Exhibit 10.2
Form of
EXECUTIVE TERMINATION PAY AGREEMENT
This Executive Termination Pay Agreement (the "Agreement"), dated as of
_____________, 2006 is between J.C. Penney Corporation, Inc. ("Corporation") and
the undersigned member of the Corporation's Executive Board (the "Executive").
WHEREAS, in order to achieve its long-term objectives, the Corporation
recognizes that it is essential to attract and retain superior executives to
serve on its Executive Board;
WHEREAS, in order to induce the Executive [to continue] to serve in the
Executive's position with the Corporation, the Corporation desires to provide
the Executive with the right to receive certain benefits in the event the
Executive's employment is terminated, on the terms and subject to the conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, it is agreed as follows:
1. Termination Payments and Benefits.
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1.1 Death or Permanent Disability. In the event of the death or Permanent
Disability (as defined in Section 2) of the Executive, as soon as
practicable, the Corporation shall pay any (a) accrued and unpaid Base
Salary (as defined in Section 2) and vacation to which the Executive
was entitled as of the effective date of termination of the
Executive's employment with the Corporation (collectively, the
"Compensation Payments") and (b) the target annual incentive (at $1.00
per unit) under the Corporation's Management Incentive Compensation
Program (or any successor plan) for the fiscal year in which the date
of death or the determination of Permanent Disability occurs, prorated
for the actual period of service for that fiscal year (the "Prorated
Bonus"). The payment of any death benefits or disability benefits
under any employee benefit or compensation plan that is maintained by
the Corporation for the Executive's benefit shall be governed by the
terms of such plan.
1.2 Termination by the Corporation for Cause; Voluntary Termination by the
Executive. In the event of the termination of the Executive by the
Corporation for Cause (as defined in Section 2) or voluntary
termination by the Executive, the Corporation shall pay the
Compensation Payments to the Executive as soon as practicable or
within the period required by law, and the Executive shall be entitled
to no other compensation, except as otherwise due to the Executive
under applicable law applicable plan or program. The Executive shall
not be entitled to the payment of any bonuses for any portion of the
fiscal year in which such termination occurs.
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1.3 Involuntary Termination by the Corporation.
(a) Form and Amount. In the event of the termination of the Executive
by the Corporation without Cause ("Involuntary Termination"), the
Corporation shall pay the Compensation Payments to the Executive
as soon as practicable or within the period required by law. In
addition, conditioned upon receipt of the Executive's written
release of claims in such form as may be required by the
Corporation and the expiration of any applicable period during
which the Executive can rescind or revoke such release, subject
to Section 1.4, the Corporation shall pay or provide to the
Executive as severance pay within 14 days thereafter, a lump sum
equal to (i) the Prorated Bonus, (ii) the Executive's monthly
salary and the target annual incentive (at $1.00 per unit) under
the Corporation's Management Incentive Compensation Program for
the Severance Period (as defined in Section 2), (iii) the
Corporation's portion of the premium cost of Medical, Dental, and
Corporation Paid Life Insurance Plans coverage for the Severance
Period as provided in Section 1.3(b), (iv) Special Bonus Hours to
the extent provided under Section 1.3(c), and (v) $25,000 to pay
for outplacement services and financial counseling services. In
addition to the lump sum payments provided for herein, following
an Involuntary Termination, the Corporation shall also provide to
the Executive Accelerated Vesting as provided in Section 1.3(d).
(b) Health Care and Life Insurance. Following an Involuntary
Termination, the Executive will receive a lump sum payment equal
to the Corporation's premium cost for the Executive's active
Associate Medical, Dental and Life Insurance Plans coverage, if
any, as in effect on the day prior to the effective date of the
Executive's Involuntary Termination, in an amount based on the
entire Severance Period. Such amount shall be grossed-up for
applicable federal income taxes using the applicable federal
income tax rate that applied to the Executive for the taxable
year prior to the year in which the Involuntary Termination shall
have occurred.
(c) Special Bonus Hours. Following an Involuntary Termination, the
Corporation shall pay the Executive a lump sum payment for
Special Bonus Hours, if the Executive is a participant in the
Corporation's Paid Time Off Policy ("PTO Policy"). Such payment
shall be determined in accordance with the provisions of the PTO
Policy applicable to an involuntary termination resulting from a
reduction in force.
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(d) Accelerated Vesting. Effective on the Involuntary Termination
date, all Long Term Incentive stock awards and stock options in
the Executive's name shall be immediately vested.
1.4 Section 409A. To the extent applicable, it is intended that this
Agreement comply with the provisions of Section 409A of the Code (as
defined in Section 2). Any provision of this Agreement that would
cause this Agreement 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 the Executive hereby agrees not to withhold consent
unreasonably to any amendment requested by the Corporation for the
purpose of complying with Code Section 409A). Notwithstanding anything
to the contrary in this Section 1, no payment or benefit that
constitutes a "deferral of compensation" will be made or commence
under this Agreement until the latest of (a) the date specified in any
Release and Waiver Agreement signed by Executive in connection with
the Executive's "separation from service," (b) the Executive's
"separation from service," or (c) in the case of a "specified
employee," six months after "separation from service." "Deferral of
compensation," "separation from service" and "specified employee" have
the meanings ascribed to such phrases in Code Section 409A.
1.5 Forfeiture. Notwithstanding the foregoing provisions of this Section
1, in addition to any remedies to which the Corporation is entitled,
any right of the Executive to receive termination payments and
benefits under Section 1 shall be forfeited to the extent of any
amounts payable or benefits to be provided after a breach of any
covenant set forth in Section 3.
1.6 Non-Eligibility For Other Company Separation Pay Benefits. The
benefits provided for herein are intended to be in lieu of, and not in
addition to, other separation pay benefits to which the Executive
might be entitled, including those under the Corporation's Separation
Pay Plan, or any successor plan or program offered by the Corporation,
which the Executive hereby waives. If the Executive receives benefits
under the Corporation's Change in Control Plan (the "CIC Plan"), in
the event of Employment Termination (as defined in the CIC Plan), the
covenants set forth in Section 3 hereof shall automatically terminate
and, if the Executive shall receive all benefits to which the
Executive is entitled under the CIC Plan, the Executive waives all
benefits hereunder.
1.7 Corporation's Right of Offset. If the Executive is at any time
indebted to the Corporation, or otherwise obligated to pay money to
the Corporation for any reason, the Corporation, at its election, may
offset amounts otherwise payable to the Executive under this
Agreement, including, but without limitation, Base Salary and
incentive compensation payments,
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against any such indebtedness or amounts due from the Executive to the
Corporation, to the extent permitted by law.
1.8 Mitigation. In the event of the Involuntary Termination of the
Executive by the Corporation, the Executive shall not be required to
mitigate damages by seeking other employment or otherwise as a
condition to receiving termination payments or benefits under this
Agreement. No amounts earned by the Executive after the Executive's
Involuntary Termination by the Corporation, whether from
self-employment, as a common law employee, or otherwise, shall reduce
the amount of any payment or benefit under any provision of this
Agreement.
1.9 Resignations. Except to the extent requested by the Corporation, upon
any termination of the Executive's employment with the Corporation,
the Executive shall immediately resign all positions and directorships
with the Corporation and each of its subsidiaries and affiliates.
2. Certain Definitions. As used in this Agreement, the following terms
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shall have the following meanings:
2.1 "Agreement" shall mean this Executive Termination Pay Agreement.
2.2 "Base Salary" shall mean the Executive's annual base salary as in
effect at the effective date of termination of the Executive's
termination of employment with the Corporation.
2.3 "Cause" shall mean (a) an intentional act of fraud, embezzlement,
theft or any other material violation of law that occurs during
or in the course of Executive's employment with the Corporation;
(b) intentional damage to the Corporation's assets; (c)
intentional disclosure of the Corporation's confidential
information contrary to Corporation's policies; (d) material
breach of Executive's obligations under this Agreement; (e)
intentional engagement in any competitive activity which would
constitute a breach of Executive's duty of loyalty or of
Executive's obligations under this Agreement; (f) the willful and
continued failure to substantially perform Executive's duties for
the Corporation (other than as a result of incapacity due to
physical or mental illness); or (g) intentional breach of any of
Corporation's policies or willful conduct by Executive that is in
either case demonstrably and materially injurious to Corporation,
monetarily or otherwise; provided, however, that termination for
Cause based on clause (d) shall not be effective unless the
Executive shall have written notice from the Chief Executive
Officer of the Corporation (which notice shall include a
description of the reasons and circumstances giving rise to such
notice) not less than 30 days prior to the Executive's
termination and the Executive has failed after receipt of such
notice to satisfactorily discharge the Executive's duties. For
purposes hereof, an act, or a failure to act, shall not be deemed
"willful" or "intentional" unless it is done, or omitted
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to be done, by the Executive in bad faith or without a reasonable
belief that the Executive's action or omission was in the best
interest of Corporation. Failure to meet performance standards or
objectives, by itself, does not constitute "Cause." "Cause" also
includes any of the above grounds for dismissal regardless of
whether the Corporation learns of it before or after terminating
Executive's employment.
2.4 "Code" shall mean the Internal Revenue Code of 1986, as amended,
including proposed, temporary or final regulations or any other
guidance issued by the Secretary of the Treasury or the Internal
Revenue Service with respect thereto.
2.5 "CIC Plan" shall have the meaning ascribed thereto in Section
1.6.
2.6 "Compensation Payments" shall have the meaning ascribed thereto
in Section 1.1.
2.7 "Competing Business" shall have the meaning ascribed thereto in
Section 3.4.
2.8 "Corporation" shall mean J.C. Penney Corporation, Inc.
2.9 "Executive" shall mean the undersigned member of the
Corporation's Executive Board.
2.10 "Involuntary Termination" shall have the meaning ascribed thereto
in Section 1.3(a).
2.11 "Permanent Disability" means that you have a total and permanent
disability that lasts more than 180 days and have received a
Social Security Disability award.
2.12 "Proprietary Information" shall have the meaning ascribed thereto
in Section 3.1.
2.13 "Prorated Bonus" shall have the meaning ascribed thereto in
Section 1.1.
2.14 "PTO Policy" shall have the meaning ascribed thereto in Section
1.3.
2.15 "Severance Period" shall mean the following period, based on the
Executive's title at the time of termination of the Executive's
employment with the Corporation:
Title Severance Period
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Executive Vice Presidents and above 18 months
Senior Vice President 12 months
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3. Covenants and Representations of the Executive. The Executive
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hereby acknowledges that the Executive's duties to the
Corporation require access to and creation of the Corporation's
confidential or proprietary information and trade secrets
(collectively, the "Proprietary Information"). The Proprietary
Information has been and will continue to be developed by the
Corporation and its subsidiaries and affiliates at substantial
cost and constitutes valuable and unique property of the
Corporation. The Executive further acknowledges that due to the
nature of the Executive's position, the Executive will have
access to Proprietary Information affecting plans and operations
in every location in which the Corporation (and its subsidiaries
and affiliates) does business or plans to do business throughout
the world, and the Executive's decisions and recommendations on
behalf of the Corporation may affect its operations throughout
the world. Accordingly, the Executive acknowledges that the
foregoing makes it reasonably necessary for the protection of the
Corporation's business interests that the Executive agree to the
following covenants:
3.1 Confidentiality. The Executive hereby covenants and agrees
that the Executive shall not, without the prior written
consent of the Corporation, during the Executive's
employment with the Corporation or at any time thereafter
disclose to any person not employed by the Corporation, or
use in connection with engaging in competition with the
Corporation, any Proprietary Information of the Corporation.
(a) It is expressly understood and agreed that the
Corporation's Proprietary Information is all nonpublic
information relating to the Corporation's business,
including but not limited to information, plans and
strategies regarding suppliers, pricing, marketing,
customers, hiring and terminations, employee
performance and evaluations, internal reviews and
investigations, short term and long range plans,
acquisitions and divestitures, advertising, information
systems, sales objectives and performance, as well as
any other nonpublic information, the nondisclosure of
which may provide a competitive or economic advantage
to the Corporation. Proprietary Information shall not
be deemed to have become public for purposes of this
Agreement where it has been disclosed or made public by
or through anyone acting in violation of a contractual,
ethical, or legal responsibility to maintain its
confidentiality.
(b) In the event the Executive receives a subpoena, court
order or other summons that may require the Executive
to disclose Proprietary Information, on pain of civil
or criminal penalty, the Executive will promptly give
notice to the Corporation of the subpoena or summons
and provide the Corporation an opportunity to appear at
the Corporation's expense and challenge the disclosure
of its Proprietary Information, and the Executive shall
provide
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reasonable cooperation to the Corporation for purposes of
affording the Corporation the opportunity to prevent the
disclosure of the Corporation's Proprietary Information.
3.2 Nonsolicitation of Employees. The Executive hereby covenants and
agrees that during the Executive's employment with the
Corporation and for a period equal to the Severance Period
thereafter, the Executive shall not, without the prior written
consent of the Corporation, on the Executive's own behalf or on
the behalf of any person, firm or company, directly or
indirectly, attempt to influence, persuade or induce, or assist
any other person in so persuading or inducing, any of the
employees of the Corporation (or any of its subsidiaries or
affiliates) to give up his or her employment with the Corporation
(or any of its subsidiaries or affiliates), and the Executive
shall not directly or indirectly solicit or hire employees of the
Corporation (or any of its subsidiaries or affiliates) for
employment with any other employer.
3.3 Noninterference with Business Relations. The Executive hereby
covenants and agrees that during the Executive's employment with
the Corporation and for a period equal to the Severance Period
thereafter, the Executive shall not, without the prior written
consent of the Corporation, on the Executive's own behalf or on
the behalf of any person, firm or company, directly or
indirectly, attempt to influence, persuade or induce, or assist
any other person in so persuading or inducing, any person, firm
or company to cease doing business with, reduce its business
with, or decline to commence a business relationship with, the
Corporation (or any of its subsidiaries or affiliates).
3.4 Noncompetition.
(a) The Executive covenants that during the Executive's
employment with the Corporation and, in the event the
Executive will receive or has received the severance
benefits provided for in Section 1.3, for a period equal to
the Severance Period thereafter, the Executive will not
undertake work for a Competing Business, as defined in
Section 3.4(b). For purposes of this covenant, "undertake
work for" shall include performing services, whether paid or
unpaid, in any capacity, including as an officer, director,
owner, consultant, employee, agent or representative, where
such services involve the performance of similar duties or
oversight responsibilities as those performed by the
Executive at any time during the 12-month period preceding
the Executive's termination from the Corporation for any
reason. Notwithstanding the foregoing, the Executive may
waive the benefits under Section 1.3 by providing a written
notice to the Corporation's General Counsel and will then
not be subject to this Section 3.4.
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(b) As used in this Agreement, the term "Competing Business"
shall mean any business that, at the time of the
determination:
(i) operates (A) any retail department store, specialty
store, or general merchandise store; (B) any retail
catalog, telemarketing, or direct mail business; (C)
any Internet-based or other electronic department store
or general merchandise retailing business; (D) any
other retail business that sells goods, merchandise, or
services of the types sold by the Corporation,
including its divisions, affiliates, and licensees; or
(E) any business that provides buying office or
sourcing services to any business of the types referred
to in this Section 3.4(b)(i); and
(B) conducts any business of the types referred to in
Section 3.4(b)(i) in the United States, Commonwealth of
Puerto Rico, or another country in which the
Corporation, including its divisions, affiliates, and
licensees, conducts a similar business.
3.5 Injunctive Relief. If the Executive shall breach any of the
covenants contained in this Section 3, the Corporation shall have
no further obligation to make any payment to the Executive
pursuant to this Agreement and may recover from the Executive all
such damages as it may be entitled to at law or in equity. In
addition, the Executive acknowledges that any such breach is
likely to result in immediate and irreparable harm to the
Corporation for which money damages are likely to be inadequate.
Accordingly, the Executive consents to injunctive and other
appropriate equitable relief without the necessity of bond in
excess of $500.00 upon the institution of proceedings therefor by
the Corporation in order to protect the Corporation's rights
hereunder.
4. Employment-at-Will. Notwithstanding any provision in this Agreement to the
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contrary, the Executive hereby acknowledges and agrees that the Executive's
employment with the Corporation is for an unspecified duration and
constitutes "at-will" employment, and the Executive further acknowledges
and agrees that this employment relationship may be terminated at any time,
with or without Cause or for any or no Cause, at the option either of the
Corporation or the Executive.
5. Miscellaneous Provisions.
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5.1 Dispute Resolution. Any dispute between the parties under this
Agreement shall be resolved (except as provided below) through
informal arbitration by an arbitrator selected under the rules of the
American Arbitration Association for arbitration of employment
disputes (located in the city in which the Corporation's principal
executive offices are based)
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and the arbitration shall be conducted in that location under the
rules of said Association. Each party shall be entitled to present
evidence and argument to the arbitrator. The arbitrator shall have the
right only to interpret and apply the provisions of this Agreement and
may not change any of its provisions, except as expressly provided in
Section 3.4 and only in the event the Corporation has not brought an
action in a court of competent jurisdiction to enforce the covenants
in Section 3. The arbitrator shall permit reasonable pre-hearing
discovery of facts, to the extent necessary to establish a claim or a
defense to a claim, subject to supervision by the arbitrator. The
determination of the arbitrator shall be conclusive and binding upon
the parties and judgment upon the same may be entered in any court
having jurisdiction thereof. The arbitrator shall give written notice
to the parties stating the arbitrator's determination, and shall
furnish to each party a signed copy of such determination. The
expenses of arbitration shall be borne equally by the Corporation and
the Executive or as the arbitrator equitably determines consistent
with the application of state or federal law; provided, however, that
the Executive's share of such expenses shall not exceed the maximum
permitted by law. Any arbitration or action pursuant to this Section
5.1 shall be governed by and construed in accordance with the
substantive laws of the State of Texas and, where applicable, federal
law, without giving effect to the principles of conflict of laws of
such State. The mandatory arbitration provisions of this Section 5.1
shall supersede in their entirety the J.C. Penney Alternative, a
dispute resolution program generally applicable to employment
terminations.
Notwithstanding the foregoing, the Corporation shall not be required
to seek or participate in arbitration regarding any actual or
threatened breach of the Executive's covenants in Section 3, but may
pursue its remedies, including injunctive relief, for such breach in a
court of competent jurisdiction in the city in which the Corporation's
principal executive offices are based, or in the sole discretion of
the Corporation, in a court of competent jurisdiction where the
Executive has committed or is threatening to commit a breach of the
Executive's covenants, and no arbitrator may make any ruling
inconsistent with the findings or rulings of such court.
5.2 Binding on Successors; Assignment. This Agreement shall be binding
upon and inure to the benefit of the Executive, the Corporation and
each of their respective successors, assigns, personal and legal
representatives, executors, administrators, heirs, distributees,
devisees, and legatees, as applicable; provided however, that neither
this Agreement nor any rights or obligations hereunder shall be
assignable or otherwise subject to hypothecation by the Executive
(except by will or by operation of the laws of intestate succession)
or by the Corporation except that the Corporation may assign this
Agreement to any successor (whether by merger, purchase or otherwise)
to all or substantially all of the stock, assets or businesses of
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the Corporation, if such successor expressly agrees to assume the
obligations of the Corporation hereunder.
5.3 Governing Law. This Agreement shall be governed, construed,
interpreted, and enforced in accordance with the substantive law of
the State of Texas and federal law, without regard to conflicts of law
principles, except as expressly provided herein. In the event the
Corporation exercises its discretion under Section 5.1 to bring an
action to enforce the covenants contained in Section 3 in a court of
competent jurisdiction where the Executive has breached or threatened
to breach such covenants, and in no other event, the parties agree
that the court may apply the law of the jurisdiction in which such
action is pending in order to enforce the covenants to the fullest
extent permissible.
5.4 Severability. Any provision of this Agreement that is deemed invalid,
illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective, to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or
any other provisions of this Agreement invalid, illegal or
unenforceable in any other jurisdiction. If any covenant in Section 3
should be deemed invalid, illegal or unenforceable because its time,
geographical area, or restricted activity, is considered excessive,
such covenant shall be modified to the minimum extent necessary to
render the modified covenant valid, legal and enforceable.
5.5 Notices. For all purposes of this Agreement, all communications
required or permitted to be given hereunder shall be in writing and
shall be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof
confirmed), or five business days after having been mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, or three business days after having been sent by a nationally
recognized overnight courier service, addressed to the Corporation at
its principal executive office, c/o the Corporation's General Counsel,
and to the Executive at the Executive's principal residence, or to
such other address as any party may have furnished to the other in
writing and in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
5.6 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute one and the same Agreement.
5.7 Entire Agreement. The terms of this Agreement are intended by the
parties to be the final expression of their agreement with respect to
the Executive's employment by the Corporation and may not be
contradicted by evidence of any prior or contemporaneous agreement.
The parties
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further intend that this Agreement shall constitute the complete and
exclusive statement of its terms and that no extrinsic evidence
whatsoever may be introduced in any judicial, administrative, or other
legal proceedings to vary the terms of this Agreement.
5.8 Amendments; Waivers. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, approved by the
Corporation and signed by the Executive and the Corporation. Failure
on the part of either party to complain of any action or omission,
breach or default on the part of the other party, no matter how long
the same may continue, shall never be deemed to be a waiver of any
rights or remedies hereunder, at law or in equity. The Executive or
the Corporation may waive compliance by the other party with any
provision of this Agreement that such other party was or is obligated
to comply with or perform only through an executed writing; provided,
however, that such waiver shall not operate as a waiver of, or
estoppel with respect to, any other or subsequent failure.
5.9 No Inconsistent Actions. The parties hereto shall not voluntarily
undertake or fail to undertake any action or course of action that is
inconsistent with the provisions or essential intent of this
Agreement. Furthermore, it is the intent of the parties hereto to act
in a fair and reasonable manner with respect to the interpretation and
application of the provisions of this Agreement.
5.10 Headings and Section References. The headings used in this Agreement
are intended for convenience or reference only and shall not in any
manner amplify, limit, modify or otherwise be used in the construction
or interpretation of any provision of this Agreement. All section
references are to sections of this Agreement, unless otherwise noted.
5.11 Beneficiaries. The Executive shall be entitled to select (and change,
to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder
following the Executive's death, and may change such election, in
either case by giving the Corporation written notice thereof in
accordance with Section 5.5. In the event of the Executive's death or
a judicial determination of the Executive's incompetence, reference in
this Agreement to the "Executive" shall be deemed, where appropriate,
to be the Executive's beneficiary, estate or other legal
representative.
5.12 Withholding. The Corporation shall be entitled to withhold from
payment any amount of withholding required by law.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
J. C. PENNEY CORPORATION, INC.
By:
Name: ----------------------------
Title: ----------------------------
EXECUTIVE
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