Exhibit 10.1
J. C. PENNEY CORPORATION, INC.
CHANGE IN CONTROL PLAN
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Effective March 21, 2006
J. C. PENNEY CORPORATION, INC.
CHANGE IN CONTROL PLAN
TABLE OF CONTENTS
Article Page
ARTICLE ONE INTRODUCTION.........................................1
ARTICLE TWO DEFINITIONS..........................................2
ARTICLE THREE ELIGIBILITY AND PARTICIPATION........................8
ARTICLE FOUR BENEFITS.............................................9
ARTICLE FIVE AMENDMENT AND TERMINATION...........................18
ARTICLE SIX MISCELLANEOUS.......................................19
APPENDIX I PARTICIPATING EMPLOYERS.............................25
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J. C. PENNEY CORPORATION, INC.
CHANGE IN CONTROL PLAN
ARTICLE ONE
INTRODUCTION
1.01 Purpose Of Plan
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The J.C. Penney Corporation, Inc. Change in Control Plan (the
"Plan") consists primarily of (i) severance benefits, (ii) other
benefits after termination of employment under or outside of the
non-qualified retirement plans maintained by the Corporation and (iii)
a cash amount payable at termination of employment equal to the
Corporation's cost of health and welfare benefits the associate
participated in immediately prior to the Change in Control. The
purpose and intent of the Plan is to attract and retain key associates
and to improve associate productivity by reducing distractions
resulting from a potential Change in Control situation, all of which
are in the best interest of the Corporation, and J.C. Penney Company,
Inc. and its stockholders.
Capitalized terms used throughout the Plan have the meanings set forth
in Article Two except as otherwise defined in the Plan, or the context
clearly requires otherwise.
1.02 Plan Status
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The Plan is intended to be a plan providing Severance Pay and
certain retirement and other benefits following a Change in Control.
The Plan is intended to be a top hat plan for a select group of
management or highly compensated executives, subject only to the
administration and enforcement provisions of ERISA.
1.03 Entire Plan
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This document, including any Appendix hereto, and any documents
incorporated by reference set forth the provisions of the Plan
effective as of the Effective Date, except as otherwise provided
herein.
1.04 Administration
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The Human Resources and Compensation Committee of the Board
("Committee") shall administer the Plan, provided, however, that none
of the members of the Committee will be a Participant. The powers and
duties of the Committee in administering the Plan are set forth in
Article Six.
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ARTICLE TWO
DEFINITIONS
2.01 For purposes of this Plan the following terms shall have the following
meanings:
Accounting Firm means a nationally recognized accounting firm, or
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actuarial, benefits or compensation consulting firm, (with experience
in performing the calculations regarding the applicability Section
280G of the Code and of the tax imposed by Section 4999 of the Code)
selected by a Participant in his/her sole discretion.
Board means the Board of Directors of J.C. Penney Company, Inc.
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Change in Control means the occurrence of any of the following events:
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(i) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") becomes
the beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the
combined voting power of the then-outstanding Voting Stock of the
Company or Corporation; provided, however, that:
(1) for purposes of this Section (i)(1), the following
acquisitions shall not constitute a Change in Control: (A)
any acquisition of Voting Stock of the Company or
Corporation directly from the Company or Corporation that is
approved by a majority of the Incumbent Directors, (B) any
acquisition of Voting Stock of the Company or Corporation by
the Company or any Subsidiary, (C) any acquisition of Voting
Stock of the Company or Corporation by the trustee or other
fiduciary holding securities under any employee benefit plan
(or related trust) sponsored or maintained by the Company or
any Subsidiary, and (D) any acquisition of Voting Stock of
the Company or Corporation by any Person pursuant to a
Business Transaction that complies with clauses (A), (B) and
(C) of Section (iii) below;
(2) if any Person becomes the beneficial owner of 20% or more of
combined voting power of the then-outstanding Voting Stock
of the Company or Corporation as a result of a transaction
described in clause (A) of Section (i)(1) above and such
Person thereafter becomes the beneficial owner of any
additional shares of Voting Stock of the Company or
Corporation representing 1% or more of the then-outstanding
Voting Stock of the Company or Corporation,
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other than in an acquisition directly from the Company or
Corporation that is approved by a majority of the Incumbent
Directors or other than as a result of a stock dividend,
stock split or similar transaction effected by the Company
or Corporation in which all holders of Voting Stock are
treated equally, such subsequent acquisition shall be
treated as a Change in Control;
(3) a Change in Control will not be deemed to have occurred if a
Person becomes the beneficial owner of 20% or more of the
Voting Stock of the Company or Corporation as a result of a
reduction in the number of shares of Voting Stock of the
Company or Corporation outstanding pursuant to a transaction
or series of transactions that is approved by a majority of
the Incumbent Directors unless and until such Person
thereafter becomes the beneficial owner of any additional
shares of Voting Stock of the Company or Corporation
representing 1% or more of the then-outstanding Voting Stock
of the Company or Corporation, other than as a result of a
stock dividend, stock split or similar transaction effected
by the Company or Corporation in which all holders of Voting
Stock are treated equally; and
(4) if at least a majority of the Incumbent Directors determine
in good faith that a Person has acquired beneficial
ownership of 20% or more of the Voting Stock of the Company
or Corporation inadvertently, and such Person divests as
promptly as practicable but no later than the date, if any,
set by the Incumbent Directors a sufficient number of shares
so that such Person beneficially owns less than 20% of the
Voting Stock of the Company or Corporation, then no Change
in Control shall have occurred as a result of such Person's
acquisition; or
(ii) a majority of the board of the Company or of the Corporation
ceases to be comprised of Incumbent Directors; or
(iii) the consummation of a reorganization, merger or consolidation,
or sale or other disposition of all or substantially all of the
assets of the Company or the Corporation, or the acquisition of
the stock or assets of another corporation, or other transaction
(each, a "Business Transaction"), unless, in each case,
immediately following such Business Transaction (A) the Voting
Stock of the Company outstanding immediately prior to such
Business Transaction continues to represent (either by remaining
outstanding or by being converted into Voting Stock of the
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surviving entity or any parent thereof), more than 50% of the
combined voting power of the then outstanding shares of Voting
Stock of the entity resulting from such Business Transaction
(including, without limitation, an entity which as a result of
such transaction owns the Company, Corporation or all or
substantially all of the Company's or Corporation's assets either
directly or through one or more subsidiaries), (B) no Person
(other than the Company, such entity resulting from such Business
Transaction, or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary or such
entity resulting from such Business Transaction) beneficially
owns, directly or indirectly, 20% or more of the combined voting
power of the then outstanding shares of Voting Stock of the
entity resulting from such Business Transaction, and (C) at least
a majority of the members of the Board of Directors of the entity
resulting from such Business Transaction were Incumbent Directors
at the time of the execution of the initial agreement or of the
action of the Board providing for such Business Transaction; or
(iv) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a
Business Transaction that complies with clauses (A), (B) and (C)
of Section (iii).
Code shall mean the Internal Revenue Code of 1986, as amended and
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the proposed, temporary and final regulations promulgated
thereunder. Reference to any section or subsection of the Code
includes reference to any comparable or succeeding provisions of
any legislation that amends, supplements or replaces such section
or subsection.
Company shall mean J. C. Penney Company, Inc., a Delaware
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corporation, or any successor company.
Compensation shall mean the annual base salary rate of a
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Participant, plus the Participant's target annual incentive
compensation (at $1.00 per unit), under the Corporation's
Management Incentive Compensation Plan (or any successor plans
thereto) for the fiscal year, all at the greater of the amount in
effect on the date of the Change in Control or as of his/her
Employment Termination date, or immediately prior to the event
that constitutes grounds for a Constructive Termination. As
applied to a Participant employed by an affiliate or Subsidiary
of the Corporation, Compensation shall include the same elements
of pay to the extent the affiliate or Subsidiary maintains
similar or comparable pay arrangements.
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Constructive Termination shall mean a resignation from employment
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with the Corporation or an affiliate or Subsidiary (as
appropriate) after any of the actions listed below directed at a
Participant:
(a) decrease in salary or incentive compensation opportunity (as
compared with the incentive compensation opportunity in effect
immediately prior to the Change in Control), or
(b) failure by the Corporation to pay the Participant any portion
of his/her current base salary, or incentive compensation within
seven days of its due date, or
(c) adverse change in reporting responsibilities, duties, or
status as compared with pre-Change in Control responsibilities,
duties, or status, or
(d) the Corporation requires the Participant to have the
Participant's principal location of work changed to a location
more than 50 miles from the location thereof immediately prior to
the Change in Control, or
(e) discontinuance of the Participant's participation in, or
discontinuance of any material employee paid time off policy,
fringe benefit, welfare benefit, incentive compensation, equity
compensation, or retirement plan (without equivalent compensating
remuneration or replacement by a plan providing substantially
similar benefits) or any action that materially reduces such
Participant's benefits or payments under such plans, as in effect
immediately before the Change in Control.
Corporation shall mean J. C. Penney Corporation, Inc., a Delaware
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corporation, or any successor company.
Effective Date shall mean March 21, 2006.
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Employment Termination shall be deemed to have occurred for a
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Participant when he/she ceases to be an employee of the
Corporation or an affiliate or Subsidiary within two years after
a Change in Control (or prior to a Change in Control if the
Participant has reasonably demonstrated that such termination of
employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change in Control, or
(ii) otherwise arose in connection with or in anticipation of a
Change in Control) because of either a Constructive Termination
or a termination by the Corporation as a result of a Summary
Dismissal. An Employment Termination shall not include a
termination by reason of the Participant's death, disability,
voluntary quit other than a Constructive Termination, or Normal
Retirement.
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ERISA shall mean the Employee Retirement Income Security Act of
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1974, as amended, and the regulations promulgated thereunder.
Reference to any section or subsection of ERISA includes
reference to any comparable or succeeding provisions of any
legislation that amends, supplements or replaces such section or
subsection.
Exchange Act means the Securities Exchange Act of 1934, as
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amended, and the regulations promulgated thereunder. Reference to
any section or subsection of the Exchange Act includes reference
to any comparable or succeeding provisions of any legislation
that amends, supplements or replaces such section or subsection.
Excise Tax shall mean, collectively, (i) the tax imposed by
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Section 4999 of the Code by reason of being "contingent on a
change in ownership or control" of the Company, within the
meaning of Section 280G of the Code, or (ii) any similar tax
imposed by state or local law, or (iii) any interest or penalties
with respect to any excise tax described in clause (i) or (ii).
Incumbent Directors means the individuals who, as of the
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Effective Date hereof, are Directors of the Company or the
Corporation, as the context requires, and any individual becoming
a Director subsequent to the date hereof whose election,
nomination for election by the Company's or Corporation's
stockholders, or appointment, was approved by a vote of at least
two-thirds of the then Incumbent Directors (either by a specific
vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without
objection to such nomination); provided, however, that an
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individual shall not be an Incumbent Director if such
individual's election or appointment to the Board occurs as a
result of an actual or threatened election contest (as described
in Rule 14a-12(c) of the Exchange Act) with respect to the
election or removal of Directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board.
Normal Retirement shall mean retirement at or after a
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Participant's normal retirement date as determined in accordance
with the J. C. Penney Corporation, Inc. Pension Plan as in effect
immediately prior to a Change in Control.
Participant shall mean each person appointed by the Board to the
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Executive Board allowing them to participate in the Plan as
provided in Article Three and who continues to be an Executive
Board member immediately prior to a Change in Control.
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Participating Employer shall mean the Corporation and any
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Subsidiary or affiliate of the Corporation which is designated as
a Participating Employer under the Plan by the Board, excluding,
however, any division of the Corporation or of a Subsidiary or
affiliate that is designated by the Board as ineligible to
participate in the Plan. Appendix I contains a list of the
Participating Employers currently participating in the Plan that
have adopted the Plan pursuant to Article Six.
Severance Pay shall mean the cash severance payments payable to a
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Participant pursuant to Section 4.01 of the Plan.
Severance Benefits shall mean Severance Pay and the other
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benefits described in Article Four of the Plan payable to a
Participant.
Subsidiary shall mean any entity in which the Company, directly
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or indirectly, beneficially owns 50% or more of the Voting Stock.
Summary Dismissal shall mean a termination due to:
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(a) any willful or negligent material violation of any
applicable securities laws (including the Sarbanes-Oxley Act of
2002);
(b) any intentional act of fraud or embezzlement from the
Corporation or Company;
(c) a conviction of or entering into a plea of nolo
contendere to a felony that occurs during or in the course of the
Participant's employment with the Corporation;
(d) any breach of a written covenant or agreement with the
Corporation, which is material and which is not cured within 30
days after written notice thereof from the Corporation; and
(e) willful and continued failure of the Participant to
substantially perform his/her duties for the Corporation (other
than as a result of incapacity due to physical or mental illness)
or to materially comply with Corporation or Company policy after
written notice, in either case, from the Corporation and a 30-day
opportunity to cure.
For purposes hereof, an act, or failure to act, shall not be
deemed to be "willful" or "intentional" unless it is done, or
omitted to be done, by the Participant in bad faith or without a
reasonable belief that the action or omission was in the best
interests of the Corporation.
Voting Stock means securities entitled to vote generally in the
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election of directors.
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ARTICLE THREE
ELIGIBILITY AND PARTICIPATION
3.01 Eligibility on the Effective Date
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Each person who has been appointed to the Executive Board of the
Corporation ("Executive Board") by the Board as of the Effective
Date will be a Participant in the Plan.
3.02 Future Eligibility
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Each person who is appointed to the Executive Board by the Board
after the Effective Date and prior to the occurrence of a Change
in Control will be a Participant in the Plan.
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ARTICLE FOUR
BENEFITS
4.01 Severance Pay
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Upon an Employment Termination, a Participant shall become
entitled to Severance Pay in accordance with the following
schedule.
Title Severance Pay Period
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Chief Executive Officer and direct reports 3 years
Other Executive Vice Presidents 2.5 years
Senior Vice Presidents 2 years
Severance Pay will be computed by multiplying the Participant's
Compensation times the number of years (including any fraction of
a year) in the Participant's Severance Pay Period, plus a cash
amount equal to the aggregate Corporation's premium cost for
active associate Medical, Dental and Life Insurance Plans
coverage, if any, provided to the Participant on the date of the
Change in Control, or if higher, the amount in effect at
Employment Termination, times the number of years (including any
fraction of a year) in the Severance Pay Period. Such lump sum
Corporation contribution toward Medical, Dental and Life
Insurance Plans coverage for the Severance Pay Period will be
grossed-up for federal income taxes using the applicable federal
income tax rate that applied to the Participant for his/her prior
year's Compensation.
Except as provided in subpart 4.01A, Severance Pay shall be paid
in a lump sum within 30 days after Employment Termination.
In the event a Participant is entitled to any cash severance
payments that are payable in the event of termination of
employment pursuant to a written contract ("contract payments")
between the Participant and the Corporation or an affiliate or
Subsidiary, Severance Pay otherwise payable to the Participant
under this Section 4.01 shall be reduced by the amount of such
contract payments. Notwithstanding the foregoing, if the
Participant receives payments and benefits pursuant to this
Section 4.01, the Participant shall not be entitled to any
severance pay or benefits under any severance plan, program or
policy of the Company or an affiliate or Subsidiary, unless
otherwise specifically provided therein in a specific reference
to this Plan.
A. Section 409A
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To the extent applicable, it is intended that this Plan comply
with the provisions of Code Section 409A. This Plan shall be
administered in a manner consistent with this intent and any
provision that would cause this
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Plan to fail to satisfy Code Section 409A shall have no force and
effect until amended to comply with Code Section 409A (which
amendment may be retroactive to the extent permitted by Code
Section 409A and may be made by the Corporation without the
consent of Participants). Notwithstanding anything to the
contrary in this Section 4.01, if any portion of Severance Pay
constitutes a "deferral of compensation," that portion of the
Severance Pay will be paid on the latest of (i) the date
specified in this Plan, (ii) the Participant's "separation from
service," or (iii) if the Participant is a "specified employee,"
six months after the Participant's separation from service.
"Deferral of compensation," "separation from service" and
"specified employee" have the meanings ascribed to such phrases
in Code Section 409A.
4.02 Prorated Incentive Compensation
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A Participant who is covered under the Management Incentive
Compensation Plan and who becomes entitled to Severance Pay under
this Plan shall be paid a lump sum equal to the Participant's
pro-rated target annual incentive compensation (at $1.00 per
unit), under the Corporation's Management Incentive Compensation
Plan (or any successor plans thereto) for the fiscal year. Such
lump sum to be paid with the Severance Pay payable under Section
4.01.
4.03 Retiree Medical and Dental Coverage
-----------------------------------
For the purposes of determining eligibility for retiree coverage
under the J. C. Penney Corporation, Inc. Voluntary Employees'
Beneficiary Association Medical Benefit Plan and Dental Benefit
Plan (collectively "Health Care Plans"), a Participant who is
covered under the Health Care Plans and who becomes entitled to
Severance Pay under this Plan shall be provided with up to 24
months of additional age and/or service credit under the Health
Care Plans the same as any other involuntary termination
resulting from a reduction in force would receive under the terms
of the Health Care Plans.
4.04 Associate-Paid Retiree Term Life Insurance/Gold Card
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Notwithstanding any provision of the J. C. Penney Corporation,
Inc. Associate-Paid Group Term Life Insurance Plan or the Gold
Card Program to the contrary, if a Participant becomes entitled
to Severance Pay under this Plan, he/she shall be provided with
up to 24 months of additional age and/or service credit under the
terms of the Associate-Paid Group Term Life Insurance Plan or
Gold Card Program the same as any other involuntary termination
resulting from a reduction in force would receive under the terms
of such plans. Retiree life insurance benefits shall be paid
solely from the insurance policy or policies provided under said
plan.
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4.05 Non-Qualified Retirement Plans
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If a Participant becomes entitled to Severance Pay under this
Plan he/she will receive an immediate lump sum payment within 30
days after Employment Termination, subject to subpart 4.01A, of
any incremental benefit provided outside the terms of the
applicable retirement plan calculated as follows, if he/she,
(a) is a participant in the Corporation's Supplemental
Retirement Plan for Management Profit-Sharing Associates
("SRP"), he/she will receive a benefit equal to the number
of years in the Participant's Severance Pay Period as years
of additional age and additional service credit, if
applicable, to make --- him/her eligible for a benefit, and
if eligible, to provide him/her with the highest benefit
available as though the entire amount of his/her benefit
were provided under such plan (including any offsets under
such plan or offsets calculated under (b) or (c) of this
Section 4.05) and using the higher of his/her Compensation
or actual Average Final Compensation under the SRP, as
his/her Average Final Compensation for purposes of such
calculation; and/or
(b) is a participant in the Corporation's Benefit Restoration
Plan ("BRP"), he/she will receive a benefit equal to the
number of years in the Participant's Severance Pay Period as
years of additional age and additional service credit, if
applicable, to make him/her eligible for a benefit, and if
eligible, to provide him/her with the highest benefit
available as though the entire amount of his/her benefit
were provided under such plan and using the higher of
his/her Compensation or actual Average Final Pay under the
BRP, as his/her Average Final Pay for purposes of such
calculation; and/or
(c) is a participant in any of the Corporation's Mirror Savings
Plans, he/she will receive benefit equal to the
Corporation's match under such plan for each year in the
Participant's Severance Pay Period, and assuming the same
Corporation contribution rate as in effect at the time of
the Change in Control to provide him/her with the highest
benefit available using his Compensation for each year of
the Severance Pay Period to determine his/her contribution
and the Corporation's matching contribution as though the
entire amount of his/her benefit were provided under such
plan.
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4.06 Legal Fees
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All expenses of a Participant incurred in enforcing his/her
rights and/or to recover his/her benefits under this Article
Four, including but not limited to, attorney's fees, court costs,
arbitration costs, and other expenses shall be paid by the
Corporation. The Corporation shall pay, or reimburse the
Participant for such fees, costs and expenses, promptly upon
presentment of appropriate documentation, but only if, to the
extent and at the earliest date(s) such reimbursements are
determined to be permitted without violating Code Section 409A.
4.07 Outplacement Services/Financial Counseling
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Following an Employment Termination, a Participant will be paid a
lump sum payment in cash of $25,000 to allow the Participant to
pay for outplacement and financial counseling services. Such lump
sum to be paid with the Severance Pay payable under Section 4.01.
4.08 Special Bonus Hours
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In the event of an Employment Termination, a Participant will be
paid for Special Bonus Hours, if he/she is also a participant in
the Paid Time Off Policy ("PTO Policy") the same as any other
involuntary termination resulting from a reduction in force would
receive under the terms of the PTO Policy. Such payment will be
determined in accordance with the provisions of the PTO Policy
and paid within 30 days after the Participant's Employment
Termination date.
4.09 Gross-Up Payments To Make Participants Whole if Excise Tax Applies
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Anything in the Plan to the contrary notwithstanding, but subject
to paragraph (g) below, if it shall be determined (as hereafter
provided) that any payment or distribution by the Corporation or
an affiliate or Subsidiary to or for the benefit of the
Participant, whether paid or payable or distributed or
distributable pursuant to the terms of the Plan or otherwise
pursuant to or by reason of any other agreement, policy, plan,
program or arrangement, including without limitation any stock
option, stock appreciation right or similar right, or the lapse
or termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment"), would be
subject to the Excise Tax, then the Participant shall be entitled
to receive an additional payment or payments (a "Gross-Up
Payment") in an amount such that, after payment by the
Participant of all taxes (including any interest or penalties
imposed with respect to such taxes other than interest and
penalties imposed by reason of the Employee's failure to timely
file a tax return or pay taxes shown due on his/her return),
including any Excise Tax imposed upon the
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Gross-Up Payment, the Participant retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. No Gross-Up Payment will be made with respect to the
Excise Tax, if any, attributable to (a) any incentive stock
option, as defined by Section 422 of the Code ("ISO") granted
prior to the commencement of a Participant's eligibility under
the Plan (unless a comparable Gross-Up Payment has theretofore
been made available with respect to such option), or (b) any
stock appreciation or similar right, whether or not limited,
granted in tandem with any ISO described in clause (a) above.
(a) Subject to the provisions of paragraph (e) hereof, all
determinations required to be made under Section 4.09 of the
Plan, including whether an Excise Tax is payable by the
Participant and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Corporation to the
Participant and the amount of such Gross-Up Payment, shall be
made by the Accounting Firm. The Accounting Firm shall make an
initial determination at the time of a change in control (as
defined in Section 409A) of any Gross-Up Payment required to be
paid taking into account current payments and estimated future
payments that might affect the amount of the Gross-Up Payment. In
addition, the Participant shall direct the Accounting Firm to
submit its determination and detailed supporting calculations to
both the Corporation and the Participant within 15 calendar days
after the date of the Participant's Employment Termination, if
applicable, and any other such time or times as may be requested
by the Corporation or the Participant; notwithstanding the
foregoing, the first two Gross-Up Payments, if otherwise
required, shall be made at a time that would satisfy the
requirements of Section 409A in relation to a change in control
(as defined in Section 409A) and the Employment Termination of
the Participant, if applicable. If the Accounting Firm determines
that any Excise Tax is payable by the Participant, the
Corporation shall pay the required Gross-Up Payment to the
Participant within five business days after the receipt of such
determination and calculations. If the Accounting Firm determines
that no Excise Tax is payable by the Participant, it shall, at
the same time as it makes such determination, furnish the
Participant with an opinion that he/she has substantial authority
not to report any Excise Tax on his/her federal, state, local
income or other tax return. As a result of the uncertainty in the
application of Section 4999 and other applicable provisions of
the Code (or any successor provisions thereto) and the
possibility of similar uncertainty regarding applicable state or
local tax law at the time of any determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments that shall
not have been made by the Corporation should have been made (an
"Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Corporation exhausts or
fails to pursue its remedies pursuant to paragraph (e) hereof and
the Participant thereafter is required to make a payment of any
Excise Tax, the Participant shall direct the Accounting Firm to
determine the amount of the Underpayment that has occurred and to
submit its determination and detailed
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supporting calculations to both the Corporation and the
Participant as promptly as possible. Any such Underpayment shall
be promptly paid by the Corporation to, or for the benefit of,
the Participant within five business days after receipt of such
determination and calculations.
(b) The Corporation and the Participant shall each provide
the Accounting Firm access to and copies of any books, records
and documents in the possession of the Corporation or the
Participant, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm
in connection with the preparation and issuance of the
determination contemplated by paragraph (a) hereof. Any
reasonable determination by the Accounting Firm as the amount of
the Gross-Up Payment (and supported by the calculations done by
the Accounting Firm) shall be binding upon the Corporation and
the Participant.
(c) The federal, state and local income or other tax returns
filed by the Participant shall be prepared and filed on a
consistent basis with the determination of the Accounting Firm
with respect to the Excise Tax, if any, payable by the
Participant. The Participant shall make proper payment of the
amount of any Excise Tax, and at the request of the Corporation,
provide to the Corporation true and correct copies (with any
amendments) of his/her federal income tax return as filed with
the Internal Revenue Service and corresponding state and local
tax returns, if relevant, as filed with the applicable taxing
authority, and such other documents reasonably requested by the
Corporation, evidencing such payment. If prior to the filing of
Participant's federal income tax return, or corresponding state
or local tax return, if relevant, the Accounting Firm determines
that the amount of the Gross-Up Payment should be reduced, the
Participant shall within five business days pay to the
Corporation the amount of such reduction.
(d) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations
contemplated by paragraphs (a) and (c) hereof shall be borne by
the Corporation. If such fees and expenses are initially paid by
the Participant, the Corporation shall reimburse the Participant
the full amount of such fees and expenses within five business
days after receipt from the Participant of a statement therefore
and reasonable evidence of this payment thereof.
(e) The Participant shall notify the Corporation in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Corporation of a Gross-Up
Payment. Such notification shall be given as promptly as
practicable but no later than 10 business days after the
Participant actually receives notice of such claim and the
Participant shall further apprise the Corporation of the nature
of such claim and the date on which such claim is requested to be
paid (in each case, to the extent known by the Participant). The
Participant shall not pay such claim prior to the earlier
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<page>
of (i) the expiration of the 30-calendar-day period following the
date on which he gives such notice to the Corporation and (ii)
the date that any payment of amount with respect to such claim is
due. If the Corporation notifies the Participant in writing prior
to the expiration of such period that it desires to contest such
claim, the Participant shall:
(1) provide the Corporation with any written records or
documents in his/her possession relating to such claim reasonably
requested by the Corporation;
(2) take such action in connection with contesting such
claim as the Corporation shall reasonably request in writing from
time to time, including without limitation accepting legal
representation with respect to such claim by an attorney
competent in respect to the subject matter and reasonably
selected by the Corporation;
(3) cooperate with the Corporation in good faith in order
effectively to contest such claim; and
(4) permit the Corporation to participate in any proceedings
relating to such claim;
provided, however, that the Corporation shall bear and pay
directly all costs and expenses (including interest and
penalties) incurred in connection with such contest and shall
indemnify and hold harmless the Participant, on an after-tax
basis, for and against any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result
of such representation and payment of costs and expenses. Without
limiting the foregoing provisions of this paragraph (e), the
Corporation shall control all proceedings taken in connection
with the contest of any claim contemplated by this paragraph (e)
and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim (provided,
however, that the Participant may participate therein at his/her
own cost and expense) and may, at its option, either direct the
Participant to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Participant
agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Corporation shall
determine; provided, however, that if the Corporation directs the
Participant to pay the tax claimed and sue for a refund, the
Corporation shall pay to the Participant the amount of such tax
(including interest and penalties) and shall indemnify and hold
the Participant harmless, on an after-tax basis, from any Excise
Tax or directly related income tax or other tax, including
interest or penalties imposed with respect to such payment; and
provided further, however, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of
the Participant
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<page>
with respect to which the contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the
Corporation's control of any such contested claim shall be
limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and the Participant shall be entitled to
settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
(f) If the Participant receives any refund with respect to
such contested claim filed at the Corporation's request under
paragraph (e), the Participant shall (subject to the
Corporation's complying with the requirements of paragraph (e)
hereof) promptly pay to the Corporation the amount of such refund
(together with any interest paid or credited thereon after any
taxes applicable thereto). If a determination is made that the
Participant shall not be entitled to any refund with respect to
such claim and the Corporation does not notify the Participant in
writing of its intent to contest such denial prior to the
expiration of 30 calendar days after such determination, then the
amount paid to the Participant by the Corporation as provided in
paragraph (e) shall not be required to be repaid and, the amount
of such payment, shall be an offset to the amount of Gross-Up
Payment required to be paid pursuant to this Section 4.09.
(g) Notwithstanding any provision of this Plan to the
contrary, but giving effect to any redetermination of the amount
of Gross-Up Payments otherwise required by this Section 4.09, if
(1) but for this sentence, the Corporation would be obligated to
make a Gross-Up Payment to the Participant and (2) the aggregate
"present value" of the "parachute payments" to be paid or
provided to the Participant under this Plan or otherwise does not
exceed 1.10 multiplied by 2.99 times the Participant's "base
amount," then the payments and benefits to be paid or provided
under this Plan will be reduced (or repaid to the Corporation, if
previously paid or provided) to the minimum extent necessary so
that no portion of any payment or benefit to the Participant, as
so reduced or repaid, constitutes an "excess parachute payment."
For purposes of this paragraph (g), the terms "excess parachute
payment," "present value," "parachute payment," and "base amount"
will have the meanings assigned to them by Section 280G of the
Code. The determination of whether any reduction in or repayment
of such payments or benefits to be provided under this Plan is
required pursuant to this paragraph (g) will be made at the
expense of the Corporation, if requested by the Participant or
the Corporation, by the Accounting Firm. Appropriate adjustments
will be made to amounts previously paid to the Participant, or to
amounts not paid pursuant to this paragraph (g), as the case may
be, to reflect properly a subsequent determination that the
Participant owes more or less Excise Tax than the amount
previously determined to be due. In the event that any payment or
benefit intended to be provided under this Plan or otherwise is
required to be reduced or repaid pursuant to this paragraph (g),
the Participant will be entitled to designate the payments and/or
benefits to be
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<page>
so reduced or repaid in order to give effect to this paragraph
(g). The Corporation will provide the Participant with all
information reasonably requested by the Participant to permit the
Participant to make such designation. In the event that the
Participant fails to make such designation within 10 business
days prior to the Employment Termination date or other due date,
the Corporation may effect such reduction or repayment in any
manner it deems appropriate.
(h) Notwithstanding the foregoing provisions of this Section
4.09, Gross-Up Payments will be made only in the manner and to
the extent (and at the earliest date(s) permitted) such that Code
Section 409A will not be violated.
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ARTICLE FIVE
AMENDMENT AND TERMINATION
5.01 Amendment
--------
The Plan may be amended by the Board at any time; provided,
however, that
(a) any amendment which would have an adverse effect on any
Participant's Plan benefits and/or rights, except as may be
otherwise required to comply with changes in applicable laws or
regulations, including, but not limited to, Code Section 409A, or
(b) any amendment within one year before or two years after a
Change in Control,
cannot be applied to any Participant who would be adversely
affected by such amendment without such Participant's consent.
After a Change in Control, any amendment shall also require the
consent of the Committee.
5.02 Termination
-----------
The Plan shall continue indefinitely after the Effective Date,
unless the Board shall decide to terminate the Plan by duly
adopting resolutions terminating the Plan; provided, however,
following the commencement of any discussion with a third party
that ultimately results in a Change in Control, the Plan shall
continue subject to Section 5.01, until such time as the
Corporation and each affiliate or Subsidiary (as appropriate)
shall have fully performed all of their obligations under the
Plan with respect to all Participants, and shall have paid all
Severance Benefits under the Plan in full to all Participants.
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ARTICLE SIX
MISCELLANEOUS
6.01 Participant Rights
------------------
The Corporation and each affiliate or Subsidiary intend this Plan
to constitute a legally enforceable obligation between (a) the
Corporation or an affiliate or Subsidiary (as appropriate) and
(b) each Participant.
It is also intended that the Plan shall confer vested and
non-forfeitable rights for each Participant to receive benefits
to which the Participant is entitled under the terms of the Plan
with Participants being third party beneficiaries.
Except as provided in the definitions of Summary Dismissal or
Constructive Termination, nothing in this Plan shall be construed
to confer on any Participant any right to continue in the employ
of the Corporation or an affiliate or Subsidiary or to affect in
any way the right of the Corporation or an affiliate or
Subsidiary to terminate a Participant's employment without prior
notice at any time for any reason or no reason.
6.02 Authority of Committee
----------------------
The Committee will administer the Plan and have the full
authority and discretion necessary to accomplish that purpose,
including, without limitation, the authority and discretion to:
(i) resolve all questions relating to the eligibility of
Executive Board members to become or continue as Participants,
(ii) determine the amount of benefits, if any, payable to
Participants under the Plan and determine the time and manner in
which such benefits are to be paid, (iii) engage any
administrative, legal, tax, actuarial, accounting, clerical, or
other services it deems appropriate in administering the Plan,
(iv) construe and interpret the Plan, supply omissions from,
correct deficiencies in and resolve inconsistencies or
ambiguities in the language of the Plan, resolve inconsistencies
or ambiguities between the provisions of this document, and adopt
rules for the administration of the Plan which are not
inconsistent with the terms of the Plan document, (v) compile and
maintain all records it determines to be necessary, appropriate
or convenient in connection with the administration of the Plan,
and (vi) resolve all questions of fact relating to any matter for
which it has administrative responsibility. The Committee shall
perform all of the duties and may exercise all of the powers and
discretion that the Committee deems necessary or appropriate for
the proper administration of the Plan, and shall do so in a
uniform, nondiscriminatory manner. Any failure by the Committee
to apply any provisions of this Plan to any particular situation
shall not represent a waiver of the Committee's authority to
apply such provisions thereafter. Every interpretation, choice,
determination or other exercise of any power or discretion given
either expressly or by implication to
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<page>
the Committee shall be conclusive and binding upon all parties
having or claiming to have an interest under the Plan or
otherwise directly or indirectly affected by such action, without
restriction, however, on the right of the Committee to reconsider
and redetermine such action. Any decision rendered by the
Committee and any review of such decision shall be limited to
determining whether the decision was so arbitrary and capricious
as to be an abuse of discretion. The Committee may adopt such
rules and procedures for the administration of the Plan as are
consistent with the terms hereof.
6.03 Claims Procedure
----------------
A. Allocation of Claims Responsibility: With respect to any claim
------------------------------------
for benefits which are provided exclusively under this Plan, the
claim shall be approved or denied by the Committee within 60 days
following the receipt of the information necessary to process the
claim. In the event the Committee denies a claim for benefits in
whole or in part, it will give written notice of the decision to
the claimant or the claimants authorized representative, which
notice will set forth in a manner calculated to be understood by
the claimant, stating the specific reasons for such denial, make
specific reference to the pertinent Plan provisions on which the
decision was based, and provide any other additional information,
as applicable, required by 29 Code of Federal Regulations Section
2560.503-1 applicable to the Plan.
With respect to any claim for benefits which, under the terms of
the Plan, are provided under another employee benefit plan
maintained by the Corporation (i.e., Health Plans, Gold Card,
life insurance, PTO/MTO Policy, Pension, Savings, Mirror Savings,
Benefit Restoration Plan, and Supplement Retirement Plan
benefits), the Committee shall determine claims regarding the
Participant's eligibility under the Plan in accordance with the
preceding paragraph, but the administration of any other claim
with respect to such benefits (including the amount of such
benefits) shall be subject to the claims procedure specified in
such other employee benefit plan or program.
B. Litigation or Appeal In the event the Committee denies a claim
--------------------
in whole or in part for benefits which are provided exclusively
under the Plan, or denies a claim regarding the claimant's
eligibility under the Plan, Participants will then be allowed to
file a lawsuit in Federal Court as provided under ERISA.
Appeals with respect to any claim for benefits which, under the
terms of the Plan, are provided under another employee benefit
plan maintained by the Corporation (i.e., group health, life
insurance, and Supplemental Retirement Plan benefits), shall be
subject to the claims and appeals procedure specified in such
other employee benefit plan.
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6.04 Records and Reports
-------------------
The Committee will maintain adequate records of all of their
proceedings and acts and all such books of account, records, and
other data as may be necessary for administration of the Plan.
The Committee will make available to each Participant upon his
request such of the Plan's records as pertain to him for
examination at reasonable times during normal business hours.
6.05 Reliance on Tables, Etc.
------------------------
In administering the Plan, the Committee is entitled to the
extent permitted by law to rely conclusively upon all tables,
valuations, certificates, opinions and reports which are
furnished by accountants, legal counsel or other experts employed
or engaged by the Committee. The Committee will be fully
protected in respect of any action taken or suffered by the
Committee in good faith reliance upon all such tables,
valuations, certificates, reports, opinions or other advice. The
Committee is also entitled to rely upon any data or information
furnished by a Participating Employer or by a Participant as to
any information pertinent to any calculation or determination to
be made under the provisions of the Plan, and, as a condition to
payment of any benefit under the Plan the Committee may request a
Participant to furnish such information as it deems necessary or
desirable in administering the Plan.
6.06 Availability of Plan Information and Documents
----------------------------------------------
Any Participant having a question concerning the administration
of the Plan or the Participant's eligibility for participation in
the Plan or for the payment of benefits under the Plan may
contact the Committee and request a copy of the Plan document.
Each Participating Employer will keep copies of this Plan
document, exhibits and amendments hereto, and any related
documents on file in its administrative offices, and such
documents will be available for review by a Participant or a
designated representative of the Participant at any reasonable
time during regular business hours. Reasonable copying charges
for such documents will be paid by the requesting party.
6.07 Expenses
---------
All Plan administration expenses incurred by the Committee shall
be paid by the Corporation and all other administration expenses
incurred by the Corporation or an affiliate or Subsidiary shall
be paid by the Corporation or an affiliate or Subsidiary (as
appropriate).
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6.08 Adoption Procedure for Participating Employer
---------------------------------------------
Any Subsidiary or affiliate of the Corporation may become a
Participating Employer under the Plan provided that (i) the Board
approves the adoption of the Plan by the Subsidiary or affiliate
and designates the Subsidiary or affiliate as a Participating
Employer in the Plan and (ii) by appropriate resolutions of the
board of directors or other governing body of the Subsidiary or
affiliate, the Subsidiary or affiliate agrees to become a
Participating Employer under the Plan and also agrees to be bound
by any other terms and conditions which may be required by the
Board or the Committee, provided that such terms and conditions
are not inconsistent with the purposes of the Plan. A
Participating Employer may withdraw from participation in the
Plan, subject to approval by the Committee, by providing written
notice to the Committee that withdrawal has been approved by the
board of directors or other governing body of the Participating
Employer; provided, however, following the commencement of any
discussion with a third party that ultimately results in a Change
in Control, the Committee shall have no authority to approve the
withdrawal of any Participating Employer until such time as the
Corporation and each affiliate or Subsidiary (as appropriate)
shall have fully performed all of their obligations under the
Plan with respect to all Participants, and shall have paid all
Severance Benefits under the Plan in full to all Participants.
The Board may at any time remove a Participating Employer from
participation in the Plan by providing written notice to the
Participating Employer that it has approved removal; provided,
however, following the commencement of any discussion with a
third party that ultimately results in a Change in Control, the
Board shall have no authority to remove or approve the withdrawal
of any Participating Employer until such time as the Corporation
and each affiliate or Subsidiary (as appropriate) shall have
fully performed all of their obligations under the Plan with
respect to all Participants, and shall have paid all Severance
Benefits under the Plan in full to all Participants. The Board
will act in accordance with this Article pursuant to unanimous
written consent or by majority vote at a meeting.
6.09 Effect on Other Benefits
------------------------
Except as otherwise provided herein, the Plan shall not affect
any Participant's rights or entitlement under any other
retirement or employee benefit plan offered to him/her by the
Corporation or an affiliate or Subsidiary (as appropriate) as of
his/her Employment Termination.
6.10 Successors
----------
The Plan shall be binding upon any successor in interest of the
Corporation or an affiliate or Subsidiary (as appropriate) and
shall inure to the benefit of, and be enforceable by, a
Participant's assigns or heirs.
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6.11 Severability
------------
The various provisions of the Plan are severable and any
determination of invalidity or unenforceability of any one
provision shall not have any effect on the remaining provisions.
6.12 Construction
------------
In determining the meaning of the Plan, words imparting the
masculine gender shall include the feminine and the singular
shall include the plural, unless the context requires otherwise.
Headings of sections and subsections of the Plan are for
convenience only and are not intended to modify or affect the
meaning of the substantive provisions of the Plan.
6.13 References to Other Plans and Programs
--------------------------------------
Each reference in the Plan to any plan, policy or program, the
Plan or document of the Corporation or an affiliate or
Subsidiary, shall include any amendments or successor provisions
thereto without the necessity of amending the Plan for such
changes.
6.14 Notices
-------
(a) General. Notices and all other communications contemplated
-------
by this Plan shall be in writing and shall be deemed to have
been duly given when personally delivered or when mailed by
U.S. registered or certified mail, return receipt requested
and postage prepaid. In the case of the Participant, (i)
mailed notices shall be addressed to the Participant at the
Participant's home address which was most recently
communicated to the Corporation in writing or (ii) in the
case of a Participant who is an employee, distributed to the
employee at his or her place of employment in compliance
with 29 CFR Section 2520.104b-1(c). In the case of the
Corporation, mailed notices shall be addressed to its
corporate headquarters, and all notices shall be directed to
the attention of its General Counsel at J.C. Penney
Corporation, Inc., 6501 Legacy Drive, Plano, Texas 75024.
(b) Notice of Termination. Any notice of Summary Dismissal by
-----------------------
the Corporation or by the Participant for Constructive
Termination shall be communicated by a notice of termination
to the other party given in accordance with this Section
6.14. Such notice shall indicate the specific termination
provision in this Plan relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to
provide the basis for termination under the provision so
indicated, and shall specify the Employment Termination
date.
-23-
6.15 No Duty to Mitigate
-------------------
The Participant shall not be required to mitigate the amount of
any payment contemplated under this Plan, nor shall such payment
be reduced by any earnings that the Participant may receive from
any other source.
6.16 Employment Taxes
-----------------
All payments made pursuant to this Plan shall be subject to
withholding of applicable income and employment taxes.
6.17 Governing Law
-------------
Except to the extent that the Plan may be subject to the
provisions of ERISA, the Plan will be construed and enforced
according to the laws of the State of Texas, without giving
effect to the conflict of laws principles thereof. Except as
otherwise required by ERISA, every right of action by an
Associate with respect to the Plan shall be barred after the
expiration of three years from the date of termination of
employment or the date of receipt of the notice of denial of a
claim for benefits or eligibility, if earlier. In the event
ERISA's limitation on legal action does not apply, the laws of
the State of Texas with respect to the limitations of legal
actions shall apply and the cause of action must be brought no
later than four years after the date the action accrues.
-24-
APPENDIX I
Participating Employers
J.C. Penney Corporation, Inc.
J.C. Penney Company, Inc.
JCP Publications Corp.
JCP Overseas Services, Inc.
J.C. Penney Puerto Rico, Inc.
JCP Logistics L. P.
JCP Media L.P.
JCP Procurement L.P.
J.C. Penney Private Brands, Inc.
JCP Ecommerce L.P.
JCP Construction Services, Inc.
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