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&lt;p style="margin: 9pt 0in 0pt;"&gt;&lt;font class="_mt" style="font-size: 10pt;"&gt;We are subject to various legal and governmental proceedings involving routine litigation incidental to our business. Reserves have been established based on our best estimates of our potential liability in certain of these matters. These estimates have been developed in consultation with in-house and outside counsel. While no assurance can be given as to the ultimate outcome of these matters, we currently believe that the final resolution of these actions, individually or in the aggregate, will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.&lt;/font&gt;&lt;/p&gt;
&lt;p style="margin: 9pt 0in 0pt;"&gt;&lt;font class="_mt" style="font-size: 10pt;"&gt;As of January 30, 2010, we estimated our total potential environmental liabilities to range from $49 million to $60 million and recorded our best estimate of $53 million in other liabilities in the Consolidated Balance Sheet as of that date. This estimate covered potential liabilities primarily related to underground storage tanks, remediation of environmental conditions involving our former Eckerd drugstore locations and asbestos removal in connection with approved plans to renovate or dispose of our facilities. We continue to assess required remediation and the adequacy of environmental reserves as new information becomes available and known conditions are further delineated. If we were to incur losses at the upper end of the estimated range, we do not believe that such losses would have a material effect on our financial condition, results of operations or liquidity.&lt;/font&gt;&lt;/p&gt;
&lt;p style="margin: 9pt 0in 0pt;"&gt;&lt;font class="_mt" style="font-size: 10pt;"&gt;As part of the 2001 asset sale of J. C. Penney Direct Marketing Services, Inc., JCP signed a guarantee agreement with a maximum exposure of $20 million. Any potential claims or losses are first recovered from established reserves, then from the purchaser and finally from any state insurance guarantee fund before JCP&amp;#8217;s guarantee would be invoked. As a result, we do not believe that any potential exposure would have a material effect on our consolidated financial statements.&lt;/font&gt;&lt;/p&gt;
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