Exhibit 10.1

TRANSITION SERVICES AGREEMENT

This transition services agreement (this "Agreement") between J. C. Penney
Company, Inc., a Delaware corporation, including its subsidiaries and affiliates
(“jcpenney”), and Myron E. Ullman III (“You, or “Your”) will set forth our
mutual understanding as to the rights and obligations of You and jcpenney in
connection with Your retirement from jcpenney, effective as of January 27, 2012,
or an earlier date determined by the Board of Directors of the Company (the
“Board”).
 
W I T N E S S E T H:

WHEREAS, You currently serve as Chairman of the Board (“Chairman”) and Chief
Executive Officer of jcpenney (“CEO”);

WHEREAS, You will continue to serve as CEO with full responsibility and
accountability for the operations of jcpenney until November 1, 2011, or an
earlier date determined by the Board, when, on such date, Mr. Ronald B. Johnson
shall become CEO with full responsibility and accountability for the operations
of jcpenney;

WHEREAS, on and subsequent to the date that CEO responsibilities are transferred
to Mr. Johnson, Your duties and responsibilities as CEO shall cease and no
executive of jcpenney shall report to You, other than at Mr. Johnson’s request;

WHEREAS, subsequent to the date that CEO responsibilities are transferred to Mr.
Johnson, You shall continue as an employee of jcpenney and Chairman with the
title “Executive Chairman” until Your Retirement Date;

WHEREAS, during the period beginning on the date Mr. Johnson assumes
responsibilities as CEO and ending on Your Retirement Date (the “Transition
Period”), You shall provide Your full Cooperation in connection with the
transition of CEO duties and responsibilities to Mr. Johnson;

WHEREAS, effective as of Your Retirement Date You will cease to serve as
Executive Chairman, at which time Your employment with jcpenney and its
affiliates will cease; and

WHEREAS, in connection with Your (i) commitment, and significant contribution
and participation in securing Mr. Johnson as the incoming CEO; (ii) full
Cooperation with the transition of CEO duties and responsibilities to Mr.
Johnson during the Transition Period; and (iii) agreement to abide by the
Covenants and Representations contained in Section 4 of this Agreement, jcpenney
has agreed to provide, in addition to Your Annual Base Salary and Incentive
Compensation under the J. C. Penney Corporation, Inc. Management Incentive
Compensation Program (the “Program”) described in Section 2 of this Agreement,
the Transition Services Compensation described in Section 3 of this Agreement.
 
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NOW, THEREFORE, in consideration of the mutual agreements contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:

1.           Definitions
 
As used herein, the following terms shall have the following respective meanings
unless the context clearly indicates otherwise:
 
“Annual Base Salary” shall mean Your annual base salary for the 2011 fiscal
year, which is equal to $1.5 million ($62,500 paid semi-monthly).

“Beneficiary” shall mean Your surviving spouse or if You have no surviving
spouse Your estate.

“Cause” shall mean:

 
(a)
an intentional act of fraud, embezzlement, theft or any other material violation
of law by You that occurs during or in the course of Your employment with
jcpenney;

 
(b)
Your intentional damage of jcpenney’s assets;

 
(c)
Your intentional disclosure of jcpenney’s confidential information contrary to
jcpenney’s policies;

 
(d)
a material breach of Your obligations under this Agreement;

 
(e)
Your intentional engagement in any competitive activity that would constitute a
breach of Your duty of loyalty or of Your obligations under this Agreement;

 
(f)
Your willful and continued failure to substantially perform Your duties for
jcpenney (other than as a result of incapacity due to physical or mental
illness) under this Agreement; or

 
(g)
Your intentional breach of any of jcpenney’s policies or willful conduct by You
that is in either case demonstrably and materially injurious to jcpenney,
monetarily or otherwise;

provided, however, that termination for Cause based on clause (d) shall not be
effective unless You shall have written notice from the Board (which notice
shall include a description of the reasons and circumstances giving rise to such
notice) not less than 30 days prior to Your termination and You fail after
receipt of such notice to satisfactorily discharge Your duties.  For purposes
hereof, an act, or a failure to act, shall not be deemed “willful” or
“intentional” unless it is done, or omitted to be done, by You in bad faith or
without a reasonable belief that Your actions or omissions were in the best
interest of jcpenney.  Failure to meet performance standards or objectives, by
itself, does not
 
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constitute “Cause.”  “Cause” also includes any of the above grounds for
dismissal regardless of whether jcpenney learns of it before or after
terminating Your employment.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Cooperation” shall mean Your assistance and support in transitioning the
CEO  responsibilities to Mr. Johnson. For purposes of this Agreement,
Cooperation shall include, but not be limited to, Your:

 
(a)
providing public support for Mr. Johnson and his decisions during the transition
period, subject to Your fiduciary obligations to jcpenney;

 
(b)
being available to consult with Mr. Johnson on an as practicable and as needed
basis regarding jcpenney’s people and operations,

 
(c)
providing access to all relevant information necessary for a smooth transition
of the duties and responsibilities of the CEO, and

 
(d)
using Your best efforts to retain jcpenney associates that You and Mr. Johnson
mutually identify as essential to jcpenney’s operations and future.

“Equity Plan” shall mean the J. C. Penney Company, Inc. 2005 Equity Compensation
Plan.

“Incentive Compensation” shall mean Your target incentive compensation payable
under the Program for the 2011 fiscal year, which is equal to $1.875 million.

“LTIP” shall mean the J. C. Penney Company, Inc. 2009 Long-Term Incentive Plan.

“Retirement Date” shall mean the date of Your termination of employment with
jcpenney within the meaning of section 409A of the Code and applicable Treasury
regulations thereunder and which, for purposes of this Agreement, shall be
January 27, 2012, or an earlier date determined by the Board. For purposes of
this definition, “jcpenny” shall include all corporations, trades, and
businesses, the employees of which, together with employees of J. C. Penney
Company, Inc., are required by the first sentence of subsection (b), by
subsection (c), by subsection (m), or by subsection (o) of Code section 414 to
be treated as if they were employed by a single employer.  For purposes of
determining whether a termination of employment has occurred, the “controlled
group” will be determined under Code sections 414(b) and 414(c) and Treasury
Regulation section 1.414(c)-2 by using the language “at least 50 percent”
instead of “at least 80 percent” each place it appears in section 1563(a)(1),
(2), and (3) of the Code.

2.           Regular Compensation and Benefits

2.1   Annual Base Salary.  Your Annual Base Salary will continue to be paid
pursuant to jcpenney’s standard payroll practices until Your Retirement Date. On
Your Retirement Date jcpenney shall pay to You, in a lump sum, any portion of
Your Annual Base Salary that is earned and unpaid as of that date and, if Your
Retirement Date is determined by the
 
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Board to be a date before January 27, 2012, any Annual Base Salary that You
would have earned had You remained employed by jcpenney through January 27,
2012.

2.2           Incentive Compensation.  If You remain employed until Your
Retirement Date, jcpenney shall pay Your Incentive Compensation to You, in a
lump sum, on January 27, 2012. In the event of Your death prior to January 27,
2012, Your Incentive Compensation shall be paid in a lump sum to Your
Beneficiary on January 27, 2012.  You shall forfeit Your Incentive Compensation
if You voluntarily terminate employment for any reason prior to January 27,
2012, or You are terminated for Cause prior to January 27, 2012, or resign in
lieu thereof.

2.3           Other Compensation and Benefits.

 
(a)
Unused My Time Off (MTO).  Following Your Retirement Date, You shall receive a
lump sum cash payment in respect of any accrued and unused MTO You may be
entitled to in accordance with jcpenney's applicable MTO policy.

 
(b)
Employee Benefits.  Except as otherwise provided in this Agreement, You shall be
entitled to continued participation in jcpenney’s employee benefit plans to the
extent eligible, including, but not necessarily limited to, the Executive
Physical and Financial Services Counseling Programs and any other executive
benefit program in which You are currently participating, the J. C. Penney
Corporation, Inc. Pension Plan, J. C. Penney Corporation, Inc. Savings,
Profit-Sharing and Stock Ownership Plan, J. C. Penney Corporation, Inc. Benefit
Restoration Plan, and the J. C. Penney Corporation, Inc. Mirror Savings Plan,
and will have all of the continuation, conversion, or portability rights under
any employee welfare benefit plan sponsored by jcpenney in which You participate
that include such rights.

 
(c)
Business Expense Reimbursement.  jcpenney shall reimburse You for all reasonable
travel, entertainment or other expenses incurred by You prior to Your Retirement
Date, in accordance with jcpenney’s expense reimbursement policy.

3.           Transition Services Compensation.  You are entitled to the
transition services compensation provided for in this Section 3 (the “Transition
Services Compensation”).  It is intended and understood that the services You
perform during the Transition Period shall be more than 20 percent of the
average level of services performed by you over the immediately preceding 36
months while You were employed as Chairman and CEO. Payment of the Transition
Services Compensation provided for in this Section 3 is contingent, along with
Your agreement to abide by the Covenants and Representations contained in
Section 4, on Your full Cooperation with the transition of CEO duties and
responsibilities to Mr. Johnson during the Transition Period. If, in the
judgment of the Board, You do not provide Your full Cooperation in connection
with transition of CEO duties and responsibilities to Mr. Johnson and on written
notice from the Board (which notice shall include a description of the reasons
and circumstances giving rise to such notice) You do not within 30 days remedy,
in a method and to the extent satisfactory to the Board, the situation
identified by the Board in its written notice, the portion of the
 
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Transition Services Compensation that relates to Your full Cooperation with the
transition of CEO duties and responsibilities to Mr. Johnson during the
Transition Period shall be forfeited.

3.1           Time-Based Restricted Stock Unit Award.  You shall be granted a
special time-based restricted stock unit (TBRSU) award under the LTIP with a
value equal to $5 million on the date of grant.  The award shall be made in
November 2011 pursuant to the Policy Statement on Equity Award Grant Practice.
If You remain employed by jcpenney until Your Retirement Date the grant will
fully vest on the date immediately prior to Your Retirement Date, and will be
distributable in shares of common stock, par value $.50 per share, of the
Company (“Common Stock”) to You on Your Retirement Date.  If You die prior to
Your Retirement Date the TBRSU award shall fully vest on the date of Your death
and shall be distributable in shares of Common Stock to Your Beneficiary on
January 27, 2012.  You shall forfeit the TBRSU award if You voluntarily
terminate employment for any reason prior to January 27, 2012, or You are
terminated for Cause prior to January 27, 2012, or resign in lieu thereof.

3.2           Lump Sum Cash Payment.  You shall be entitled to receive a special
one time, lump sum payment totaling $10.1 million, subject to any applicable
withholding. If You remain employed by jcpenney until Your Retirement Date, such
payment shall be made to You in a lump sum in cash on January 27, 2012. If You
die prior to Your Retirement Date, the lump sum shall  be paid to Your
Beneficiary on January 27, 2012.  The lump sum payment shall be forfeited if You
voluntarily terminate employment for any reason prior to January 27, 2012, or
You are terminated for Cause prior to January 27, 2012, or resign in lieu
thereof.

3.3           Acceleration of Vesting of Unvested TBRSU Awards.  If You remain
employed by jcpenney until Your Retirement Date all outstanding TBRSU awards
granted under the Equity Plan and the LTIP that are unvested and would, by the
terms of the applicable TBRSU grant notice, be forfeited as of Your Retirement
Date shall fully vest on January 27, 2012 and be distributable to You in shares
of Common Stock as provided in the terms of the applicable TBRSU grant notice.

3.4           Acceleration of Vesting of Performance-Based Restricted Stock Unit
Awards.  If You remain employed by jcpenney until Your Retirement Date:

 
(a)
all shares of Common Stock under an outstanding performance-based restricted
stock unit (PBRSU) award that are earned, because the applicable performance
period has passed and the applicable number of shares of Common Stock under the
award has been established by the award’s terms (which shares may or may not
have been earned at the target amount), but which shares are unvested and would,
by the terms of the applicable PBRSU grant notice, be forfeited as of Your
Retirement Date shall fully vest on January 27, 2012, and be distributable to
You in shares of Common Stock as provided in the terms of the applicable PBRSU
grant notice; and

 
(b)
all outstanding PBRSU awards that are unearned and unvested and would, by the
terms of the applicable PBRSU grant notice, be forfeited as of Your

 
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Retirement Date shall fully vest on January 27, 2012, at the target amount and
be distributable to You in shares of Common Stock as provided in the terms of
the applicable PBRSU grant notice.

 
3.5           Cash in Lieu of Stock Options. If You remain employed by jcpenney
until Your Retirement Date You shall receive a lump sum payment as soon as
practicable after January 27, 2012 but no later than February 3, 2012, equal to
the fair market value of all outstanding stock options granted under the Equity
Plan and the LTIP that are unvested and would, by the terms of the applicable
stock option grant notice, be forfeited as of Your Retirement Date.  The fair
market value of each stock option subject to forfeiture shall be determined
using the Black-Scholes method of valuation based on the closing price of the
Common Stock on Your Retirement Date.

4.           Covenants and Representations.  You hereby acknowledge that Your
duties with jcpenney involved and continue to involve access to and creation of
jcpenney’s confidential or proprietary information and trade secrets
(collectively, the “Proprietary Information”).  The Proprietary Information has
been and will continue to be developed by jcpenney at substantial cost and
constitutes valuable and unique property of jcpenney.  You further acknowledge
that due to the nature of Your position, You had and continue to have access to
Proprietary Information affecting plans and operations in every location in
which jcpenney does business or plans to do business throughout the world, and
Your decisions and recommendations on behalf of jcpenney affect its operations
throughout the world.  Accordingly, You acknowledge that the foregoing makes it
reasonably necessary for jcpenney to protect its business interests.  In that
regard and to that end, You and jcpenney have agreed that a portion of the
Transition Services Compensation is to compensate You for Your agreement to the
following covenants.

4.1           Confidentiality.  You covenant and agree that You will not,
without the prior written consent of jcpenney, during the Transition Period, or
at any time after Your Retirement Date disclose to any person not employed by
jcpenney, or use in connection with engaging in competition with jcpenney, any
Proprietary Information of jcpenney. For this purpose “Proprietary Information”
includes all nonpublic information relating to jcpenney’s business, including
but not limited to information, plans and strategies regarding suppliers,
pricing, marketing, customers, hirings 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
jcpenney. Proprietary Information shall not be deemed to have become public
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.
 
4.2           Nonsolicitation of Employees.  You covenant and agree that during
the Transition Period and for a period of 18 months following Your Retirement
Date, that You will not, without the prior written consent of jcpenney, on Your
own behalf or on 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 jcpenney (or any of its
subsidiaries or affiliates) to give up his or her employment with jcpenney (or
any
 
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of its subsidiaries or affiliates), and that You will not directly or indirectly
solicit or hire employees of jcpenney (or any of its subsidiaries or affiliates)
for employment with any other employer.
 
4.3           Noninterference with Business Relations.  You covenant and agree
that during the Transition Period and for a period of 18 months following Your
Retirement Date, that You will not, without the prior written consent of
jcpenney, on Your own behalf or on 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, jcpenney (or any of its subsidiaries or affiliates).
 
4.4           Noncompetition.  You covenant that during the Transition Period
and for a period of 18 months following Your Retirement Date, that You will not
undertake work for a Competing Business.  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 You at any time
during the 12-month period preceding Your Retirement Date.  The term “Competing
Business” shall mean any business that, at the time of the determination:
 
 
(a) 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 jcpenney, 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 above; and

 
 
(b) conducts any business of the types referred to in (a) in the United States,
Commonwealth of Puerto Rico, or another country in which jcpenney, including its
divisions, affiliates, and licensees, conducts a similar business.

 
Notwithstanding the forgoing, subject to the express written consent of
jcpenney, which consent shall not be unreasonably withheld, You may serve on the
board of directors of a Competing Business.  This covenant will not apply solely
with respect to Your services as a member of the board of directors for any
business in which You were active as a director as of November 1, 2011.
 
4.5           Injunctive Relief.  If You breach any of the covenants contained
in this Section 4, jcpenney shall have no further obligation to pay You that
portion of the Transition Services Compensation intended to compensate You for
the covenants contained in this Section 4, or if such amount has already been
paid to You jcpenney shall have the right to seek repayment of a prorated
portion of Transition Services Compensation intended to compensate You for the
covenants contained in this Section 4.  Such prorated portion shall be
determined by multiplying the portion of the Transition Services Compensation
intended to compensate You for the covenants contained in this Section 4 by a
fraction the numerator of which is the total number of days remaining in the
18-month covenant
 
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period, and the denominator of which is the total number of days in such
covenant period.  You acknowledge that any such breach is likely to result in
immediate and irreparable harm to jcpenney for which money damages are likely to
be inadequate.  Accordingly, You consent to injunctive and other appropriate
equitable relief without the necessity of bond in excess of $500.00 upon the
institution of proceedings therefor by jcpenney in order to protect jcpenney’s
rights hereunder.
 
5.            General Provisions.
 
5.1           Supersedes Other Agreements.  As provided herein, the Incentive
Compensation Payment described in Section 2.2 shall be in lieu of any incentive
compensation payment you might otherwise be entitled to under the Program. The
Transition Services Compensation described in Sections 3.3, 3.4, and 3.5 shall
be in lieu of any corresponding rights and benefits You may have with respect to
any such awards contemplated by those sections under the Equity Plan and the
LTIP.  In addition, you agree to waive all rights you may have to any payments
under the J. C. Penney Corporation, Inc. Change in Control Plan as amended and
restated March 28, 2008. Nothing in this Agreement shall be construed or deemed
to supersede or amend any of Your rights to indemnification and defence under
any agreement, policy, bylaw or other document providing for the indemnification
of jcpenney’s officers and directors.
 
5.2           Severability.  The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.  If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with law.
 
5.3           Dispute Resolution.  All disputes arising under, related to, or in
connection with this Agreement shall be settled by expedited arbitration
conducted before a panel of three arbitrators sitting in Plano, Collin
County,  Texas, in accordance with the rules of the American Arbitration
Association then in effect.  The decision of the arbitrators in that proceeding
shall be binding on jcpenney and You.  Judgment may be entered on the award of
the arbitrators in any court having jurisdiction.  The arbitrators, in their
discretion, may award the costs of such arbitration, including reasonable legal
and professional fees, to a prevailing party in such arbitration.
 
5.4           Successors and Assigns.  This Agreement is personal to You and,
without the prior written consent of jcpenney, shall not be assignable by You
otherwise than by will or the laws of descent and distribution.  This Agreement
shall inure to the benefit of and be enforceable by Your legal
representatives.  This Agreement shall inure to the benefit of and be binding
upon jcpenney and its successors and assigns.
 
5.5           Governing Law.  This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Texas, without reference to
principles of conflict of laws.
 
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5.6           Withholding.  Notwithstanding any other provision of this
Agreement, jcpenney may withhold from amounts payable under this Agreement all
federal, state, local and foreign taxes that are required to be withheld by
applicable laws or regulations.
 
5.7           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 jcpenney
at its principal executive office, c/o jcpenney’s General Counsel, and to You at
Your 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.
 
5.8           Entire Agreement.  The terms of this Agreement are intended by the
parties to be the final expression of their agreement with respect to Your
employment by jcpenney and may not be contradicted by evidence of any prior or
contemporaneous agreement.  The parties 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.
 
5.9           Amendments; Waivers.  This Agreement may not be modified, amended,
or terminated except by an instrument in writing, approved by jcpenney and
signed by You and jcpenney. 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.  You or jcpenney 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.
 
5.10          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.
 
5.11          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.
 
To indicate Your understanding and acceptance of the terms set forth in this
Agreement, please sign and date this Agreement in the space provided below.
 
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[This page intentionally left blank.  Signature page follows.]
 
 
 
 
 
 
 
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Sincerely,

J.C. Penney Company, Inc.

By:      
 /s/ Burl Osborne                                                                             
August 22, 2011
Burl
Osborne                                                                                     Date
Chairman Human Resources
And Compensation Committee of the
Board of Directors

ACCEPTED AND AGREED:

Addressee

/s/ Myron E. Ullman
III                                                                    August
22, 2011
Myron E. Ullman
III                                                                            Date

 
 
 
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