmen's compensation laws,
unemployment insurance laws and old age pensions or other social
security benefits or other similar laws;
(f) Liens securing the performance of bids, tenders, leases,
contracts, statutory obligations, surety and appeal bonds, and other
obligations of like nature, incurred in the ordinary course of
business;
(g) Liens imposed by law, such as carriers', warehouseman's,
mechanics', materialmen's and vendors' liens, incurred in good faith
in the ordinary course of business with respect to obligations not
then delinquent, or that are being contested in good faith by
appropriate proceedings for which adequate reserves have been
established;
(h) Liens for taxes to the extent nonpayment thereof shall be
permitted by Section 5.03 hereof;
(i) Liens incidental to the normal conduct of the business of
Funding and its Subsidiaries or the ownership of their property and
not securing Funded Indebtedness (including zoning restrictions,
easements, licenses, reservations, restrictions on the use of real
property or minor irregularities incident thereto and with respect to
leasehold interests, Liens that are incurred, created, assumed or
permitted to exist and arise by, through or under or are asserted by a
landlord or owner of the leased property, with or without consent of
the lessee) which do not in the aggregate materially impair the value
or use of the
<PAGE> 72
68
property used in the business of Funding and its Subsidiaries taken as
a whole, or the use of such property for the purpose for which such
property is held;
(j) Liens arising from capitalized lease obligations, such
Liens not to extend to any other property of Funding;
(k) Liens in respect of litigation or other similar
proceedings in an amount not to exceed $500,000,000 on an aggregate
basis (i) the validity of which is being currently contested on a
timely basis in good faith by appropriate proceedings (provided that
the enforcement of any Liens arising out of such proceedings shall be
stayed during such proceedings) and (ii) for which adequate reserves
shall have been established;
(l) 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 Funding and its
Subsidiaries;
(m) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into
by Funding or any of its Subsidiaries in the ordinary course of
business in accordance with the past practices of Funding and its
Subsidiaries; or
(n) 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.
SECTION 6.06. Conduct of Funding's Business. (a) Funding
will not, and will not permit any Subsidiary of Funding to, engage in any
business other than dealing in Receivables and Penney Supplier Receivables,
making Investments as permitted by paragraph (c) below, financing the
acquisition of Receivables and Penney Supplier Receivables and making of such
Investments, and any activities incidental or related to the foregoing.
Receivables at any time acquired by Funding and its Subsidiaries from JCPenney
and its Subsidiaries, together with Receivables previously acquired from
JCPenney and its Subsidiaries and then owned by Funding and its Subsidiaries,
shall be reasonably repre-
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69
sentative of the then outstanding Receivables which have arisen in the business
of JCPenney and those Subsidiaries of JCPenney from which such Receivables have
been or are being acquired; provided, however, that Receivables at any time
acquired and owned by Funding and its Subsidiaries may exclude any type or
types of Receivables which are sold or assigned by JCPenney and its
Subsidiaries to one or more third parties if in the opinion of Funding's board
of directors such type or types of Receivables may be serviced more efficiently
or economically by any such third party than by JCPenney, Funding or any such
Subsidiary.
(b) Funding will not, and will not permit any of its
subsidiaries to, make any loan or advance to JCPenney or any Subsidiary of
JCPenney (other than Funding or a Subsidiary of Funding) except on a basis
which in the opinion of Funding's board of directors reasonably reflects sound
credit practices at the time of such loan or advance.
(c) Funding will not, and will not permit any of its
subsidiaries to, make any Investments, directly or indirectly, other than
(i) Investments in Receivables;
(ii) loans and advances to JCPenney and its Subsid-
iaries;
(iii) Investments in wholly-owned Subsidiaries of Funding or
Investments by any Subsidiary of Funding in Funding;
(iv) Investments in Penney Supplier Receivables;
and,
(v) Investments in any direct and indirect obligations of the
United States of America or any agency thereof having a maturity not
in excess of ten years from the date of purchase; obligations having a
maturity not in excess of ten years from the date of purchase of any
county, municipality or state of the United States of America and
having any of the three highest ratings assigned by any nationally
recognized organization regularly engaged in rating the investment
quality of such obligations; open market commercial paper; bankers'
acceptances; certificates of deposit; and other obligations which, in
the opinion of
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Funding's board of directors, are similar in risk, quality and
maturity to any of the foregoing.
ARTICLE VII. EVENTS OF DEFAULT
In case of the happening of any of the following events
("Events of Default"):
(a) (i) any representation or warranty made or deemed made
pursuant to this Agreement shall prove to have been false or
misleading in any respect, or (ii) any material representation,
warranty, statement or information contained in any report,
certificate, financial statement or other instrument furnished in
connection with or pursuant to this Agreement shall prove to have been
false or misleading in any respect;and only if, in both subsection (i)
and subsection (ii), such falsehood or misleading matter would result
in a Material Adverse Effect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of
any Loan 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 by
acceleration thereof or otherwise, and such default shall continue
unremedied for one Business Day;
(c) default shall be made in the payment of any interest on
any Loan or any Fee or any other amount (other than an amount referred
to in (b) above) due under this Agreement, when and as the same shall
become due and payable, and such default shall continue unremedied for
a period of five Business Days;
(d) default shall be made in the due observance or performance
by the Borrowers of any covenant, condition or agreement contained in
Section 5.01(a), 5.05 or 5.10 or in Article VI and such default shall
continue unremedied for a period of five Business Days;
(e) default shall be made in the due observance or performance
by any Borrower or Restricted Subsidiary of any covenant, condition or
agreement contained in this Agreement (other than those specified in
(b), (c) or (d) above) and such default shall continue unremedied for
a period of 30 days after notice thereof from the
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71
Agent or any Lender to such Borrower or, if such default is able to be
cured and such Borrower is using its best efforts to cure such
default, such longer period as is reasonably required to cure such
default;
(f) any Borrower or Restricted Subsidiary shall (i) fail to
pay any principal or interest, regardless of amount, due in respect of
any indebtedness for borrowed money in a principal amount in excess of
$50,000,000, when and as the same shall become due and payable (after
the expiration of any applicable grace period), and (unless such
indebtedness is already due and payable at the time of such default)
such default results in an acceleration of such indebtedness and in
either case is not cured within five Business Days thereafter or (ii)
fail to observe or perform any other term, covenant, condition or
agreement contained in any agreement or instrument evidencing or
governing any such indebtedness if any failure referred to in this
clause (ii) results in an acceleration of such indebtedness that is
not annulled or rescinded within 15 days after the date of such
acceleration;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of any Borrower or
Restricted Subsidiary, or of a substantial part of the property or
assets of any Borrower or Restricted Subsidiary, under Title 11 of the
United States Code, as now constituted or hereafter amended, or any
other Federal or state bankruptcy, insolvency, receivership or similar
law, (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Borrower or
Restricted Subsidiary or for a substantial part of the property or
assets of any Borrower or Restricted Subsidiary or (iii) the
winding-up or liquidation of any Borrower or Restricted Subsidiary;
and 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;
(h) any Borrower or Restricted Subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking
relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (ii) consent to the
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72
institution of, or fail to contest in a timely and appropriate manner,
any proceeding or the filing of any petition described in (g) above,
(iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any
Borrower or Restricted Subsidiary or for a substantial part of the
property or assets of any Borrower or Restricted Subsidiary, (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, (vi) admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action
for the purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an
aggregate amount in excess of $100,000,000 shall be rendered against
any Borrower, any Restricted Subsidiary or any combination of
Borrowers and Restricted Subsidiaries and the same shall remain
undischarged for a period of 30 consecutive Business Days during which
execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to levy upon assets or properties
of any Borrower or Restricted Subsidiary to enforce any such judgment;
(j) a Reportable Event or Reportable Events, or a failure to
make a required installment or other payment (within the meaning of
Section 412(n)(l) of the Code), shall have occurred with respect to
any Plan or Plans that reasonably could be expected to result in
liability of the Borrowers to the PBGC or to any Plan or Plans in an
aggregate amount exceeding $200,000,000 and, within 30 days after the
reporting of any such Reportable Event to the Agent or after the
receipt by the Agent of the statement required pursuant to Section
5.06, the Agent shall have notified the Borrowers in writing that (i)
the Required Lenders have made a determination that, on the basis of
such Reportable Event or Reportable Events or the failure to make a
required payment, there are reasonable grounds (A) for the termination
of such Plan or Plans by the PBGC, (B) for the appointment by the
appropriate United States District Court of a trustee to administer
such Plan or Plans or (C) for the imposition of a lien in favor of a
Plan and (ii) as a result thereof an Event of Default exists
hereunder; or a trustee shall be
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73
appointed by a United States District Court to administer any such
Plan or Plans; or the PBGC shall institute proceedings to terminate
any Plan or Plans;
(k) Funding (or any permitted successor thereto under Section
6.04(b)) shall cease to be a direct or indirect wholly-owned
subsidiary of JCPenney (unless Funding or such permitted successor
shall be merged into JCPenney); or
(l) an Event of Default shall occur under the Tranche A
Credit Agreement.
then, and in every such event (other than an event described in paragraph (g)
or (h) above), and at any time thereafter during the continuance of such event,
the Agent, at the request of the Required Lenders, shall, by notice to the
Borrowers, take either or both of the following actions, at the same or
different times: (x) terminate forthwith the Commitments and (y) declare the
Loans then outstanding to be forthwith due and payable in whole or in part,
whereupon the principal of the Loans so declared to be due and payable,
together with accrued interest thereon and any unpaid accrued Fees and all
other liabilities of the Borrowers accrued hereunder, shall become forthwith
due and payable, without presentment, demand, protest or any other notice of
any kind, all of which are hereby expressly waived by the Borrowers, anything
contained herein to the contrary notwithstanding; and in any event described in
paragraph (g) or (h) above, the Commitments shall automatically and immediately
terminate and the principal of the Loans then outstanding, together with
accrued interest thereon and any unpaid accrued Fees and all other liabilities
of the Borrowers accrued hereunder, shall automatically and immediately become
due and payable, without presentment, demand, protest or any other notice of
any kind, all of which are hereby expressly waived by the Borrowers, anything
contained herein to the contrary notwithstanding.
ARTICLE VIII. THE AGENT
In order to expedite the transactions contemplated by this
Agreement, each Lender hereby appoints the Agent to act as its agent hereunder.
Each of the Lenders hereby irrevocably authorizes the Agent to take such
actions on behalf of such Lender and to exercise such powers as are
specifically delegated to the Agent by the terms and provi-
<PAGE> 78
74
sions hereof, together with such actions and powers as are reasonably
incidental thereto. The Agent is hereby expressly authorized by the Lenders,
without hereby limiting any implied authority, (a) to receive on behalf of the
Lenders all payments of principal of and interest on the Loans and all other
amounts due to the Lenders hereunder, and promptly to distribute to each Lender
its proper share of each payment so received; (b) to give notice on behalf of
each of the Lenders to the Borrowers of any Event of Default specified in this
Agreement of which the Agent has actual knowledge acquired in connection with
its agency hereunder; and (c) to distribute to each Lender copies of all
notices, financial statements and other materials delivered by the Borrowers
pursuant to this Agreement as received by the Agent.
The Agent and its directors, officers, employees and agents
shall not be liable as such for any action taken or omitted by any of them, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, except in each case
to the extent of its or his own gross negligence or wilful misconduct in
connection therewith, or be required to ascertain or to make any inquiry
concerning the performance or observance by the Borrowers of any of the terms,
conditions, covenants or agreements contained in this Agreement. The Agent
shall not be responsible to the Lenders for the due execution, genuineness,
validity, enforceability or effectiveness of this Agreement or any other
instruments or agreements; provided, however, that the Agent shall be
responsible for its own due execution of this Agreement and any other
instrument or agreement relating to this Agreement. The Agent shall in all
cases be fully protected in acting, or refraining from acting, in accordance
with written instructions signed by the Required Lenders and, except as
otherwise specifically provided herein, such instructions and any action or
inaction pursuant thereto shall be binding on all the Lenders. The Agent
shall, in the absence of knowledge to the contrary, be entitled to rely on any
instrument or document believed by it in good faith to be genuine and correct
and to have been signed or sent by the proper person or persons. The Agent and
its directors, officers, employees and agents shall not have any responsibility
to any Borrower on account of the failure of or delay in performance or breach
by any Lender of any of its obligations hereunder or to any Lender on account
of the failure of or delay in performance or breach by any other Lender or any
Borrower of any of its respective
<PAGE> 79
75
obligations hereunder or in connection herewith. The Agent may execute any and
all of its duties hereunder by or through agents of recognized standing or
employees and shall be entitled to rely upon the advice of legal counsel of
recognized standing selected by it with respect to all matters arising
hereunder and shall not be liable for any action taken or suffered in good
faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that the Agent shall be under
no duty to take any discretionary action permitted to be taken by it pursuant
to the provisions of this Agreement unless it shall be requested in writing to
do so by the Required Lenders.
Subject to the appointment and acceptance of a successor Agent
as provided below, the Agent may resign at any time by notifying the Lenders
and the Borrowers. Upon any such resignation, the Required Lenders shall have
the right to appoint a successor; provided, however, that any such appointment
shall be subject to the prior written consent of JCPenney (which consent shall
not be unreasonably withheld so long as such successor shall be (i) a bank with
a rating of Aa or better from Moody's or a rating of AA or better from S&P, or
an Affiliate of any such bank, or (ii) any Co-Agent). If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Agent gives notice of its
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent; provided, however, that any such appointment shall be subject
to the prior written consent of JCPenney (which consent shall not be
unreasonably withheld so long as such successor shall be (i) a bank with a
rating of Aa or better from Moody's or a rating of AA or better from S&P, or an
Affiliate of any such bank, or (ii) any Co-Agent). Upon the acceptance of any
appointment as Agent hereunder by a permitted successor, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent and the retiring Agent shall be discharged from its
duties and obligations as Agent hereunder. After an Agent's resignation
hereunder, the provisions of this Article and Section 9.05 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Agent.
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76
The Borrowers shall have the right to replace any Agent
requesting compensation under Section 2.19, but only in accordance with the
provisions of Section 2.20(b).
With respect to the Loans made by it hereunder, the Agent (and
any Lender appointed as a successor Agent) in its individual capacity and not
as Agent shall have the same rights and powers as any other Lender and may
exercise the same as though it were not the Agent (or such successor Agent) and
the Agent and its Affiliates (and any such successor Agent and its Affiliates)
may accept deposits from, lend money to and generally engage in any kind of
business with any Borrower or Subsidiary or any Affiliate of any Borrower as if
the Agent (or such successor Agent) were not an Agent.
Each Lender agrees (i) to reimburse the Agent, on demand, in
the amount of its pro rata share (based on its Commitment hereunder) of any
expenses (other than expenses in connection with the negotiation, preparation
and closing of this Agreement) incurred for the benefit of the Lenders by the
Agent, including counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, which shall not have been
reimbursed by the Borrowers and (ii) to indemnify and hold harmless the Agent
and any of its directors, officers, employees or agents, on demand, in the
amount of such pro rata share, from and against any and all liabilities, taxes,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against it in its capacity as an Agent or any of
them in any way relating to or arising out of this Agreement or any action
taken or omitted by it or any of them under this Agreement, to the extent the
same shall not have been reimbursed by the Borrowers; provided that no Lender
shall be liable to the Agent for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the gross negligence or wilful misconduct of the
Agent or any of its directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and
without reliance upon the 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
<PAGE> 81
77
upon the 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 related agreement or any document furnished hereunder or thereunder.
ARTICLE IX. MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed or sent by telex, graphic scanning or other
telegraphic communications equipment, as follows:
(a) if to J.C. Penney, to it at J.C. Penney Company, Inc.,
6501 Legacy Drive, Mail Code 1304, Plano, TX 75024-3698, Attention of
Treasurer
Telephone: (214) 431-2001
Telecopy: (214) 431-2044
With a copy to: General Counsel - J.C. Penney Company, Inc., at the
same address;
(b) if to Funding, to it at J.C. Penney Funding Corporation,
6501 Legacy Drive, Mail Code 1304, Plano, TX 75024- 3698, Attention of
President
Telephone: (214) 431-2001
Telecopy: (214) 431-2044
With a copy to: General Counsel - J.C. Penney Company, Inc., at the
same address.
(c) if to the Agent, to it at Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York 10260, Attention of Mr.
John O'Dowd
Telephone: (212) 648-6973
Telecopy: (212) 648-5336
(d) if to a Lender, to it at its address (or telecopy number)
set forth in Schedule 2.01.
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 if delivered by hand or overnight courier service or sent by
telex, telecopy or other telegraphic communications equipment, or on the date
five Business Days after dispatch by certified or registered mail if mailed, in
each case delivered,
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78
sent or mailed (properly addressed) to such party as provided in this Section
9.01 or in accordance with the latest unrevoked direction from such party given
in accordance with this Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants,
agreements, representations and warranties made by any Borrower herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement shall be considered to have been relied upon by
the Lenders and shall survive the making by the Lenders of the Loans,
regardless of any investigation made by the Lenders or on their behalf, 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 and so long as the Commitments have not
been terminated.
SECTION 9.03. Binding Effect. This Agreement shall become
effective when it shall have been executed by each of the Borrowers and the
Agent and when the Agent shall have received copies hereof which, when taken
together, bear the signatures of each Lender, and thereafter shall be binding
upon and inure to the benefit of the Borrowers, the Agent and each Lender and
their respective successors and permitted assigns in accordance with its terms,
except that no Borrower shall have any right to assign or delegate any of its
respective rights or duties hereunder or any interest herein without the prior
consent of all the Lenders.
SECTION 9.04. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and permitted assigns of such party; and all
covenants, promises and agreements by or on behalf of any Borrower, the Agent
or the Lenders that are contained in this Agreement shall bind and inure to the
benefit of their respective successors and permitted assigns.
(b) Each Lender may assign to an Eligible Assignee, at the
expense of the assignor and/or the assignee, all or a portion of its interests,
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it); provided, however, that (i)
except in the case of an assignment by a Lender to an Affiliate of such Lender
which is a bank or bank holding company, the Borrowers and the Agent must give
their prior written consent to such
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assignment, (ii) the amount of the Commitment of the assigning Lender subject
to such assignment (determined as of the date of such assignment) shall not be
less than $10,000,000 (or the remaining amount of the Commitment of such
Lender), (iii) the parties to each such assignment shall execute and deliver to
the Agent an instrument evidencing such assignment (the "Assignment
Instrument") and a processing and recordation fee of $2,000 (which fee shall
not in any event be an obligation of the Borrowers) and (iv) as of the date of
such assignment, except with the prior written consent of JCPenney, (x) the
assignee shall not have any right, and shall have no knowledge that such
assignment would result in its having the right, to request compensation
pursuant to Section 2.13 or 2.19 after giving effect to such assignment in
excess of any compensation to which the assigning Lender would have been
entitled under such Sections and (y) the parties to such assignment shall have
no knowledge that such assignment (A) would cause it to be unlawful for any
party thereto to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan or (B)
would cause any Borrower to incur any liability under Section 2.15. Upon
acceptance and recording pursuant to paragraph (e) of this Section 9.04, from
and after the effective date specified in each Assignment Instrument, which
effective date shall be at least five days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment Instrument, shall have the rights and obligations
of, and shall for all purposes be, a Lender under this Agreement and (B) the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment Instrument, be released from its obligations under this
Agreement (and, in the case of an Assignment Instrument covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto (but, subject to
Section 2.20, shall continue to be entitled to the benefits of Sections 2.13,
2.15, 2.19 and 9.05, as well as to any Fees accrued for its account hereunder
and not yet paid)). Notwithstanding the foregoing, any Lender assigning any
portion of its rights and obligations under this Agreement may retain any
Competitive Loans made by it outstanding at such time, and in such case shall
retain its rights hereunder in respect of any Loans so retained until such
Loans have been repaid in full in accordance with this Agreement. No
assignment may be made by any Lender except in accordance with the provisions
of this Section 9.04(b).
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80
(c) By executing and delivering an Assignment Instrument, the
assignee thereunder shall be deemed to confirm to and agree with the other
parties hereto as follows: (i) such assignee confirms that it has received a
copy of this Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 5.04 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment Instrument; (ii) such assignee will
independently and without reliance upon the Agent, the assigning Lender 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 this Agreement; (iii) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(iv) such assignee agrees that it will perform in accordance with their terms
all the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(d) The Agent shall retain a copy of each Assignment
Instrument delivered to it and a register for the recordation of the name and
address of, and the Commitment of, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive in the absence of
manifest error and the Borrowers, the Agent 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. The Register shall be
available for inspection by any Borrower or any Lender, at any reasonable time
and from time to time upon reasonable prior notice.
(e) Each Lender may without the consent of the Borrowers or
the Agent sell participations to one or more banks or other entities in all or
a portion of its rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans owing to it); provided, however, that
(i) such Lender's obligations under this Agreement shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the participating banks or other
entities shall not be entitled to the benefit of the provisions contained in
Sections 2.13, 2.15, 2.19 and 9.05 and (iv) the Borrowers, the Agent and
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81
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,
and such Lender shall retain the sole right to enforce the obligations of the
Borrowers relating to the Loans and to approve any amendment, modification or
waiver of any provision of this Agreement (other than any amendments,
modifications or waivers decreasing any fees payable hereunder or the amount of
principal of or the rate at which interest is payable on the Loans, or
extending any scheduled principal payment date or date fixed for the payment of
interest on the Loans, that would affect the Lender in question and its
participants).
(f) Any Lender or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 9.04, disclose to the assignee or participant or proposed assignee
or participant any information relating to any Borrower furnished to such
Lender by or on behalf of such Borrower; provided that, prior to any such
disclosure of information designated by such Borrower as confidential, each
such assignee or participant or proposed assignee or participant shall execute
an agreement whereby such assignee or participant shall agree to preserve the
confidentiality of such confidential information in accordance with Section
9.15.
(g) Any Lender may at any time, without the consent of any
other party hereto, assign all or any portion of its rights under this
Agreement and any notes issued to it to a Federal Reserve Bank provided that no
such assignment shall release a Lender from any of its obligations hereunder.
In order to facilitate such an assignment to a Federal Reserve Bank, the
Borrower shall, at the request of the assigning Lender, promptly execute and
deliver to the assigning Lender a note with terms in accordance with this
Agreement, in a form reasonably acceptable to the Agent and the Borrower,
evidencing the Loans made to the Borrower by the assigning Lender hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrowers agree,
jointly and severally, to pay all reasonable out-of- pocket expenses incurred
by the Agent in connection with the negotiation, preparation and closing of
this Agreement, including the reasonable fees and disbursements of Cravath,
Swaine & Moore, special counsel for the Agent, and, only with the written
consent of the Borrowers prior to any incurrence, all reasonable out-of-pocket
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82
expenses incurred by the Agent in connection with any amendment, modification
or waiver of this Agreement. The Borrowers agree, jointly and severally, to
pay all reasonable out-of-pocket costs and expenses of the Agent and Lenders,
as well as the allocated costs of in-house counsel, in connection with the
collection or enforcement of this Agreement.
(b) The Borrowers agree, jointly and severally, to indemnify
the Agent, each Lender and its directors, officers and employees (each such
person being called an "Indemnitee") against, and to hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees and expenses, incurred by or
asserted against any Indemnitee arising as a result of (i) any breach by any
Borrower of any of its obligations under this Agreement or any agreement or
instrument contemplated hereby, (ii) the use of the proceeds of the Loans or
(iii) any claim, litigation, investigation or proceeding relating to any of the
foregoing, if any Indemnitee is at any time 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 and against such Indemnitee, (y) result from the gross
negligence or wilful misconduct of such Indemnitee (or, if such Indemnitee is a
Lender or the Agent, any of its directors, officers or employees) or (z)
result from any disputes among the Lenders and the Agent, or any of them, other
than disputes resulting from the fault of a Borrower.
(c) The provisions of this Section 9.05 shall remain
operative and in full force and effect regardless of the expiration of the term
of this Agreement, the consummation of the transactions contemplated hereby,
the repayment of any of the Loans, the invalidity or unenforceability of any
term or provision of this Agreement, or any investigation made by or on behalf
of the Agent or the Lender. All amounts due under this Section 9.05 shall be
payable on written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall
have occurred and be continuing and any three Lenders representing at least
$50,000,000 in aggregate amount of the Commitments have requested the Agent, in
writing, in accordance with the provisions of Article VII,
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83
to declare the Loan to be forthwith due and payable, each Lender 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 indebtedness at any
time owing by such Lender to or for the credit or the account of any Borrower
against any of and all the obligations of such Borrower now or hereafter
existing under this Agreement held by such Lender (other than obligations
purchased after such Event of Default shall have become known to such Lender),
irrespective of whether or not such Lender shall have made any demand under
this Agreement and although such obligations may be unmatured. The rights of
each Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have. Any Lender
exercising its rights under this Section shall give notice thereof to JCPenney
concurrently with or prior to the exercise of such rights.
SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay
of the Agent or Lender in exercising any power or right hereunder 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 Agent, the Lenders and
the Borrowers hereunder are cumulative and are not exclusive of any rights or
remedies which they would otherwise have. No waiver of any provision of this
Agreement or consent to any departure by any Borrower therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand on any
Borrower in any case shall entitle such Borrower 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 Borrowers and the Required Lenders; provided,
however, that no such agreement shall (i) decrease the principal amount
<PAGE> 88
84
of, or extend the maturity of or any scheduled principal payment date or date
for the payment of any interest on any Loan, or waive or excuse any such
payment or any part thereof, or decrease the rate of interest on any Loan,
without the prior written consent of each Lender affected thereby, (ii) change
the Commitment or decrease the Commitment Fees or Facility Fees of any Lender
without the prior written consent of such Lender, or (iii) amend or modify the
provisions of Section 2.16, the provisions of this Section or the definition of
the "Required Lenders", without the prior written consent of each Lender;
provided further that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Agent hereunder without the prior written consent
of the Agent. Each Lender shall be bound by any waiver, amendment or
modification authorized by this Section, and any consent by any Lender pursuant
to this Section shall bind any subsequent assignee of such Lender.
SECTION 9.09. Interest and Charges. Notwithstanding any
other provision in this Agreement, no Lender shall ever be entitled to receive,
collect or apply, as interest on any amount owing to such Lender under this
Agreement or in connection herewith, any amount in excess of the Maximum
Amount. If any Lender ever receives, collects or applies, as interest, any
such excess, such excess shall be deemed a partial repayment of principal and
treated hereunder as such; and if principal is paid in full, any remaining
excess shall be paid to the appropriate Borrower. In determining whether or
not the interest paid or payable, under any specific contingency, exceeds the
Maximum Amount, the Borrowers and the Lenders shall, to the maximum extent
permitted under applicable law, (i) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effect thereof, and (iii) amortize, prorate, allocate and
spread in equal parts, the total amount of interest throughout the entire
contemplated term of this Agreement so that the interest rate is uniform
throughout the entire period that any amount is outstanding under or in
connection with this Agreement; provided, however, that if any obligation owing
to a Lender hereunder or in connection herewith is paid and performed in full
prior to the end of the full contemplated term thereof, and if the interest
received by such Lender on such obligation for its actual term exceeds the
Maximum Amount with respect thereto, such Lender shall refund to the
appropriate Borrower the amount of such excess or credit the amount of such
excess against the total principal amount of all amounts owing to such
<PAGE> 89
85
Lender hereunder or in connection herewith, and, in such event, such Lender
shall not be subject to any penalties provided by any laws for contracting for,
charging or receiving interest in excess of the Maximum Amount.
SECTION 9.10. Entire Agreement. This written Agreement
together with the letter agreement with respect to payment of fees of even date
herewith represent the final agreement among the parties with respect to the
subject matter hereof and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties. There are no
unwritten oral agreements among the parties with respect to the subject matter
hereof.
SECTION 9.11. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties 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 9.12. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall constitute an original but all
of which when taken together shall constitute but one contract, and shall
become effective as provided in Section 9.03.
SECTION 9.13. 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 are not to affect the construction of, or to be
taken into consideration in interpreting, this Agreement.
SECTION 9.14. Jurisdiction; Consent to Service of Process.
(a) Each Borrower hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York State court
or Federal court of the United States of America sitting in New York City, and
any appellate court from any thereof, in any action or proceeding arising out
of or relating to this Agreement, 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
<PAGE> 90
86
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. Subject to the
foregoing and to paragraph (b) below, nothing in this Agreement shall affect
any right that any party hereto may otherwise have to bring any action or
proceeding relating to this Agreement against any other party hereto in the
courts of any jurisdiction.
(b) Each Borrower 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 in any
New York State or Federal court. 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 9.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 9.15. Confidentiality. Notwithstanding anything
contained in this Agreement to the contrary, the Lenders and the Agent shall
hold in confidence all agreements, statements, reports and information that are
not in the public domain concerning the Borrowers and their Subsidiaries that
the Agent or any Lender receives pursuant to or in connection with this
Agreement. The Agent and each of the Lenders shall not distribute any such
confidential information to other persons except (a) to its counsel, its
Affiliates, its examiners, regulatory authorities and prospective assignees of,
or participants in, its interest herein and their respective counsel (each of
which shall be instructed to hold the same in confidence, and in the case of
any prospective assignee or prospective participant, shall execute an agreement
to such effect pursuant to Section 9.04(f) as a condition to receiving a copy
of this Agreement and becoming an assignee or participant hereunder), (b)
pursuant to legal process, (c) in connection with litigation against or by the
Lenders and/or the Agent arising in connection with this Agreement or (d) with
the prior written consent of the Borrowers. The Agent and each
<PAGE> 91
87
of the Lenders shall give prior or contemporaneous notice to the Borrowers of
any disclosure by it of confidential information pursuant to clause (b) or (c)
above.
SECTION 9.16. Liability of Borrowers. Except as expressly
provided in this Agreement, the obligations of each Borrower hereunder shall be
several obligations with respect to Loans made to it.
IN WITNESS WHEREOF, the Borrowers, the Agent, the Co-Agents
and the Lenders 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/ Donald A. McKay
Name: Donald A. McKay
Title: Vice President &
Treasurer
J. C. PENNEY FUNDING CORPORATION,
by
/s/ Donald A. McKay
Name: Donald A. McKay
Title: Chairman of the Board
<PAGE> 92
88
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, Individually and as Agent,
by
/s/ M. Jennifer Shipe
Name: M. Jennifer Shipe
Title: Vice President
BANKERS TRUST COMPANY, Individually
and as Co-Agent,
by
/s/ Henry DelVecchio
Name: Henry DelVecchio
Title: Vice President
CHEMICAL BANK, Individually and as
Co-Agent,
by
/s/ Meredith Vanden Handel
Name: Meredith Vanden Handel
Title: Vice President
CREDIT SUISSE, Individually and as
Co-Agent,
by
/s/ Geoffrey M. Craig
Name: Geoffrey M. Craig
Title: Member of Senior
Management
by
/s/ Kristinn R. Kristinsson
Name: Kristinn R. Kristinsson
Title: Associate
<PAGE> 93
89
ABN AMRO BANK N.V.,
by
/s/ Ronald A. Mahle
Name: Ronald A. Mahle
Title: Vice President
by
/s/ Brian J. Heagler
Name: Brian J. Heagler
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
by
/s/ Susan B. Leopold
Name: Susan B. Leopold
Title: Vice President
by
/s/ Jody B. Schneider
Name: Jody B. Schneider
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
by
/s/ Lisa S. Marshall
Name: Lisa S. Marshall
Title: Director
BANK OF TOKYO, LTD., Acting by and
through its Dallas Agency, as a
Lender,
by
/s/ John M. Mearns
Name: John M. Mearns
Title: Vice President
<PAGE> 94
90
BANK ONE, TEXAS, N.A.,
by
/s/ Michael Silverman
Name: Michael Silverman
Title: Vice President
BANQUE NATIONALE DE PARIS, Houston
Agency,
by
/s/ Henry F. Setina
Name: Henry F. Setina
Title: Vice President
by
______________________________
Name:
Title:
CIBC, INC.,
by
/s/ J.D. Westland
Name: J.D. Westland
Title: Vice President
CITIBANK, N.A.,
by
/s/ Arnold J. Ziegel
Name: Arnold J. Ziegel
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH,
by
/s/ Robert Ivosevich
Name: Robert Ivosevich
Title: Senior Vice President
<PAGE> 95
91
FIRST INTERSTATE BANK OF CALIFORNIA,
by
/s/ Edwina G. Kew
Name: Edwina G. Kew
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
by
/s/ Ted Wozniak
Name: Ted Wozniak
Title: Vice President
FIRST SECURITY BANK OF UTAH, N.A.,
by
/s/ Kevin Imlay
Name: Kevin Imlay
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA,
by
/s/ Michael T. Grady
Name: Michael T. Grady
Title: Vice President
by
/s/ C. Jeffrey Seaton
Name: C. Jeffrey Seaton
Title: Senior Vice President
FIRSTAR BANK MILWAUKEE, N.A.,
by
/s/ Timothy W. Somers
Name: Timothy W. Somers
Title: Assistant Vice President
<PAGE> 96
92
THE FUJI BANK, LIMITED, Houston
Agency,
by
/s/ David L. Kelley
Name: David L. Kelley
Title: Vice President & Senior
Manager
INDUSTRIAL BANK OF JAPAN TRUST
COMPANY,
by
/s/ Takeshi Kawano
Name: Takeshi Kawano
Title: Senior Vice President
and Senior Manager
JP MORGAN DELAWARE,
by
/s/ David J. Morris
Name: David J. Morris
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, New York Branch,
by
/s/ Fumihiko Kamoshida
Name: Fumihiko Kamoshida
Title: Deputy General Manager
MELLON BANK, N.A.,
by
/s/ Lisa M. Pellow
Name: Lisa M. Pellow
Title: Assistant Vice President
<PAGE> 97
93
NATIONAL WESTMINSTER BANK PLC,
New York Branch,
by
/s/ David L. Smith
Name: David L. Smith
Title: Vice President
NATIONAL WESTMINSTER BANK PLC,
Nassau Branch,
by
/s/ David L. Smith
Name: David L. Smith
Title: Vice President
NATIONSBANK OF TEXAS, N.A.,
by
/s/ Robert L. Silmon
Name: Robert L. Silmon
Title: Vice President
NBD BANK, N.A.
by
/s/ D. Andrew Bateman
Name: D. Andrew Bateman
Title: First Vice President
by /s/ William J. McCaffrey
Name: William J. McCaffrey
Title: Second Vice President
THE NORTHERN TRUST COMPANY,
by
/s/ Martin G. Alston
Name: Martin G. Alston
Title: Vice President
<PAGE> 98
94
NORWEST BANK MINNESOTA, N.A.,
by
/s/ Susan M.C. Engebretson
Name: Susan M.C. Engebretson
Title: Assistant Vice President
PNC BANK, NATIONAL ASSOCIATION,
by
/s/ Richard B. Lewis
Name: Richard B. Lewis
Title: Commercial Banking
Officer
ROYAL BANK OF CANADA,
by
/s/ Gil J. Benard
Name: Gil J. Benard
Title: Manager
by
______________________________
Title:
INSTITUTO BANCARIO SAN PAOLO DI
TORINO, SpA,
by
/s/ William J. DeAngelo
Name: William J. DeAngelo
Title: First Vice President
by
/s/ Robert S. Wurster
Name: Robert S. Wurster
Title: First Vice President
<PAGE> 99
95
THE SANWA BANK LIMITED, Dallas Agency,
by
/s/ Robert S. Smith
Name: Robert S. Smith
Title: Assistant Vice President
SOCIETE GENERALE, Southwest Agency,
by
/s/ Louis P. Laville, III
Name: Louis P. Laville, III
Title: Vice President
THE SUMITOMO BANK, LTD., Houston
Agency,
by
/s/ Tatsuo Ueda
Name: Tatsuo Ueda
Title: General Manager
by
_______________________________
Name:
Title:
SUNBANK, NATIONAL ASSOCIATION,
by
/s/ Eric K. Waldron
Name: Eric K. Waldron
Title: First Vice President
<PAGE> 100
96
SWISS BANK CORPORATION, Cayman
Islands Branch,
by
/s/ Marcia L. Thatcher
Name: Marcia L. Thatcher
Title: Director, Merchant
Banking
by
/s/ Filippe Goossens
Name: Filippe Goossens
Title: Associate Director,
Merchant Banking
UNION BANK OF SWITZERLAND,
Houston Agency,
by
/s/ Evans Swann
Name: Evans Swann
Title: Vice President
by
/s/ Henry Sturzenegger
Name: Henry Sturzenegger
Title: Assistant Vice President
UNITED MISSOURI BANK, N.A.,
by
/s/ Walter Beck
Name: Walter Beck
Title: Executive Vice President
<PAGE> 101
97
UNITED STATES NATIONAL
BANK OF OREGON,
by
/s/ Blake R. Howells
Name: Blake R. Howells
Title: Assistant Vice President
by
______________________________
Name:
Title:
WACHOVIA BANK OF GEORGIA, N.A.,
by
/s/ Terry L. Akins
Name: Terry L. Akins
Title: Senior Vice President
<PAGE> 102
EXHIBIT A-1
FORM OF COMPETITIVE BID REQUEST
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
(Date)
Attention: ( )
Dear Sirs:
The undersigned, ( ) (the "Borrower"), refers to the
Revolving Credit Agreement dated as of December 16, 1993 (as it may hereafter
be amended, modified, extended or restated from time to time, the "Credit
Agreement"), to which it is a party. Capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
The Borrower hereby gives you notice pursuant to Section 2.03(a) of the Credit
Agreement that it requests a Competitive Borrowing under the Credit Agreement,
and in that connection sets forth below the terms on which such Competitive
Borrowing is requested to be made:
(A) Date of Competitive Borrowing
(which is a Business Day) ______________
(B) Principal Amount of
Competitive Borrowing 1/ ______________
(C) Interest rate basis 2/ ______________
(D) Interest Period and the last
day thereof 3/ ______________
____________________
1/ Not less than $25,000,000 (and in integral multiples of
$5,000,000) or, if less, an aggregate principal amount equal to
the Total Commitment on the date of such Borrowing minus the
outstanding aggregate principal amount on such date of all
Competitive Loans.
2/ Eurodollar Loan, Fixed Rate Loan or CD Loan.
3/ Which shall be subject to the definition of "Interest
Period" and end not later than the Maturity Date.
<PAGE> 103
2
Upon acceptance of any or all of the Loans offered by the
Lenders in response to this request, the Borrower shall be deemed to have
represented and warranted, except as otherwise provided in Section 4.01, that
the conditions to lending specified in Section 4.01(b) and (c) of the Credit
Agreement have been satisfied.
Very truly yours,
by_______________________________
Title: (Responsible Officer) 4/
____________________
4/ Chairman, vice chairman, president, chief financial officer, treasurer
or controller of such corporation or any executive or senior vice president of
such corporation.
<PAGE> 104
EXHIBIT A-2
FORM OF NOTICE OF COMPETITIVE BID REQUEST
(Name of Lender)
(Address)
(Date)
Attention: ( )
Dear Sirs:
Reference is made to the Revolving Credit Agreement dated as
of December 16, 1993 (as it may hereafter be amended, modified, extended or
restated from time to time, the "Credit Agreement"), among J. C. Penney
Company, Inc. ("JCPenney"), J. C. Penney Funding Corporation ("Funding"), the
Lenders and Morgan Guaranty Trust Company of New York, as Agent. Capitalized
terms used but not defined herein shall have the meanings assigned to such
terms in the Credit Agreement. ( ) 1/ made a Competitive Bid
Request on ( ), 19( ), pursuant to Section 2.03(a) of the Credit
Agreement, and in that connection you are invited to submit a Competitive Bid
by (time), on (date). 2/ Your Competitive Bid must comply with Section 2.03(b)
of the Credit Agreement and the terms set forth below on which the Competitive
Bid Request was made:
(A) Date of Competitive Borrowing _______________
(B) Principal amount of
Competitive Borrowing _______________
(C) Interest rate basis _______________
____________________
1/ JCPenney or Funding.
2/ The Competitive Bid must be received by the Agent: (i) in the case of
Eurodollar Loans or CD Loans, not later than 9:00 a.m., New York City time,
three Business Days before the proposed Competitive Borrowing, and (ii) in the
case of Fixed Rate Loans, not later than 9:00 a.m., New York City time, on the
day of a proposed Competitive Borrowing.
<PAGE> 105
2
(D) Interest Period and the last day thereof _______________
Very truly yours,
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent,
By____________________________
Title:
<PAGE> 106
EXHIBIT A-3
FORM OF COMPETITIVE BID
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
(Date)
Attention: ( )
Dear Sirs:
The undersigned, (name of Lender), refers to the Revolving
Credit Agreement dated as of December 16, 1993 (as it may hereafter be amended,
modified, extended or restated from time to time, the "Credit Agreement"),
among J. C. Penney Company, Inc. ("JCPenney"), J. C. Penney Funding Corporation
("Funding"), the Lenders and Morgan Guaranty Trust Company of New York, as
Agent. Capitalized terms used but not defined herein shall have the meanings
assigned to such terms in the Credit Agreement. The undersigned hereby makes a
Competitive Bid pursuant to Section 2.03(b) of the Credit Agreement, in
response to the Competitive Bid Request made by ( ) 1/ on (
), 19( ),
____________________
1/ JCPenney or Funding.
<PAGE> 107
2
and in that connection sets forth below the terms on which such Competitive Bid
is made:
(A) Principal Amount 2/ _______________
(B) Competitive Bid Rate(s) 3/ _______________
(C) Interest Period and last day thereof _______________
The undersigned hereby confirms that it will, subject only to
the conditions set forth in the Credit Agreement, extend credit to the Borrower
upon acceptance by the Borrower of this bid in accordance with Section 2.03(d)
of the Credit Agreement.
Very truly yours,
(NAME OF LENDER),
by
__________________________
Title:
____________________
2/ An integral multiple of $5,000,000 (unless equal to the requested
Competitive Borrowing) and not greater than the requested Competitive
Borrowing. Multiple bids will be accepted by the Agent.
3/ One or more rates; i.e., LIBO Rate + or - ____%, in the case of
Eurodollar Loans, Adjusted CD Rate + or - ____%, in the case of CD Loans, or
____%, in the case of Fixed Rate Loans.
<PAGE> 108
EXHIBIT A-4
FORM OF STANDBY BORROWING REQUEST
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
(Date)
Attention: ( )
Dear Sirs:
The undersigned, ( ) (the "Borrower"), refers to
the Revolving Credit Agreement dated as of December 16, 1993 (as it may
hereafter be amended, modified, extended or restated from time to time, the
"Credit Agreement"), to which it is a party. Capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. The Borrower hereby gives you notice pursuant to Section 2.04 of
the Credit Agreement that it requests a Standby Borrowing under the Credit
Agreement, and in that connection sets forth below the terms on which such
Standby Borrowing is requested to be made:
(A) Date of Standby Borrowing
(which is a Business Day) _______________
(B) Principal Amount of
Standby Borrowing 1/ _______________
____________________
1/ Not less than $25,000,000 (and in integral multiples of $5,000,000) or,
if less, an aggregate principal amount equal to the remaining available balance
of the Total Commitment.
<PAGE> 109
2
(C) Interest rate basis 2/ _______________
(D) Interest Period and the Last
day thereof 3/ _______________
Upon acceptance of any or all of the Loans made by the Lenders
in response to this request, the Borrower shall be deemed to have represented
and warranted except as that the conditions to lending specified in Section
4.01(b) and (c) of the Credit Agreement have been satisfied; provided, however,
that in the case of a refinancing of a Standby Borrowing with a new Standby
Borrowing that does not increase the outstanding aggregate principal amount of
the Loans of any Lender, the Borrower shall not be subject to the satisfaction
of any of the Section 4.01 conditions.
Very truly yours,
by
________________________________
Title: (Responsible Officer) 4/
____________________
2/ Eurodollar Loan or ABR Loan. Notice under Section 2.04 is necessary
to refinance a Standby Borrowing with a Eurodollar Borrowing. In the absence
of such a notice, unless the Borrowing is repaid at the end of the applicable
Interest Period, the Borrower shall be deemed to have given notice of an
election to refinance such Borrowing with an ABR Borrowing of 5 days' duration.
3/ Which shall be subject to the definition of "Interest Period" and end
not later than the Maturity Date.
4/ Chairman, vice chairman, president, chief financial officer, treasurer
or controller of such corporation or any executive or senior vice president of
such corporation.
<PAGE> 110
EXHIBIT B
Charles R. Lotter
Senior Vice President
Secretary and General Counsel
December 16, 1993
Each of the lenders named in the
Schedule referred to below
Re: Revolving Credit Agreements of
J. C. Penney Company, Inc. and
J. C. Penney Funding Corporatio
Dear Sirs:
As the General Counsel of J. C. Penney Company, Inc., a Delaware
corporation ("JCPenney"), and of J. C. Penney Funding Corporation, a Delaware
corporation ("Funding"; together with JCPenney, "Borrowers"), I have been asked
to render an opinion pursuant to Section 4.02 of those certain 364-day and
five-year Revolving Credit Agreements dated as of December 16, 1993
("Agreements") among the Borrowers, Morgan Guaranty Trust Company of New York
("Agent"), the lenders listed in Schedule 2.01 of the Agreements ("Lenders")
and Bankers Trust Company, Chemical Bank and Credit Suisse ("Co-Agents").
In rendering the opinion set forth below, I have examined originals,
photostatic, or certified copies of the Agreements, the respective corporate
records and documents of the Borrowers, copies of public documents,
certificates of the officers or representatives of the Borrowers, and such
other instruments and documents, and have made such inquiries, as I have deemed
necessary as a basis for such opinion. In making such examinations, I have
assumed with your consent the genuineness of all signatures (other than the
signatures of the Borrowers) 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
opinion, to the extent I deemed necessary, I have relied upon the
representations and warranties of the Borrowers made in the Agreements and upon
certificates of the officers of the Borrowers. Capitalized terms not otherwise
defined in this opinion letter have the meanings specified in the Agreements.
<PAGE> 111
Each of the lenders named in the Schedule
December 16, 1993
Page 2
Based upon the foregoing, I am of the opinion that:
1. Each of the Borrowers has been duly incorporated and is validly
existing and in good standing under the laws of the State of Delaware, 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 Borrowers 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 Borrowers of the
Agreements and the Borrowings by the Borrowers under the Agreements (i) are
within the corporate power of each of the Borrowers; (ii) have been duly
authorized by each of the Borrowers by all necessary corporate action; (iii)
are not in contravention of JCPenney's Restated Certificate of Incorporation,
as amended, Funding's Certificate of Incorporation, as amended, or either of
the Borrower's by-laws; (iv) to the best of my knowledge do not violate any
material law, statute, rule, or regulation, or any material order of any
Governmental Authority, applicable to either of the Borrowers; (v) do not
conflict with or result in the breach of, or constitute a default under, the
material borrowing indentures, agreements, or other instruments of either of
the Borrowers; (vi) do not result in the creation or imposition of any Lien
upon any of the property or assets of either of the Borrowers other than any
Lien created by the Agreements; and (vii) do not require the consent or
approval of, or any filing with, any Governmental Authority or any other person
party to those agreements described above other than those that have been
obtained or made or where the failure to obtain such consent or approval would
not result in a Material Adverse Effect.
3. The Agreements have been duly executed and delivered by each of
the Borrowers and constitute the legal, valid, and binding obligation of such
Borrower, enforceable against such Borrower in accordance with their terms,
except as such enforcement may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
<PAGE> 112
Each of the lenders named in the Schedule
December 16, 1993
Page 3
4. Neither Borrower is an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or a "public-utility company"
or a "holding company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
5. To the best of my knowledge after due inquiry, except as set forth
in Schedule 3.09 of the Agreements, no litigation by or before any Governmental
Authority is now pending or threatened against JCPenney or Funding (i) which
involves the Agreements or the Transactions 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.
6. The Support Agreements have been duly executed and delivered by
JCPenney and, where applicable, Funding and, as of the Closing Date, are in
full force and effect in accordance with their terms.
The opinions expressed herein are limited to the laws of the State of
Delaware with respect to the opinions provided in paragraph 1 (except as to due
qualification as a foreign corporation and good standing under the laws of
other jurisdictions) and clauses (i), (ii), and (iii) of paragraph 2. 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 jurisdictions. This opinion is furnished to you in
connection with the transactions contemplated by the Agreements, and 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.
<PAGE> 113
Each of the lenders named in the Schedule
December 16, 1993
Page 4
Very truly yours,
/s/ CHARLES R. LOTTER
Charles R. Lotter
<PAGE> 114
EXHIBIT C
GUARANTY
This Guaranty Agreement is executed as of
this 16th day of December, 1993 by J. C. Penney
Company, Inc., a Delaware corporation ("Guarantor"),
in favor of J. C. Penney Funding Corporation, a
Delaware corporation ("Funding"), and the lenders
("Lenders") (as defined below).
RECITALS:
WHEREAS, Funding is a wholly-owned subsidiary of Guarantor;
WHEREAS, Funding and Guarantor have entered into those certain
364-day and five-year Revolving Credit Agreements (collectively, the
"Agreements") dated as of December 16, 1993, among Guarantor, Funding, Morgan
Guaranty Trust Company of New York, as agent for Lenders, Bankers Trust
Company, Chemical Bank and Credit Suisse, as co-agents for Lenders, and certain
other financial institutions named in the Agreements (collectively, the
"Lenders") in amounts not to exceed Four Hundred Fifty Million Dollars
($450,000,000) and Eight Hundred Million Dollars ($800,000,000), respectively;
and
WHEREAS, Guarantor is willing to guarantee any borrowings of
Funding under the Agreements on the terms set forth herein.
<PAGE> 115
2
NOW, THEREFORE, in consideration of the premises, Guarantor
hereby agrees as follows:
1. Subject to the terms and conditions of subordination set
forth in this Guaranty, Guarantor hereby unconditionally guarantees in favor of
the Lenders, the prompt payment when due of all interest, principal, and other
amounts owing under the Agreements (collectively, the "Guaranteed Debt"). This
is an unconditional guaranty of payment, and in the event of default by Funding
in the payment of interest, principal, or any other amounts payable under the
Guaranteed Debt, the Lenders may proceed directly against Guarantor to enforce
this Guaranty (including by the institution of legal proceedings) without first
proceeding against Funding.
2. Guarantor acknowledges that it has received and will
receive a direct or indirect benefit from the making of this Guaranty and the
creation of the Guaranteed Debt.
3. (a) The Guaranteed Debt shall be subordinated and subject
in right of payment to the prior payment in full of any and all other
indebtedness for borrowed money incurred, created, assumed, or otherwise
guaranteed by Guarantor (collectively referred to as the Guarantor's "Senior
Debt").
<PAGE> 116
3
(b) In the event of (i) any dissolution or winding-up or
total or partial liquidation or reorganization of Guarantor, whether voluntary
or involuntary, or any bankruptcy, insolvency, receivership, or similar
proceeding relative to Guarantor, or (ii) any default in the payment of
principal (including any acceleration or required prepayments or amortization)
of or interest on any Senior Debt of Guarantor, then, subject to the provisions
of subsection (d) below, the Lenders shall not be entitled to receive any
payment under this Guaranty on account of the Guaranteed Debt unless and until
all Senior Debt shall have been paid in full or otherwise discharged.
(c) For purposes of determining the priority of payments
between the Senior Debt and the Guaranteed Debt, in the event that the
Guaranteed Debt, or any part thereof, is declared due and payable prior to its
stated maturity, all principal of and interest and any other amounts due on all
Senior Debt outstanding at the time of such declaration as to the Guaranteed
Debt shall first have been paid in full, before any payment is made by
Guarantor upon the Guaranteed Debt.
(d) In no event shall any Lender be required by this
subordination to refund any amounts paid to it pursuant to this Guaranty on
account of the Guaranteed Debt prior to
<PAGE> 117
4
the events specified in subsections (b) and (c) above, and prior to such events
the Lenders shall be entitled to be paid hereunder as agreed and to collect any
sums due such Lenders hereunder by any lawful means.
(e) The provisions of this Section are for the purpose of
defining the relative rights of the holders of any Senior Debt, on the one
hand, and the Lenders, on the other hand, against Guarantor, and nothing herein
shall impair, as between the Guarantor and the Lenders, the obligation of
Guarantor, which is unconditional and absolute, to guarantee the prompt payment
when due of the Guaranteed Debt in accordance with the terms and provisions
thereof; nor shall anything herein prevent the Lenders from exercising all
remedies otherwise permitted by applicable law upon default hereunder, subject
to the rights, if any, under this Section of any Senior Debt holder.
4. The substantive laws of the State of New York shall govern
the validity, construction, enforcement, and interpretation of this Guaranty.
<PAGE> 118
5
IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of the date first written above.
J. C. PENNEY COMPANY, INC.,
a Delaware corporation, as
Guarantor,
By: /s/ D. A. MCKAY
Name: D. A. McKay
Title: Vice President & Treasurer
<PAGE> 119
SCHEDULE 2.01
LENDERS
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
ABN AMRO Bank N.V. ABN AMRO Bank N.V. $12,600,000
Three Riverway, Three Riverway,
Suite 1600 Suite 1600
Houston, TX 77056 Houston, TX 77056
For Business/Credit Matters
---------------------------
Attention: Brian J. Heagler
Telephone: (713) 964-3360
Fax: (713) 629-7533
For Administrative Matters
--------------------------
Attention: Patricia Baker or
Belinda Rowell
Telephone: (713) 964-3331
Fax: (713) 629-7533
Bank of America For Business/Credit Matters $18,000,000
National Trust and Savings ---------------------------
Association
1850 Gateway Boulevard Bank of America NT&SA
Concord, CA 94520 333 Clay Street
Suite 4550
Houston, TX 77002
Attention: Susan B. Leopold,
Vice President (Business)
Jody B. Schneider,
Vice President (Credit)
Telephone: (713) 651-4976
(Business)
(713) 651-4865 (Credit)
Telex: 67652 BANKMER SFO
Fax: (713) 651-4841
For Administrative Matters
--------------------------
Bank of America NT&SA
ABA #12100 358
Global Payments Operations #5693
Concord, CA 94520
Attention: Camille Gibbey
Telephone: (510) 675-7759
Telex: 34346 BANKMER SFO
Fax: (510) 675-7531
The First National Bank The First National Bank $7,200,000
of Boston of Boston
100 Federal Street 100 Federal Street
Boston, MA 02110 Boston, MA 02110
</TABLE>
<PAGE> 120
2
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Business/Credit Matters
---------------------------
Attention: Bethann R. Halligan
Telephone: (617) 434-0144
Fax: (617) 434-0630/6685
For Administrative Matters
--------------------------
Attention: Michele Taglione
Telephone: (617) 434-4039
Fax: (617) 434-0630/6685
The Bank of Tokyo, Ltd. The Bank of Tokyo, Ltd. $7,200,000
Dallas Agency Dallas Agency
2001 Ross Avenue, #3150 2001 Ross Avenue, #3150
Dallas, TX 75201 Dallas, TX 75201
For Business/Credit Matters
---------------------------
Attention: J. M. Mearns,
Vice President and Manager
Telephone: (214) 954-1200
Fax: (214) 954-1007
For Administrative Matters
--------------------------
Attention: Brenda Trader
Telephone: (214) 954-1200
Fax: (214) 954-1007
Bank One, Texas, N.A. Bank One, Texas, N.A. $ 5,400,000
1717 Main Street 1717 Main Street
Dallas, TX 75201 Dallas, TX 75201
For Business/Credit Matters
---------------------------
Attention: Michael R. Silverman
Third Floor
Telephone: (214) 290-2367
Fax: (214) 290-2683
For Administrative Matters
--------------------------
Attention: Lisa Peterson
Telephone: (214) 290-2614
Fax: (214) 290-2683
Bankers Trust Company Bankers Trust Company $21,600,000
130 Liberty Street P.O. Box 318
New York, NY 10008 Church Street Station
New York, NY 10008-0318
</TABLE>
<PAGE> 121
3
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Business/Credit Matters
---------------------------
Attention: Henry J. Del Vecchio
Corporate Finance Credit
Telephone: (212) 250-7801
Fax: (212) 250-7478
For Administrative Matters
--------------------------
Attention: John Jeffcoat
Telephone: (212) 250-8195
Fax: (212) 250-7351
Banque Nationale de Paris BNP $7,200,000
Houston Agency 717 North Harwood, Suite 2630
333 Clay Street Dallas, TX 75201
Suite 3400
Houston, TX 77002 For Business/Credit Matters
---------------------------
Attention: Henry F. Setina
Telephone: (214) 969-7388
Fax: (214) 969-0060
For Administrative Matters
--------------------------
Attention: Donna Rose
Telephone: (713) 951-1240
Telex: 166085 BNPHTX
Fax: (713) 659-1414
Canadian Imperial Bank of For Business/Credit Matters $12,600,000
Commerce, Inc. ---------------------------
2727 Paces Ferry Road
Suite 1200 Canadian Imperial Bank
2 Paces West of Commerce
Atlanta, GA 30339 909 Fannin, Suite 1200
Houston, TX 77010
Attention: Craig Torrence
Telephone: (713) 658-8400
Fax: (713) 658-9922
For Administrative Matters
--------------------------
2727 Paces Ferry Road,
Suite 1200
2 Paces West
Atlanta, GA 30339
Attention: Adrienne Burch
Telephone: (404) 319-4835
Telex: 542413 CANBANK ATL
Fax: (404) 319-4950
</TABLE>
<PAGE> 122
4
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
Chemical Bank Chemical Bank $21,600,000
270 Park Avenue, 270 Park Avenue,
10th Floor 10th Floor
New York, NY 10017 New York, NY 10017
For Business/Credit Matters
---------------------------
Attention: Meredith L.
Vanden Handel
Telephone: (212) 270-2999
Fax: (212) 270-9856
For Administrative Matters
--------------------------
Attention: Sheila Hamilton
Telephone: (212) 270-2322
Fax: (212) 682-8937
Citibank, N.A. Citibank, N.A. $12,600,000
399 Park Avenue, 399 Park Avenue,
12th Floor, Zone 16 12th Floor, Zone 16
New York, NY 10043 New York, NY 10043
For Business/Credit Matters
---------------------------
Attention: Robert A. Snell, AVP
Telephone: (212) 559-3215
Fax: (212) 793-7585/7590
For Administrative Matters
--------------------------
Attention: Stephance L. Tackors
Telephone (212) 559-3944
Fax: (212) 793-7585/7590
Credit Lyonnais, New York Credit Lyonnais Dallas $12,600,000
Branch 500 North Akard, Suite 3210
1301 Avenue of the Dallas, TX 75201
Americas
New York, NY 10019 For Business/Credit Matters
---------------------------
Attention: Karen Watson,
Vice President
Telephone: (214) 954-3500
Telex: 682 9274 CRLYDAL
Fax: (214) 954-3312
For Administrative Matters
--------------------------
Attention: Judy Gordon
Telephone: (214) 954-3500
Telex: 682 9274 CRLYDAL
Fax: (214) 954-3312
</TABLE>
<PAGE> 123
5
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
Credit Suisse For Business/Credit Matters $21,600,000
Tower 49 ---------------------------
12 East 49th Street
New York, NY 10017 Credit Suisse
1100 Louisiana, Suite 4750
Houston, TX 77002
Attention: James P. Moran
Telephone: (713) 751-0300
Fax: (713) 751-0702
For Administrative Matters
--------------------------
Tower 49
12 East 49th Street
New York, NY 10017
Attention: Hazel Leslie
Telephone: (212) 238-5218
Fax: (212) 238-5245
First Interstate Bank of For Business/Credit Matters $12,600,000
California ---------------------------
Commercial Loan Service
Center First Interstate Bank of
1055 Wilshire Blvd., B10-6 California
Los Angeles, CA 90017 U.S. Banking Division
707 Wilshire Blvd., W16-13
Los Angeles, CA 90017
Attention: William J. Baird
Telephone: (213) 614-5540/2723
Fax: (213) 614-2569
For Administrative Matters
--------------------------
First Interstate Bank of
California
1055 Wilshire Blvd., B10-6
Los Angeles, CA 90017
Attention: Carol Collins or
Irene Zao
Telephone: (213) 580-6166/6148
Fax: (213) 488-9909/9959
The First National Bank The First National Bank $12,600,000
of Chicago of Chicago
One First National Plaza One First National Plaza
Suite 0374; 1-10 Suite 0374; 1-10
Chicago, IL 60670 Chicago, IL 60670
For Business/Credit Matters
---------------------------
Attention: Catherine V. Frank
Telephone: (312) 732-2003
Telex: 4330253
Fax: (312) 732-3055
</TABLE>
<PAGE> 124
6
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Administrative Matters
--------------------------
Attention: John Loizzo
Telephone: (312) 732-4118
Telex: 4330253
Fax: (312) 732-4840
First Security Bank First Security Bank $ 5,400,000
of Utah, N.A. of Utah, N.A.
Commercial Banking Commercial Banking Division
Division 15 East 100 South,
15 East 100 South, 2nd Floor
2nd Floor Salt Lake City, UT 84111
Salt Lake City, UT 84111
For Business/Credit Matters
---------------------------
Attention: Kevin Imlay
Telephone: (801) 246-5524
Fax: (801) 246-5532
For Administrative Matters
--------------------------
Attention: Trish Sanders
Telephone: (801) 246-5575
Fax: (801) 246-5532
First Union National Bank First Union National Bank $ 7,200,000
of North Carolina of North Carolina
301 South College Street, 301 South College Street,
TW-19 TW-19
Charlotte, NC 28288 Charlotte, NC 28288
For Business/Credit Matters
---------------------------
Attention: A. Kimball Collins,
U.S. Banking
Telephone: (704) 374-2366
Fax: (704) 374-2802
For Administrative Matters
--------------------------
Attention: Perry Brown,
U.S. Banking
Telephone: (704)374-6613
Fax: (704) 374-2802
Firstar Bank Milwaukee, N.A. Firstar Bank Milwaukee, N.A. $ 5,400,000
Box 532 Box 532
Milwaukee, WI 53201 Milwaukee, WI 53201
U.S. Banking Division
</TABLE>
<PAGE> 125
7
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Business/Credit Matters
---------------------------
Attention: Timothy W. Somers
Telephone: (414) 765-6077
Fax: (414) 765-5062
For Administrative Matters
--------------------------
Attention: Jane Gumina
Telephone: (414) 765-4647
Fax: (414) 765-5062
The Fuji Bank, Ltd. The Fuji Bank, Ltd. $12,600,000
Houston Agency Houston Agency
2 Houston Center, 2 Houston Center,
Suite 2800 Suite 2800
909 Fannin 909 Fannin
Houston, TX 77010 Houston, TX 77010
For Business/Credit Matters
---------------------------
Attention: Mark Denkler
Telephone: (713) 759-1800
Telex: 790026 FUJIBANK HOU
Fax: (713) 759-0048
For Administrative Matters
--------------------------
Attention: Jenny Lin
Telephone: (713) 650-7821
Telex: 790026 FUJIBANK HOU
Fax: (713) 759-0048
The Industrial Bank The Industrial Bank $7,200,00
of Japan Trust Company of Japan Trust Company
245 Park Avenue 245 Park Avenue
New York, NY 10167 New York, NY 10167
For Business/Credit Matters
---------------------------
Attention: Linda Muscarella
Telephone: (212) 309-6872
Telex: 175597 IBJTC
Fax: (212) 557-3581
For Administrative Matters
--------------------------
Attention: Agnes Aberin
Telephone: (212) 309-6793
Telex: 175597 IBJTC
Fax: (212) 557-3581
</TABLE>
<PAGE> 126
8
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
Instituto Bancario Instituto Bancario $7,200,00
San Paolo Di Torino San Paolo Di Torino
SpA-New York SpA-New York
245 Park Avenue 245 Park Avenue
35th Floor 35th Floor
New York, NY 10167 New York, NY 10167
For Business/Credit Matters
---------------------------
Attention: Robert S. Wurster
Telephone: (212) 692-3160
Telex: 220045 SPAOL UR
Fax: (212) 599-5303
For Administrative Matters
--------------------------
Attention: Mr. Filippo Goia
Telephone: (212) 692-3180
Telex: 220045 SPAOL UR
Fax: (212) 599-5303
The Long-Term Credit Bank The Long-Term Credit Bank $7,200,000
of Japan, Ltd. of Japan, Ltd.
165 Broadway 165 Broadway
New York, NY 10006 New York, NY 10006
For Business/Credit Matters
---------------------------
Attention: Ichiro Murakami
Telephone: (212) 335-4542
Telex: 425722 LTCBNY
Fax: (212) 608-2371
For Administrative Matters
--------------------------
Attention: Robert Pacifici
Telephone: (212) 335-4801
Telex: 425722 LTCBNY
Fax: (212) 608-3452
Mellon Bank, N.A. Mellon Bank, N.A. $12,600,000
Loan Administration Loan Administration
Room 2332 Room 2332
Three Mellon Bank Center Three Mellon Bank Center
Pittsburgh, PA 15259 Pittsburgh, PA 15259
For Business/Credit Matters
---------------------------
Attention: Lisa M. Pellow,
Global Corporate Banking
Telephone: (412) 236-2790
Fax: (412) 236-1914
</TABLE>
<PAGE> 127
9
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Administrative Matters
--------------------------
Attention: Tracy Stevens,
Loan Administration
Telephone: (412) 234-8285
Fax: (412) 234-5049
National Westminster For Business/Credit Matters $12,600,000
Bank Plc, ---------------------------
New York Branch
175 Water Street National Westminster Bank Plc
New York, NY 10038 Houston Marketing Office and
North American Energy Unit
Texas Commerce Tower
600 Travis Street-6070
Houston, TX 77002
Attention: Steven J. Krakoski,
Vice President
Telephone: (713) 221-2400
Fax: (713) 221-2430
For Administrative Matters
--------------------------
National Westminster Bank, Plc
New York Branch
175 Water Street
New York, NY 10038
Attention: Robert Passarello
Telephone: (212) 602-4149
Telex: 233222 NWBKUR
Fax: (212) 602-4118
NationsBank of Texas, N.A. NationsBank of Texas, N.A. $18,000,000
901 Main Street 901 Main Street
Dallas, TX 75202 Dallas, TX 75202
For Business/Credit Matters
---------------------------
Attention: Bob Silmon
Telephone: (214) 508-0978
Fax: (214) 508-0980
For Administrative Matters
--------------------------
Attention: Karen Puente
Telephone: (214) 508-0519
Fax: (214) 508-0944
NBD Bank, N.A. NBD Bank, N.A. $12,600,000
611 Woodward Avenue 611 Woodward Avenue
Detroit, MI 48226 Detroit, MI 48226
</TABLE>
<PAGE> 128
10
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Business/Credit Matters
---------------------------
Attention: William J.
McCaffrey,
National Banking Division
Telephone: (313) 225-3444
Telex: 4320060
Fax: (313) 225-2649
For Administrative Matters
--------------------------
Attention: Candace Laitan,
National Banking Division
Telephone: (313) 225-2273
Telex: 4320060
Fax: (313) 225-2649
The Northern Trust Company The Northern Trust Company $7,200,000
50 South LaSalle Street 50 South LaSalle Street
Chicago, IL 60675 Chicago, IL 60675
For Business/Credit Matters
---------------------------
Attention: Martin G. Alston,
Western Division
Telephone: (312) 444-5058
Fax: (312) 630-1566
For Administrative Matters
--------------------------
Attention: Linda Honda,
Western Division
Telephone: (312) 444-5051
Fax: (312) 630-1566
Norwest Bank Norwest Bank $5,400,000
Minnesota, National Minnesota, National
Association Association
6th and Marquette 6th and Marquette
Minneapolis, MN Minneapolis, MN
55479-0085 55479-0085
For Business/Credit Matters
---------------------------
Attention: Susan Engebretson
Telephone: (612) 667-4296
Fax: (612) 667-4145
</TABLE>
<PAGE> 129
11
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Administrative Matters
--------------------------
Attention: Margret Hamzavi
Telephone: (612) 667-4747
Fax: (612) 667-4145
PNC Bank, N.A. PNC Bank, N.A. $12,600,000
Fifth Avenue and Fifth Avenue and
Wood Street Wood Street
Pittsburgh, PA 15222 Pittsburgh, PA 15222
For Business/Credit Matters
---------------------------
Attention: Rick Lewis
Telephone: (214) 740-2585
Fax: (214) 740-2588
For Administrative Matters
--------------------------
Attention: Sharon Tackett
Telephone: (214) 740-2525
Fax: (214) 740-2588
Royal Bank of Canada For Business/Credit Matters $12,600,000
Pierrepont Plaza ---------------------------
300 Cadman Plaza West
14th Floor 600 Wilshire Blvd. Suite 800
Brooklyn, NY 11201-2701 Los Angeles, CA 90017
Attention: Doug Frost
Telephone: (213) 955-5300
Fax: (213) 955-5350
For Administrative Matters
--------------------------
Royal Bank of Canada
Pierrepont Plaza
300 Cadman Plaza West
14th Floor
Brooklyn, NY 11201-2701
Attention: Linda Swanston,
Loan Administration
Telephone: (212) 858-7176
Telex: ROYBAN 62519
Fax: (718) 522-6292
The Sanwa Bank Ltd., The Sanwa Bank Ltd., $ 7,200,00
Dallas Agency Dallas Agency
901 Main Street, 901 Main Street,
Suite 2830 Suite 2830
Dallas, TX 75202 Dallas, TX 75202
</TABLE>
<PAGE> 130
12
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Business/Credit Matters
---------------------------
Attention: Robert Smith, A.V.P.
Telephone: (214) 744-5555
Telex: 735282
Fax: (214) 741-6535
For Administrative Matters
--------------------------
Attention: Gregory Crowe,
A.V.P.
Telephone: (214) 744-5555
Telex: 735282
Fax: (214) 741-6535
Societe Generale Societe Generale $ 7,200,000
Southwest Agency Southwest Agency
2001 Ross Avenue 2001 Ross Avenue
Suite 4800 Suite 4800
Dallas, TX 75201 Dallas, TX 75201
For Business/Credit Matters
---------------------------
Attention: Louis P. Laville
III, , V.P.
Telephone: (214) 979-2777
Telex: 170494 SOCGEN UT
Fax: (214) 979-1104
For Administrative Matters
--------------------------
Attention: Angela Aldridge/
Operations
Telephone: (214) 979-2743
Telex: 170494 SOCGEN UT
Fax: (214) 754-0171
The Sumitomo Bank, Ltd. The Sumitomo Bank, Ltd. $12,600,000
Houston Agency Houston Agency
700 Louisiana, Suite 1750 700 Louisiana, Suite 1750
Houston, TX 77002 Houston, TX 77002
For Business/Credit Matters
---------------------------
Attention: William S. Rogers, V.P.
Telephone: (713) 238-8214
Telex: 774417
Fax: (713) 759-0020
</TABLE>
<PAGE> 131
13
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Administrative Matters
--------------------------
Attention: Mr. Goto, Loan
Administration
Telephone: (713) 238-8240
Telex: 774417
Fax: (713) 759-0020
SunBank, N.A. SunBank, N.A. $12,600,000
200 South Orange Avenue 200 South Orange Avenue
Tower 4 Tower 4
Orlando, FL 32802 Orlando, FL 32802
For Business/Credit Matters
---------------------------
Attention: Mr. J. Carol Doyle
Telephone: (407) 237-4333
Fax: (407) 237-6894
For Administrative Matters
--------------------------
Attention: Ms. Lois Keezel
Telephone: (407) 237-4855
Fax: (407) 237-6894
Swiss Bank Corporation Swiss Bank Corporation $12,600,000
New York Branch New York Branch
10 East 50th Street 10 East 50th Street
SBT 17A SBT 17A
New York, NY 10022 New York, NY 10022
For Business/Credit Matters
---------------------------
Attention: Filippe Goossens,
Associate Director
Telephone: (212) 574-3110
Fax: (212) 574-3852
For Administrative Matters
--------------------------
Attention: Valerie Williams
Telephone: (212) 574-3146
Fax: (212) 574-4176/3852
Union Bank of Switzerland Union Bank of Switzerland $12,600,000
Houston Agency Houston Agency
1100 Louisiana, Suite 4500 1100 Louisiana, Suite 4500
Houston, TX 77002 Houston, TX 77002
</TABLE>
<PAGE> 132
14
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Business/Credit Matters
---------------------------
Attention: Dan Boyle
Telephone: (713) 655-6500
Fax: (713) 655-6555
For Administrative Matters
--------------------------
Attention: Robert Mack, Loan
Administration
Telephone: (212) 821-3225
Fax: (212) 821-3259
United Missouri Bank, N.A. United Missouri Bank, N.A. $ 7,200,000
1010 Grand Avenue 1010 Grand Avenue
Kansas City, MO 64106 Kansas City, MO 64106
For Business/Credit Matters
---------------------------
Attention: Walter Beck,
Commercial Loan Department
Telephone: (816) 860-7109
Telex: 6875032 UMNBK UW
Fax: (816) 860-7143
For Administrative Matters
--------------------------
Attention Billy Ray Smith
Telephone: (816) 860-7019
Telex: 687-5032 UMNBK UW
Fax: (816) 860-7143
United States National United States National $ 7,200,000
Bank of Oregon Bank of Oregon
309 S.W. Sixth Avenue, 309 S.W. Sixth Avenue,
BB-10 BB-10
Portland, OR 97204 Portland, OR 97204
For Business/Credit Matters
---------------------------
Attention: Blake R. Howells,
A.V.P.
National Corporate Banking
Division
Telephone: (503) 275-3475
Fax: (503) 275-4346
For Administrative Matters
--------------------------
Attention: Participation
Specialist
Telephone: (503) 275-6561
Fax: (503) 275-4600
</TABLE>
<PAGE> 133
15
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
Wachovia Bank Wachovia Bank $12,600,000
of Georgia, N.A. of Georgia, N.A.
191 Peachtree Street, NE 191 Peachtree Street, NE
Atlanta, GA 30303 Atlanta, GA 30303
For Business/Credit Matters
---------------------------
Attention: Burton French, U.S.
Corporate-Dallas
Telephone: (214) 880-7009
Fax: (214) 880-7008
For Administrative Matters
--------------------------
Attention: Elizabeth Zires,
U.S. Corporate-Dallas
Telephone: (214) 880-7000
Fax: (214) 880-7008
Morgan Guaranty Trust Morgan Guaranty Trust $13,500,000
Company of New York Company of New York
60 Wall Street 60 Wall Street
New York, NY 10260-0060 New York, NY 10260-0060
For Business/Credit Matters
---------------------------
Attention: Michael C. Mauer,
Vice President
Telephone: (212) 648-9111
Telex: 177615 MGT UT
Fax: (212) 648-5336
For Administrative Matters
--------------------------
Attention: John J. O'Dowd
Telephone: (212) 648-6973
Telex: 177615 MGT UT
Fax: (212) 648-5336
J.P. Morgan, Delaware J.P. Morgan, Delaware $13,500,000
500 Stanton Christiana 500 Stanton Christiana
Road Road
P.O. Box 6070 P.O. Box 6070
Newark, DE 19713-2107 Newark, DE 19713-2107
Attention: Kevin M. McCann,
Assistant Treasurer
Telephone: (302) 992-1850
Fax: (302) 992-1852
</TABLE>
<PAGE> 134
SCHEDULE 3.08
RESTRICTED SUBSIDIARIES
None.
<PAGE> 135
SCHEDULE 3.09
MATERIAL LITIGATION
None.
<PAGE> 136
EXHIBIT 4(C)
CONFORMED COPY
================================================================================
J. C. PENNEY COMPANY, INC.
J. C. PENNEY FUNDING CORPORATION
____________________
REVOLVING CREDIT AGREEMENT
Dated as of December 16, 1993
____________________
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent
and
BANKERS TRUST COMPANY, CHEMICAL BANK, and
CREDIT SUISSE
as Co-Agents
and
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION and NATIONSBANK OF TEXAS, N.A.,
as Lead Managers
================================================================================
(CS&M Ref. No. 1385-280)
<PAGE> 137
TABLE OF CONTENTS
Page
Article Section ----
- ------- -------
I. DEFINITIONS
1.01 Defined Terms .......................... 1
1.02 Terms Generally ........................ 23
II. THE CREDITS
2.01 Commitments ............................ 23
2.02 Loans .................................. 24
2.03 Competitive Bid Procedure .............. 26
2.04 Standby Borrowing Procedure ............ 30
2.05 Refinancings ........................... 31
2.06 Fees ................................... 31
2.07 Repayment of Loans; Evidence of the
Borrowers' Obligations .............. 32
2.08 Interest on Loans ...................... 33
2.09 Default Interest ....................... 34
2.10 Alternate Rate of Interest ............. 34
2.11 Termination and Reduction
of Commitments ...................... 35
2.12 Prepayment ............................. 36
2.13 Reserve Requirements;
Change in Circumstances ............. 36
2.14 Change in Legality ..................... 38
2.15 Indemnity .............................. 39
2.16 Pro Rata Treatment ..................... 41
2.17 Sharing of Setoffs ..................... 41
2.18 Payments ............................... 42
2.19 Taxes .................................. 43
2.20 Mitigation; Duties of Lenders
and the Agent ....................... 45
III. REPRESENTATIONS AND WARRANTIES
3.01 Organization; Powers ................... 49
3.02 Authorization .......................... 50
3.03 Enforceability ......................... 50
3.04 Governmental Approvals ................. 50
3.05 Financial Statements ................... 51
3.06 No Material Adverse Change ............. 51
3.07 Title to Properties; Possession
Under Leases ........................ 51
3.08 Restricted Subsidiaries ................ 52
<PAGE> 138
Contents, p. 2
Article Section Page
- ------- ------- ----
3.09 Litigation; Compliance with
Laws ................................ 52
3.10 Agreements ............................. 52
3.11 Federal Reserve Regulations ............ 52
3.12 Investment Company Act;
Public Utility Holding Company
Act ................................. 53
3.13 Use of Proceeds ........................ 53
3.14 Tax Returns ............................ 53
3.15 No Material Misstatements .............. 53
3.16 Employee Benefit Plans ................. 53
3.17 Support Agreements ..................... 54
IV. CONDITIONS OF LENDING
4.01 All Borrowings ......................... 54
4.02 First Borrowing ........................ 55
V. AFFIRMATIVE COVENANTS
5.01 Existence; Businesses and Properties ... 56
5.02 Insurance .............................. 57
5.03 Obligations and Taxes .................. 57
5.04 Financial Statements, Reports, etc. .... 58
5.05 Litigation and Other Notices ........... 59
5.06 ERISA .................................. 60
5.07 Maintaining Records; Access to
Properties and Inspections .......... 60
5.08 Use of Proceeds ........................ 61
5.09 Pari-Passu ............................. 61
5.10 Support Agreements ..................... 61
VI. NEGATIVE COVENANTS
6.01 Limitation on Liens--JCPenney .......... 61
6.02 Limitations on Senior Funded
Indebtedness ........................ 65
6.03 Limitations with Respect to
Restricted Subsidiaries ............. 65
6.04 Mergers, Consolidations, Sales of
Assets and Acquisitions ............. 67
6.05 Limitations on Liens--Funding .......... 68
6.06 Conduct of Funding's Business .......... 71
VII. EVENTS OF DEFAULT ................................ 72
VIII. THE AGENT ........................................ 76
<PAGE> 139
Contents, p. 3
Article Section Page
- ------- ------- ----
IX. MISCELLANEOUS
9.01 Notices ................................ 79
9.02 Survival of Agreement .................. 80
9.03 Binding Effect ......................... 80
9.04 Successors and Assigns ................. 80
9.05 Expenses; Indemnity .................... 84
9.06 Right of Setoff ........................ 85
9.07 Applicable Law ......................... 85
9.08 Waivers; Amendment ..................... 85
9.09 Interest and Charges ................... 86
9.10 Entire Agreement ....................... 87
9.11 Severability ........................... 87
9.12 Counterparts ........................... 87
9.13 Headings ............................... 88
9.14 Jurisdiction; Consent to Service
of Process .......................... 88
9.15 Confidentiality ........................ 88
9.16 Liability of Borrowers ................. 89
Exhibit A-1 Form of Competitive Bid Request
Exhibit A-2 Form of Notice of Competitive Bid Request
Exhibit A-3 Form of Competitive Bid
Exhibit A-4 Form of Standby Borrowing Request
Exhibit B Form of Opinion
Exhibit C Form of Guaranty
Schedule 2.01 Commitments
Schedule 3.08 Restricted Subsidiaries
Schedule 3.09 Material Litigation
<PAGE> 140
CONFORMED COPY
REVOLVING CREDIT AGREEMENT dated as of
December 16, 1993, among J. C. PENNEY COMPANY, INC. a
Delaware corporation ("JCPenney"), J. C. PENNEY
FUNDING CORPORATION, a Delaware corporation
("Funding"), the lenders listed in Schedule 2.01 (as
of any date, together with any permitted assigns
hereunder on such date, the "Lenders"), MORGAN
GUARANTY TRUST COMPANY OF NEW YORK ("Morgan"), as
agent for the Lenders (in such capacity, the "Agent")
and BANKERS TRUST COMPANY, CHEMICAL BANK and CREDIT
SUISSE, as co-agents for the Lenders (in such
capacity, the "Co-Agents").
The Borrowers (as herein defined) have requested the Lenders
to extend credit to the Borrowers in order to enable them to borrow on a
standby revolving credit basis on and after the date hereof and at any time and
from time to time prior to the Maturity Date (as herein defined) an aggregate
principal amount not in excess of $800,000,000 at any time outstanding. The
Borrowers have also requested the Lenders to provide a procedure pursuant to
which the Borrowers may invite the Lenders to bid on an uncommitted basis on
borrowings by the Borrowers scheduled to mature on or prior to the Maturity
Date. The proceeds of such borrowings are to be used for general corporate
purposes, including, without limitation, working capital requirements,
liquidity and the repayment of maturing commercial paper and other indebtedness
of the Borrowers. The Lenders will extend such credit to the Borrowers on the
terms and subject to the conditions herein set forth.
Accordingly, the Borrowers, the Lenders, the Agent and the
Co-Agents agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
--------------
following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
<PAGE> 141
2
"ABR Loan" shall mean any Standby Loan bearing interest at a
----------
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Adjusted CD Rate" shall mean, with respect to any CD
------------------
Borrowing requested by any Borrower pursuant to Section 2.03(a) for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100 of 1%) equal to the sum of (a) a rate per annum equal to the
product of (i) the Fixed CD Rate in effect for such Interest Period and (ii)
Statutory Reserves, plus (b) the Assessment Rate. For purposes hereof, the
term "Fixed CD Rate" shall mean the arithmetic average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the prevailing rates per annum bid at or
about 10:00 a.m., New York City time, to the Agent on the first Business Day of
the Interest Period applicable to such CD Borrowing by three New York City
negotiable certificate of deposit dealers of recognized standing selected by
the Agent for the purchase at face value of negotiable certificates of deposit
of major United States money center banks in a principal amount approximately
equal to the product of (x) the aggregate principal amount of such CD Borrowing
as specified in the related Competitive Bid Request and (y) the percentage
which the Agent's Commitment represents of the Total Commitment and with a
maturity comparable to such Interest Period.
"Additional Costs" shall mean, with respect to any Lender, any
------------------
increased costs or reduction in amounts received or receivable or reduction in
return on capital incurred or suffered by such Lender and in respect of which
such Lender is entitled to request compensation in accordance with Section
2.13.
"Administrative Fees" shall have the meaning assigned to such
---------------------
term in Section 2.06(c).
"Affiliate" shall mean, when used 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.
"Alternate Base Rate" shall mean, for any day, a rate per
---------------------
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greater of (a) the Prime Rate on such day as announced by Morgan Guaranty Trust
Company of New York, and (b) the Federal Funds Effective Rate in effect
<PAGE> 142
3
on such day plus 0.50%. For purposes hereof, "Federal Funds Effective Rate"
shall mean, for any day, the weighted average 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 which is a Business Day, the average of the rates quoted to the Agent on
such day for such transactions by three Federal funds brokers of recognized
standing selected by it. If for any reason the Agent shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate for any reason, including
the inability or failure of the Agent to obtain sufficient quotations in
accordance with the terms hereof, the Alternate Base Rate shall be determined
without regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate shall be effective on the
date such change is announced publicly.
"Applicable Lending Office" shall mean, for each Lender and
---------------------------
for each Type of Loan, the office or branch of such Lender (or of an Affiliate
of such Lender) designated for such Type of Loan opposite such Lender's name on
Schedule 2.01 or such other office or branch of such Lender (or of an Affiliate
of such Lender) as such Lender may from time to time, in accordance with the
terms of this Agreement, specify to the Agent and the Borrowers as the office
or branch by which its Loans of such Type are to be made and maintained.
"Assessment Rate" shall mean for any date the then current net
-----------------
annual assessment rate (rounded upwards, if necessary, to the next 1/100 of 1%)
actually employed by the Agent in determining amounts payable by the Agent to
the Federal Deposit Insurance Corporation (or any successor) for insurance by
such Corporation (or such successor) of time deposits made in dollars at the
Agent's domestic offices.
"Board" shall mean the Board of Governors of the Federal
-------
Reserve System of the United States.
"Borrowers" shall mean JCPenney and Funding.
-----------
"Borrowing" shall mean a group of Loans of a single Type made
-----------
by the Lenders (or, in the case of a
<PAGE> 143
4
Competitive Borrowing, by the Lender or Lenders whose Competitive Bids have
been accepted pursuant to Section 2.03) to the same Borrower on a single date
and as to which a single Interest Period is in effect.
"Business Day" shall mean any day (other than a day which is a
--------------
Saturday, Sunday or legal holiday in the State of New York) on which banks are
open for business in New York City; provided, however, 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.
"CD Borrowing" shall mean a Competitive Borrowing comprised
--------------
of CD Loans.
"CD Loan" shall mean any Competitive Loan bearing interest at
---------
a rate determined by reference to the Adjusted CD Rate in accordance with the
provisions of Article II.
"Closing Date" shall mean the date of this Agreement.
--------------
"Code" shall mean the Internal Revenue Code of 1986, as the
------
same may be amended from time to time.
"Commitment" shall mean, with respect to each Lender, the
------------
commitment of such Lender hereunder as set forth as of the Closing Date in
Schedule 2.01 hereto and, thereafter, in the Register (or as otherwise
determined by the parties hereto in the event of manifest error in the
Register), as such Lender's Commitment may be permanently terminated or reduced
from time to time pursuant to Section 2.11. The Commitment of each Lender
shall automatically and permanently terminate on the Maturity Date if not
terminated earlier pursuant to the terms hereof.
"Commitment Fee" shall have the meaning assigned to such term
----------------
in Section 2.06(b).
"Commitment Fee Percentage" shall mean on any date the
---------------------------
applicable percentage set forth below based upon the
<PAGE> 144
5
ratings by Moody's and S&P, respectively, applicable on such date to the Index
Debt:
Commitment Fee Percentage
Category 1 Per Annum
- ---------- -------------------------
Moody's: A2 or better 0.0450%
S&P: A or better
Category 2
- ----------
Moody's: A3 0.0500%
S&P: A-
Category 3
- ----------
Moody's: Baa2 or better,
but lower than A3 0.0750%
S&P: BBB or better, but
lower than A-
Category 4
- ----------
Moody's: Lower than Baa2,
or unrated
S&P: Lower than BBB, or 0.1000%
unrated
For purposes of the foregoing, (i) if no rating for the Index Debt shall be
available from either rating agency, (other than because (a) such rating agency
shall no longer be in the business of rating corporate debt obligations or (b)
of any other reason outside the control of JCPenney and Funding), such rating
agency shall be deemed to have established a rating in Category 4, (ii) if the
ratings established or deemed to have been established by Moody's and S&P shall
fall within different Categories, the Commitment Fees shall be based upon the
numerically higher Category (i.e. the Category corresponding to the lower
ratings) and (iii) if any rating established or deemed to have been established
by Moody's or S&P shall be changed (other than as a result of a change in the
rating system of either Moody's or S&P), such change shall be effective as of
the date on which such change is first publicly announced by the rating agency
making such change. If the rating system of either Moody's or S&P shall change
prior to the Maturity Date, or if either such rating agency shall cease to be
in
<PAGE> 145
6
the business of rating corporate debt obligations or shall no longer have in
effect a rating for any reason outside the control of JCPenney and Funding, the
Borrowers and the Lenders shall negotiate in good faith to amend the references
to specific ratings in this definition to reflect such changed rating system or
the absence of such a rating. Pending agreement on any such amendment, (i) if
the rating system of one such rating agency shall remain unchanged, or if a
rating shall be available from one such rating agency, the Commitment Fee
Percentage shall be determined by reference to the rating established by such
rating agency, (ii) if no rating for the Index Debt shall be available from
either rating agency then (A) for 60 days, the Commitment Fee Percentage shall
be determined by reference to the rating or ratings most recently available,
(B) after 60 days, the Commitment Fee Percentage shall be determined by
reference to Category 3 (or Category 4 if such Percentage shall have been
determined by reference to Category 3 under clause (A) above) and (C) after 180
days, the Commitment Fee Percentage shall be determined by reference to
Category 4.
"Commitment Termination Date" shall have the meaning assigned
-----------------------------
to such term in Section 2.11(d).
"Competitive Bid" shall mean an offer by a Lender to make a
-----------------
Competitive Loan pursuant to Section 2.03.
"Competitive Bid Rate" shall mean, as to any Competitive Bid
----------------------
made by a Lender pursuant to Section 2.03(b), (a) in the case of a Eurodollar
Competitive Loan or a CD Loan, the Competitive Margin, and (b) in the case of a
Fixed Rate Loan, the fixed rate of interest offered by the Lender making such
Competitive Bid.
"Competitive Bid Request" shall mean a request made pursuant
-------------------------
to Section 2.03 in the form of Exhibit A-1.
"Competitive Borrowing" shall mean a Borrowing consisting of a
-----------------------
Competitive Loan or concurrent Competitive Loans from the Lender or Lenders
whose Competitive Bids for such Borrowing have been accepted under the bidding
procedure described in Section 2.03 by the Borrower requesting such Borrowing.
"Competitive Loan" shall mean a Loan from a Lender to a
------------------
Borrower pursuant to the bidding procedure described in Section 2.03. Each
Competitive Loan shall be a Eurodollar Competitive Loan, a CD Loan or a Fixed
Rate Loan.
<PAGE> 146
7
"Competitive Margin" shall mean, as to any Eurodollar
--------------------
Competitive Loan or CD Loan, the margin (expressed as a percentage rate per
annum in the form of a decimal to no more than four decimal places) to be added
to or subtracted from the LIBO Rate or the Adjusted CD Rate, as applicable, in
order to determine the interest rate applicable to such Eurodollar Competitive
Loan or CD Loan, as specified in the Competitive Bid relating to such
Eurodollar Competitive Loan or CD Loan.
"Control" shall mean 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 ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Default" shall mean any event or condition which upon notice,
---------
lapse of time or both would constitute an Event of Default.
"dollars" or "$" shall mean lawful money of the United States
----------------
of America.
"Eligible Assignee" shall mean (a) a commercial bank organized
-------------------
under the laws of the United States, or any state thereof, and having total
assets in excess of $1,000,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country,
and having total assets in excess of $1,000,000,000, provided that such bank is
acting through a branch or agency located in the country in which it is
organized or another country which is described in this clause; and (c) the
central bank of any country which is a member of the Organization for Economic
Cooperation and Development.
"ERISA" shall mean the Employee Retirement Income Security Act
-------
of 1974, as the same may be amended from time to time, and the rules and
regulations promulgated thereunder, as from time to time in effect.
"ERISA Affiliate" shall mean any trade or business (whether or
-----------------
not incorporated) that is a member of a group of which any Borrower is a member
and which is treated as a single employer under Section 414 of the Code.
<PAGE> 147
8
"Eurodollar Borrowing" shall mean a Borrowing comprised of
----------------------
Eurodollar Loans.
"Eurodollar Competitive Loan" shall mean any Competitive Loan
-----------------------------
bearing interest at a rate determined by reference to the LIBO Rate in
accordance with the provisions of Article II.
"Eurodollar Loan" shall mean any Eurodollar Competitive Loan
-----------------
or Eurodollar Standby Loan.
"Eurodollar Standby Loan" shall mean any Standby Loan bearing
-------------------------
interest at a rate determined by reference to the LIBO Rate in accordance with
the provisions of Article II.
"Event of Default" shall have the meaning assigned to such
------------------
term in Article VII.
"Facility Fee" shall have the meaning assigned to such term in
--------------
Section 2.06(a).
"Facility Fee Percentage" shall mean on any date the
-------------------------
applicable percentage set forth below based upon the ratings by Moody's and
S&P, respectively, applicable on such date to the Index Debt:
Category 1 Percentage
- ---------- ----------
Moody's: A2 or better
S&P: A or better 0.0750%
Category 2
- ----------
Moody's: A3
S&P: A- 0.1000%
<PAGE> 148
9
Category 3
- ----------
Moody's: Baa2 or better,
but lower than A3
S&P: BBB or better, but
lower than A- 0.1500%
Category 4
- ----------
Moody's: Lower than Baa2,
or unrated
S&P: Lower than BBB,
or unrated 0.2000%
For purposes of the foregoing, (i) if no rating for the Index Debt shall be
available from either rating agency, (other than because (a) such rating agency
shall no longer be in the business of rating corporate debt obligations or (b)
of any other reason outside the control of JCPenney and Funding), such rating
agency shall be deemed to have established a rating in Category 4, (ii) if the
ratings established or deemed to have been established by Moody's and S&P shall
fall within different Categories, the Facility Fee Percentage shall be based
upon the numerically higher Category (i.e. the Category corresponding to the
lower ratings) and (iii) if any rating established or deemed to have been
established by Moody's or S&P shall be changed (other than as a result of a
change in the rating system of either Moody's or S&P), such change shall be
effective as of the date on which such change is first publicly announced by
the rating agency making such change. If the rating system of either Moody's
or S&P shall change prior to the Maturity Date, or if either such rating agency
shall cease to be in the business of rating corporate debt obligations or shall
no longer have in effect a rating for any reason outside the control of
JCPenney and Funding, the Borrowers and the Lenders shall negotiate in good
faith to amend the references to specific ratings in this definition to reflect
such changed rating system or the absence of such a rating. Pending agreement
on any such amendment, (i) if the rating system of one such rating agency shall
remain unchanged, or if a rating shall be available from one such rating
agency, the Facility Fee Percentage shall be determined by reference to the
rating established by such rating agency, (ii) if no rating for the Index Debt
shall be available from either rating agency then (A) for 60 days, the Facility
Fee Percentage shall be determined by reference to the rating or ratings most
recently available, (B) after 60 days, the
<PAGE> 149
10
Facility Fee Percentage shall be determined by reference to Category 3 (or
Category 4 if such Percentage shall have been determined by reference to
Category 3 under clause (A) above) and (C) after 180 days, the Facility Fee
Percentage shall be determined by reference to Category 4.
"Fees" shall mean the Commitment Fees, the Facility Fees and
------
the Administrative Fees.
"Fixed Rate Borrowing" shall mean a Competitive Borrowing
----------------------
comprised of Fixed Rate Loans.
"Fixed Rate Loan" shall mean any Competitive Loan bearing
-----------------
interest at a fixed percentage rate per annum (expressed in the form of a
decimal to no more than four decimal places) specified by the Lender making
such Loan in its related Competitive Bid.
"Funded Indebtedness" of any corporation shall mean, at any
---------------------
date for the determination thereof, without duplication, the outstanding
aggregate principal amount of (a) all indebtedness created, incurred or assumed
by such corporation (including, in the case of any Borrower, the Loans made to
such Borrower) which by its terms is not payable on demand and which matures by
its terms, or which by its terms such corporation has the right at its option
to renew or extend to a date, more than one year after the date of
determination, whether outstanding on the Closing Date or thereafter created,
incurred or assumed (including the current portion of any indebtedness which
shall constitute Funded Indebtedness at the time of its incurrence), and which
is (i) for money borrowed or (ii) evidenced by a note or similar instrument
given in connection with the acquisition of any business, properties or assets,
including securities, (b) any indebtedness of others of the kinds described in
the preceding clause (a) for the payment of which such corporation is
responsible or liable as guarantor or otherwise and (c) amendments, renewals
and refundings of any such indebtedness; provided, however, that such term
shall not include any obligations under leases or any guarantees of obligations
of others under leases. 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.
<PAGE> 150
11
"GAAP" shall mean United States generally accepted accounting
------
principles, applied on a consistent basis.
"Governmental Authority" shall mean any court or governmental
------------------------
agency, authority, instrumentality or regulatory body, in each case whether
Federal, state, local or foreign.
"Indenture" shall mean the Indenture dated as of October 1,
-----------
1982, between JCPenney and Bank of America National Trust and Savings
Association, as trustee, as amended by a First Supplemental Indenture dated as
of March 15, 1983, a Second Supplemental Indenture dated as of May 1, 1984, a
Third Supplemental Indenture dated as of March 7, 1986, and a Fourth
Supplemental Indenture dated as of June 7, 1991.
"Index Debt" shall mean JCPenney's senior unsecured, non
------------
credit-enhanced, publicly held long-term indebtedness.
"Interest Payment Date" shall mean, with respect to any Loan,
-----------------------
the last day of the Interest Period applicable thereto and, in the case of a
Eurodollar Loan with an Interest Period of more than three months' duration or
a CD Loan or Fixed Rate Loan with an Interest Period of more than 90 days'
duration, each day that would have been an Interest Payment Date for such Loan
had successive Interest Periods of three months' duration or 90 days' duration,
as the case may be, been applicable to such Loan and, in addition, the date of
any refinancing or conversion of such Loan with or to a Loan of a different
Type.
"Interest Period" shall mean (a) as to any Eurodollar
-----------------
Borrowing that is a Standby Borrowing, the period commencing on the date of
such Borrowing or on the last day of the immediately preceding Interest Period
applicable to such Borrowing, as the case may be, and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the
last day) in the calendar month that is 1, 2, 3, 6 or, subject to availability
from each Lender, 12 months thereafter, as the Borrower requesting such
Borrowing may elect, (b) as to any ABR Borrowing, the period commencing on the
date of such Borrowing and ending on the date specified in the related Standby
Borrowing Request (which date shall in no event be later than 5 Business Days
after the date of such Borrowing), (c) as to any Eurodollar Borrowing that is a
Competitive Borrowing,
<PAGE> 151
12
the period commencing on the date of such Borrowing and ending on the date
specified in the Competitive Bids in which the offers to make the Eurodollar
Competitive Loans comprising such Borrowing were extended (which date shall be
(A) the numerically corresponding day (or, if there is no numerically
corresponding day, the last day) in the calendar month that is 1, 2, 3, 6, 9 or
12 months after the date of such Borrowing or (B) such other date as shall be
specified in such Competitive Bids) and (d) as to any CD Borrowing or Fixed
Rate Borrowing, the period specified in the Competitive Bids in which the
offers to make the CD Loans or Fixed Rate Loans comprising such Borrowing were
extended, commencing on the date of such Borrowing (which period shall be a
period of 30, 60, 90, 180 or 360 days' duration or such other duration as shall
be specified in such Competitive Bids); provided, however, that (x) 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 Eurodollar Loans 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, (y) no Interest Period may be selected that ends
later than the Maturity Date then in effect and (z) the Interest Period for any
ABR Loan or CD Loan made in lieu of, or resulting from the conversion of, a
Eurodollar Loan pursuant to Section 2.10 or 2.14 shall be determined in
accordance with the provisions of such Section. Interest shall accrue from and
including the first day of an Interest Period to but excluding the last day of
such Interest Period.
"Investment" means, with respect to each of Funding and its
------------
Subsidiaries only, any acquisition of any of the capital stock of any
corporation, or any acquisition of indebtedness of, or any capital
contribution, loan or advance to, or any guarantee of an obligation of, any
person, except (i) any loan or advance made in connection with the lease,
purchase or construction of office space for Funding or any of its Subsidiaries
or the purchase of materials, supplies, services or equipment for the offices
of Funding or any of its Subsidiaries and (ii) any guarantee or endorsement
made in the ordinary course of business in connection with the deposit of items
for collection or any guarantee of an obligation of an agent or an employee of
Funding or any of its Subsidiaries that is required to meet applicable legal
requirements.
<PAGE> 152
13
"LIBO Rate" shall mean, 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 the average of the rates at
which dollar deposits approximately equal in principal amount to (i) in the
case of a Standby Borrowing, each LIBO Reference Lender's portion of such
Eurodollar Borrowing and (ii) in the case of a Competitive Borrowing, the
principal amounts that would have been each LIBO Reference Lender's portion of
such Competitive Borrowing had such Competitive Borrowing been a Standby
Borrowing, and for a maturity comparable to such Interest Period are offered to
the principal London office of the applicable LIBO Reference Lender 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.
"LIBO Reference Lenders" shall mean Morgan Guaranty Trust
------------------------
Company of New York, Credit Suisse and NBD Bank, N.A., or such other or
additional Lenders as the Borrowers, the Agent and the Required Lenders shall
designate in writing as "LIBO Reference Lenders".
"Lien" shall mean, with respect to any asset, any mortgage,
------
lien, pledge or security interest in or on such asset.
"Loan" shall mean a Competitive Loan or a Standby Loan,
------
whether made as a Eurodollar Loan, a CD Loan, a Fixed Rate Loan or an ABR Loan,
as permitted hereby.
"Margin Stock" shall have the meaning given such term under
--------------
Regulation U.
"Material Adverse Effect" shall mean (a) a materially adverse
-------------------------
effect on the business, assets or financial condition of (i) JCPenney and the
Restricted Subsidiaries, taken as a whole, or (ii) Funding and its
Subsidiaries, taken as a whole, (b) a material impairment of the ability of any
Borrower to perform any of its obligations under this Agreement or (c) a
material impairment of the rights of or benefits available to the Lenders under
this Agreement (other than any such impairment of rights or benefits that is
primarily attributable to (x) action taken by or against one or more Lenders
(excluding any action against one or more Lenders taken by any Borrower or
Restricted Subsidiary) or (y) circumstances that are unrelated to any
Borrower).
<PAGE> 153
14
"Maturity Date" shall mean December 16, 1998.
---------------
"Maximum Amount" shall mean, with respect to any amount owing
----------------
to any Lender under this Agreement or in connection herewith, the maximum
amount of interest that such Lender is permitted to charge under applicable law
on such amount.
"Moody's" shall mean Moody's Investors Service, Inc. and any
---------
successor thereto that is a nationally recognized rating agency.
"Multiemployer Plan" shall mean a multiemployer plan as
--------------------
defined in Section 4001(a)(3) of ERISA to which any Borrower or any ERISA
Affiliate (other than one considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Section 414 of the Code) is making or accruing an
obligation to make contributions, or has within any of the preceding five plan
years made or accrued an obligation to make contributions.
"Net Tangible Assets" means the aggregate amount at which the
---------------------
assets of JCPenney and all Restricted 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 JCPenney) ending within the 65 days next preceding the date of
determination, of JCPenney and the Restricted Subsidiaries (after deducting all
valuation and qualifying reserves relating to said assets), except any of the
following described items that may be included among said assets:
(a) trademarks, patents, goodwill and similar intangibles;
(b) investments in and advances to Non-Restricted
Subsidiaries; and
(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.
"Non-Restricted Subsidiary" shall mean any Subsidiary other
---------------------------
than the Restricted Subsidiaries.
<PAGE> 154
15
"Officer's Certificate" of any corporation shall mean a
-----------------------
certificate signed by a Responsible Officer of such corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
------
referred to and defined in ERISA.
"Penney Supplier" means any person that supplies goods or
-----------------
services to JCPenney or any Subsidiary.
"Penney Supplier Receivables" means the obligations of Penney
-----------------------------
Suppliers for the payment of money for goods or services sold by JCPenney or
any Subsidiary to Penney Suppliers for use in goods or services to be supplied
to JCPenney or any Subsidiary.
"person" shall mean any individual, corporation, partnership,
--------
joint venture, association, joint-stock company, trust, unincorporated
organization or Governmental Authority.
"Plan" shall mean any pension plan (other than a Multiemployer
------
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
that is maintained for employees of any Borrower or ERISA Affiliate.
"Prime Rate" means the rate of interest publicly announced by
------------
Morgan Guaranty Trust Company of New York in New York City from time to time as
its Prime Rate.
"Principal Property" means all real property and tangible
--------------------
personal property owned by JCPenney or a Restricted Subsidiary constituting a
part of any store, warehouse or distribution center located within one of the
50 states of the United States or the District of Columbia, exclusive of motor
vehicles, mobile materials-handling equipment and other rolling stock, cash
registers and other point of sale recording devices and related equipment, and
data processing and other office equipment; provided, however, that such term
-------- -------
shall not include any such property constituting a part of any such store,
warehouse or distribution center unless the net book value of all real property
(including leasehold improvements) and store fixtures constituting a part of
such store, warehouse or distribution center exceeds .25% of Stockholders'
Equity.
<PAGE> 155
16
"Receivables" means the obligations of customers for the
-------------
payment of money arising under agreements between such customers and JCPenney
or any Subsidiary.
"Register" shall have the meaning assigned to such term in
----------
Section 9.04(d).
"Regulation G" shall mean Regulation G of the Board as from
--------------
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation U" shall mean Regulation U of the Board as from
--------------
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation X" shall mean Regulation X of the Board as from
--------------
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Reportable Event" shall mean any reportable event as defined
------------------
in Section 4043(b) of ERISA or the regulations issued thereunder with respect
to a Plan (other than a Plan maintained by an ERISA Affiliate which is
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Code).
"Required Lenders" shall mean, at any time, (a) for the
------------------
purposes of terminating the Commitments pursuant to clause (x) of Article VII,
Lenders having Commitments representing at least 66-2/3% of the Total
Commitment, (b) for purposes of acceleration pursuant to clause (y) of Article
VII, Lenders holding Loans representing at least 66-2/3% of the aggregate
principal amount of the Loans outstanding and (c) for all other purposes,
Lenders having Commitments representing greater than 50% of the Total
Commitment.
"Responsible Officer" of any corporation shall mean the
---------------------
chairman, vice chairman, president, chief financial officer, treasurer or
controller of such corporation or any executive or senior vice president of
such corporation.
"Restricted Subsidiary" means any Subsidiary of JCPenney
-----------------------
(other than Funding) which JCPenney shall, by an Officer's Certificate of
JCPenney, have designated as a Restricted Subsidiary and the designation of
which as a Restricted Subsidiary shall not have been cancelled by an Officer's
Certificate of JCPenney; provided, however, that
-------- -------
<PAGE> 156
17
neither the designation of a Subsidiary as a Restricted Subsidiary nor the
cancellation of such designation shall be operative if the immediate effect of
such designation or cancellation shall be to make Net Tangible Assets less than
200% of the Senior Funded Indebtedness of JCPenney and the Restricted
Subsidiaries on a pro forma basis (eliminating intercompany items); and
provided, further, that any Officer's Certificate designating a Subsidiary as a
- -------- -------
Restricted Subsidiary or cancelling such designation shall set forth the Net
Tangible Assets and Senior Funded Indebtedness of JCPenney and its Restricted
Subsidiaries on a pro forma basis (eliminating intercompany items) and show
compliance with the first proviso of this paragraph. Any such designation or
cancellation of such designation may be made more than once with respect to any
Subsidiary.
"S&P" shall mean Standard & Poor's Corporation and any
-----
successor thereto that is a nationally recognized rating agency.
"SEC" shall mean the Securities and Exchange commission.
-----
"Senior Funded Indebtedness" of JCPenney shall mean any Funded
----------------------------
Indebtedness of JCPenney unless in any instrument or instruments evidencing or
securing such Funded Indebtedness or pursuant to which the same is outstanding,
or in any amendment, renewal, extension or refunding of such Funded
Indebtedness, it is provided that such Funded Indebtedness is subordinate in
right of payment to the Loans (a) in the event of any dissolution or winding-up
or total or partial liquidation or reorganization of JCPenney, whether
voluntary or involuntary, or any bankruptcy, insolvency, receivership or
similar proceedings relative to JCPenney and (b) in the event of any default in
the payment of principal (including any required prepayments or amortization)
of or interest on any Loans of JCPenney. "Senior Funded Indebtedness" of any
Restricted Subsidiary means any Funded Indebtedness of such Restricted
Subsidiary and the aggregate preference on involuntary liquidation of any class
of stock of such Restricted Subsidiary ranking, either as to payment of
dividends or distribution of assets, prior to any other class of stock of such
Restricted Subsidiary.
"Standby Borrowing" shall mean a Borrowing consisting of
-------------------
simultaneous Standby Loans from each of the Lenders.
<PAGE> 157
18
"Standby Borrowing Request" shall mean a request made pursuant
---------------------------
to Section 2.04 in the form of Exhibit A-4.
"Standby Loans" shall mean the revolving loans made by the
---------------
Lenders to the Borrowers pursuant to Section 2.04. Each Standby Loan shall be
a Eurodollar Standby Loan or an ABR Loan.
"Standby Margin" shall mean on any date, with respect to each
----------------
Standby Loan made as part of any Eurodollar Standby Borrowing or ABR Borrowing,
as the case may be, the applicable percentage, based upon the ratings
applicable on such date to the Index Debt, set forth (a) in Table A below if
the aggregate principal amount of the Loans outstanding on such date does not
exceed 50% of the Total Commitment on such date and (b) in Table B below if the
aggregate principal amount of the Loans outstanding on such date exceeds 50% of
the Total Commitment on such date:
<PAGE> 158
19
Table A:
Eurodollar ABR
Borrowing Borrowing
---------- ---------
Category 1
----------
Moody's: A2 or better 0.1750% 0%
S&P: A or better
Category 2
----------
Moody's: A3
S&P: A- 0.2750% 0%
Category 3
----------
Moody's: Baa2 or better, but
lower than A3 0.3500% 0%
S&P: BBB or
better, but
lower than A-
Category 4
----------
Moody's: Lower than
Baa2, or 0.4250% 0%
unrated
S&P: Lower than
BBB, or
unrated
<PAGE> 159
20
Table B:
Eurodollar ABR
Borrowing Borrowing
---------- ---------
Category 1
----------
Moody's: A2 or better 0.2500% 0%
S&P: A or better
Category 2
----------
Moody's: A3 0.3250% 0%
S&P: A-
Category 3
----------
Moody's: Baa2 or
better, but 0.4250% 0%
lower than A3
S&P: BBB or
better, but
lower than A-
Category 4
----------
Moody's: Lower than
Baa2, or 0.5500% 0%
unrated
S&P: Lower than
BBB, or
unrated
For purposes of the foregoing, (i) if no rating for the Index Debt shall be
available from either rating agency, (other than because (a) such rating agency
shall no longer be in the business of rating corporate debt obligations or (b)
of any other reason outside the control of JCPenney and Funding), such rating
agency shall be deemed to have established a rating in Category 4, (ii) if the
ratings established or deemed to have been established by Moody's and S&P shall
fall within different Categories, the Standby Margin shall be based upon the
numerically higher Category (i.e. the Category corresponding to the lower
ratings) and
<PAGE> 160
21
(iii) if any rating established or deemed to have been established by Moody's
or S&P shall be changed (other than as a result of a change in the rating
system of either Moody's or S&P), such change shall be effective as of the date
on which such change is first publicly announced by the rating agency making
such change. If the rating system of either Moody's or S&P shall change prior
to the Maturity Date, or if either such rating agency shall cease to be in the
business of rating corporate debt obligations or shall no longer have in effect
a rating for any reason outside the control of JCPenney and Funding, the
Borrowers and the Lenders shall negotiate in good faith to amend the references
to specific ratings in this definition to reflect such changed rating system or
the absence of such a rating. Pending agreement on any such amendment, (i) if
the rating system of one such rating agency shall remain unchanged, or if a
rating shall be available from one such rating agency, the Standby Margin shall
be determined by reference to the rating established by such rating agency,
(ii) if no rating for the Index Debt shall be available from either rating
agency then (A) for 60 days, the Standby Margin shall be determined by
reference to the rating or ratings most recently available, (B) after 60 days,
the Standby Margin shall be determined by reference to Category 3 (or Category
4 if such Margin shall have been determined by reference to Category 3 under
clause (A) above) and (C) after 180 days, the Standby Margin shall be
determined by reference to Category 4.
"Statutory Reserves" shall mean 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 actual reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board and any other banking authority to which
the Agent is subject for new negotiable nonpersonal time deposits in dollars of
over $100,000 with maturities approximately equal to the applicable Interest
Period. Statutory Reserves shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"Stockholders' Equity" means the sum, as at the close of a
----------------------
monthly accounting period (selected by JCPenney) ending within the 65 days next
preceding the date of determination, of (a) the aggregate of capital, capital
stock, capital surplus, capital in excess of par value of stock, reinvested
earnings, earned surplus and net income retained
<PAGE> 161
22
for use in the business (however the foregoing may be designated), after
deducting the cost of shares of capital stock of JCPenney held in its treasury,
of JCPenney and its consolidated Subsidiaries, determined in accordance with
GAAP, plus (b) the amount reflected in such determination as deferred tax
effects.
"Subsidiary" means (a) any corporation of which JCPenney,
------------
directly or indirectly, owns more than 50% of the outstanding stock which at
the time shall have by the terms thereof ordinary voting power to elect
directors of such corporation, irrespective of whether or not at the time stock
of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency, or (b) any such
corporation of which such percentage of shares of outstanding stock of the
character described in the foregoing clause (a) shall at the time be owned,
directly or indirectly, (i) by JCPenney and one or more Subsidiaries as defined
in the foregoing clause (a) or (ii) by one or more such Subsidiaries.
"Support Agreements" shall mean (a) the Amended and Restated
--------------------
Receivables Agreement dated as of January 29, 1980, between JCPenney and
Funding (formerly J. C. Penney Financial Corporation), as amended by Amendment
No. 1 thereto dated as of January 25, 1983, and (b) the Loan Agreement dated as
of January 28, 1986, between JCPenney and Funding, as amended by Amendment No.
1 thereto dated as of December 26, 1986, in each case as amended or modified
from time to time after the Closing Date in compliance with Section 5.10, and
(c) the subordinated Guaranty of the obligations of Funding dated as of
December 16, 1993, executed by JCPenney in favor of the Lenders and attached
hereto as Exhibit C.
"Taxes" shall mean, with respect to any Lender or Agent, any
-------
and all U.S. Federal income taxes after application of any relevant treaty or
convention and all interest and penalties with respect thereto, attributable to
any payment made by any Borrower hereunder to such Lender or Agent.
"Total Commitment" shall mean at any time the aggregate amount
------------------
of the Lenders' Commitments, as in effect at such time.
"Tranche B Credit Agreement" shall mean the $450,000,000
----------------------------
Revolving Credit Agreement dated the date
<PAGE> 162
23
hereof among the Borrowers, the financial institutions named therein as lenders
(which include certain of the Lenders), Morgan Guaranty Trust Company of New
York as Agent for the Lenders, and Bankers Trust Company, Chemical Bank, and
Credit Suisse as Co-Agents for the Lenders, as such agreement may be amended
from time to time.
"Transactions" shall have the meaning assigned to such term
--------------
in Section 3.02.
"Type", when used in respect of any Loan or Borrowing, shall
------
refer to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, "Rate" shall
include the LIBO Rate, the Adjusted CD Rate, and the Alternate Base Rate and,
in the case of any Fixed Rate Loan, the fixed percentage rate per annum
specified by the Lender making such Loan in its related Competitive Bid.
SECTION 1.02. Terms Generally. The definitions in Section
----------------
1.01 shall apply equally to both 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". All references herein to Articles, Sections, Exhibits
and Schedules shall be deemed references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. 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, however, that, for purposes of
-------- -------
determining compliance with any covenant set forth in Article VI, such terms
shall be construed in accordance with GAAP as in effect on the date of this
Agreement applied on a basis consistent with the application used in preparing
JCPenney's audited consolidated financial statements referred to in Section
3.05.
ARTICLE II. THE CREDITS
SECTION 2.01. Commitments. Subject to the terms and conditions and
------------
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, to make Standby Loans to the Borrowers at
any time and from time to time on and after the date hereof
<PAGE> 163
24
and until the earlier of the Maturity Date and the termination of the
Commitment of such Lender, in an aggregate principal amount at any time
outstanding not to exceed such Lender's Commitment, subject, however, to the
conditions that (a) at no time shall the outstanding aggregate principal amount
of all Loans made by all Lenders exceed the Total Commitment and (b) at all
times the outstanding aggregate principal amount of all Standby Loans made by
each Lender to a Borrower shall equal the product of (i) the percentage which
its Commitment represents of the Total Commitment times (ii) the outstanding
aggregate principal amount of all Standby Loans made to such Borrower pursuant
to Section 2.04. Subject to Section 2.03(h), any Lender may at its discretion
make Competitive Loans in an aggregate principal amount up to the amount of the
Total Commitment of the Lenders hereunder. Each Lender's Commitment as of the
Closing Date is set forth opposite its respective name in Schedule 2.01 and,
after the Closing Date, each Lender's Commitment shall be set forth opposite
its respective name in the Register. Such Commitments may be terminated,
reduced or extended from time to time pursuant to Section 2.11.
Within the foregoing limits, the Borrowers may borrow, pay or
prepay and reborrow hereunder, on and after the Closing Date and prior to the
Maturity Date, subject to the terms, conditions and limitations set forth
herein.
SECTION 2.02. Loans. (a) Each Standby Loan shall be made as
------
part of a Borrowing consisting of Loans made by the Lenders ratably in
accordance with their Commitments; provided, however, that the failure of any
Lender to make any Standby Loan shall not by itself relieve any other Lender of
its obligation to lend hereunder (it being understood, however, that no Lender
shall be responsible for the failure of any other Lender to make any Loan
required to be made by such other Lender). Each Competitive Loan shall be made
in accordance with the procedures set forth in Section 2.03. The Standby Loans
or Competitive Loans comprising any Borrowing shall be (i) in the case of
Competitive Loans, in an aggregate principal amount which is an integral
multiple of $5,000,000 and not less than $25,000,000 (or, if less, an aggregate
principal amount equal to the Total Commitment on the date of such Borrowing
minus the outstanding aggregate principal amount on such date of all
Competitive Loans) and (ii) in the case of Standby Loans, in an aggregate
principal amount which is an integral multiple of $5,000,000 and not less than
$25,000,000 (or an aggregate
<PAGE> 164
25
principal amount equal to the remaining available balance of the Total
Commitment).
(b) Subject to Sections 2.10 and 2.14, each Competitive
Borrowing shall be comprised entirely of Eurodollar Competitive Loans, CD Loans
or Fixed Rate Loans, and each Standby Borrowing shall be comprised entirely of
Eurodollar Standby Loans or ABR Loans, as the Borrower requesting such
Competitive Borrowing or Standby Borrowing may specify pursuant to Section 2.03
or 2.04, as the case may be.
(c) Subject to Section 2.05, each Lender shall make each Loan
to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds to the Agent in New York, New York, not later than
12:00 noon, New York City time (11:00 a.m., New York City time, in the case of
a Eurodollar Loan), and the Agent shall by 2:00 p.m., New York City time,
credit the amounts so received to the general deposit account of the Borrower
of such Loan with the Agent or, if a Borrowing shall not occur on such date
because any condition precedent herein specified shall not have been met,
return the amounts so received to the respective Lenders. Competitive Loans
shall be made by the Lender or Lenders whose Competitive Bids therefor are
accepted pursuant to Section 2.03 in the amounts so accepted and Standby Loans
shall be made by the Lenders pro rata in accordance with Section 2.16. Unless
the Agent shall have received notice from a Lender prior to the date of any
Borrowing that such Lender will not make available to the Agent such Lender's
portion of such Borrowing, the Agent may assume that such Lender has made such
portion available to it on the date of such Borrowing in accordance with this
paragraph (c) and may, in reliance upon such assumption, make a corresponding
amount available on such date to the Borrower requesting such Borrowing. If
and to the extent that such Lender shall not have made such portion available
to the Agent, such Lender and such Borrower severally agree to pay or repay to
the Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to such
Borrower until the date such amount is repaid to the Agent at (i) in the case
of such Borrower, the interest rate applicable at the time to the Loans
comprising such Borrowing and (ii) in the case of such Lender, the Federal
Funds Effective Rate; provided, however, that such Borrower shall not in any
event have any liability in respect of such repayment under Section 2.15. If
such
<PAGE> 165
26
Lender shall pay to the Agent such corresponding amount, such amount shall
constitute such Lender's Loan as part of such Borrowing for purposes of this
Agreement.
(d) Notwithstanding any other provision of this Agreement, no
Borrower shall be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity Date.
(e) The Loans of each Type made by each Lender shall be made
through and maintained at such Lender's Applicable Lending Office for Loans of
such Type. Any Lender may change its Applicable Lending Office for any Type of
Loans without the prior written consent of JCPenney so long as (i) such Lender
shall have no knowledge that such change would cause it to be unlawful for such
Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan and (ii)
such Lender shall not be entitled to recoupment, reimbursement or
indemnification in accordance with the terms and conditions of Sections 2.13
and 2.15 to the extent that such Lender shall have had knowledge at the time of
such change in Applicable Lending Office that such entitlement would arise as a
result of such change.
SECTION 2.03. Competitive Bid Procedure. (a) In order to
--------------------------
request Competitive Bids, a Borrower shall hand deliver, telex or telecopy to
the Agent a duly completed Competitive Bid Request in the form of Exhibit A-1
hereto, to be received by the Agent (i) in the case of a Eurodollar Borrowing
or a CD Borrowing, not later than 11:00 a.m., New York City time, four Business
Days before a proposed Competitive Borrowing and (ii) in the case of a Fixed
Rate Borrowing, not later than 11:00 a.m., New York City time, one Business Day
before a proposed Competitive Borrowing. No ABR Loan shall be requested in, or
made pursuant to, a Competitive Bid Request. A Competitive Bid Request that
does not conform substantially to the format of Exhibit A-1 shall be rejected
and the Agent shall promptly notify the appropriate Borrower of such rejection
by telex or telecopier. Such request shall in each case refer to this
Agreement and specify (x) that the Borrowing then being requested is to be a
Eurodollar Borrowing, a CD Borrowing or a Fixed Rate Borrowing, (y) the date of
such Borrowing (which shall be a Business Day) and the aggregate principal
amount thereof (which shall be, subject to the third sentence of Section
2.02(a), in a minimum principal amount of $25,000,000 and in an integral
multiple of $5,000,000 and
<PAGE> 166
27
(z) the Interest Period with respect thereto (which may not end after the
Maturity Date). Promptly after its receipt of a Competitive Bid Request that
is not rejected as aforesaid, the Agent shall invite by telex or telecopier (in
the form set forth in Exhibit A-2 hereto) the Lenders to bid, on the terms and
conditions of this Agreement, to make Competitive Loans pursuant to the
Competitive Bid Request.
(b) The Agent may, in its sole discretion, make one or more
Competitive Bids to the appropriate Borrower responsive to such Borrower's
Competitive Bid Request. Each Competitive Bid by the Agent must be submitted
to the Borrower via telex or telecopier, in the form of Exhibit A-3 hereto, (i)
in the case of a Eurodollar Borrowing or CD Borrowing, not later than 8:30
a.m., New York City time, three Business Days before a proposed Competitive
Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later than 8:30
a.m., New York City time, on the day of a proposed Competitive Borrowing. Each
Lender may, in its sole discretion, make one or more Competitive Bids to the
appropriate Borrower responsive to such Borrower's Competitive Bid Request.
Each Competitive Bid by a Lender must be received by the Agent via telex or
telecopier, in the form of Exhibit A-3 hereto, (i) in the case of a Eurodollar
Borrowing or CD Borrowing, not later than 9:00 a.m., New York City time, three
Business Days before a proposed Competitive Borrowing and (ii) in the case of a
Fixed Rate Borrowing, not later than 9:00 a.m., New York City time, on the day
of a proposed Competitive Borrowing. Multiple bids will be accepted by the
Agent. Competitive Bids that do not conform substantially to the format of
Exhibit A-3 may be rejected by the Agent after conferring with, and upon the
instruction of, the Borrower requesting such Competitive Bids, and the Agent
shall notify the Lender making such nonconforming bid of such rejection as soon
as practicable. Each Competitive Bid shall refer to this Agreement and specify
(x) the principal amount (which shall be in an integral multiple of $5,000,000
(unless such principal amount shall equal the entire principal amount of the
Competitive Borrowing requested by such Borrower) and which may equal such
entire principal amount) of the Competitive Loan or Loans that the Lender is
willing to make to the Borrower requesting such Competitive Bid, (y) the
Competitive Bid Rate or Rates at which the Lender is prepared to make the
Competitive Loan or Loans and (z) the Interest Period and the last day thereof.
If any Lender shall elect not to make a Competitive Bid, such Lender shall so
notify the Agent via telex or telecopier (A) in the case
<PAGE> 167
28
of a Eurodollar Borrowing or a CD Borrowing, not later than 9:00 a.m., New York
City time, three Business Days before a proposed Competitive Borrowing and (B)
in the case of a Fixed Rate Borrowing, not later than 9:00 a.m., New York City
time, on the day of a proposed Competitive Borrowing; provided, however, that
failure by any Lender to give such notice shall not cause such Lender to be
obligated to make any Competitive Loan as part of such Competitive Borrowing.
A Competitive Bid submitted by a Lender pursuant to this paragraph (b) shall be
irrevocable.
(c) The Agent shall notify the appropriate Borrower by telex
or telecopier not later than (i) in the case of a Eurodollar Borrowing or a CD
Borrowing, 10:00 a.m., New York City time, three Business Days before the
proposed Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing,
10:00 a.m., New York City time, on the day of the proposed Competitive
Borrowing of all the Competitive Bids made, the Competitive Bid Rate and the
principal amount of each Competitive Loan in respect of which a Competitive Bid
was made and the identity of the Lender that made each bid. The Agent shall
send a copy of all Competitive Bids to such Borrower for its records as soon as
practicable after completion of the bidding process set forth in this Section
2.03.
(d) The appropriate Borrower may in its sole and absolute
discretion, subject only to the provisions of this paragraph (d) and paragraph
(h) below, accept or reject any Competitive Bid referred to in paragraph (c)
above. Such Borrower shall notify the Agent by telex or telecopier not later
than (i) in the case of a Eurodollar Borrowing or a CD Borrowing, 11:30 a.m.,
New York City time, three Business Days before the proposed Competitive
Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later than 11:30
a.m., New York City time, on the day of the proposed Competitive Borrowing
whether and to what extent it has decided to accept or reject any of or all the
bids referred to in paragraph (c) above; provided, however, that (v) the
-------- -------
failure by such Borrower to give such notice shall be deemed to be a rejection
of all the bids referred to in paragraph (c) above, (w) such Borrower shall not
accept a bid made at a particular Competitive Bid Rate if it has decided to
reject a bid made at a lower Competitive Bid Rate, (x) the aggregate amount of
the Competitive Bids accepted by such Borrower shall not exceed the principal
amount specified in the related Competitive Bid Request, (y) if such Borrower
shall accept a bid or bids made at a
<PAGE> 168
29
particular Competitive Bid Rate but the amount of such bid or bids shall cause
the total amount of bids to be accepted by such Borrower to exceed the amount
specified in the related Competitive Bid Request, then such Borrower shall
accept a portion of such bid or bids in an amount equal to the amount specified
in the related Competitive Bid Request less the amount of all other Competitive
Bids accepted with respect to such Competitive Bid Request, which acceptance,
in the case of multiple bids at such Competitive Bid Rate, shall be made pro
rata in accordance with the amount of each such bid at such Competitive Bid
Rate, and (z) except pursuant to clause (y) above, no bid shall be accepted for
a Competitive Loan unless the principal amount of such Competitive Loan is in
an integral multiple of $5,000,000 or is equal to the entire principal amount
of the Competitive Borrowing being requested by such Borrower; provided
--------
further, however, that if a Competitive Loan must be in an amount less than
- ------- -------
$5,000,000 because of the provisions of clause (y) above, such Competitive Loan
may be for a minimum of $1,000,000 or any integral multiple thereof, and in
calculating the pro rata allocation of acceptances of portions of multiple bids
at a particular Competitive Bid Rate pursuant to clause (y) the amounts shall
be rounded to integral multiples of $1,000,000 in a manner which shall be in
the discretion of such Borrower. A notice given pursuant to this paragraph (d)
by the appropriate Borrower shall be irrevocable.
(e) The Agent shall promptly notify each bidding Lender
whether or not its Competitive Bid has been accepted (and if so, in what amount
and at what Competitive Bid Rate) by telex or telecopier sent by the Agent, and
each successful bidder will thereupon become bound, subject to the other
applicable conditions hereof, to make the Competitive Loan in respect of which
its bid has been accepted.
(f) The Borrowers shall not make more than 10 Competitive Bid
Requests during any 30-day period.
(g) All Notices required by this Section 2.03 shall be given
in accordance with Section 9.01.
(h) At no time shall the outstanding aggregate principal
amount of all Competitive Loans made by all Lenders exceed the Total Commitment
in effect at such time.
<PAGE> 169
30
(i) The Agent shall hold in confidence each Competitive Bid
received by the Agent until such Competitive Bid has been disclosed to the
appropriate Borrower pursuant to paragraph (d) above.
SECTION 2.04. Standby Borrowing Procedure. In order to
----------------------------
request a Standby Borrowing, a Borrower shall hand deliver, telex or telecopy a
Standby Borrowing Request in the form of Exhibit A-4 to the Agent (a) in the
case of a Standby Borrowing that is a Eurodollar Borrowing, not later than
11:00 a.m., New York City time, three Business Days before a proposed borrowing
and (b) in the case of an ABR Borrowing, not later than 10:00 a.m., New York
City time, on the day of a proposed borrowing. A Borrower shall be deemed to
have given a Standby Borrowing Request if it (i) notifies an officer of the
Agent identified in Section 9.01 by telephone of the content of such Standby
Borrowing Request not later than the relevant time set forth above for delivery
thereof and (ii) delivers such Standby Borrowing Request to Agent as soon as
practicable; provided, however, that a Borrower shall not have any right to
-------- -------
receive the proceeds of a Standby Borrowing unless the Agent has received the
related written Standby Borrowing Request. Such notice shall be irrevocable
and shall in each case specify (i) whether the Borrowing then being requested
is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such
Standby Borrowing (which shall be a business Day) and the amount thereof; and
(iii) the Interest Period with respect thereto. If no election as to the Type
of Standby Borrowing is specified in any such notice, then the requested
Standby Borrowing shall be an ABR Borrowing. If no Interest Period with
respect to any Standby Borrowing is specified in any such notice, then the
Borrower requesting such Borrowing shall be deemed to have selected an Interest
Period of one month's duration, in the case of a Eurodollar Borrowing, or five
days' duration, in the case of an ABR Borrowing. If a Borrower shall not have
given notice in accordance with this Section 2.04 of its election to refinance
a Standby Borrowing of such Borrower prior to the end of the Interest Period in
effect for such Borrowing, then such Borrower shall (unless such Borrowing is
repaid at the end of such Interest Period) be deemed to have given notice of an
election to refinance such Borrowing with an ABR Borrowing. The Agent shall
promptly advise the Lenders of any notice given pursuant to this Section 2.04
and of each Lender's portion of the requested Borrowing.
<PAGE> 170
31
SECTION 2.05. Refinancings. Any Borrower may refinance all
-------------
or any part of any Borrowing of such Borrower with a Borrowing of the same or a
different Type made pursuant to Section 2.03 or Section 2.04, subject to the
conditions and limitations set forth herein and elsewhere in this Agreement,
including refinancings of Competitive Borrowings with Standby Borrowings and
Standby Borrowings with Competitive Borrowings. Any Borrowing or part thereof
so refinanced shall be deemed to be repaid in accordance with Section 2.07 with
the proceeds of a new Borrowing hereunder and the proceeds of the new
Borrowing, to the extent they do not exceed the principal amount of the
Borrowing being refinanced, shall not be paid by the Lenders to the Agent or by
the Agent to the appropriate Borrower pursuant to Section 2.02(c); provided,
--------
however, that (i) if the principal amount extended by a Lender in a refinancing
- -------
is greater than the principal amount extended by such Lender in the Borrowing
being refinanced, then such Lender shall pay such difference to the Agent for
distribution to the Lenders described in (ii) below, (ii) if the principal
amount extended by a Lender in the Borrowing being refinanced is greater than
the principal amount being extended by such Lender in the refinancing, the
Agent shall return the difference to such Lender out of amounts received
pursuant to (i) above and (iii) to the extent any Lender fails to pay to the
Agent amounts due from it pursuant to (i) above, any Loan or portion thereof
being refinanced shall not be deemed repaid in accordance with Section 2.07 and
shall be payable by the Borrower to which such Loan was made; provided,
--------
however, that such Borrower shall not have any liability under Section 2.15 in
- -------
respect of any of its payment obligations under this clause (iii).
SECTION 2.06. Fees. (a) The Borrowers agree, jointly and
-----
severally, to pay to each Lender, through the Agent, on each March 31, June 30,
September 30 and December 31 and on the date on which the Commitment of such
Lender shall be terminated as provided herein, a facility fee (a "Facility
Fee") at a rate per annum equal to the Facility Fee Percentage from time to
time in effect on the amount of the Commitment of such Lender, whether used or
unused, from time to time in effect during the preceding quarter (or shorter
period commencing with the date hereof and/or ending with the Maturity Date or
the Commitment Termination Date with respect to each Lender or any later date
on which the Commitment of such Lender shall be terminated). All Facility Fees
shall be computed in arrears on the basis of the actual number of days elapsed
in a year
<PAGE> 171
32
of 360 days. The Facility Fee due to each Lender shall commence to accrue on
the Closing Date (or, if later, the date on which such Lender became a Lender)
and shall cease to accrue on the earlier of the Maturity Date and the
termination of the Commitment of such Lender as provided herein.
(b) The Borrowers agree, jointly and severally, to pay to
each Lender, through the Agent, on each March 31, June 30, September 30 and
December 31 and on the date on which the Commitment of such Lender shall be
terminated as provided herein, a commitment fee (a "Commitment Fee") at a rate
per annum equal to the Commitment Fee Percentage from time to time in effect on
the average daily unused amount of such Lender's Commitment during the
preceding quarter (or shorter period commencing with the date hereof and/or
ending with the Maturity Date, the Commitment Termination Date with respect to
such Lender or any other date on which the Commitment of such Lender shall be
terminated). All Commitment Fees due shall be computed in arrears on the basis
of the actual number of days elapsed in a year of 365 or 366 days, as the case
may be. The Commitment Fee due to each Lender shall commence to accrue on the
Closing Date (or, if later, the date on which such Lender became a Lender) and
shall cease to accrue on the earlier of the Maturity Date and the termination
of the Commitment of such Lender as provided herein.
(c) The Borrowers agree, jointly and severally, to pay to the
Agent from time to time, for its own account, agent and administrative fees
(the "Administrative Fees") at such times and in such amounts as have been
previously agreed upon in writing between the Borrowers and the Agent.
(d) All Fees shall be paid on the dates due in immediately
available funds. Once paid, none of the Fees shall be refundable, except in
the event of manifest error.
SECTION 2.07. Repayment of Loans; Evidence of the Borrowers'
----------------------------------------------
Obligations. Subject to Section 4.01, the outstanding principal balance of
- ------------
each Competitive Loan and Standby Loan made by any Lender shall be payable (i)
except in the case of ABR Loans, on the last day of the Interest Period
applicable to such Loan and (ii) on the Commitment Termination Date with
respect to such Lender. Each Competitive Loan and each Standby Loan shall bear
interest from the date thereof on the outstanding principal balance thereof as
set forth in Section 2.08. With respect to each
<PAGE> 172
33
Lender, the entries made in the accounts maintained by the Agent and such
Lender shall be prima facie evidence of the existence and amounts of the
monetary obligations payable by any Borrower to such Lender in respect of the
Loans made by such Lender to such Borrower; provided that the failure to
--------
maintain any such accounts or any error therein shall not affect the
obligations of the Borrowers hereunder.
SECTION 2.08. Interest on Loans. (a) Subject to the
------------------
provisions of Section 2.09, the Loans comprising each Eurodollar Borrowing
shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 360 days) at a rate per annum on any date of determination equal
to (i) in the case of each Eurodollar Standby Loan, the LIBO Rate for the
Interest Period in effect for such Borrowing plus the Standby Margin for such
date, and (ii) in the case of each Eurodollar Competitive Loan, the LIBO Rate
for the Interest Period in effect for such Loan plus the Competitive Margin
offered by the Lender making such Loan and accepted by the Borrower requesting
such Loan pursuant to Section 2.03. The LIBO Rate for each Interest Period
shall be determined by the Agent in consultation with the LIBO Reference
Lenders, and such determination shall be conclusive absent manifest error. The
Agent shall promptly advise the Borrowers and each Lender of such
determination.
(b) Subject to the provisions of Section 2.09, the Loans
comprising each ABR Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be) at a rate per annum equal to the Alternate Base Rate. The Alternate Base
Rate shall be determined by the Agent, and such determination shall be
conclusive absent manifest error. The Agent shall promptly advise the
Borrowers and each Lender of such determination.
(c) Subject to the provisions of Section 2.09, the Loans
comprising each CD Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) at a rate per annum
equal to the Adjusted CD Rate for the Interest Period in effect for such
Borrowing plus, in the case of each such Loan, the Competitive Margin offered
by the Lender making such Loan and accepted by the Borrower requesting such
Borrowing pursuant to Section 2.03, provided, however, that any CD Loan made
-------- -------
pursuant to Section 2.10 or 2.14 shall bear interest (computed as described in
this paragraph) at a rate per annum on any date of determination equal to the
Adjusted CD
<PAGE> 173
34
Rate for the Interest Period applicable to such CD Loan plus the Standby Margin
for such date.
(d) Subject to the provisions of Section 2.09, each Fixed
Rate Loan shall bear interest at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) equal to the fixed rate
of interest offered by the Lender making such Loan and accepted by the Borrower
requesting the applicable Fixed Rate Borrowing pursuant to Section 2.03.
(e) Interest on each Borrowing shall be payable on each
applicable Interest Payment Date.
SECTION 2.09. Default Interest. If any Borrower shall
-----------------
default in the payment of the principal of or interest on any Loan or any other
amount becoming due hereunder, whether by scheduled maturity, notice of
prepayment, acceleration or otherwise, such Borrower shall on demand from time
to time from the Agent pay interest, to the extent permitted by applicable law,
on such defaulted amount from the date on which the Agent first notifies such
Borrower that it will be required to pay interest pursuant to this Section on
such defaulted amount up to (but not including) the date of actual payment
(after as well as before judgment) at a rate per annum (computed on the basis
of the actual number of days elapsed over a year of 365 or 366 days, as the
case may be) equal to the Alternate Base Rate plus 2%.
SECTION 2.10. Alternate Rate of Interest. In the event, and
---------------------------
on each occasion, that on the day two Business Days prior to the commencement
of any Interest Period for a Eurodollar Borrowing the LIBO Reference Lenders
shall have determined and communicated to the Agent that dollar deposits in the
principal amounts of the Eurodollar Loans comprising such Borrowing are not
generally available in the London interbank market, or that the rates at which
such dollar deposits are being offered will not adequately and fairly reflect
the cost to any Lender of making or maintaining its Eurodollar Loan during such
Interest Period, or that reasonable means do not exist for ascertaining the
LIBO Rate, the Agent shall, as soon as practicable thereafter, give written or
telex notice of such determination to the Borrowers and the Lenders. In the
event of any such determination, until the Agent shall have advised the
Borrowers and the Lenders that the circumstances giving rise to such notice no
longer exist, (i) any request
<PAGE> 174
35
by any Borrower for a Competitive Borrowing pursuant to Section 2.03 shall be
of no force and effect and shall be denied by the Agent and (ii) any request by
any Borrower for a Eurodollar Borrowing pursuant to Section 2.04 shall be
deemed to be a request for (A) an ABR Borrowing having an Interest Period of
five days' duration and (B) a refinancing of such ABR Borrowing with an ABR
Borrowing or a CD Borrowing, as such Borrower shall elect by notice to the
Agent not later than 11:00 a.m., New York City time, one Business Day before
such refinancing, comprised of Loans having an Interest Period that is, when
added to the Interest Period for the ABR Borrowing being refinanced, equal to
(in the case of an ABR Borrowing) or as close as possible to (in the case of a
CD Borrowing) the Interest Period requested by such Borrower in connection with
such Eurodollar Borrowing. The parties hereto shall have the same rights and
obligations in respect of a deemed request for a CD Borrowing pursuant to this
Section and the CD Loans made pursuant thereto, and the Commitments shall be
utilized by such CD Loans, as if such Borrowing were a Standby Borrowing
requested, and such Loans were Standby Loans made, pursuant to Section 2.04.
Each determination by the LIBO Reference Lenders hereunder shall be conclusive
absent manifest error.
SECTION 2.11. Termination and Reduction of Commitments. (a)
-----------------------------------------
Any Commitment that has not been terminated prior to the Maturity Date shall be
automatically terminated on the Maturity Date.
(b) Except as provided in Section 2.20 hereof, upon at least
5 Business Days' prior irrevocable written or telex notice to the Agent,
JCPenney may at any time in whole permanently terminate, or from time to time
in part permanently reduce, the Total Commitment; provided, however, that each
partial reduction of the Total Commitment shall be in an integral multiple of
$5,000,000 and in a minimum principal amount of $25,000,000 or, if less, the
Total Commitment then in effect.
(c) Except as provided in Section 2.20, each reduction in the
Total Commitment hereunder shall be made ratably among the Lenders in
accordance with their respective Commitments. Subject to Section 9.09, the
Borrowers shall pay to the Agent for the account of the Lenders, on the date of
each termination or reduction, the Commitment Fees and Facility Fees accrued
through the date of such termination or reduction.
<PAGE> 175
36
(d) The Commitment of each Lender shall automatically and
permanently terminate on December 16, 1998 (the "Commitment Termination Date");
provided, however, that the Commitment Termination Date with respect to any
- -------- -------
Lender shall not be extended under any circumstances to a date later than the
Maturity Date.
SECTION 2.12. Prepayment. (a) Each Borrower shall have the
-----------
right at any time and from time to time to prepay any Standby Borrowing or any
Competitive Borrowing of such Borrower, in whole or in part, subject to the
requirements of Section 2.15 but otherwise without premium or penalty, upon
giving written or telex notice (or telephone notice promptly confirmed by
written or telex notice) to the Agent before 10:00 a.m., New York City time,
one Business Day prior to such prepayment; provided, however, that each partial
-------- -------
prepayment shall be in an amount which is an integral multiple of $5,000,000
and not less than $25,000,000.
(b) On the date of any termination or reduction of the
Commitments pursuant to Section 2.11, the Borrowers shall pay or prepay so much
of the Standby Borrowings as shall be necessary in order that the aggregate
principal amount of the Standby Loans outstanding will not exceed the Total
Commitment after giving effect to such termination or reduction.
(c) Each notice of prepayment shall specify the prepayment
date and the principal amount of each Borrowing (or portion thereof) to be
prepaid, shall be irrevocable and shall commit the Borrower giving such notice
to prepay such Borrowing (or portion thereof) by the amount stated therein on
the date stated therein. All prepayments under this Section 2.12 shall be
subject to Section 2.15 but otherwise without premium or penalty. All
prepayments under this Section 2.12 shall be accompanied by accrued interest on
the principal amount being prepaid to the date of payment.
SECTION 2.13. Reserve Requirements; Change in Circumstances.
----------------------------------------------
Subject to the procedures and limitations of Section 2.20:
(a) Notwithstanding any other provision herein, if after the
date of this Agreement any change in applicable law or regulation or in the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law) shall change the basis of taxation
<PAGE> 176
37
of payments to any Lender of the principal of or interest on any Eurodollar
Loan, CD Loan or Fixed Rate Loan made by such Lender or any Fees or other
amounts payable hereunder (other than changes in respect of taxes imposed on
such Lender by the jurisdiction in which such Lender is organized, has its
principal office or maintains its Applicable Lending office for such Loan or by
any political subdivision or taxing authority in any such jurisdiction), or
shall 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 such Lender, or shall impose on such Lender or the London interbank
market any other condition affecting this Agreement or any Eurodollar Loan, CD
Loan or Fixed Rate Loan made by such Lender, and the result of any of the
foregoing shall be to increase the cost to such Lender of making or maintaining
any Eurodollar Loan, CD Loan or Fixed Rate Loan or to reduce the amount of any
sum received or receivable by such Lender hereunder (whether of principal,
interest or otherwise) by an amount deemed by such Lender in its reasonable
judgment to be material, then such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered
will be paid to such Lender in accordance with Section 2.20 (i) if such
additional costs or reduction shall relate to a particular Loan, by the
Borrower to which such Loan was made and (ii) otherwise, by JCPenney.
Notwithstanding the foregoing, no Lender shall be entitled to request
compensation under this paragraph with respect to any Loan if it shall have
been aware that the change giving rise to such request had been adopted or
enacted at the earlier of the time at which the Lender became a party to this
Agreement or, with respect to a Competitive Loan, the time of submission of the
Competitive Bid pursuant to which such Competitive Loan shall have been made.
(b) If the adoption after the date hereof of any law, rule,
regulation or guideline regarding capital adequacy, or any change after the
date hereof in any of the foregoing or in the interpretation or administration
of any of the foregoing by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender (or any Applicable Lending Office of such Lender) with
any request or directive regarding capital adequacy (whether or not having the
force of law) made or issued after the date hereof by any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Lender's capital as a consequence of this
<PAGE> 177
38
Agreement or the Loans made by such Lender pursuant hereto to a level below
that which such Lender could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's policies with respect to
capital adequacy) by an amount deemed by such Lender in its reasonable judgment
to be material, then subject to Section 2.20 hereof, from time to time such
additional amount or amounts as will compensate such Lender for any such
reduction suffered will be paid to such Lender in accordance with Section 2.20
(i) if such reduction shall relate to a particular Loan, by the Borrower to
which such Loan was made and (ii) otherwise, by JCPenney.
SECTION 2.14. Change in Legality. (a) Notwithstanding any
-------------------
other provision herein, if any change after the Closing Date in any law or
regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it
unlawful for any Lender to make or maintain any Eurodollar Loan or to give
effect to its obligations as contemplated hereby with respect to any Eurodollar
Loan, then, by written notice to the Borrowers and to the Agent, such Lender
may:
(i) declare that Eurodollar Loans will not thereafter be made
by such Lender hereunder, whereupon such Lender shall not submit a
Competitive Bid in response to a request for Competitive Loans and any
request by any Borrower for a Standby Borrowing comprised of
Eurodollar Loans shall, as to such Lender only, be deemed a request
for an ABR Loan or a CD Loan, as such Borrower shall elect by notice
to the Agent not later than 11:00 a.m., New York City time, one
Business Day before such Borrowing, having an Interest Period equal to
(in the case of an ABR Loan) or as close as possible to (in the case
of a CD Loan) the Interest Period applicable to such Eurodollar Loans
unless such declaration shall be subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it
be converted to ABR Loans or to CD Loans, in which event all such
Eurodollar Loans shall be automatically converted to ABR Loans or, if
JCPenney shall so notify the Agent on the date of such conversion and
the Agent shall have determined that the Adjusted CD Rate can be
determined for the Interest Period in question, to CD Loans as of the
effective date of such notice as provided in paragraph (b) below.
<PAGE> 178
39
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans or CD Loans made by such Lender in lieu of, or resulting from the
conversion of, such Eurodollar Loans. The parties hereto shall have the same
rights and obligations in respect of a deemed request for a CD Loan pursuant to
clause (i) above and any CD Loan made pursuant to paragraph (a) above, and the
Commitments shall be utilized by any such CD Loan, as if such CD Loan were a
Standby Loan requested and made pursuant to Section 2.04.
(b) For purposes of this Section 2.14, a notice to the
Borrowers by any Lender shall be effective as to each Eurodollar Loan, if
lawful, on the last day of the Interest Period currently applicable to such
Eurodollar Loan; in all other cases such notice shall be effective on the date
of receipt by the Borrowers (in which case the ABR Loan or CD Loan resulting
from the conversion of such Eurodollar Loan pursuant to clause (ii) of
paragraph (a) above shall have an Interest Period equal to (in the case of an
ABR Loan) or as close as possible to (in the case of a CD Loan) the Interest
Period applicable to such Eurodollar Loan).
SECTION 2.15. Indemnity. Each Borrower agrees to indemnify
----------
the Agent and each Lender against any reasonable out- of-pocket loss or expense
which the Agent and/or such Lender may sustain or incur as a consequence of (a)
any failure by such Borrower to fulfill on the date of any borrowing hereunder
the applicable conditions set forth in Article IV, (b) any failure by such
Borrower to borrow or to refinance or continue any Loan hereunder after
irrevocable notice of such borrowing, refinancing or continuation has been
given pursuant to Section 2.03 or 2.04, (c) any payment, prepayment or
conversion of a Eurodollar Loan, CD Loan or Fixed Rate Loan made to such
Borrower that is required by any other provision of this Agreement or otherwise
made or deemed made on a date other than the last day of the Interest Period
applicable thereto or (d) any default in payment or prepayment of the principal
amount of any Eurodollar Loan, CD Loan or Fixed Rate Loan made to such Borrower
or any part thereof or interest accrued thereon, as and when due and payable
(at the due date thereof, whether by scheduled maturity, acceleration,
irrevocable notice of prepayment or otherwise), after the expiration of the
applicable grace period, including, in each such case, any
<PAGE> 179
40
reasonable out-of-pocket loss or expense sustained or incurred in liquidating
or employing deposits from third parties acquired to effect or maintain such
Loan or any part thereof as a Eurodollar Loan, CD Loan or Fixed Rate Loan.
Such loss or reasonable expense shall include an amount equal to the excess, if
any, as reasonably determined by the Agent and/or such Lender, of (i) its cost
of obtaining the funds for the Loan being paid, prepaid, converted or not
borrowed (based on the LIBO Rate or Adjusted CD Rate or, in the case of a Fixed
Rate Loan, the fixed rate of interest applicable thereto) for the period from
the date of such payment, prepayment or failure to borrow to the last day of
the Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan which would have commenced on the date of such
failure) over (ii) the amount of interest (as reasonably determined in good
faith by the Agent and/or such Lender) that would be realized by the Agent
and/or such Lender in reemploying the funds so paid, prepaid or not borrowed
for such period or Interest Period, as the case may be; provided, however, that
-------- -------
with respect to any Eurodollar Loan or CD Loan for which the corresponding LIBO
Rate or Adjusted CD Rate, as the case may be, is available for the period or
Interest Period in question, the amount of interest realized in reemploying
such funds shall be computed at such LIBO Rate or Adjusted CD Rate, as the case
may be, at the time of the applicable payment, prepayment or failure to borrow.
In order to exercise its rights under this Section, the Agent and/or a Lender
shall deliver to the appropriate Borrower a certificate setting forth any
amount or amounts which the Agent and/or such Lender is entitled to receive
pursuant to this Section. Such Borrower shall have a 30-Business Day period
following the receipt of such certificate (if such Borrower in good faith
disagrees with the assertion that any payment under such section is due or with
the amount shown as due on such certificate and so notifies the Agent and/or
such Lender of such disagreement within 10 Business Days following receipt of
such certificate) to negotiate with the Agent and/or such Lender, which
negotiations shall be conducted by the respective parties in good faith, and to
agree upon another amount that will adequately compensate the Agent and/or such
Lender, it being expressly understood that if such Borrower does not provide
the required notice of its disagreement as provided above, such Borrower shall
pay the amount shown as due on the certificate on the tenth Business Day
following receipt thereof and further if such Borrower does provide such
required notice, and negotiations are entered into but do not result in
agreement by such
<PAGE> 180
41
Borrower and the Agent and/or such Lender within the 30-Business Day period,
then such Borrower shall pay the amount shown as due on the certificate on the
last day of such period.
SECTION 2.16. Pro Rata Treatment. Except as required under
-------------------
Sections 2.14 and 2.20(b), each Standby Borrowing, each payment or prepayment
of principal of any Standby Borrowing, each payment of interest on the Standby
Loans, each payment of the Facility Fees and Commitment Fees, each reduction of
the Commitments and each refinancing of any Borrowing with a Standby Borrowing
of any Type, shall be allocated pro rata among the Lenders in accordance with
their respective Commitments (or, if such Commitments shall have expired or
been terminated, in accordance with the respective principal amounts of their
outstanding Standby Loans). Each payment of principal of any Competitive
Borrowing shall be allocated pro rata among the Lenders participating in such
Borrowing in accordance with the respective principal amounts of their
outstanding Competitive Loans comprising such Borrowing. Each payment of
interest on any Competitive Borrowing shall be allocated pro rata among the
Lenders participating in such Borrowing in accordance with the respective
amounts of accrued and unpaid interest on their outstanding Competitive Loans
comprising such Borrowing. For purposes of determining the available
Commitments of the Lenders at any time, each outstanding Competitive Borrowing
shall be deemed to utilize the Commitments of each of the Lenders pro rata in
accordance with their respective Commitments. Each Lender agrees that in
computing such Lender's portion of any Borrowing to be made hereunder, the
Agent may, in its discretion, round each Lender's percentage of such Borrowing
to the next higher or lower whole dollar amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if
-------------------
it shall, through the exercise of a right of banker's lien, setoff or
counterclaim against any Borrower, or pursuant to a secured claim under Section
506 of Title 11 of the United States Code or other security or interest arising
from, or in lieu of, such secured claim, received by such Lender under any
applicable bankruptcy, insolvency or other similar law or otherwise, or by any
other means, obtain payment (voluntary or involuntary) in respect of any
Standby Loan or Loans as a result of which the unpaid principal portion of its
Standby Loans shall be proportionately less than the unpaid principal portion
of the Standby Loans of any other Lender, it shall be deemed simultaneously
<PAGE> 181
42
to have purchased from such other Lender at face value, and shall promptly pay
to such other Lender the purchase price for, a participation in the Standby
Loans of such other Lender, so that the aggregate unpaid principal amount of
the Standby Loans and participations in the Standby Loans held by each Lender
shall be in the same proportion to the aggregate unpaid principal amount of all
Standby Loans then outstanding as the principal amount of its Standby Loans
prior to such exercise of banker's lien, setoff or counterclaim or other event
was to the principal amount of all Standby Loans outstanding prior to such
exercise of banker's lien, setoff or counterclaim or other event; provided,
--------
however, that, if any such purchase or purchases or adjustments shall be
- -------
made pursuant to this Section 2.17 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Borrowers expressly consent to the
foregoing arrangements and agree that, subject to Section 9.06, any Lender
holding a participation in a Standby Loan deemed to have been so purchased may
exercise any and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by any Borrowers to such Lender by reason
thereof as fully as if such Lender had made a Standby Loan directly to the
Borrower in the amount of such participation.
SECTION 2.18. Payments. (a) Each Borrower shall make each
---------
payment (including principal of or interest on any Borrowing or any Fees or
other amounts) required to be made by it hereunder not later than 12:00 (noon),
New York City time (11:00 a.m., New York City time, in the case of any payment
to be made to the Agent), on the date when due in dollars to the Agent at
account number 006-035280 (ref: JCPenney) maintained by the Agent with Chemical
Bank, 270 Park Avenue, New York, New York 10017, in each case in immediately
available funds.
(b) Whenever any payment (including principal of or interest
on any Borrowing or any Fees or other amounts) hereunder shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or Fees, if applicable.
<PAGE> 182
43
SECTION 2.19. Taxes. (a) If any Borrower shall be required
------
by reason of any change occurring after the date of this Agreement in
applicable law or regulation or tax treaty or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having force of law)
(a "Change of Law") to deduct any Taxes from or in respect of any sum payable
by it hereunder to any Lender or to the Agent, then except as otherwise
provided in this Section 2.19 and subject to Section 2.20, (i) the sum payable
shall be increased by the amount necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.19) such Lender or the Agent (as the case may be) shall receive
an amount equal to the sum it would have received had no such deductions been
made, (ii) such Borrower shall make such deductions and (iii) such Borrower
shall pay the full amount deducted to the relevant taxing authority or other
Governmental Authority in accordance with applicable law.
(b) In addition, the Borrowers agree, jointly and severally,
to pay any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made
hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement (hereinafter referred to as "Other Taxes") other
than any Other Taxes imposed upon any assignment or participation of a Lender's
rights, interests and obligations hereunder; provided, however, that the amount
the Borrowers shall be required to pay to a particular Lender in respect of
Other Taxes shall not exceed 1% of the aggregate amount of the Loans or, if
applicable, the Commitment of such Lender on which such Other Taxes are imposed
and provided further, however, 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 Borrowers of such Other Tax
and the Borrowers shall thereafter have the benefit of the provisions of
Section 2.20(b).
(c) Within 30 days after the date of any payment of Taxes
withheld by any Borrower in respect of any payment to any Lender or the Agent,
such Borrower will furnish to the 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
<PAGE> 183
44
such Borrower setting forth the amount of such payment and the date on which
such payment was made.
(d) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.19
shall survive the payment in full of the principal of and interest on all Loans
made hereunder.
(e) On the date hereof (or, in the case of an entity that
becomes a Lender after the date hereof, on the date such entity becomes a
Lender) and thereafter as required by applicable law, each Lender that is
organized under the laws of a jurisdiction outside the United States shall
deliver to JCPenney and the Agent such certificates, documents or other
evidence, and any amendments or supplements to such certificates, documents or
other evidence, as required by the Code or Treasury Regulations issued pursuant
thereto, including Internal Revenue Service Form 1001 or Form 4224 and any
other certificate or statement of exemption required by Treasury Regulation
Section 1.1441-1, 1.1441-2, 1.441-4(a) or 1.1441-6(c) or any similar or
successor provision, properly completed and duly executed by such Lender (or
the Agent) establishing that payments made under this Agreement to such Lender
(or to the Agent) are (i) not subject to withholding under the Code because
such payments are effectively connected with the conduct by such Lender (or the
Agent) of a trade or business in the United States or (ii) totally exempt from
United States tax under a provision of an applicable tax treaty. Unless
JCPenney and the Agent have received forms or other documents satisfactory to
them indicating that payments hereunder are not subject to Taxes or are subject
to such Taxes at a rate reduced by an applicable tax treaty, the appropriate
Borrower shall withhold Taxes from such payments at the applicable statutory
rate in the case of payments to or for any Lender (or to the Agent) organized
under the laws of a jurisdiction outside the United States.
(f) The Borrowers shall not be required to pay any additional
amounts to any Lender (or to the Agent) pursuant to paragraph (a) above if the
obligation to pay such additional amounts would not have arisen but for a
failure by such Lender (or the Agent) to comply with the provisions of
paragraph (e) above unless such failure results from a change occurring after
the date of this Agreement in applicable law or regulation or tax treaty or in
the interpretation or administration thereof by any
<PAGE> 184
45
Governmental Authority charged with the interpretation or administration
thereof (whether or not having force of law).
(g) The Borrowers shall not be liable under this Section 2.19
to any Lender or to the Agent that has changed the location of its principal
office or any of its Applicable Lending Offices after the date (the "Relevant
Date") on which it first becomes a party to this Agreement (a "Change in
Location") for any Taxes that would have not been imposed but for a Change of
Law enacted, promulgated or effective before the Relevant Date, but only to the
extent such Taxes exceed the amount the Borrowers were required to pay such
Lender or the Agent pursuant to this Section 2.19 immediately prior to such
Change in Location.
(h) If any Lender or the Agent shall become aware that it is
entitled to receive a refund in respect of Taxes indemnified and paid by the
Borrower, such Lender or the Agent shall promptly notify the Borrowers of the
availability of such refund and shall, within 30 days after receipt of a
request by JCPenney, apply for such refund at JCPenney's expense. If any
Lender or the Agent receives a refund in respect of any Taxes for which such
Lender or the Agent has received payment from any Borrower hereunder, it shall
within 30 days after receipt thereof repay the lesser of such refund and the
amount paid by the Borrowers with respect to such Taxes to the appropriate
Borrower, in each case net of all reasonable out-of-pocket expenses of such
Lender or the Agent and with interest received by such Lender or the Agent from
the relevant taxing authority attributable to such refund; provided, however,
that such Borrower, upon the request of such Lender or the Agent, agrees to
return such refund (plus interest, penalties or other charges) to such Lender
or the Agent in the event such Lender or the Agent is required to repay such
refund to any Governmental Authority.
(i) Each Lender and the Agent severally (but not jointly)
represents and warrants to the Borrowers that, as of the date such person
becomes a party to this Agreement, payments made by the Borrowers to such
Lender or to the Agent in connection with the Agreement are effectively
connected with the conduct by such Lender or the Agent of a trade or business
in the United States.
SECTION 2.20. Mitigation; Duties of Lenders and Agent. (a)
----------------------------------------
If, with respect to any Lender or the Agent, an event or circumstance occurs
that would entitle such Lender
<PAGE> 185
46
or the Agent to exercise any of the rights or benefits afforded by Section 2.13
or 2.19(a), such Lender or the Agent, promptly upon becoming aware of the same,
shall take all steps as may be reasonably available (including, as may be
applicable, designating a different Applicable Lending Office, making the
affected Type of Loan through an Affiliate, 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 Agent) to eliminate or mitigate the effects
of any event resulting in the ability of such Lender or the Agent to exercise
rights under any of such Sections; provided, however, that, no Lender or the
-------- -------
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 have expressly agreed
to reimburse it therefor or (ii) be materially disadvantageous to such Lender
or to the Agent. Within 60 days after the occurrence of any event giving rise
to any rights or benefits provided by Sections 2.13 and 2.19(a) in favor of any
Lender or the Agent, such Lender or the Agent (i) will notify the Borrowers of
such event or circumstance and (ii) provide the Borrowers with a certificate
setting forth in reasonable detail (x) the event or circumstance giving rise to
any benefit under Sections 2.13 and 2.19(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, however, that if such
-------- -------
Lender or the Agent does not give the Borrowers such notice and certificate
within the 60-day period set forth in this sentence, the Borrowers shall be
required to indemnify such Lender or the 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 Borrowers. Such
Lender or the Agent shall notify the Borrowers 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 Agent obtains
knowledge thereof. Such certificate shall be conclusive absent manifest error.
Notwithstanding the foregoing, no Lender or Agent shall deliver the notice and
certificate described in this paragraph (a) to the Borrowers in respect of any
Additional Costs or Taxes unless it is then the general policy of such Lender
or the Agent to pursue similar rights
<PAGE> 186
47
and remedies in similar circumstances under comparable provisions of other
credit agreements.
(b) With respect to Sections 2.13 and 2.19, the Borrowers
shall have the right, should any Lender request any compensation or indemnity
thereunder, to (i) unless an Event of Default shall have occurred and be
continuing, (A) promptly terminate such Lender's Commitment by irrevocable
written or telex notice of such termination to such Lender and the Agent
without the necessity of complying with Sections 2.11(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 made by such Lender
hereunder, together with accrued and unpaid interest thereon and all other
amounts owed to such Lender hereunder, including under Section 2.15 in
connection with any such prepayment or (ii) require such Lender to assign its
Commitment, without recourse to or representation or warranty by such Lender,
to another Lender or assignee acceptable to the Borrowers and with the consent
of the Agent, which consent shall not be unreasonably withheld; provided,
--------
however, 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 Borrowers and/or such assignee
full payment in immediately available funds of the principal of and interest
accrued to the date of such payment on the Loans made by it hereunder to the
extent that such Loans are subject to such assignment and all other amounts
owed to it hereunder. The Borrowers shall have the right, should the Agent
request any compensation or indemnity under such Sections, to require the Agent
to assign its rights and obligations hereunder to a successor Agent with the
consent of the Required Lenders, which consent shall not be unreasonably
withheld.
(c) With respect to Sections 2.13 or 2.19 (i) other than with
respect to Section 2.19(b), no Lender or Agent shall be entitled to exercise
any right or benefit afforded thereby and no Borrower shall be obligated to
reimburse any Lender or the Agent pursuant to such Sections unless (x) such
Lender or the Agent has delivered to the Borrowers in accordance with Section
9.01 the notice and the certificate described in Section 2.20(a) hereof and (y)
the affected Borrower has had a 30-Business Day period following the receipt of
such notice and certificate (if such Borrower in good faith disagrees with the
assertion that any payment under such Sections is due or with the amount shown
as due
<PAGE> 187
48
on such certificate and so notifies the Lender or the Agent of such
disagreement within 10 Business Days following receipt of the notice and
certificate) to negotiate with the requesting Lender or the 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
Agent, it being expressly understood that if such Borrower does not provide the
required notice of its disagreement as provided above, such Borrower shall pay
the amount shown as due on the certificate on the tenth Business Day following
receipt thereof and further if such Borrower does provide such required notice,
and negotiations are entered into but do not result in agreement by such
Borrower and such Lender or the Agent within the 30-Business Day period, then
such Borrower 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 Borrowers within the 60-day period described in Section
2.20(a), the Borrowers 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 the Borrowers, (iii)
the Borrowers' liability for any amounts incurred as a result of any change in
Applicable Lending Office shall be limited as set forth in Section 2.02(e),
(iv) in no event shall the Borrowers be liable for any taxes (other than other
Taxes) that would not have been imposed but for a connection between such
Lender or the Agent (other than by reason of the activities contemplated by
this Agreement) and the relevant taxing jurisdiction, (v) each Lender or the
Agent shall in good faith allocate all Additional Costs, Taxes, and payments
required to be made fairly among all its commitments and credit extensions
(whether or not it seeks compensation from all affected borrowers), (vi) no
Lender or Agent shall be entitled to exercise any right or benefit afforded
hereby or receive any payment otherwise due under Sections 2.13 or 2.19
(including without limitation, any repayment by a Borrower of any refund of
Taxes pursuant to Section 2.19(h)) which arises from any gross negligence,
fraud or wilful misconduct of any Lender or the Agent, or the failure of such
Lender or the Agent to comply with the terms of this Agreement, (vii) if a
Lender or the Agent shall have recouped any amount or received any offsetting
tax benefit (other than a refund of Taxes as described in Section 2.19(h)) or
reserve or capital benefits theretofore
<PAGE> 188
49
paid to it by such Borrower, such Lender or the Agent shall promptly pay to
such Borrower an amount equal to the amount of the recoupment received by such
Lender or the Agent reduced by any reasonable out-of-pocket expenses of such
Lender or the Agent attributable to such recoupment, as determined in good
faith by such Lender or the Agent, and (viii) the liability of either Borrower
to any Lender or the Agent with respect to any taxes shall be reduced to the
extent that such Lender or the Agent receives an offsetting tax benefit (or
could have received such a benefit by taking reasonable measures to receive
it); provided, however, that there shall not be any reductions pursuant to this
-------- -------
clause (viii) with respect to any tax benefit (x) the existence of which such
Lender or the Agent is unaware, (y) the claiming of which would result in any
cost or tax to such Lender or the Agent (unless such Borrower shall have agreed
to pay its reasonably allocable portion of such cost or tax) and (z) unless
such Borrower shall agree to indemnify the Lender or the Agent to the extent
any tax benefit taken into account under this clause (viii) is thereafter lost
or becomes unavailable.
(d) In addition to their obligations under Section 2.19
hereof, each of the Lenders and the Agent hereby agree 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 2.20 and Sections 2.13 and 2.19. The
Borrowers agree, jointly and severally, to pay all filing fees incurred by any
Lender or the Agent in performing its obligations under this Section 2.20.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to each of the Lenders
that:
SECTION 3.01. Organization; Powers. Each of the Borrowers
--------------------
and the Restricted Subsidiaries (a) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to own its property and
assets and to carry on its business as now conducted and as proposed to be
conducted, (c) is qualified to do business in every jurisdiction where such
qualification is required, except where the failure so to
<PAGE> 189
50
qualify would not result in a Material Adverse Effect, and (d) in the case of
each Borrower, has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement and each other agreement or
instrument contemplated hereby to which it is or will be a party and to borrow
hereunder.
SECTION 3.02. Authorization. The execution, delivery and
-------------
performance by each Borrower of this Agreement and the borrowings hereunder
(collectively, the "Transactions") (a) have been duly authorized by all
requisite corporate and, if required, stockholder action and (b) will not (i)
violate (A) any applicable provision of law, statute, material rule or material
regulation, or of the certificate or articles of incorporation or other
constitutive documents or by-laws of JCPenney, Funding or any Restricted
Subsidiary, (B) any applicable material order of any Governmental Authority or
(C) any provision of any indenture, agreement or other instrument to which
JCPenney, Funding or any Restricted Subsidiary is a party or by which any of
them or any of their property is or may be bound, (ii) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under any such indenture, agreement or other instrument or
(iii) result in the creation or imposition of any Lien upon or with respect to
any property or assets now owned or hereafter acquired by JCPenney, Funding or
any Restricted Subsidiary.
SECTION 3.03. Enforceability. This Agreement has been duly
--------------
executed and delivered by each Borrower and constitutes a legal, valid and
binding obligation of such Borrower enforceable against such Borrower in
accordance with its terms, except as enforceability may be limited by (a) any
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer, or similar laws relating to or affecting creditors' rights generally
and (b) general principles of equity.
SECTION 3.04. Governmental Approvals. No action, consent or
----------------------
approval of, registration or filing with, or any other action by, any
Governmental Authority is or will be required in connection with the
Transactions, except (a) such as have been made or obtained and are in full
force and effect or as to which the failure to be made or obtained and in full
force and effect would not result in a Material Adverse Effect and (b) such
periodic and current reports, if any, as (i) are required to disclose the
Transactions and
<PAGE> 190
51
(ii) will be filed with the SEC on a timely basis.
SECTION 3.05. Financial Statements. Each of JCPenney and
--------------------
Funding has heretofore furnished to the Lenders its consolidated balance sheets
and related consolidated statements of income and cash flows (a) as of and for
the fiscal year ended January 30, 1993, audited by and accompanied by the
opinion of KPMG Peat Marwick, independent public accountants, and (b) as of and
for the fiscal quarter and the portion of the fiscal year ended October 30,
1993, as filed by JCPenney or Funding, as the case may be, with the SEC on Form
10-Q in respect of such fiscal quarter. Such financial statements fairly
present the financial position, results of operations and cash flows of
JCPenney and its Subsidiaries, or of Funding and its Subsidiaries, as the case
may be, in accordance with GAAP, subject, in the case of the financial
statements referred to in clause (b) above, to normal year-end audit
adjustments.
SECTION 3.06. No Material Adverse Change. Except as
--------------------------
previously disclosed to the Lenders in writing, as of the Closing Date, there
has been no material adverse change in the business, assets, operations or
financial condition of JCPenney, Funding or JCPenney and the Restricted
Subsidiaries taken as a whole since January 30, 1993.
SECTION 3.07. Title to Properties; Possession Under Leases.
--------------------------------------------
(a) Each of the Borrowers and the Restricted Subsidiaries has good and
marketable title to all its Principal Properties, except for minor defects in
title and other restrictions that do not interfere with its ability to conduct
its business as currently conducted or to utilize such Principal Properties for
their intended purposes. All the Principal Properties are free and clear of
Liens, other than Liens expressly permitted by Section 6.01.
(b) Each of the Borrowers and the Restricted Subsidiaries has
valid leasehold interests in all the material properties that it purports to
hold under lease, except for restrictions that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes. Each of the Borrowers and the
Restricted Subsidiaries has complied with all material obligations under all
material leases to which it is a party and all such leases are in full force
and effect, except in each case for provisions of such leases that are being
contested in good faith in the ordinary course of the Borrower's business.
Each of the
<PAGE> 191
52
Borrowers and the Restricted Subsidiaries enjoys peaceful and undisturbed
possession under all such material leases.
SECTION 3.08. Restricted Subsidiaries. Schedule 3.08 sets
-----------------------
forth as of the date hereof a list of all the Restricted Subsidiaries and the
percentage ownership interest of JCPenney therein. JCPenney owns, free and
clear of all Liens, all the issued and outstanding shares of the capital stock
of Funding, and all such outstanding shares are validly issued, fully paid and
nonassessable.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except
--------------------------------
as set forth in Schedule 3.09 or as subsequently disclosed in writing to the
Lenders, there are not any actions, suits or proceedings at law or in equity or
by or before any Governmental Authority now pending or, to the knowledge of any
Borrower, threatened against or affecting JCPenney or Funding or any Restricted
Subsidiary or any business, property or rights of any such person (i) which
involve this Agreement or the Transactions 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.
(b) None of the Borrowers or the Restricted Subsidiaries is
in violation of any law, rule or regulation, or in default with respect to any
judgment, writ, injunction or decree of any Governmental Authority, where such
violation or default would result in a Material Adverse Effect.
SECTION 3.10. Agreements. (a) None of the Borrowers or the
----------
Restricted Subsidiaries is a party to any agreement or instrument or subject to
any corporate restriction that has resulted or would result in a Material
Adverse Effect.
(b) None of the Borrowers or the Restricted Subsidiaries is
in default in any manner under any provision of any indenture or other
agreement or instrument evidencing indebtedness for money borrowed, or any
other material agreement or instrument to which it is a party or by which it or
any of its material properties or material assets are bound, where such default
would result in a Material Adverse Effect.
SECTION 3.11. Federal Reserve Regulations. (a) None of the
---------------------------
Borrowers or the Subsidiaries is engaged
<PAGE> 192
53
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately,
(i) to purchase or carry Margin Stock or to extend credit to others for the
purpose of purchasing or carrying Margin Stock or to refund indebtedness
originally incurred for such purpose, or (ii) for any purpose which entails a
violation of, or which is inconsistent with, the provisions of the Regulations
of the Board, including Regulation G, U or X.
SECTION 3.12. Investment Company Act; Public Utility Holding
----------------------------------------------
Company Act. None of the Borrowers is (a) an "investment company" as defined
- -----------
in, or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrowers will use the
---------------
proceeds of the Loans only for the purposes specified in the preamble to this
Agreement.
SECTION 3.14. Tax Returns. Each of the Borrowers and the
-----------
Restricted Subsidiaries has filed or caused to be filed all Federal, state and
local tax returns required to have been filed by it and has paid or caused to
be paid all taxes shown to be due and payable on such returns or on any
assessments received by it, except taxes that are being contested in good faith
by appropriate proceedings and for which the appropriate Borrower or Restricted
Subsidiary shall have set aside on its books adequate reserves.
SECTION 3.15. No Material Misstatements. No information,
-------------------------
report, financial statement, exhibit or schedule furnished by or on behalf of
any Borrower to the Agent or any Lender in connection with the negotiation of
this Agreement or included herein or delivered pursuant hereto contained,
contains or will contain any material misstatement of fact or omitted, omits or
will omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were, are or will be made,
not misleading.
SECTION 3.16. Employee Benefit Plans. During the immediately
----------------------
preceding six-year period with respect to the
<PAGE> 193
54
Plans, there were no: (a) violations known to the Borrowers of ERISA, or (b)
Reportable Events (other than a Reportable Event for which the PBGC has waived
the 30-day notice requirement of Section 4043(a) of ERISA), that would,
individually or in the aggregate, result in a Material Adverse Effect. The
present value of all benefit liabilities under each Plan (based on the
assumptions used to fund such Plan) does not exceed the value of the assets of
such Plan. None of the Borrowers or the ERISA Affiliates has made
contributions to any Multiemployer Plan within the past five years, and such
contributions are not now being made or expected to be required.
SECTION 3.17. Support Agreements. The Support Agreements
------------------
have been duly executed and delivered by JCPenney and, where applicable,
Funding and, as of the Closing Date, are in full force and effect in accordance
with their terms. A complete and correct copy of each Support Agreement as in
effect on the Closing Date has previously been furnished to each Lender and to
the Agent.
ARTICLE IV. CONDITIONS OF LENDING
The obligations of the Lenders to make Loans hereunder are
subject to the satisfaction of the following conditions:
SECTION 4.01. All Borrowings. Subject to the provisions of
--------------
the last sentence of this Section 4.01, on the date of each Borrowing:
(a) The Agent shall have received such notice of such
Borrowing as is required by Section 2.03 or Section 2.04, as
applicable.
(b) The representations and warranties set forth in Article
III hereof (except, in the case of all Borrowings hereunder, the
representation set forth in Section 3.06) shall be true and correct in
all material respects on and as of the date of such Borrowing with the
same effect as though made on and as of such date, except to the
extent such representations and warranties expressly relate to an
earlier date.
(c) At the time of and immediately after such Borrowing, no
Event of Default or Default shall have occurred and be continuing.
<PAGE> 194
55
Each Borrowing (other than any new Borrowing described in the last sentence of
this Section 4.01) shall be deemed to constitute a representation and warranty
by the Borrowers on the date of such Borrowing as to the matters specified in
paragraphs (b) and (c) of this Section 4.01. Notwithstanding the other
provisions of this Section 4.01, the refinancing of any Borrowing with a new
Borrowing that does not increase the outstanding aggregate principal amount of
the Loans of any Lender shall not be subject to the satisfaction of any of the
foregoing conditions.
SECTION 4.02. First Borrowing. On or prior to the first
---------------
Borrowing hereunder:
(a) The Agent shall have received a favorable written opinion
of Charles R. Lotter, General Counsel for the Borrowers, dated not
later than the date of such first Borrowing and not earlier than the
Closing Date and addressed to the Lenders, to the effect set forth in
Exhibit B hereto, and the Borrowers hereby instruct such counsel to
deliver such opinion to the Agent.
(b) The Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments
thereto, of each Borrower, certified as of a date not later than the
date of such first Borrowing and not earlier than seven days prior to
the Closing Date by the Secretary of State of the state of its
organization, and a certificate as to the good standing of such
Borrower as of a date not later than the date of such first Borrowing
and not earlier than the Closing Date, from such Secretary of State;
(ii) a certificate of the Secretary or Assistant Secretary of each
Borrower dated the date of the Standby Borrowing Request or the
Competitive Bid Request relating to such first Borrowing, as the case
may be, and certifying (A) that attached thereto is a true and
complete copy of the by-laws of such Borrower as in effect on such
date and at all times since a date prior to the date of the
resolutions described in clause (B) below, (B) that attached thereto
is a true and complete copy of resolutions duly adopted by the Board
of Directors of such Borrower authorizing the execution, delivery and
performance of this Agreement and the Borrowings hereunder, and that
such resolutions have not been modified, rescinded or amended and are
in full force and effect, (C) that the certificate or articles of
<PAGE> 195
56
incorporation of such Borrower have not been amended since the date of
the last amendment thereto shown on the certificate of good standing
furnished pursuant to clause (i) above, and (D) as to the incumbency
and signature of each officer executing this Agreement or any document
delivered in connection herewith on behalf of such Borrower; and (iii)
a certificate of another officer of each Borrower as to the incumbency
and specimen signature of the Secretary or Assistant Secretary of such
Borrower executing the certificate pursuant to (ii) above.
(c) The Agent shall have received an Officer's Certificate,
dated the date of the Standby Borrowing Request or the Competitive Bid
Request relating to such first Borrowing, as the case may be, and
signed by at least one Responsible officer of each Borrower,
confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01.
(d) The Agent shall have received all Fees and other amounts
due and payable to it (whether for its own account or for the account
of the Lenders) on or prior to the date of such first Borrowing.
(e) The International Revolving Credit Agreement dated as of
June 8, 1992, among JCPenney, Funding, Credit Suisse First Boston
Limited as Administrative Agent and as Arranger, Union Bank of
Switzerland, New York Branch, as Swingline Agent and certain other
financial institutions, shall have been terminated as of the Closing
Date and all amounts outstanding thereunder shall have been paid.
ARTICLE V. AFFIRMATIVE COVENANTS
The Borrowers covenant and agree with each Lender that, so long as
this Agreement shall remain in effect or the principal of or interest on any
Loan, any Fees or any other expenses or amounts payable under this Agreement
shall be unpaid, unless the Required Lenders shall otherwise consent in
writing, each of the Borrowers will, and will cause each of the Restricted
Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or
------------------------------------
cause to be done all things necessary to preserve, renew and keep in full force
and
<PAGE> 196
57
effect its legal existence, except as would not cause a Default under Section
6.04 or otherwise cause an Event of Default under this Agreement.
(b) Do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the rights, licenses,
permits, franchises, authorizations, patents, copyrights, trademarks and trade
names material to the conduct of its business; maintain and operate such
business in substantially the manner in which it is presently conducted and
operated; comply in all material respects with all applicable laws, rules,
regulations and orders of any Governmental Authority, whether now in effect or
hereafter enacted; except in each case where the failure to do so would not
result in a Material Adverse Effect; and at all times maintain and preserve all
property material to the conduct of its business and keep such property in good
repair, working order and condition and from time to time make, or cause to be
made, all needful and proper repairs, renewals, additions, improvements and
replacements thereto necessary in order that the business carried on in
connection therewith may be properly conducted at all times; provided, however,
-------- -------
that nothing in this paragraph (b) shall prevent any Borrower or Restricted
Subsidiary from discontinuing the operation and maintenance of any of its
properties no longer deemed useful in the conduct of its business.
SECTION 5.02. Insurance. Maintain insurance and/or self
---------
insurance programs in force that adequately protect the Principal Properties
and the public liability exposures of the Borrowers, as may be required by law,
and as is customary with companies in the same or similar businesses or of the
same general financial net worth.
SECTION 5.03. Obligations and Taxes. Pay and discharge
---------------------
promptly when due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its properties,
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise which, if unpaid, might
give rise to a Lien upon such properties or any material part thereof;
provided, however, that such payment and discharge shall not be required with
respect to any such tax, assessment, charge, levy or claim so long as (a) the
validity or amount thereof shall be contested in good faith by appropriate
proceedings
<PAGE> 197
58
and (b) the applicable Borrower has made appropriate reserves therefor as
required by GAAP.
SECTION 5.04. Financial Statements, Reports, etc. In the
----------------------------------
case of the Borrowers, furnish to the Agent for distribution to the Lenders:
(a) as soon as available and in any event within 120 days
after the end of each fiscal year, a copy of the reports filed by each
of JCPenney and Funding with the SEC on Form 10-K in respect of such
fiscal year, accompanied by JCPenney's annual report in respect of
such fiscal year or, if either of JCPenney or Funding is not required
to file such a report in respect of such fiscal year, the consolidated
balance sheets and related consolidated statements of income and cash
flows of JCPenney and its Subsidiaries, or of Funding and its
Subsidiaries, as the case may be, as of the close of such fiscal year,
all audited by KPMG Peat Marwick or other independent public
accountants of recognized national standing and accompanied by an
opinion of such accountants (which shall be in scope and substance
reasonably satisfactory to the Required Lenders) to the effect that
such consolidated financial statements fairly present the financial
position, results of operations and cash flows of JCPenney and its
Subsidiaries or of Funding and its Subsidiaries, as the case may be,
in accordance with GAAP;
(b) as soon as available and in any event within 60 days after
the end of each of the first three quarterly periods of each fiscal
year, a copy of the quarterly reports filed by each of JCPenney and
Funding with the SEC on Form 10-Q in respect of such quarterly period,
or if either of JCPenney or Funding is not required to file such a
report in respect of such quarterly period, the consolidated balance
sheets and related consolidated statements of income and cash flows of
JCPenney and its Subsidiaries, or of Funding and its Subsidiaries, as
the case may be, as of the close of such fiscal quarter, certified by
its chief financial officer, treasurer or controller as fairly
presenting the financial position, results of operations and cash
flows of JCPenney and its Subsidiaries or of Funding and its
Subsidiaries, as the case may be, in accordance with GAAP, subject to
normal year-end audit adjustments;
<PAGE> 198
59
(c) concurrently with any delivery of financial statements by
JCPenney or Funding under (a) above (whether contained in a report
filed with the SEC or otherwise), a certificate of its chief financial
officer, president, treasurer or controller (i) stating that no Event
of Default or Default has occurred or, if such an Event of Default or
Default has occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect thereto
and (ii) with respect to JCPenney, setting forth computations in
reasonable detail demonstrating compliance with the covenant contained
in Section 6.02;
(d) promptly after the same become publicly available, copies
of all documents and reports that any Borrower may be required to file
with the SEC pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, or with any Governmental Authority
succeeding to any of or all the functions of the SEC;
(e) promptly after the execution and delivery thereof by the
parties thereto, copies of all agreements and other instruments that
have the effect of amending, modifying or waiving any provision of a
Support Agreement; and
(f) promptly, from time to time, such other documents and
information regarding the operations, business affairs and financial
condition of any Borrower or Restricted Subsidiary, or compliance with
the terms of this Agreement, as the Agent or any Lender may reasonably
request.
SECTION 5.05. Litigation and Other Notices. Furnish to the
----------------------------
Agent prompt written notice of the following promptly after becoming aware
thereof:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) proposed to be taken
with respect thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any
Governmental Authority, against any Borrower or Restricted
<PAGE> 199
60
Subsidiary which, if adversely determined, would result in a Material
Adverse Effect; and
(c) any development that has resulted in, or would result in,
a Material Adverse Effect.
SECTION 5.06. ERISA. (a) Comply in all material respects
-----
with the applicable provisions of ERISA and (b) furnish to the Agent and each
Lender (i) as soon as possible, and in any event within 30 days after any
Responsible Officer of any Borrower or ERISA Affiliate either knows or has
reason to know that any Reportable Event has occurred that alone or together
with any other Reportable Events could reasonably be expected to result in
liability of the Borrowers and/or the Restricted Subsidiaries to the PBGC in an
aggregate amount exceeding $200,000,000, a statement of a Responsible Officer
of JCPenney setting forth details as to such Reportable Event and the action
proposed to be taken with respect thereto, together with a copy of the notice,
if any, of such Reportable Event given to the PBGC, (ii) promptly after receipt
thereof, a copy of any notice that any Borrower or ERISA Affiliate receives
from the PBGC relating to the intention of the PBGC to terminate any Plan or
Plans (other than a Plan maintained by an ERISA Affiliate which is considered
an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code) or to appoint a trustee to administer any Plan or Plans and (iii) within
10 days after the due date for filing with the PBGC pursuant to Section 412(n)
of the Code of a notice of failure to make a required installment or other
payment with respect to a Plan, a statement of a Responsible Officer of
JCPenney setting forth details as to such failure and the action proposed to be
taken with respect thereto, together with a copy of such notice given to the
PBGC. Any failure to comply with applicable provisions of ERISA shall not be
deemed to be material, unless such failure or failures would result in a
Material Adverse Effect.
SECTION 5.07. Maintaining Records; Access to Properties and
---------------------------------------------
Inspections. Maintain all financial records in accordance with GAAP and permit
- -----------
any representatives designated by any Lender to (a) visit and inspect the
financial records and the Principal Properties of any Borrower or Restricted
Subsidiary during business hours upon reasonable notice, (b) make extracts from
and copies of such financial records, (c) discuss the affairs, finances and
condition of any Borrower or Restricted Subsidiary with the chief financial
officer, treasurer or any assistant
<PAGE> 200
61
treasurer of any Borrower or Restricted Subsidiary and (d) discuss the affairs,
finances and condition of any Borrower or Restricted Subsidiary with such
person's independent accountants in the presence of any of the chief financial
officer, treasurer or any assistant treasurer of such person. No such
inspection, discussion or other right granted under this Section 5.07 and
exercised by any Lender shall disrupt the normal and ordinary conduct of
business of any Borrower or Restricted Subsidiary, and all costs and expenses
incurred in connection therewith, shall, prior to the occurrence and
continuance of an Event of Default, be borne by the Lender exercising such
right.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans
---------------
only for the purposes set forth in the preamble to this Agreement.
SECTION 5.09. Pari-Passu. Ensure that (a) the payment
----------
obligations of any Borrower under this Agreement will at all times rank at
least equally and ratably in all respects with the claims of any other
unsecured creditor of such Borrower and (b) the proceeds of any Loan made to
Funding will be used for the purpose of making either (i) Investments of the
type referred to in clause (v) of Section 6.06(c) or (ii) loans to JCPenney
constituting senior unsecured indebtedness of JCPenney, and not for any other
purpose.
SECTION 5.10. Support Agreements. Ensure that (a) each
------------------
Support Agreement remains in full force and effect in accordance with its terms
and (b) no amendment or modification is made to any Support Agreement or any of
the terms thereof, and no waiver is given or agreed to be given by or on behalf
of Funding with respect to any of its rights under any Support Agreement, which
would have a Material Adverse Effect.
ARTICLE VI. NEGATIVE COVENANTS
Each Borrower covenants and agrees with each Lender and the
Agent, so long as this Agreement shall remain in effect or the principal of or
interest on any Loan, any
<PAGE> 201
62
Fees or any other expenses or amounts payable under this Agreement shall be
unpaid, unless the Required Lenders shall otherwise consent in writing, as
follows:
SECTION 6.01. Limitation on Liens--JCPenney. JCPenney will
-----------------------------
not, and will not permit any Restricted Subsidiary to, issue, assume or
guarantee any notes, bonds, debentures or other similar evidences of
indebtedness for money borrowed (referred to in this Section 6.01 as
"indebtedness") secured by any Lien upon any Principal Property, or shares of
capital stock or evidences of indebtedness for money borrowed issued by any
Restricted Subsidiary and owned by JCPenney or any Restricted Subsidiary,
whether owned on the Closing Date or thereafter acquired, without making
effective provision whereby the Loans made to JCPenney are secured by such Lien
equally and ratably with any and all other indebtedness thereby secured, so
long as such indebtedness shall be so secured; provided, however, that the
-------- -------
foregoing restriction shall not apply to indebtedness secured by any of the
following:
(i) Liens on any property existing at the time of acquisition
thereof by JCPenney or any Restricted Subsidiary;
(ii) Liens on property of a corporation existing at the time
such corporation is merged into or consolidated with JCPenney or any
Restricted Subsidiary or at the time of a sale, lease or other
disposition of the properties of such corporation (or a division
thereof) as an entirety or substantially as an entirety to JCPenney or
any Restricted Subsidiary,provided that such Lien as a result of such
merger, consolidation, sale, lease or other disposition is not
extended to property owned by JCPenney or such Restricted Subsidiary
immediately prior thereto;
(iii) Liens on property of a corporation existing at the time
such corporation first becomes a Restricted Subsidiary;
(iv) Liens securing indebtedness of a Restricted Subsidiary
to JCPenney or to another Restricted Subsidiary;
(v) Liens on property to secure all or part of the cost of
acquiring, substantially repairing or altering, constructing,
developing or substantially
<PAGE> 202
63
improving such property, or to secure indebtedness incurred to provide
funds for any such purpose or for reimbursement of funds previously
expended for any such purpose, provided that the commitment of the
creditor to extend the credit secured by any such Lien shall have been
obtained not later than twelve months after the later of (a) the
completion of the acquisition, substantial repair or alteration,
construction, development or substantial improvement of such property
or (b) the placing in operation of such property or of such property
as so substantially repaired or altered, constructed, developed or
substantially improved;
(vi) Liens securing indebtedness payable on demand or not
more than one year after the date as of which the determination is
made (excluding any indebtedness renewable or extendable at the option
of the debtor for a period or periods ending more than one year after
the date as of which such determination is made), which indebtedness
in accordance with GAAP would be included among current liabilities;
or
(vii) any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any
Lien referred to in the foregoing clauses (i) through (vi),
inclusive; provided, however, that the principal amount of indebtedness
-------- -------
secured thereby and not otherwise authorized by said clauses (i)
through (vi), inclusive, shall not exceed the principal amount of
indebtedness, plus any premium or fee payable in connection with any
such extension, renewal or replacement, so secured at the time of such
extension, renewal or replacement;
(viii) Liens arising under workmen's compensation laws,
unemployment insurance laws and old age pensions or other social
security benefits or other similar laws;
(ix) Liens securing the performance of bids, tenders, leases,
contracts, statutory obligations, surety and appeal bonds, and other
obligations of like nature, incurred in the ordinary course of
business;
(x) Liens imposed by law, such as carriers', warehouseman's,
mechanics', materialmen's and vendors' liens, incurred in good faith
in the ordinary course of business with respect to obligations not
then
<PAGE> 203
64
delinquent, or that are being contested in good faith by appropriate
proceedings for which adequate reserves have been established;
(xi) Liens for taxes to the extent nonpayment thereof shall
be permitted by Section 5.03 hereof;
(xii) Liens incidental to the normal conduct of the business
of JCPenney and its Restricted Subsidiaries or the ownership of their
property and not securing Funded Indebtedness (including zoning
restrictions, easements, licenses, reservations, restrictions on the
use of real property or minor irregularities incident thereto and with
respect to leasehold interests, Liens that are incurred, created,
assumed or permitted to exist and arise by, through or under or are
asserted by a landlord or owner of the leased property, with or
without consent of the lessee) which do not in the aggregate
materially impair the value or use of the property used in the
business of JCPenney and its Restricted Subsidiaries taken as a whole,
or the use of such property for the purpose for which such property is
held;
(xiii) Liens arising from capitalized lease obligations, such
Liens not to extend to any other property of JCPenney;
(xiv) Liens in respect of litigation or other similar
proceedings in an amount not to exceed $500,000,000 on an aggregate
basis (i) the validity of which is being currently contested on a
timely basis in good faith by appropriate proceedings (provided that
the enforcement of any Liens arising out of such proceedings shall be
stayed during such proceedings) and (ii) for which adequate reserves
shall have been established;
(xv) 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 JCPenney and its
Restricted Subsidiaries;
(xvi) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into
by JCPenney or any of its Restricted Subsidiaries in the ordinary
course of
<PAGE> 204
65
business in accordance with the past practices of JCPenney and its
Restricted Subsidiaries; or
(xvii) 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.
Notwithstanding the provisions of the immediately preceding
sentence, JCPenney or any Restricted Subsidiary may issue, assume or guarantee
indebtedness secured by Liens which would otherwise be subject to the
restrictions of this Section in an aggregate amount which, together with all
attributable debt (as defined in Section 5.09(b) of the Indenture) outstanding
pursuant to Section 5.09(b) of the Indenture, all Senior Funded Indebtedness
outstanding pursuant to the second sentence of Section 6.03(a), the capitalized
amount of all capitalized leases referred to in Section 6.05(j), and all
indebtedness outstanding pursuant to this sentence, does not exceed 5% of
Stockholders' Equity.
SECTION 6.02. Limitations on Senior Funded Indebtedness.
-----------------------------------------
JCPenney will not, and will not permit any Restricted Subsidiary to, issue,
assume or guarantee any Senior Funded Indebtedness (otherwise than in
connection with any renewal, extension or refunding of Senior Funded
Indebtedness which does not, except for any premium or fee payable in
connection with such renewal, extension or refunding, increase the unpaid
principal amount of Senior Funded Indebtedness outstanding), or sell, transfer
or otherwise dispose of any Senior Funded Indebtedness of a Restricted
Subsidiary, unless, after giving effect thereto and to the retirement of any
Senior Funded Indebtedness to be retired substantially concurrently therewith,
Net Tangible Assets shall be at least 200% of Senior Funded Indebtedness of
JCPenney and the Restricted Subsidiaries (eliminating intercompany items).
SECTION 6.03. Limitations with Respect to Restricted
--------------------------------------
Subsidiaries. (a) JCPenney will not permit any Restricted Subsidiary to
- ------------
issue, assume or guarantee any Senior Funded Indebtedness; provided, however,
-------- -------
that the foregoing restriction shall not apply to any of the following:
(i) Senior Funded Indebtedness secured by a Lien permitted
under the first sentence of Section 6.01;
<PAGE> 205
66
(ii) Senior Funded Indebtedness of a corporation existing at
the time such corporation is merged into or consolidated with a
Restricted Subsidiary or at the time of a sale, lease or other
disposition of the properties of such corporation (or a division
thereof) as an entirety or substantially as an entirety to a
Restricted Subsidiary;
(iii) Senior Funded Indebtedness of a corporation existing at
the time such corporation first becomes a Restricted Subsidiary:
(iv) Senior Funded Indebtedness of a Restricted Subsidiary to
or held by JCPenney or another Restricted Subsidiary; or
(v) any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any
Senior Funded Indebtedness referred to in the foregoing clauses (i)
through (iv), inclusive; provided, however, that the principal amount
-------- -------
or the aggregate preference on involuntary liquidation, as the case may
be, of Senior Funded Indebtedness issued pursuant to such extension,
renewal or replacement and not otherwise authorized by said clauses
(i) through (iv), inclusive, shall not exceed the principal amount or
the aggregate preference on involuntary liquidation, as the case may
be, of the Senior Funded Indebtedness so extended, renewed or
replaced, plus any premium or fee payable in connection with any such
extension, renewal or replacement.
Notwithstanding the provisions of the immediately preceding
sentence, any Restricted Subsidiary may issue, assume or guarantee Senior
Funded Indebtedness which would otherwise be subject to the restrictions of
this Section 6.03(a) in an aggregate amount which, together with all
indebtedness outstanding pursuant to the second sentence of Section 6.01, all
attributable debt (as defined in Section 5.09(b) of the Indenture) outstanding
pursuant to Section 5.09(b) of the Indenture and all Senior Funded Indebtedness
of the Restricted Subsidiaries outstanding pursuant to this sentence, does not
exceed 5% of Stockholders' Equity.
(b) JCPenney will not, and will not permit any Restricted
Subsidiary to, (i) sell or transfer (except to JCPenney or a Restricted
Subsidiary) any Senior Funded
<PAGE> 206
67
Indebtedness of a Restricted Subsidiary, except Senior Funded Indebtedness
secured by a Lien permitted under the provisions of the first sentence of
Section 6.01 and except to carry out a transaction permitted by Section 6.03(c)
or (ii) sell or transfer (except, in each case, to the extent, if any, required
to qualify directors of a Restricted Subsidiary under applicable law or to
permit any person to maintain his proportionate interest in a Restricted
Subsidiary or except to effect dissolution of any such Restricted Subsidiary or
to carry out a transaction permitted by Section 6.03(c) or except to JCPenney
or a Restricted Subsidiary) any shares of common stock of a Restricted
Subsidiary, unless all the common stock of such Restricted Subsidiary at the
time owned by JCPenney and the Restricted Subsidiaries shall be sold or
transferred at the same time and unless thereafter Net Tangible Assets shall be
at least 200% of Senior Funded Indebtedness of JCPenney and the Restricted
Subsidiaries (eliminating intercompany items).
(c) JCPenney will not permit any Restricted Subsidiary to
sell or otherwise dispose of its assets substantially as an entirety or
consolidate with or merge into any other corporation, unless the corporation to
which such assets shall be sold or otherwise disposed of or which shall be
formed by or result from such consolidation or merger shall be JCPenney or any
Restricted Subsidiary or unless thereafter Net Tangible Assets shall be at
least 200% of Senior Funded Indebtedness of JCPenney and the Restricted
Subsidiaries (eliminating intercompany items).
SECTION 6.04. Mergers, Consolidations, Sales of Assets and
--------------------------------------------
Acquisitions. (a) JCPenney shall not consolidate with or merge into any
- ------------
other corporation or convey or transfer its properties and assets substantially
as an entirety to any person, unless:
(i) the corporation formed by such consolidation or into which
JCPenney is merged or the person which acquires by conveyance or
transfer the properties and assets of JCPenney substantially as an
entirety shall be a corporation organized and existing under the laws
of the United States of America or any State or the District of
Columbia, and shall expressly assume, by an instrument in writing
(delivered to the Lenders) the due and punctual payment of the
principal and interest, if any, on all the Loans and all other amounts
payable by JCPenney under this Agreement and all the rights,
<PAGE> 207
68
interests and other obligations of JCPenney under this Agreement;
(ii) immediately after giving effect to such transaction, (x)
the representations and warranties set forth in Article III shall be
true and correct in all material respects on the date of such
transaction with the same effect as if made on and as of such date,
except to the extent such representations and warranties expressly
relate to an earlier date and (y) no Event of Default or Default shall
have occurred and be continuing; and
(iii) JCPenney shall have delivered an Officer's Certificate
stating that such consolidation, merger, conveyance or transfer and
such written instrument comply with this Section 6.04(a).
(b) Funding shall not consolidate with or merge into any
other corporation or convey or transfer its properties and assets substantially
as an entirety to any person, except that Funding may merge into JCPenney or a
direct or indirect wholly- owned Subsidiary of JCPenney subject to the
satisfaction of the following conditions:
(i) the corporation formed by such consolidation or into which
Funding is merged or the person which acquires by conveyance or
transfer the properties and assets of Funding substantially as an
entirety shall expressly assume, by an instrument in writing
(delivered to the Lenders) the due and punctual payment of the
principal and interest, if any, on all the Loans and all other amounts
payable by Funding under this Agreement and all the rights, interests
and other obligations of Funding under this Agreement;
(ii) immediately after giving effect to such transaction, (x)
the representations and warranties set forth in Article III shall be
true and correct in all material respects on the date of such
transaction with the same effect as if made on and as of such date,
except to the extent such representations and warranties expressly
relate to an earlier date and (y) no Event of Default or Default shall
have occurred and be continuing; and
(iii) Funding shall have delivered an Officer's Certificate
stating that such consolidation, merger,
<PAGE> 208
69
conveyance or transfer and such written instrument comply with this
Section 6.04(b).
SECTION 6.05. Limitations on Liens--Funding. Funding will
-----------------------------
not, and will not permit any of its Subsidiaries to, create or assume any Lien
upon any of the property of Funding or any such Subsidiary, whether now owned
or hereafter acquired, in connection with the borrowing of money or the
acquisition or construction of property; provided, however, that nothing in
this Section 6.05 shall prevent or be deemed to prohibit:
(a) Funding or any of its Subsidiaries from acquiring property
subject to a Lien existing thereon at the time of acquisition, and
assuming the same, or from creating a Lien on property being
constructed or acquired to secure a portion of the cost or purchase
price thereof, provided, however, that (i) any such Lien shall cover
solely fixed assets or other physical properties and (ii) such
property is not or shall not thereby become encumbered in an amount in
excess of two- thirds of the lesser of the cost and fair value thereof
(as determined in good faith by the board of directors of Funding);
(b) any Subsidiary of Funding from creating a Lien upon all or
any part of its property in favor of Funding or a wholly-owned
Subsidiary of Funding to secure indebtedness owed by such Subsidiary
to Funding or a wholly-owned Subsidiary;
(c) Liens existing on all or any part of the assets of a
Subsidiary of Funding at the time it shall become such a Subsidiary;
(d) Funding or any of its Subsidiaries from extending,
renewing or refunding any Lien permitted by the foregoing provisions
of this Section 6.05 upon the same property theretofore subject
thereto in connection with the extension, renewal or refunding of the
indebtedness secured thereby;
(e) Liens arising under workmen's compensation laws,
unemployment insurance laws and old age pensions or other social
security benefits or other similar laws;
<PAGE> 209
70
(f) Liens securing the performance of bids, tenders, leases,
contracts, statutory obligations, surety and appeal bonds, and other
obligations of like nature, incurred in the ordinary course of
business;
(g) Liens imposed by law, such as carriers', warehouseman's,
mechanics', materialmen's and vendors' liens, incurred in good faith
in the ordinary course of business with respect to obligations not
then delinquent, or that are being contested in good faith by
appropriate proceedings for which adequate reserves have been
established;
(h) Liens for taxes to the extent nonpayment thereof shall be
permitted by Section 5.03 hereof;
(i) Liens incidental to the normal conduct of the business of
Funding and its Subsidiaries or the ownership of their property and
not securing Funded Indebtedness (including zoning restrictions,
easements, licenses, reservations, restrictions on the use of real
property or minor irregularities incident thereto and with respect to
leasehold interests, Liens that are incurred, created, assumed or
permitted to exist and arise by, through or under or are asserted by a
landlord or owner of the leased property, with or without consent of
the lessee) which do not in the aggregate materially impair the value
or use of the property used in the business of Funding and its
Subsidiaries taken as a whole, or the use of such property for the
purpose for which such property is held;
(j) Liens arising from capitalized lease obligations, such
Liens not to extend to any other property of Funding;
(k) Liens in respect of litigation or other similar
proceedings in an amount not to exceed $500,000,000 on an aggregate
basis (i) the validity of which is being currently contested on a
timely basis in good faith by appropriate proceedings (provided that
the enforcement of any Liens arising out of such proceedings shall be
stayed during such proceedings) and (ii) for which adequate reserves
shall have been established;
<PAGE> 210
71
(l) 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 Funding and its
Subsidiaries;
(m) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into
by Funding or any of its Subsidiaries in the ordinary course of
business in accordance with the past practices of Funding and its
Subsidiaries; or
(n) 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.
SECTION 6.06. Conduct of Funding's Business. (a) Funding
-----------------------------
will not, and will not permit any Subsidiary of Funding to, engage in any
business other than dealing in Receivables and Penney Supplier Receivables,
making Investments as permitted by paragraph (c) below, financing the
acquisition of Receivables and Penney Supplier Receivables and making of such
Investments, and any activities incidental or related to the foregoing.
Receivables at any time acquired by Funding and its Subsidiaries from JCPenney
and its Subsidiaries, together with Receivables previously acquired from
JCPenney and its Subsidiaries and then owned by Funding and its Subsidiaries,
shall be reasonably representative of the then outstanding Receivables which
have arisen in the business of JCPenney and those Subsidiaries of JCPenney from
which such Receivables have been or are being acquired; provided, however, that
-------- -------
Receivables at any time acquired and owned by Funding and its Subsidiaries may
exclude any type or types of Receivables which are sold or assigned by JCPenney
and its Subsidiaries to one or more third parties if in the opinion of
Funding's board of directors such type or types of Receivables may be serviced
more efficiently or economically by any such third party than by JCPenney,
Funding or any such Subsidiary.
(b) Funding will not, and will not permit any of its
subsidiaries to, make any loan or advance to JCPenney or any Subsidiary of
JCPenney (other than Funding or a Subsidiary of Funding) except on a basis
which in the opinion of Funding's board of directors reasonably reflects sound
credit practices at the time of such loan or advance.
<PAGE> 211
72
(c) Funding will not, and will not permit any of its
subsidiaries to, make any Investments, directly or indirectly, other
than
(i) Investments in Receivables;
(ii) loans and advances to JCPenney and its Subsidiaries;
(iii) Investments in wholly-owned Subsidiaries of Funding or
Investments by any Subsidiary of Funding in Funding;
(iv) Investments in Penney Supplier Receivables;
and,
(v) Investments in any direct and indirect obligations of the
United States of America or any agency thereof having a maturity not
in excess of ten years from the date of purchase; obligations having a
maturity not in excess of ten years from the date of purchase of any
county, municipality or state of the United States of America and
having any of the three highest ratings assigned by any nationally
recognized organization regularly engaged in rating the investment
quality of such obligations; open market commercial paper; bankers'
acceptances; certificates of deposit; and other obligations which, in
the opinion of Funding's board of directors, are similar in risk,
quality and maturity to any of the foregoing.
ARTICLE VII. EVENTS OF DEFAULT
In case of the happening of any of the following events
("Events of Default"):
(a) (i) any representation or warranty made or deemed made
pursuant to this Agreement shall prove to have been false or
misleading in any respect, or (ii) any material representation,
warranty, statement or information contained in any report,
certificate, financial statement or other instrument furnished in
connection with or pursuant to this Agreement shall prove to have been
false or misleading in any respect;and only if, in both subsection (i)
and subsection (ii), such falsehood or misleading matter would result
<PAGE> 212
73
in a Material Adverse Effect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of
any Loan 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 by
acceleration thereof or otherwise, and such default shall continue
unremedied for one Business Day;
(c) default shall be made in the payment of any interest on
any Loan or any Fee or any other amount (other than an amount referred
to in (b) above) due under this Agreement, when and as the same shall
become due and payable, and such default shall continue unremedied for
a period of five Business Days;
(d) default shall be made in the due observance or performance
by the Borrowers of any covenant, condition or agreement contained in
Section 5.01(a), 5.05 or 5.10 or in Article VI and such default shall
continue unremedied for a period of five Business Days;
(e) default shall be made in the due observance or performance
by any Borrower or Restricted Subsidiary of any covenant, condition or
agreement contained in this Agreement (other than those specified in
(b), (c) or (d) above) and such default shall continue unremedied for
a period of 30 days after notice thereof from the Agent or any Lender
to such Borrower or, if such default is able to be cured and such
Borrower is using its best efforts to cure such default, such longer
period as is reasonably required to cure such default;
(f) any Borrower or Restricted Subsidiary shall (i) fail to
pay any principal or interest, regardless of amount, due in respect of
any indebtedness for borrowed money in a principal amount in excess of
$50,000,000, when and as the same shall become due and payable (after
the expiration of any applicable grace period), and (unless such
indebtedness is already due and payable at the time of such default)
such default results in an acceleration of such indebtedness and in
either case is not cured within five Business Days thereafter or (ii)
fail to observe or perform any other term, covenant, condition or
agreement contained in any agreement or instrument evidencing or
governing any such indebtedness if any failure referred to in this
<PAGE> 213
74
clause (ii) results in an acceleration of such indebtedness that is
not annulled or rescinded within 15 days after the date of such
acceleration;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of any Borrower or
Restricted Subsidiary, or of a substantial part of the property or
assets of any Borrower or Restricted Subsidiary, under Title 11 of the
United States Code, as now constituted or hereafter amended, or any
other Federal or state bankruptcy, insolvency, receivership or similar
law, (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Borrower or
Restricted Subsidiary or for a substantial part of the property or
assets of any Borrower or Restricted Subsidiary or (iii) the
winding-up or liquidation of any Borrower or Restricted Subsidiary;
and 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;
(h) any Borrower or Restricted Subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking
relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner,
any proceeding or the filing of any petition described in (g) above,
(iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any
Borrower or Restricted Subsidiary or for a substantial part of the
property or assets of any Borrower or Restricted Subsidiary, (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, (vi) admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action
for the purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an
aggregate amount in excess of $100,000,000 shall be rendered against
any Borrower, any Restricted Subsidiary or any combination of
Borrowers and
<PAGE> 214
75
Restricted Subsidiaries and the same shall remain undischarged for a
period of 30 consecutive Business Days during which execution shall
not be effectively stayed, or any action shall be legally taken by a
judgment creditor to levy upon assets or properties of any Borrower or
Restricted Subsidiary to enforce any such judgment;
(j) a Reportable Event or Reportable Events, or a failure to
make a required installment or other payment (within the meaning of
Section 412(n)(l) of the Code), shall have occurred with respect to
any Plan or Plans that reasonably could be expected to result in
liability of the Borrowers to the PBGC or to any Plan or Plans in an
aggregate amount exceeding $200,000,000 and, within 30 days after the
reporting of any such Reportable Event to the Agent or after the
receipt by the Agent of the statement required pursuant to Section
5.06, the Agent shall have notified the Borrowers in writing that (i)
the Required Lenders have made a determination that, on the basis of
such Reportable Event or Reportable Events or the failure to make a
required payment, there are reasonable grounds (A) for the termination
of such Plan or Plans by the PBGC, (B) for the appointment by the
appropriate United States District Court of a trustee to administer
such Plan or Plans or (C) for the imposition of a lien in favor of a
Plan and (ii) as a result thereof an Event of Default exists
hereunder; or a trustee shall be appointed by a United States District
Court to administer any such Plan or Plans; or the PBGC shall
institute proceedings to terminate any Plan or Plans;
(k) Funding (or any permitted successor thereto under Section
6.04(b)) shall cease to be a direct or indirect wholly-owned
subsidiary of JCPenney (unless Funding or such permitted successor
shall be merged into JCPenney); or
(l) an Event of Default shall occur under the Tranche B
Credit Agreement.
then, and in every such event (other than an event described in paragraph (g)
or (h) above), and at any time thereafter during the continuance of such event,
the Agent, at the request of the Required Lenders, shall, by notice to the
Borrowers, take either or both of the following actions, at the same or
different times: (x) terminate forthwith the
<PAGE> 215
76
Commitments and (y) declare the Loans then outstanding to be forthwith due and
payable in whole or in part, whereupon the principal of the Loans so declared
to be due and payable, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of the Borrowers accrued hereunder,
shall become forthwith due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Borrowers, anything contained herein to the contrary notwithstanding; and in
any event described in paragraph (g) or (h) above, the Commitments shall
automatically and immediately terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and any unpaid accrued Fees
and all other liabilities of the Borrowers accrued hereunder, shall
automatically and immediately become due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrowers, anything contained herein to the contrary
notwithstanding.
ARTICLE VIII. THE AGENT
In order to expedite the transactions contemplated by this
Agreement, each Lender hereby appoints the Agent to act as its agent hereunder.
Each of the Lenders hereby irrevocably authorizes the Agent to take such
actions on behalf of such Lender and to exercise such powers as are
specifically delegated to the Agent by the terms and provisions hereof,
together with such actions and powers as are reasonably incidental thereto.
The Agent is hereby expressly authorized by the Lenders, without hereby
limiting any implied authority, (a) to receive on behalf of the Lenders all
payments of principal of and interest on the Loans and all other amounts due to
the Lenders hereunder, and promptly to distribute to each Lender its proper
share of each payment so received; (b) to give notice on behalf of each of the
Lenders to the Borrowers of any Event of Default specified in this Agreement of
which the Agent has actual knowledge acquired in connection with its agency
hereunder; and (c) to distribute to each Lender copies of all notices,
financial statements and other materials delivered by the Borrowers pursuant to
this Agreement as received by the Agent.
The Agent and its directors, officers, employees and agents
shall not be liable as such for any action taken or omitted by any of them, or
be responsible for any
<PAGE> 216
77
statement, warranty or representation herein or the contents of any document
delivered in connection herewith, except in each case to the extent of its or
his own gross negligence or wilful misconduct in connection therewith, or be
required to ascertain or to make any inquiry concerning the performance or
observance by the Borrowers of any of the terms, conditions, covenants or
agreements contained in this Agreement. The Agent shall not be responsible to
the Lenders for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement or any other instruments or agreements;
provided, however, that the Agent shall be responsible for its own due
execution of this Agreement and any other instrument or agreement relating to
this Agreement. The Agent shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders and, except as otherwise specifically provided herein, such
instructions and any action or inaction pursuant thereto shall be binding on
all the Lenders. The Agent shall, in the absence of knowledge to the contrary,
be entitled to rely on any instrument or document believed by it in good faith
to be genuine and correct and to have been signed or sent by the proper person
or persons. The Agent and its directors, officers, employees and agents shall
not have any responsibility to any Borrower on account of the failure of or
delay in performance or breach by any Lender of any of its obligations
hereunder or to any Lender on account of the failure of or delay in performance
or breach by any other Lender or any Borrower of any of its respective
obligations hereunder or in connection herewith. The Agent may execute any and
all of its duties hereunder by or through agents of recognized standing or
employees and shall be entitled to rely upon the advice of legal counsel of
recognized standing selected by it with respect to all matters arising
hereunder and shall not be liable for any action taken or suffered in good
faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that the Agent shall be under
no duty to take any discretionary action permitted to be taken by it pursuant
to the provisions of this Agreement unless it shall be requested in writing to
do so by the Required Lenders.
Subject to the appointment and acceptance of a successor Agent
as provided below, the Agent may resign at any time by notifying the Lenders
and the Borrowers. Upon any such resignation, the Required Lenders shall have
the
<PAGE> 217
78
right to appoint a successor; provided, however, that any such appointment
-------- -------
shall be subject to the prior written consent of JCPenney (which consent shall
not be unreasonably withheld so long as such successor shall be (i) a bank with
a rating of Aa or better from Moody's or a rating of AA or better from S&P, or
an Affiliate of any such bank, or (ii) any Co-Agent). If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Agent gives notice of its
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent; provided, however, that any such appointment shall be subject
-------- -------
to the prior written consent of JCPenney (which consent shall not be
unreasonably withheld so long as such successor shall be (i) a bank with a
rating of Aa or better from Moody's or a rating of AA or better from S&P, or an
Affiliate of any such bank, or (ii) any Co-Agent). Upon the acceptance of any
appointment as Agent hereunder by a permitted successor, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent and the retiring Agent shall be discharged from its
duties and obligations as Agent hereunder. After an Agent's resignation
hereunder, the provisions of this Article and Section 9.05 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Agent.
The Borrowers shall have the right to replace any Agent
requesting compensation under Section 2.19, but only in accordance with the
provisions of Section 2.20(b).
With respect to the Loans made by it hereunder, the Agent (and
any Lender appointed as a successor Agent) in its individual capacity and not
as Agent shall have the same rights and powers as any other Lender and may
exercise the same as though it were not the Agent (or such successor Agent) and
the Agent and its Affiliates (and any such successor Agent and its Affiliates)
may accept deposits from, lend money to and generally engage in any kind of
business with any Borrower or Subsidiary or any Affiliate of any Borrower as if
the Agent (or such successor Agent) were not an Agent.
Each Lender agrees (i) to reimburse the Agent, on demand, in
the amount of its pro rata share (based on its Commitment hereunder) of any
expenses (other than expenses in connection with the negotiation, preparation
and closing of this Agreement) incurred for the benefit of the Lenders
<PAGE> 218
79
by the Agent, including counsel fees and compensation of agents and employees
paid for services rendered on behalf of the Lenders, which shall not have been
reimbursed by the Borrowers and (ii) to indemnify and hold harmless the Agent
and any of its directors, officers, employees or agents, on demand, in the
amount of such pro rata share, from and against any and all liabilities, taxes,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against it in its capacity as an Agent or any of
them in any way relating to or arising out of this Agreement or any action
taken or omitted by it or any of them under this Agreement, to the extent the
same shall not have been reimbursed by the Borrowers; provided that no Lender
--------
shall be liable to the Agent for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the gross negligence or wilful misconduct of the
Agent or any of its directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and
without reliance upon the 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 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 related agreement or any document
furnished hereunder or thereunder.
ARTICLE IX. MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications
--------
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed or
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80
sent by telex, graphic scanning or other telegraphic communications equipment,
as follows:
(a) if to J.C. Penney, to it at J.C. Penney Company, Inc.,
6501 Legacy Drive, Mail Code 1304, Plano, TX 75024-3698, Attention of
Treasurer
Telephone: (214) 431-2001
Telecopy: (214) 431-2044
With a copy to: General Counsel - J.C. Penney Company, Inc., at the
same address;
(b) if to Funding, to it at J.C. Penney Funding Corporation,
6501 Legacy Drive, Mail Code 1304, Plano, TX 75024- 3698, Attention of
President
Telephone: (214) 431-2001
Telecopy: (214) 431-2044
With a copy to: General Counsel - J.C. Penney Company, Inc., at the
same address.
(c) if to the Agent, to it at Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York 10260, Attention of Mr.
John O'Dowd
Telephone: (212) 648-6973
Telecopy: (212) 648-5336
(d) if to a Lender, to it at its address (or telecopy number)
set forth in Schedule 2.01.
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 if delivered by hand or overnight courier service or sent by
telex, telecopy or other telegraphic communications equipment, or on the date
five Business Days after dispatch by certified or registered mail if mailed, in
each case delivered, sent or mailed (properly addressed) to such party as
provided in this Section 9.01 or in accordance with the latest unrevoked
direction from such party given in accordance with this Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants,
----------------------
agreements, representations and warranties made by any Borrower herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement shall be considered to have been relied upon by
the Lenders and shall survive the making by the Lenders of the Loans,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in
<PAGE> 220
81
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 and so long as the Commitments have not been terminated.
SECTION 9.03. Binding Effect. This Agreement shall become
---------------
effective when it shall have been executed by each of the Borrowers and the
Agent and when the Agent shall have received copies hereof which, when taken
together, bear the signatures of each Lender, and thereafter shall be binding
upon and inure to the benefit of the Borrowers, the Agent and each Lender and
their respective successors and permitted assigns in accordance with its terms,
except that no Borrower shall have any right to assign or delegate any of its
respective rights or duties hereunder or any interest herein without the prior
consent of all the Lenders.
SECTION 9.04. Successors and Assigns. (a) Whenever in this
-----------------------
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and permitted assigns of such party; and all
covenants, promises and agreements by or on behalf of any Borrower, the Agent
or the Lenders that are contained in this Agreement shall bind and inure to the
benefit of their respective successors and permitted assigns.
(b) Each Lender may assign to an Eligible Assignee, at the
expense of the assignor and/or the assignee, all or a portion of its interests,
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it); provided, however, that (i)
-------- -------
except in the case of an assignment by a Lender to an Affiliate of such Lender
which is a bank or bank holding company, the Borrowers and the Agent must give
their prior written consent to such assignment, (ii) the amount of the
Commitment of the assigning Lender subject to such assignment (determined as of
the date of such assignment) shall not be less than $15,000,000 (or the
remaining amount of the Commitment of such Lender), (iii) the parties to each
such assignment shall execute and deliver to the Agent an instrument evidencing
such assignment (the "Assignment Instrument") and a processing and recordation
fee of $2,000 (which fee shall not in any event be an obligation of the
Borrowers) and (iv) as of the date of such assignment, except with the prior
written consent of JCPenney, (x) the assignee shall not have any right, and
shall have no knowledge that such assignment would result in its having the
right, to request
<PAGE> 221
82
compensation pursuant to Section 2.13 or 2.19 after giving effect to such
assignment in excess of any compensation to which the assigning Lender would
have been entitled under such Sections and (y) the parties to such assignment
shall have no knowledge that such assignment (A) would cause it to be unlawful
for any party thereto to make or maintain any Eurodollar Loan or to give effect
to its obligations as contemplated hereby with respect to any Eurodollar Loan
or (B) would cause any Borrower to incur any liability under Section 2.15.
Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04,
from and after the effective date specified in each Assignment Instrument,
which effective date shall be at least five days after the execution thereof,
(A) the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment Instrument, shall have the rights and
obligations of, and shall for all purposes be, a Lender under this Agreement
and (B) the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment Instrument, be released from its obligations under
this Agreement (and, in the case of an Assignment Instrument covering all or
the remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto (but, subject to
Section 2.20, shall continue to be entitled to the benefits of Sections 2.13,
2.15, 2.19 and 9.05, as well as to any Fees accrued for its account hereunder
and not yet paid)). Notwithstanding the foregoing, any Lender assigning any
portion of its rights and obligations under this Agreement may retain any
Competitive Loans made by it outstanding at such time, and in such case shall
retain its rights hereunder in respect of any Loans so retained until such
Loans have been repaid in full in accordance with this Agreement. No
assignment may be made by any Lender except in accordance with the provisions
of this Section 9.04(b).
(c) By executing and delivering an Assignment Instrument, the
assignee thereunder shall be deemed to confirm to and agree with the other
parties hereto as follows: (i) such assignee confirms that it has received a
copy of this Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 5.04 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment Instrument; (ii) such assignee will
independently and without reliance upon the Agent, the assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate
<PAGE> 222
83
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (iii) such assignee appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (iv) such
assignee agrees that it will perform in accordance with their terms all the
obligations which by the terms of this Agreement are required to be performed
by it as a Lender.
(d) The Agent shall retain a copy of each Assignment
Instrument delivered to it and a register for the recordation of the name and
address of, and the Commitment of, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive in the absence of
manifest error and the Borrowers, the Agent 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. The Register shall be
available for inspection by any Borrower or any Lender, at any reasonable time
and from time to time upon reasonable prior notice.
(e) Each Lender may without the consent of the Borrowers or
the Agent sell participations to one or more banks or other entities in all or
a portion of its rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans owing to it); provided, however, that
-------- -------
(i) such Lender's obligations under this Agreement shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the participating banks or other
entities shall not be entitled to the benefit of the provisions contained in
Sections 2.13, 2.15, 2.19 and 9.05 and (iv) the Borrowers, the Agent 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, and
such Lender shall retain the sole right to enforce the obligations of the
Borrowers relating to the Loans and to approve any amendment, modification or
waiver of any provision of this Agreement (other than any amendments,
modifications or waivers decreasing any fees payable hereunder or the amount of
principal of or the rate at which interest is payable on the Loans, or
extending any scheduled principal payment date or date fixed for the payment of
interest on the Loans, that would affect the Lender in question and its
participants).
<PAGE> 223
84
(f) Any Lender or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 9.04, disclose to the assignee or participant or proposed assignee
or participant any information relating to any Borrower furnished to such
Lender by or on behalf of such Borrower; provided that, prior to any such
--------
disclosure of information designated by such Borrower as confidential, each
such assignee or participant or proposed assignee or participant shall execute
an agreement whereby such assignee or participant shall agree to preserve the
confidentiality of such confidential information in accordance with Section
9.15.
(g) Any Lender may at any time, without the consent of any
other party hereto, assign all or any portion of its rights under this
Agreement and any notes issued to it to a Federal Reserve Bank provided that no
--------
such assignment shall release a Lender from any of its obligations hereunder.
In order to facilitate such an assignment to a Federal Reserve Bank, the
Borrower shall, at the request of the assigning Lender, promptly execute and
deliver to the assigning Lender a note with terms in accordance with this
Agreement, in a form reasonably acceptable to the Agent and the Borrower,
evidencing the Loans made to the Borrower by the assigning Lender hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrowers agree,
--------------------
jointly and severally, to pay all reasonable out-of- pocket expenses incurred
by the Agent in connection with the negotiation, preparation and closing of
this Agreement, including the reasonable fees and disbursements of Cravath,
Swaine & Moore, special counsel for the Agent, and, only with the written
consent of the Borrowers prior to any incurrence, all reasonable out-of-pocket
expenses incurred by the Agent in connection with any amendment, modification
or waiver of this Agreement. The Borrowers agree, jointly and severally, to
pay all reasonable out-of-pocket costs and expenses of the Agent and Lenders,
as well as the allocated costs of in-house counsel, in connection with the
collection or enforcement of this Agreement.
(b) The Borrowers agree, jointly and severally, to indemnify
the Agent, each Lender and its directors, officers and employees (each such
person being called an "Indemnitee") against, and to hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and
<PAGE> 224
85
related expenses, including reasonable counsel fees and expenses, incurred by
or asserted against any Indemnitee arising as a result of (i) any breach by any
Borrower of any of its obligations under this Agreement or any agreement or
instrument contemplated hereby, (ii) the use of the proceeds of the Loans or
(iii) any claim, litigation, investigation or proceeding relating to any of the
foregoing, if any Indemnitee is at any time 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 and against such Indemnitee, (y) result from the gross
negligence or wilful misconduct of such Indemnitee (or, if such Indemnitee is a
Lender or the Agent, any of its directors, officers or employees) or (z)
result from any disputes among the Lenders and the Agent, or any of them, other
than disputes resulting from the fault of a Borrower.
(c) The provisions of this Section 9.05 shall remain
operative and in full force and effect regardless of the expiration of the term
of this Agreement, the consummation of the transactions contemplated hereby,
the repayment of any of the Loans, the invalidity or unenforceability of any
term or provision of this Agreement, or any investigation made by or on behalf
of the Agent or the Lender. All amounts due under this Section 9.05 shall be
payable on written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall
---------------
have occurred and be continuing and any three Lenders representing at least
$50,000,000 in aggregate amount of the Commitments have requested the Agent, in
writing, in accordance with the provisions of Article VII, to declare the Loan
to be forthwith due and payable, each Lender 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 indebtedness at any time owing by such Lender
to or for the credit or the account of any Borrower against any of and all the
obligations of such Borrower now or hereafter existing under this Agreement
held by such Lender (other than obligations purchased after such Event of
Default shall have become known to such Lender), irrespective of whether or not
such Lender shall have made any demand under this Agreement and although such
obligations may be unmatured. The rights
<PAGE> 225
86
of each Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have. Any Lender
exercising its rights under this Section shall give notice thereof to JCPenney
concurrently with or prior to the exercise of such rights.
SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay
of the Agent or Lender in exercising any power or right hereunder 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 Agent, the Lenders and
the Borrowers hereunder are cumulative and are not exclusive of any rights or
remedies which they would otherwise have. No waiver of any provision of this
Agreement or consent to any departure by any Borrower therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand on any
Borrower in any case shall entitle such Borrower 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 Borrowers and the Required Lenders; provided,
---------
however, that no such agreement shall (i) decrease the principal amount of, or
- -------
extend the maturity of or any scheduled principal payment date or date for the
payment of any interest on any Loan, or waive or excuse any such payment or any
part thereof, or decrease the rate of interest on any Loan, without the prior
written consent of each Lender affected thereby, (ii) change the Commitment or
decrease the Commitment Fees or Facility Fees of any Lender without the prior
written consent of such Lender, or (iii) amend or modify the provisions of
Section 2.16, the provisions of this Section or the definition of the "Required
Lenders", without the prior written consent of each Lender; provided further
that no such agreement shall amend, modify or otherwise affect the rights or
duties of the Agent hereunder without the
<PAGE> 226
87
prior written consent of the Agent. Each Lender shall be bound by any waiver,
amendment or modification authorized by this Section, and any consent by any
Lender pursuant to this Section shall bind any subsequent assignee of such
Lender.
SECTION 9.09. Interest and Charges. Notwithstanding any
--------------------
other provision in this Agreement, no Lender shall ever be entitled to receive,
collect or apply, as interest on any amount owing to such Lender under this
Agreement or in connection herewith, any amount in excess of the Maximum
Amount. If any Lender ever receives, collects or applies, as interest, any
such excess, such excess shall be deemed a partial repayment of principal and
treated hereunder as such; and if principal is paid in full, any remaining
excess shall be paid to the appropriate Borrower. In determining whether or
not the interest paid or payable, under any specific contingency, exceeds the
Maximum Amount, the Borrowers and the Lenders shall, to the maximum extent
permitted under applicable law, (i) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effect thereof, and (iii) amortize, prorate, allocate and
spread in equal parts, the total amount of interest throughout the entire
contemplated term of this Agreement so that the interest rate is uniform
throughout the entire period that any amount is outstanding under or in
connection with this Agreement; provided, however, that if any obligation owing
-------- -------
to a Lender hereunder or in connection herewith is paid and performed in full
prior to the end of the full contemplated term thereof, and if the interest
received by such Lender on such obligation for its actual term exceeds the
Maximum Amount with respect thereto, such Lender shall refund to the
appropriate Borrower the amount of such excess or credit the amount of such
excess against the total principal amount of all amounts owing to such Lender
hereunder or in connection herewith, and, in such event, such Lender shall not
be subject to any penalties provided by any laws for contracting for, charging
or receiving interest in excess of the Maximum Amount.
SECTION 9.10. Entire Agreement. This written Agreement
----------------
together with the letter agreement with respect to payment of fees of even date
herewith represent the final agreement among the parties with respect to the
subject matter hereof and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties. There are no
unwritten oral agreements among the parties with respect to the subject matter
hereof.
<PAGE> 227
88
SECTION 9.11. Severability. In the event any one or more of
------------
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties 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 9.12. Counterparts. This Agreement may be executed
------------
in two or more counterparts, each of which shall constitute an original but all
of which when taken together shall constitute but one contract, and shall
become effective as provided in Section 9.03.
SECTION 9.13. 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 are not to affect the construction of, or to be
taken into consideration in interpreting, this Agreement.
SECTION 9.14. Jurisdiction; Consent to Service of Process.
--------------------------------------------
(a) Each Borrower hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York State court
or Federal court of the United States of America sitting in New York City, and
any appellate court from any thereof, in any action or proceeding arising out
of or relating to this Agreement, 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.
Subject to the foregoing and to paragraph (b) below, nothing in this Agreement
shall affect any right that any party hereto may otherwise have to bring any
action or proceeding relating to this Agreement against any other party hereto
in the courts of any jurisdiction.
(b) Each Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or here-
<PAGE> 228
89
after have to the laying of venue of any suit, action or proceeding arising out
of or relating to this Agreement in any New York State or Federal court. 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 9.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 9.15. Confidentiality. Notwithstanding anything
----------------
contained in this Agreement to the contrary, the Lenders and the Agent shall
hold in confidence all agreements, statements, reports and information that are
not in the public domain concerning the Borrowers and their Subsidiaries that
the Agent or any Lender receives pursuant to or in connection with this
Agreement. The Agent and each of the Lenders shall not distribute any such
confidential information to other persons except (a) to its counsel, its
Affiliates, its examiners, regulatory authorities and prospective assignees of,
or participants in, its interest herein and their respective counsel (each of
which shall be instructed to hold the same in confidence, and in the case of
any prospective assignee or prospective participant, shall execute an agreement
to such effect pursuant to Section 9.04(f) as a condition to receiving a copy
of this Agreement and becoming an assignee or participant hereunder), (b)
pursuant to legal process, (c) in connection with litigation against or by the
Lenders and/or the Agent arising in connection with this Agreement or (d) with
the prior written consent of the Borrowers. The Agent and each of the Lenders
shall give prior or contemporaneous notice to the Borrowers of any disclosure
by it of confidential information pursuant to clause (b) or (c) above.
SECTION 9.16. Liability of Borrowers. Except as expressly
-----------------------
provided in this Agreement, the obligations of each Borrower hereunder shall be
several obligations with respect to Loans made to it.
IN WITNESS WHEREOF, the Borrowers, the Agent, the Co-Agents
and the Lenders have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.
<PAGE> 229
90
J. C. PENNEY COMPANY, INC.,
by
/s/ Donald A. McKay
Name: Donald A. McKay
Title: Vice President & Treasurer
J. C. PENNEY FUNDING CORPORATION,
by
/s/ Donald A. McKay
Name: Donald A. McKay
Title: Chairman of the Board
<PAGE> 230
91
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, Individually and as Agent,
by
/s/ M. Jennifer Shipe
Name: M. Jennifer Shipe
Title: Vice President
BANKERS TRUST COMPANY, Individually and
as Co-Agent,
by
/s/ Henry DelVecchio
Name: Henry DelVecchio
Title: Vice President
CHEMICAL BANK, Individually and as
Co-Agent,
by
/s/ Meredith Vanden Handel
Name: Meredith Vanden Handel
Title: Vice President
CREDIT SUISSE, Individually and as
Co-Agent,
by
/s/ Geoffrey M. Craig
Name: Geoffrey M. Craig
Title: Member of Senior Management
by
/s/ Kristinn R. Kristinsson
Name: Kristinn R. Kristinsson
Title: Associate
<PAGE> 231
92
ABN AMRO BANK N.V.,
by
/s/ Ronald A. Mahle
Name: Ronald A. Mahle
Title: Vice President
by
/s/ Brian J. Heagler
Name: Brian J. Heagler
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
by
/s/ Susan B. Leopold
Name: Susan B. Leopold
Title: Vice President
by
/s/ Jody B. Schneider
Name: Jody B. Schneider
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
by
/s/ Lisa S. Marshall
Name: Lisa S. Marshall
Title: Director
BANK OF TOKYO, LTD., Acting by and
through its Dallas Agency, as a Lender,
by
/s/ John M. Mearns
Name: John M. Mearns
Title: Vice President
<PAGE> 232
93
BANK ONE, TEXAS, N.A.,
by
/s/ Michael Silverman
Name: Michael Silverman
Title: Vice President
BANQUE NATIONALE DE PARIS, Houston
Agency,
by
/s/ Henry F. Setina
Name: Henry F. Setina
Title: Vice President
by
Name:
Title:
CIBC, INC.,
by
/s/ J.D. Westland
Name: J.D. Westland
Title: Vice President
CITIBANK, N.A.,
by
/s/ Arnold J. Ziegel
Name: Arnold J. Ziegel
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH,
by
/s/ Robert Ivosevich
Name: Robert Ivosevich
Title: Senior Vice President
<PAGE> 233
94
FIRST INTERSTATE BANK OF CALIFORNIA,
by
/s/ Edwina G. Kew
Name: Edwina G. Kew
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
by
/s/ Ted Wozniak
Name: Ted Wozniak
Title: Vice President
FIRST SECURITY BANK OF UTAH, N.A.,
by
/s/ Kevin Imlay
Name: Kevin Imlay
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA,
by
/s/ Michael T. Grady
Name: Michael T. Grady
Title: Vice President
by
/s/ C. Jeffrey Seaton
Name: C. Jeffrey Seaton
Title: Senior Vice President
FIRSTAR BANK MILWAUKEE, N.A.,
by
/s/ Timothy W. Somers
Name: Timothy W. Somers
Title: Assistant Vice President
<PAGE> 234
95
THE FUJI BANK, LIMITED, Houston Agency,
by
/s/ David L. Kelley
Name: David L. Kelley
Title: Vice President & Senior
Manager
INDUSTRIAL BANK OF JAPAN TRUST COMPANY,
by
/s/ Takeshi Kawano
Name: Takeshi Kawano
Title: Senior Vice President
and Senior Manager
JP MORGAN DELAWARE,
by
/s/ David J. Morris
Name: David J. Morris
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, New York Branch,
by
/s/ Fumihiko Kamoshida
Name: Fumihiko Kamoshida
Title: Deputy General Manager
MELLON BANK, N.A.,
by
/s/ Lisa M. Pellow
Name: Lisa M. Pellow
Title: Assistant Vice President
<PAGE> 235
96
NATIONAL WESTMINSTER BANK PLC,
New York Branch,
by
/s/ David L. Smith
Name: David L. Smith
Title: Vice President
NATIONAL WESTMINSTER BANK PLC, Nassau
Branch,
by
/s/ David L. Smith
Name: David L. Smith
Title: Vice President
NATIONSBANK OF TEXAS, N.A.,
by
/s/ Robert L. Silmon
Name: Robert L. Silmon
Title: Vice President
NBD BANK, N.A.
by
/s/ D. Andrew Bateman
Name: D. Andrew Bateman
Title: First Vice President
by /s/ William J. McCaffrey
Name: William J. McCaffrey
Title: Second Vice President
THE NORTHERN TRUST COMPANY,
by
/s/ Martin G. Alston
Name: Martin G. Alston
Title: Vice President
<PAGE> 236
97
NORWEST BANK MINNESOTA, N.A.,
by
/s/ Susan M.C. Engebretson
Name: Susan M.C. Engebretson
Title: Assistant Vice President
PNC BANK, NATIONAL ASSOCIATION,
by
/s/ Richard B. Lewis
Name: Richard B. Lewis
Title: Commercial Banking Officer
ROYAL BANK OF CANADA,
by
/s/ Gil J. Benard
Name: Gil J. Benard
Title: Manager
by
Title:
INSTITUTO BANCARIO SAN PAOLO DI
TORINO, SpA,
by
/s/ William J. DeAngelo
Name: William J. DeAngelo
Title: First Vice President
by
/s/ Robert S. Wurster
Name: Robert S. Wurster
Title: First Vice President
<PAGE> 237
98
THE SANWA BANK LIMITED, Dallas Agency,
by
/s/ Robert S. Smith
Name: Robert S. Smith
Title: Assistant Vice President
SOCIETE GENERALE, Southwest Agency,
by
/s/ Louis P. Laville, III
Name: Louis P. Laville, III
Title: Vice President
THE SUMITOMO BANK, LTD., Houston
Agency,
by
/s/ Tatsuo Ueda
Name: Tatsuo Ueda
Title: General Manager
by
Name:
Title:
SUNBANK, NATIONAL ASSOCIATION,
by
/s/ Eric K. Waldron
Name: Eric K. Waldron
Title: First Vice President
<PAGE> 238
99
SWISS BANK CORPORATION, Cayman Islands
Branch,
by
/s/ Marcia L. Thatcher
Name: Marcia L. Thatcher
Title: Director, Merchant Banking
by
/s/ Filippe Goossens
Name: Filippe Goossens
Title: Associate Director,
Merchant Banking
UNION BANK OF SWITZERLAND,
Houston Agency,
by
/s/ Evans Swann
Name: Evans Swann
Title: Vice President
by
/s/ Henry Sturzenegger
Name: Henry Sturzenegger
Title: Assistant Vice President
UNITED MISSOURI BANK, N.A.,
by
/s/ Walter Beck
Name: Walter Beck
Title: Executive Vice President
<PAGE> 239
100
UNITED STATES NATIONAL
BANK OF OREGON,
by
/s/ Blake R. Howells
Name: Blake R. Howells
Title: Assistant Vice President
by
Name:
Title:
WACHOVIA BANK OF GEORGIA, N.A.,
by
/s/ Terry L. Akins
Name: Terry L. Akins
Title: Senior Vice President
<PAGE> 240
EXHIBIT A-1
FORM OF COMPETITIVE BID REQUEST
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
(Date)
Attention: ( )
Dear Sirs:
The undersigned, ( ) (the "Borrower"), refers to the
Revolving Credit Agreement dated as of December 16, 1993 (as it may hereafter
be amended, modified, extended or restated from time to time, the "Credit
Agreement"), to which it is a party. Capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
The Borrower hereby gives you notice pursuant to Section 2.03(a) of the Credit
Agreement that it requests a Competitive Borrowing under the Credit Agreement,
and in that connection sets forth below the terms on which such Competitive
Borrowing is requested to be made:
(A) Date of Competitive Borrowing
(which is a Business Day) ______________
(B) Principal Amount of
Competitive Borrowing 1/ ______________
(C) Interest rate basis 2/ ______________
(D) Interest Period and the last
day thereof 3/ ______________
____________________
1/ Not less than $25,000,000 (and in integral multiples of
$5,000,000) or, if less, an aggregate principal amount equal to
the Total Commitment on the date of such Borrowing minus the
outstanding aggregate principal amount on such date of all
Competitive Loans.
2/ Eurodollar Loan, Fixed Rate Loan or CD Loan.
3/ Which shall be subject to the definition of "Interest
Period" and end not later than the Maturity Date.
<PAGE> 241
2
Upon acceptance of any or all of the Loans offered by the
Lenders in response to this request, the Borrower shall be deemed to have
represented and warranted, except as otherwise provided in Section 4.01, that
the conditions to lending specified in Section 4.01(b) and (c) of the Credit
Agreement have been satisfied.
Very truly yours,
by_______________________________
Title: (Responsible Officer) 4/
____________________
4/ Chairman, vice chairman, president, chief financial officer, treasurer
or controller of such corporation or any executive or senior vice president of
such corporation.
<PAGE> 242
EXHIBIT A-2
FORM OF NOTICE OF COMPETITIVE BID REQUEST
(Name of Lender)
(Address)
(Date)
Attention: ( )
Dear Sirs:
Reference is made to the Revolving Credit Agreement dated as
of December 16, 1993 (as it may hereafter be amended, modified, extended or
restated from time to time, the "Credit Agreement"), among J. C. Penney
Company, Inc. ("JCPenney"), J. C. Penney Funding Corporation ("Funding"), the
Lenders and Morgan Guaranty Trust Company of New York, as Agent. Capitalized
terms used but not defined herein shall have the meanings assigned to such
terms in the Credit Agreement. ( ) 1/ made a Competitive Bid
Request on ( ), 19( ), pursuant to Section 2.03(a) of the Credit
Agreement, and in that connection you are invited to submit a Competitive Bid
by (time), on (date). 2/ Your Competitive Bid must comply with Section 2.03(b)
of the Credit Agreement and the terms set forth below on which the Competitive
Bid Request was made:
(A) Date of Competitive Borrowing _______________
(B) Principal amount of
Competitive Borrowing _______________
(C) Interest rate basis _______________
____________________
1/ JCPenney or Funding.
2/ The Competitive Bid must be received by the Agent: (i) in the case of
Eurodollar Loans or CD Loans, not later than 9:00 a.m., New York City time,
three Business Days before the proposed Competitive Borrowing, and (ii) in the
case of Fixed Rate Loans, not later than 9:00 a.m., New York City time, on the
day of a proposed Competitive Borrowing.
<PAGE> 243
2
(D) Interest Period and the last day thereof _______________
Very truly yours,
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent,
By____________________________
Title:
<PAGE> 244
EXHIBIT A-3
FORM OF COMPETITIVE BID
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
(Date)
Attention: ( )
Dear Sirs:
The undersigned, (name of Lender), refers to the Revolving
Credit Agreement dated as of December 16, 1993 (as it may hereafter be amended,
modified, extended or restated from time to time, the "Credit Agreement"),
among J. C. Penney Company, Inc. ("JCPenney"), J. C. Penney Funding Corporation
("Funding"), the Lenders and Morgan Guaranty Trust Company of New York, as
Agent. Capitalized terms used but not defined herein shall have the meanings
assigned to such terms in the Credit Agreement. The undersigned hereby makes a
Competitive Bid pursuant to Section 2.03(b) of the Credit Agreement, in
response to the Competitive Bid Request made by ( ) 1/ on (
), 19( ),
____________________
1/ JCPenney or Funding.
<PAGE> 245
2
and in that connection sets forth below the terms on which such Competitive Bid
is made:
(A) Principal Amount 2/ _______________
(B) Competitive Bid Rate(s) 3/ _______________
(C) Interest Period and last day thereof _______________
The undersigned hereby confirms that it will, subject only to
the conditions set forth in the Credit Agreement, extend credit to the Borrower
upon acceptance by the Borrower of this bid in accordance with Section 2.03(d)
of the Credit Agreement.
Very truly yours,
(NAME OF LENDER),
by
__________________________
Title:
____________________
2/ An integral multiple of $5,000,000 (unless equal to the requested
Competitive Borrowing) and not greater than the requested Competitive
Borrowing. Multiple bids will be accepted by the Agent.
3/ One or more rates; i.e., LIBO Rate + or - ____%, in the case of
Eurodollar Loans, Adjusted CD Rate + or - ____%, in the case of CD Loans, or
____%, in the case of Fixed Rate Loans.
<PAGE> 246
EXHIBIT A-4
FORM OF STANDBY BORROWING REQUEST
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
(Date)
Attention: ( )
Dear Sirs:
The undersigned, ( ) (the "Borrower"), refers to
the Revolving Credit Agreement dated as of December 16, 1993 (as it may
hereafter be amended, modified, extended or restated from time to time, the
"Credit Agreement"), to which it is a party. Capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. The Borrower hereby gives you notice pursuant to Section 2.04 of
the Credit Agreement that it requests a Standby Borrowing under the Credit
Agreement, and in that connection sets forth below the terms on which such
Standby Borrowing is requested to be made:
(A) Date of Standby Borrowing
(which is a Business Day) _______________
(B) Principal Amount of
Standby Borrowing 1/ _______________
____________________
1/ Not less than $25,000,000 (and in integral multiples of $5,000,000) or,
if less, an aggregate principal amount equal to the remaining available balance
of the Total Commitment.
<PAGE> 247
2
(C) Interest rate basis 2/ _______________
(D) Interest Period and the Last
day thereof 3/ _______________
Upon acceptance of any or all of the Loans made by the Lenders
in response to this request, the Borrower shall be deemed to have represented
and warranted except as that the conditions to lending specified in Section
4.01(b) and (c) of the Credit Agreement have been satisfied; provided, however,
that in the case of a refinancing of a Standby Borrowing with a new Standby
Borrowing that does not increase the outstanding aggregate principal amount of
the Loans of any Lender, the Borrower shall not be subject to the satisfaction
of any of the Section 4.01 conditions.
Very truly yours,
by
________________________________
Title: (Responsible Officer) 4/
____________________
2/ Eurodollar Loan or ABR Loan. Notice under Section 2.04 is necessary
to refinance a Standby Borrowing with a Eurodollar Borrowing. In the absence
of such a notice, unless the Borrowing is repaid at the end of the applicable
Interest Period, the Borrower shall be deemed to have given notice of an
election to refinance such Borrowing with an ABR Borrowing of 5 days' duration.
3/ Which shall be subject to the definition of "Interest Period" and end
not later than the Maturity Date.
4/ Chairman, vice chairman, president, chief financial officer, treasurer
or controller of such corporation or any executive or senior vice president of
such corporation.
<PAGE> 248
EXHIBIT B
Charles R. Lotter
Senior Vice President
Secretary and General Counsel
December 16, 1993
Each of the lenders named in the
Schedule referred to below
Re: Revolving Credit Agreements of
J. C. Penney Company, Inc. and
J. C. Penney Funding Corporatio
Dear Sirs:
As the General Counsel of J. C. Penney Company, Inc., a Delaware
corporation ("JCPenney"), and of J. C. Penney Funding Corporation, a Delaware
corporation ("Funding"; together with JCPenney, "Borrowers"), I have been asked
to render an opinion pursuant to Section 4.02 of those certain 364-day and
five-year Revolving Credit Agreements dated as of December 16, 1993
("Agreements") among the Borrowers, Morgan Guaranty Trust Company of New York
("Agent"), the lenders listed in Schedule 2.01 of the Agreements ("Lenders")
and Bankers Trust Company, Chemical Bank and Credit Suisse ("Co-Agents").
In rendering the opinion set forth below, I have examined originals,
photostatic, or certified copies of the Agreements, the respective corporate
records and documents of the Borrowers, copies of public documents,
certificates of the officers or representatives of the Borrowers, and such
other instruments and documents, and have made such inquiries, as I have deemed
necessary as a basis for such opinion. In making such examinations, I have
assumed with your consent the genuineness of all signatures (other than the
signatures of the Borrowers) 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
opinion, to the extent I deemed necessary, I have relied upon the
representations and warranties of the Borrowers made in the Agreements and upon
certificates of the officers of the Borrowers. Capitalized terms not otherwise
defined in this opinion letter have the meanings specified in the Agreements.
<PAGE> 249
Each of the lenders named in the Schedule
December 16, 1993
Page 2
Based upon the foregoing, I am of the opinion that:
1. Each of the Borrowers has been duly incorporated and is validly
existing and in good standing under the laws of the State of Delaware, 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 Borrowers 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 Borrowers of the
Agreements and the Borrowings by the Borrowers under the Agreements (i) are
within the corporate power of each of the Borrowers; (ii) have been duly
authorized by each of the Borrowers by all necessary corporate action; (iii)
are not in contravention of JCPenney's Restated Certificate of Incorporation,
as amended, Funding's Certificate of Incorporation, as amended, or either of
the Borrower's by-laws; (iv) to the best of my knowledge do not violate any
material law, statute, rule, or regulation, or any material order of any
Governmental Authority, applicable to either of the Borrowers; (v) do not
conflict with or result in the breach of, or constitute a default under, the
material borrowing indentures, agreements, or other instruments of either of
the Borrowers; (vi) do not result in the creation or imposition of any Lien
upon any of the property or assets of either of the Borrowers other than any
Lien created by the Agreements; and (vii) do not require the consent or
approval of, or any filing with, any Governmental Authority or any other person
party to those agreements described above other than those that have been
obtained or made or where the failure to obtain such consent or approval would
not result in a Material Adverse Effect.
3. The Agreements have been duly executed and delivered by each of
the Borrowers and constitute the legal, valid, and binding obligation of such
Borrower, enforceable against such Borrower in accordance with their terms,
except as such enforcement may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
<PAGE> 250
Each of the lenders named in the Schedule
December 16, 1993
Page 3
4. Neither Borrower is an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or a "public-utility company"
or a "holding company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
5. To the best of my knowledge after due inquiry, except as set forth
in Schedule 3.09 of the Agreements, no litigation by or before any Governmental
Authority is now pending or threatened against JCPenney or Funding (i) which
involves the Agreements or the Transactions 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.
6. The Support Agreements have been duly executed and delivered by
JCPenney and, where applicable, Funding and, as of the Closing Date, are in
full force and effect in accordance with their terms.
The opinions expressed herein are limited to the laws of the State of
Delaware with respect to the opinions provided in paragraph 1 (except as to due
qualification as a foreign corporation and good standing under the laws of
other jurisdictions) and clauses (i), (ii), and (iii) of paragraph 2. 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 jurisdictions. This opinion is furnished to you in
connection with the transactions contemplated by the Agreements, and 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.
<PAGE> 251
Each of the lenders named in the Schedule
December 16, 1993
Page 4
Very truly yours,
/s/ CHARLES R. LOTTER
Charles R. Lotter
<PAGE> 252
EXHIBIT C
GUARANTY
This Guaranty Agreement is executed as of
this 16th day of December, 1993 by J. C. Penney
Company, Inc., a Delaware corporation ("Guarantor"),
in favor of J. C. Penney Funding Corporation, a
Delaware corporation ("Funding"), and the lenders
("Lenders") (as defined below).
RECITALS:
WHEREAS, Funding is a wholly-owned subsidiary of Guarantor;
WHEREAS, Funding and Guarantor have entered into those certain
364-day and five-year Revolving Credit Agreements (collectively, the
"Agreements") dated as of December 16, 1993, among Guarantor, Funding, Morgan
Guaranty Trust Company of New York, as agent for Lenders, Bankers Trust
Company, Chemical Bank and Credit Suisse, as co-agents for Lenders, and certain
other financial institutions named in the Agreements (collectively, the
"Lenders") in amounts not to exceed Four Hundred Fifty Million Dollars
($450,000,000) and Eight Hundred Million Dollars ($800,000,000), respectively;
and
WHEREAS, Guarantor is willing to guarantee any borrowings of
Funding under the Agreements on the terms set forth herein.
<PAGE> 253
2
NOW, THEREFORE, in consideration of the premises, Guarantor
hereby agrees as follows:
1. Subject to the terms and conditions of subordination set
forth in this Guaranty, Guarantor hereby unconditionally guarantees in favor of
the Lenders, the prompt payment when due of all interest, principal, and other
amounts owing under the Agreements (collectively, the "Guaranteed Debt"). This
is an unconditional guaranty of payment, and in the event of default by Funding
in the payment of interest, principal, or any other amounts payable under the
Guaranteed Debt, the Lenders may proceed directly against Guarantor to enforce
this Guaranty (including by the institution of legal proceedings) without first
proceeding against Funding.
2. Guarantor acknowledges that it has received and will
receive a direct or indirect benefit from the making of this Guaranty and the
creation of the Guaranteed Debt.
3. (a) The Guaranteed Debt shall be subordinated and subject
in right of payment to the prior payment in full of any and all other
indebtedness for borrowed money incurred, created, assumed, or otherwise
guaranteed by Guarantor (collectively referred to as the Guarantor's "Senior
Debt").
<PAGE> 254
3
(b) In the event of (i) any dissolution or winding-up or
total or partial liquidation or reorganization of Guarantor, whether voluntary
or involuntary, or any bankruptcy, insolvency, receivership, or similar
proceeding relative to Guarantor, or (ii) any default in the payment of
principal (including any acceleration or required prepayments or amortization)
of or interest on any Senior Debt of Guarantor, then, subject to the provisions
of subsection (d) below, the Lenders shall not be entitled to receive any
payment under this Guaranty on account of the Guaranteed Debt unless and until
all Senior Debt shall have been paid in full or otherwise discharged.
(c) For purposes of determining the priority of payments
between the Senior Debt and the Guaranteed Debt, in the event that the
Guaranteed Debt, or any part thereof, is declared due and payable prior to its
stated maturity, all principal of and interest and any other amounts due on all
Senior Debt outstanding at the time of such declaration as to the Guaranteed
Debt shall first have been paid in full, before any payment is made by
Guarantor upon the Guaranteed Debt.
(d) In no event shall any Lender be required by this
subordination to refund any amounts paid to it pursuant to this Guaranty on
account of the Guaranteed Debt prior to
<PAGE> 255
4
the events specified in subsections (b) and (c) above, and prior to such events
the Lenders shall be entitled to be paid hereunder as agreed and to collect any
sums due such Lenders hereunder by any lawful means.
(e) The provisions of this Section are for the purpose of
defining the relative rights of the holders of any Senior Debt, on the one
hand, and the Lenders, on the other hand, against Guarantor, and nothing herein
shall impair, as between the Guarantor and the Lenders, the obligation of
Guarantor, which is unconditional and absolute, to guarantee the prompt payment
when due of the Guaranteed Debt in accordance with the terms and provisions
thereof; nor shall anything herein prevent the Lenders from exercising all
remedies otherwise permitted by applicable law upon default hereunder, subject
to the rights, if any, under this Section of any Senior Debt holder.
4. The substantive laws of the State of New York shall govern
the validity, construction, enforcement, and interpretation of this Guaranty.
<PAGE> 256
5
IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of the date first written above.
J. C. PENNEY COMPANY, INC.,
a Delaware corporation, as
Guarantor,
By: /s/ D. A. MCKAY
Name: D. A. McKay
Title: Vice President & Treasurer
<PAGE> 257
SCHEDULE 2.01
LENDERS
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
ABN AMRO Bank N.V. ABN AMRO Bank N.V. $22,400,000
Three Riverway, Three Riverway,
Suite 1600 Suite 1600
Houston, TX 77056 Houston, TX 77056
For Business/Credit Matters
---------------------------
Attention: Brian J. Heagler
Telephone: (713) 964-3360
Fax: (713) 629-7533
For Administrative Matters
--------------------------
Attention: Patricia Baker or
Belinda Rowell
Telephone: (713) 964-3331
Fax: (713) 629-7533
Bank of America For Business/Credit Matters $32,000,000
National Trust and Savings ---------------------------
Association
1850 Gateway Boulevard Bank of America NT&SA
Concord, CA 94520 333 Clay Street
Suite 4550
Houston, TX 77002
Attention: Susan B. Leopold,
Vice President (Business)
Jody B. Schneider,
Vice President (Credit)
Telephone: (713) 651-4976
(Business)
(713) 651-4865 (Credit)
Telex: 67652 BANKMER SFO
Fax: (713) 651-4841
For Administrative Matters
--------------------------
Bank of America NT&SA
ABA #12100 358
Global Payments Operations #5693
Concord, CA 94520
Attention: Camille Gibbey
Telephone: (510) 675-7759
Telex: 34346 BANKMER SFO
Fax: (510) 675-7531
The First National Bank The First National Bank $12,800,000
of Boston of Boston
100 Federal Street 100 Federal Street
Boston, MA 02110 Boston, MA 02110
</TABLE>
<PAGE> 258
2
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Business/Credit Matters
---------------------------
Attention: Bethann R. Halligan
Telephone: (617) 434-0144
Fax: (617) 434-0630/6685
For Administrative Matters
--------------------------
Attention: Michele Taglione
Telephone: (617) 434-4039
Fax: (617) 434-0630/6685
The Bank of Tokyo, Ltd. The Bank of Tokyo, Ltd. $12,800,000
Dallas Agency Dallas Agency
2001 Ross Avenue, #3150 2001 Ross Avenue, #3150
Dallas, TX 75201 Dallas, TX 75201
For Business/Credit Matters
---------------------------
Attention: J. M. Mearns,
Vice President and Manager
Telephone: (214) 954-1200
Fax: (214) 954-1007
For Administrative Matters
--------------------------
Attention: Brenda Trader
Telephone: (214) 954-1200
Fax: (214) 954-1007
Bank One, Texas, N.A. Bank One, Texas, N.A. $ 9,600,000
1717 Main Street 1717 Main Street
Dallas, TX 75201 Dallas, TX 75201
For Business/Credit Matters
---------------------------
Attention: Michael R. Silverman
Third Floor
Telephone: (214) 290-2367
Fax: (214) 290-2683
For Administrative Matters
--------------------------
Attention: Lisa Peterson
Telephone: (214) 290-2614
Fax: (214) 290-2683
Bankers Trust Company Bankers Trust Company $38,400,000
130 Liberty Street P.O. Box 318
New York, NY 10008 Church Street Station
New York, NY 10008-0318
</TABLE>
<PAGE> 259
3
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Business/Credit Matters
---------------------------
Attention: Henry J. Del Vecchio
Corporate Finance Credit
Telephone: (212) 250-7801
Fax: (212) 250-7478
For Administrative Matters
--------------------------
Attention: John Jeffcoat
Telephone: (212) 250-8195
Fax: (212) 250-7351
Banque Nationale de Paris BNP $12,800,000
Houston Agency 717 North Harwood, Suite 2630
333 Clay Street Dallas, TX 75201
Suite 3400
Houston, TX 77002 For Business/Credit Matters
---------------------------
Attention: Henry F. Setina
Telephone: (214) 969-7388
Fax: (214) 969-0060
For Administrative Matters
--------------------------
Attention: Donna Rose
Telephone: (713) 951-1240
Telex: 166085 BNPHTX
Fax: (713) 659-1414
Canadian Imperial Bank of For Business/Credit Matters $22,400,000
Commerce, Inc. ---------------------------
2727 Paces Ferry Road
Suite 1200 Canadian Imperial Bank
2 Paces West of Commerce
Atlanta, GA 30339 909 Fannin, Suite 1200
Houston, TX 77010
Attention: Craig Torrence
Telephone: (713) 658-8400
Fax: (713) 658-9922
For Administrative Matters
--------------------------
2727 Paces Ferry Road,
Suite 1200
2 Paces West
Atlanta, GA 30339
Attention: Adrienne Burch
Telephone: (404) 319-4835
Telex: 542413 CANBANK ATL
Fax: (404) 319-4950
</TABLE>
<PAGE> 260
4
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
Chemical Bank Chemical Bank $38,400,000
270 Park Avenue, 270 Park Avenue,
10th Floor 10th Floor
New York, NY 10017 New York, NY 10017
For Business/Credit Matters
---------------------------
Attention: Meredith L.
Vanden Handel
Telephone: (212) 270-2999
Fax: (212) 270-9856
For Administrative Matters
--------------------------
Attention: Sheila Hamilton
Telephone: (212) 270-2322
Fax: (212) 682-8937
Citibank, N.A. Citibank, N.A. $22,400,000
399 Park Avenue, 399 Park Avenue,
12th Floor, Zone 16 12th Floor, Zone 16
New York, NY 10043 New York, NY 10043
For Business/Credit Matters
---------------------------
Attention: Robert A. Snell, AVP
Telephone: (212) 559-3215
Fax: (212) 793-7585/7590
For Administrative Matters
--------------------------
Attention: Stephance L. Tackors
Telephone (212) 559-3944
Fax: (212) 793-7585/7590
Credit Lyonnais, New York Credit Lyonnais Dallas $22,400,000
Branch 500 North Akard, Suite 3210
1301 Avenue of the Dallas, TX 75201
Americas
New York, NY 10019 For Business/Credit Matters
---------------------------
Attention: Karen Watson,
Vice President
Telephone: (214) 954-3500
Telex: 682 9274 CRLYDAL
Fax: (214) 954-3312
For Administrative Matters
--------------------------
Attention: Judy Gordon
Telephone: (214) 954-3500
Telex: 682 9274 CRLYDAL
Fax: (214) 954-3312
</TABLE>
<PAGE> 261
5
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
Credit Suisse For Business/Credit Matters $38,400,000
Tower 49 ---------------------------
12 East 49th Street
New York, NY 10017 Credit Suisse
1100 Louisiana, Suite 4750
Houston, TX 77002
Attention: James P. Moran
Telephone: (713) 751-0300
Fax: (713) 751-0702
For Administrative Matters
--------------------------
Tower 49
12 East 49th Street
New York, NY 10017
Attention: Hazel Leslie
Telephone: (212) 238-5218
Fax: (212) 238-5245
First Interstate Bank of For Business/Credit Matters $22,400,000
California ---------------------------
Commercial Loan Service
Center First Interstate Bank of
1055 Wilshire Blvd., B10-6 California
Los Angeles, CA 90017 U.S. Banking Division
707 Wilshire Blvd., W16-13
Los Angeles, CA 90017
Attention: William J. Baird
Telephone: (213) 614-5540/2723
Fax: (213) 614-2569
For Administrative Matters
--------------------------
First Interstate Bank of
California
1055 Wilshire Blvd., B10-6
Los Angeles, CA 90017
Attention: Carol Collins or
Irene Zao
Telephone: (213) 580-6166/6148
Fax: (213) 488-9909/9959
The First National Bank The First National Bank $22,400,000
of Chicago of Chicago
One First National Plaza One First National Plaza
Suite 0374; 1-10 Suite 0374; 1-10
Chicago, IL 60670 Chicago, IL 60670
For Business/Credit Matters
---------------------------
Attention: Catherine V. Frank
Telephone: (312) 732-2003
Telex: 4330253
Fax: (312) 732-3055
</TABLE>
<PAGE> 262
6
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Administrative Matters
--------------------------
Attention: John Loizzo
Telephone: (312) 732-4118
Telex: 4330253
Fax: (312) 732-4840
First Security Bank First Security Bank $ 9,600,000
of Utah, N.A. of Utah, N.A.
Commercial Banking Commercial Banking Division
Division 15 East 100 South,
15 East 100 South, 2nd Floor
2nd Floor Salt Lake City, UT 84111
Salt Lake City, UT 84111
For Business/Credit Matters
---------------------------
Attention: Kevin Imlay
Telephone: (801) 246-5524
Fax: (801) 246-5532
For Administrative Matters
--------------------------
Attention: Trish Sanders
Telephone: (801) 246-5575
Fax: (801) 246-5532
First Union National Bank First Union National Bank $12,800,000
of North Carolina of North Carolina
301 South College Street, 301 South College Street,
TW-19 TW-19
Charlotte, NC 28288 Charlotte, NC 28288
For Business/Credit Matters
---------------------------
Attention: A. Kimball Collins,
U.S. Banking
Telephone: (704) 374-2366
Fax: (704) 374-2802
For Administrative Matters
--------------------------
Attention: Perry Brown,
U.S. Banking
Telephone: (704)374-6613
Fax: (704) 374-2802
Firstar Bank Milwaukee, N.A. Firstar Bank Milwaukee, N.A. $ 9,600,000
Box 532 Box 532
Milwaukee, WI 53201 Milwaukee, WI 53201
U.S. Banking Division
</TABLE>
<PAGE> 263
7
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Business/Credit Matters
---------------------------
Attention: Timothy W. Somers
Telephone: (414) 765-6077
Fax: (414) 765-5062
For Administrative Matters
--------------------------
Attention: Jane Gumina
Telephone: (414) 765-4647
Fax: (414) 765-5062
The Fuji Bank, Ltd. The Fuji Bank, Ltd. $22,400,000
Houston Agency Houston Agency
2 Houston Center, 2 Houston Center,
Suite 2800 Suite 2800
909 Fannin 909 Fannin
Houston, TX 77010 Houston, TX 77010
For Business/Credit Matters
---------------------------
Attention: Mark Denkler
Telephone: (713) 759-1800
Telex: 790026 FUJIBANK HOU
Fax: (713) 759-0048
For Administrative Matters
--------------------------
Attention: Jenny Lin
Telephone: (713) 650-7821
Telex: 790026 FUJIBANK HOU
Fax: (713) 759-0048
The Industrial Bank The Industrial Bank $12,800,000
of Japan Trust Company of Japan Trust Company
245 Park Avenue 245 Park Avenue
New York, NY 10167 New York, NY 10167
For Business/Credit Matters
---------------------------
Attention: Linda Muscarella
Telephone: (212) 309-6872
Telex: 175597 IBJTC
Fax: (212) 557-3581
For Administrative Matters
--------------------------
Attention: Agnes Aberin
Telephone: (212) 309-6793
Telex: 175597 IBJTC
Fax: (212) 557-3581
</TABLE>
<PAGE> 264
8
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
Instituto Bancario Instituto Bancario $12,800,000
San Paolo Di Torino San Paolo Di Torino
SpA-New York SpA-New York
245 Park Avenue 245 Park Avenue
35th Floor 35th Floor
New York, NY 10167 New York, NY 10167
For Business/Credit Matters
---------------------------
Attention: Robert S. Wurster
Telephone: (212) 692-3160
Telex: 220045 SPAOL UR
Fax: (212) 599-5303
For Administrative Matters
--------------------------
Attention: Mr. Filippo Goia
Telephone: (212) 692-3180
Telex: 220045 SPAOL UR
Fax: (212) 599-5303
The Long-Term Credit Bank The Long-Term Credit Bank $12,800,000
of Japan, Ltd. of Japan, Ltd.
165 Broadway 165 Broadway
New York, NY 10006 New York, NY 10006
For Business/Credit Matters
---------------------------
Attention: Ichiro Murakami
Telephone: (212) 335-4542
Telex: 425722 LTCBNY
Fax: (212) 608-2371
For Administrative Matters
--------------------------
Attention: Robert Pacifici
Telephone: (212) 335-4801
Telex: 425722 LTCBNY
Fax: (212) 608-3452
Mellon Bank, N.A. Mellon Bank, N.A. $22,400,000
Loan Administration Loan Administration
Room 2332 Room 2332
Three Mellon Bank Center Three Mellon Bank Center
Pittsburgh, PA 15259 Pittsburgh, PA 15259
For Business/Credit Matters
---------------------------
Attention: Lisa M. Pellow,
Global Corporate Banking
Telephone: (412) 236-2790
Fax: (412) 236-1914
</TABLE>
<PAGE> 265
9
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Administrative Matters
--------------------------
Attention: Tracy Stevens,
Loan Administration
Telephone: (412) 234-8285
Fax: (412) 234-5049
National Westminster For Business/Credit Matters $22,400,000
Bank Plc, ---------------------------
New York Branch
175 Water Street National Westminster Bank Plc
New York, NY 10038 Houston Marketing Office and
North American Energy Unit
Texas Commerce Tower
600 Travis Street-6070
Houston, TX 77002
Attention: Steven J. Krakoski,
Vice President
Telephone: (713) 221-2400
Fax: (713) 221-2430
For Administrative Matters
--------------------------
National Westminster Bank, Plc
New York Branch
175 Water Street
New York, NY 10038
Attention: Robert Passarello
Telephone: (212) 602-4149
Telex: 233222 NWBKUR
Fax: (212) 602-4118
NationsBank of Texas, N.A. NationsBank of Texas, N.A. $32,000,000
901 Main Street 901 Main Street
Dallas, TX 75202 Dallas, TX 75202
For Business/Credit Matters
---------------------------
Attention: Bob Silmon
Telephone: (214) 508-0978
Fax: (214) 508-0980
For Administrative Matters
--------------------------
Attention: Karen Puente
Telephone: (214) 508-0519
Fax: (214) 508-0944
NBD Bank, N.A. NBD Bank, N.A. $22,400,000
611 Woodward Avenue 611 Woodward Avenue
Detroit, MI 48226 Detroit, MI 48226
</TABLE>
<PAGE> 266
10
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Business/Credit Matters
---------------------------
Attention: William J.
McCaffrey,
National Banking Division
Telephone: (313) 225-3444
Telex: 4320060
Fax: (313) 225-2649
For Administrative Matters
--------------------------
Attention: Candace Laitan,
National Banking Division
Telephone: (313) 225-2273
Telex: 4320060
Fax: (313) 225-2649
The Northern Trust Company The Northern Trust Company $12,800,000
50 South LaSalle Street 50 South LaSalle Street
Chicago, IL 60675 Chicago, IL 60675
For Business/Credit Matters
---------------------------
Attention: Martin G. Alston,
Western Division
Telephone: (312) 444-5058
Fax: (312) 630-1566
For Administrative Matters
--------------------------
Attention: Linda Honda,
Western Division
Telephone: (312) 444-5051
Fax: (312) 630-1566
Norwest Bank Norwest Bank $ 9,600,000
Minnesota, National Minnesota, National
Association Association
6th and Marquette 6th and Marquette
Minneapolis, MN Minneapolis, MN
55479-0085 55479-0085
For Business/Credit Matters
---------------------------
Attention: Susan Engebretson
Telephone: (612) 667-4296
Fax: (612) 667-4145
</TABLE>
<PAGE> 267
11
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Administrative Matters
--------------------------
Attention: Margret Hamzavi
Telephone: (612) 667-4747
Fax: (612) 667-4145
PNC Bank, N.A. PNC Bank, N.A. $22,400,000
Fifth Avenue and Fifth Avenue and
Wood Street Wood Street
Pittsburgh, PA 15222 Pittsburgh, PA 15222
For Business/Credit Matters
---------------------------
Attention: Rick Lewis
Telephone: (214) 740-2585
Fax: (214) 740-2588
For Administrative Matters
--------------------------
Attention: Sharon Tackett
Telephone: (214) 740-2525
Fax: (214) 740-2588
Royal Bank of Canada For Business/Credit Matters $22,400,000
Pierrepont Plaza ---------------------------
300 Cadman Plaza West
14th Floor 600 Wilshire Blvd. Suite 800
Brooklyn, NY 11201-2701 Los Angeles, CA 90017
Attention: Doug Frost
Telephone: (213) 955-5300
Fax: (213) 955-5350
For Administrative Matters
--------------------------
Royal Bank of Canada
Pierrepont Plaza
300 Cadman Plaza West
14th Floor
Brooklyn, NY 11201-2701
Attention: Linda Swanston,
Loan Administration
Telephone: (212) 858-7176
Telex: ROYBAN 62519
Fax: (718) 522-6292
The Sanwa Bank Ltd., The Sanwa Bank Ltd., $12,800,000
Dallas Agency Dallas Agency
901 Main Street, 901 Main Street,
Suite 2830 Suite 2830
Dallas, TX 75202 Dallas, TX 75202
</TABLE>
<PAGE> 268
12
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Business/Credit Matters
---------------------------
Attention: Robert Smith, A.V.P.
Telephone: (214) 744-5555
Telex: 735282
Fax: (214) 741-6535
For Administrative Matters
--------------------------
Attention: Gregory Crowe,
A.V.P.
Telephone: (214) 744-5555
Telex: 735282
Fax: (214) 741-6535
Societe Generale Societe Generale $12,800,000
Southwest Agency Southwest Agency
2001 Ross Avenue 2001 Ross Avenue
Suite 4800 Suite 4800
Dallas, TX 75201 Dallas, TX 75201
For Business/Credit Matters
---------------------------
Attention: Louis P. Laville
III, , V.P.
Telephone: (214) 979-2777
Telex: 170494 SOCGEN UT
Fax: (214) 979-1104
For Administrative Matters
--------------------------
Attention: Angela Aldridge/
Operations
Telephone: (214) 979-2743
Telex: 170494 SOCGEN UT
Fax: (214) 754-0171
The Sumitomo Bank, Ltd. The Sumitomo Bank, Ltd. $22,400,000
Houston Agency Houston Agency
700 Louisiana, Suite 1750 700 Louisiana, Suite 1750
Houston, TX 77002 Houston, TX 77002
For Business/Credit Matters
---------------------------
Attention: William S. Rogers, V.P.
Telephone: (713) 238-8214
Telex: 774417
Fax: (713) 759-0020
</TABLE>
<PAGE> 269
13
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Administrative Matters
--------------------------
Attention: Mr. Goto, Loan
Administration
Telephone: (713) 238-8240
Telex: 774417
Fax: (713) 759-0020
SunBank, N.A. SunBank, N.A. $22,400,000
200 South Orange Avenue 200 South Orange Avenue
Tower 4 Tower 4
Orlando, FL 32802 Orlando, FL 32802
For Business/Credit Matters
---------------------------
Attention: Mr. J. Carol Doyle
Telephone: (407) 237-4333
Fax: (407) 237-6894
For Administrative Matters
--------------------------
Attention: Ms. Lois Keezel
Telephone: (407) 237-4855
Fax: (407) 237-6894
Swiss Bank Corporation Swiss Bank Corporation $22,400,000
New York Branch New York Branch
10 East 50th Street 10 East 50th Street
SBT 17A SBT 17A
New York, NY 10022 New York, NY 10022
For Business/Credit Matters
---------------------------
Attention: Filippe Goossens,
Associate Director
Telephone: (212) 574-3110
Fax: (212) 574-3852
For Administrative Matters
--------------------------
Attention: Valerie Williams
Telephone: (212) 574-3146
Fax: (212) 574-4176/3852
Union Bank of Switzerland Union Bank of Switzerland $22,400,000
Houston Agency Houston Agency
1100 Louisiana, Suite 4500 1100 Louisiana, Suite 4500
Houston, TX 77002 Houston, TX 77002
</TABLE>
<PAGE> 270
14
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
For Business/Credit Matters
---------------------------
Attention: Dan Boyle
Telephone: (713) 655-6500
Fax: (713) 655-6555
For Administrative Matters
--------------------------
Attention: Robert Mack, Loan
Administration
Telephone: (212) 821-3225
Fax: (212) 821-3259
United Missouri Bank, N.A. United Missouri Bank, N.A. $12,800,000
1010 Grand Avenue 1010 Grand Avenue
Kansas City, MO 64106 Kansas City, MO 64106
For Business/Credit Matters
---------------------------
Attention: Walter Beck,
Commercial Loan Department
Telephone: (816) 860-7109
Telex: 6875032 UMNBK UW
Fax: (816) 860-7143
For Administrative Matters
--------------------------
Attention Billy Ray Smith
Telephone: (816) 860-7019
Telex: 687-5032 UMNBK UW
Fax: (816) 860-7143
United States National United States National $12,800,000
Bank of Oregon Bank of Oregon
309 S.W. Sixth Avenue, 309 S.W. Sixth Avenue,
BB-10 BB-10
Portland, OR 97204 Portland, OR 97204
For Business/Credit Matters
---------------------------
Attention: Blake R. Howells,
A.V.P.
National Corporate Banking
Division
Telephone: (503) 275-3475
Fax: (503) 275-4346
For Administrative Matters
--------------------------
Attention: Participation
Specialist
Telephone: (503) 275-6561
Fax: (503) 275-4600
</TABLE>
<PAGE> 271
15
<TABLE>
<CAPTION>
Name of Lender and
Applicable Lending Office Address for Notices Commitment
- ------------------------- ------------------- ----------
<S> <C> <C>
Wachovia Bank Wachovia Bank $22,400,000
of Georgia, N.A. of Georgia, N.A.
191 Peachtree Street, NE 191 Peachtree Street, NE
Atlanta, GA 30303 Atlanta, GA 30303
For Business/Credit Matters
---------------------------
Attention: Burton French, U.S.
Corporate-Dallas
Telephone: (214) 880-7009
Fax: (214) 880-7008
For Administrative Matters
--------------------------
Attention: Elizabeth Zires,
U.S. Corporate-Dallas
Telephone: (214) 880-7000
Fax: (214) 880-7008
Morgan Guaranty Trust Morgan Guaranty Trust $24,000,000
Company of New York Company of New York
60 Wall Street 60 Wall Street
New York, NY 10260-0060 New York, NY 10260-0060
For Business/Credit Matters
---------------------------
Attention: Michael C. Mauer,
Vice President
Telephone: (212) 648-9111
Telex: 177615 MGT UT
Fax: (212) 648-5336
For Administrative Matters
--------------------------
Attention: John J. O'Dowd
Telephone: (212) 648-6973
Telex: 177615 MGT UT
Fax: (212) 648-5336
J.P. Morgan, Delaware J.P. Morgan, Delaware $24,000,000
500 Stanton Christiana 500 Stanton Christiana
Road Road
P.O. Box 6070 P.O. Box 6070
Newark, DE 19713-2107 Newark, DE 19713-2107
Attention: Kevin M. McCann,
Assistant Treasurer
Telephone: (302) 992-1850
Fax: (302) 992-1852
</TABLE>
<PAGE> 272
SCHEDULE 3.08
RESTRICTED SUBSIDIARIES
None.
<PAGE> 273
SCHEDULE 3.09
MATERIAL LITIGATION
None.
<PAGE> 1
Exhibit 10(a)
CONFORMED COPY
================================================================================
RECEIVABLES AGREEMENT
BETWEEN
J. C. PENNEY COMPANY, INC.
AND
J. C. PENNEY FINANCIAL CORPORATION
AMENDED AND
RESTATED AS OF
JANUARY 29, 1980
================================================================================
<PAGE> 2
J. C. PENNEY COMPANY, INC.
1301 AVENUE OF THE AMERICAS
NEW YORK, N.Y. 10019
As of January 29, 1980
J.C. PENNEY FINANCIAL CORPORATION
P.O. Box 3999
Wilmington, Delaware 19807
Dear Sirs:
In the course of our business of selling merchandise at retail
throughout the United States, a portion of our sales is made on an installment
payment basis pursuant to credit agreements with our customers. Said credit
agreements are hereinafter called the Credit Agreements. At our offices listed
on Exhibit A hereto we maintain the Credit Agreements and all instruments and
records applicable to our credit sales. Account records at each office show
balances due from each customer served by that office under outstanding Credit
Agreements.
We hereby offer to sell to you, upon the terms and conditions
hereinafter set forth, unpaid obligations of our customers under Credit
Agreements.
As used in this Agreement, the term "Customer Obligation" shall mean
as of any date the total recorded unpaid amount of the obligations (including
assessed finance charges) of a customer under a Credit Agreement, whether or
not all or part of such obligations shall have been conveyed to you hereunder,
but such term shall not include: (i) any Defaulted Obligation (as hereinafter
defined), or (ii) any Customer Obligation which we have conveyed, or are
obligated, pursuant to a contract as to which no event of termination has
occurred or is claimed to have occurred, to convey to any party other than you;
the term "Conveyed Customer Obligation" shall mean as of any date the amount of
a Customer Obligation conveyed to you hereunder, but such term shall not
include any Conveyed Defaulted Obligation (as hereinafter defined); the term
"Defaulted Obligation" shall mean as of any date an obligation which would
otherwise be a Customer Obligation, except that as of such date a portion of
the customer's balance is more than 180 days past due or the customer is, in
our reasonable judgment, unable to make further payment; the term "Conveyed
Defaulted Obligation" shall mean as of any date any Conveyed Customer
Obligation which has become a Defaulted Obligation; and the term "Adjustments"
shall mean any adjustments pursuant to paragraph 3 hereof.
1. Conveyance and Ownership of Obligations. (a) Promptly after
the end of each interim accounting period mutually agreed upon from time to
time by you and us (each such interim accounting
<PAGE> 3
period hereinafter called an Accounting Period) and at such other times during
the term of this Agreement as may be mutually agreed upon by you and us, we
will convey to you, and you will purchase, as hereinafter provided, all our
right, title and interest in and to such dollar amount of Customer Obligations
(not theretofore conveyed to you) outstanding as of the end of the last
complete Accounting Period as shall be specified in the instrument effecting
such conveyance.
(b) At any time during the term of this Agreement, you shall own a
portion equal to Your Share (as hereinafter defined) as of such date of each
Customer Obligation outstanding as of the end of the last complete Accounting
Period. As used in this Agreement, the words "Your Share" shall mean at any
time during an Accounting Period the percentage which the amount of Conveyed
Customer Obligations outstanding at such date shall bear to the total amount of
Customer Obligations outstanding as of the end of the last complete Accounting
Period. For the purposes of this Agreement, the amount of Customer Obligations
outstanding at any time during an Accounting Period shall be determined as of
the end of the last complete Accounting Period, after giving effect to the
settlement as of the end of such last complete Accounting Period pursuant to
paragraph 4 hereof.
(c) If, as of the end of any Accounting Period during the term
hereof, you shall not have purchased any Customer Obligations pursuant to
subparagraph (a) of this paragraph 1 or shall not have so purchased a
sufficient dollar amount of Customer Obligations to maintain or increase Your
Share of all Customer Obligations, you agree to release to us your interest in
Customer Obligations in excess of Your Share (determined as of the end of such
Accounting Period after giving effect to the settlement as of the end of such
Accounting Period pursuant to paragraph 4 hereof), and we agree, in
consideration of such release, to convey to you a like amount of Customer
Obligations recorded since the beginning of such Accounting Period, so that you
will own the same percentage interest in each Customer Obligation outstanding
as of the end of such Accounting Period. Each such release and conveyance will
be made in connection with a settlement pursuant to paragraph 4 hereof and
shall be effective as of the end of the Accounting Period with respect to which
such settlement is being made.
(d) Any conveyance to you of Customer Obligations pursuant to
subparagraph (a) of this paragraph 1 and any release and conveyance pursuant to
subparagraph (c) of this paragraph 1 shall be accomplished by the delivery to
you and acceptance by you at your office in Wilmington, Delaware, of an
instrument in substantially the form annexed hereto as Exhibit B.
2. Purchase Price; Deferred Discount. (a) The purchase price at
which you shall acquire, as of the end of any Accounting Period, Conveyed
Customer Obligations shall be the dollar amount
2
<PAGE> 4
(hereinafter called the Stated Amount) of such Conveyed Customer Obligations;
provided, however, that a portion of such purchase price equal to the lesser of
(x) 5% of the Stated Amount of the Conveyed Customer Obligations then being
purchased by you or (y) the amount, if any, required to increase the amount in
the Contract Reserve Account (as hereinafter defined), after giving effect to
such purchase and all Adjustments being made as of the date of purchase, to 5%
of the total amount of Conveyed Customer Obligations outstanding on the date of
such purchase, shall be retained by you in an account (herein called the
Contract Reserve Account) to be set up on your books and used in the manner
described in paragraph 3 hereof, and the balance of such purchase price shall
be paid to us.
(b) In lieu of allowing you at the time of conveyance a discount on
the purchase price of Conveyed Customer Obligations acquired by you, we will
pay you in connection with the settlement after the end of each Accounting
Period commencing with the next immediately succeeding Accounting Period, with
respect to Conveyed Customer Obligations owned by you during such Accounting
Period, such amount of deferred discount as shall be agreed upon by you and us,
except that if you and we shall fail to agree, we will pay you as such deferred
discount an amount equal to 1/2 of 1% of the average daily closing balance of
Conveyed Customer Obligations owned by you during such Accounting Period, less
the average daily closing balance of the Contract Reserve Account during such
Accounting Period.
3. Adjustments. Promptly after the end of each Accounting
Period, the following Adjustments shall be made (which Adjustments shall be
deemed to be made immediately prior to the end of such Accounting Period):
(a) Collections. You shall be credited, on account of
the amount of Conveyed Customer Obligations owned by you immediately
prior to the end of such Accounting Period, with Your Share
(determined immediately prior to the end of such Accounting Period) of
total collections by us of Customer Obligations during such Accounting
Period. If any amounts are collected during such Accounting Period
with respect to Defaulted Obligations, Your Share (determined
immediately prior to the end of such Accounting Period) of such
collections shall be credited to the Contract Reserve Account.
(b) Returned, Rejected and Repossessed Merchandise. If
merchandise to which Customer Obligations relate shall have been
returned or rejected by, or repossessed from, customers during such
Accounting Period, we will pay to you, in reduction of the amount of
Conveyed Customer Obligations owned by you immediately prior to the
end of such Accounting Period, Your Share (determined
3
<PAGE> 5
immediately prior to the end of such Accounting Period) of the amount
remaining to be paid by such customers with respect to such
merchandise so returned, rejected or repossessed. If any returned,
rejected or repossessed merchandise, the sale of which gave rise to a
Customer Obligation which has become a Defaulted Obligation, is sold
by us during such Accounting Period, Your Share (determined
immediately prior to the end of such Accounting Period) of the
proceeds of such sale shall be credited to the Contract Reserve
Account.
(c) Breach of Warranties; Indemnities. If, in such
Accounting Period, any breach of a warranty contained in paragraph 5
hereof shall have occurred or any amount on account of a Customer
Obligation shall have become due to you under the indemnity contained
in paragraph 6 hereof, we will pay to you, in reduction of the amount
of Conveyed Customer Obligations owned by you immediately prior to the
end of such Accounting Period or, if said breach of warranty or
indemnity shall be with respect to a Conveyed Defaulted Obligation
theretofore charged against the Contract Reserve Account, we will
credit to said Account, the amount by which you have been damaged as a
result of such breach of warranty or the amount due under such
indemnity, as the case may be.
(d) Defaulted Customer Obligations. If, in such
Accounting Period, any Customer Obligations shall have become
Defaulted Obligations, Your Share (determined immediately prior to the
end of such Accounting Period) of the amount remaining to be paid on
account of such Defaulted Obligations shall be excluded from the
amount of Conveyed Customer Obligations outstanding immediately prior
to the end of such Accounting Period, and you shall reimburse yourself
for the sum so excluded by charging such sum to the Contract Reserve
Account (to the extent thereof). Any charge to the Contract Reserve
Account in accordance with the provisions of this Agreement will be
made regardless of whether any deficit results. We shall not be
liable for payment of any deficit, but any subsequent credits to the
Contract Reserve Account shall be first credited against any such
deficit.
Notwithstanding the foregoing, in case of a termination pursuant to
paragraph 11 hereof, (i) the percentage which shall constitute Your Share for
the purposes of this paragraph 3 with respect to any Accounting Period ending
after the effective date of such termination shall be the percentage
constituting Your Share on the effective date of such termination and (ii) the
Adjustments which shall thereafter be made pursuant to this paragraph 3 shall
relate only to Customer Obligations outstanding on the effective date of such
termination.
4
<PAGE> 6
4. Settlement. (a) As promptly as practicable after the end of
each Accounting Period, we will deliver to you a Settlement Statement in
substantially the form annexed hereto as Exhibit C showing settlements to be
made as of the end of such Accounting Period. The balance due between you and
us shall thereupon be settled by payment in appropriate funds. All Adjustments
with respect to any Accounting Period shall for all purposes hereof be deemed
to have been made immediately prior to the end of such Accounting Period and at
no other time. Each conveyance, and each release and conveyance, made at the
time of the settlement for an Accounting Period covered by a Settlement
Statement shall for all purposes hereof be deemed to have been made as of the
end of such Accounting Period.
(b) If, as of the end of any Accounting Period, after giving
effect to all settlements as of such time pursuant to subparagraph (a) of this
paragraph 4, the amount in the Contract Reserve Account shall exceed 5% of the
total amount of Conveyed Customer Obligations outstanding as of such time, the
excess shall be promptly returned by you to us; provided, however, that no such
return shall be made of any excess in the Contract Reserve Account arising
after the effective date of a termination pursuant to paragraph 11 hereof so
long as any Conveyed Customer Obligations shall be outstanding.
5. Representations and Warranties. We hereby represent and
warrant to you as follows:
(a) the figures set forth in each Settlement Statement
delivered to you hereunder will be true and correct (subject to minor
adjustments);
(b) at the time of conveyance of Conveyed Customer
Obligations, such Conveyed Customer Obligations will, to our
knowledge, represent valid and legally enforceable obligations of
customers in connection with sales of merchandise or services payable
in accordance with the terms of their respective Credit Agreements;
(c) each instrument of conveyance executed and delivered
to you by us hereunder will convey to you our entire right, title and
interest in and to the Conveyed Customer Obligations covered by such
instrument and the proceeds of collection thereof, in each case free
and clear from claims of any third parties, except to the extent of
any actions or infirmities on your part;
(d) at the time of conveyance of Conveyed Customer
Obligations, such Conveyed Customer Obligations will be free and clear
of all liens and encumbrances whatsoever and will not be the subject
of any offset, counterclaim or other defense;
5
<PAGE> 7
(e) to our knowledge at the time of conveyance of
Conveyed Customer Obligations, such Conveyed Customer Obligations will
conform with any and all applicable laws, official rulings and
regulations; and
(f) at the time of conveyance of Conveyed Customer
Obligations, all obligations to be performed by us or by any other
person under or in connection with such Conveyed Customer Obligations,
including obligations with respect to the merchandise or services the
sale or performance of which gave rise to any of such Conveyed
Customer Obligations, will have been or will promptly be fulfilled.
6. Authority to Collect, Repossess and Adjust. We shall at our
own cost and expense: (a) endeavor to collect, or cause to be collected, from
our customers as and when due any and all amounts owing under or on account of
Conveyed Customer Obligations (including Conveyed Defaulted Obligations) and
(b) take, or cause to be taken, such action to repossess merchandise and to
enforce rights under Conveyed Customer Obligations (including Conveyed
Defaulted Obligations) as we may deem proper, it being understood that we shall
have the right, without your consent, to assign all such services or to
subcontract various aspects of such services, including clerical, data
processing and statement mailing, provided that we shall remain liable for the
performance of such assignee or subcontractor pursuant to the terms hereof.
We may allow, or cause to be allowed, such adjustments to customers
under Conveyed Customer Obligations (including Conveyed Defaulted Obligations),
regardless of whether accompanied by the return or rejection of all or any part
of the merchandise relating thereto, as we may determine to be right or proper,
whether by reason of sound merchandising policy, or to facilitate maximum
collections or otherwise, under Conveyed Customer Obligations (including
Conveyed Defaulted Obligations) and may receive, or cause to be received, such
merchandise as may be returned or rejected by, or repossessed from, customers.
In acting with respect to Conveyed Customer Obligations (including Conveyed
Defaulted Obligations), we will comply with all laws, official rulings and
regulations and will indemnify and hold you harmless from and against any and
all penalties or losses which might be incurred by you as the result of our
failure to comply therewith.
In giving notice of termination pursuant to paragraph 11 hereof, or
any time after the giving of such notice, you may by written notice revoke all
or any of our authority under this paragraph 6 with respect to Conveyed
Customer Obligations and Conveyed Defaulted Obligations, and, upon request in
writing from you, unless we shall have repurchased Conveyed Customer
Obligations and Conveyed Defaulted Obligations at a mutually agreed upon price
pursuant to paragraph 9 hereof or otherwise, (i) we shall at our
6
<PAGE> 8
own cost and expense, promptly notify, or cause to be notified, all customers
whose Conveyed Customer Obligations and Conveyed Defaulted Obligations are
outstanding on the effective date of such termination of your ownership of Your
Share thereof (determined as provided in the last subparagraph of paragraph 3
hereof), instructing said customers thereafter to make payments of said portion
of their then existing Conveyed Customer Obligations and Conveyed Defaulted
Obligations to you or to whomsoever you may designate, (ii) all bills
thereafter rendered by us to customers with respect to Conveyed Customer
Obligations and Conveyed Defaulted Obligations outstanding on the effective
date of such termination shall, to the extent practicable, show separately the
proportion of each payment and of the aggregate obligation to be paid by each
customer to each of you and us, respectively, and (iii) you may deduct from any
amounts otherwise due us hereunder any costs which you incur in collecting or
otherwise enforcing Conveyed Customer Obligations and Conveyed Defaulted
Obligations.
At all times during and after the term of this Agreement, you will
keep information concerning our customers confidential.
7. Records; Notices of Assignment. (a) We will (i) hold in trust
and safely keep such documents as may be required for the enforcement of
Conveyed Customer Obligations and Conveyed Defaulted Obligations from time to
time owned by you; (ii) keep such accounts and other records as will enable you
to determine at any time the status of the Conveyed Customer Obligations and
Conveyed Defaulted Obligations from time to time owned by you; (iii) permit you
during normal business hours to inspect, audit, check and make abstracts from
our accounts, records, correspondence and other papers pertaining to Conveyed
Customer Obligations and Conveyed Defaulted Obligations; and (iv) deliver to
you, upon your request and at our own cost and expense, any of said accounts,
records, correspondence and other papers as you may deem essential to enable
you to enforce your rights with respect to Conveyed Customer Obligations and
Conveyed Defaulted Obligations.
(b) So long as you shall own any Conveyed Customer Obligations and
if you shall request, we shall mark appropriate master control accounts at each
office listed on Exhibit A with words indicating those accounts or portions of
accounts which have been assigned to you pursuant to this Agreement. In
addition, we shall post such other notices as you reasonably request of
conveyances pursuant to this agreement on our account records, on the
receptacles in which such records are maintained or in the rooms in which such
records are maintained.
8. Recording. Unless you request us in writing to do so, we
shall not be obligated to file or record in any public office any instrument
relating to Conveyed Customer Obligations (including Conveyed Defaulted
Obligations) or the conveyance to you of Conveyed Customer Obligations
(including Conveyed Defaulted
7
<PAGE> 9
Obligations). Any filing or recording by you or us will be at our expense. In
the event that there is any such filing or recording, upon any reconveyance in
accordance with this Agreement, appropriate termination statements or other
instruments evidencing such reconveyance will be filed at our expense.
9. Reconveyance. (a) At any time, and from time to time, at our
request, you will sell and reconvey to us, on and as of the date specified in
our request, and we will purchase from you, all your right, title and interest
in, to and under all or any portion of Conveyed Customer Obligations and
Conveyed Defaulted Obligations arising out of Credit Agreements assigned to one
or more of our billing cycles as we shall designate ("Reconveyed Customer
Obligations"). The purchase price at which we shall acquire Reconveyed
Customer Obligations shall be their Stated Amount on such date, subject to
adjustments in accordance with paragraph 2 hereof. As used in this Agreement,
the term "billing cycle" shall mean all Customer Obligations arising out of
Credit Agreements assigned from time to time by us in accordance with our
customary procedures for billing as of the end of the approximately monthly
time interval for which a periodic billing statement of charges and credits is
rendered to a customer.
(b) Any reconveyance by you to us of Conveyed Customer Obligations
and Conveyed Defaulted Obligations pursuant to subparagraph (a) of this
paragraph 9 shall be accomplished by the delivery by you of an instrument in
substantially the form annexed hereto as Exhibit D.
10. Waivers. We hereby waive any failure or delay on your part in
asserting or enforcing any of your rights or in making any claims or demands
hereunder.
11. Termination. This Agreement (except as it relates to Conveyed
Customer Obligations and Conveyed Defaulted Obligations owned and not
reconveyed by you on the effective date of termination) may be terminated by
either party hereto by giving the other party prior written notice of such
termination. No such termination shall affect any rights of the parties
accruing up to the date of such termination.
12. Loans. From time to time upon request from us, you may make
loans to us, in amounts and at interest rates to be mutually agreed upon.
13. Successors. The covenants, representations, warranties and
agreements herein set forth shall be binding upon ourselves and our successors,
and shall inure to your benefit and to that of your successors.
8
<PAGE> 10
14. Governing Law. This Agreement has been entered into under,
and shall be governed in all respects by, the laws of the State of Delaware.
If our foregoing proposal is agreeable to you, please so indicate by
signing the enclosed copy and returning it to us, whereupon this Agreement
shall become effective as of the date set forth on the first page hereof.
Very truly yours,
J. C. PENNEY COMPANY, INC.
/s/ PAULL F. HUBBARD
By Paull F. Hubbard
Treasurer
Agreed to:
J. C. PENNEY FINANCIAL CORPORATION
/s/ PHILIP G. RICKARDS
By Philip G. Rickards
President
9
<PAGE> 11
EXHIBIT A
CREDIT REGIONAL OFFICES
715 Peachtree Street, N.E. P.O. Box 31
Atlanta, Georgia 30308 Mission, Kansas 66276
P.O. Box 4444 2150 Franklin Street
Buena Park, California 90624 Oakland, California 94612
One IBM Plaza 7 Parkway Center
Chicago, Illinois 60611 Pittsburgh, Pennsylvania 15262
P.O. Box 65 P.O. Box 3665
Dallas, Texas 75221 Portland, Oregon 97208
P.O. Box 1559 G.P.O. Box 4788
Denver, Colorado 80222 San Juan, Puerto Rico 00936
P.O. Box 1560 Four Echelon Plaza
Minneapolis, Minnesota 55440 Voorhees, New Jersey 08043
10
<PAGE> 12
EXHIBIT B
J. C. PENNEY COMPANY, INC.
1301 AVENUE OF THE AMERICAS
NEW YORK, N. Y. 10019
(A) ,19
J. C. PENNEY FINANCIAL CORPORATION
P. O. Box 3999
Wilmington, Delaware 19807
Dear Sirs:
This letter is being delivered to you pursuant to the Amended and
Restated Agreement between us dated as of January 29, 1980 (all terms used
herein which are defined in said Agreement being used herein as so defined).
(B) (1) The undersigned hereby assigns to you, pursuant to
paragraph 1(a) of said Agreement, $ of Customer Obligations outstanding
as of the close of business on (C) .
(B (2) The purchase price of said Stated Amount of Conveyed
Customer Obligations is $ .
(3) (As a result of the foregoing conveyance and) after giving
effect to all Adjustments to date, you own as of the close of business on the
date hereof $ of Conveyed Customer Obligations constituting (D)
% of the total of $ Customer Obligations outstanding as of the close of
business on (C) . Therefore, Your Share of each such
outstanding Customer Obligations is (D) %.
(E) (4) (Because you have not purchased any Customer Obligations
as of the date hereof,) (After giving effect to the purchase by you of Customer
Obligations as of the date hereof,) Your Share has decreased from % to
(D) %. In order that you shall own (D) % of each Customer Obligation
outstanding as of the close of business on the date hereof, you hereby release
to us your interest in Customer Obligations in excess of (D) % and we
hereby assign to you a like amount of Customer Obligations recorded since the
end of the last complete Accounting Period.
(5) This instrument shall become effective as of the close of
business on the date hereof upon your acceptance hereof.
Very truly yours,
J. C. PENNEY COMPANY, INC.
By.................................
Accepted at Wilmington, Delaware, (Title)
this day of ,19
J. C. PENNEY FINANCIAL CORPORATION
By........................
(Title)
(A) Insert last date of the respective Accounting Period, or, in
the case of a conveyance as of a date other than the end of an Accounting
Period, such other date as shall be mutually agreed upon.
(B) Include only if Customer Obligations are being conveyed
pursuant to paragraph I (a) of the Letter Agreement. (c) If
letter is dated as of the end of an Accounting Period, insert "the
date hereof"; otherwise insert date of end of
last Accounting Period.
(D) The new percentage constituting Your Share.
(E) Include only if Your Share decreases and readjustment is made
pursuant to paragraph 1(c) of the Agreement.
11
<PAGE> 13
EXHIBIT C
SETTLEMENT STATEMENT AS OF ________, 19__
FOR THE ________ ACCOUNTING PERIOD
PURSUANT TO AMENDED AND RESTATED RECEIVABLES AGREEMENT DATED AS OF JANUARY 29,
1980 BETWEEN J. C. PENNEY COMPANY, INC. AND J. C. PENNEY FINANCIAL CORPORATION
CUSTOMER OBLIGATIONS
--------------------
1. Customer Obligations outstanding as of end of prior
Period (item 11 previous report) .................. $________
5. Collections and other Adjustments on Customer
Obligations during Period.......................... $________
6. Customer Obligations which became Defaulted
Obligations during Period.......................... $________
7. Collections and other Adjustments on Defaulted
Obligations during Period.......................... $========
8. Total deductions during Period
(items 5 plus 6)................................... $________
9. Balance of Customer Obligations immediately prior
to end of Period (item 1 less item 8).............. $========
10. Amount of Customer Obligations created during
Period............................................. $________
11. Total Customer Obligations as of end of Period
(item 9 plus 10)................................... $========
CONVEYED CUSTOMER OBLIGATIONS
-----------------------------
21. Conveyed Customer Obligations outstanding as of end
of prior Period (item 31 previous report).......... $________
22. Conveyed Customer Obligations conveyed during
Period............................................. $________
23. Total Conveyed Customer Obligations immediately
prior to end of Period (item 21 plus 22)........... $________
24. Your Share determined immediately prior to end of %
Period (% which item 23 bears on item 1)........... =========
25. Collections and other Adjustments or Conveyed
Customer Obligations during Period (Your Share
of item 5)......................................... $________
26. Conveyed Customer Obligations which became Conveyed
Defaulted Obligations during Period (Your Share of
item 6)............................................ $________
28. Total deductions during Period (item 25
plus 26)........................................... $________
29. Balance of Conveyed Customer Obligations
immediately prior to end of Period (item 23 less
item 28)........................................... $========
30. Amount of Conveyed Customer Obligations conveyed
as of end of Period................................ $________
31. Total Conveyed Customer Obligations as of end of
Period (items 29 plus 30).......................... $========
32. Your Share as of end of Period (% which item 31 %
bears to item 11).................................. _________
CONTRACT RESERVE ACCOUNT
------------------------
41. Balance as of end of prior Period (item 54 from
previous report)................................... $________
42. Amount credited to Reserve during Period (5% of
item 22)........................................... $________
43. Total Reserve immediately prior to end of Period
(items 41 plus 42)................................. $========
46. Charge against Reserve (item 26)................... $________
47. Collections and other Adjustments on Conveyed
Defaulted Obligations during Period (Your Share of
item 7)............................................ $========
49. Balance in Reserve immediately prior to end of
Period (item 43 plus item 47, less item 46)........ $========
50. 5% of item 30...................................... $________
51. 5% of item 31...................................... $________
52. The excess, if any, of item 51 over item 49........ $________
53. If item 49 exceeds item 51, the amount of such
excess............................................. $________
54. Balance in Reserve as of end of Period (item 49
less any amount entered under item 53, otherwise
item 49 plus the smaller of item 50 or 52)......... $========
SETTLEMENT
----------
DUE
J.C.P DUE
CO., INC. J.C.P.F.C.
--------- ----------
65. Amount of item 25.................................. XXX $________
67. Amount of item 47 (for credit to Reserve).......... XXX $________
69. Deferred Discount.................................. XXX $________
70. Amount of item 30, less the smaller of item 50
or 52.............................................. $________ XXX
73. Amount of item 53.................................. $________ XXX
75. Totals............................................. $======== $========
76. Net balance due J.C.P. Co., Inc. .................. $________
77. Net balance due J.C.P.F.C. ........................ $________
Initials
J.C.P. Co., Inc. ___________
J.C.P.F.C. _______________
12
<PAGE> 14
EXHIBIT D
BILL OF SALE AND ASSIGNMENT
FOR VALUE RECEIVED, J.C. Penney Financial Corporation ("Seller"), pursuant
to paragraph 9 of the Amended and Restated Receivables Agreement dated as of
January 29, 1980 ("Receivables Agreement") between Seller and J.C. Penney
Company, Inc. ("Purchaser"), hereby sells, assigns and transfers to Purchaser
all Seller's right, title and interest in, to and under all Conveyed Customer
Obligations and Conveyed Defaulted Obligations outstanding at the close of
business on arising as a result of sales of merchandise
--------------------
and services pursuant to Credit Agreements assigned by Purchaser to its billing
cycle .
--------------
For the consideration set forth above, Seller covenants with Purchaser
that it will do, execute and deliver, or will cause to be done, executed and
delivered, all such further transfers, assignments, conveyances, powers of
attorney, and other acts and assurances necessary or desirable for the better
assuring, conveying and confirming to Purchaser the property hereby assigned,
transferred and conveyed which Purchaser shall reasonably require.
Seller warrants that since the date of purchase from Purchaser of such
Conveyed Customer Obligations and Conveyed Defaulted Obligations, there are no
liens, encumbrances or rights of others in and to any such Conveyed Customer
Obligations and Conveyed Defaulted Obligations arising out of or resulting from
any act, direct or indirect, by it.
All terms used herein which are defined in the Receivables Agreement are
used herein as so defined.
Dated:
J. C. PENNEY FINANCIAL CORPORATION
By
------------------------------
(Title)
13
<PAGE> 1
Exhibit 10(b)
CONFORMED COPY
As of January 25, 1983
J. C. Penney Financial Corporation
P.O. Box 3999
Wilmington, Delaware 19807
Amendment No. 1 to Amended and
Restated Receivables Agreement
Dear Sirs:
Referring to the Receivables Agreement Amended and Restated as of
January 29, 1980 between you and us ("Receivables Agreement"), you and we
hereby agree that the Receivables Agreement shall be amended as follows:
(1) Paragraphs 3 and 4 of the Receivables Agreement are each
hereby amended by deleting the number "11" which appears in the last sentence
of each such paragraph and inserting the number "10" in place thereof.
(2) Paragraph 6 of the Receivables Agreement is hereby amended by
deleting the number "11" which appears therein and inserting the number "10" in
place thereof and by deleting the words "unless we shall have repurchased
Conveyed Customer Obligations and Conveyed Defaulted Obligations at a mutually
agreed upon price pursuant to paragraph 9 hereof or otherwise,".
(3) Paragraph 8 of the Receivables Agreement is hereby amended by
deleting the final sentence thereof.
(4) Paragraph 9 of, and Exhibit D to, the Receivables Agreement
are hereby deleted in their entirety.
(5) Paragraphs 10, 11, 12, 13, and 14 of the Receivables Agreement
are hereby renumbered, respectively, 9, 10, 11, 12 and 13.
(6) Paragraph 10 (as renumbered) of the Receivables Agreement is
hereby amended by deleting the words "and not reconveyed".
(7) Exhibit A to the Receivables Agreement is hereby amended in
its entirety to read as set forth in Exhibit A hereto.
Very truly yours,
J. C. PENNEY COMPANY, INC.
By /s/ PAULL F. HUBBARD
Vice President
<PAGE> 2
Agreed to at Wilmington,
Delaware, as of January 25, 1983.
J. C. PENNEY FINANCIAL CORPORATION
By /s/ PHILIP G. RICHARDS
President
<PAGE> 3
EXHIBIT A
CREDIT REGIONAL OFFICES
4580 Paradise Boulevard P. O. Box 2989
Albuquerque, New Mexico 87114 Mission, Kansas 66202
715 Peachtree Street, N.E. 7 Parkway Center
Atlanta, Georgia 30308 Pittsburgh, Pennsylvania 15262
P. O. Box 4444 P.O. Box 3665
Buena Park, California 90624 Portland, Oregon 97208
3300 Kearney Street G. P. O. Box 4788
Fremont, California 94538 San Juan, Puerto Rico 00936
One IBM Plaza Four Echelon Plaza
Chicago, Illinois 60611 Voorhees, New Jersey 08043
P. O. Box 65 P. O. Box 34866
Dallas, Texas 75221 San Antonio, Texas 78233
P. O. Box 1559 P. O. Box 1676
Denver, Colorado 80222 Honolulu, Hawaii 96806
P. O. Box 1560
Minneapolis, Minnesota 55402
<PAGE> 1
Exhibit 13
CONFORMED COPY
J. C. PENNEY FUNDING CORPORATION
FINANCIAL HIGHLIGHTS (In millions)
<TABLE>
<CAPTION>
FOR THE YEAR 1993 1992 1991
------------------------------------------
<S> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 16 $ 17 $ 23
Fixed charges - times earned . . . . . . . . . . . . . . . . 1.52 1.52 1.52
Commercial paper and master notes
Volume . . . . . . . . . . . . . . . . . . . . . . . . $ 12,507 $ 11,645 $ 13,122
Peak outstanding . . . . . . . . . . . . . . . . . . . $ 2,327 $ 1,665 $ 1,489
Average outstanding . . . . . . . . . . . . . . . . . . $ 1,347 $ 1,146 $ 754
AT YEAR END
Loans to JCPenney . . . . . . . . . . . . . . . . . . . . . . $ 2,323 $ 1,912 $ 1,609
Total debt
Short term debt . . . . . . . . . . . . . . . . . . . . $ 1,284 $ 887 $ 471
Long term debt . . . . . . . . . . . . . . . . . . . . $ -- $ -- $ 177
Total debt . . . . . . . . . . . . . . . . . . . . . . $ 1,284 $ 887 $ 648
Equity of JCPenney . . . . . . . . . . . . . . . . . . . . . $ 996 $ 980 $ 963
</TABLE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Financial Highlights 1 Independent Auditors' Report 6
Management's Discussion and Analysis of Notes to Financial Statements 6
Financial Condition and Results of Operations 2
Five Year Financial Summary 7
Statements of Income 3
Quarterly Data 8
Statements of Reinvested Earnings 3
Committed Revolving Credit Facilities 8
Balance Sheets 4
Commercial Paper Sales Policies 9
Statements of Cash Flows 5
Directors and Officers 10
</TABLE>
1
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
1993 ANNUAL REPORT
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
J. C. Penney Funding Corporation ("Funding") is a wholly-owned consolidated
subsidiary of J. C. Penney Company, Inc. ("JCPenney"). The business of Funding
consists of financing a portion of JCPenney's operations through loans to
JCPenney, the purchase of customer receivable balances that arise from the
retail credit sales of JCPenney, or a combination of both. No receivables have
been purchased by Funding since 1985. The loan agreement between Funding and
JCPenney provides for unsecured loans to be made by Funding to JCPenney. Each
loan is evidenced by a revolving promissory note and is payable upon demand in
whole or in part as may be required by Funding. Copies of our loan and
receivables agreements with JCPenney are available upon request.
To finance its operations, Funding primarily issues commercial paper through
The First Boston Corporation and J.P. Morgan Securities, Inc. to corporate and
institutional investors in the domestic market. The commercial paper is
guaranteed by JCPenney on a subordinated basis. Funding has, from time to
time, issued long term debt in public and private markets in the United States
and abroad. The commercial paper is rated "A-1" by Standard & Poor's
Corporation, "Prime-1" by Moody's Investors Service, Inc., and "F- 1" by Fitch
Investors Service, Inc.
Income is derived primarily from earnings on loans to JCPenney and is designed
to produce earnings sufficient to cover fixed charges (principally interest
expense) at a coverage ratio mutually agreed upon by Funding and JCPenney. The
earnings to fixed charges ratio has historically been at least one and one-half
times.
In 1993, net income decreased to $16 million from $17 million in 1992 and $23
million in 1991. The decrease is attributed to lower interest rates and the
commensurate lower earnings on loans to JCPenney. Interest expense was $47
million in 1993 compared with $50 million in 1992 and $66 million in 1991.
Interest earned from JCPenney was $71 million in 1993 compared to $75 million
in 1992 and $89 million in 1991.
Commercial paper borrowings averaged $1,347 million in 1993 compared to $1,146
million in 1992 and $754 million in 1991. The average interest rate on
commercial paper was 3.2 per cent in 1993, down from 3.7 per cent in 1992 and
5.6 per cent in 1991.
Total debt averaged $1,347 million in 1993, compared with $1,185 million in
1992 and $986 million in 1991. During 1992, JCPenney initiated a program to
restructure its debt portfolio to take advantage of declining interest rates.
Under the debt restructure program, Funding exercised its option to prepay all
of its long term debt, totalling $177 million.
In 1993, Funding and JCPenney entered into two syndicated revolving credit
facility agreements. Committed bank credit facilities available to the Company
as of January 29, 1994, amounted to $1.25 billion. These facilities include a
$450 million, one-year revolver and an $800 million, five-year revolver with a
group of 39 domestic and international banks. These facilities, which replaced
the $500 million confirmed lines of credit and the $750 million international
revolving credit facility, support commercial paper borrowing arrangements.
Neither of the borrowing facilities was in use as of January 29, 1994. See
page 8 for a complete list of committed bank credit facilities.
We would like to express our appreciation to the institutional investment
community, as well as to our credit line participants and commercial paper
dealers for their continued support during 1993.
/S/ D. A. McKay
Donald A. McKay
Chairman of the Board
March 28, 1994
2
<PAGE> 3
STATEMENTS OF INCOME J. C. PENNEY FUNDING CORPORATION
(In millions)
<TABLE>
<CAPTION>
FOR THE YEAR 1993 1992 1991
-----------------------------------------
<S> <C> <C> <C>
INCOME
Interest earned from JCPenney . . . . . . . . . . . . . . $ 71 $ 75 $ 89
Interest earned on short term investments . . . . . . . . -- 2 12
------ ----- -----
TOTAL INCOME . . . . . . . . . . . . . . . . . . . . . . 71 77 101
------ ----- -----
EXPENSES
Interest on short term debt . . . . . . . . . . . . . . . 47 46 46
Interest on long term debt . . . . . . . . . . . . . . . -- 4 20
Administrative and other expenses . . . . . . . . . . . . -- 1 1
------ ----- -----
TOTAL EXPENSES . . . . . . . . . . . . . . . . . . . . . . 47 51 67
------ ----- -----
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . 24 26 34
Income taxes . . . . . . . . . . . . . . . . . . . . . . 8 9 11
------ ----- -----
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16 $ 17 $ 23
====== ===== =====
</TABLE>
STATEMENTS OF REINVESTED EARNINGS
(In millions)
<TABLE>
<CAPTION>
1993 1992 1991
-----------------------------------------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR . . . . . . . . . . . . . . . $ 835 $ 818 $ 795
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . 16 17 23
------ ----- -----
BALANCE AT END OF YEAR . . . . . . . . . . . . . . . . . . $ 851 $ 835 $ 818
====== ===== =====
</TABLE>
See Notes to Financial Statements on page 6 and Five Year Financial Summary on
Page 7.
3
<PAGE> 4
BALANCE SHEETS J. C. PENNEY FUNDING CORPORATION
(In millions except share data)
<TABLE>
<CAPTION>
1993 1992 1991
-------------------------------------------
<S> <C> <C> <C>
ASSETS (ALL CURRENT)
Loans to JCPenney . . . . . . . . . . . . . . . . . . . . . . $ 2,323 $ 1,912 $ 1,609
Short term investments . . . . . . . . . . . . . . . . . . . -- -- 53
Other assets . . . . . . . . . . . . . . . . . . . . . . . . -- -- 1
-------- ------- -------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . $ 2,323 $ 1,912 $ 1,663
======== ======= =======
LIABILITIES AND EQUITY OF JCPENNEY
CURRENT LIABILITIES
Short term debt . . . . . . . . . . . . . . . . . . . . . . . $ 1,284 $ 887 $ 471
Due to JCPenney . . . . . . . . . . . . . . . . . . . . . . . 43 45 47
Accrued interest and other expenses . . . . . . . . . . . . . -- -- 5
-------- -------- -------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . 1,327 932 523
Long term debt . . . . . . . . . . . . . . . . . . . . . . . -- -- 177
EQUITY OF JCPENNEY
Common stock (including contributed
capital), par value $100:
Authorized, 750,000 shares -
issued and outstanding, 500,000 shares . . . . . . . . . 145 145 145
Reinvested earnings . . . . . . . . . . . . . . . . . . . . . 851 835 818
-------- ------- -------
TOTAL EQUITY OF JCPENNEY . . . . . . . . . . . . . . . 996 980 963
-------- ------- -------
TOTAL LIABILITIES AND EQUITY OF JCPENNEY $ 2,323 $ 1,912 $ 1,663
======== ======= =======
</TABLE>
See Notes to Financial Statements on page 6 and Five Year Financial Summary on
page 7.
4
<PAGE> 5
STATEMENTS OF CASH FLOWS J. C. PENNEY FUNDING CORPORATION
(In millions)
<TABLE>
<CAPTION>
FOR THE YEAR 1993 1992 1991
----------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 16 $ 17 $ 23
(Increase) decrease in loans to JCPenney (411) (303) 477
(Decrease) increase in amount due to JCPenney (2) (2) 1
Change in other assets and liabilities, net -- (4) (5)
------ ------ ------
(397) (292) 496
------ ------ ------
FINANCING ACTIVITIES
Increase (decrease) in short term debt . . . . . . . . . . . . . 397 416 (433)
Payments of long term debt . . . . . . . . . . . . . . . . . . . - (177) (94)
------ ------ ------
397 239 (527)
------ ------ ------
INCREASE (DECREASE) IN SHORT TERM INVESTMENTS
Short term investments at beginning of year . . . . . . . . . . -- (53) (31)
Short term investments at end of year . . . . . . . . . . . . . -- 53 84
------ ------ ------
$ -- $ -- $ 53
====== ====== ======
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . $ 47 $ 55 $ 70
Interest received . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 2 $ 12
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . $ 4 $ 11 $ 10
</TABLE>
See Notes to Financial Statements on page 6 and Five Year Financial Summary on
page 7.
5
<PAGE> 6
INDEPENDENT AUDITORS' REPORT
J. C. PENNEY FUNDING CORPORATION
To the Board of Directors of
J. C. Penney Funding Corporation:
We have audited the accompanying balance sheets of J. C. Penney Funding
Corporation as of January 29, 1994, January 30, 1993, and January 25, 1992, and
the related statements of income, reinvested earnings, and cash flows,
appearing on pages 3 through 6, for the years then ended. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position
of J. C. Penney Funding Corporation as of January 29, 1994, January 30, 1993,
and January 25, 1992, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
In our opinion, the information set forth in the selected financial data for
each of the three years in the period ended January 29, 1994, appearing on page
7, is fairly stated, in all material respects, in relation to the consolidated
financial statements from which it has been derived.
/S/ KPMG PEAT MARWICK
KPMG Peat Marwick
200 Crescent Court, Dallas, Texas 75201
February 24, 1994
NOTES TO FINANCIAL STATEMENTS
GENERAL
J. C. Penney Funding Corporation ("Funding") is a wholly-owned consolidated
subsidiary of J. C. Penney Company, Inc. ("JCPenney"). The principal business
of Funding consists of financing a portion of JCPenney's operations through
loans to JCPenney. To finance its operations, Funding issues commercial paper,
which is guaranteed by JCPenney on a subordinated basis, to corporate and
institutional investors in the domestic market. Funding has, from time to
time, issued long term debt in public and private markets in the United States
and abroad.
DEFINITION OF FISCAL YEAR
Funding's fiscal year ends on the last Saturday in January. Fiscal year 1993
ended January 29, 1994, 1992 ended January 30, 1993, and 1991 ended January 25,
1992. Fiscal years 1991 and 1993 each comprised 52 weeks and fiscal year 1992
comprised 53 weeks.
COMMERCIAL PAPER PLACEMENT
Funding began placing commercial paper solely through dealers, rather than as a
direct issuer, on April 3, 1992.
SUMMARY OF ACCOUNTING POLICIES
SHORT TERM INVESTMENTS
Cash invested in instruments with maturities of three months or less from time
of investment is reflected as short term investments. No short term
investments existed on January 29, 1994, or January 30, 1994.
INCOME TAXES
Funding's taxable income is included in the consolidated federal income tax
return of JCPenney. Income taxes in Funding's statement of income are computed
as if Funding filed a separate federal income tax return.
LOANS TO JCPENNEY
Funding and JCPenney are parties to a Loan Agreement which provides for
unsecured loans, payable on demand, to be made from time to time by Funding to
JCPenney for the general business purposes of JCPenney, subject to the terms
and conditions of the Loan Agreement. Under the terms of the Agreement,
Funding and JCPenney agree upon a mutually-acceptable earnings coverage of
Funding's interest and other fixed charges. The earnings to fixed charges
ratio has historically been at least one and one-half times.
COMMITTED BANK CREDIT FACILITIES
In 1993, Funding and JCPenney entered into two syndicated revolving credit
facility agreements. Committed bank credit facilities available as of January
29, 1994, amounted to $1.25 billion. These facilities include a $450 million,
one-year revolver and an $800 million, five-year revolver with a group of 39
domestic and international banks. These facilities, which replaced the $500
million confirmed lines of credit and the $750 million international revolving
credit facility, support commercial paper borrowing arrangements. See page 8
for a complete list of committed bank credit facilities. In addition a number
of minority-owned banks participate in a $5 million credit line for which First
Texas Bank acts as agent. None of the borrowing facilities were in use as of
January 29, 1994.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of short term debt (commercial paper) at January 29, 1994, and
January 30, 1993, approximates the amount as reflected on the balance sheet due
to its short average maturity.
The fair value of loans to JCPenney at January 29, 1994, and January 30, 1993,
also approximates the amount reflected on the balance sheet because the loan is
payable on demand and the interest charged on the loan balance is adjusted to
reflect current market interest rates.
6
<PAGE> 7
FIVE YEAR FINANCIAL SUMMARY J. C. PENNEY FUNDING CORPORATION
(In millions)
<TABLE>
<CAPTION>
AT YEAR END 1993 1992 1991 1990 1989
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITALIZATION
Short term debt
Commercial paper . . . . . . . . . . . . $ 1,284 887 414 842 1,255
Master notes . . . . . . . . . . . . . . -- -- 57 62 33
--------- -------- ------- ------- ------
Total short term debt . . . . . . . 1,284 887 471 904 1,288
--------- -------- ------- ------- ------
Current maturities of long term debt . . . . -- -- -- 75 --
--------- -------- ------- ------- ------
Long term debt
7.875% to 9.25% due 1991 to 1998 . . . . . -- -- 177 196 278
10.20% to 12.75% due 1991 to 1994 . . . . . -- -- -- -- 7
--------- -------- ------- ------- ------
Total long term debt . . . . . . . . -- -- 177 196 285
--------- -------- ------- ------- ------
Total debt . . . . . . . . . . . . . . . . . 1,284 887 648 1,175 1,573
--------- -------- ------- ------- ------
Equity of JCPenney . . . . . . . . . . . . . 996 980 963 940 895
--------- -------- ------- ------- ------
TOTAL CAPITALIZATION . . . . . . . . . . . . . . . $ 2,280 1,867 1,611 2,115 2,468
========= ======== ======= ======= ======
COMMITTED BANK CREDIT FACILITIES $ 1,250 1,250 1,250 2,000 1,200
FOR THE YEAR
INCOME . . . . . . . . . . . . . . . . . . . . . . . $ 71 77 101 200 227
EXPENSES . . . . . . . . . . . . . . . . . . . . . $ 47 51 67 132 149
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 16 17 23 45 52
FIXED CHARGES - TIMES EARNED . . . . . . . . . . . . 1.52 1.52 1.52 1.52 1.52
PEAK SHORT TERM DEBT . . . . . . . . . . . . . . . . $ 2,327 1,665 1,489 1,665 2, 241
AVERAGE DEBT
Short term . . . . . . . . . . . . . . . . . $ 1,347 1,146 754 1,277 1,266
Long term . . . . . . . . . . . . . . . . . . $ -- 39 232 281 365
Total . . . . . . . . . . . . . . . . . . . . $ 1,347 1,185 986 1,558 1,631
AVERAGE INTEREST RATES
Short term debt . . . . . . . . . . . . . . . 3.2 % 3.7% 5.6% 8.1% 8.9%
Long term debt . . . . . . . . . . . . . . . -- % 8.9% 8.7% 8.6% 8.8%
Total . . . . . . . . . . . . . . . . . . . . 3.2 % 3.9% 6.3% 8.2% 8.9%
</TABLE>
See Notes to Financial Statements on page 6 and Five Year Financial Summary on
page 7.
7
<PAGE> 8
QUARTERLY DATA J. C. PENNEY FUNDING CORPORATION
($ in millions) (Unaudited)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
----------------- ----------------- ---------------- ----------------
1993 1992 1991 1993 1992 1991 1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income . . . . . . . . $ 13 22 28 15 19 22 22 18 24 21 18 27
Expenses . . . . . . . $ 9 15 19 10 12 14 14 12 16 14 12 18
Income before taxes . . $ 4 7 9 5 7 8 8 6 8 7 6 9
Net income . . . . . . $ 3 5 6 3 4 5 5 4 6 5 4 6
Fixed charges -
times earned . . . . 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52
</TABLE>
8
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of
J. C. Penney Funding Corporation:
We consent to incorporation by reference in: (1) the Registration Statement
(No. 2-91101) on Form S-8; (2) the Registration Statement (No. 33-28390) on
Form S-8; (3) the Registration Statement (No. 33-59666) on Form S-8; (4) the
Registration Statement (No. 33-59668) on Form S-8; (5) the Registration
Statement (No. 33-66070) on Form S-8; and (6) the Registration Statement (No.
33-66072) on Form S-8 of J. C. Penney Company, Inc. of our report dated
February 24, 1994, relating to the balance sheets of J. C. Penney Funding
Corporation as of January 29, 1994, January 30, 1993, and January 25, 1992, and
the related statements of income, reinvested earnings, and cash flows, and
related selected financial data for the years then ended, which report appears
in the 1993 Annual Report of J. C. Penney Funding Corporation, which Annual
Report is incorporated by reference in the Annual Report on Form 10-K of J. C.
Penney Funding Corporation for the year ended January 29, 1994.
/s/ KPMG Peat Marwick
KPMG Peat Marwick
Dallas, Texas
April 6, 1994
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT each of the undersigned directors and
officers of J. C. PENNEY FUNDING CORPORATION, a Delaware corporation, which is
about to file with the Securities and Exchange Commission, Washington, D.C.,
under the provisions of the Securities Exchange Act of 1934, its Annual Report
on Form 10-K for the 52 weeks ended January 29, 1994, hereby constitutes and
appoints L. A. Gispanski and D. A. McKay, and each of them, his or her true and
lawful attorneys-in-fact and agents, with full power to act without the other,
for him or her and in his or her name, place, and stead, in any and all
capacities, to sign said Annual Report, which is about to be filed, and any and
all subsequent amendments to said Annual Report, and to file said Annual Report
and each subsequent amendment so signed, with all exhibits thereto, and any and
all documents in connection therewith, and to appear before the Securities and
Exchange Commission in connection with any matter relating to said Annual
Report and any subsequent amendments, hereby granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform any and all acts and things requisite and necessary to be done in
and about the premises as fully and to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney as of
the 25th day of March, 1994.
/s/ R. B. CAVANAUGH /s/ L. A. GISPANSKI
R. B. Cavanaugh L. A. Gispanski
Director Controller
(principal accounting officer);
Director
/s/ D. A. MCKAY /s/ R. E. NORTHAM
D. A. McKay R. E. Northam
Chairman of the Board Director
(principal executive officer);
Director
/s/ S. F. WALSH
S. F. Walsh
President
(principal financial officer);
Director
<PAGE> 1
EXHIBIT 99
J.C. PENNEY COMPANY, INC.
1993 ANNUAL REPORT
{EXCERPT}
<PAGE> 2
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS (In millions except per share data) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Retail sales, per cent increase (decrease) 5.4 11.2 (1.0)
Gross margin, per cent of retail sales(1)
FIFO 31.3 31.5 30.9
LIFO 31.5 31.7 31.5
Selling, general, and administrative expenses,
per cent of retail sales(1) 23.7 24.7 25.6
Pre-tax income of other businesses $ 149 $ 125 $ 91
Effective income tax rate 39.3 38.3 43.5
Net income2,3 $ 940 $ 777 $ 80
Per share2,3 $ 3.53 $ 2.95 $ .20
</TABLE>
1 Ratios for 1992 and 1991 reflect the reclassifications made to conform with
1993, as described on page 18.
2 Excluding the effects of an extraordinary charge and the cumulative effect of
an accounting change, after tax income was $944 million, or $3.55 per share, in
1993.
3 Excluding the effects of nonrecurring items and the cumulative effect of an
accounting change, after tax income was $528 million, or $2.00 per share, in
1991.
NET INCOME was $940 million in 1993, an increase of 20.9 per cent from $777
million in 1992. Fully diluted earnings per share improved to $3.53 per share
from $2.95 per share in 1992. Net income in 1993 was reduced by an
extraordinary charge, net of tax, of $55 million, or 21 cents per share, for
the premium and unamortized issuing costs related to retired debt. Net income
was increased by $51 million, or 19 cents per share, for the cumulative effect
of implementing Financial Accounting Standards Board Statement No. 109,
Accounting for Income Taxes. Excluding the impact of the extraordinary charge
and the cumulative effect of the accounting change, net income was $944
million, or $3.55 per share. 1993 net income also included a charge of $14
million, or 5 cents per share, for the impact of the tax rate increase on
deferred taxes. Increased sales volume in both stores and catalog, resulting
from the Company's strategy of offering fashion, quality, and price to its
customers, as well as an aggressive national advertising campaign, were largely
responsible for the improvement. Contributing to increased profits were well
managed selling, general, and administrative expenses. These expenses, as a per
cent of retail sales, declined significantly in 1993.
Net income was $777 million in 1992, an increase of 47.2 per cent from $528
million in 1991, excluding the impact in 1991 of nonrecurring items and the
cumulative effect of an accounting change. On a comparable basis, fully diluted
earnings per share improved to $2.95 per share from $2.00 per share in 1991.
Higher sales volume due to increased unit sales, resulting from the shift in
the Company's strategy to more affordable pricing, was largely responsible for
the improvement. Selling, general, and administrative expenses, as a per cent
of retail sales, declined significantly in 1992.
Net income was $80 million in 1991 and fully diluted earnings per share was
20 cents. Net income in 1991 was reduced by a provision for nonrecurring items
and the cumulative effect of an accounting change. Nonrecurring items in 1991
amounted to $395 million before income taxes, and reflected certain changes in
strategy. The Company made a strategic business decision in 1991 to hold only
regional shopping center joint ventures in its real estate investment portfolio
and to dispose of all other projects as soon as practicable. As a result of this
decision, a provision of $220 million was made to record the costs to dispose of
the properties the Company planned to exit. Also, in 1991, a decision was made
to downsize or discontinue several non-core retail operations. This decision
reflected a change in business strategy to deemphasize experimental businesses
and to focus on the Company's core business, resulting in a provision of $115
million. In addition, nonrecurring items included a provision of $60 million for
the costs associated with consolidating and streamlining various Company
activities. In 1993, the Company completed the disposition of all its
non-regional shopping center properties, and continued to close unproductive
stores and implement cost cutting measures. The restructuring was substantially
complete at the end of 1993. In 1991, the Company adopted Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, that resulted in a one-time charge to earnings of $184 million, net of
taxes, or 79 cents per share.
Excluding the effects of the nonrecurring items and the cumulative effect
of the accounting change in 1991, income declined 8.5 per cent to $528 million
from $577 million in 1990. The decline in 1991 was due to a 1.0 per cent decline
in sales volume and an increase in the income tax rate. On a comparable basis,
earnings per share declined from $2.16 in 1990 to $2.00 in 1991.
<TABLE>
<CAPTION>
Per cent increase Per cent increase
REVENUE (In millions) 1993 (decrease) 1992 (decrease) 1991
---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C>
JCPenney stores $14,056 4.4 $13,460 12.1 $12,007
Catalog 3,514 11.0 3,166 5.5 3,002
Drug stores 1,413 2.2 1,383 16.0 1,192
Total retail sales* 18,983 5.4 18,009 11.2 16,201
JCPenney Insurance 475 22.5 388 18.3 328
JCPenney National Bank 120 2.0 118 (1.1) 119
Total revenue $19,578 5.7 $18,515 11.2 $16,648
</TABLE>
1993 and 1991 comprised 52 weeks, and 1992 comprised 53 weeks.
*On a comparable 52-week basis, total retail sales increased 6.9 per cent in
1993 and 9.8 per cent in 1992.
10
<PAGE> 3
SALES of all JCPenney stores in 1993 increased 4.4 per cent while comparable
store sales increased 4.0 per cent. The sales gain was primarily the result of
the Company's strategy of offering fashion and quality merchandise to its
customers at competitive, affordable prices; a new national television
advertising campaign; and the increased emphasis on developing its private
brands. On a comparable 52 week basis, sales of JCPenney stores increased 5.8
per cent in 1993, and comparable store sales increased 5.3 per cent. JCPenney
store sales increased approximately 6 per cent in each of the merchandise
divisions (women's, men's, children's and family shoes, and home and leisure).
Sales of all JCPenney stores, on a 52 week basis, increased 10.9 per cent in
1992, and comparable store sales increased 9.7 per cent.
Catalog sales increased 11.0 per cent in 1993 to a record $3,514
million. The results were impacted by significant growth in the number of new
customers, gains from specialty catalogs, and improved synergy with JCPenney
stores' merchandise mix. The Company's decision to accept the Discover Card in
April 1993 contributed to 1993's growth in attracting new customers.
Drug store sales increased 2.2 per cent in 1993. On a comparable 52 week
basis, drug store sales increased 4.2 per cent in 1993, primarily as a result
of higher mail order pharmacy sales.
GROSS MARGIN on a FIFO basis, as a per cent of retail sales, declined in 1993
to 31.3 per cent from 31.5 per cent in 1992, due to a more promotional
environment during the holiday season. This ratio increased in 1992 as compared
with 1991 due to lower markdowns. The decline in this ratio in 1991 as
compared with 1990 was due to increased markdowns in the first half of 1991.
In 1991, based on its strategy to lower retail prices, the Company
elected to apply an internally developed LIFO index (rather than one prepared
by the U.S. Government for all department stores) to measure more accurately
increases and decreases in JCPenney retail prices. Because of the continued
decline in retail prices, there was deflation in the Company's LIFO index in
1993, 1992, and in 1991. As a result, there was a LIFO credit of $36 million in
1993, as compared with a credit of $32 million in 1992 and a $91 million credit
in 1991.
Gross margin on a LIFO basis, as a per cent of retail sales, was 31.5
per cent in 1993, as compared with 31.7 per cent in 1992 and 31.5 per cent in
1991.
SG&A EXPENSES increased in 1993 by 1.4 per cent from 1992's level. As a per
cent of sales, SG&A expenses declined in 1993 to 23.7 per cent from 24.7 per
cent in 1992, reflecting the Company's continuing efforts to control costs
across all operating and support areas.
SG&A expenses increased in 1992 by 7.0 per cent, reflecting higher
salaries and personnel related costs resulting from increased sales volume and
planned increases in advertising associated with a national television
advertising campaign and increased distribution of circulars. SG&A expenses
declined in 1991 by 3.1 per cent, reflecting the Company's efforts to reduce
costs across all operating and support areas. In 1992, the SG&A expense ratio
declined to 24.7 per cent from 25.6 per cent in 1991 and 26.2 per cent in 1990,
as a result of higher sales volume and well managed expenses.
<TABLE>
<CAPTION>
NET INTEREST EXPENSE AND CREDIT COSTS (In millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Finance charge revenue $ (523) $ (509) $ (567)
Interest expense, net 241 258 308
Credit costs
Bad debt expense 95 122 175
Operating expenses (including third
party credit costs) 260 261 260
------- ------ -------
Net interest expense and credit costs $ 73 $ 132 $ 176
</TABLE>
NET INTEREST EXPENSE AND CREDIT COSTS declined 44.7 per cent in 1993 to $73
million, primarily as a result of lower bad debt and interest expense. Interest
expense declined as a result of the debt restructuring program (described on
page 13) initiated by the Company to take advantage of declining interest
rates. Net interest expense and credit costs was $132 million in 1992, a
decline of 25.0 per cent from $176 million in 1991. The decline in 1992 was
also due to lower bad debt and interest expense.
11
<PAGE> 4
THE EFFECTIVE INCOME TAX RATE for 1993 was 39.3 per cent as compared with 38.3
per cent in 1992 and 43.5 per cent in 1991. The 1993 rate included a one-time,
non-cash charge of $14 million for the revaluation of deferred taxes, as
required by Statement No. 109, Accounting for Income Taxes. Excluding the
adjustment for deferred taxes, the 1993 effective income tax rate was 38.3 per
cent, which approximates the expected rate for 1994. The 1993 rate increased
from 1992's rate due to the legislated Federal income tax rate increase from 34
per cent to 35 per cent. The 1993 rate was reduced by the tax effect of
dividends on allocated leveraged employee stock ownership plan (LESOP) shares,
in accordance with Statement No. 109. The 1992 effective income tax rate
declined from 1991's rate primarily due to the $21 million charge to income tax
expense in 1991 for prior years' tax audit adjustments.
<TABLE>
<CAPTION>
PRE-TAX INCOME OF OTHER BUSINESSES (In millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
JCPenney Insurance $ 120 $ 101 $ 78
JCPenney National Bank 29 24 13
------ ------ ------
Total $ 149 $ 125 $ 91
</TABLE>
JCPENNEY INSURANCE, which markets life, accident and health, and credit
insurance, continued its growth trend which began in 1989. Pre-tax income was
$120 million, an increase of $19 million or 19.3 per cent over 1992. This
growth resulted from favorable trends in both premiums earned and lower loss
ratios. Premium income for 1993 was $416 million, an increase of $83 million or
25 per cent over 1992. The growth in premium income resulted from an increase
of 1.2 million policies, 25 per cent more than in 1992. Increases in renewal
premiums of $59 million resulted from the increased sales over the past three
years coupled with favorable policy retention. Pre-tax income was $101 million
in 1992, an increase of 27.9 per cent over 1991, primarily due to increased
premiums. During the past two years, JCPenney Insurance has expanded its
market share through relationships with other credit card issuers in both the
United States and Canada to solicit their customers. These relationships
included 17 companies in the United States and three companies in Canada.
JCPENNEY NATIONAL BANK offers Visa and MasterCard credit cards. At the end of
the year, about 403 thousand credit cards were active. Pre-tax income improved
in both 1993 and 1992, as a result of lower interest rates and a reduction in
bad debt expense.
FINANCIAL POSITION. The Company generated $286 million in cash from operating
activities in 1993 as compared with $1,574 million in 1992 and $911 million in
1991. The change in 1993 was due to an increase in customer accounts
receivable, particularly in the fourth quarter when the utilization of the
JCPenney credit card increased to 47.5 per cent of sales from 46.6 per cent in
1992's comparable period. Additionally, $425 million of securitized accounts
receivable were amortized. The primary contributions to increased cash flow in
1992 were higher net income and declines in customer accounts receivable.
Total customer receivables serviced by the Company were $4.4 billion at
the end of 1993, $352 million or 8.8 per cent higher than the level at the end
of 1992. The increase in customer receivables was due to the higher sales
volume in 1993. In 1993, the Company established the JCPenney Card Bank,
National Association, which issues JCPenney credit cards to customers in five
states. The customer accounts receivable owned by the Card Bank are fully
consolidated for reporting purposes in the total customer receivables serviced
by the Company. Customer receivables serviced totaled $4.0 billion at the end
of 1992, $411 million or 9.3 per cent below the level at the end of 1991. The
decline in 1992 customer receivables serviced reflected a reduction in the
utilization of the JCPenney credit card, increased usage of third party credit
cards, as well as faster repayments by customers. Customer receivables serviced
were $4.4 billion at the end of 1991, or 8.6 per cent below the level at the
end of 1990.
Merchandise inventories, on a FIFO basis, increased to $3.8 billion in
1993, up 7.1 per cent from 1992 and are in line with recent sales volumes. FIFO
inventories increased 10.2 per cent in 1992 and 4.9 per cent in 1991.
Net property, plant, and equipment, at $3.8 billion, was $63 million
above the level of the preceding year. Cash requirements for capital
expenditures in 1993 were $480 million, $26 million above 1992. Capital
expenditures were $516 million in 1991. The Company presently expects capital
expenditures of approximately $500 million in each of the next three years.
12
<PAGE> 5
Investments, at $1.2 billion, increased $191 million in 1993, primarily
due to growth in JCPenney Insurance investments.
Accounts payable and accrued expenses increased 5 per cent to $2.1 billion
in 1993 primarily as a result of the increase in trade accounts payable due to
the $287 million increase in merchandise inventories. Accounts payable and
accrued expenses were $2.0 billion in 1992 and $1.6 billion in 1991.
During 1993, the Company continued a program to restructure its debt and
securitized accounts receivable portfolio to take advantage of the lower
interest rate environment. The program, which was initiated in 1992,
restructured and refinanced $2.6 billion of high cost debt, including both on
and off- balance-sheet debt, through various methods including calls, open
market purchases, defeasance, and scheduled retirements. Additionally, in
February 1994, $350 million of zero coupon notes yielding 13 per cent matured.
The restructured debt was financed with operating cash flow and lower cost
debt. The weighted average annual interest rate on the restructured and
refinanced debt was 10 per cent. In connection with the program, the Company
issued $1.25 billion of fixed rate debt in 1993 and 1992 with maturities of
five, 10, and 30 years, with a weighted average annual interest rate of 6.1 per
cent. As a result, the program will produce annual financing cost savings in
excess of $120 million.
Total debt at year end 1993 included $379 million of borrowings by the
LESOP, which is guaranteed by the Company. The source of funds to repay the
LESOP debt will be dividends from the Series B preferred stock and cash
contributions by the Company, totaling approximately $50 million semi-annually
through July 1998.
Stockholders' equity was $5.4 billion at the end of 1993, an increase of
$660 million from the previous year due primarily to the increase in net
income.
On March 9, 1994, the Board of Directors declared an increase in the
regular quarterly dividend to 42 cents per share, or an indicated annual rate
of $1.68 per share. The regular quarterly dividend on the Company's outstanding
stock was payable on May 1, 1994, to stockholders of record on April 8, 1994.
The Board also approved on March 9, 1994, the purchase of up to 10 million
shares of the Company's common stock to offset dilution caused by the issuance
of common shares under the Company's equity compensation and benefit plans. The
shares will be purchased from time to time on the open market or through
privately negotiated transactions. On March 10, 1993, the Board of Directors
declared a two-for-one split of the Company's common stock and increased the
quarterly dividend to 36 cents per share from 33 cents per share, or an
indicated annual rate of $1.44 compared with $1.32 per share in 1992.
The Company anticipates that the major portion of its cash requirements
during the next few years to finance its operations, update its stores, and
expand will continue to be generated internally from operations. The Company
will continue to review all expenditures to maximize financial returns and
maintain financial flexibility.
IMPACT OF INFLATION AND CHANGING PRICES. The impact of inflation on the Company
has lessened in recent years as the rate of inflation has declined. Inflation
causes increases in the cost of doing business, including capital expenditures.
The effect of rising costs cannot always be passed along to customers by
adjusting prices because of competitive conditions. By striving to control
costs, the Company attempts to minimize the effects of inflation on its
operations.
13
<PAGE> 6
INDEPENDENT
AUDITORS'
REPORT
To the Stockholders and Board of Directors of J.C. Penney Company, Inc.:
We have audited the accompanying consolidated balance sheets of J.C. Penney
Company, Inc. and Subsidiaries as of January 29, 1994, January 30, 1993, and
January 25, 1992, and the related consolidated statements of income, reinvested
earnings, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of J.C. Penney
Company, Inc. and Subsidiaries as of January 29, 1994, January 30, 1993, and
January 25, 1992, and the results of their operations and their cash flows for
the years then ended in conformity with generally accepted accounting
principles.
As discussed on page 25, the Company adopted the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, in 1991. Also, as discussed on page 27, the Company adopted the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, in 1993.
KPMG Peat Marwick
200 Crescent Court, Dallas, Texas 75201
February 24, 1994
The Company is responsible for the information presented in this Annual Report.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and are considered to present fairly
in all material respects the Company's results of operations, financial
position, and cash flows. Certain amounts included in the consolidated
financial statements are estimated based on currently available information and
judgment of the outcome of future conditions and circumstances. Financial
information elsewhere in this Annual Report is consistent with that in the
consolidated financial statements.
The Company's system of internal controls is supported by written
policies and procedures and supplemented by a staff of internal auditors. This
system is designed to provide reasonable assurance, at suitable costs, that
assets are safeguarded and that transactions are executed in accordance with
appropriate authorization and are recorded and reported properly. The system is
continually reviewed, evaluated, and where appropriate, modified to accommodate
current conditions. Emphasis is placed on the careful selection, training, and
development of professional managers.
An organizational alignment that is premised upon appropriate delegation
of authority and division of responsibility is fundamental to this system.
Communication programs are aimed at assuring that established policies and
procedures are disseminated and understood throughout the Company.
The consolidated financial statements have been audited by independent
auditors whose report appears above. This audit was conducted in accordance
with generally accepted auditing standards, which includes the consideration of
the Company's internal controls to the extent necessary to form an independent
opinion on the consolidated financial statements prepared by management.
The Audit Committee of the Board of Directors is composed solely of
directors who are not officers or employees of the Company. The Audit
Committee's responsibilities include recommending to the Board for stockholder
approval the independent auditors for the annual audit of the Company's
consolidated financial statements. The Committee also reviews the audit plans,
scope, fees, and audit results of the auditors; internal audit reports on the
adequacy of internal controls; non-audit services and related fees; the
Company's ethics program; status of significant legal matters; the scope of the
internal auditors' plans and budget and results of their audits; and the
effectiveness of the Company's program for correcting audit findings. Company
personnel, including internal auditors, meet periodically with the Audit
Committee to discuss auditing and financial reporting matters.
William R. Howell Robert E. Northam
Chairman of the Board Executive Vice President
and Chief Executive Officer and Chief Financial Officer
14
<PAGE> 7
COMPANY
STATEMENT
ON FINANCIAL
INFORMATION
(In Millions except per share data)
J.C. Penny Company, Inc. and Subsidiaries
<TABLE>
<CAPTION>
FOR THE YEAR 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
REVENUE
Retail sales $ 18,983 $ 18,009 $ 16,201
Other revenue 595 506 447
-------- -------- --------
TOTAL REVENUE
COSTS AND EXPENSES 19,578 18,515 16,648
-------- -------- --------
Cost of goods sold, occupancy, buying,
and warehousing costs 12,997 12,297 11,099
Selling, general, and administrative expenses 4,508 4,446 4,154
Costs and expenses of other businesses 446 381 356
Net interest expense and credit costs 73 132 176
Nonrecurring items -- -- 395
-------- -------- --------
TOTAL COSTS AND EXPENSES 18,024 17,256 16,180
-------- -------- --------
INCOME BEFORE INCOME TAXES, EXTRAORDINARY
CHARGE, AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGES 1,554 1,259 468
Income taxes 610 482 204
-------- -------- --------
INCOME BEFORE EXTRAORDINARY CHARGE AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES 944 777 264
Extraordinary charge on debt redemption,
net of income taxes of $35 (55) -- --
Cumulative effect of accounting change
for income taxes 51 -- --
Cumulative effect of accounting change for
postretirement health care benefits, net of
income taxes of $116 -- -- (184)
-------- -------- --------
NET INCOME $ 940 $ 777 $ 80
======== ======== ========
EARNINGS PER COMMON SHARE
PRIMARY
Income before extraordinary charge and cumulative
effect of accounting changes $ 3.79 $ 3.15 $ .99
Extraordinary charge on debt redemption, net (.23) -- --
Cumulative effect of accounting change for
income taxes .21 -- --
Cumulative effect of accounting change for
postretirement health care benefits -- -- (.79)
-------- -------- --------
Net income $ 3.77 $ 3.15 $ .20
======== ======== ========
FULLY DILUTED
Income before extraordinary charge and cumulative
effect of accounting changes $ 3.55 $ 2.95 $ .99
Extraordinary charge on debt redemption, net (.21) -- --
Cumulative effect of accounting change for
income taxes .19 -- --
Cumulative effect of accounting change for
postretirement health care benefits -- -- (.79)
-------- -------- --------
Net income $ 3.53 $ 2.95 $ .20
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements on pages 18 through 29.
15
<PAGE> 8
CONSOLIDATED
BALANCE
SHEETS
(In millions except share data)
J.C.Penney Company,
Inc. and Subsidiaries
<TABLE>
<CAPTION>
ASSETS 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
CURRENT ASSETS
Cash and short term investments of $156, $405,
and $126 $ 173 $ 426 $ 137
Receivables, net 4,679 3,750 4,131
Merchandise inventories 3,545 3,258 2,897
Prepaid expenses 168 157 163
-------- -------- --------
TOTAL CURRENT ASSETS 8,565 7,591 7,328
PROPERTIES, NET 3,818 3,755 3,633
INVESTMENTS 1,182 991 442
DEFERRED INSURANCE POLICY ACQUISITION COSTS 426 372 313
OTHER ASSETS 797 758 728
-------- -------- --------
$ 14,788 $ 13,467 $ 12,444
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,139 $ 2,038 $ 1,565
Short term debt 1,284 907 471
Current maturities of long term debt 348 -- 237
Deferred taxes 112 64 60
-------- -------- --------
TOTAL CURRENT LIABILITIES 3,883 3,009 2,333
LONG TERM DEBT 2,929 3,171 3,354
DEFERRED TAXES 1,013 1,012 968
BANK DEPOSITS 581 538 530
INSURANCE POLICY AND CLAIMS RESERVES 540 462 353
OTHER LIABILITIES 477 570 718
STOCKHOLDERS' EQUITY
Preferred stock, without par value:
Authorized, 25 million shares --
issued, 1 million shares of Series B LESOP
convertible preferred 648 666 684
Guaranteed LESOP obligation (379) (447) (509)
Common stock, par value 50c.:
Authorized, 500 million shares --
issued, 236, 235, and 233 million shares 1,003 955 857
Reinvested earnings 4,093 3,531 3,156
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 5,365 4,705 4,188
-------- -------- --------
$ 14,788 $ 13,467 $ 12,444
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements on pages 18 through 29.
<TABLE>
<S> <C> <C> <C>
REINVESTED EARNINGS AT BEGINNING
OF YEAR $ 3,531 $ 3,156 $ 3,413
Net income 940 777 80
Unrealized change in equity securities 1 (1) 5
Two-for-one stock split -- (59) --
Common stock dividends declared (339) (309) (308)
Preferred stock dividends declared, net
of taxes (40) (33) (34)
-------- -------- --------
REINVESTED EARNINGS AT END OF YEAR $ 4,093 $ 3,531 $ 3,156
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements on pages 18 through 29.
16
<PAGE> 9
CONSOLIDATED
STATEMENTS
OF REINVESTED
EARNINGS
(In millions)
J.C. Penney Company,
Inc. and Subsidiaries
<TABLE>
<CAPTION>
FOR THE YEAR 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 940 $ 777 $ 80
Extraordinary charge, net of income taxes 55 -- --
Cumulative effect of accounting change for
income taxes (51) -- --
Nonrecurring items and cumulative effect of
accounting change -- -- 695
Deferred tax effects -- -- (268)
Depreciation and amortization 316 310 316
Amortization of original issue discount 48 58 53
Deferred taxes 100 48 109
Change in cash from:
Customer receivables (352) 411 413
Securitized customer receivables amortized (425) (36) (214)
Inventories, net of trade payables (196) (27) (293)
Other assets and liabilities, net (149) 33 20
------ ------ ------
286 1,574 911
INVESTING ACTIVITIES ------ ------ ------
Capital expenditures (480) (454) (516)
Investment in asset-backed certificates (12) (419) --
Purchases of investment securities (351) (325) (169)
Proceeds from sales of investment securities 215 195 149
------ ------ ------
(628) (1,003) (536)
FINANCING ACTIVITIES ------ ------ ------
Increase (decrease) in short term debt 377 436 (433)
Issuance of long term debt 1,015 280 500
Payments of long term debt (875) (677) (104)
Premium on debt retirement (76) -- --
Common stock issued, net 37 39 7
Preferred stock retired (18) (18) (13)
Dividends paid, preferred and common (371) (342) (342)
------ ------ ------
89 (282) (385)
NET INCREASE (DECREASE) IN CASH AND ------ ------ ------
SHORT TERM INVESTMENTS (253) 289 (10)
CASH AND SHORT TERM INVESTMENTS AT
BEGINNING OF YEAR 426 137 147
CASH AND SHORT TERM INVESTMENTS AT ------ ------ ------
END OF YEAR $ 173 $ 426 $ 137
====== ====== ======
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 253 $ 265 $ 267
Interest received $ 51 $ 71 $ 22
Income taxes paid $ 486 $ 322 $ 259
</TABLE>
See Notes to Consolidated Financial Statements on pages 18 through 29.
17
<PAGE> 10
RECLASSIFICATIONS. Certain amounts for prior years have been reclassified in
the Consolidated Statements of Income to conform with the classifications used
in 1993. Previously, these amounts were included in "Selling, general, and
administrative expenses," "Interest expense, net," "Finance charge revenue,"
and "Costs and expenses of other businesses." The "Net interest expense and
credit costs" caption in the Consolidated Statements of Income includes net
interest expense, finance charge revenue, and credit operating costs, including
bad debt expense. These reclassifications had no effect on net income. In the
Consolidated Balance Sheets, the assets and liabilities of JCPenney Insurance,
JCPenney National Bank, and JCP Realty, Inc., which were included in "Other
assets" and "Other liabilities," respectively, in prior years, have been fully
consolidated. All prior year data throughout this report has been restated to
conform with the classifications used in 1993.
BASIS OF CONSOLIDATION. The consolidated financial statements present the
results of J.C. Penney Company, Inc. and all of its wholly-owned and
majority-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
DEFINITION OF FISCAL YEAR. The Company's fiscal year ends on the last Saturday
in January. Fiscal year 1993 ended January 29, 1994, 1992 ended January 30,
1993, and 1991 ended January 25, 1992. They comprised 52 weeks, 53 weeks, and
52 weeks, respectively. The accounts of JCPenney Insurance and JCPenney
National Bank are on a calendar year basis.
RETAIL SALES. Retail sales include merchandise and services, net of returns,
and exclude sales taxes.
EARNINGS PER COMMON SHARE. Primary earnings per share are computed by dividing
net income less dividend requirements on the Series B LESOP convertible
preferred stock, net of tax, by the weighted average common stock and common
stock equivalents outstanding. Fully diluted earnings per share also assume
conversion of the Series B LESOP convertible preferred stock into the Company's
common stock. Additionally, it assumes adjustment of net income for the
additional cash requirements, net of tax, needed to fund the LESOP debt service
resulting from the assumed replacement of the preferred dividends with common
stock dividends. The number of shares used in the computation of fully diluted
earnings per share was 261 million in 1993, 258 million in 1992, and 234
million in 1991.
CASH AND SHORT TERM INVESTMENTS. Cash invested in instruments with remaining
maturities of three months or less from time of investment is reflected as
short term investments. The carrying value of these instruments approximates
market value due to their short maturities.
MERCHANDISE INVENTORIES. Substantially all merchandise inventories are valued
at the lower of cost (last-in, first-out) or market, determined by the retail
method.
DEPRECIATION. The cost of buildings and equipment is depreciated on a straight
line basis over the estimated useful lives of the assets. The principal annual
rates of depreciation are 2 per cent for buildings, 5 per cent for warehouse
fixtures and equipment, 10 per cent for selling fixtures and equipment, and 20
per cent for data center equipment. Improvements to leased premises are
amortized on a straight line basis over the expected term of the lease or their
estimated useful lives, whichever is shorter.
DEFERRED CHARGES. Expenses associated with the opening of new stores are
written off in the year of the store opening, except those of stores opened in
January, which are written off in the following fiscal year. Deferred policy
acquisition costs, principally marketing costs and commissions incurred by
JCPenney Insurance to secure new insurance policies, are amortized over the
expected premium-paying period of the related policies.
INVESTMENTS. Fixed income investments (principally bonds), held by JCPenney
Insurance, are carried at amortized cost. Marketable equity securities are
carried at market value. Investments also include JCP Receivables, Inc.
asset-backed certificates held by the Company, which are carried at amortized
cost.
INSURANCE POLICY AND CLAIMS RESERVES. Liabilities established by JCPenney
Insurance for future policy benefits are computed using a net level premium
method including assumptions as to investment yields, mortality, morbidity, and
persistency based on the Company's experience. Liabilities for unpaid claims
are charged to expense in the period that the claims are incurred.
ADVERTISING. Costs for newspaper, television, radio, and other media are
expensed as incurred, and were $523 million in 1993, $503 million in 1992, and
$398 million in 1991. Direct response advertising consists primarily of catalog
preparation and printing costs, which are charged to expense over the period
during which the benefits of the catalogs are expected, not to exceed six
months. Catalog advertising reported in prepaid expense on the balance sheet
was $88 million at the end of 1993, as compared with $79 million and $81
million at the end of 1992 and 1991, respectively.
FINANCE CHARGE REVENUE AND BAD DEBT EXPENSE, on customer accounts receivable
owned by the Company, are included in the "Net interest expense and credit
costs" line of the Consolidated Statements of Income. Finance charge revenue
was $523 million in 1993, $509 million in 1992, and $567 million in 1991. Bad
debt expense was $95 million in 1993, $122 million in 1992, and $175 million in
1991.
18
<PAGE> 11
NONRECURRING ITEMS amounted to $395 million in 1991, and included recognition
of the costs to dispose of certain real estate properties, the write-off of
investments in several experimental businesses, and costs associated with
consolidating and streamlining various Company activities. There were no
nonrecurring items in 1993 or 1992.
INCOME TAXES. The Financial Accounting Standards Board issued Statement No.
109, Accounting for Income Taxes, in February 1992. This statement requires an
asset and liability approach to accounting for differences between the tax
basis of an asset or liability and its reported amount in the financial
statements. Previously, the Company accounted for income taxes under APB
Opinion No. 11. The Company adopted Statement No. 109 effective January 31,
1993, and recorded a $51 million cumulative adjustment, reducing deferred taxes
on the balance sheet, and increasing net income by the same amount.
POSTEMPLOYMENT BENEFITS. The Financial Accounting Standards Board issued
Statement No. 112, Employers' Accounting for Postemployment Benefits, in
November 1992. This statement, which is required to be adopted in 1994,
requires employers to recognize the obligation to provide postemployment
benefits on an accrual basis if certain conditions are met. The impact on the
Company of adopting this standard is expected to be immaterial.
DEBT AND EQUITY SECURITIES. The Financial Accounting Standards Board issued
Statement No. 115, Accounting for Certain Investments in Debt and Equity
Securities, in May 1993. This statement, which is required to be adopted in
1994 and reflected prospectively, requires that, except for debt securities
classified as "held to maturity," investments in debt and equity securities be
reported at fair value. Changes in unrealized gains and losses for securities
classified as "available for sale" are recorded directly to stockholders'
equity, net of applicable income taxes. Had this statement been adopted at year
end 1993, assets and deferred taxes on the balance sheet would be increased
$119 million and $45 million, respectively, and stockholders' equity would be
increased $74 million, with no change in net income.
ADVERTISING. The American Institute of Certified Public Accountants issued
Statement of Position No. 93-7, Reporting on Advertising Costs, in December
1993. This SOP, which is effective in 1994, requires that all advertising costs
be expensed as incurred or the first time the advertising takes place, except
for direct response advertising, which can be capitalized and written off over
the period during which the benefits are expected. The Company's reporting of
advertising costs is in conformance with the provisions of this statement.
<TABLE>
<CAPTION>
RECEIVABLES (In millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Customer receivables serviced $ 4,410 $ 4,068 $ 4,489
Customer receivables sold 725 1,150 1,186
------- ------- -------
Customer receivables owned 3,685 2,918 3,303
Less allowance for doubtful accounts 59 69 79
------- ------- -------
Customer receivables, net 3,626 2,849 3,224
JCPenney National Bank receivables 587 538 539
Other receivables 466 363 368
------- ------- -------
Receivables, net $ 4,679 $ 3,750 $ 4,131
</TABLE>
The Company believes that the carrying value of existing customer and
bank receivables is the best estimate of fair value because of their short
average maturity and bad debt losses can be reasonably estimated and have been
reserved.
The Company's policy is to write off accounts when the scheduled minimum
payment has not been received for six consecutive months, if any portion of the
balance is more than 12 months past due, or if it is otherwise determined that
the customer is unable to pay. Collection efforts continue subsequent to write
off, and recoveries are applied as a reduction of bad debt losses.
Concentrations of credit risk with respect to customer receivables are limited
due to the large number of customers comprising the Company's credit card base
and their dispersion across the country.
During the period 1988 to 1990, the Company transferred portions of its
customer receivables to a trust which, in turn, sold certificates representing
undivided interests in the trust in public offerings. Certificates sold during
this period totaled $1,400 million. No gain or loss was recognized at the date
of sale. The $250 million of certificates sold in 1988 were completely
amortized by the end of 1992. Of the $800 million certificates sold in 1990,
$425 million were amortized in 1993. As of JanuaryE29, 1994, $725 million of
the certificates were outstanding and the balance of the receivables in the
trust was $1,642 million. The Company owns the remaining undivided interest in
the trust not represented by the certificates and will continue to service all
receivables for the trust.
19
<PAGE> 12
In 1993 and 1992, the Company purchased $12 million and $419 million,
respectively, of its asset-backed certificates in the open market. The fair
value of this total investment of $431 million at the end of 1993 was $510
million based upon quoted market value. The fair value of the $419 million
investment at the end of 1992 was $465 million.
Cash flows generated from receivables in the trust are dedicated to
payment of interest on the certificates (fixed rates ranging from 8.70% to
9.625%), absorption of defaulted accounts in the trust, and payment of
servicing fees to the Company. The reserve funds are fully funded ($112 million
at January 29, 1994). Reserves are available if cash flows from the receivables
become insufficient to make such payments. None of the reserve funds has been
utilized as of January 29, 1994. Additionally, the Company has made available
to the trust irrevocable letters of credit of $138 million that may be drawn
upon should the reserve funds be exhausted. None of the letters of credit was
in use as of JanuaryE29, 1994.
In connection with the sale of $375 million of certificates in 1990, the
Company entered into two offsetting interest rate swap agreements with a
commercial bank, each having a notional principal amount of $375 million.
Because these interest rate swap agreements are offsetting, their net fair
value at the end of 1993 and 1992 was zero. Currently, the Company has no
interest rate exposure from these offsetting interest rate swap agreements
which terminate when all certificates have been settled in the year 2000. Under
one swap the Company receives a fixed rate and pays a floating rate while under
the second swap, the Company pays a fixed rate and receives a floating rate.
Because of the offsetting nature of these swaps, there is no financial
statement impact. The credit risk has been minimized by the selection of a
high credit quality commercial bank as counter party. As long as the Company
holds both swap positions, there is effectively no credit risk since there is
no net exchange of cash flows.
<TABLE>
<CAPTION>
MERCHANDISE INVENTORIES (In millions) 1993 1992 1991
-------- -------- -------
<S> <C> <C> <C>
Merchandise inventories, at lower of cost (FIFO)
or market $ 3,791 $ 3,540 $ 3,211
LIFO reserve (246) (282) (314)
------- ------- -------
Merchandise inventories, at LIFO cost $ 3,545 $ 3,258 $ 2,897
</TABLE>
Substantially all of the Company's inventories are measured using the
last-in, first-out (LIFO) method of inventory valuation. Since 1991, the
Company has applied internally developed indices that more accurately measure
increases and decreases in its own retail prices. From 1974 through 1990, the
Company used the Bureau of Labor Statistics price indices applied against
inventory selling values to arrive at an inventory valuation. The cumulative
effect of this change on reinvested earnings at the beginning of 1991 was not
determinable. However, the effect of using the internal indices instead of the
Bureau of Labor Statistics price indices at the end of 1991 was to increase net
income by approximately $100 million, or 39 cents per share.
<TABLE>
<CAPTION>
PROPERTIES (In millions) 1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Land $ 213 $ 212 $ 205
Buildings
Owned 2,119 2,016 1,838
Capital leases 219 237 244
Fixtures and equipment 2,693 2,703 2,649
Leasehold improvements 575 544 569
------- ------- -------
5,819 5,712 5,505
Less accumulated depreciation and amortization 2,001 1,957 1,872
------- ------- -------
Properties, net $ 3,818 $ 3,755 $ 3,633
</TABLE>
At January 29,1994, the Company owned 245 retail stores, four catalog
distribution centers, one store distribution center, its home office facility,
and the insurance company corporate office building.
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES (In millions) 1993 1992 1991
-------- -------- -------
<S> <C> <C> <C>
Land $ 1 $ 8 $ 7
Buildings 119 189 209
Fixtures and equipment 276 270 238
Leasehold improvements 63 27 52
-------- -------- --------
Total capital expenditures $ 459 $ 494 $ 506
</TABLE>
Expenditures for existing stores, primarily modernizations and updates,
were $130 million in 1993, as compared with $76 million in 1992 and $134
million in 1991. Expenditures for new stores opened in 1993, 1992, and 1991
were $162 million, $130 million, and $172 million, respectively.
20
<PAGE> 13
INVESTMENTS at year end 1993 totalled $1,182 million, and consisted of fixed
income securities and asset-backed certificates carried at amortized cost
(shown in the table below) and equity securities carried at market value. The
market value of investments is based on quoted market prices.
Equity securities were $80 million (cost, $71 million) at year end 1993,
$29 million (cost, $22 million) at the end of 1992, and $27 million (cost, $18
million) at the end of 1991. Gross unrealized gains and losses at year end 1993
were $10 million and $1 million, respectively. Net unrealized investment gains
on equity securities included in stockholders' equity were $6 million, net of
deferred income taxes of $3 million.
The market values of investments carried at amortized cost were as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------------------- ------------------ ---------------------
Amortized Market Amortized Market Amortized Market
INVESTMENTS (ln millions) Cost Value Cost Value Cost Value
--------- -------- --------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government obligations $ 139 $ 153 $ 138 $ 142 $ 48 $ 52
Corporate securities 280 302 210 224 193 210
Mortgage-backed securities 158 164 148 159 140 154
Asset-backed certificates 431 510 419 465 -- --
Other 94 92 47 45 34 35
-------- ------- ------ ------- ------- -------
Total $ 1,102 $ 1,221 $ 962 $ 1,035 $ 415 $ 451
</TABLE>
Gross unrealized gains and losses were $125 million and $6 million,
respectively, at year end 1993.
Investments carried at amortized cost had scheduled maturities at year
end 1993, as follows:
<TABLE>
<CAPTION>
Amortized Market
(In millions) Cost Value
--------- --------
<S> <C> <C>
Due in one year or less $ 12 $ 12
Due after one year through five years 147 153
Due after five years through ten years 567 657
Due after ten years 201 218
-------- -------
$ 927 $ 1,040
Mortgage-backed securities 158 164
Other 17 17
-------- -------
Total $ 1,102 $ 1,221
</TABLE>
Net realized investment gains are included in "Other revenue" on the
Consolidated Statements of Income. These gains were $14 million in 1993, $12
million in 1992, and $5 million in 1991.
The Company limits the credit risk by diversifying its investments by
industry and geographic region.
<TABLE>
<CAPTION>
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (In millions) 1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Trade payables $ 1,034 $ 944 $ 610
Accrued salaries, vacations, profit-sharing,
and bonuses 311 308 256
Taxes, including income taxes 234 238 209
Workers' compensation and public liability
insurance 126 116 112
Common dividend payable 85 77 77
Other 349 355 301
-------- -------- --------
Total $ 2,139 $ 2,038 $ 1,565
</TABLE>
<TABLE>
<CAPTION>
SHORT TERM DEBT (In millions) 1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Commercial paper $ 1,284 $ 887 $ 414
Master notes and other -- 20 57
-------- ------- -------
Short term debt $ 1,284 $ 907 $ 471
Average short term debt outstanding $ 1,350 $ 1,154 $ 754
Peak outstanding $ 2,327 $ 1,675 $ 1,489
Average interest rates 3.2% 3.7% 5.6%
</TABLE>
21
<PAGE> 14
<TABLE>
<CAPTION>
LONG TERM DEBT (In millions) 1993 1992 1991
------- -------- -------
<S> <C> <C> <C>
Original issue discount
Zero coupon notes and 6% debentures, due
1992 to 1994 and 2006, $700 at maturity,
yields 13.5% to 15.1%, effective rates 12.5%
to 13.2% $ 101 $ 401 $ 359
Debentures and notes
5.375% to 7.125%, due 1998 to 2023 1,000 -- --
8.25% to 8.875%, due 1992 to 2022 250 366 269
9% to 10%, due 1992 to 2021 1,000 1,750 2,007
Guaranteed LESOP notes, 8.17%, due 1998* 379 447 509
Present value of commitments under capital
leases 127 141 160
Other 72 66 50
------- ------- -------
Long term debt $ 2,929 $ 3,171 $ 3,354
Average long term debt outstanding $ 2,471 $ 2,683 $ 2,827
Average interest rates 9.9% 10.5% 10.2%
</TABLE>
*For further discussion, see LESOP on page 26.
The fair value for long term debt at the end of 1993 and 1992, excluding
capital leases, exceeded the recorded amount by $219 million and $265 million,
respectively. The fair value of these instruments was determined based on the
interest rate environment and the Company's credit rating.
The Company has in place interest rate swap contracts that were entered
into shortly after the issuance of $250 million aggregate principal amount of
8.25 per cent sinking fund debentures in August 1992. These are four year
agreements with a notional principal amount totalling $250 million. Under the
swap agreements, the Company receives a fixed rate payment and disburses a
floating rate payment. The counter parties to these contracts are high credit
quality commercial banks. Consequently, credit risk, which is inherent in all
swaps, has been minimized to a large extent. The accounting treatment for these
contracts, which serve to hedge the 8.25 per cent debentures, is to record the
net interest received or paid as an adjustment to interest expense on a current
basis. Gains or losses resulting from market movements are not recognized. The
fair value of these interest rate swaps at the end of 1993 and 1992 was $13
million and $4 million, respectively.
<TABLE>
<CAPTION>
CHANGES IN LONG TERM DEBT (In millions) 1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Increases
5.375% to 9.75% notes, due 1997 to 2023 $ 1,000 $ 250 $ 500
Amortization of original issue discount 48 43 53
Other 16 30 5
-------- ------- -------
1,064 323 558
-------- ------- -------
Decreases
Transfers to current maturities of long
term debt 348 -- 237
8.375% to 12.75% debentures, bonds, and
notes, due 1995 to 2021, retired in 1992 and 1993 872 423 --
Other, including LESOP amortization 86 83 102
-------- ------- -------
1,306 506 339
-------- ------- -------
Net increase (decrease) in long term debt $ (242) $ (183) $ 219
</TABLE>
<TABLE>
<CAPTION>
Long term Capital
MATURITIES OF LONG TERM DEBT (In millions) debt leases
--------- --------
<S> <C> <C>
1994 $ 352 $ 24
1995 2 18
1996 6 19
1997 257 15
1998 587 16
1999 to 2003 821 53
Thereafter 845 19
--------- --------
Total $ 2,870 164
=========
Less future interest and executory expenses 37
--------
Present value $ 127
========
</TABLE>
22
<PAGE> 15
COMMITTED BANK CREDIT FACILITIES available to the Company as of January 29,
1994, amounted to $1.25 billion. In 1993, the Company entered into two
syndicated revolving credit facility agreements. These facilities include a
$450 million, one-year revolver and an $800 million, five-year revolver with a
group of 39 domestic and international banks. These facilities, which replaced
the $500 million confirmed lines of credit and the $750 million International
Revolving Credit Facility, support commercial paper borrowing arrangements.
Neither of the borrowing facilities was in use as of January 29, 1994.
PREFERRED STOCK. In 1988, a leveraged employee stock ownership plan (LESOP) was
adopted (see page 26 for further discussion). The LESOP purchased approximately
1.2 million shares of a new issue of Series B convertible preferred stock from
the Company. These shares are convertible into shares of the Company's common
stock at a conversion rate equivalent to 20 shares of common stock for each
share of preferred stock. The conversion price is $30.00 per common share. The
convertible preferred stock may be redeemed at the option of the Company or the
LESOP, under certain limited circum-stances. The redemption price may be
satisfied in cash or common stock or a combination of both at the Company's
sole discretion. The dividends are cumulative, are payable semi-annually on
January 1 and July 1, and yield 7.9 per cent. The convertible preferred stock
issued to the LESOP has been recorded in the stockholders' equity section of
the consolidated balance sheet, and the "Guaranteed LESOP obligation,"
representing borrowings by the LESOP, has been recorded as a reduction of
stockholders' equity.
THE PREFERRED DIVIDEND is payable semi-annually at an annual rate of $2.37 per
common equivalent share. Preferred dividends declared were $52 million in 1993,
$53 million in 1992, and $54 million in 1991; on an after tax basis, the
dividends amounted to $31 million in 1993, $33 million in 1992, and $34 million
in 1991.
In 1990, the Board of Directors declared a dividend distribution of
one new preferred stock purchase right on each outstanding share of common
stock and authorized the redemption of the old preferred stock purchase rights
for five cents per share totalling $12 million. The preferred stock purchase
rights, in accordance with the rights agreement, entitle the purchase, for each
right held, of 1/400 of a share of Series A junior participating preferred
stock at a price of $140. The rights are exercisable upon the occurrence of
certain events and are redeemable by the Company under certain circumstances,
all as described in the rights agreement.
COMMON STOCK. On March 9, 1994, the Board of Directors increased the quarterly
common dividend to 42 cents per share, or an indicated annual rate of $1.68 per
share. The regular quarterly dividend on the Company's outstanding common stock
was payable on May 1, 1994, to stockholders of record on April 8, 1994. The
Board of Directors also approved on March 9, 1994, the purchase of up to 10
million shares of the Company's common stock to offset dilution caused by the
issuance of common shares under the Company's equity compensation and benefit
plans. The shares will be purchased from time to time on the open market or
through privately negotiated transactions.
The quarterly common dividend was 36 cents per share in 1993, and 33
cents per share in 1992 and 1991, or an indicated annual rate of $1.44 per
share in 1993, and $1.32 per share in 1992 and 1991. Common dividends declared
were $339 million in 1993, $309 million in 1992, and $308 million in 1991.
On March 10, 1993, the Board of Directors declared a two-for-one stock
split in the form of a stock dividend, which was payable May 1, 1993, to
stockholders of record on April 12, 1993.
The Company will request stockholder approval at its May 20, 1994 Annual
Meeting of Stockholders to increase the authorized number of shares of common
stock from 500 million to 1.25 billion shares.
<TABLE>
<CAPTION>
Shares Amounts
---------------------------- ------------------------
CHANGES IN OUTSTANDING (In thousands) (In millions)
COMMON STOCK 1993 1992 1991 1993 1992 1991
------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of year 234,778 233,302 233,122 $ 955 $ 857 $ 850
Two-for-one stock split -- -- -- -- 59 --
Common stock issued 1,308 1,476 180 48 39 7
------- ------- ------- ------ ----- -----
Balance at end of year 236,086 234,778 233,302 $1,003 $ 955 $ 857
</TABLE>
There were approximately 53,000 stockholders of record at year end 1993.
In addition, the Company's savings plans, including the LESOP, had 111,000
participants and held 36.1 million shares of the Company's common stock. The
savings plans also held 1.1 million shares of preferred stock, convertible into
21.6 million shares of common stock. On a combined basis, these plans held
approximately 22 per cent of the Company's common shares after giving effect to
the conversion of the preferred stock at the end of fiscal year 1993.
23
<PAGE> 16
1993 EQUITY COMPENSATION PLAN AND 1993 NON-ASSOCIATE DIRECTORS' EQUITY PLAN. In
May 1993, stockholders approved the 1993 Equity Compensation Plan (1993 Plan),
which replaced the expiring 1989 Equity Compensation Plan. Under the 1993 Plan,
11.6 million shares of common stock were reserved for issuance upon the
exercise of options and stock appreciation rights and for the payment of stock
awards over the five-year term of the 1993 Plan. No discount options nor tax
benefit rights may be issued under the 1993 Plan. Participants in the 1993
Plan are generally to be selected management associates of the Company and its
subsidiaries and affiliates as determined by the committee administering the
1993 Plan. It is anticipated that approximately 2,000 associates will be
eligible to participate. No awards may be made under the 1993 Plan after May
31, 1998. In May 1993, stockholders also approved the 1993 Non- Associate
Directors' Equity Plan (Directors' Plan). Under the Directors' Plan, 90,000
shares of common stock were reserved for issuance upon the exercise of stock
options and the payment of stock awards over the five-year term of the
Directors' Plan. Each director who is presently not an active employee of the
Company will automatically be granted annually an option to purchase 800
shares, in tandem with an award of 200 restricted shares of common stock. An
initial grant/award in this same amount will also automatically be granted to
each new Non-Associate Director upon his or her first being elected as a
director. Such stock options will become exercisable six months from the date
of grant, but shares acquired upon such exercise will not be transferable until
a director terminates service.
<TABLE>
<CAPTION>
1993 1992 1991
------------------------- ------------------------ -------------------------
Weighted Weighted Weighted
average average average
Shares option Shares option Shares option
STOCK OPTIONS (In thousands) price (In thousands) price (In thousands) price
-------------- -------- -------------- -------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of year 8,844 $ 27.42 9,490 $ 26.31 3,820 $ 24.11
Granted 159 41.24 574 35.10 6,048 27.29
Exercised (752) 24.49 (974) 21.02 (206) 12.85
Expired and cancelled (16) 26.89 (246) 27.66 (172) 28.20
----- ------- ----- ------- ----- -------
Balance at end of year 8,235 $ 27.96 8,844 $ 27.42 9,490 $ 26.31
</TABLE>
At year end 1993, options covering 2.2 million shares were exercisable and
11.6 million shares were reserved for future grants.
<TABLE>
<CAPTION>
INTEREST EXPENSE (In millions) 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Short term debt $ 43 $ 43 $ 42
Long term debt 246 281 288
Income on short term investments (14) (48) (19)
Interest capitalized (4) (14) (12)
Other, net* (30) (4) 9
------ ------ ------
Interest expense, net $ 241 $ 258 $ 308
</TABLE>
*1993 and 1992 include $34 million and $28 million, respectively, of
interest income from the Company's investment in asset-backed certificates.
<TABLE>
<CAPTION>
RENT EXPENSE (In millions) 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Minimum rent on noncancelable operating leases $ 236 $ 244 $ 251
Rent based on sales 37 35 33
Minimum rent on cancelable personal
property leases 92 107 91
Real estate taxes and common area costs 145 134 120
------ ------ ------
Total $ 510 $ 520 $ 495
</TABLE>
24
<PAGE> 17
The Company conducts the major part of its operations from leased premises
which include retail stores, distribution centers, warehouses, offices, and
other facilities. Almost all leases will expire during the next 20 years;
however, most leases will be renewed or replaced by leases on other premises.
<TABLE>
<CAPTION>
MINIMUM ANNUAL RENTS UNDER NONCANCELABLE
OPERATING LEASES AND SUBLEASES (In millions) Gross rents Net rents*
----------- ----------
<S> <C> <C>
1994 $ 247 $ 173
1995 232 163
1996 217 152
1997 197 141
1998 184 125
Thereafter 973 718
------ ------
Total $2,050 $1,472
====== ======
Present value $ 900
Weighted average interest rate 10%
</TABLE>
*Rents are shown net of their estimated executory costs, which are principally
real estate taxes, maintenance, and insurance.
<TABLE>
<CAPTION>
RETIREMENT PLANS (In millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Pension
Service cost $ 50 $ 46 $ 37
Interest cost 123 122 114
Actual (return) loss on assets (236) (90) (332)
Net amortization and deferral 59 (90) 180
----- ----- -----
Pension credit (4) (12) (1)
----- ----- -----
Postretirement health care
Service cost 3 6 5
Interest cost 24 27 26
----- ----- -----
Total 27 33 31
----- ----- -----
LESOP expense 50 49 48
----- ----- -----
Total retirement plans $ 73 $ 70 $ 78
</TABLE>
PENSION PLAN. JCPenney's principal pension plan, which is noncontributory,
covers substantially all United States employees who have completed 1,000 or
more hours of service within a period of 12 consecutive months and have
attained 21 years of age. In addition, the Company has an unfunded,
noncontributory, supplemental retirement program for certain management
employees. In general, benefits payable under the principal pension plan are
determined by reference to a participant's final average earnings and years of
credited service up to 35 years.
In 1993, the Company lowered its discount rate to 7.25 per cent due to
the continuation of a lower interest rate environment. The discount rate was
also lowered in 1992 to 8 per cent from 9 per cent in 1991. In 1992, the salary
progression rate was reduced from 6 per cent to 4 per cent because of lower
inflation. The impact of these changes increased the Company's obligation at
year end 1993 and 1992. Accordingly, the Company made a cash contribution of
$65 million to the plan in 1993 and expects to make a cash contribution to the
plan in 1994. The 1993 contribution was the first since 1983.
POSTRETIREMENT HEALTH CARE BENEFITS. The Company's retiree health care plan
(Retiree Plan) covers medical and dental services and eligibility for benefits
is based on age and years of service. The Retiree Plan is contributory and the
amounts paid by retired employees have increased in recent years and are
expected to continue to do so. For certain groups of employees, Company
contributions toward the cost of retiree coverage will be based on a fixed
dollar amount which will vary with years of service, age, and dependent
coverage. The Retiree Plan is funded on a pay-as-you-go basis by the Company
and retiree contributions. The Company adopted the Financial Accounting
Standards Board Statement No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, for its Retiree Plan in 1991.
25
<PAGE> 18
In 1993 and 1992, the Company modified several postretirement health
care assumptions. The discount rate was lowered from 8 per cent to 7.25 per
cent in 1993 and from 9 per cent to 8 per cent in 1992. The health care trend
rate was lowered from 12 per cent to 10 per cent for 1994 with gradual
reductions to 6 per cent by 2003 and beyond. In 1992, the health care trend
rate was lowered from 13 per cent to 12 per cent. The health care trend rate
change represents a modification from previous assumptions because of favorable
experience and a lower inflation environment. The changes in plan assumptions
had no significant impact on the Company's obligation at year end 1993. A one
per cent increase in the health care trend rate would increase the amount
reported for the accumulated obligation by $28 million and would result in $2
million additional expense for 1993.
LESOP. The Company's LESOP, adopted in 1988, is a defined contribution plan
which covers substantially all United States employees who have completed at
least 1,000 hours of service within a period of 12 consecutive months, and if
hired on or after January 1, 1988, have attained 21 years of age.
The LESOP borrowed $700 million at an interest rate of 8.17 per cent
through a 10 year loan guaranteed by the Company. The LESOP used the proceeds
of the loan to purchase a new issue of convertible preferred stock from the
Company. The Company used the proceeds from the issuance of preferred stock to
the LESOP to purchase 28 million common shares of the Company in the open
market.
The Company has reflected the guaranteed LESOP borrowing as long term
debt on the Consolidated Balance Sheet. A like amount of "Guaranteed LESOP
obligation" was recorded as a reduction of stockholders' equity. The
convertible preferred stock issued to the LESOP for cash was recorded in the
stockholders' equity section. As the Company makes contributions to the LESOP,
these contributions, plus the dividends paid on the Company's preferred stock
held by the LESOP, will be used to repay the loan. As the principal amount of
the loan is repaid, the "Guaranteed LESOP obligation" is reduced accordingly.
The amount of compensation cost recorded by the Company represents its
cash contribution to the LESOP.
The following table sets forth the status of the Company's retirement
plans:
<TABLE>
<CAPTION>
December 31
-----------
RETIREMENT PLANS (In millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Pension
Present value of accumulated benefits
Vested $ 1,367 $ 1,227 $ 976
Non-vested 80 73 67
------- ------- -------
$ 1,447 $ 1,300 $ 1,043
======= ======= =======
Present value of actuarial benefit obligation $(1,781) $(1,694) $(1,373)
Net assets at fair market value 1,800 1,585 1,561
Unrecognized transition asset, net of
unrecognized losses 216 259 (64)
------- ------- -------
Net prepaid pension cost $ 235 $ 150 $ 124
======= ======= =======
Postretirement health care benefits
Accumulated benefit obligation
Retirees $ 246 $ 205 $ 191
Fully eligible active participants 51 82 77
Other active participants 41 43 42
------- ------- -------
338 330 310
Unrecognized net loss (10) (7) --
------- ------- -------
Net liability $ 328 $ 323 $ 310
======= ======= =======
Key assumptions
Rate of return on pension plan assets 9.5% 9.5% 9.5%
Discount rate 7.25% 8.0% 9.0%
Salary progression rate 4.0% 4.0% 6.0%
</TABLE>
26
<PAGE> 19
<TABLE>
<CAPTION>
Savings plans Pension
------------- -------
December 31 December 31
----------- -----------
TOTAL ASSETS AND EQUITY (In millions) 1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
JCPenney preferred and common stock $3,030 $2,200 $1,720 $ -- $ -- $ --
Equity securities 117 103 79 1,424 1,232 1,188
Fixed income investments 1,091 1,061 902 302 275 279
LESOP loan obligation,
including accrued interest
of $17, $20, and $21 (431) (498) (560) -- -- --
Other assets, net 47 37 32 74 78 94
------ ------ ------ ------ ------ ------
Net assets $3,854 $2,903 $2,173 $1,800 $1,585 $1,561
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Savings plans Pension
------------- -------
December 31 December 31
CHANGES IN FAIR VALUE OF ----------- -----------
NET ASSETS (In millions) 1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net assets at beginning of year $2,903 $2,173 $1,823 $1,585 $1,561 $1,284
Company contribution 50 49 48 65 -- --
Participants' contributions 184 169 156 -- -- --
Gains 984 794 400 236 93 332
LESOP interest expense (35) (40) (45) -- -- --
Benefits paid (232) (242) (209) (86) (69) (55)
------ ------ ------ ------ ------ ------
Net assets at end of year $3,854 $2,903 $2,173 $1,800 $1,585 $1,561
====== ====== ====== ====== ====== ======
</TABLE>
TAXES. Taxes other than income taxes, over half of which were payroll taxes,
totalled $416 million in 1993, as compared with $386 million in 1992 and $372
million in 1991.
The Financial Accounting Standards Board issued Statement No. 109,
Accounting for Income Taxes, in February 1992. This statement requires an asset
and liability approach to accounting for differences between the tax basis of
an asset or liability and its reported amount in the financial statements
(temporary differences). Deferred taxes are determined by applying the
provisions of enacted tax laws, and adjustments are required for changes in tax
laws and rates. The Company adopted Statement No. 109 effective January 31,
1993. Deferred taxes reflected on the balance sheet were reduced by $51
million, and a cumulative adjustment was recorded to increase net income by the
same amount, using current tax rates in effect at the beginning of fiscal 1993.
The Omnibus Budget Reconciliation Act of 1993, which was signed into law
on August 10, 1993, included an increase in the statutory Federal income tax
rate from 34 per cent to 35 per cent, retroactive to January 1, 1993. This
change in the tax rate resulted in higher taxes on operating income in 1993 as
well as a one-time, non-cash tax expense totalling $14 million for the
revaluation of deferred taxes on the balance sheet as required by Statement No.
109.
Deferred tax assets and liabilities reflected on the Company's
consolidated balance sheet at January 29, 1994, were measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The major components of
deferred tax liabilities (assets) at January 29, 1994, were as follows:
<TABLE>
<CAPTION>
Net
Deferred Deferred (Asset)
TEMPORARY DIFFERENCES (In millions) (Asset) Liability Liability
-------- --------- ---------
<S> <C> <C> <C>
Retirement plans $ (191) $ 154 $ (37)
Restructuring reserve (49) -- (49)
Worker's compensation/public liability (78) -- (78)
Leases (36) 388 352
Accounts receivable (22) -- (22)
Inventories (23) 125 102
Depreciation -- 704 704
Deferred policy acquisition costs -- 147 147
Other (153) 159 6
------ ------- -------
Total $ (552) $ 1,677 $ 1,125
</TABLE>
No valuation allowances were considered necessary as of January 31, 1993
or January 29, 1994. The Company believes that the existing deductible
temporary differences will be offset by future reversals of differences
generating taxable income.
Deferred taxes, under APB Opinion No. 11 in 1992 and 1991, consisted
principally of accumulated depreciation and accounting for leases.
27
<PAGE> 20
<TABLE>
<CAPTION>
INCOME TAX EXPENSE (In millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Current
Federal $ 443 $ 372 $ 196
State and local 67 62 62
------ ------ ------
510 434 258
------ ------ ------
Deferred
Federal 80 29 (29)
State and local 20 19 (25)
------ ------ ------
100 48 (54)
------ ------ ------
Total $ 610 $ 482 $ 204
Effective tax rate 39.3% 38.3% 43.5%
</TABLE>
<TABLE>
<CAPTION>
Per cent of
Amounts (In millions) pre-tax income
--------------------- --------------
RECONCILIATION OF TAX RATES 1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Federal income tax at statutory rate $ 544 $ 428 $ 159 35.0 34.0 34.0
State and local income taxes, less federal
income tax benefit 58 53 25 3.7 4.2 5.1
Revaluation of deferred taxes 14 -- -- .9 -- --
Tax effect of dividends on allocated
LESOP shares (9) -- -- (.5) -- --
Interest, net of tax, on prior years'
audit adjustments -- -- 21 -- -- 4.6
Tax credits and other 3 1 (1) .2 .1 (.2)
------ ------ ------ ---- ---- ----
Total $ 610 $ 482 $ 204 39.3 38.3 43.5
</TABLE>
SEGMENT REPORTING. The Company operates predominantly in one industry segment
consisting of selling merchandise and services to consumers through retail
department stores that include catalog departments. Total assets for that
industry segment at the end of the last three years were $12,888 million,
$11,820 million, and $10,987 million, respectively.
28
<PAGE> 21
<TABLE>
<CAPTION>
QUARTERLY DATA
--------------
(Unaudited)
First Second Third Fourth
----- ------ ----- ------
(In millions except per share data) 1993 1992 1991 1993 1992 1991 1993 1992 1991 1993 1992 1991
- ----------------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RETAIL SALES $ 3,964 3,793 3,433 3,963 3,789 3,456 4,735 4,342 3,937 6,321 6,085 5,375
Per cent increase (decrease) 4.5 10.5 (2.7) 4.6 9.6 (3.5) 9.1 10.3 (1.4) 3.9 13.2 2.2
TOTAL REVENUE $ 4,106 3,918 3,538 4,106 3,912 3,567 4,888 4,472 4,050 6,478 6,213 5,493
Per cent increase (decrease) 4.8 10.7 (2.2) 5.0 9.7 (2.8) 9.3 10.4 (1.0) 4.3 13.1 2.5
LIFO gross margin $ 1,280 1,233 1,107 1,191 1,164 1,036 1,530 1,395 1,250 1,985 1,920 1,709
LIFO gross margin, per cent of retail sales 32.3 32.5 32.2 30.1 30.7 30.0 32.3 32.1 31.8 31.4 31.6 31.8
Selling, general, and administrative
expenses, per cent of retail sales 25.9 26.7 28.4 25.8 27.1 27.8 24.2 25.0 26.3 20.8 21.7 22.0
INCOME BEFORE EXTRAORDINARY CHARGE
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES $ 172 136 80 112 80 31 221 186 116 439 375 37
NET INCOME (LOSS) $ 206 136 (104) 112 80 31 185 186 116 437 375 37
INCOME PER SHARE BEFORE EXTRAORDINARY
CHARGE AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES
Primary $ .68 .54 .31 .43 .31 .10 .88 .75 .46 1.80 1.55 .12
Fully diluted $ .65 .52 .31 .42 .31 .10 .83 .70 .46 1.65 1.42 .12
NET INCOME (LOSS) PER COMMON SHARE
Primary $ .82 .54 (.48) .43 .31 .10 .73 .75 .46 1.79 1.55 .12
Fully diluted $ .78 .52 (.48) .42 .31 .10 .69 .70 .46 1.64 1.42 .12
DIVIDENDS PER COMMON SHARE $ .36 .33 .33 .36 .33 .33 .36 .33 .33 .36 .33 .33
COMMON STOCK PRICE RANGE
High $ 45 34 28 49 36 29 52 38 27 56 40 29
Low $ 36 27 24 41 32 24 39 33 24 49 36 24
</TABLE>
29
<PAGE> 22
SUPPLEMENTAL
INFORMATION
(Unaudited)
CREDIT OPERATIONS. The following table presents the results of the Company's
proprietary credit card operation, measuring on an all- inclusive basis the
costs of granting, operating, and financing credit, net of finance charge
revenue. Revenue, costs, and expenses contained in the table below relate to
all customer accounts receivable generated and serviced by the Company,
including those recorded as sold under asset securitization transactions. This
presentation is designed to measure on an "economic basis" the total pre-tax
cost of providing the JCPenney credit card to customers.
<TABLE>
<CAPTION>
(Unaudited)
PRE-TAX COST OF JCPENNEY CREDIT CARD (In millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Finance charge revenue
On receivables owned $ (523) $ (509) $ (567)
On receivables sold (129) (166) (197)
------ ------ -------
Total (652) (675) (764)
Bad debt expense 128 171 240
Operating expenses (including
in-store costs) 265 270 275
Cost of capital 399 417 496
------ ------ -------
Total 792 858 1,011
------ ------ -------
Pre-tax cost of JCPenney credit $ 140 $ 183 $ 247
Per cent of JCPenney credit sales 1.6% 2.2% 3.1%
</TABLE>
The cost of capital shown above represents the cost of financing both
Company-owned accounts receivable and securitized accounts receivable. The cost
of the sold receivables is the actual interest paid to certificate holders. The
owned accounts receivables are financed with both debt and equity capital. The
debt component uses the total Company weighted average interest rate, while the
equity component uses the Company's minimum return on equity objective of 16
per cent. On a combined basis, for both owned and sold receivables, the debt
and equity components of the total capital requirements were 88 per cent debt
and 12 per cent equity, which approximates the finance industry standard debt
to equity ratio.
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
Per cent Per cent Per cent
Amounts of eligible Amounts of eligible Amounts of eligible
CREDIT SALES (In billions) sales (In billions) sales (In billions) sales
------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
JCPenney credit card $ 8.8 46.4 $ 8.4 46.6 $ 7.9 49.3
American Express, Discover,
MasterCard, and Visa 2.9 15.4 2.4 13.2 2.0 12.3
------ ---- ----- ---- ----- ----
Total $ 11.7 61.8 $10.8 59.8 $ 9.9 61.6
------ ---- ----- ---- ----- ----
KEY JCPENNEY CREDIT CARD INFORMATION (In millions) 1993 1992 1991
---- ---- ----
Number of accounts serviced with balances 17.2 17.5 18.3
Total customer receivables serviced $ 4,410 $ 4,068 $ 4,489
Average customer receivables financed $ 3,767 $ 3,901 $ 4,288
Average account balances (in dollars) $ 256 $ 231 $ 244
Average account maturity (months) 4.0 4.1 4.7
-------- ------- -------
</TABLE>
30
<PAGE> 23
FINANCING COSTS incurred by the Company to finance its operations, including
those costs related to off-balance-sheet liabilities were as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Interest expense, net $ 241 $ 258 $ 308
Interest portion of LESOP debt payment 35 40 45
Off-balance-sheet financing costs
Interest imputed on operating leases 97 96 95
Asset-backed certificates interest 87 105 117
------ ------ ------
Total $ 460 $ 499 $ 565
</TABLE>
DEBT TO CAPITAL ratio shown in the table below includes both debt recorded on
the Company's Consolidated Balance Sheet as well as off-balance-sheet debt
related to operating leases and the securitization of a portion of the
Company's customer accounts receivable.
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Short term debt, net of short term investments $ 1,128 $ 502 $ 345
Long term debt, including current maturities 3,277 3,171 3,591
------- -------- --------
4,405 3,673 3,936
Off-balance-sheet debt
Present value of operating leases 900 950 900
Securitization of accounts receivable, net 294 731 1,186
------- -------- --------
Total debt $ 5,599 $ 5,354 $ 6,022
Consolidated equity $ 5,365 $ 4,705 $ 4,188
Total capital $10,964 $ 10,059 $ 10,210
Per cent of total debt to capital 51.1% 53.2% 59.0%
</TABLE>
31
<PAGE> 24
FIVE YEAR
FINANCIAL
SUMMARY
(In millions except per
share data)
J.C. Penney Company,
Inc. and Subsidiaries
<TABLE>
<CAPTION>
1993(1) 1992 1991(2) 1990 1989(3)
------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
RESULTS FOR THE YEAR
Total revenue $ 19,578 18,515 16,648 16,736 16,405
Retail sales $ 18,983 18,009 16,201 16,365 16,103
Per cent increase (decrease) 5.4 11.2 (1.0) 1.6 8.6
LIFO gross margin, per cent of
retail sales 31.5 31.7 31.5 31.4 33.4
FIFO gross margin, per cent of
retail sales 31.3 31.5 30.9 31.7 33.2
Selling, general, and administrative
expenses, per cent of retail sales 23.7 24.7 25.6 26.2 25.8
Depreciation and amortization $ 316 310 316 299 275
Income taxes $ 610 482 204 255 368
Income before extraordinary charge
and cumulative effect of
accounting changes $ 944 777 264 577 802
Net income $ 940 777 80 577 802
EARNINGS PER COMMON SHARE
PRIMARY
Before extraordinary charge and
cumulative effect of
accounting changes $ 3.79 3.15 .99 2.30 3.16
Net income $ 3.77 3.15 .20 2.30 3.16
FULLY DILUTED
Before extraordinary charge and
cumulative effect of
accounting changes $ 3.55 2.95 .99 2.16 2.93
Net income $ 3.53 2.95 .20 2.16 2.93
PER COMMON SHARE
Dividends $ 1.44 1.32 1.32 1.32 1.12
Stockholders' equity $ 21.53 19.17 17.33 18.38 17.81
RETURN ON STOCKHOLDERS' EQUITY 20.1 18.6 12.0 13.3 20.8
FINANCIAL POSITION
Receivables, net $ 4,679 3,750 4,131 4,303 4,872
Merchandise inventories $ 3,545 3,258 2,897 2,657 2,613
Properties, net $ 3,818 3,755 3,633 3,532 3,268
Capital expenditures $ 459 494 506 601 520
Total assets $ 14,788 13,467 12,444 12,256 12,635
Total debt $ 4,561 4,078 4,062 4,114 4,207
Stockholders' equity $ 5,365 4,705 4,188 4,394 4,353
NUMBER OF COMMON SHARES
OUTSTANDING AT YEAR END 236 235 233 234 240
WEIGHTED AVERAGE COMMON SHARES
Primary 239 236 234 236 244
Fully diluted 261 258 234 260 268
NUMBER OF EMPLOYEES AT YEAR END
(In thousands) 193 192 185 196 198
</TABLE>
1 Excluding the impact of the tax rate increase on deferred taxes, after tax
income was $958 million, or $3.60 per share, on a fully diluted basis.
2 Excluding the effect of nonrecurring items and the cumulative effect of an
accounting change, after tax income was $528 million, or $2.00 per share, on a
fully diluted basis.
3 Excluding the effect of nonrecurring items, after tax income was $822 million,
or $3.00 per share, on a fully diluted basis.
32
<PAGE> 25
FIVE YEAR
OPERATIONS
SUMMARY
J.C.Penney Company,
Inc. and Subsidiaries
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
JCPENNEY STORES
Number of stores
Beginning of year 1,266 1,283 1,312 1,328 1,355
Openings 24 33 38 46 38
Closings (44) (50) (67) (62) (65)
End of year 1,246 1,266 1,283 1,312 1,328
-------- ------ ------ ------ ------
Gross selling space (In million sq. ft.) 113.9 114.4 114.5 114.4 112.8
Sales including catalog
desks (In millions) $ 16,846 15,698 14,277 14,616 14,469
Comparative store sales per cent
increase (decrease)1 6.4 9.7 (1.5) 0.0 6.8
Sales per gross square foot1 $ 146 137 125 127 127
CATALOG
Number of catalog units
JCPenney stores 1,246 1,266 1,283 1,312 1,328
Freestanding sales centers
and merchants 543 640 697 626 501
Drug stores 101 128 134 136 126
Other, principally outlet stores 14 14 16 16 16
-------- ------ ------ ------ ------
Total 1,904 2,048 2,130 2,090 1,971
Number of distribution centers 6 6 6 6 6
Distribution space (In million sq. ft.) 11.4 11.4 11.4 11.4 11.4
Sales (In millions) $ 3,514 3,166 3,002 3,220 3,205
DRUG STORES
Number of stores
Beginning of year 548 530 487 471 434
Openings 35 30 46 22 39
Closings (77) (12) (3) (6) (2)
-------- ------ ------ ------ ------
End of year 506 548 530 487 471
Gross selling space (In million sq. ft.) 4.6 5.2 5.0 4.8 4.7
Sales (In millions) $ 1,413 1,383 1,192 1,097 987
Sales per gross square foot1 $ 235 211 201 198 189
JCPENNEY INSURANCE (In millions)
Premium income $ 416 333 286 221 165
Policies and certificates in force 5.8 4.6 4.3 4.1 3.5
Amount of life insurance in force $ 7,627 6,552 5,419 5,268 3,797
Total assets $ 1,246 1,033 857 764 739
</TABLE>
1 1992 is presented on a 52 week basis.
33
