Contract

EXECUTION COPY U.S. $4,000,000,000 FIVE-YEAR CREDIT AGREEMENT Dated as of February 22, 2005 Among SEARS HOLDINGS CORPORATION and SEARS ROEBUCK ACCEPTANCE CORP. and KMART CORPORATION, as Borrowers and THE INITIAL LENDERS NAMED HEREIN, as Initial Lenders and CITICORP USA, INC. and BANK OF AMERICA, N.A., as Syndication Agents and BARCLAYS BANK PLC, LEHMAN COMMERCIAL PAPER INC., HSBC BANK USA, MERRILL LYNCH BANK USA, MORGAN STANLEY BANK, THE ROYAL BANK OF SCOTLAND, PLC AND WACHOVIA BANK NATIONAL ASSOCIATION, as Documentation Agents and J.P. MORGAN SECURITIES INC., CITIGROUP GLOBAL MARKETS INC. and BANC OF AMERICA SECURITIES LLC, as Lead Arrangers and Joint Bookrunners and JPMORGAN CHASE BANK, N.A., as Administrative Agent TABLE OF CONTENTS

PAGE —- ARTICLE I DEFINITIONS AND ACCOUNTING TERMSSECTION 1.01. Certain Defined Terms…………………………………………………………………. 1SECTION 1.02. Computation of Time Periods……………………………………………………………. 19SECTION 1.03. Accounting Terms……………………………………………………………………… 19 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCESSECTION 2.01. The Revolving Advances………………………………………………………………… 19SECTION 2.02. Making the Revolving Advances………………………………………………………….. 19SECTION 2.03. The Swingline Advances………………………………………………………………… 20SECTION 2.04. Making the Swingline Advances………………………………………………………….. 21SECTION 2.05. Fees………………………………………………………………………………… 22SECTION 2.06. Optional Termination or Reduction of the Commitments……………………………………… 22SECTION 2.07. Repayment of Advances…………………………………………………………………. 22SECTION 2.08. Interest on Advances………………………………………………………………….. 22SECTION 2.09. Interest Rate Determination……………………………………………………………. 23SECTION 2.10. Optional Conversion of Revolving Advances……………………………………………….. 23SECTION 2.11. Optional and Mandatory Prepayments of Advances…………………………………………… 23SECTION 2.12. Increased Costs………………………………………………………………………. 24SECTION 2.13. Illegality…………………………………………………………………………… 25SECTION 2.14. Payments and Computations……………………………………………………………… 25SECTION 2.15. Taxes……………………………………………………………………………….. 25SECTION 2.16. Sharing of Payments, Etc………………………………………………………………. 27SECTION 2.17. Use of Proceeds of Advances……………………………………………………………. 28 ARTICLE III AMOUNT AND TERMS OF THE LETTERS OF CREDITSECTION 3.01. L/C Commitment……………………………………………………………………….. 28SECTION 3.02. Procedure for Issuance of Letter of Credit………………………………………………. 28SECTION 3.03. Fees and Other Charges………………………………………………………………… 28SECTION 3.04. Letter of Credit Participations………………………………………………………… 29SECTION 3.05. Reimbursement Obligation of the Borrowers……………………………………………….. 29SECTION 3.06. Obligations Absolute………………………………………………………………….. 30SECTION 3.07. Letter of Credit Payments……………………………………………………………… 30SECTION 3.08. Applications…………………………………………………………………………. 30SECTION 3.09. Use of Letters of Credit………………………………………………………………. 30 ARTICLE IV CONDITIONS TO EFFECTIVENESSSECTION 4.01. Conditions Precedent to Effectiveness…………………………………………………… 30SECTION 4.02. Conditions Precedent to Each Extension of Credit…………………………………………. 32SECTION 4.03. Effective Date……………………………………………………………………….. 32

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ARTICLE V REPRESENTATIONS AND WARRANTIESSECTION 5.01. Representations and Warranties of the Borrowers………………………………………….. 32 ARTICLE VI COVENANTSSECTION 6.01. Affirmative Covenants…………………………………………………………………. 35SECTION 6.02. Negative Covenants……………………………………………………………………. 38SECTION 6.03. Financial Covenant……………………………………………………………………. 41 ARTICLE VII EVENTS OF DEFAULTSECTION 7.01. Events of Default…………………………………………………………………….. 41 RTICLE VIII THE AGENTSECTION 8.01. Appointment………………………………………………………………………….. 43SECTION 8.02. Delegation of Duties………………………………………………………………….. 43SECTION 8.03. Exculpatory Provisions………………………………………………………………… 43SECTION 8.04. Reliance by Agent…………………………………………………………………….. 44SECTION 8.05. Notice of Default…………………………………………………………………….. 44SECTION 8.06. Non-Reliance on Agents and Other Lenders………………………………………………… 44SECTION 8.07. Indemnification………………………………………………………………………. 44SECTION 8.08. Agent in Its Individual Capacity……………………………………………………….. 45SECTION 8.09. Successor Agent………………………………………………………………………. 45SECTION 8.10. Documentation Agents and Syndication Agents……………………………………………… 45 ARTICLE IX MISCELLANEOUSSECTION 9.01. Amendments, Etc………………………………………………………………………. 45SECTION 9.02. Notices, Etc…………………………………………………………………………. 46SECTION 9.03. No Waiver; Remedies…………………………………………………………………… 47SECTION 9.04. Costs and Expenses……………………………………………………………………. 47SECTION 9.05. Right of Set-off……………………………………………………………………… 48SECTION 9.06. Binding Effect; Effectiveness………………………………………………………….. 48SECTION 9.07. Assignments and Participations…………………………………………………………. 48SECTION 9.08. Confidentiality………………………………………………………………………. 50SECTION 9.09. Governing Law………………………………………………………………………… 50SECTION 9.10. Execution in Counterparts……………………………………………………………… 50SECTION 9.11. Jurisdiction, Etc…………………………………………………………………….. 51SECTION 9.12. WAIVER OF JURY TRIAL………………………………………………………………….. 51SECTION 9.13. Release of Collateral…………………………………………………………………. 51SECTION 9.14. USA PATRIOT Act Notice………………………………………………………………… 52SECTION 9.15. Integration………………………………………………………………………….. 52

iiSchedulesSchedule IA – Pricing GridSchedule 5.01(r) -UCC Filing JurisdictionsSchedule 6.02(a) -Existing LiensExhibitsExhibit A – Form of Notice of BorrowingExhibit B – Form of Assignment and AcceptanceExhibit C – Form of Borrowing Base CertificateExhibit D – Form of Guarantee and Collateral AgreementExhibit E-1 – Form of Opinion of Counsel for the Borrowers (Sears Law Department)Exhibit E-2 – Form of Opinion of Counsel for the Borrowers (Kmart Law Department)Exhibit E-3 – Form of Opinion of Special Counsel for the Borrowers (Wachtell, Lipton, Rosen & Katz) iii FIVE-YEAR CREDIT AGREEMENT Dated as of February 22, 2005 SEARS HOLDINGS CORPORATION, a Delaware corporation (“Holdings”),SEARS ROEBUCK ACCEPTANCE CORP., a Delaware corporation (“SRAC”), KMARTCORPORATION, a Michigan corporation (“Kmart Corp.”), the banks, financialinstitutions and other institutional lenders (the “Initial Lenders”) listed onthe signature pages hereof, CITICORP USA, INC. and BANK OF AMERICA, N.A., assyndication agents, BARCLAYS BANK PLC, LEHMAN COMMERCIAL PAPER INC., HSBC BANKUSA, MERRILL LYNCH BANK USA, MORGAN STANLEY BANK, THE ROYAL BANK OF SCOTLAND,PLC and WACHOVIA BANK NATIONAL ASSOCIATION, as documentation agents, J.P. MORGANSECURITIES INC., CITIGROUP GLOBAL MARKETS INC. and BANC OF AMERICA SECURITIESLLC, as lead arrangers and joint bookrunners (the “Lead Arrangers”), andJPMORGAN CHASE BANK, N.A. (“JPMorgan Chase Bank”), as administrative agent (the”Agent”) for the Lenders (as hereinafter defined), agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, thefollowing terms shall have the following meanings (such meanings to be equallyapplicable to both the singular and plural forms of the terms defined): “Adjustment Date” has the meaning set forth in the Pricing Grid. “Advance” means any advance by a Lender to any Borrower as part of a Borrowing. “Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person by contract or otherwise. “Agent’s Account” means the account of the Agent maintained by the Agent at JPMorgan Chase Bank at its office at 270 Park Avenue, New York, New York 10017, Account No. 304288446, Attention: Bank Loan Syndications. “Applicable Lending Office” means, with respect to each Lender, such Lender’s Domestic Lending Office in the case of a Base Rate Advance and such Lender’s Eurodollar Lending Office in the case of a Eurodollar Rate Advance. “Applicable Margin” means, initially, (a) 0.875% per annum for Eurodollar Rate Advances and (b) 0% per annum for Base Rate Advances; provided, that on and after the first Adjustment Date occurring after the Effective Date, the Applicable Margin will be determined pursuant to the Pricing Grid. “Application” means an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to open a Letter of Credit. “Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of Exhibit B hereto. “Authorized Officer” means, as to Holdings or any Borrower, its president, chief executive officer, chief financial officer, vice president and controller, vice president and treasurer, vice president, finance, executive vice president, finance or any other person designated by it and acceptable to the Required Lenders. “Available Cash” means, on any date, (a) the aggregate amount of cash and Cash Equivalents of Holdings and its Subsidiaries on such date (determined on a Consolidated basis and in accordance with GAAP) minus (b) $125,000,000. “Available Commitment” means as to any Lender at any time, an amount equal to the excess, if any, of (a) such Lender’s Commitment then in effect over (b) such Lender’s Extensions of Credit then outstanding; provided, that in calculating any Lender’s Extensions of Credit for the purpose of determining such Lender’s Available Commitment pursuant to Section 2.05(a), the aggregate principal amount of Swingline Advances then outstanding shall be deemed to be zero. “Base Rate” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of: (a) the rate of interest announced publicly by JPMorgan Chase Bank in New York, New York, from time to time, as its prime rate; and (b) 1/2 of one percent per annum above the Federal Funds Rate. “Base Rate Advance” means an Advance that bears interest as provided in Section 2.08(a)(i). “Borrower Information” has the meaning specified in Section 9.08. “Borrowers” means, collectively, SRAC and Kmart Corp.; provided that in the event SRAC is dissolved, merged with and into Holdings or any Subsidiary of Holdings or otherwise ceases to exist in accordance with Section 6.01(d), then Sears shall designate that Sears or a direct wholly owned Domestic Subsidiary of Sears become a Borrower for all purposes of the Loan Documents. “Borrowing” means a borrowing consisting of simultaneous Advances of the same Type made by each of the applicable Lenders pursuant to Section 2.01 or Section 2.03. “Borrowing Base” means, at any time, an amount equal to (a) 85% of the aggregate outstanding Eligible Credit Card Accounts Receivable at such time plus (b) the lesser of (i) 70% of the Net Eligible Inventory at such time minus 100% of Other Borrowing Base Reserves and (ii) 85% of the Net Orderly Liquidation Value at such time. The Agent may, in its Permitted Discretion and with 5 days notice to the Borrowers, reduce the advance rates set forth above or adjust one or more of the other elements used in computing the Borrowing Base. “Borrowing Base Certificate” means a certificate, signed by an Authorized Officer of Holdings, in the form of Exhibit C or another form which is acceptable to the Agent in its Permitted Discretion. “Business Day” means a day of the year on which banks are not required or authorized by law to close in New York, New York or, in the case of matters relating to SRAC, Greenville, Delaware or, in the case of matters relating to Kmart Corp., Detroit, Michigan, and, if the applicable Business Day relates to any Eurodollar Rate Advances, a day of the year on which dealings are carried on in the London interbank market. “Cash Equivalents” means investments of Holdings and its Subsidiaries recorded as cash or cash equivalents in accordance with GAAP. “Collateral” means all property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document. 2 “Collateral Release Date” means the date on which the Collateral is released from the Liens of the Agent pursuant to Section 9.13(c). “Commercial L/C” means a commercial documentary Letter of Credit under which the Issuing Lender agrees to make payments in Dollars for the account of any Borrower, on behalf of any Group Member, in respect of obligations of such Group Member in connection with the purchase of goods or services in the ordinary course of business. “Commitment” means, as to any Lender, the obligation of such Lender to make Revolving Advances and participate in Swingline Advances and Letters of Credit in an aggregate principal amount and/or face amount up to (a) the amount set forth opposite such Lender’s name on the signature pages hereof or (b) if such Lender has entered into any Assignment and Acceptance, the amount set forth for such Lender in the Register maintained by the Agent pursuant to Section 9.07(d), as such amount may be reduced pursuant to Section 2.06. “Commitment Fee Rate” means, initially, 0.175% per annum; provided, that on and after the first Adjustment Date occurring after the Effective Date, the Commitment Fee Rate will be determined pursuant to the Pricing Grid. “Commitment Percentage” means, as to any Lender at any time, the percentage which such Lender’s Commitment then constitutes of the aggregate Commitments of all Lenders or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender’s Advances then outstanding constitutes of the aggregate principal amount of the Advances then outstanding, provided, that, in the event that the Advances are paid in full prior to the reduction to zero of the Total Extensions of Credit, the Commitment Percentage shall be determined in a manner designed to ensure that the other outstanding Extensions of Credit shall be held by the Lenders on a comparable basis. “Commonly Controlled Entity” means an entity, whether or not incorporated, that is under common control with any Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes any Borrower and that is treated as a single employer under Section 414 of the Internal Revenue Code. “Consolidated” refers to the consolidation of accounts of Holdings, excluding Sears Canada, in accordance with GAAP and as presented on a GAAP basis. “Consolidated Adjusted Leverage Ratio” means, as of any given day, the ratio of (a) the sum of (i) Consolidated Average Net Debt on such day and (ii) the product of Consolidated Rent Expense for the four immediately preceding fiscal quarters for which financial statements are available and 6 to (b) Consolidated EBITDAR for the four immediately preceding fiscal quarters for which financial statements are available. “Consolidated Average Net Debt” means, as of the last day of any period, (a) the sum of (i) Consolidated Net Debt as of such day and (ii) the sum of Consolidated Net Debt as of the end of each of the three immediately preceding fiscal quarters divided by (b) 4. “Consolidated EBITDA” means for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) provision for income taxes, (b) interest expense, (c) depreciation and amortization expense, (d) results attributable to the minority interest owned by any Person in a non-wholly owned Subsidiary of Holdings to the extent such Subsidiary is a Loan Party, (e) expenses relating to the Kmart Corp. bankruptcy case in an amount not to exceed $12,000,000 in any twelve month period, (f) the impact of conforming accounting policies as a result of the Merger through the first full fiscal year following the Merger, (g) all non-recurring expenses and special charges related to the Merger incurred within twelve months after the date of the Merger, (h) non-cash charges arising from share-based payments (as defined in accordance with GAAP) to employees or directors and (i) any extraordinary or other non- 3 recurring non-cash expenses or losses, and minus, to the extent included in the statement of such Consolidated Net Income for such period, any cash payments made during such period in respect of items added back pursuant to clause (i) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were reflected as a charge in the statement of Consolidated Net Income, all as determined on a Consolidated basis. For the purposes of calculating Consolidated EBITDA for any fiscal quarter pursuant to any determination of the Consolidated Adjusted Leverage Ratio or the Consolidated Leverage Ratio, (i) if at any time during such fiscal quarter Holdings or any of its Subsidiaries (other than Sears Canada) shall have made any Material Disposition, the Consolidated EBITDA for such fiscal quarter shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such fiscal quarter or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such fiscal quarter and (ii) if during such fiscal quarter Holdings or any of its Subsidiaries (other than Sears Canada) shall have made a Material Acquisition, Consolidated EBITDA for such fiscal quarter shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such fiscal quarter. As used in this definition, “Material Acquisition” means any acquisition of property or series of related acquisitions of property that (a) constitutes assets comprising all or substantially all of an operating unit of a business or constitutes all or substantially all of the common stock of a Person and (b) involves the payment of consideration by Holdings and its Subsidiaries (other than Sears Canada) in excess of $100,000,000; and “Material Disposition” means any Disposition of property or series of related Dispositions of property that yields gross proceeds to Holdings or any of its Subsidiaries in excess of $100,000,000. “Consolidated EBITDAR” means, for any period, the sum of (a) Consolidated EBITDA for such period plus (b) Consolidated Rent Expense for such period. “Consolidated Inventory Coverage Ratio” means, as of the last day of any period, the ratio of (a) Gross Domestic Inventory on such day to (b) Total Net Extensions of Credit on such day. “Consolidated Leverage Ratio” means, as of any given day, the ratio of (a) Consolidated Average Net Debt on such day to (b) Consolidated EBITDA for the four immediately preceding fiscal quarters for which financial statements are available. For purposes of determining the Consolidated Leverage Ratio as of the end of the first four fiscal quarters following the Effective Date, Consolidated Average Net Debt and Consolidated EBITDA shall be calculated to give pro forma effect to the Merger as if the Merger had occurred on the first day of the relevant period of four consecutive fiscal quarters. “Consolidated Net Debt” means, on any date, Consolidated Total Debt minus Available Cash. “Consolidated Net Income” means, for any period, the consolidated net income (or loss) of Holdings and its Subsidiaries, determined on a Consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of Holdings or is merged into or consolidated with Holdings or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of Holdings) in which Holdings or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by Holdings or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of Holdings (other than a Loan Party) to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary. “Consolidated Rent Expense” means, for any period, the aggregate amount of fixed and contingent rentals payable by Holdings and its Subsidiaries for such period with respect to operating leases of real estate, determined on a Consolidated basis in accordance with GAAP. “Consolidated Total Debt” means, at any date, the aggregate principal amount of all Debt of Holdings and its Subsidiaries at such date, determined on a Consolidated basis in accordance with GAAP, 4 but excluding (i) issued but not funded letters of credit, (ii) reimbursement obligations which are characterized as trade payables and are not overdue with respect to trade letters of credit (other than Letters of Credit issued hereunder) and (iii) contingent obligations. “Convert”, “Conversion” and “Converted” each refers to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.09 or 2.10. “Credit Card Accounts Receivable” means each “Account” (as defined in the UCC) together with all income, payments and proceeds thereof, owed by an issuer of credit cards to a Loan Party resulting from charges by a customer of a Group Member (other than Sears Canada) on credit cards issued by such issuer in connection with the sale of goods by a Group Member (other than Sears Canada), or services performed by a Group Member (other than Sears Canada), in each case in the ordinary course of its business. “DC” means any distribution center owned or leased and operated by any Loan Party. “Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money (excluding interest payable thereon unless such interest is to be accrued and added to the principal amount of such indebtedness), (b) all obligations of such Person for the deferred purchase price of property or services (other than (i) trade payables incurred in the ordinary course of such Person’s business and (ii) any such obligations which are due less than twelve months from the date of incurrence), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeals bonds arising in the ordinary course of business and other than the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business) or in respect of acceptances or letters of credit, (d) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (f) all direct recourse payment obligations of such Person in respect of any accounts receivable sold by such Person, (g) all Debt of others referred to in clauses (a) through (f) above or clause (h) below and other payment obligations guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (1) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (2) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (3) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (4) otherwise to assure a creditor against loss, and (h) all Debt referred to in clauses (a) through (g) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt. “Default” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. “Disposition” means any sale of property other than goods held for sale in the ordinary course of business. “Dollars” and “$” refers to lawful money of the United States. “Domestic Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Domestic Lending Office” on the signature pages hereof or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrowers and the Agent. 5 “Domestic Subsidiary” means any Subsidiary organized under the laws of any jurisdiction within the United States. “Effective Date” means the date on which the conditions precedent set forth in Section 4.01 shall have been satisfied. “Eligible Assignee” means any Person approved by the Agent, the Issuing Lender and, unless (a) an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 9.07 or (b) the assignee is an existing Lender or an Affiliate of an existing Lender, the Borrowers, in each case such approval not to be unreasonably withheld or delayed; provided that neither the Borrowers nor an Affiliate of the Borrowers shall qualify as an Eligible Assignee. “Eligible Credit Card Accounts Receivable” means at the time of any determination thereof, each Credit Card Accounts Receivable that satisfies the following criteria at the time of creation and continues to meet the same at the time of such determination: such Credit Card Account Receivable (i) has been earned and represents the bona fide amounts due to a Loan Party from a credit card payment processor and/or credit card issuer, and in each case originated in the ordinary course of business of the applicable Loan Party and (ii) is not ineligible for inclusion in the calculation of the Borrowing Base pursuant to any of clauses (a) through (i) below. Without limiting the foregoing, to qualify as an Eligible Credit Card Account Receivable, an Account shall indicate no person other than a Loan Party as payee or remittance party. In determining the amount to be so included, the face amount of an Account shall be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges, credit card processor fees or other allowances (including any amount that the applicable Loan Party may be obligated to rebate to a customer, a credit card payment processor, or credit card issuer pursuant to the terms of any agreement or understanding (written or oral)) and (ii) the aggregate amount of all cash received in respect of such Account but not yet applied by the applicable Loan Party to reduce the amount of such Credit Card Account Receivable. Unless otherwise approved from time to time in writing by the Agent, no Credit Card Accounts Receivable shall be Eligible Credit Card Accounts Receivable if, without duplication: (a) such Credit Card Accounts Receivable are not owned by a Loan Party and such Loan Party does not have good or marketable title to such Credit Card Accounts Receivable free and clear of any Lien of any Person other than the Agent; (b) such Credit Card Accounts Receivable do not constitute “Accounts” (as defined in the UCC) or such Credit Card Accounts Receivable have been outstanding for more than seven (7) business days; (c) the issuer or payment processor of the applicable credit card with respect to such Credit Card Accounts Receivable is the subject of any bankruptcy or insolvency proceedings; (d) such Credit Card Accounts Receivable are not valid, legally enforceable obligations of the applicable issuer with respect thereto; (e) such Credit Card Accounts Receivable are not subject to a properly perfected security interest in favor of the Agent, or are not in form and substance reasonably satisfactory to the Agent, or are subject to any Lien whatsoever other than Permitted Liens contemplated by the processor agreements and for which appropriate reserves (as determined by the Agent) have been established or maintained by the Loan Parties; 6 (f) the Credit Card Accounts Receivable do not conform to all representations, warranties or other provisions in the Loan Documents relating to Credit Card Accounts Receivable; (g) such Credit Card Accounts Receivable are subject to risk of set-off, non-collection or not being processed due to unpaid and/or accrued credit card processor fee balances, limited to the lesser of the balance of Credit Card Accounts Receivable or unpaid credit card processor fees; (h) such Credit Card Accounts Receivable are evidenced by “chattel paper” or an “instrument” of any kind unless such “chattel paper” or “instrument” is in the possession of the Agent, and to the extent necessary or appropriate, endorsed to the Agent; or (i) such Credit Card Accounts Receivable do not meet such other usual and customary eligibility criteria for Credit Card Accounts Receivable as the Agent may determine from time to time in its Permitted Discretion. “Eligible Inventory” means, at any time, the Inventory of any Loan Party held for sale to third party customers that is not ineligible for inclusion in the calculation of the Borrowing Base pursuant to any of clauses (a) through (s) below. Without limiting the foregoing, to qualify as “Eligible Inventory” no Person other than the Loan Parties shall have any direct or indirect ownership, interest or title to such Inventory and no Person other than the Loan Parties shall be indicated on any purchase order or invoice with respect to such Inventory as having or purporting to have an interest therein. Unless otherwise from time to time approved in writing by the Agent, no Inventory shall be deemed Eligible Inventory if, without duplication: (a) the Loan Parties do not have sole and good, valid and unencumbered title thereto (except for Liens of the type described in clauses (a), (b), (c) and (e) of the definition of Permitted Liens); or (b) it is not located in the United States, Puerto Rico or U.S. Virgin Islands; or (c) it is not located at property owned or leased by the Loan Parties (except to the extent such Inventory is in transit between such locations or is located at a dealer’s store or is deemed eligible pursuant to clause (h)) or is located at a third party warehouse or is located at a closed Store (except pursuant to clause (f)) or is located at a closed DC; or (d) it is identified as accrued Inventory without a receiver in the applicable Loan Party’s stockledger; or (e) it is not subject to a valid and perfected first priority Lien in favor of the Agent for the benefit of the Agent and the Lenders; or (f) it is Inventory located at a Store which is being closed; provided however that such Inventory will be deemed eligible for the first four (4) weeks after the commencement of the Store Closure Sale for that Store; or (g) it is consigned from a vendor or is at a customer location but still accounted for in the applicable Loan Party’s inventory balance; or (h) it is in-transit from a vendor and has not yet been received into a DC or Store; provided that in-transit inventory purchased under “private label” 7 letters of credit issued by SRAC or Letters of Credit issued hereunder shall be deemed Eligible Inventory, subject to a 25% reserve, if (i) the relevant Loan Party has sole title (including Inventory delivered on a FOB shipping point basis and whether or not payment has been made to the letter of credit beneficiary and/or the issuer of such letter of credit), (ii) the relevant Loan Party has possession or control over title documents relating to such Inventory, (iii) the Inventory is fully insured and (iv) the Inventory would not be deemed ineligible pursuant to any other provision of this definition; or (i) it is considered perishable goods or is identified in the stockledger of the applicable Loan Party as any of the following departments or consists of Inventory which is ordinarily classified by such Loan Party consistent with its historical practices as the following: bakery; dairy; deli; floral; gasoline; live plants; meat; miscellaneous or other as classified on the Loan Party’s stockledger; produce; books; magazines; restaurant operations; or seafood; or it is identified per the applicable Loan Party’s stockledger as candy, provided that it will only be considered ineligible to the extent that the Inventory Value thereof is greater than 2% of Gross Inventory Value; or (j) it is Inventory that is packed-away and stored at a DC or a Store for future sale, including merchandise of Sears and its Subsidiaries that has been carried over for more than 9 months as currently reported as XOM status per the RIM merchandising system; or (k) from and after the delivery by Holdings of the first monthly Borrowing Base Certificate after a specified holiday or event has occurred, any Inventory (other than seasonal apparel) identified as seasonal per the Loan Parties’ stockledger for sale for such specific holiday or event; or (l) it is identified as wholesaler freight fees; or (m) from and after any date that is more than four (4) weeks past a specified selling season, any Inventory that is seasonal apparel and that the Loan Parties have identified, in accordance in all material respects with the Loan Parties’ current or historical accounting practices, as related to such specific selling season, including merchandise of Sears and its Subsidiaries that is currently reported by the SAMS database; or (n) it is Inventory which is ordinarily classified by such Loan Party consistent with its historical practices as repair services, provided that 50% of the value of such Inventory shall constitute Eligible Inventory; or (o) it is Inventory on layaway or is Inventory which has been sold but not delivered or as to which any Loan Party has accepted a deposit from a third party; or (p) it is identified per the Loan Parties’ stockledger as Inventory that is in a leased department, including digital imaging, photofinishing and 1 hour lab; or (q) it is otherwise deemed ineligible by the Agent in its Permitted Discretion on at least five (5) Business Days’ notice to Holdings; or 8 (r) it is operating supplies, packaging or\ shipping materials, cartons, labels or other such materials not considered used for sale in the ordinary course of business by the Agent in its Permitted Discretion; or (s) it is Inventory which exhibits, includes or is identified by any trademark, tradename or other Intellectual Property right which trademark, tradename or other Intellectual Property right (i) is subject to a restriction that could reasonably be expected to adversely affect the Agent’s ability to liquidate such Inventory or (ii) the relevant Loan Party does not have the right to use in connection with the sale of such Inventory, either through direct ownership or through a written license or sublicense. “Environmental Action” means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment, including (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. “Environmental Law” means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials. “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrowers or any of their Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. “Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. “ERISA Affiliate” means any Person that for purposes of Title IV of ERISA is a member of any Borrower’s controlled group, or under common control with such Borrower, within the meaning of Section 414 of the Internal Revenue Code. “ERISA Event” means (a) (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are met with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of any Borrower or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Borrower 9 or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for the imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, a Plan. “Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. “Eurodollar Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Eurodollar Lending Office” on the signature pages hereof or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrowers and the Agent. “Eurodollar Rate” means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate screen (or otherwise on such screen), the “Eurodollar Rate” shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Agent or, in the absence of such availability, by reference to the rate at which the Agent is offered Dollar deposits at or about 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein. “Eurodollar Rate Advance” means an Advance that bears interest as provided in Section 2.08(a)(ii). “Eurodollar Rate Reserve Percentage” for any Interest Period for a Eurodollar Rate Advance by any Lender means the reserve percentage applicable to such Lender two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period. “Events of Default” has the meaning specified in Section 7.01. “Extensions of Credit” means as to any Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Advances held by such Lender then outstanding, (b) such Lender’s Commitment Percentage of the aggregate principal amount of Swingline Advances then outstanding and (c) such Lender’s Commitment Percentage of the L/C Obligations then outstanding. “Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to 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 for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the 10 quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing reasonably selected by it. “GAAP” has the meaning specified in Section 1.03. “Gift Card Liability Reserve” shall mean, at any fiscal month end, as the case may be, a reserve equal to the total value of all gift cards outstanding. “Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization (including the National Association of Insurance Commissioners). “Gross Domestic Inventory” means, on any day, the cost of all Inventory of Holdings and its Subsidiaries (determined on a first-in-first-out basis either under the retail or average cost method) located in the United States, Puerto Rico or U.S. Virgin Islands on such day (other than consignment Inventory (including Inventory subject to “sale or return” arrangements) and import Inventory that is in transit from a location outside of the United States) less reserves taken in accordance with GAAP, determined on a consolidated basis in accordance with GAAP; provided that, until the Collateral Release Date, Inventory shall only be included in the calculation of Gross Domestic Inventory if such Inventory is subject to a perfected first-priority Lien in favor of the Agent pursuant to the terms of the Security Documents. “Gross Inventory Value” shall mean, at any month end, the Inventory Value of the domestic Inventory for Stores and DCs per the Loan Parties’ stockledger as calculated in Exhibit C hereto under the heading of “Inventory Subject to Net Recovery Rate”. “Group Members” means, collectively, Holdings, the Borrowers and their respective Subsidiaries. “Guarantee and Collateral Agreement” means the Guarantee and Collateral Agreement to be executed and delivered by Holdings, Sears, Kmart, Kmart Management Corporation, the Borrowers and each Subsidiary Guarantor, substantially in the form of Exhibit D. “Hazardous Materials” means (a) petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law. “Information Memorandum” means the information memorandum dated January 2005, as amended or supplemented from time to time, used by the Agent in connection with the syndication of the Commitments. “Insolvency” means with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. “Insolvent” means pertaining to a condition of Insolvency. “Intellectual Property” means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. 11 “Interest Period” means, for each Eurodollar Rate Advance comprising part of the same Borrowing of Revolving Advances, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance and ending on the last day of the period selected by the applicable Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the applicable Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, or, subject to clause (c) of this definition, 7 days or nine or twelve months, as the applicable Borrower may, upon notice received by the Agent not later than 12:00 noon on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: (a) a Borrower may not select any Interest Period that ends after the Termination Date; (b) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration; (c) in the case of any such Borrowing, a Borrower shall not be entitled to select an Interest Period having duration of 7 days or nine or twelve months unless, by 2:00 P.M. on the third Business Day prior to the first day of such Interest Period, each Lender notifies the Agent that such Lender will be providing funding for such Borrowing with such Interest Period (the failure of any Lender to so respond by such time being deemed for all purposes of this Agreement as an objection by such Lender to the requested duration of such Interest Period); provided that, if any or all of the Lenders object to the requested duration of such Interest Period, the duration of the Interest Period for such Borrowing shall be one, two, three or six months, as specified by the applicable Borrower in the applicable Notice of Borrowing as the desired alternative to an Interest Period of 7 days or nine or twelve months; (d) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period of one month or longer to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (e) whenever the first day of any Interest Period of one month or longer occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. “Inventory” as defined in the Uniform Commercial Code as from time to time in effect in the State of New York. “Inventory Reserves” means the following: (a) a reserve for shrink, or discrepancies that arise between Inventory quantities on hand per the Loan Parties’ unit inventory system, and physical counts of the Inventory which will be equal to the greater of (i) the mathematical average of the historical shrink results expressed as a percent of sales, multiplied by sales for the relevant year-to-date period and adjusted for the cost complement for the relevant year-to-date period, but only to the extent such amount exceeds reserves already netted out of the Gross Inventory Value per the stockledger; or (ii) an amount 12 determined by the Agent in its Permitted Discretion on five (5) Business Days’ notice to Holdings; and (b) a reserve for intracompany profit, equal to the most recent three (3) fiscal months of capitalized cost of the foreign buying offices owned and operated by any Loan Party, with the time frame subject to change on five (5) Business Days’ notice to Holdings based on Inventory performance, or the Agent’s Permitted Discretion; and (c) to the extent not already netted out of the Gross Inventory Value per the stockledger or not treated as ineligible pursuant to the definition of Eligible Inventory, a reserve for (i) hard (permanent) markdowns, (ii) seasonal merchandise, (iii) discontinued and clearance merchandise, (iv) change in product mix of merchandise, (v) change in pricing strategy or markon percentages, (vi) damaged merchandise, (vii) price changes, or (viii) other adjustments as deemed appropriate; and (d) a reserve for Inventory returned (other than as a result of reclamations) to either the return goods center (“RGC”), the vendor, given to charity, or otherwise considered non-saleable, whether defective or non-defective. This reserve is to be calculated as the monthly average for the most recent rolling 12 fiscal month period of return (other than as a result of reclamations) activity to the vendors, the RGC, given to charity, or otherwise considered non-saleable, whether defective or non-defective, both from the Stores and DCs, and is subject to change on five (5) Business Days’ notice to Holdings at the Agent’s Permitted Discretion; and such reserve to be recalculated by the 10th day after each month-end and to be reflected on each Borrowing Base Certificate delivered by Holdings after such date until the amount of such reserve is recalculated pursuant hereto. “Inventory Value” shall mean, with respect to any Inventory of the Loan Parties, the value of such Inventory valued at cost on a basis consistent with the Loan Parties’ current and historical accounting practice per the stockledger (without giving effect to LIFO reserves and general ledger reserves for discontinued inventory, markdowns, intercompany profit, rebates and discounts, any cut off adjustments, revaluation adjustments, purchase price adjustments or adjustments with respect to the capitalization of buying, occupancy, distribution and other overhead costs reflected on the balance sheet of the Loan Parties in respect of Inventory). The value of the Inventory as set forth above will, without duplication for any Inventory Reserves, be calculated net of the reserve established by the Loan Parties on a basis consistent with the Loan Parties’ current and historical practice in respect of lost, misplaced or stolen Inventory at such time. “Investment Grade Ratings” shall consist of ratings of at least (i) Baa3 from Moody’s, (ii) BBB- from S&P or (iii) BBB- from Fitch Ratings; provided that solely in the case that the rating at issue is the minimum rating provided under this definition, such rating shall, in addition, have a stable or better outlook. “Issuing Lender” means, collectively, JPMorgan Chase Bank, Bank of America, N.A. or Fleet National Bank, Citibank, N.A. (provided that any reimbursement or payment on account of a Letter of Credit issued by Citibank, N.A. hereunder shall be made to Citicorp USA, Inc.), and any other Lender which at the request of any Borrower and with the consent of the Agent, not to be unreasonably withheld, agrees to become an Issuing Lender, it being understood that with the consent of the requesting Borrower (not to be unreasonably withheld) the Issuing Lender may arrange for one or more Letters of Credit to be issued by affiliates of such Issuing Lender, in which case the term “Issuing Lender” shall include any such affiliate with respect to Letters of Credit issued by such affiliate. Each reference herein to “the Issuing Lender” shall be deemed to be a reference to the relevant Issuing Lender with respect to the relevant Letter of Credit. “Kmart” means Kmart Holding Corporation, a Delaware corporation. 13 “L/C Commitment” means $1,500,000,000. “L/C Obligations” means at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit that have not then been reimbursed or discharged pursuant to Section 3.05 (after giving effect to the proviso thereof). “Lenders” means the Initial Lenders and each Person that shall become a party hereto pursuant to Section 9.07. “Letters of Credit” means the collective reference to Commercial L/Cs and Standby L/Cs; individually, a “Letter of Credit”. “Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property, but excluding consignments or bailments of goods of third parties and the interests of lessors under operating leases. “Loan Documents” means this Agreement, the Security Documents, the Notes, any Application and any amendment, waiver, supplement or other modification to any of the foregoing. “Loan Parties” means each Group Member that is a party to a Loan Document. “Martha Stewart Reserve” shall mean, at any fiscal month end, a reserve equal to the then current accrued and unpaid royalty in excess of $25,000,000 earned for Martha Stewart merchandise sold as reflected on the most recent Borrowing Base Certificate. “Material Adverse Change” means a material adverse change in the business, condition (financial or otherwise) or operations of Holdings and its Subsidiaries taken as a whole. “Material Adverse Effect” means a material adverse effect on (a) the business, condition (financial or otherwise) or operations of Holdings and its Subsidiaries taken as a whole or (b) the validity or enforceability of any of the Loan Documents or the rights and remedies of the Agent and the Lenders thereunder. “Merger” has the meaning specified in Section 4.01(a). “Moody’s” means Moody’s Investors Service, Inc. “Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which Holdings or any ERISA Affiliate 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. “Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of Holdings or any ERISA Affiliate and at least one Person other than Holdings and the ERISA Affiliates or (b) was so maintained and in respect of which Holdings or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. “Net Eligible Inventory” means, at any time, an amount equal to the Inventory Value of Eligible Inventory less Inventory Reserves. “Net Orderly Liquidation Value” means the product of (i) Net Recovery Rate and (ii) the Gross Inventory Value. 14 “Net Recovery Rate” means the quotient of (x) the estimated net income, payments and proceeds (net of expenses) which could reasonably be realized in connection with an orderly liquidation of each Loan Party’s Inventory given a reasonable period of time for soliciting offers for the sale of such Inventory on an “as is, where is” basis based on an appraisal provided by an independent third party appraiser retained or approved by the Agent in consultation with the Borrowers and (y) the Gross Inventory Value as of the effective date of the estimate provided pursuant to clause (x) of this definition “Note” means a promissory note of any Borrower payable to the order of any Lender evidencing the Commitment of such Lender. “Notice of Borrowing” has the meaning specified in Section 2.02(a). “Other Borrowing Base Reserves” means, to the extent that relevant merchandise is not treated as ineligible pursuant to the definition of Eligible Inventory, the following: (a) a reserve in an amount to be determined by the Agent in its Permitted Discretion for rent expense at leased Store and DC locations; (b) a reserve for royalties payable to non-Loan Parties in respect of licensed merchandise (other than the Martha Stewart Reserve); (c) the Martha Stewart Reserve; (d) the Gift Card Liability Reserve; (e) PACA Liability Reserves; and (f) PASA Liability Reserves. “Other Taxes” has the meaning specified in Section 2.15. “PACA” means the Perishable Agricultural Commodities Act of 1930, as amended. “PACA Liability Reserve” means an amount calculated on a monthly basis by the Agent to provide for vendor liabilities pursuant to PACA. “PASA” means the Packers and Stockyards Act of 1921, as amended. “PASA Liability Reserve” means the liability for vendor liabilities pursuant to PASA. “PBGC” means the Pension Benefit Guaranty Corporation (or any successor). “Permitted Discretion” means a determination made in good faith and in the exercise of commercially reasonable business judgment. “Permitted Holder” means ESL Investments, Inc. and any of its Affiliates other than a Group Member. “Permitted Liens” means: (a) Liens for taxes, assessments and governmental charges or levies to the extent such taxes, assessments or governmental charges are being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained; (b) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings and as to which appropriate reserves 15 are being maintained; (c) landlords’ Liens arising in the ordinary course of business securing (i) rents not yet due and payable, (ii) rent for Stores in an amount not to exceed the monthly base rent due for the immediately preceding calendar month and (iii) rents for Stores in excess of the amount set forth in the preceding clause (ii) so long as such amounts are being contested in good faith by appropriate proceedings and as to which appropriate reserves are being maintained; (d) any attachment or judgment lien not constituting an Event of Default under Section 7.01(f); (e) Liens presently existing or hereafter created in favor of the Agent, on behalf of the Lenders; (f) Liens arising by the terms of commercial letters of credit entered into in the ordinary course of business to secure reimbursement obligations thereunder, provided that such Liens only encumber the title documents and underlying goods relating to such letters of credit; (g) consignments and claims under PACA and PASA; and (h) Liens in favor of issuers of credit cards arising in the ordinary course of business securing the obligation to pay customary fees and expenses in connection with credit card arrangements. “Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof. “Plan” means a Single Employer Plan or a Multiple Employer Plan. “Pricing Grid” means the pricing grid set forth on Schedule IA. “Pro Forma Financial Information” means the pro forma financial data of Holdings contained in the Registration Statement. “Refunded Swingline Advances” has the meaning specified in Section 2.04(b). “Register” has the meaning specified in Section 9.07(d). “Registration Statement” means the Registration Statement of Holdings on Form S-4 filed with the SEC (Registration No. 333-120954) and declared effective on February 18, 2005. “Reimbursement Obligation” means the obligation of the Borrowers to reimburse the Issuing Lender pursuant to Section 3.05 for amounts drawn under Letters of Credit. “Related Intellectual Property” means such rights with respect to the Intellectual Property of the Borrowers and their Subsidiaries (other than Sears Canada) as are reasonably necessary to permit the Agent to enforce its remedies under the Loan Documents with respect to the Collateral. “Reorganization” means with respect to any Multiemployer Plan, the condition that such Plan is in reorganization within the meaning of Section 4241 of ERISA. “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than (i) those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. Section 4043 and (ii) any event that must be reported solely as a result of the bankruptcy filing by Kmart Corp. and certain of its Subsidiaries on January 22, 2002 in the Bankruptcy Court for the Northern District of Illinois, Eastern Division. “Required Lenders” means, at any time, the holders of more than 50% of the Commitments then in effect or, if the Commitments have been terminated, the holders of more than 50% of the Total Extensions of Credit then outstanding. “Requirements of Law” means as to any Person, the Certificate of Incorporation and By Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or 16 determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. “Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any equity interests in Holdings or any Subsidiary of Holdings, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such equity interests in Holdings or any Subsidiary of Holdings or any option, warrant or other right to acquire any such equity interests in Holdings or any Subsidiary of Holdings. “Revolving Advance” has the meaning specified in Section 2.01. A Revolving Advance may be a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a “Type” of Revolving Advance). “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. “Sears” means Sears, Roebuck and Co., a New York corporation. “Sears Canada” means the collective reference to Sears Canada Inc., a Canadian corporation, and its Subsidiaries. “SEC” means the Securities and Exchange Commission. “Security Documents” means the collective reference to the Guarantee and Collateral Agreement, and all other security documents hereafter delivered to the Agent granting a Lien on any property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document. “Single Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Borrower or any ERISA Affiliate and no Person other than such Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which any Borrower or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. “Solvent” means, when used with respect to any Person, that, as of any date of determination, (a) the amount of the “present fair saleable value” of the assets of such Person will, as of such date, exceed the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) “debt” means liability on a “claim”, and (ii) “claim” means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. “Standby L/C” means an irrevocable letter of credit under which the Issuing Lender agrees to make payments in Dollars for the account of any Borrower, on behalf of any Group Member in respect of obligations of such Group Member incurred pursuant to contracts made or performances undertaken or to be undertaken or like matters relating to contracts to which such Group Member is or proposes to become a party, including, without limiting the foregoing, for insurance purposes or in respect of advance payments 17 or as bid or performance bonds or for any other purpose for which a standby letter of credit might be issued. “Store” means any store owned or leased and operated by any Loan Party. “Store Closure Sale” means a store closure sale that is properly advertised and professionally managed over a defined period that is anticipated by the Borrowers not to exceed 12 weeks (on average) from the date of the same commencement. “Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries. “Subsidiary Guarantor” means each Domestic Subsidiary of Holdings which owns Inventory or Credit Card Accounts Receivable. “Supermajority Lenders” means, at any time, the holders of 66-2/3% or more of Commitments then in effect or, if the Commitments have been terminated, the holders of 66-2/3% or more of the Total Extensions of Credit then outstanding. “Swingline Advances” has the meaning specified in Section 2.03. “Swingline Commitment” means the obligation of the Swingline Lender to make Swingline Advances pursuant to Section 2.03 in an aggregate principal amount at any one time outstanding not to exceed $100,000,000. “Swingline Lender” means JPMorgan Chase Bank, in its capacity as the lender of Swingline Advances. “Swingline Participation Amount” has the meaning specified in Section 2.04(c). “Taxes” has the meaning specified in Section 2.15. “Termination Date” means the earlier of (a) the date that is five years after the Effective Date and (b) the date of termination in whole of the Commitments pursuant to Section 2.06 or 7.01. “Total Availability” means the amount at any time by which (a) the lesser of (i) aggregate Commitments or (ii) the Borrowing Base, if applicable, exceeds (b) the Total Extensions of Credit at such time. “Total Extensions of Credit” means at any time, the aggregate amount of the Extensions of Credit of the Lenders outstanding at such time. “Total Net Extensions of Credit” means, on any day, (a) Total Extensions of Credit on such day less (b) Available Cash on such day. “Type” means either a Base Rate Advance or a Eurodollar Rate Advance. 18 “UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York. “Voting Stock” means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. SECTION 1.02. Computation of Time Periods. In this Agreement (a) inthe computation of periods of time from a specified date to a later specifieddate, the word “from” means “from and including” and the words “to” and “until”each mean “to but excluding” (b) “including” means “including withoutlimitation”; and (c) unless otherwise specified, any reference to a time of daymeans such time in New York City. SECTION 1.03. Accounting Terms. All accounting terms notspecifically defined herein or in the other Loan Documents shall be construed inaccordance with U.S. generally accepted accounting principles (“GAAP”) which forpurposes of Section 6.03 shall be consistently applied. If at any time anychange in U.S. generally accepted accounting principles would affect thecomputation of any financial ratio or requirement set forth herein, and eitherthe Borrowers or the Required Lenders shall so request, the Agent, the Lendersand the Borrowers shall negotiate in good faith to amend such ratio orrequirement to preserve the original intent thereof in light of such change inU.S. generally accepted accounting principles (subject to the approval of theRequired Lenders which shall not be unreasonably withheld), provided that, untilso amended, (i) such ratio or requirement shall continue to be computed inaccordance with U.S. generally accepted accounting principles prior to suchchange in principles and (ii) the Borrowers shall provide to the Agent and theLenders financial statements and other documents required under this Agreementor as reasonably requested hereunder setting forth a reconciliation betweencalculations of such ratio or requirement made before and after giving effect tosuch change in U.S. generally accepted accounting principles. For the avoidanceof doubt, no retroactive change in U.S. generally accepted accounting principlesshall apply to the construction of accounting terms under this Agreement in theabsence of an amendment hereto in accordance with the terms of this Section1.03. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Revolving Advances. Each Lender severally agrees,on the terms and conditions hereinafter set forth, to make revolving advances(the “Revolving Advances”) to the Borrowers from time to time on any BusinessDay during the period from the Effective Date until the Termination Date in anaggregate amount at any one time outstanding which, when added to such Lender’sCommitment Percentage of the sum of (i) the aggregate principal amount of theSwingline Advances then outstanding and (ii) the L/C Obligations thenoutstanding, equals the amount of such Lender’s Commitment; provided, that theaggregate principal amount of any Borrowing made at any time shall not exceedthe Total Availability at such time. Each Borrowing under this Section 2.01shall be in an aggregate amount of $5,000,000 or an integral multiple of$1,000,000 in excess thereof (provided, that the Swingline Lender may request,on behalf of the applicable Borrower, Borrowings that are Base Rate Advances inother amounts pursuant to Section 2.04(b)) and shall consist of RevolvingAdvances of the same Type made on the same day by the Lenders ratably accordingto their respective Commitments. Within the limits set forth in this Section2.01, the Borrowers may borrow under this Section 2.01, prepay pursuant toSection 2.11 and reborrow under this Section 2.01. SECTION 2.02. Making the Revolving Advances. (a) Each Borrowingunder Section 2.01 shall be made on notice, given not later than (x) 12:00 noonon the third Business Day prior to the date of the proposed Borrowing in thecase of a Borrowing consisting of Eurodollar Rate Advances or (y) 12:00 noon onthe date of the proposed Borrowing in the case of a Borrowing consisting of BaseRate Advances, by the applicable Borrower to the Agent, which shall give to eachLender prompt notice thereof by telecopier. Each such notice of a Borrowing (a”Notice of Borrowing”) shall be by telephone, confirmed immediately in writing,by email attachment or by telecopier, in substantially the form of Exhibit Ahereto, specifying therein the requested (i) date of such Borrowing, (ii) Typeof Revolving Advances comprising such Borrowing, (iii) aggregate amount of suchBorrowing, and (iv) in 19the case of a Borrowing consisting of Eurodollar Rate Advances, initial InterestPeriod for each such Revolving Advance. Each Lender shall, before 1:00 P.M. onthe date of such Borrowing make available for the account of its ApplicableLending Office to the Agent at the Agent’s Account, in same day funds, suchLender’s ratable (in accordance with its Commitment Percentage) portion of suchBorrowing. After the Agent’s receipt of such funds and upon fulfillment of theapplicable conditions set forth in Article IV, the Agent will make such fundsavailable to the Borrower requesting such Borrowing at the Agent’s addressreferred to in Section 9.02. (b) Anything in subsection (a) above to the contrarynotwithstanding, (i) a Borrower may not select Eurodollar Rate Advances for anyBorrowing if the aggregate amount of such Borrowing is less than $5,000,000 orif the obligation of the Lenders to make Eurodollar Rate Advances shall then besuspended pursuant to Section 2.09 or 2.13 and (ii) the Eurodollar Rate Advancesmay not be outstanding as part of more than ten separate Borrowings. (c) Each Notice of Borrowing shall be irrevocable and binding on theapplicable Borrower. In the case of any Borrowing that the related Notice ofBorrowing specifies is to be comprised of Eurodollar Rate Advances, theapplicable Borrower shall indemnify each Lender against any loss, cost orexpense incurred by such Lender as a result of any failure to fulfill on orbefore the date specified in such Notice of Borrowing for such Borrowing theapplicable conditions set forth in Article IV, including any loss (includingloss of anticipated profits), cost or expense incurred by reason of theliquidation or reemployment of deposits or other funds acquired by such Lenderto fund the Revolving Advance to be made by such Lender as part of suchBorrowing when such Revolving Advance, as a result of such failure, is not madeon such date. (d) Unless the Agent shall have received notice from a Lender priorto the time of any Borrowing that such Lender will not make available to theAgent such Lender’s ratable portion of such Borrowing, the Agent may assume thatsuch Lender has made such portion available to the Agent on the date of suchBorrowing in accordance with subsection (a) of this Section 2.02 and the Agentmay, in reliance upon such assumption, make available to the applicable Borroweron such date a corresponding amount. If and to the extent that such Lender shallnot have so made such ratable portion available to the Agent, such Lender andthe applicable Borrower severally agree to repay to the Agent forthwith ondemand such corresponding amount together with interest thereon, for each dayfrom the date such amount is made available to such Borrower until the date suchamount is repaid to the Agent, at (i) in the case of such Borrower, the interestrate applicable at the time to Revolving Advances comprising such Borrowing and(ii) in the case of such Lender, the Federal Funds Rate. If such Lender shallrepay to the Agent such corresponding amount, such amount so repaid shall bemade available to the applicable Borrower and shall constitute such Lender’sRevolving Advance as part of such Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the Revolving Advance to bemade by it as part of any Borrowing shall not relieve any other Lender of itsobligation, if any, hereunder to make its Revolving Advance on the date of suchBorrowing, but no Lender shall be responsible for the failure of any otherLender to make the Revolving Advance to be made by such other Lender on the dateof any Borrowing. SECTION 2.03. The Swingline Advances. (a) Subject to the terms andconditions hereof, the Swingline Lender agrees to make a portion of the creditotherwise available to the Borrowers under the Commitments from time to timeduring the period from the Effective Date until the Termination Date by makingswing line advances (“Swingline Advances”) to the Borrowers; provided that (i)the aggregate principal amount of Swingline Advances outstanding at any timeshall not exceed the Swingline Commitment then in effect (notwithstanding thatthe Swingline Advances outstanding at any time, when aggregated with theSwingline Lender’s other outstanding Revolving Advances, may exceed theSwingline Commitment then in effect) and (ii) the amount of any SwinglineAdvance made at any time shall not exceed the Total Availability at such time.During the period from the Effective Date until the Termination Date, theBorrowers may use the Swingline Commitment by borrowing, repaying andreborrowing, all in accordance with the terms and conditions hereof. SwinglineAdvances shall be available as Base Rate Advances only. (b) Each Borrower shall repay to the Swingline Lender the thenunpaid principal amount of each Swingline Advance made to it on the earlier ofthe Termination Date and the first date after such Swingline Advance is madethat is the 15th or last day of a calendar month and is at least two BusinessDays after such Swingline 20Advance is made; provided that on each date that a Revolving Advance is borrowedby a Borrower, such Borrower shall repay all Swingline Advances thenoutstanding, if any, and may use all or a portion of such Revolving Advance tofund such repayment. SECTION 2.04. Making the Swingline Advances. (a) Each Borrowingunder Section 2.03 shall be made on notice, given not later than 1:00 P.M. onthe date of the proposed Borrowing, by the applicable Borrower to the Agent andSwingline Lender. Each such Notice of a Borrowing shall be by telephone,confirmed immediately in writing, by email attachment or by telecopier, insubstantially the form of Exhibit A hereto, specifying therein the requested (i)date of such Borrowing and (ii) aggregate amount of such Borrowing. EachBorrowing under the Swingline Commitment shall be in an amount equal to $500,000or a whole multiple of $100,000 in excess thereof. Not later than 3:00 P.M. onthe date of the proposed Borrowing, the Swingline Lender shall make available tothe Agent at the Agent’s Account an amount in immediately available funds equalto the amount of the Swingline Advance to be made by the Swingline Lender. Uponfulfillment of the applicable conditions set forth in Article IV, the Agentshall make the proceeds of such Swingline Advance available to the Borrowerrequesting such Borrowing at the Agent’s address referred to in Section 9.02. (b) The Swingline Lender, at any time and from time to time in itssole and absolute discretion may, on behalf of the Borrowers (which herebyirrevocably direct the Swingline Lender to act on their behalf), by notice givenby the Swingline Lender no later than 12:00 noon, request each Lender to make,and each Lender hereby agrees to make, a Revolving Advance, in an amount equalto such Lender’s Commitment Percentage of the aggregate amount of the SwinglineAdvances (the “Refunded Swingline Advances”) outstanding on the date of suchnotice, to repay the Swingline Lender. Each Lender shall make the amount of suchRevolving Advance available to the Agent at the Agent’s Account in same dayfunds, not later than 1:00 P.M. on the date of such notice. The proceeds of suchRevolving Advances shall be immediately made available by the Agent to theSwingline Lender for application by the Swingline Lender to the repayment of theRefunded Swingline Advances. Each Borrower irrevocably authorizes the SwinglineLender to charge such Borrower’s accounts with the Agent (up to the amountavailable in each such account) in order to immediately pay the amount of suchRefunded Swingline Advances to the extent amounts received from the Lenders arenot sufficient to repay in full such Refunded Swingline Advances. (c) If prior to the time a Revolving Advance would have otherwisebeen made pursuant to Section 2.04(b), one of the events described in Section7.01 shall have occurred and be continuing or if for any other reason, asdetermined by the Swingline Lender in its sole discretion, Revolving Advancesmay not be made as contemplated by Section 2.04(b), each Lender shall, on thedate such Revolving Advance was to have been made pursuant to the noticereferred to in Section 2.04(b), purchase for cash an undivided participatinginterest in the then outstanding Swingline Advances by paying to the SwinglineLender an amount (the “Swingline Participation Amount”) equal to (i) suchLender’s Commitment Percentage multiplied by (ii) the sum of the aggregateprincipal amount of Swingline Advances then outstanding that were to have beenrepaid with such Revolving Advances. (d) Whenever, at any time after the Swingline Lender has receivedfrom any Lender such Lender’s Swingline Participation Amount, the SwinglineLender receives any payment on account of the Swingline Advances, the SwinglineLender will distribute to such Lender its Swingline Participation Amount(appropriately adjusted, in the case of interest payments, to reflect the periodof time during which such Lender’s participating interest was outstanding andfunded and, in the case of principal and interest payments, to reflect suchLender’s pro rata portion of such payment if such payment is not sufficient topay the principal of and interest on all Swingline Advances then due); provided,however, that in the event that such payment received by the Swingline Lender isrequired to be returned, such Lender will return to the Swingline Lender anyportion thereof previously distributed to it by the Swingline Lender. (e) Each Lender’s obligation to make the Advances referred to inSection 2.04(b) and to purchase participating interests pursuant to Section2.04(c) shall be absolute and unconditional and shall not be affected by anycircumstance, including (i) any set-off, counterclaim, recoupment, defense orother right that such Lender or any Borrower may have against the SwinglineLender, any Borrower or any other Person for any reason whatsoever, (ii) theoccurrence or continuance of a Default or an Event of Default or the failure tosatisfy any of the other conditions specified in Article IV, (iii) any adversechange in the condition (financial or otherwise) of any Borrower, (iv) anybreach of this Agreement or any other Loan Document by any Borrower, any otherLoan Party or any other Lender or (v) any other circumstance, happening or eventwhatsoever, whether or not similar to any of the foregoing. 21 SECTION 2.05. Fees. (a) Commitment Fee. The Borrowers jointly andseverally agree to pay to the Agent for the account of each Lender a commitmentfee commencing on the Effective Date on the average daily amount of theAvailable Commitment of such Lender during the period for which payment is madeat a rate per annum equal to the Commitment Fee Rate in effect from time totime, payable in arrears quarterly on the 5th day subsequent to the last day ofeach April, July, October and January, commencing April 30, 2005, and on theTermination Date. (b) Agent’s Fees. The Borrowers shall pay to the Agent for its ownaccount such fees as may from time to time be agreed between the Borrowers andthe Agent. SECTION 2.06. Optional Termination or Reduction of the Commitments.The Borrowers shall have the right, without penalty or premium and upon at leastthree Business Days’ notice to the Agent, to permanently terminate in whole orpermanently reduce ratably in part the unused portions of the respectiveCommitments of the Lenders, provided that no such termination or reduction ofthe Commitments shall be permitted if, after giving effect thereof and to anyprepayments of the Advances made on the effective date thereof, the TotalExtensions of Credit would exceed the aggregate amount of the Commitments as soreduced. Any partial reduction of the Commitments shall be in the aggregateamount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof. SECTION 2.07. Repayment of Advances. Each Borrower shall repay tothe Agent for the ratable account of the Lenders on the Termination Date theaggregate principal amount of the Advances made to it then outstanding. SECTION 2.08. Interest on Advances. (a) Scheduled Interest. EachBorrower shall pay interest on the unpaid principal amount of each Advance madeto it and owing to each Lender from the date of such Advance until suchprincipal amount shall be paid in full, at the following rates per annum: (i) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (x) the Base Rate in effect from time to time plus (y) the Applicable Margin in effect from time to time, payable (I) in the case of any Base Rate Advance other than a Swingline Advance, in arrears quarterly on the 5th day subsequent to the last day of each April, July, October and January during such periods and on the date such Base Rate Advance shall be Converted or paid in full and (II) in the case of any Swingline Advance, on the date that such Swingline Advance is required to be repaid. (ii) Eurodollar Rate Advances. During such periods as such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (x) the Eurodollar Rate for such Interest Period for such Advance plus (y) the Applicable Margin in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full. (b) Default Interest. Upon the occurrence and during thecontinuance of an Event of Default under Section 7.01(a) in respect of principalamounts, the Borrowers shall pay interest on the unpaid principal amount of eachAdvance and Reimbursement Obligation owing to each Lender, payable in arrears onthe dates referred to in clause (a)(i) or (a)(ii) above, at a rate per annumequal to 2% per annum above the rate per annum required to be paid on suchAdvance or Reimbursement Obligation pursuant to clause (a)(i) or (a)(ii) above.Further, the Borrowers shall pay interest, to the fullest extent permitted bylaw, on the amount of any interest, fee or other amount (other than principal)payable hereunder that is not paid when due, from the date such amount shall bedue until such amount shall be paid in full, payable in arrears on the date suchamount shall be paid in full and on demand, at a rate per annum equal to 2% perannum above the rate per annum required to be paid on Base Rate Advancespursuant to clause (a)(i) above. (c) Regulation D Compensation. Each Lender that is subject toreserve requirements of the Board of Governors of the Federal Reserve System (orany successor) may require the Borrowers to pay, 22contemporaneously with each payment of interest on the Eurodollar Rate Advances,additional interest on the related Eurodollar Rate Advances of such Lender atthe rate per annum equal to the excess of (i) (A) the applicable Eurodollar Ratedivided by (B) one minus the Eurodollar Rate Reserve Percentage over (ii) theapplicable Eurodollar Rate. Any Lender wishing to require payment of suchadditional interest (x) shall so notify the Agent and the Borrowers, in whichcase such additional interest on the Eurodollar Rate Advances of such Lendershall be payable to such Lender at the place indicated in such notice withrespect to each Interest Period commencing at least five Business Days after thegiving of such notice and (y) shall notify the Agent and the Borrowers at leastfive Business Days prior to each date on which interest is payable on the amountthen due it under this Section. Each such notification shall be accompanied bysuch information as the Borrowers may reasonably request. SECTION 2.09. Interest Rate Determination. (a) The Agent shall giveprompt notice to the Borrowers and the Lenders of the applicable interest ratedetermined by the Agent for purposes of Section 2.08(a)(i) or (ii). (b) If, with respect to any Eurodollar Rate Advances, the RequiredLenders notify the Agent at least one Business Day before the date of anyproposed Eurodollar Rate Advance that the Eurodollar Rate for any InterestPeriod for such Advances will not adequately reflect the cost to such RequiredLenders of making, funding or maintaining their respective Eurodollar RateAdvances for such Interest Period, the Agent shall forthwith so notify theBorrowers and the Lenders, whereupon (i) each Eurodollar Rate Advance willautomatically, on the last day of the then existing Interest Period therefor,Convert into a Base Rate Advance, and (ii) the obligation of the Lenders tomake, or to Convert Advances into, Eurodollar Rate Advances shall be suspendeduntil the Agent shall notify the Borrowers and the Lenders that thecircumstances causing such suspension no longer exist. (c) If any Borrower shall fail to select the duration of anyInterest Period for any Eurodollar Rate Advances in accordance with theprovisions contained in the definition of “Interest Period” in Section 1.01, theAgent will forthwith so notify such Borrower and the Lenders and such Advanceswill automatically, on the last day of the then existing Interest Periodtherefor, Convert into Base Rate Advances. (d) On the date on which the aggregate unpaid principal amount ofEurodollar Rate Advances comprising any Borrowing shall be reduced, by paymentor prepayment or otherwise, to less than $5,000,000, such Advances shallautomatically Convert into Base Rate Advances. (e) Upon the occurrence and during the continuance of any Event ofDefault under Section 7.01(a), (i) each Eurodollar Rate Advance willautomatically, on the last day of the then existing Interest Period therefor,Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,or to Convert Revolving Advances into, Eurodollar Rate Advances shall besuspended. SECTION 2.10. Optional Conversion of Revolving Advances. TheBorrowers may on any Business Day, upon notice given to the Agent not later than12:00 noon on the third Business Day prior to the date of the proposedConversion and subject to the provisions of Sections 2.09 and 2.13, Convert allRevolving Advances of one Type comprising the same Borrowing into RevolvingAdvances of the other Type; provided, however, that any Conversion of EurodollarRate Advances into Base Rate Advances shall be made only on the last day of anInterest Period for such Eurodollar Rate Advances, any Conversion of Base RateAdvances into Eurodollar Rate Advances shall be in an amount not less than theminimum amount specified in Section 2.02(b) and no Conversion of any RevolvingAdvances shall result in more separate Borrowings than permitted under Section2.02(b). Each such notice of a Conversion shall, within the restrictionsspecified above, specify (i) the date of such Conversion, (ii) the RevolvingAdvances to be Converted, and (iii) if such Conversion is into Eurodollar RateAdvances, the duration of the initial Interest Period for each such RevolvingAdvance. Each notice of Conversion shall be irrevocable and binding on theapplicable Borrower. SECTION 2.11. Optional and Mandatory Prepayments of Advances. (a)Any Borrower may, without penalty or premium and upon notice given not laterthan 12:00 noon on the date of such prepayment to the Agent stating the proposeddate and aggregate principal amount of the prepayment, and if such notice isgiven such Borrower shall, prepay the outstanding principal amount of theAdvances comprising part of the same Borrowing in whole or ratably in part,together with accrued interest to the date of such prepayment on the principalamount prepaid; provided, however, that (x) each partial prepayment shall be inan aggregate principal amount of 23$5,000,000 or an integral multiple of $1,000,000 in excess thereof (or, in thecase of partial prepayments of Swingline Advances, $100,000 or a whole multiplethereof) and (y) in the event of any such prepayment of a Eurodollar RateAdvance, the applicable Borrower shall be obligated to reimburse the Lenders inrespect thereof pursuant to Section 9.04(c). (b) On the date of delivery of any Borrowing Base Certificate, ifthe amount described in clause (b) of the definition of Total Availabilityexceeds the amount described in clause (a) of such definition, the Borrowersshall prepay Advances in an amount equal to such excess, provided that if theaggregate principal amount of Advances then outstanding is less than the amountof such excess (because L/C Obligations constitute a portion thereof), theBorrowers shall, to the extent of the balance of such excess, replaceoutstanding Letters of Credit and/or deposit an amount in cash in a cashcollateral account established with the Agent for the benefit of the Lenders onterms and conditions satisfactory to the Agent. Any prepayment of Loans pursuantto this Section 2.11(b) shall be applied, first, to any Base Rate Advances thenoutstanding and the balance of such prepayment, if any, to the Eurodollar RateAdvances then outstanding. SECTION 2.12. Increased Costs. (a) If, due to either (i) after thedate of this Agreement the introduction of or any change in or in theinterpretation of any law or regulation or (ii) the compliance with anyguideline or request from any central bank or other governmental authority(whether or not having the force of law) made or issued after the date of thisAgreement, there shall be any increase in the cost to any Lender of agreeing tomake or making, funding or maintaining Eurodollar Rate Advances or issuing orparticipating in Letters of Credit (excluding for purposes of this Section 2.12any such increased costs resulting from (i) Taxes or Other Taxes (as to whichSection 2.15 shall govern) and (ii) changes in the basis of taxation of overallnet income or overall gross income by the United States or by the foreignjurisdiction or state under the laws of which such Lender is organized or hasits Applicable Lending Office or any political subdivision thereof), then theBorrowers shall from time to time, upon demand by such Lender (with a copy ofsuch demand to the Agent), pay to the Agent for the account of such Lenderadditional amounts sufficient to compensate such Lender for such increased cost;provided that a Lender claiming additional amounts under this Section 2.12(a)agrees to use reasonable efforts (consistent with its internal policy and legaland regulatory restrictions) to designate a different Applicable Lending Officeand/or take other commercially reasonable action if the making of such adesignation or the taking of such actions would avoid the need for, or reducethe amount of, such increased cost that may thereafter accrue and would not, inthe reasonable judgment of such Lender, be otherwise disadvantageous to suchLender. A certificate as to the amount of such increased cost, submitted to theBorrowers and the Agent by such Lender, shall be entitled to a presumption ofcorrectness. If any Borrower so notifies the Agent after any Lender notifies theBorrowers of any increased cost pursuant to the foregoing provisions of thisSection 2.12(a), such Borrower may, upon payment of such increased cost to suchLender, replace such Lender with a Person that is an Eligible Assignee inaccordance with the terms of Section 9.07 (and the Lender being so replacedshall take all action as may be necessary to assign its rights and obligationsunder this Agreement to such Eligible Assignee). (b) If any Lender determines that compliance with any change afterthe date of this Agreement in law or regulation or any guideline or requestafter the date of this Agreement from any central bank or other governmentalauthority (whether or not having the force of law) affects or would affect theamount of capital required or expected to be maintained by such Lender or anyentity controlling such Lender and that the amount of such capital is increasedby or based upon the existence of such Lender’s commitment to lend hereunder andother commitments of this type, then, upon demand by such Lender (with a copy ofsuch demand to the Agent), the Borrowers shall pay to the Agent for the accountof such Lender, from time to time as specified by such Lender, additionalamounts sufficient to compensate such Lender or such entity in the light of suchcircumstances, to the extent that such Lender reasonably determines suchincrease in capital to be allocable to the existence of such Lender’s commitmentto lend hereunder. A certificate as to such amounts submitted to the Borrowersand the Agent by such Lender shall be entitled to a presumption of correctness. (c) The Borrowers shall not be required to compensate a Lenderpursuant to this Section for any increased costs or capital or reserverequirement or pursuant to Section 2.15 for any taxes incurred more than sixmonths prior to the date that such Lender notifies the Borrowers of the changeor issuance giving rise to such increased costs or capital or reserverequirement or tax and of such Lender’s intention to claim compensationtherefor; provided that if the change or issuance giving rise to such increasedcosts or capital or reserve requirement 24or tax is retroactive, then the six-month period referred to above shall beextended to include the period of retroactive effect thereof. SECTION 2.13. Illegality. Notwithstanding any other provision ofthis Agreement, if any Lender shall notify the Agent that the introduction of orany change in or in the interpretation of any law or regulation makes itunlawful, or any central bank or other governmental authority asserts that it isunlawful, for any Lender or its Eurodollar Lending Office to perform itsobligations hereunder to make Eurodollar Rate Advances or to fund or maintainEurodollar Rate Advances hereunder, (a) each Eurodollar Rate Advance willautomatically, upon such demand, Convert into a Base Rate Advance or an Advancethat bears interest at the rate set forth in Section 2.08(a)(i), as the case maybe, and (b) the obligation of the Lenders to make Eurodollar Rate Advances or toConvert Advances into Eurodollar Rate Advances shall be suspended until theAgent shall notify the Borrowers and the Lenders that the circumstances causingsuch suspension no longer exist. SECTION 2.14. Payments and Computations. (a) The Borrowers shallmake each payment hereunder and under the other Loan Documents, without anyright of counterclaim or set-off, not later than 1:00 P.M. on the day when duein U.S. dollars to the Agent at the Agent’s Account in same day funds. The Agentwill promptly thereafter cause to be distributed like funds relating to thepayment of principal or interest or commitment fees ratably (other than amountspayable pursuant to Section 2.12, 2.15 or 10.04(c)) to the Lenders for theaccount of their respective Applicable Lending Offices, and like funds relatingto the payment of any other amount payable to any Lender to such Lender for theaccount of its Applicable Lending Office, in each case to be applied inaccordance with the terms of this Agreement. Upon its acceptance of anAssignment and Acceptance and recording of the information contained therein inthe Register pursuant to Section 9.07(c), from and after the effective datespecified in such Assignment and Acceptance, the Agent shall make all paymentshereunder and under the other Loan Documents in respect of the interest assignedthereby to the Lender assignee thereunder, and the parties to such Assignmentand Acceptance shall make all appropriate adjustments in such payments forperiods prior to such effective date directly between themselves. (b) Each Borrower hereby authorizes each Lender, if and to theextent payment owed by it to such Lender is not made when due hereunder or underthe other Loan Documents, to charge from time to time against any or all of suchBorrower’s accounts with such Lender any amount so due. (c) All computations of interest based on the Base Rate shall bemade by the Agent on the basis of a year of 365 or 366 days, as the case may be,and all computations of interest based on the Eurodollar Rate or the FederalFunds Rate and of commitment fees shall be made by the Agent on the basis of ayear of 360 days, in each case for the actual number of days (including thefirst day but excluding the last day) occurring in the period for which suchinterest or commitment fees are payable. Each determination by the Agent of aninterest rate hereunder shall be conclusive and binding for all purposes, absentmanifest error. (d) Whenever any payment hereunder or under the other Loan Documentsshall be stated to be due on a day other than a Business Day, such payment shallbe made on the next succeeding Business Day, and such extension of time shall insuch case be included in the computation of payment of interest or commitmentfee, as the case may be; provided, however, that, if such extension would causepayment of interest on or principal of Eurodollar Rate Advances to be made inthe next following calendar month, such payment shall be made on the nextpreceding Business Day. (e) Unless the Agent shall have received notice from any Borrowerprior to the date on which any payment is due by it to the Lenders hereunderthat such Borrower will not make such payment in full, the Agent may assume thatthe applicable Borrower has made such payment in full to the Agent on such dateand the Agent may, in reliance upon such assumption, cause to be distributed toeach Lender on such due date an amount equal to the amount then due such Lender.If and to the extent such Borrower shall not have so made such payment in fullto the Agent, each Lender shall repay to the Agent forthwith on demand suchamount distributed to such Lender together with interest thereon, for each dayfrom the date such amount is distributed to such Lender until the date suchLender repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.15. Taxes. (a) Any and all payments by the Borrowers to orfor the account of any Lender or the Agent hereunder or under the other LoanDocuments or any other documents to be delivered 25hereunder shall be made, in accordance with Section 2.14 or the applicableprovisions of such other documents, free and clear of and without deduction forany and all present or future withholding taxes, including levies, imposts,deductions, charges or withholdings, and all liabilities with respect thereto,excluding, in the case of each Lender and the Agent, taxes imposed on itsoverall net income, and franchise taxes imposed on it in lieu of net incometaxes, and branch profits taxes, by the jurisdiction under the laws of whichsuch Lender or the Agent (as the case may be) is organized or any politicalsubdivision thereof and, in the case of each Lender, taxes imposed on itsoverall net income, and franchise taxes imposed on it in lieu of net incometaxes, and branch profits taxes, by the jurisdiction of such Lender’s ApplicableLending Office or any political subdivision thereof (all such non-excludedtaxes, levies, imposts, deductions, charges, withholdings and liabilities inrespect of payments hereunder or under the other Loan Documents beinghereinafter referred to as “Taxes”). If the Borrowers shall be required by lawto deduct any Taxes from or in respect of any sum payable hereunder or under anyother Loan Document or any other documents to be delivered hereunder to anyLender or the Agent, (i) the sum payable shall be increased as may be necessaryso that after making all required deductions (including deductions applicable toadditional sums payable under this Section 2.15) such Lender or the Agent (asthe case may be) receives an amount equal to the sum it would have received hadno such deductions been made, (ii) the Borrowers shall make such deductions and(iii) the Borrowers shall pay the full amount deducted to the relevant taxationauthority or other authority in accordance with applicable law. (b) In addition, the Borrowers shall pay any present or future stampor documentary taxes or any other excise or property taxes, charges or similarlevies that arise from any payment made hereunder or under the other LoanDocuments or from the execution, delivery or registration of, performing under,or otherwise with respect to, this Agreement or the other Loan Documents or anyother documents to be delivered hereunder, but excluding all other United Statesfederal taxes other than withholding taxes (hereinafter referred to as “OtherTaxes”). (c) The Borrowers shall indemnify each Lender and the Agent for andhold it harmless against the full amount of Taxes or Other Taxes (includingtaxes of any kind imposed or asserted by any jurisdiction on amounts payableunder this Section 2.15) imposed on or paid by such Lender or the Agent (as thecase may be) and any liability (including penalties, interest and expenses)arising therefrom or with respect thereto. This indemnification shall be madewithin 30 days from the date such Lender or the Agent (as the case may be) makeswritten demand therefor. (d) Within 30 days after the date of any payment of Taxes, theBorrowers shall furnish to the Agent, at its address referred to in Section9.02, the original or a certified copy of a receipt evidencing such payment tothe extent such a receipt is issued therefor, or other written proof of paymentthereof that is reasonably satisfactory to the Agent. In the case of any paymenthereunder or under the other Loan Documents or any other documents to bedelivered hereunder by or on behalf of the Borrowers through an account orbranch outside the United States or by or on behalf of the Borrowers by a payorthat is not a United States person, if the Borrowers determine that no Taxes arepayable in respect thereof, the Borrowers shall furnish, or shall cause suchpayor to furnish, to the Agent, at such address, an opinion of counselacceptable to the Agent stating that such payment is exempt from Taxes. Forpurposes of this subsection (d) and subsection (e), the terms “United States”and “United States person” shall have the meanings specified in Section 7701 ofthe Internal Revenue Code. (e) Each Lender organized under the laws of a jurisdiction outsidethe United States, and each other Lender that is not a domestic corporationwithin the meaning of Section 7701(a)(30) of the Internal Revenue Code (i)represents that all payments to be made to it under this Agreement or any otherLoan Document are exempt from United States withholding tax (including backupwithholding tax) under an applicable statute or tax treaty and (ii) on or priorto the date of its execution and delivery of this Agreement in the case of eachInitial Lender and on the date of the Assignment and Acceptance pursuant towhich it becomes a Lender in the case of each other Lender, and from time totime thereafter as reasonably requested in writing by the Borrowers (but only solong as such Lender remains lawfully able to do so), shall provide each of theAgent and the Borrowers with two original Internal Revenue Service forms W-8BENor W-8ECI, as appropriate, or any successor or other form prescribed by theInternal Revenue Service, certifying that such Lender is exempt from or entitledto a reduced rate of United States withholding tax on payments pursuant to thisAgreement or the other Loan Documents. If the form provided by a Lender at thetime such Lender first becomes a party to this Agreement indicates a UnitedStates interest withholding tax rate in excess of zero, withholding tax at suchrate shall be considered excluded from Taxes unless 26and until such Lender provides the appropriate forms certifying that a lesserrate applies, whereupon withholding tax at such lesser rate only shall beconsidered excluded from Taxes for periods governed by such form; provided,however, that, if at the date of the Assignment and Acceptance pursuant to whicha Lender assignee becomes a party to this Agreement, the Lender assignor wasentitled to payments under subsection (a) in respect of United Stateswithholding tax with respect to interest paid at such date, then, to suchextent, the term Taxes shall include (in addition to withholding taxes that maybe imposed in the future or other amounts otherwise includable in Taxes) UnitedStates withholding tax, if any, applicable with respect to the Lender assigneeon such date. If any form or document referred to in this subsection (e)requires the disclosure of information, other than information necessary tocompute the tax payable and information required on the date hereof by InternalRevenue Service form W-8BEN or W-8ECI, that the Lender reasonably considers tobe confidential, the Lender shall give notice thereof to the Borrowers and shallnot be obligated to include in such form or document such confidentialinformation. (f) For any period with respect to which a Lender has failed toprovide the Borrowers with the appropriate form, certificate or other documentdescribed in Section 2.15(e) (other than if such failure is due to a change inlaw, or in the interpretation or application thereof, occurring subsequent tothe date on which a form, certificate or other document originally was requiredto be provided, or if such form, certificate or other document otherwise is notrequired under subsection (e) above), such Lender shall not be entitled toindemnification under Section 2.15(a) or (c) with respect to Taxes imposed bythe United States by reason of such failure; provided, however, that should aLender become subject to Taxes because of its failure to deliver a form,certificate or other document required hereunder, the Borrowers shall take suchsteps as the Lender shall reasonably request to assist the Lender to recoversuch Taxes. (g) Any Lender claiming any additional amounts payable pursuant tothis Section 2.15 agrees to use reasonable efforts (consistent with its internalpolicy and legal and regulatory restrictions) to change the jurisdiction of itsEurodollar Lending Office if the making of such a change would avoid the needfor, or reduce the amount of, any such additional amounts that may thereafteraccrue and would not, in the reasonable judgment of such Lender, be otherwisedisadvantageous to such Lender. (h) If any Lender determines, in its sole discretion, that it hasactually and finally realized, by reason of a refund, deduction or credit of anyTaxes paid or reimbursed by the Borrowers pursuant to subsection (a) or (c)above in respect of payments under the Credit Agreement or the other LoanDocuments, a current monetary benefit that it would otherwise not have obtained,and that would result in the total payments under this Section 2.15 exceedingthe amount needed to make such Lender whole, such Lender shall pay to theBorrowers, with reasonable promptness following the date on which it actuallyrealizes such benefit, an amount equal to the amount of such excess, net of allout-of-pocket expenses reasonably allocable in securing such refund, deductionor credit, provided that the Borrowers, upon the request of such Lender, agreeto repay the amount paid over to the Borrowers to such Lender in the event suchLender is required to repay such refund to such jurisdiction. Nothing in thissubsection (h) shall be construed to require any Lender to make available to theBorrowers or any other Person its tax returns or any confidential taxinformation. (i) If Agent or any Lender, as the case may be, shall become awarethat it is entitled to claim a refund from a Governmental Authority in respectof Taxes or Other Taxes paid by Borrower pursuant to this Section 2.15,including Taxes or Other Taxes as to which it has been indemnified by Borrower,or with respect to which Borrower or a Group Member that is a signatory heretohas paid additional amounts pursuant to this Section 2.15, it shall notifyBorrower of the availability of such refund claim and, if Agent or such Lender,as the case may be, determines in good faith that making a claim for refund willnot have any adverse consequence to its taxes or business operations, shall,after receipt of a request by Borrower, make a claim to such GovernmentalAuthority for such refund at Borrower’s expense. SECTION 2.16. Sharing of Payments, Etc. If any Lender shall obtainany payment (whether voluntary, involuntary, through the exercise of any rightof set-off, or otherwise) on account of the Advances or other amounts owing toit (other than pursuant to Section 2.12, 2.15 or 10.04(c)) in excess of itsratable share, such Lender shall forthwith purchase from the other Lenders suchparticipations in the Advances or other amounts owing to them as shall benecessary to cause such purchasing Lender to share the excess payment ratablywith each of them; provided, however, that if all or any portion of such excesspayment is thereafter recovered from such purchasing Lender, such purchase fromeach Lender shall be rescinded and such Lender shall repay to the 27purchasing Lender the purchase price to the extent of such recovery togetherwith an amount equal to such Lender’s ratable share (according to the proportionof (i) the amount of such Lender’s required repayment to (ii) the total amountso recovered from the purchasing Lender) of any interest or other amount paid orpayable by the purchasing Lender in respect of the total amount so recovered.The Borrowers agree that any Lender so purchasing a participation from anotherLender pursuant to this Section 2.16 may, to the fullest extent permitted bylaw, exercise all its rights of payment (including the right of set-off) withrespect to such participation as fully as if such Lender were the directcreditor of the Borrowers in the amount of such participation. SECTION 2.17. Use of Proceeds of Advances. The proceeds of theAdvances shall be available (and each Borrower agrees that it shall use suchproceeds) for general corporate purposes of Holdings and its Subsidiaries,including liquidity support for commercial paper, acquisitions, capitalexpenditures, cash dividends and stock and bond repurchases. ARTICLE III AMOUNT AND TERMS OF THE LETTERS OF CREDIT SECTION 3.01. L/C Commitment. (a) Subject to the terms andconditions hereof, each Issuing Lender, in reliance on the agreements of theother Lenders set forth in Section 3.04(a), agrees to issue Commercial L/Cs andStandby L/Cs for the account of any Borrower on any Business Day during theperiod from the Effective Date until the Termination Date in such form as may beapproved from time to time by such Issuing Lender; provided that no IssuingLender shall have any obligation to issue any Letter of Credit if (i) aftergiving effect to such issuance, the L/C Obligations would exceed the L/CCommitment or (ii) the face amount of the requested Letter of Credit exceeds theTotal Availability at such time; provided further that each Issuing Lender may,but shall not be required to, issue Letters of Credit such that the aggregateL/C Obligations attributable to all such Letters of Credit issued by suchIssuing Lender exceed $500,000,000. Each Letter of Credit shall (i) bedenominated in Dollars and (ii) expire no later than the earlier of (x) thefirst anniversary of its date of issuance and (y) the date that is five BusinessDays prior to the Termination Date, provided that any Letter of Credit with aone-year term may provide for the renewal thereof for additional one-yearperiods (which shall in no event extend beyond the date referred to in clause(y) above). Each Application and each Letter of Credit shall be subject to theInternational Standby Practices (ISP 98) of the International Chamber ofCommerce (in the case of Standby L/Cs) or the Uniform Customs and Practice forDocumentary Credits as most recently published by the International Chamber ofCommerce (in the case of Commercial L/Cs) and, to the extent not inconsistenttherewith, the laws of the State of New York. (b) The Issuing Lender shall not at any time be obligated to issueany Letter of Credit if such issuance would conflict with, or cause the IssuingLender or any Lender to exceed any limits imposed by, any applicable Requirementof Law. SECTION 3.02. Procedure for Issuance of Letter of Credit. AnyBorrower may from time to time request that the Issuing Lender issue aCommercial L/C or Standby L/C for its account by delivering to the IssuingLender at its address for notices specified herein an Application therefor,completed to the satisfaction of the Issuing Lender, and such othercertificates, documents and other papers and information as the Issuing Lendermay reasonably request. Upon receipt of any Application, the Issuing Lender willprocess such Application and the certificates, documents and other papers andinformation delivered to it in connection therewith in accordance with itscustomary procedures and shall promptly issue the Letter of Credit requestedthereby (but in no event shall the Issuing Lender be required to issue anyLetter of Credit earlier than three Business Days after its receipt of theApplication therefor and all such other certificates, documents and other papersand information relating thereto) by issuing the original of such Letter ofCredit to the beneficiary thereof or as otherwise may be agreed to by theIssuing Lender and the applicable Borrower. The Issuing Lender shall furnish acopy of such Letter of Credit to the applicable Borrower promptly following theissuance thereof. The Issuing Lender shall promptly notify the Agent of theissuance, extension or amendment of Letters of Credit and any drawings or otherpayments under Letters of Credit. SECTION 3.03. Fees and Other Charges. (a) The Borrowers will pay afee on all outstanding Letters of Credit at a per annum rate equal to (i) in thecase of Standby L/Cs, the Applicable Margin then in effect 28with respect to Eurodollar Rate Advances and (ii) in the case of CommercialL/Cs, 50% of the Applicable Margin then in effect with respect to EurodollarRate Advances, in each case shared ratably among the Lenders and payablequarterly in arrears the 5th day subsequent to the last day of each April, July,October and January after the issuance date. In addition, the Borrowers shallpay to the Issuing Lender for its own account a fronting fee in an amount to beagreed upon by the applicable Issuing Lender and the Borrowers (but in no eventto exceed 0.125% per annum) on the undrawn and unexpired amount of each Letterof Credit, payable quarterly in arrears on the 5th day subsequent to the lastday of each April, July, October and January after the issuance date. (b) In addition to the foregoing fees, the Borrowers shall pay orreimburse the Issuing Lender for such normal and customary costs and expenses asare incurred or charged by the Issuing Lender in issuing, negotiating, effectingpayment under, amending or otherwise administering any Letter of Credit, unlessotherwise agreed. SECTION 3.04. Letter of Credit Participations. (a) The IssuingLender irrevocably agrees to grant and hereby grants to each Lender, and, toinduce the Issuing Lender to issue Letters of Credit, each Lender irrevocablyagrees to accept and purchase and hereby accepts and purchases from the IssuingLender, on the terms and conditions set forth below, for such Lender’s ownaccount and risk an undivided interest equal to such Lender’s CommitmentPercentage in the Issuing Lender’s obligations and rights under and in respectof each Letter of Credit and the amount of each draft paid by the Issuing Lenderthereunder. Each Lender agrees with the Issuing Lender that, if a draft is paidunder any Letter of Credit for which the Issuing Lender is not reimbursed infull by the Borrowers in accordance with the terms of this Agreement, suchLender shall pay to the Issuing Lender upon demand at the Issuing Lender’saddress for notices specified herein an amount equal to such Lender’s CommitmentPercentage of the amount of such draft, or any part thereof, that is not soreimbursed. Each Lender’s obligation to pay such amount shall be absolute andunconditional and shall not be affected by any circumstance, including (i) anyset-off, counterclaim, recoupment, defense or other right that such Lender mayhave against the Issuing Lender, the Borrowers or any other Person for anyreason whatsoever, (ii) the occurrence or continuance of a Default or an Eventof Default or the failure to satisfy any of the other conditions specified inArticle IV, (iii) any adverse change in the condition (financial or otherwise)of the Borrowers, (iv) any breach of this Agreement or any other Loan Documentby the Borrowers, any other Loan Party or any other Lender or (v) any othercircumstance, happening or event whatsoever, whether or not similar to any ofthe foregoing. (b) If any amount required to be paid by any Lender to the IssuingLender pursuant to Section 3.04(a) in respect of any unreimbursed portion of anypayment made by the Issuing Lender under any Letter of Credit is paid to theIssuing Lender within three Business Days after the date such payment is due,such Lender shall pay to the Issuing Lender on demand an amount equal to theproduct of (i) such amount, times (ii) the daily average Federal Funds Rateduring the period from and including the date such payment is required to thedate on which such payment is immediately available to the Issuing Lender, times(iii) a fraction the numerator of which is the number of days that elapse duringsuch period and the denominator of which is 360. If any such amount required tobe paid by any Lender pursuant to Section 3.04(a) is not made available to theIssuing Lender by such Lender within three Business Days after the date suchpayment is due, the Issuing Lender shall be entitled to recover from suchLender, on demand, such amount with interest thereon calculated from such duedate at the rate per annum applicable to Base Rate Advances. A certificate ofthe Issuing Lender submitted to any Lender with respect to any amounts owingunder this Section shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Lender has madepayment under any Letter of Credit and has received from any Lender its pro ratashare of such payment in accordance with Section 3.04(a), the Issuing Lenderreceives any payment related to such Letter of Credit (whether directly from theapplicable Borrower or otherwise, including proceeds of collateral appliedthereto by the Issuing Lender), or any payment of interest on account thereof,the Issuing Lender will distribute to such Lender its pro rata share thereof;provided, however, that in the event that any such payment received by theIssuing Lender shall be required to be returned by the Issuing Lender, suchLender shall return to the Issuing Lender the portion thereof previouslydistributed by the Issuing Lender to it. SECTION 3.05. Reimbursement Obligation of the Borrowers. If anydraft is paid under any Letter of Credit, the applicable Borrower shallreimburse the Issuing Lender for the amount of (a) the draft so paid and (b) anytaxes, fees, charges or other costs or expenses incurred by the Issuing Lenderin connection with such 29payment, not later than 12:00 Noon on (i) the Business Day that the applicableBorrower receives notice of such draft, if such notice is received on such dayprior to 10:00 A.M. or (ii) if clause (i) above does not apply, the Business Dayimmediately following the day that the applicable Borrower receives such notice;provided, that if the total reimbursement amount set forth in subsections (a)and (b) above is not less than $5,000,000 or $500,000, as the case may be, theapplicable Borrower may, subject to the conditions to borrowing set forthherein, request that such reimbursement be financed with a Base Rate Advance orSwingline Advance in an equivalent amount and, to the extent so financed, theBorrower’s obligation to make such payment shall be discharged and replaced bythe resulting Advance. Each such payment shall be made to the Issuing Lender atits address for notices referred to herein in Dollars and in immediatelyavailable funds. Interest shall be payable on any such amounts from the date onwhich the relevant draft is paid until payment in full at the rate set forth in(x) until the Business Day next succeeding the date of the relevant notice,Section 2.08(a)(i) and (y) thereafter, Section 2.08(b). SECTION 3.06. Obligations Absolute. Each Borrower’s obligationsunder this Article III shall be absolute and unconditional under any and allcircumstances and irrespective of any set-off, counterclaim or defense topayment that any Borrower may have or have had against the Issuing Lender, anybeneficiary of a Letter of Credit or any other Person. Each Borrower also agreeswith the Issuing Lender that the Issuing Lender shall not be responsible for,and such Borrower’s Reimbursement Obligations under Section 3.05 shall not beaffected by, among other things, the validity or genuineness of documents or ofany endorsements thereon, even though such documents shall in fact prove to beinvalid, fraudulent or forged, or any dispute between or among such Borrower andany beneficiary of any Letter of Credit or any other party to which such Letterof Credit may be transferred or any claims whatsoever of such Borrower againstany beneficiary of such Letter of Credit or any such transferee. The IssuingLender shall not be liable for any error, omission, interruption or delay intransmission, dispatch or delivery of any message or advice, howevertransmitted, in connection with any Letter of Credit, except for errors oromissions found by a final and nonappealable decision of a court of competentjurisdiction to have resulted from the gross negligence or willful misconduct ofthe Issuing Lender. Each Borrower agrees that any action taken or omitted by theIssuing Lender under or in connection with any Letter of Credit or the relateddrafts or documents, if done in the absence of gross negligence or willfulmisconduct, shall be binding on such Borrower and shall not result in anyliability of the Issuing Lender to such Borrower. SECTION 3.07. Letter of Credit Payments. If any draft shall bepresented for payment under any Letter of Credit, the Issuing Lender shallpromptly notify the applicable Borrower of the date and amount thereof. Theresponsibility of the Issuing Lender to the Borrowers in connection with anydraft presented for payment under any Letter of Credit shall, in addition to anypayment obligation expressly provided for in such Letter of Credit, be limitedto determining that the documents (including each draft) delivered under suchLetter of Credit in connection with such presentment are substantially inconformity with such Letter of Credit. SECTION 3.08. Applications. To the extent that any provision of anyApplication related to any Letter of Credit is inconsistent with the provisionsof this Article III, the provisions of this Article III shall apply. SECTION 3.09. Use of Letters of Credit. The Letters of Credit shallbe available (and each Borrower agrees that it shall use such Letters of Credit)for general corporate purposes of Holdings and its Subsidiaries. ARTICLE IV CONDITIONS TO EFFECTIVENESS SECTION 4.01. Conditions Precedent to Effectiveness. This Agreementshall become effective on and as of the first date on which each of thefollowing conditions precedent have been satisfied: (a) The merger of Sears and Kmart (the “Merger”) shall have been consummated substantially on the terms disclosed by Holdings in its Registration Statement or on such other terms reasonably satisfactory to the Lead Arrangers and the Agent. (b) There shall have occurred no Material Adverse Change since the date the Registration Statement was declared effective by the SEC. 30 (c) All governmental and third party consents and approvals necessary in connection with the Merger and the transactions contemplated hereby shall have been obtained (without the imposition of any conditions that are not acceptable to the Lenders) and shall remain in effect, and no law or regulation shall be applicable in the reasonable judgment of the Lenders that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated hereby. (d) The Lenders shall have received projections for Holdings through January 2006. (e) All actions and documents required to establish the Agent’s security interest in the Collateral with the priority required herein (including lien searches and Uniform Commercial Code financing statements) shall have been completed in a manner satisfactory to the Agent. (f) The Borrowers shall have notified each Lender and the Agent in writing as to the proposed Effective Date. (g) The Borrowers shall have paid all accrued fees and expenses of the Agent, the Lead Arrangers and the Lenders payable hereunder for which invoices have been presented (including the accrued fees and expenses of one counsel to the Agent and Lead Arrangers). (h) On the Effective Date, the following statements shall be true and the Agent shall have received for the account of each Lender a certificate signed by duly authorized officers of the Borrowers, dated the Effective Date, stating that: (i) The representations and warranties contained in each Loan Document are correct on and as of the Effective Date, and (ii) No event has occurred and is continuing that constitutes a Default or an Event of Default. (i) The Agent shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Agent: (i) The Guarantee and Collateral Agreement, duly executed by Holdings, Sears, Kmart, the Borrowers and each Subsidiary Guarantor. (ii) A Borrowing Base Certificate, duly completed and executed by Holdings and dated (i) in the event the Effective Date occurs on or before the 15th of the month, as of the end of the second fiscal month immediately preceding the month in which the Effective Date occurs (it being understood that a Borrowing Base Certificate with respect to the immediately preceding fiscal month shall be delivered in accordance with Section 6.01(j)(iii)) or (ii) in the event the Effective Date occurs after the 15th of the month, as of the end of the fiscal month immediately preceding the month in which the Effective Date occurs. (iii) Certified copies of the resolutions of the Board of Directors of each Loan Party approving each Loan Document to which it is a party, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and each Loan Document to which it is a party. (iv) A certificate of the Secretary or an Assistant Secretary of each Loan Party, each certifying the names and true signatures of the officers of such Loan Party authorized to sign this Agreement and each Loan Document to which it is a party, and the other documents to be delivered hereunder or thereunder. (v) A favorable opinion of in-house counsel to Sears, of in-house counsel to Kmart and of Wachtell, Lipton, Rosen & Katz, special counsel for the Borrowers, substantially in the 31 form of Exhibit E-1, E-2 and E-3 hereto, respectively, and as to such other matters as any Lender through the Agent may reasonably request. (vi) A favorable opinion of local counsel to the Borrowers with respect to the perfection of the Agent’s security interest in the Collateral of each Loan Party organized under the laws of the state of Delaware or Michigan in form and substance reasonably satisfactory to the Agent. (j) Holdings and its Subsidiaries shall have terminated the commitments and paid in full all of the Debt, interest, fees and other amounts outstanding under (i) the Three-Year Credit Agreement, dated as of May 17, 2004, among SRAC, the lenders parties thereto, Citibank, N.A., as administrative agent, and the other agents named therein and (ii) the Credit Agreement, dated as of May 6, 2003, as amended and restated as of October 7, 2004, among Kmart Corporation, the lenders parties thereto, General Electric Capital Corporation, as administrative agent, and the other agents named therein, and reasonably satisfactory arrangements shall have been made for the termination of all Liens granted thereunder. By execution of this Agreement, each of the Lenders that is a lender under such credit agreements hereby waives any requirement set forth in such credit agreements of prior notice of the termination of the commitments thereunder. (k) The Registration Statement shall have been declared effective. SECTION 4.02. Conditions Precedent to Each Extension of Credit. Theobligation of each Lender to make an Extension of Credit on any date shall besubject to the conditions precedent that the Effective Date shall have occurredand on the date of such Extension of Credit the following statements shall betrue (and each of the giving of the applicable Notice of Borrowing orApplication for a Letter of Credit, as the case may be, and the acceptance bythe applicable Borrower of the proceeds of such Borrowing or the issuance ofsuch Letter of Credit, as applicable, shall constitute a representation andwarranty by the applicable Borrower that on the date of such Borrowing or Letterof Credit issuance such statements are true): (i) the representations and warranties made by each Loan Party in or pursuant to the Loan Documents (except the representations set forth in subsections (g), (h), (i) and, from and after the Collateral Release Date, (r) of Section 5.01 of this Agreement) are correct on and as of such date, before and after giving effect to such Extension of Credit and to the application of the proceeds therefrom, as though made on and as of such date; (ii) no event has occurred and is continuing, or would result from such Extension of Credit or from the application of the proceeds therefrom, that constitutes a Default or an Event of Default; and (iii) after giving effect to such Extension of Credit, the Total Extensions of Credit will not exceed the lesser of the aggregate Commitments or Borrowing Base then in effect. SECTION 4.03. Effective Date. The Agent shall promptly notify theLenders and the Borrowers of the occurrence of the Effective Date. ARTICLE V REPRESENTATIONS AND WARRANTIES SECTION 5.01. Representations and Warranties of the Borrowers.Holdings and the Borrowers hereby jointly and severally represent and warrant asfollows: (a) Each Group Member (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and (b) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 32 (b) The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated hereby or thereby, are within such Loan Party’s powers, have been duly authorized by all necessary organizational action, and do not contravene (i) the charter or by-laws or other organizational or governing documents of such Loan Party or (ii) law or any contractual restriction binding on or affecting the Loan Party, except, for purposes of this clause (ii), to the extent such contravention would not reasonably be expected to have a Material Adverse Effect. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery and performance by any Loan Party of any Loan Document to which it is a party. (d) Each Loan Document has been duly executed and delivered by each Loan Party party thereto. This Agreement constitutes, and each other Loan Document will constitute upon execution, the legal, valid and binding obligation of each Loan Party party thereto enforceable against such Loan Party in accordance with its respective terms subject to the effect of any applicable bankruptcy, insolvency, reorganization or moratorium or similar laws affecting the rights of creditors generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (e) The consolidated balance sheet of Sears and its Subsidiaries as at January 3, 2004, as amended, and the related consolidated statements of income and cash flows of Sears and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of Deloitte & Touche LLP, independent public accountants, copies of which have been furnished to the Agent, fairly present the consolidated financial condition of Sears and its Subsidiaries as at such date and the consolidated results of the operations of Sears and its Subsidiaries for the period ended on such date, all in accordance with GAAP consistently applied. The unaudited consolidated balance sheet of Sears and its Subsidiaries as at October 2, 2004, as amended, and the related consolidated statements of income and cash flows of Sears and its Subsidiaries for the nine-month period then ended, copies of which have been furnished to the Agent, fairly present the consolidated financial condition of Sears and its Subsidiaries as at such date and the consolidated results of the operations of Sears and its Subsidiaries for the nine-month period ended on such date, all in accordance with GAAP consistently applied (subject to year-end audit adjustments). Except as reflected in the most recent financial statements referred to in this paragraph, or in the notes thereto, neither Sears nor any of its Subsidiaries has, as of the date of such financial statements, any liabilities (whether absolute, accrued, contingent and whether or not due) which would reasonably be expected to be material to the Borrowers and their Subsidiaries, taken as a whole. (f) The consolidated balance sheet of Kmart and its Subsidiaries as at January 28, 2004, as amended, and the related consolidated statements of income and cash flows of Kmart and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of BDO Seidman, LLP, independent public accountants, copies of which have been furnished to the Agent, fairly present the consolidated financial condition of Kmart and its Subsidiaries as at such date and the consolidated results of the operations of Kmart and its Subsidiaries for the period ended on such date, all in accordance with GAAP consistently applied. The unaudited consolidated balance sheet of Kmart and its Subsidiaries as at October 27, 2004, as amended, and the related consolidated statements of income and cash flows of Kmart and its Subsidiaries for the nine-month period then ended, copies of which have been furnished to the Agent, fairly present the consolidated financial condition of Kmart and its Subsidiaries as at such date and the consolidated results of the operations of Kmart and its Subsidiaries for the nine-month period ended on such date, all in accordance with GAAP consistently applied (subject to year-end audit adjustments). Except as reflected in the most recent financial statements referred to in this paragraph, or in the notes thereto, neither Kmart nor any of its Subsidiaries has, as of the date of such financial statements, any liabilities (whether absolute, accrued, contingent and whether or not due) which would reasonably be expected to be material to the Borrowers and their Subsidiaries, taken as a whole. (g) Since the date the Registration Statement was declared effective by the SEC, there has been no Material Adverse Change. 33 (h) The Pro Forma Financial Information has been prepared in accordance with GAAP, with appropriate pro forma adjustments made in accordance with Regulation S-X promulgated by the SEC. (i) There is no action, suit, investigation, litigation or proceeding, including any Environmental Action, which is pending or, to Holdings or any Borrower’s knowledge, threatened affecting Holdings, the Borrowers or any of their respective Subsidiaries before any court, governmental agency or arbitrator that would reasonably be expected to have a Material Adverse Effect other than as reported in filings with the SEC made prior to the date hereof. (j) Following application of the proceeds of each Advance and the issuance of each Letter of Credit, not more than 25 percent of the value of the assets of the Borrowers and their respective Subsidiaries on a consolidated basis will be margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System). (k) No Loan Party is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended. (l) All United States Federal income tax returns and all other material tax returns which are required to be filed have been filed by or on behalf of Holdings, the Borrowers and their respective Subsidiaries, and all taxes due with respect to Holdings, the Borrowers and their respective Subsidiaries pursuant to such returns or pursuant to any assessment received by Holdings, the Borrowers or any Subsidiary have been paid except to the extent permitted in Section 6.01(b). The charges, accruals and reserves on the books of Holdings, the Borrowers and their Subsidiaries in respect of taxes or other governmental charges have been made in accordance with, and to the extent required by, GAAP. (m) All written factual information heretofore furnished by Holdings, the Borrowers or their Subsidiaries to the Agent or any Lender (including the Information Memorandum) for purposes of or in connection with this Agreement or any other Loan Document, taken as a whole, was true and correct in all material respects on the date as of which such information was stated or certified, provided that Holdings and the Borrowers make no representations or warranties with respect to any projections or other non-factual information contained in such information. (n) (i) Each Group Member has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property except as, in the aggregate, would not reasonably be expected to have a Material Adverse Effect, and (ii) no Inventory, Credit Card Account Receivable or Related Intellectual Property is subject to any Lien except as permitted by Section 6.02(a). (o) Except as, in the aggregate, would not reasonably be expected to have a Material Adverse Effect: (i) each Group Member owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as currently conducted; (ii) no material claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor do Holdings or the Borrowers know of any valid basis for any such claim; and (iii) the use of Intellectual Property by each Group Member does not infringe on the rights of any Person in any material respect. (p) Neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA) has occurred during the five year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Internal Revenue Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by an amount that would reasonably be expected to have a Material Adverse Effect. Neither Holdings, the Borrowers nor any Commonly Controlled Entity 34 has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to result in a material liability under ERISA, and neither the Borrowers nor any Commonly Controlled Entity may reasonably be expected to become subject to any material liability under ERISA if Holdings, any Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent except as would not reasonably be expected to result in aggregate liability to Holdings and its Subsidiaries of $100,000,000 or more. (q) Except as, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, no Group Member (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (r) The Guarantee and Collateral Agreement is effective to create in favor of the Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. When financing statements and other filings specified on Schedule 5.01(r) in appropriate form are filed in the offices specified on Schedule 5.01(r), the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to the Lien or claim of any other Person (except Liens permitted by Section 6.02(a)). (s) Each Loan Party is, and after giving effect to the Merger and the incurrence of all indebtedness and obligations being incurred in connection herewith and therewith will be and will continue to be, Solvent. ARTICLE VI COVENANTS SECTION 6.01. Affirmative Covenants. So long as any Advance shallremain unpaid, any Letter of Credit shall remain outstanding or any Lender shallhave any Commitment hereunder, each of Holdings and the Borrowers will, and willcause each of their Subsidiaries (which for all purposes of this Section 6.01(other than Section 6.01(j)(i) and (ii)) shall be deemed to exclude SearsCanada) to: (a) Compliance with Laws, Etc. Comply in all respects with all applicable Requirements of Law, such compliance to include compliance with ERISA and Environmental Laws, except for such noncompliance as would not reasonably be expected to have a Material Adverse Effect. (b) Payment of Taxes, Etc. Pay and discharge before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided that neither Holdings, the Borrowers nor any of their Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim (x) that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors or (y) if such non-payments, either individually or in the aggregate, would not be reasonably expected to have a Material Adverse Effect. (c) Maintenance of Insurance. Maintain insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is consistent with prudent business practice; provided that Holdings, the Borrowers and their Subsidiaries may self insure to the extent consistent with prudent business practice. 35 (d) Preservation of Corporate Existence, Etc. Preserve and maintain its corporate existence, rights (charter and statutory) and franchises; provided that (i) Holdings, the Borrowers and their Subsidiaries may consummate any merger or consolidation permitted under Section 6.02(b); (ii) neither Holdings nor the Borrowers nor any of their Subsidiaries shall be required to preserve or maintain the corporate existence of any Subsidiary (other than SRAC and Kmart Corp.) if the Board of Directors of the parent of such Subsidiary, or an executive officer of such parent to whom such Board of Directors has delegated the requisite authority, shall determine that the preservation and maintenance thereof is no longer desirable in the conduct of the business of such parent and that the loss thereof is not disadvantageous in any material respect to the Borrowers, such parent or the Lenders; (iii) Sears shall not be required to preserve or maintain the corporate existence of SRAC, provided that in the event SRAC is dissolved, merged with or into Holdings or any Subsidiary of Holdings or otherwise ceases to exist, then Sears shall, or shall cause a direct wholly owned Domestic Subsidiary of Sears to, execute and deliver to the Agent an assumption agreement with respect to SRAC’s obligations under the Loan Documents in form and substance reasonably satisfactory to the Agent and such other officer certificates, legal opinions, financing statements (if applicable) and documentation as the Agent reasonably requests; and (iv) neither Holdings, the Borrowers nor any of their Subsidiaries shall be required to preserve any right or franchise if the Board of Directors of Holdings, such Borrower or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of its business and that the loss thereof is not disadvantageous in any material respect to Holdings, the Borrowers, such Subsidiary or the Lenders. (e) Inspection Rights. Subject to reasonable confidentiality limitations and requirements imposed by Holdings or the Borrowers due to competitive concerns or otherwise, at any reasonable time and from time to time (but no more than twice a year unless a Default or an Event of Default has occurred and is continuing), permit the Agent or any of the Lenders or any agents or representatives thereof, at the Lenders’ expense, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, Holdings, the Borrowers and any of their Subsidiaries, and to discuss the affairs, finances and accounts of Holdings, the Borrowers and any of their Subsidiaries, as the case may be, with any of their officers or directors and with their independent certified public accountants. (f) Keeping of Books. Keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of Holdings, the Borrowers and each such Subsidiary in accordance with GAAP in effect from time to time. (g) Maintenance of Properties, Etc. Except as otherwise permitted pursuant to Section 6.02(b), or where the failure to do so, either individually or in the aggregate, would not be reasonably expected to have a Material Adverse Effect, maintain and preserve all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (h) Transactions with Affiliates. Conduct all transactions otherwise permitted under this Agreement with any of their Affiliates on terms that are fair and reasonable and no less favorable to Holdings, the applicable Borrower or such Subsidiary than it would obtain in a comparable arm’s-length transaction with a Person not an Affiliate other than (i) as required by any applicable Requirement of Law, (ii) so long as no Default or Event of Default has occurred and is continuing, transactions between or among the Loan Parties and any of their Subsidiaries or (iii) if a Default or Event of Default has occurred and is continuing, transactions in the ordinary course of business between or among the Loan Parties and any of their Subsidiaries and transactions between or among Loan Parties; provided, that the foregoing shall not prohibit any Loan Party or any Subsidiary thereof from entering into employment arrangements with its officers and retention and other agreements with officers and directors pursuant to the reasonable requirements of its business. (i) Further Assurances. (i) With respect to any Inventory and Credit Card Accounts Receivable acquired after the Effective Date and prior to the Collateral Release Date by any Group Member (other than such property acquired by any Subsidiary organized outside of the United States) as to which the Agent, for the benefit of the Lenders, does not have a perfected Lien, promptly (i) execute and deliver to the Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Agent may reasonably request in order to grant to the Agent, for the benefit of the Lenders, a security 36 interest in such property and (ii) take all actions as the Agent may reasonably request to grant to the Agent, for the benefit of the Lenders, a perfected security interest in such property with the priority required herein, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Agent. (ii) With respect to any new Domestic Subsidiary which is created or acquired after the Effective Date by any Group Member and which owns Inventory or Credit Card Accounts Receivable, promptly cause such new Domestic Subsidiary to (i) become a party to the Guarantee and Collateral Agreement, (ii) prior to the Collateral Release Date take such actions as the Agent may reasonably request to grant to the Agent for the benefit of the Lenders a perfected security interest, with the priority required herein, in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Domestic Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Agent, (iii) if requested by the Agent, deliver to the Agent an officer certificate with respect to such Domestic Subsidiary in form and substance reasonably satisfactory to the Agent and (iv) if requested by the Agent, deliver to the Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Agent. (j) Reporting Requirements. Furnish to the Agent: (i) as soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year of Holdings, (a) the consolidated balance sheet of Holdings and its Subsidiaries as of the end of such quarter and consolidated statements of income and cash flows of Holdings and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, duly certified (subject to year-end audit adjustments) by an Authorized Officer of Holdings as having been prepared in accordance with GAAP and (b) a certificate of an Authorized Officer of Holdings as to compliance with the terms of this Agreement and the other Loan Documents and, from and after the Collateral Release Date, setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 6.03, provided that in the event of any change in GAAP used in the preparation of such financial statements, subject to Section 1.03, the Borrowers shall also provide, if necessary for the determination of compliance with Section 6.03, a statement of reconciliation conforming such financial statements to GAAP (the Borrowers being permitted to satisfy the requirements of clause (i)(a) by delivery, in the manner provided in Section 9.02(b), of its quarterly report on form 10-Q (or any successor form), as filed with the SEC); (ii) as soon as available and in any event within 95 days after the end of each fiscal year of Holdings, (a) a copy of the annual audit report for such year for Holdings and its Subsidiaries, containing the consolidated balance sheet of Holdings and its Subsidiaries as of the end of such fiscal year and consolidated statements of income and cash flows of Holdings and its Subsidiaries for such fiscal year, in each case reported on without a “going concern” or like qualification or exception, or qualification arising out of the scope of the audit, by its Board-appointed auditor of national standing and (b) a certificate of an Authorized Officer of Holdings as to compliance with the terms of this Agreement and the other Loan Documents and, from and after the Collateral Release Date, setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 6.03, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Borrowers shall also provide, if necessary for the determination of compliance with Section 6.03, a statement of reconciliation conforming such financial statements to GAAP (the Borrowers being permitted to satisfy the requirements of clause (ii)(a) by delivery, in the manner provided in Section 9.02(b), of its annual report on form 10-K (or any successor form), as filed with the SEC); (iii) as soon as available and in any event within 10 Business Days of the end of each fiscal month ended prior to the Collateral Release Date, a Borrowing Base Certificate as of the end 37 of the preceding fiscal month and supporting information satisfactory to the Agent in its Permitted Discretion with respect to the determination of the Borrowing Base; (iv) promptly and in any event within five days after any officer of Holdings or any Borrower knows or should have had knowledge of the occurrence of each Default or Event of Default continuing on the date of such statement, a statement of an Authorized Officer of Holdings or such Borrower setting forth details of such Default or Event of Default and the action that Holdings or such Borrower has taken and proposes to take with respect thereto; (v) promptly after the sending or filing thereof, copies of all quarterly and annual reports and proxy solicitations that Holdings sends to its public security holders generally, and copies of all reports on form 8-K (or its equivalent) and registration statements for the public offering (other than pursuant to employee Plans) of securities that Holdings or any of its Subsidiaries files with the SEC or any national securities exchange; (vi) promptly after the commencement thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting Holdings, the Borrowers or any of their Subsidiaries of the type described in Section 5.01(i); and (vii) such other information respecting Holdings, the Borrowers or any of their Subsidiaries as any Lender through the Agent may from time to time reasonably request. Reports and financial statements required to be delivered by the Borrowers pursuant to clauses (i)(a), (ii)(a) and (v) of this subsection (j) shall be deemed to have been delivered on the date on which Holdings causes such reports, or reports containing such financial statements, to be posted on the Internet at www.sec.gov or at such other website identified by the Borrowers in a notice to the Agent and the Lenders and that is accessible by the Lenders without charge. (k) Collateral Monitoring and Review. At any time prior to the Collateral Release Date, upon the request of the Required Lenders and upon reasonable notice, permit the Agent or professionals (including consultants, accountants and/or appraisers) retained by the Agent to conduct evaluations and/or appraisals of (i) the Loan Parties’ practices in the computation of the Borrowing Base and (ii) the assets included in the Borrowing Base, and pay the reasonable fees and expenses in connection therewith (including the reasonable and customary fees and expenses associated with the Agent’s IB ABL Portfolio Management Group), provided that if no Default or Event of Default shall exist and be continuing, the Borrowers shall only be required to pay the fees and expenses associated with one such evaluation and one such appraisal per fiscal year. In connection with any collateral monitoring or review and appraisals relating to the computation of the Borrowing Base, Holdings shall make such adjustments to the calculation of the Borrowing Base as the Agent shall, on 5 days notice, reasonably require in its Permitted Discretion based upon the terms of this Agreement and the results of such collateral monitoring, review and appraisal. (l) Landlord Waivers. To the extent required by the terms of any lease agreement with any third party relating to a leased Store or DC which is material to the conduct of the business of the Loan Parties, (i) provide notice of the Merger to such third party and (ii) use commercially reasonable efforts to obtain any necessary consent, approval or waiver from such third party with respect thereto. SECTION 6.02. Negative Covenants. So long as any Advance shallremain unpaid, any Letter of Credit shall remain outstanding or any Lender shallhave any Commitment hereunder, each of Holdings and the Borrowers will not, andwill not permit any of their Subsidiaries (which for all purposes of thisSection 6.02 shall be deemed to exclude Sears Canada) to: (a) Liens, Etc. Create or suffer to exist any Lien on the Inventory, Credit Card Accounts Receivable or Related Intellectual Property of Holdings, the Borrowers or any of their Domestic Subsidiaries other than: 38 (i) Permitted Liens, (ii) the Liens existing on the Effective Date and described on Schedule 6.02(a) hereto, (iii) the replacement, extension or renewal of any Lien permitted by clause (ii) above upon or in the same property theretofore subject thereto (and in any additions to any such property and in any property taken in replacement or substitution for any such property), or the replacement, extension or renewal (without increase in the amount) of the Debt secured thereby, (iv) to the extent any Liens permitted by clause (ii) above are terminated (and not replaced, extended or renewed in accordance with clause (iii) above), Liens not otherwise permitted by clause (iii) above securing Debt in an amount up to the amount of Debt secured by such terminated Liens, and (v) any Lien on Related Intellectual Property which would not reasonably be expected to impair the Agent’s ability to enforce its remedies under the Loan Documents with respect to the Collateral. (b) Fundamental Changes. Merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default or Event of Default shall have occurred and be continuing (i) any Subsidiary of any Borrower may merge into such Borrower in a transaction in which such Borrower is the surviving entity, (ii) any Subsidiary of Holdings may merge into Holdings or any other Subsidiary of Holdings (provided that (A) if Kmart Corp. is a party to such merger, such merger shall be with Holdings, Kmart or a direct Subsidiary of Kmart Corp. and Kmart Corp. shall be the continuing or surviving entity, (B) if any Subsidiary Guarantor is a party to such merger (other than with a Borrower or Holdings), such Subsidiary Guarantor shall be the continuing or surviving entity or the continuing or surviving entity shall become a Subsidiary Guarantor and (C) if SRAC is a party to such merger, then Sears shall comply with the requirements of Section 6.01(d)), (iii) any Subsidiary of Holdings other than the Borrowers may sell, transfer, lease or otherwise dispose of its assets to any Borrower, to Holdings or to a Subsidiary of Holdings (provided that if such sale or transfer includes Inventory, Credit Card Accounts Receivable or Related Intellectual Property and the transferee is not the Borrower or Holdings, the transferee shall be a Subsidiary Guarantor), (iv) any Subsidiary of Holdings other than the Borrowers may sell, transfer, lease or otherwise dispose of its assets to a Person that is not a Subsidiary through transactions which are undertaken in the ordinary course of its business or determined by Holdings or the Borrowers in good faith to be in the best interests of Holdings, the Borrowers and their Subsidiaries, (v) any Subsidiary of Holdings other than the Borrowers (except, in the case of SRAC, as provided in Section 6.01(d)) may liquidate or dissolve if Holdings and the Borrowers determine in good faith that such liquidation or dissolution is in the best interests of Holdings, the Borrowers and their Subsidiaries and is not materially disadvantageous to the Lenders and (vi) Holdings or any Subsidiary of Holdings may merge with a Person that is not a Subsidiary of Holdings immediately prior to such merger if, in the case of any merger involving Holdings, a Borrower or a Subsidiary Guarantor, Holdings, such Borrower or such Subsidiary Guarantor, as applicable, is the continuing or surviving entity or, in the case of any merger involving a Subsidiary Guarantor, the continuing or surviving entity shall become a Subsidiary Guarantor in accordance with Section 6.01(i)(ii). (c) Acquisitions. Purchase or acquire (including pursuant to any merger with any Person that was not a wholly-owned Subsidiary prior to such merger) the equity interests, voting equity interests or assets of any Person unless (i) at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing, (ii) immediately after giving effect thereto, Holdings and the Borrowers shall comply with Section 6.01(i) to the extent applicable and (iii) at least 5 Business Days prior to consummating any acquisition subsequent to the Collateral Release Date in which the aggregate amount of consideration to be paid in connection therewith exceeds $50,000,000, Holdings shall have delivered to the Agent a certificate of an Authorized Officer of Holdings setting forth in 39 reasonable detail the calculations necessary to demonstrate Holdings’ compliance, on a pro forma basis after giving effect to such acquisition, with the covenants set forth in Section 6.03. (d) Restricted Payments. Declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment if at the date of the declaration thereof (either before or immediately after giving effect thereto and to the payment thereof) a Default or Event of Default shall have occurred and be continuing, except that at any time which a Default or Event of Default shall exist and be continuing (a) Holdings may declare and pay dividends with respect to its equity interests payable solely in additional shares of its common stock and (b) Subsidiaries of Holdings may declare and pay dividends to Holdings, the Borrowers or another wholly-owned Subsidiary of any Borrower. (e) Negative Pledge Clauses. Enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of Holdings or any Subsidiary of Holdings to create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, other than (i) this Agreement and the other Loan Documents and (ii) any agreements governing any Lien not prohibited by Section 6.02(a) (in which case any prohibition or limitation shall only be effective against the assets subject to the relevant Lien). (f) Clauses Restricting Subsidiary Distributions. Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of Holdings other than a Loan Party to (a) make Restricted Payments in respect of any equity interests of such Subsidiary held by, or pay any indebtedness owed to, Holdings or any other Subsidiary of Holdings, (b) make loans or advances to, or other investments in, Holdings or any other Subsidiary of Holdings or (c) transfer any of its assets to Holdings or any other Subsidiary of Holdings, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under this Agreement and the other Loan Documents; (ii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the disposition of all or any portion of the equity interests or assets of such Subsidiary; (iii) the provisions contained in any existing indebtedness (and in any refinancing of such indebtedness so long as no more restrictive than those contained in the respective existing indebtedness so refinanced); (iv) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of any Borrower or a Subsidiary of any Borrower entered into in the ordinary course of business, (v) customary restrictions and conditions contained in the documents relating to any Lien, so long as such Lien is not prohibited hereunder and such restrictions or conditions relate only to the specific asset subject to such Lien; (vi) customary provisions restricting assignment of any contract entered into by any Borrower or any Subsidiary of any Borrower in the ordinary course of business, (vii) any agreement or instrument governing acquired debt, which restriction is not applicable to any Person or the properties or assets of any Person, other than the Person or the properties or assets of the Person acquired pursuant to the respective acquisition and so long as the respective encumbrances or restrictions were not created (or made more restrictive) in connection with or in anticipation of the respective acquisition; (viii) customary provisions restricting the assignment of licensing agreements, management agreements or franchise agreements entered into by any Borrower or any of its Subsidiaries in the ordinary course of business; (ix) restrictions on the transfer of assets securing purchase money obligations and capitalized lease obligations; (x) customary net worth provisions contained in real property leases entered into by Subsidiaries of any Borrower, so long as the applicable Borrower has determined in good faith that such net worth provisions could not reasonably be expected to impair the ability of the Borrowers and their Subsidiaries to meet their ongoing obligations. (g) Accounting Changes. Make or permit any change in accounting policies or reporting practices, except as required or permitted by GAAP. (h) Circumvention of Covenants. Circumvent any of the covenants set forth in Section 6.02 by causing Sears Canada to undertake a transaction for the benefit of Holdings or any of its Subsidiaries which Holdings or any of its Subsidiaries would not be permitted to undertake directly. 40 SECTION 6.03. Financial Covenant. From and after the CollateralRelease Date, so long as any Advance shall remain unpaid, any Letter of Creditremains outstanding or any Lender shall have any Commitment hereunder, each ofHoldings and the Borrowers: (a) Will not permit the Consolidated Adjusted Leverage Ratio as of the last day of any period of four consecutive fiscal quarters of Holdings to exceed 3.00 to 1.0. (b) Will not permit the Consolidated Inventory Coverage Ratio as of the last day of any fiscal quarter of Holdings to be less than 1.40 to 1.0. ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Events of Default. If any of the following events(“Events of Default”) shall occur and be continuing: (a) Any Borrower shall fail to pay any principal of any Advance or Reimbursement Obligation when the same becomes due and payable; or any Borrower shall fail to pay any interest on any Advance or Reimbursement Obligation or make any other payment of fees or other amounts payable under this Agreement or any other Loan Document within five Business Days after the same becomes due and payable; or (b) Any representation or warranty made by any Loan Party herein or in any other Loan Document shall prove to have been incorrect in any material respect when made; or (c) (i) Any Loan Party shall fail to perform or observe any term, covenant or agreement contained in Section 6.01(d), (e), (h), (j) (other than 6.01(j)(vii)) or (k), 6.02 or 6.03 of this Agreement or (ii) any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in this Agreement or any other Loan Document if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to Holdings or the Borrowers by the Agent or any Lender; or (d) Any Group Member (excluding Sears Canada for so long as the Loan Parties do not collectively own, directly or indirectly, more than 60% of the voting or economic interests in Sears Canada) shall fail to pay principal of at least $100,000,000 on any Debt that is outstanding (but excluding Debt outstanding hereunder) when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any Debt that is outstanding in a principal amount of at least $100,000,000 and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid or redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made and is accepted in an amount of at least $100,000,000 (in each case other than (i) a scheduled prepayment, redemption or purchase or (ii) a mandatory prepayment, redemption or purchase or a required offer to prepay, redeem or purchase that results from the voluntary sale or transfer of property or assets), in each case prior to the stated maturity thereof; or (e) Any Group Member shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Group Member seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in 41 the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 90 days, or any of the actions sought in such proceeding (including the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or any Group Member shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) A judgment or order for the payment of money in excess of $100,000,000 (net of any portion of such judgment to be paid by a third-party insurer as to which coverage has not been disputed) shall be rendered against any Group Member (excluding Sears Canada for so long as the Loan Parties do not collectively own, directly or indirectly, more than 60% of the voting or economic interests in Sears Canada) and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) (i) Any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its Subsidiaries, and any Person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) other than a Permitted Holder becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire (such right, an “option right”), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 35% or more of the equity securities of Holdings entitled to vote for members of the Board of Directors of Holdings on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right) and such “person” or “group” shall beneficially own (as such term is used herein) a greater percentage of the equity Securities of Holdings entitled to vote for members of the Board of Directors than the Permitted Holders shall, collectively, beneficially own; or (ii) during any period of 12 consecutive months, a majority of the members of the Board of Directors or other equivalent governing body of Holdings cease to be composed of individuals (x) who were members of that board or equivalent governing body on the first day of such period, (y) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (x) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (z) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (x) and (y) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (y) and clause (z), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the Board of Directors); or (iii) Holdings shall cease for any reason to own, directly or indirectly, 100% of the Voting Stock of Sears and Kmart; or (h) Any Borrower or any of its ERISA Affiliates shall incur, or shall be reasonably likely to incur liability in excess of $100,000,000 in the aggregate as a result of one or more of the following: (i) the occurrence of any ERISA Event; (ii) the partial or complete withdrawal of such Borrower or any of its ERISA Affiliates from a Multiemployer Plan; or (iii) the reorganization or termination of a Multiemployer Plan; or (i) Any of the Security Documents shall, prior to the Collateral Release Date, cease, for any reason, to be in full force and effect, or any Loan Party shall so state in writing, or, prior to the Collateral Release Date, any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby, including as a result of the failure to comply with Section 5.4 of the Guarantee and Collateral Agreement; or (j) The guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason, to be in full force and effect or any Loan Party shall so state in writing; 42then, and in any such event, the Agent (i) shall at the request, or may with theconsent, of the Required Lenders, by notice to the Borrowers, declare theCommitment of each Lender to be terminated, whereupon the same shall forthwithterminate, and (ii) shall at the request, or may with the consent, of theRequired Lenders, by notice to the Borrowers, declare the Advances, all interestthereon and all other amounts payable under this Agreement and the other LoanDocuments (including all amounts of the L/C Obligations, whether or not thebeneficiaries of the then outstanding Letters of Credit shall have presented thedocuments required thereunder) to be forthwith due and payable, whereupon theAdvances, all such interest and all such amounts shall become and be forthwithdue and payable, without presentment, demand, protest or further notice of anykind, all of which are hereby expressly waived by the Borrowers; provided,however, that in the event of an actual or deemed entry of an order for reliefwith respect to any Borrower under the United States Bankruptcy Code, (A) theCommitment of each Lender shall automatically be terminated and (B) theAdvances, all such interest and all such amounts shall automatically become andbe due and payable, without presentment, demand, protest or any notice of anykind, all of which are hereby expressly waived by the Borrowers. With respect toall Letters of Credit with respect to which presentment for honor shall not haveoccurred at the time of an acceleration pursuant to this paragraph, theBorrowers shall at such time deposit in a cash collateral account opened by theAgent an amount equal to 101% of the aggregate then undrawn and unexpired amountof such Letters of Credit. Amounts held in such cash collateral account shall beapplied by the Agent to the payment of drafts drawn under such Letters ofCredit, and the unused portion thereof after all such Letters of Credit shallhave expired or been fully drawn upon, if any, shall be applied to repay otherobligations of the Borrowers hereunder and under the other Loan Documents. Afterall such Letters of Credit shall have expired or been fully drawn upon, allReimbursement Obligations shall have been satisfied and all other obligations ofthe Borrowers hereunder and under the other Loan Documents shall have been paidin full, the balance, if any, in such cash collateral account shall be returnedto the Borrowers (or such other Person as may be lawfully entitled thereto). ARTICLE VIII THE AGENT SECTION 8.01. Appointment. Each Lender hereby irrevocably designatesand appoints the Agent as the agent of such Lender under this Agreement and theother Loan Documents, and each such Lender irrevocably authorizes the Agent, insuch capacity, to take such action on its behalf under the provisions of thisAgreement and the other Loan Documents and to exercise such powers and performsuch duties as are expressly delegated to the Agent by the terms of thisAgreement and the other Loan Documents, together with such other powers as arereasonably incidental thereto. Notwithstanding any provision to the contraryelsewhere in this Agreement, the Agent shall not have any duties orresponsibilities, except those expressly set forth herein, or any fiduciaryrelationship with any Lender, and no implied covenants, functions,responsibilities, duties, obligations or liabilities shall be read into thisAgreement or any other Loan Document or otherwise exist against the Agent. SECTION 8.02. Delegation of Duties. The Agent may execute any of itsduties under this Agreement and the other Loan Documents by or through agents orattorneys-in-fact and shall be entitled to advice of counsel concerning allmatters pertaining to such duties. The Agent shall not be responsible for thenegligence or misconduct of any agents or attorneys in-fact selected by it withreasonable care. SECTION 8.03. Exculpatory Provisions. Neither any Agent (forpurposes of this Article VIII, “Agents” shall mean the collective reference tothe Agent and any other Lender designated as an “Agent” for purposes of thisAgreement, including the syndication agents and the documentation agents) norany of their respective officers, directors, employees, agents,attorneys-in-fact or affiliates shall be (i) liable for any action lawfullytaken or omitted to be taken by it or such Person under or in connection withthis Agreement or any other Loan Document (except to the extent that any of theforegoing are found by a final and nonappealable decision of a court ofcompetent jurisdiction to have resulted from its or such Person’s own grossnegligence or willful misconduct) or (ii) responsible in any manner to any ofthe Lenders for any recitals, statements, representations or warranties made byany Loan Party or any officer thereof contained in this Agreement or any otherLoan Document or in any certificate, report, statement or other documentreferred to or provided for in, or received by the Agents under or in connectionwith, this Agreement or any other Loan Document or for the value, validity,effectiveness, genuineness, enforceability or sufficiency of this Agreement orany other Loan Document or for any failure of any Loan Party a party thereto toperform its obligations hereunder or thereunder. The Agents shall not be underany 43obligation to any Lender to ascertain or to inquire as to the observance orperformance of any of the agreements contained in, or conditions of, thisAgreement or any other Loan Document, or to inspect the properties, books orrecords of any Loan Party. SECTION 8.04. Reliance by Agent. The Agent shall be entitledto rely, and shall be fully protected in relying, upon any instrument, writing,resolution, notice, consent, certificate, affidavit, letter, telecopy, telex orteletype message, statement, order or other document or conversation believed byit to be genuine and correct and to have been signed, sent or made by the properPerson or Persons and upon advice and statements of legal counsel (includingcounsel to Holdings or the Borrowers), independent accountants and other expertsselected by the Agent. The Agent may deem and treat the payee of any Note as theowner thereof for all purposes unless a written notice of assignment,negotiation or transfer thereof shall have been filed with the Agent. The Agentshall be fully justified in failing or refusing to take any action under thisAgreement or any other Loan Document unless it shall first receive such adviceor concurrence of the Required Lenders (or, if so specified by this Agreement,the Supermajority Lenders or all Lenders) as it deems appropriate or it shallfirst be indemnified to its satisfaction by the Lenders against any and allliability and expense that may be incurred by it by reason of taking orcontinuing to take any such action. The Agent shall in all cases be fullyprotected in acting, or in refraining from acting, under this Agreement and theother Loan Documents in accordance with a request of the Required Lenders (or,if so specified by this Agreement, the Supermajority Lenders or all Lenders),and such request and any action taken or failure to act pursuant thereto shallbe binding upon all the Lenders and all future holders of the Advances. SECTION 8.05. Notice of Default. The Agent shall not be deemed to haveknowledge or notice of the occurrence of any Default or Event of Default unlessthe Agent has received notice from a Lender, Holdings or a Borrower referring tothis Agreement, describing such Default or Event of Default and stating thatsuch notice is a “notice of default”. In the event that the Agent receives sucha notice, the Agent shall give notice thereof to the Lenders. The Agent shalltake such action with respect to such Default or Event of Default as shall bereasonably directed by the Required Lenders (or, if so specified by thisAgreement, the Supermajority Lenders or all Lenders); provided that unless anduntil the Agent shall have received such directions, the Agent may (but shallnot be obligated to) take such action, or refrain from taking such action, withrespect to such Default or Event of Default as it shall deem advisable in thebest interests of the Lenders. SECTION 8.06. Non-Reliance on Agents and Other Lenders. Each Lenderexpressly acknowledges that neither the Agents nor any of their respectiveofficers, directors, employees, agents, attorneys-in-fact or affiliates havemade any representations or warranties to it and that no act by any Agenthereafter taken, including any review of the affairs of a Loan Party or anyaffiliate of a Loan Party, shall be deemed to constitute any representation orwarranty by any Agent to any Lender. Each Lender represents to the Agents thatit has, independently and without reliance upon any Agent or any other Lender,and based on such documents and information as it has deemed appropriate, madeits own appraisal of and investigation into the business, operations, property,financial and other condition and creditworthiness of the Loan Parties and theiraffiliates and made its own decision to make its Advances hereunder and enterinto this Agreement. Each Lender also represents that it will, independently andwithout reliance upon any Agent or any other Lender, and based on such documentsand information as it shall deem appropriate at the time, continue to make itsown credit analysis, appraisals and decisions in taking or not taking actionunder this Agreement and the other Loan Documents, and to make suchinvestigation as it deems necessary to inform itself as to the business,operations, property, financial and other condition and creditworthiness of theLoan Parties and their affiliates. Except for notices, reports and otherdocuments expressly required to be furnished to the Lenders by the Agenthereunder, the Agent shall not have any duty or responsibility to provide anyLender with any credit or other information concerning the business, operations,property, condition (financial or otherwise), prospects or creditworthiness ofany Loan Party or any affiliate of a Loan Party that may come into thepossession of the Agent or any of its officers, directors, employees, agents,attorneys-in-fact or affiliates. SECTION 8.07. Indemnification. The Lenders agree to indemnify eachAgent in its capacity as such (to the extent not reimbursed by Holdings or theBorrowers and without limiting the obligation of Holdings or the Borrowers to doso), ratably according to their respective Commitment Percentages in effect onthe date on which indemnification is sought under this Section (or, ifindemnification is sought after the date upon which the Commitments shall haveterminated and the Advances shall have been paid in full, ratably in accordancewith such Commitment Percentages immediately prior to such date), from andagainst any and all liabilities, obligations, 44losses, damages, penalties, actions, judgments, suits, costs, expenses ordisbursements of any kind whatsoever that may at any time (whether before orafter the payment of the Advances) be imposed on, incurred by or assertedagainst such Agent in any way relating to or arising out of, the Commitments,this Agreement, any of the other Loan Documents or any documents contemplated byor referred to herein or therein or the transactions contemplated hereby orthereby or any action taken or omitted by such Agent under or in connection withany of the foregoing; provided that no Lender shall be liable for the payment ofany portion of such liabilities, obligations, losses, damages, penalties,actions, judgments, suits, costs, expenses or disbursements that are found by afinal and nonappealable decision of a court of competent jurisdiction to haveresulted from such Agent’s gross negligence or willful misconduct. Theagreements in this Section shall survive the payment of the Advances and allother amounts payable hereunder. SECTION 8.08. Agent in Its Individual Capacity. Each Agent and itsaffiliates may make loans to, accept deposits from and generally engage in anykind of business with any Loan Party as though such Agent were not an Agent.With respect to its Advances made or renewed by it and with respect to anyLetter of Credit issued or participated in by it, each Agent shall have the samerights and powers under this Agreement and the other Loan Documents as anyLender and may exercise the same as though it were not an Agent, and the terms”Lender” and “Lenders” shall include each Agent in its individual capacity. SECTION 8.09. Successor Agent. The Agent may resign as Agent upon 30days’ notice to the Lenders and the Borrowers. If the Agent shall resign asAgent under this Agreement and the other Loan Documents, then the RequiredLenders shall appoint from among the Lenders a successor agent for the Lenders,which successor agent shall (unless an Event of Default under Section 7.01(a) orSection 7.01(e) with respect to any Borrower shall have occurred and becontinuing) be subject to approval by the Borrowers (which approval shall not beunreasonably withheld or delayed), whereupon such successor agent shall succeedto the rights, powers and duties of the Agent, and the term “Agent” shall meansuch successor agent effective upon such appointment and approval, and theformer Agent’s rights, powers and duties as Agent shall be terminated, withoutany other or further act or deed on the part of such former Agent or any of theparties to this Agreement or any holders of the Advances. If no successor agenthas accepted appointment as Agent by the date that is 30 days following aretiring Agent’s notice of resignation, the retiring Agent’s resignation shallnevertheless thereupon become effective, and the Lenders shall assume andperform all of the duties of the Agent hereunder until such time, if any, as theRequired Lenders appoint a successor agent as provided for above. After anyretiring Agent’s resignation as Agent, the provisions of this Article VIII shallinure to its benefit as to any actions taken or omitted to be taken by it whileit was Agent under this Agreement and the other Loan Documents. SECTION 8.10. Documentation Agents and Syndication Agents. None of thedocumentation agents, syndication agents or any other Lender designated as an”Agent” for purposes of this Agreement (other than JPMorgan Chase Bank in itscapacity as Agent) shall have any duties or responsibilities hereunder in itscapacity as such. ARTICLE IX MISCELLANEOUS SECTION 9.01. Amendments, Etc. No amendment or waiver of any provisionof this Agreement or any other Loan Document, nor consent to any departure byany Borrower or any Loan Party therefrom, shall in any event be effective unlessthe same shall be in writing and signed by the Required Lenders, and then suchwaiver or consent shall be effective only in the specific instance and for thespecific purpose for which given; provided, however, that no amendment, waiveror consent shall (a) unless in writing and signed by each Lender directlyaffected thereby, do any of the following: (i) increase the amount or extend theexpiration date of any Lender’s Commitment, (ii) reduce the principal of, orinterest on, the Advances or any fees or other amounts payable hereunder or(iii) postpone any date fixed for any payment of principal of, or interest on,the Advances or any fees or other amounts payable hereunder; (b) unless inwriting and signed by all of the Lenders, do any of the following: (i) changethe percentage of the Commitments or of the aggregate unpaid principal amount ofthe Advances, or the number of Lenders, that shall be required for the Lendersor any of them to take any action hereunder, (ii) other than in accordance withSection 9.13, release all or substantially all of the Collateral or release allor substantially all of the guarantors from their obligations under theGuarantee and Collateral Agreement, (iii) 45amend Section 9.13(c), (iv) amend this Section 9.01 or (v) other than inaccordance with Section 6.01(d), release either Borrower from all of itsobligations hereunder; (c) unless in writing and signed by the SupermajorityLenders, increase any advance rate percentage set forth in the definition of”Borrowing Base”; (d) unless in writing and signed by the Agent (in addition tothe Lenders required above to take such action), amend, modify or waive anyprovision of Article VIII or affect the rights or duties of the Agent under thisAgreement or any other Loan Document; (e) unless in writing and signed by theSwingline Lender (in addition to the Lenders required above to take suchaction), amend, modify or waive any provision of Section 2.03 or 2.04; or (f)unless in writing and signed by each Issuing Lender (in addition to the Lendersrequired above to take such action), amend, modify or waive any provision ofArticle III. SECTION 9.02. Notices, Etc. (a) All notices and other communicationsprovided for hereunder shall be in writing (including telecopier communication)and mailed, telecopied or delivered, if to Holdings, at its address at 3333Beverly Road, Hoffman Estates, Illinois 60179, Attention: President/CEO, with acopy to Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York10019, Attention: Scott Charles; if to SRAC, at its address at 3711 KennettPike, Greenville, Delaware 19807, Attention: President, with a copy to Wachtell,Lipton, Rosen & Katz at its address set forth above; if to Kmart Corp., at itsaddress at 3100 West Big Beaver Road, Troy, Michigan 48084, Attentions: ChiefFinancial Officer and General Counsel, with a copy to Wachtell, Lipton, Rosen &Katz at its address set forth above; if to any Lender, at its address set forthin its completed administrative questionnaire delivered to the Agent; and if tothe Agent, the Swingline Lender or the Issuing Lender, at its address at 1111Fannin Street, Houston, Texas 77002, Attention: Erin M. Merritt, JPMorgan LoanServices – Deal Management; or, as to any Borrower, the Agent, the SwinglineLender or any Issuing Lender, at such other address as shall be designated bysuch party in a written notice to the other parties and, as to each other party,at such other address as shall be designated by such party in a written noticeto the Borrowers and the Agent; provided that notices required to be deliveredpursuant to Section 6.01(j)(i), (ii), (iii) and (v) shall be delivered to theAgent and the Lenders as specified in Section 9.02(b). All such notices andcommunications shall, when mailed, telecopied, telegraphed or emailed, beeffective when deposited in the mails, telecopied, delivered to the telegraphcompany or confirmed by email, respectively, except that notices andcommunications to the Agent pursuant to Article II, III or VIII shall not beeffective until received by the Agent. Delivery by telecopier of an executedcounterpart of any amendment or waiver of any provision of this Agreement or anyLoan Document or of any exhibit hereto or thereto to be executed and deliveredhereunder shall be effective as delivery of a manually executed counterpartthereof. (b) So long as JPMorgan Chase Bank or any of its Affiliates is theAgent, materials required to be delivered pursuant to Sections 6.01(j)(i), (ii),(iii) and (v) shall be delivered to the Agent in an electronic medium in aformat acceptable to the Agent by e-mail at erin.m.merritt@jpmorgan.com.Holdings and the Borrowers agree that the Agent may make such materials, as wellas any other written information, documents, instruments and other materialrelating to Holdings, the Borrowers, any of their Subsidiaries or any othermaterials or matters relating to this Agreement, the Loan Documents or any ofthe transactions contemplated hereby (collectively, the “Communications”)available to the Lenders by posting such notices on Intralinks or asubstantially similar electronic system (the “Platform”). Holdings and theBorrowers acknowledge that (i) the distribution of material through anelectronic medium is not necessarily secure and that there are confidentialityand other risks associated with such distribution, (ii) the Platform is provided”as is” and “as available” and (iii) neither the Agent nor any of its Affiliateswarrants the accuracy, adequacy or completeness of the Communications or thePlatform and each expressly disclaims liability for errors or omissions in theCommunications or the Platform. No warranty of any kind, express, implied orstatutory, including any warranty of merchantability, fitness for a particularpurpose, non-infringement of third party rights or freedom from viruses or othercode defects, is made by the Agent or any of its Affiliates in connection withthe Platform. (c) Each Lender agrees that notice to it (as provided in the nextsentence) (a “Notice”) specifying that any Communications have been posted tothe Platform shall constitute effective delivery of such information, documentsor other materials to such Lender for purposes of this Agreement; provided thatif requested by any Lender the Agent shall deliver a copy of the Communicationsto such Lender by email or telecopier. Each Lender agrees (i) to notify theAgent in writing of such Lender’s e-mail address to which a Notice may be sentby electronic transmission (including by electronic communication) on or beforethe date such Lender becomes a party to this Agreement (and from time to timethereafter to ensure that the Agent has on record an effective e-mail addressfor such Lender) and (ii) that any Notice may be sent to such e-mail address. 46 SECTION 9.03. No Waiver; Remedies. No failure on the part of any Lenderor the Agent to exercise, and no delay in exercising, any right hereunder orunder any other Loan Document shall operate as a waiver thereof; nor shall anysingle or partial exercise of any such right preclude any other or furtherexercise thereof or the exercise of any other right. The remedies hereinprovided are cumulative and not exclusive of any remedies provided by law. SECTION 9.04. Costs and Expenses. (a) Holdings and the Borrowersjointly and severally agree to pay promptly all reasonable costs and expenses ofthe Agent in connection with the preparation, execution, delivery, distribution(including via the internet or through a service such as Intralinks),administration, modification and amendment of this Agreement, the other LoanDocuments and the other documents to be delivered hereunder, including, (A) alldue diligence, syndication (including printing, distribution and bank meetings),transportation, computer, duplication, appraisal, consultant, and auditexpenses, (B) subject to Section 6.01(k), all expenses incurred in connectionwith inspections, verifications, examinations and appraisals relating to theBorrowing Base and the Collateral, and (C) the reasonable fees and expenses ofcounsel for the Agent with respect thereto and with respect to advising theAgent as to its rights and responsibilities under this Agreement and the otherLoan Documents. Holdings and the Borrowers further jointly and severally agreeto pay on demand all costs and expenses of the Agent and the Lenders, if any(including reasonable counsel fees and expenses), in connection with theenforcement (whether through negotiations, legal proceedings or otherwise) ofthis Agreement, the other Loan Documents and the other documents to be deliveredhereunder, including reasonable fees and expenses of one counsel for the Agentand one counsel for the Lenders in connection with the enforcement of rightsunder this Section 9.04(a). (b) Holdings and the Borrowers jointly and severally agree to indemnifyand hold harmless the Agent and each Lender and each of their Affiliates andtheir officers, directors, employees, agents and advisors (each, an “IndemnifiedParty”) from and against any and all claims, damages, losses, liabilities andexpenses (including reasonable fees and expenses of counsel) incurred by orasserted or awarded against any Indemnified Party, in each case arising out ofor in connection with or by reason of (including in connection with anyinvestigation, litigation or proceeding or preparation of a defense inconnection therewith) (i) this Agreement, the other Loan Documents, any of thetransactions contemplated herein or the actual or proposed use of the Letters ofCredit or the proceeds of the Advances, (ii) the actual or alleged presence ofHazardous Materials on any property of the Borrowers or any of theirSubsidiaries or any Environmental Action relating in any way to the Borrowers orany of their Subsidiaries, except to the extent such claim, damage, loss,liability or expense is found in a final, non-appealable judgment by a court ofcompetent jurisdiction to have resulted from such Indemnified Party’s grossnegligence or willful misconduct. In the case of an investigation, litigation orother proceeding to which the indemnity in this Section 9.04(b) applies, suchindemnity shall be effective whether or not such investigation, litigation orproceeding is brought by Holdings, any Borrower, its directors, equityholders orcreditors or an Indemnified Party or any other Person, whether or not anyIndemnified Party is otherwise a party thereto and whether or not thetransactions contemplated hereby are consummated. Holdings and the Borrowersalso agree not to assert any claim for special, indirect, consequential orpunitive damages against the Agent, any Lender, any of their Affiliates, or anyof their respective directors, officers, employees, attorneys and agents, on anytheory of liability, arising out of or otherwise relating to this Agreement, theother Loan Documents, any of the transactions contemplated herein or the actualor proposed use of the Letters of Credit or the proceeds of the Advances. (c) If any payment of principal of, or Conversion of, any EurodollarRate Advance is made by any Borrower to or for the account of a Lender otherthan on the last day of the Interest Period for such Advance, as a result of apayment or Conversion pursuant to Section 2.09(d) or (e), 2.11 or 2.13,acceleration of the maturity of the Advances pursuant to Section 7.01 or for anyother reason, or by an Eligible Assignee to a Lender other than on the last dayof the Interest Period for such Advance upon an assignment of rights andobligations under this Agreement pursuant to Section 9.07 as a result of ademand by any Borrower pursuant to Section 9.07(a), the applicable Borrowershall, promptly after notice by such Lender setting forth in reasonable detailthe calculations used to quantify such amount (with a copy of such notice to theAgent), pay to the Agent for the account of such Lender any amounts required tocompensate such Lender for any additional losses, costs or expenses that it mayreasonably incur as a result of such payment or Conversion, including any loss(including loss of anticipated profits), cost or expense incurred by reason ofthe liquidation or reemployment of deposits or other funds acquired by anyLender to fund or maintain such Advance. 47 (d) Without prejudice to the survival of any other agreement ofHoldings or any Borrower hereunder, the agreements and obligations of Holdingsand the Borrowers contained in Sections 2.12, 2.15 and 9.04 shall survive thepayment in full of principal, interest and all other amounts payable hereunderand under the other Loan Documents. SECTION 9.05. Right of Set-off. Upon (i) the occurrence and during thecontinuance of any Event of Default and (ii) the making of the request or thegranting of the consent specified by Section 7.01 to authorize the Agent todeclare the Extensions of Credit due and payable pursuant to the provisions ofSection 7.01, each Lender and each of its Affiliates is hereby authorized at anytime and from time to time, to the fullest extent permitted by law, to set offand apply any and all deposits (general or special, time or demand, provisionalor final) at any time held and other indebtedness at any time owing by suchLender or such Affiliate to or for the credit or the account of Holdings or anyBorrower against any and all of the obligations of Holdings and the Borrowersnow or hereafter existing under this Agreement and the Extensions of Credit ofsuch Lender, whether or not such Lender shall have made any demand under thisAgreement. Each Lender agrees promptly to notify Holdings or the applicableBorrower after any such set-off and application, provided that the failure togive such notice shall not affect the validity of such set-off and application.The rights of each Lender and its Affiliate under this Section are in additionto other rights and remedies (including other rights of set-off) that suchLender and its Affiliate may have. SECTION 9.06. Binding Effect; Effectiveness. When this Agreement hasbeen executed by Holdings, the Borrowers and the Agent and when the Agent shallhave been notified by each Initial Lender that such Initial Lender has executedit, this Agreement shall thereafter be binding upon and inure to the benefit ofHoldings, the Borrowers, the Agent and each Lender and their respectivesuccessors and assigns; provided that, except with respect to Sections 9.07 and9.08, this Agreement shall only become effective upon satisfaction of theconditions precedent set forth in Section 4.01 and none of the provisions ofthis Agreement other than Sections 9.07 and 9.08, including without limitationprovisions in respect of Advances and Letters of Credit to be made by or issuedby any Lender, and in respect of any covenant, fee, indemnity, default, andexpense reimbursement made by any Loan Party or for which any Loan Party isliable hereunder, shall become effective, nor shall any representation herein bedeemed to be made, until the satisfaction of such conditions. In the event theagreement between Sears and Kmart in respect of the Merger is terminated, thenupon termination of such agreement this Agreement shall immediately andautomatically be terminated and be rendered null and void without giving effectto any provision herein. SECTION 9.07. Assignments and Participations. (a) Each Lender may, uponnotice to the Borrowers and the Agent and with the consent, not to beunreasonably withheld, of the Agent, the Issuing Lender, and, unless an Event ofDefault has occurred and is continuing, the Borrowers, and if demanded by anyBorrower (following a demand by such Lender pursuant to Section 2.12 or 2.15)upon at least five Business Days’ notice to such Lender and the Agent and theIssuing Lender will, assign to one or more Persons all or a portion of itsrights and obligations under this Agreement (including all or a portion of itsCommitment, the Advances and other amounts owing to it and any Note or Notesheld by it); provided, however, that (i) each such assignment shall be of aconstant, and not a varying, percentage of all rights and obligations under thisAgreement, (ii) except in the case of an assignment to a Person that,immediately prior to such assignment, was a Lender or an assignment of all of aLender’s rights and obligations under this Agreement, the amount of theCommitment of the assigning Lender being assigned pursuant to each suchassignment (determined as of the date of the Assignment and Acceptance withrespect to such assignment) shall in no event be less than $10,000,000 (unlessan Event of Default has occurred and is continuing, in which case not less than$5,000,000) or an integral multiple of $1,000,000 in excess thereof unless theBorrowers and the Agent otherwise agree, (iii) each such assignment shall be toan Eligible Assignee, (iv) each such assignment made as a result of a demand byany Borrower pursuant to this Section 9.07(a) shall be arranged by such Borrowerafter consultation with and subject to the consent, not to be unreasonablywithheld, of the Agent and the Issuing Lender and shall be either an assignmentof all of the rights and obligations of the assigning Lender under thisAgreement or an assignment of a portion of such rights and obligations madeconcurrently with another such assignment or other such assignments thattogether cover all of the rights and obligations of the assigning Lender underthis Agreement, (v) no Lender shall be obligated to make any such assignment asa result of a demand by any Borrower pursuant to this Section 9.07(a) unless anduntil such Lender shall have received one or more payments from either theBorrowers or one or more Eligible Assignees in an aggregate amount at leastequal to the aggregate outstanding principal amount of the Advances owing tosuch Lender, together with accrued interest thereon to the date of payment ofsuch principal amount and all other amounts payable to such Lender under this 48Agreement, and (vi) the parties to each such assignment shall execute anddeliver to the Agent, for its acceptance and recording in the Register, anAssignment and Acceptance, and the parties to such assignment (other than theBorrowers, the Agent and the Issuing Lender) shall deliver together therewithany Note subject to such assignment and a processing and recordation fee of$3,500, provided, however, that in the case of each assignment made as a resultof a demand by any Borrower, such recordation fee shall be payable by theBorrowers, and (vii) any Lender may, without the approval of the Borrowers, butwith notice to the Borrowers, assign all or a portion of its rights andobligations to any of its Affiliates or to another Lender. Upon such execution,delivery, acceptance and recording, from and after the effective date specifiedin each Assignment and Acceptance, (x) the assignee thereunder shall be a partyhereto and, to the extent that rights and obligations hereunder have beenassigned to it pursuant to such Assignment and Acceptance, have the rights andobligations of a Lender hereunder and (y) the Lender assignor thereunder shall,to the extent that rights and obligations hereunder have been assigned by itpursuant to such Assignment and Acceptance, relinquish its rights (other thanits rights under Section 2.12, 2.15 and 9.04 to the extent any claim thereunderrelates to an event arising prior such assignment) and be released from itsobligations under this Agreement (and, in the case of an Assignment andAcceptance covering all or the remaining portion of an assigning Lender’s rightsand obligations under this Agreement, such Lender shall cease to be a partyhereto). (b) By executing and delivering an Assignment and Acceptance, theLender assignor thereunder and the assignee thereunder confirm to and agree witheach other and the other parties hereto as follows: (i) other than as providedin such Assignment and Acceptance, such assigning Lender makes no representationor warranty and assumes no responsibility with respect to any statements,warranties or representations made in or in connection with this Agreement orthe other Loan Documents or the execution, legality, validity, enforceability,genuineness, sufficiency or value of this Agreement or the other Loan Documentsor any other instrument or document furnished pursuant hereto or thereto; (ii)such assigning Lender makes no representation or warranty and assumes noresponsibility with respect to the financial condition of the Borrowers or theperformance or observance by the Borrowers of any of their obligations underthis Agreement or any other instrument or document furnished pursuant hereto;(iii) such assignee confirms that it has received a copy of this Agreement,together with copies of the financial statements referred to in Section 5.01 andsuch other documents and information as it has deemed appropriate to make itsown credit analysis and decision to enter into such Assignment and Acceptance;(iv) such assignee will, independently and without reliance upon the Agent, suchassigning Lender or any other Lender and based on such documents and informationas it shall deem appropriate at the time, continue to make its own creditdecisions in taking or not taking action under this Agreement and the other LoanDocuments; (v) such assignee confirms that it is an Eligible Assignee; (vi) suchassignee appoints and authorizes the Agent to take such action as agent on itsbehalf and to exercise such powers and discretion under this Agreement and theother Loan Documents as are delegated to the Agent by the terms hereof andthereof, together with such powers and discretion as are reasonably incidentalthereto; and (vii) such assignee agrees that it will perform in accordance withtheir terms all of the obligations that by the terms of this Agreement arerequired to be performed by it as a Lender. (c) Upon its receipt of an Assignment and Acceptance executed by anassigning Lender and an assignee representing that it is an Eligible Assignee,together with any Note or Notes subject to such assignment, the Agent shall, ifsuch Assignment and Acceptance has been completed and is in substantially theform of Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii) recordthe information contained therein in the Register and (iii) give prompt noticethereof to the Borrowers. (d) The Agent shall maintain at its address referred to in Section 9.02a copy of each Assignment and Acceptance delivered to and accepted by it and aregister for the recordation of the names and addresses of the Lenders and theCommitment of, and principal amount of the Advances and L/C Obligations owingto, each Lender from time to time (the “Register”). The entries in the Registershall be conclusive and binding for all purposes, absent manifest error, and theBorrowers, the Agent and the Lenders may treat each Person whose name isrecorded in the Register as a Lender hereunder for all purposes of thisAgreement. The Register shall be available for inspection by the Borrowers orany Lender at any reasonable time and from time to time upon reasonable priornotice. (e) Each Lender may sell participations to one or more banks or otherentities (other than the Borrowers or any of their Affiliates) in or to all or aportion of its rights and obligations under this Agreement (including all or aportion of its Commitment, the Advances owing to it and any Note or Notes heldby it); provided, however, that (i) such Lender’s obligations under thisAgreement (including its Commitment to the Borrowers and 49its obligations to the Swingline Lender and the Issuing Lender hereunder) shallremain unchanged, (ii) such Lender shall remain solely responsible to the otherparties hereto for the performance of such obligations, (iii) such Lender shallremain the holder of any such Note for all purposes of this Agreement, (iv) theBorrowers, the Agent and the other Lenders shall continue to deal solely anddirectly with such Lender in connection with such Lender’s rights andobligations under this Agreement and (v) no participant under any suchparticipation shall have any right to approve any amendment or waiver of anyprovision of this Agreement or any Loan Document, or consent to any departure byany Borrower therefrom, except to the extent that such amendment, waiver orconsent would require the affirmative vote of the Lender from which it purchasedits participation pursuant to Section 9.01(a). (f) Any Lender may, in connection with any assignment or participationor proposed assignment or participation pursuant to this Section 9.07, discloseto the assignee or participant or proposed assignee or participant, anyinformation relating to Holdings, the Borrowers or their Subsidiaries furnishedto such Lender by or on behalf of the Borrowers; provided that, prior to anysuch disclosure, the assignee or participant or proposed assignee or participantshall agree to preserve the confidentiality of any Borrower Information relatingto Holdings, the Borrowers or their Subsidiaries received by it from such Lenderin accordance with Section 9.08. (g) Notwithstanding any other provision set forth in this Agreement,any Lender may at any time create a security interest in all or any portion ofits rights under this Agreement (including the Advances owing to it and anyNotes held by it) in favor of any Federal Reserve Bank in accordance withRegulation A of the Board of Governors of the Federal Reserve System. (h) The Borrowers, upon receipt of written notice from the relevantLender, agree to issue Notes to any Lender to facilitate transactions of thetype described in paragraph (g) above. (i) Neither Holdings nor any Borrower shall have the right to assignits rights hereunder or any interest herein without the prior written consent ofeach of the Lenders (except, in the case of SRAC, pursuant to Section 6.01(d)). SECTION 9.08. Confidentiality. Neither the Agent nor any Lender maydisclose to any Person any confidential, proprietary or non-public informationof Holdings or the Borrowers furnished to the Agent or the Lenders by Holdingsor the Borrowers (such information being referred to collectively herein as the”Borrower Information”), except that each of the Agent and each of the Lendersmay disclose Borrower Information (i) to its and its affiliates’ employees,officers, directors, agents and advisors to whom disclosure is required toenable the Agent or such Lender to perform its obligations under this Agreementor in connection with the administration or monitoring of this Agreement by theAgent or such Lender (it being understood that the Persons to whom suchdisclosure is made will be informed of the confidential nature of such BorrowerInformation and instructed to keep such Borrower Information confidential onsubstantially the same terms as provided herein), (ii) to the extent requestedby any regulatory authority, (iii) to the extent required by applicable laws orregulations or by any subpoena or similar legal process, (iv) to any other partyto this Agreement, (v) in connection with the exercise of any remedies hereunderor any suit, action or proceeding relating to this Agreement or the enforcementof rights hereunder or thereunder, (vi) subject to an agreement containingprovisions substantially the same as those of this Section 9.08, to any assigneeor participant, or any prospective assignee or participant, (vii) to the extentsuch Borrower Information (A) is or becomes generally available to the public ona non-confidential basis other than as a result of a breach of this Section 9.08by the Agent or such Lender, as the case may be, or (B) is or becomes availableto the Agent or such Lender on a non-confidential basis from a source other thanHoldings, the Borrowers or any of their Subsidiaries and (viii) with the consentof the Borrowers. SECTION 9.09. Governing Law. This Agreement and the Notes shall begoverned by, and construed in accordance with, the laws of the State of NewYork. SECTION 9.10. Execution in Counterparts. This Agreement may be executedin any number of counterparts and by different parties hereto in separatecounterparts, each of which when so executed shall be deemed to be an originaland all of which taken together shall constitute one and the same agreement.Delivery of an executed counterpart of a signature page to this Agreement bytelecopier shall be effective as delivery of a manually executed counterpart ofthis Agreement. 50 SECTION 9.11. Jurisdiction, Etc. (a) Each of the parties hereto herebyirrevocably and unconditionally submits, for itself and its property, to thenonexclusive jurisdiction of any New York State court or federal court of theUnited States of America sitting in New York City, and any appellate court fromany thereof, in any action or proceeding arising out of or relating to thisAgreement or the other Loan Documents, or for recognition or enforcement of anyjudgment, and each of the parties hereto hereby irrevocably and unconditionallyagrees that all claims in respect of any such action or proceeding may be heardand determined in any such New York State court or, to the extent permitted bylaw, in such federal court. Holdings and each of the Borrowers herebyirrevocably consents to the service of process in any action or proceeding insuch courts by the mailing thereof by any parties hereto by registered orcertified mail, postage prepaid, to Holdings or such Borrower at its addressspecified pursuant to Section 9.02. Each of the parties hereto agrees that afinal judgment in any such action or proceeding shall be conclusive and may beenforced in other jurisdictions by suit on the judgment or in any other mannerprovided by law. Nothing in this Agreement shall affect any right that any partymay otherwise have to bring any action or proceeding relating to this Agreementor the other Loan Documents in the courts of any jurisdiction. (b) Each of the parties hereto irrevocably and unconditionally waives,to the fullest extent it may legally and effectively do so, any objection thatit may now or hereafter have to the laying of venue of any suit, action orproceeding arising out of or relating to this Agreement or the other LoanDocuments in any New York State or federal court. Each of the parties heretohereby irrevocably waives, to the fullest extent permitted by law, the defenseof an inconvenient forum to the maintenance of such action or proceeding in anysuch court. SECTION 9.12. WAIVER OF JURY TRIAL. EACH OF HOLDINGS, THE BORROWERS,THE AGENT, THE ISSUING LENDER AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALLRIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASEDON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT ORTHE OTHER LOAN DOCUMENTS OR THE ACTIONS OF THE AGENT OR ANY LENDER IN THENEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. SECTION 9.13. Release of Collateral. (a) Notwithstanding anything tothe contrary contained herein or in any other Loan Document, the Agent is herebyirrevocably authorized by each Lender (without requirement of consent of or,except as set forth in paragraph (c) below, notice to any Lender) to take, andhereby agrees to take, any action requested by the Borrowers having the effectof releasing any Collateral or guarantee obligations (i) to the extent necessaryto permit consummation of any transaction not prohibited by any Loan Document orthat has been consented to in accordance with Section 9.01 or (ii) under thecircumstances described in paragraph (b) or (c) below. (b) At such time as the Advances, the Reimbursement Obligations and theother obligations under the Loan Documents shall have been paid in full, theCommitments have been terminated and no Letter of Credit shall be outstanding,the Collateral shall be released from the Liens created by the SecurityDocuments, and the Security Documents and all obligations (other than thoseexpressly stated to survive such termination) of the Agent and each Loan Partyunder the Security Documents shall terminate, all without delivery of anyinstrument or performance of any act by any Person. (c) On any date on or after the second anniversary of the EffectiveDate on which (i) the Consolidated Adjusted Leverage Ratio for each of the fourquarter periods of Holdings ending as of the dates of the three most recentlycompleted fiscal quarters of Holdings is less than 2.25 to 1.0 or (ii) any classof non-credit enhanced long term senior unsecured debt of Holdings has at leasttwo Investment Grade Ratings, then so long as no Default or Event of Defaultexists on such date, the Borrowers may, by written notice to the Agent (whichnotice shall (x) attach a certificate of an Authorized Officer of Holdingssetting forth in reasonable detail the calculations necessary to demonstrateHoldings’ satisfaction of the condition set forth in clause (i) of thisparagraph (c) and compliance with the covenants set forth in Section 6.03 as ofthe end of the most recently completed fiscal quarter for which financialstatements are available and (y) promptly be distributed by the Agent to theLenders), request that all Collateral be released from the Liens created by theSecurity Document, and upon the Agent’s receipt of such written request allCollateral shall be released from such Liens (all such released Collateral beingthe “Released Collateral”), all without delivery of any instrument orperformance of any act by any party, and all rights to the Released Collateralshall revert to the Loan Parties. At the request and sole expense of any LoanParty following 51any such release, the Agent shall deliver to such Loan Party any ReleasedCollateral held by the Agent under any Security Document, and execute anddeliver to such Loan Party such documents as such Loan Party shall reasonablyrequest to evidence such release. SECTION 9.14. USA PATRIOT Act Notice. Each Lender that is subject tothe Act (as hereinafter defined) and the Agent (for itself and not on behalf ofany Lender) hereby notifies each Borrower that pursuant to the requirements ofthe USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,2001)) (the “Act”), it is required to obtain, verify and record information thatidentifies each Borrower, which information includes the name and address ofsuch Borrower and other information that will allow such Lender or the Agent, asapplicable, to identify such Borrower in accordance with the Act. Each Borrowerhereby agrees to provide such information promptly upon the request of anyLender or the Agent. SECTION 9.15. Integration. This Agreement and the other Loan Documentsrepresent the agreement of the Holdings, the Borrowers, the Agent and theLenders with respect to the subject matter hereof and thereof, and there are nopromises, undertakings, representations or warranties by the Agent or any Lenderrelative to subject matter hereof and thereof not expressly set forth orreferred to herein or in the other Loan Documents. 52 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to beexecuted by their respective officers thereunto duly authorized, as of the datefirst above written. SEARS HOLDINGS CORPORATION By: /s/ Allen R. Ravas —————————————- Name: Allen R. Ravas Title: VP Assistant Treasurer SEARS ROEBUCK ACCEPTANCE CORP. By: /s/ Keith Trost —————————————- Name: Keith Trost Title: President KMART CORPORATION By: /s/ Allen R. Ravas —————————————- Name: Allen R. Ravas Title: Treasurer 53 JPMORGAN CHASE BANK, N.A., as Agent, Swingline Lender and Issuing Lender By: /s/Teri Streusand —————————————- Name: Teri Streusand Title: Vice President CITICORP USA, INC., as a Syndication Agent and Issuing Lender By: /s/ Carolyn Kee —————————————- Name: Carolyn Kee Title: Vice President BANK OF AMERICA, N.A., as a Syndication Agent and Issuing Lender By: /s/ Daniel Platt —————————————- Name: Daniel Platt Title: Director BARCLAYS BANK PLC, as a Documentation Agent By: /s/ Nicholas Bell —————————————- Name: Nicholas Bell Title: Director LEHMAN COMMERCIAL PAPER INC., as a Documentation Agent By: /s/ Janine M. Shugan —————————————- Name: Janine Shugan Title: Authorized Signatory HSBC BANK USA, as a Documentation Agent By: /s/ John Lyons —————————————- Name: John Lyons Title: Senior Vice President 54 MERRILL LYNCH BANK USA, as a Documentation Agent By: /s/ Louis Alder —————————————- Name: Louis Alder Title: Director MORGAN STANLEY BANK, as a Documentation Agent By: /s/ Daniel Twenge —————————————- Name: Daniel Twenge Title: Vice President THE ROYAL BANK OF SCOTLAND, PLC, as a Documentation Agent By: /s/ Charlotte Sohn Fuiks —————————————- Name: Charlotte Sohn Fuiks Title: Senior Vice President WACHOVIA BANK NATIONAL ASSOCIATION, as a Documentation Agent By: /s/ Thomas Grabosky —————————————- Name: Thomas Grabosky Title: First Vice President J.P. MORGAN SECURITIES INC., as Lead Arranger By: /s/ Bruce S. Borden —————————————- Name: Bruce S. Borden Title: Vice President BANC OF AMERICA SECURITIES LLC, as Lead Arranger By: /s/ Jeffrey McLand —————————————- Name: Jeffrey McLand Title: Vice President CITIGROUP GLOBAL MARKETS INC., as Lead Arranger By: /s/ Jeffrey Nitz —————————————- Name: Jeffrey Nitz Title: Director 55 By: /s/ Jeffrey Nitz ———————————- Name: Jeffrey Nitz Title: Director 56Commitment: $230,200,000.00 JPMorgan Chase Bank, N.A. ——————————— Name of Lender By: /s/ Teri Streusand ———————————- Name: Teri Streusand Title: Vice President Domestic Lending Office: Address: 1111 Fannin Street Houston, TX 77002 Attention: Erin M. Merritt Phone: 713-750-2119 Facsimile: 713-750-2782 Eurodollar Lending Office: Address: 1111 Fannin Street Houston, TX 77002 Attention: Erin M. Merritt Phone: 713-750-2119 Facsimile: 713-750-2782 57Commitment: $230,200,000.00 Citicorp USA, Inc. —————– Name of Lender By: /s/ Carolyn Kee ———————————- Name: Carolyn Kee Title: Vice President Domestic Lending Office: Address: Citicorp USA, Inc. 399 Park Avenue 16th Floor New York, NY Attention: Alex Iannelli Phone: 302-894-6058 Facsimile: 212-994-0847 Eurodollar Lending Office: Address: Citicorp USA, Inc. 399 Park Avenue 16th Floor New York, NY Attention: Alex Iannelli Phone: 302-894-6058 Facsimile: 212-994-0847 58Commitment: $230,200,000.00 Bank of America, N.A. ——————— Name of Lender By: /s/ Daniel Platt ———————————- Name: Daniel Platt Title: Director Domestic Lending Office: Address: 40 Broad St. 10th Floor Boston, MA 02110 Attention: Daniel Platt Phone: 617-434-4190 Facsimile: 617-434-4312 Eurodollar Lending Office: Address: 40 Broad St. 10th Floor Boston, MA 02110 Attention: Daniel Platt Phone: 617-434-4190 Facsimile: 617-434-4312 59Commitment: $217,200,000.00 Barclays Bank PLC —————– Name of Lender By: /s/ Nicholas Bell ———————————- Name: Nicholas Bell Title: Director Domestic Lending Office: Address: 200 Park Avenue, New York, NY 10166 Attention: Nicholas Bell Phone: 212-412-4029 Facsimile: 212-412-7600 Eurodollar Lending Office: Address: 200 Park Avenue, New York, NY 10166 Attention: Nicholas Bell Phone: 212-412-4029 Facsimile: 212-412-7600 60Commitment: $217,200,000 Lehman Brothers Bank, FSB ————————- Name of Lender By: /s/ Janine M. Shugan ———————————- Name: Janine M. Shugan Title: Authorized Signatory Domestic Lending Office: Address: 745 Seventh Avenue, 16th Floor New York, NY 10019 Attention: Joseph Lo Phone: 212-526-6560 Facsimile: 212-520-0450 Eurodollar Lending Office: Address: 745 Seventh Avenue, 16th Floor New York, NY 10019 Attention: Joseph Lo Phone: 212-526-6560 Facsimile: 212-520-0450 61Commitment: $217,200,000.00 Wachovia Bank, N.A. ——————- Name of Lender By: /s/ Thomas Grabosky ———————————- Name: Thomas Grabosky Title: First Vice President Domestic Lending Office: Address: 1133 Avenue of the Americas New York, NY 10036 Attention: Dave Hill Phone: 212-545-4418 Facsimile: 212-545-4283 Eurodollar Lending Office: Address: 1133 Ave of the Americas New York, NY 10036 Attention: Sam Ho Phone: 212-545-4468 Facsimile: 212-545-4246 62Commitment: $217,200,000.00 Morgan Stanley Bank ——————- Name of Lender By: /s/ Daniel Twenge ———————————- Name: Daniel Twenge Title: Vice President Morgan Stanley Bank Domestic Lending Office: Address: 1633 Broadway, 25th Fl New York, NY 10019 Attention: Larry Benison Phone: 212-537-1439 Facsimile: 212-537-1867 Eurodollar Lending Office: Address: 1633 Broadway, 25th Fl New York, NY 10019 Attention: Larry Benison Phone: 212-537-1439 Facsimile: 212-537-1867 63Commitment: $217,200,000.00 HSBC Bank USA ————- Name of Lender By: /s/ John Lyons ———————————- Name: John Lyons Title: Senior Vice President Domestic Lending Office: Address: 452 Fifth Avenue, 5th Fl. New York, NY 10018 Attention: Robert Corder, S.V.P. Phone: 212-525-2602 Facsimile: 212 525-2479 Eurodollar Lending Office: Address: 452 Fifth Avenue, 5th Fl. New York, NY 10018 Attention: Robert Corder, S.V.P. Phone: 212-525-2602 Facsimile: 212 525-2479 64Commitment: $217,200,000.00 Merrill Lynch Bank, USA ———————– Name of Lender By: /s/ Louis Alder ———————————- Name: Louis Alder Title: Director Domestic Lending Office: Address: Merrill Lynch Bank USA 15 W. South Temple St. STE 300 Sale Lake City, UT 84101 Attention: Julie Young Phone: 801-526-8331 Facsimile: 801-359-4667 Eurodollar Lending Office: Address: Merrill Lynch Bank USA 15 W. South Temple St. STE 300 Sale Lake City, UT 84101 Attention: Julie Young Phone: 801-526-8331 Facsimile: 801-359-4667 65Commitment: $217,200,000.00 The Royal Bank of Scotland plc —————————— Name of Lender By: /s/ Charlotte Sohn Fuiks ———————————- Name: Charlotte Sohn Fuiks Title: Senior Vice President Domestic Lending Office: Address: 101 Park Avenue New York, NY 10178 Attention: Charlotte Sohn Fuiks Phone: 212-401-3703 Facsimile: 212-401-3456 Eurodollar Lending Office: Address: 101 Park Avenue New York, NY 10178 Attention: Charlotte Sohn Fuiks Phone: 212-401-3703 Facsimile: 212-401-3456 66Commitment: $197,400,000.00 Goldman Sachs Credit Partners, L.P. ———————————– Name of Lender By: /s/ Tom Connolly ———————————- Name: Tom Connolly Title: Authorized Signatory Domestic Lending Office: Address: 30 Hudson Street, 17th Fl Jersey City, NJ 07302 Attention: Philip.Green@gs.com Phone: 212-357-7570 Facsimile: 212-357-4597 Eurodollar Lending Office: Address: Goldman Sachs International Peterborough Court 133 Fleet Street, London EC4 A 2BB Attention: Katherine.Gillespie@gs.com Phone: 44(20) 7774-6457*The London Office is only needed for same day borrowing. New York willotherwise fund both in US Dollars and Euros. 67Commitment: $197,400,000.00 Harris Nesbitt Financing, Inc. —————————— Name of Lender By: /s/ Joseph W. Linder ———————————- Name: Joseph W. Linder Title: Vice President Domestic Lending Office: Address: 115 LaSalle Street; 17W Chicago, IL 60603-3868 Attention: Ellen Dancer Client Service Officer Phone: 312-461-2587 Facsimile: 312-293-5283 Eurodollar Lending Office: Address: 115 LaSalle Street; 17W Chicago, IL 60603-3868 Attention: Ellen Dancer Client Service Officer Phone: 312-461-2587 Facsimile: 312-293-5283 68Commitment: $197,400,000.00 CREDIT SUISSE FIRST BOSTON, acting through its Cayman Islands Branch ———————————– Name of Lender By: /s/ Phillip Ho ———————————- Name: Phillip Ho Title: Director By: /s/ Cassandra Droogan ———————————- Name: Cassandra Droogan Title: Associate Domestic Lending Office: Address: Eleven Madison Avenue New York, NY 10010 Attention: Cassandra Droogan Phone: 212-325-2949 Facsimile: 212-325-8319 Eurodollar Lending Office: Address: Eleven Madison Avenue New York, NY 10010 Attention: Cassandra Droogan Phone: 212-325-2949 Facsimile: 212-325-8319 69Commitment: $197,400,000.00 The Bank of Nova Scotia ———————– Name of Lender By: /s/ V. Gibson ———————————- Name: V. Gibson Title: Assistant Agent Domestic Lending Office: Address: 600 Peachtree St., N.E. Suite 2700 Atlanta, GA 30308 Attention: George Wong Phone: 404-877-1556 Facsimile: 404-888-8998 Eurodollar Lending Office: Address: 600 Peachtree St., N.E. Suite 2700 Atlanta, GA 30308 Attention: George Wong Phone: 404-877-1556 Facsimile: 404-888-8998 70Commitment: $197,400,000.00 Bear Stearns Corporate Lending Inc. ———————————– Name of Lender By: /s/ Victor Bulzacchelli ———————————- Name: Victor Bulzacchelli Title: Vice President Domestic Lending Office: Address: Bear, Stearns & Co., Inc. 383 Madison Avenue New York, NY 10179 Attention: Randall Trombley Phone: 212-272-8871 Facsimile: 212-272-9184 E-Mail: rtrombley@bear.com Eurodollar Lending Office N/ACommitment: $100,000,000.00 The CIT Group/Business Credit, Inc. ———————————– Name of Lender By: /s/ Christopher J. Esposito ———————————- Name: Christopher J. Esposito Title: Vice President Domestic Lending Office: Address: 300 South Grand Avenue, 3rd, Floor Los Angeles, CA 90071 Attention: Becky Martin Phone: 213-613-2510 Facsimile: 213-613-2599 Eurodollar Lending Office: Address: 300 South Grand Avenue, 3rd, Floor Los Angeles, CA 90071 Attention: Becky Martin Phone: 213-613-2510 Facsimile: 213-613-2599Commitment: $100,000,000.00 Royal Bank of Canada ——————– Name of Lender By: /s/ Howard Lee ———————————- Name: Howard Lee Title: Authorized Signatory Domestic Lending Office: Address: Royal Bank of Canada New York Branch One Liberty Plaza – 4th Floor New York, NY 10006 Attention: Linda Joannou Phone: 212-428-6212 Facsimile: 212-428-2372 Eurodollar Lending Office: Address: Royal Bank of Canada New York Branch One Liberty Plaza – 4th Floor New York, NY 10006 Attention: Linda Joannou Phone: 212-428-6212 Facsimile: 212-428-2372Commitment: $75,000,000.00 National City Bank —————— Name of Lender By: /s/ Brian T. Strayton ———————————- Name: Brian T. Strayton Title: Senior Vice President Domestic Lending Office: Address: National City Park 1900 East Ninth Street Cleveland, Oh 44114 Attention: David Gregory Phone: 216-488-7087 Facsimile: 216-488-7110 Eurodollar Lending Office: Address: National City Bank 1900 East Ninth Street Cleveland, OH 44114 Attention: David Gregory Phone: 216-488-7087 Facsimile: 216-488-7110Commitment: $75,000,000.00 The Bank of New York ——————– Name of Lender By: /s/ Lucille Madden ———————————- Name: Lucille Madden Title: Vice President Domestic Lending Office: Address: One Wall Street, 8th Floor New York, NY 10286 Attention: Laina Chan Phone: 212-635-1366 Facsimile: 212-635-1483 Eurodollar Lending Office: Address: One Wall Street, 8th Floor New York, NY 10286 Attention: Laina Chan Phone: 212-635-1366 Facsimile: 212-635-1483 2Commitment: $70,000,000.00 Banco Popular de Puerto Rico By: /s/ Hector J. Gonzalez ———————- Name: Hector J. Gonzalez Title: Vice President Domestic Lending Office: Address: 7 West 51st Street New York, NY 10019 Attention: Hector J. Gonzalez Phone: 212-445-1988 Facsimile: 212-245-4677 Eurodollar Lending Office: Address: 7 West 51st Street New York, NY 10019 Attention: Hector J. Gonzalez Phone: 212-445-1988 Facsimile: 212-245-4677 3Commitment: $50,000,000.00 CIBC, Inc. By: /s/ Dominic J. Sorresso ———————– Name: Dominic J. Sorresso Title: Executive Director CIBC World Markets Corp., as Agent Domestic Lending Office: Address: 40 Dundas Street, 5th Floor Toronto, Ontario Canada M5G 2C2 Attention: Asanka de Silva Phone: 416-542-4465 Facsimile: 416-542-4558 Eurodollar Lending Office: Address: 40 Dundas Street, 5th Floor Toronto, Ontario Canada M5G 2C2 Attention: Asanka de Silva Phone: 416-542-4465 Facsimile: 416-542-4558 4Commitment: $50,000,000.00 Mizuho Corporate Bank ——————— Name of Lender By: /s/ Betram H. Tang —————— Name: Betram H. Tang Title: Senior Vice President & Team Leader Domestic Lending Office: Address: Harborside Financial Center 1800 Plaza Ten Jersey City, NJ 07311 Attention: Frank Lehaf Phone: 201-626-9303 Facsimile: 201-626-9913/9935 Eurodollar Lending Office: Address: Harborside Financial Center 1800 Plaza Ten Jersey City, NJ 07311 Attention: Frank Lehaf Phone: 201-626-9303 Facsimile: 201-626-9913/9935 5Commitment: $50,000,000.00 The Northern Trust Company ————————– Name of Lender By: /s/ David C. Fisher ——————- Name: David C. Fisher Title: Vice President Domestic Lending Office: Address: 50 S. LaSalle Chicago, IL 60675 Attention: Ms. Sharon Jackson Phone: 312-630-1609 Facsimile: 312-630-1566 Eurodollar Lending Office: Address: 50 S. LaSalle Chicago, IL 60675 Attention: Ms. Sharon Jackson Phone: 312-630-1609 Facsimile: 312-630-1566 6Commitment: $35,000,000.00 Banca di Roma, Chicago Branch —————————– Name of Lender By: /s/ Aurora Pensa —————- Name: Aurora Pensa Title: Vice President By: /s/ Enrico Verdoscia ——————– Name: Enrico Verdoscia Title: Sr. Vice President Domestic Lending Office: Address: 225 West Washington St. Suite 1200 Chicago, IL 60606 Attention: James Semonchik Phone: 312-704-2629 Facsimile: 312-726-3058 Eurodollar Lending Office: Address: 225 West Washington St. Suite 1200 Chicago, IL 60606 Attention: James Semonchik Phone: 312-704-2629 Facsimile: 312-726-3058 7Commitment: $25,000,000.00 Branch Banking and Trust Company ——————————– Name of Lender By: /s/ John G. Reeves —————— Name: John G. Reeves Title: Assistant Vice President Domestic Lending Office: Address: 200 West Second Street 16th Floor Winston-Salem, NC 27101 Attention: Robert A. Bass Phone: 336-733-2734 Facsimile: 336-733-2740 Eurodollar Lending Office: Address: 200 West Second Street 16th Floor Winston-Salem, NC 27101 Attention: Robert A. Bass Phone: 336-733-2734 Facsimile: 336-733-2740 8Commitment: $25,000,000.00 First Hawaiian Bank ——————- Name of Lender By: /s/ Ronald C.M. Chang ——————— Name: Ronald C.M. Chang Title: Vice President Domestic Lending Office: Address: 999 Bishop Street, 11th Floor Honolulu, Hawaii 96813 Attention: Corporate National Division Phone: 808-525-5194 Facsimile: 808-525-6372 Eurodollar Lending Office: Address: 999 Bishop Street, 11th Floor Honolulu, Hawaii 96813 Attention: Corporate National Division Phone: 808-525-5194 Facsimile: 808-525-6372 9Commitment: $25,000,000.00 KeyBank National Association —————————- Name of Lender By: /s/ Michael J. Vegh ——————- Name: Michael J. Vegh Title: Assistant Vice President Domestic Lending Office: Address: 127 Public Square 6th Floor Cleveland, OH 44114 Attention: Michael J. Vegh Phone: 216-689-7759 Facsimile: 216-689-4981 Eurodollar Lending Office: Address: 127 Public Square 6th Floor Cleveland, OH 44114 Attention: Michael J. Vegh Phone: 216-689-7759 Facsimile: 216-689-4981 10Commitment: $25,000,000.00 United Overseas Bank Limited, New York Agency ——————————————— Name of Lender By: /s/ Kwong Yew Wong —————— Name: Kwong Yew Wong Title: FVP & General Manager By: /s/ Phillip Cheong —————— Name: Phillip Cheong Title: VP & Deputy General Manager Domestic Lending Office: Address: 592 Fifth Avenue, 10th Floor New York, NY 10036 Attention: Kwong Yew Wong Phone: 212-382-0088 Facsimile: 212-382-1881 Eurodollar Lending Office: Address: 592 Fifth Avenue, 10th Floor New York, NY 10036 Attention: Kwong Yew Wong Phone: 212-382-0088 Facsimile: 212-382-1881 11Commitment: $25,000,000.00 U.S. Bank National Association —————————— Name of Lender By: /s/ John Franceschi ——————- Name: John Franceschi Title: Vice President Domestic Lending Office: Address: 777 E. Wisconsin Ave. Mail Code: MK-WI-TGCB Milwaukee, WI 53202 Attention: John Franceschi Phone: 414-765-5656 Facsimile: 414-765-5367 Eurodollar Lending Office: Address: 777 E. Wisconsin Ave. Mail Code: MK-WI-TGCB Milwaukee, WI 53202 Attention: John Franceschi Phone: 414-765-5656 Facsimile: 414-765-5367 12Commitment: $17,000,000.00 Siemens Financial Services, Inc. ——————————– Name of Lender By: /s/ Michael Coiley —————— Name: Michael Coiley Title: Senior Vice President Domestic Lending Office: Address: 170 Wood Avenue South Iselin, NJ 08830 Attention: Victor Alarcon Phone: 732-590-6622 Facsimile: 732-590-6648 Eurodollar Lending Office: N/A 13Commitment: $15,000,000.00 First Tennessee Bank National Association —————————————– Name of Lender By: /s/ Malcolm Koch —————- Name: Malcolm Koch Title: Vice President Domestic Lending Office: Address: 165 Madison Ave. National Department Memphis, TN 38103 Attention: Jim Moore Phone: 901-523-4108 Facsimile: 901-523-4267 Eurodollar Lending Office: N/A 14Commitment: $15,000,000.00 The International Commercial Bank of China —————————————— Name of Lender By: /s/ Nae-Yee Lung —————- Name: Nae-Yee Lung Title: EVP & General Manager Domestic Lending Office: Address: 65 Liberty Street New York, NY 10005 Attention: Louis Wen-Luh Chang Phone: 212-815-9168 Facsimile: 212-766-5006 Eurodollar Lending Office: Address: 65 Liberty Street New York, NY 10005 Attention: Louis Wen-Luh Chang Phone: 212-815-9168 Facsimile: 212-766-5006 15Commitment: $15,000,000.00 Malayan Banking Berhad ———————- Name of Lender By: /s/ Wan Fadzmi Othman ——————— Name: Wan Fadzmi Othman Title: General Manager Domestic Lending Office: Address: 400 Park Avenue New York, NY 10022 Attention: P.C. Kim Phone: 212-303-1305 Facsimile: 212-308-0109 Eurodollar Lending Office: N/A 16Commitment: $10,000,000.00 Bank of Oklahoma —————- Name of Lender By: /s/ Holly M. Byrne —————— Name: Holly M. Byrne Title: Assistant Vice President Domestic Lending Office: Address: One Williams Center 8th Floor Tulsa, OK 74172 Attention: Holly Byrne Phone: 918-588-6493 Facsimile: 918-280-3368 Eurodollar Lending Office: N/A 17