Exhibit 10.3
J. C. Penney Company, Inc. Notice of Grant of Stock Option(s)
2005 Annual Grant of Stock Options
2001 Equity
Compensation Plan
Stock Option Program
<table>
<c> <c>
Name Date of Grant Option Price Per Share
$ 00.00
Employee ID Unit Number Area of Responsibility / District Number
0000000000 000000
Number of NSO Shares Granted
0,000
</table>
This Notice of Non-Qualified (also known as "Non-Statutory") Stock Option
("NSO") gives you the right to purchase the total number of shares of Common
Stock of 50 cent par value ("Common Stock") of J. C. Penney Company, Inc.
("Company") at the price per share as shown above. This option is subject to all
the terms, rules, and conditions of the J. C. Penney Company, Inc. 2001 Equity
Compensation Plan ("Plan"). Capitalized terms not otherwise defined herein shall
have the respective meanings assigned to them in the Plan. The option price and
number of shares will be adjusted as provided in the Plan in the event of a
stock dividend, stock split, recapitalization, merger, consolidation,
combination or exchange of shares, spinoff, distribution to holders of Common
Stock other than cash dividends, or the like.
Terms of Exercise
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Effective Exercise Date
- ------------------------
When an option exercise instruction is given in conjunction with a sell order
for the underlying stock that is a Sell-to-Cover Order, a Cashless Exercise
Order, a Limit Order or a Good-till Cancelled Order, the effective exercise date
shall be the date on which such sale order is executed. For a Cash Payment
(Exercise and Hold) transaction, the effective exercise date will be the date
the requisite funds are received by the Company at its home office in Plano,
Texas, or such other location as the Company may designate, or by a third party
duly designated by the Company at the offices of such third party. For a Stock
Payment transaction, the effective exercise date will be the date the properly
completed option exercise form and any necessary accompanying documents and
payment are received by the Company at its home office in Plano, Texas, or such
other location as the Company may designate, or by a third party duly designated
by the Company at the offices of such third party. Exercise instructions
received after the close of the New York Stock Exchange ("NYSE") for the day
shall be deemed received as of the opening of the next Business Day (a "Business
Day" being any day on which the NYSE is open and operating). An effective
exercise date shall never mean a non-Business Day. If any "effective exercise
date," as defined above, falls on a day Common Stock is not traded on the NYSE,
all transactions will be postponed until the next trading day, and the effective
exercise date will be deemed to be the next trading date, unless such day is
after the Normal Expiration Date (as defined below), in which case the option
will expire. Options can only be exercised through your Company designated
brokerage account which must be activated by you prior to your exercising any
option.
Transferability
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This option may be assigned or transferred by will or the laws of descent and
distribution. No Stock Option will be exercisable except by you or (a) upon your
incapacity, by your guardian or legal representative, or (b) upon your death, by
the beneficiary you have designated on the JCPenney Beneficiary Designation form
or in the absence of such beneficiary, your legal representative (collectively,
"Legal Transferees").
Date Option Becomes Exercisable
- --------------------------------
This option will vest over a three-year period in accordance with the following
schedule:
<table>
<c> <c>
Normal Vesting Dates Percent of this Option Grant that will vest
----------------------------------------------------- ---------------------------------------------------
----------------------------------------------------- ---------------------------------------------------
33-1/3%
----------------------------------------------------- ---------------------------------------------------
----------------------------------------------------- ---------------------------------------------------
33-1/3%
----------------------------------------------------- ---------------------------------------------------
----------------------------------------------------- ---------------------------------------------------
33-1/3%
----------------------------------------------------- ---------------------------------------------------
</table>
This option will be 100% vested on -------------------.
However, this option becomes immediately exercisable, without regard to these
dates, upon a "Change of Control" (as defined in the Plan) of the Company, and
this option becomes immediately exercisable, without regard to these dates, in
the event of your employment termination due to retirement, death, disability,
or reduction in force/unit closing as described below.
<page>
Additional Exercise Terms Of This Option Are:
- ---------------------------------------------
While you are Employed
- ------------------------
While you are employed by the Company, subsidiary, or other entity affiliated
with the Company, you may exercise vested options any time on or after the
Normal Vesting Dates until the option Expiration Date of ------ ("Normal
Expiration Date"). This option can be exercised by:
o Cash Payment Method (Exercise and Hold)
o Stock Payment Method
o Cashless Method
o Sell To Cover Method
After your Employment Termination
- ----------------------------------
In all cases, the option exercise period following termination of employment
cannot extend beyond the applicable date described below or the Normal
Expiration Date, whichever comes first.
1) Retirement or Disability: If your employment terminates due to your:
o Retirement at age 60 or more,
o Retirement between ages 55 and 59 with at least 15 years of service, or
o Disability,
before all Normal Vesting Dates have been reached, this option will become
immediately 100% exercisable on such employment termination. This option
may be exercised for a period of five years after such employment
termination or until the option's Normal Expiration Date, whichever comes
first.
If your employment terminates due to any of the three circumstances listed
above on or after all Normal Vesting Dates have been reached, this option
may be exercised for a period of five years after employment termination or
until the option's Normal Expiration Date, whichever comes first.
2) Reduction in Force or Unit Closing - If your employment terminates due to a
reduction in force or unit closing before all Normal Vesting Dates have
been reached, this option will become immediately exercisable on such
employment termination. This option may be exercised for a period of three
years after such employment termination or until the option's Normal
Expiration Date, whichever comes first.
If your employment terminates due to a reduction in force or unit closing
on or after all Normal Vesting Dates have been reached, this option may be
exercised for a period of three years after employment termination or until
the option's Normal Expiration Date, whichever comes first.
3) Resignation, Discretionary Dismissal or Resignation in Lieu of
Discretionary Dismissal (excluding Reduction In Force or Unit Closing): If
your employment terminates due to your resignation, discretionary dismissal
or resignation in lieu of a discretionary dismissal, then this option will
expire as of the date of your employment separation
4) Death: If your employment terminates due to your death before all Normal
Vesting Dates have been reached, this option will become immediately 100%
exercisable on such employment termination. Such exercise must be made by
your Legal Transferee, and must be made within two years after your date of
death; provided, however, that in no event may such exercise be made after
the Normal Expiration Date.
If you die on or after all Normal Vesting Dates have been reached and: a)
while employed by the Company; b) during the five-year post-termination
exercise period described above for termination due to retirement or
disability; or c) during the three-year post-termination exercise period
described above for termination due to reduction in force, your Legal
Transferee may exercise this option for a period of two years following
your date of death. However, in no event can the exercise period after
death extend beyond the option's Normal Expiration Date. In most cases,
special documentation will be required to exercise an option after your
death.
5) Summary Dismissal or Resignation in Lieu of Summary Dismissal: If you are
given a Summary Dismissal, or allowed to resign in lieu of a Summary
Dismissal, then this option will expire as of the date of your employment
separation.
This stock option grant does not constitute an employment contract. It does not
guarantee employment for the length of the vesting period or for any portion
thereof.