Exhibit






Exhibit 10.12.2




2018-2020 Performance-Based Restricted Stock Units
Terms and Conditions
Amended and Restated 2009 Omnibus Incentive Compensation Plan




1.    Grant of Performance-Based Restricted Stock Units.  Macy’s, Inc. (the “Company”) has granted to Grantee as of the grant date (“Date of Grant”) that “Target” number Performance-Based Restricted Stock Units (“Performance Units”) as shown on the Performance-Based Restricted Stock Unit Award Letter (“Award Letter”) to which these Terms and Conditions apply, subject to the terms, conditions and restrictions set forth herein and in the Macy’s, Inc. Amended and Restated 2009 Omnibus Incentive Compensation Plan (the “Plan”). These Terms and Conditions and the Award Letter together constitute an Evidence of Award, as defined in the Plan.  Subject to Section 14 of the Plan, each Performance Unit represents the right to receive one share of common stock of the Company (“Common Stock”). 


2.    Performance Period.  The Performance Period shall commence on February 4, 2018 (the “Commencement Date”) and, except as otherwise provided in these Terms and Conditions, will expire in full on January 30, 2021 (the “Performance Period”).  For the sake of clarity, if a Change in Control occurs, the Performance Period will end on the date of a Change in Control and the Performance Units will convert to time-based restricted stock units in accordance with Section 4(c) below.


3.    Normal Vesting of Performance Units. 
(a)  The actual number of Performance Units that may be earned and become nonforfeitable is based on achieving the targeted level of the Company’s average Comparable Sales Growth (“Comparable Sales Growth”), average Return on Invested Capital (“ROIC”) and relative Total Shareholder Return (“TSR”) goals for the Performance Period (the “Performance Goals”), weighted 33.3%, 33.3% and 33.4% respectively, as set forth in the following schedules.  


COMPARABLE SALES GROWTH SCHEDULE


	
						
	 
	 
	Comparable Sales Growth (33.3%)

	Performance Level*
	 
	3-year Average
	Vesting Percentage

	Outstanding
	 
	≥3.0%
	

	%
	150%

	Target
	 
	1.9
	%
	%
	100%

	Threshold
	 
	0.0
	%
	%
	50%

	Below Threshold
	 
	<0.0%
	

	 
	0%




* Straight-line interpolation will apply to performance levels between the ones shown above.


(i)  “Comparable Sales Growth” is defined as the period-to-period percentage change in net owned plus licensed sales from stores in operation throughout the year presented and the immediately preceding year and all online sales, as reported in the Company’s financial statements included in its Form 10-K.  Stores impacted by a natural disaster or that undergo significant expansion or shrinkage remain in the comparable sales calculation unless the store is closed for a significant period of time.  


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Comparable Sales will be measured on a three-year average basis (i.e., the average of Fiscal 2018, Fiscal 2019 and Fiscal 2020 annual Comparable Sales Growth).
ROIC SCHEDULE


	
					
	 
	 
	ROIC (33.3%)

	Performance Level*
	 
	3-year Average
	Vesting Percentage

	Outstanding
	 
	>18.6%
	 
	150%

	Target
	 
	18.2%
	 
	100%

	Threshold
	 
	16.6%
	 
	50%

	Below Threshold
	 
	<16.6%
	 
	0%




* Straight-line interpolation will apply to performance levels between the ones shown above.


(ii)  “Return on Invested Capital” is defined as EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization, which is equal to the sum of operating income and depreciation and amortization as reported in the Company’s financial statements included in its Form 10-K, adjusted as provided in Section 1(b) below) divided by Total Average Gross Investment. EBITDAR is equal to the sum of EBITDA plus Net Rent Expense. Net Rent Expense represents rent expense as reported in the Company’s financial statements included in its Form 10-K less the deferred rent amortization related to contributions received from landlords. Total Average Gross Investment is equal to the sum of Gross Property, Plant and Equipment (PPE) plus Capitalized Value of Non-Capitalized Leases, Working Capital – which includes Receivables, Merchandise Inventories, Prepaid Expenses and Other Current Assets – offset by Merchandise Accounts Payable and Accounts Payable and Accrued Liabilities, and Other Assets, each as reported in the Company’s financial statements in the applicable Form 10-K or Form 10-Q. Gross PPE will be determined using a two-point average (i.e., beginning and end of year). Capitalized Value of Non-Capitalized Leases will be calculated as 8x Net Rent Expense. Working Capital components and Other Assets will be determined using a four-point (i.e., quarterly) average. ROIC will be measured on a three-year average basis (i.e., the average of Fiscal 2018, Fiscal 2019 and Fiscal 2020 annual ROIC).


RELATIVE TSR SCHEDULE


	
				
	 
	 
	Relative TSR (33.4%)

	Performance Level*
	 
	3-year TSR vs. Peer Group**
	Vesting Percentage

	Outstanding
	 
	≥75%
	150%

	Target
	 
	50%
	100%

	Threshold
	 
	35%
	50%

	Below Threshold
	 
	<35%
	0%




* Straight-line interpolation will apply to performance levels between the ones shown above.
** Peer group companies: Bed, Bath & Beyond, Dillard’s, Gap, J.C. Penney, Kohl’s, L Brands, Nordstrom, Ross Stores, Sears Holdings, Target, TJX Companies, and Walmart.


(i)  TSR will be calculated on a compound annualized basis over the three-year period. 


(ii)  TSR is defined as the change in the value of the Common Stock over the three-year performance period, taking into account both stock price appreciation and the reinvestment of dividends. The beginning and ending stock prices will be based on a 20-day average stock price.


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(iii)  Dividends will be reinvested at the closing price on the last day of the month after the “ex dividend” date. All cash special dividends shall be treated like regular dividends. All spin-offs or share-based dividends shall be assumed to be sold on the issue date and reinvested in the issuing company that same date


(iv)  Relative TSR is the percentile rank of the Company’s TSR compared to the TSR of the peer group over the Performance Period. If any of the companies in the peer group are no longer publicly traded at the end of the Performance Period due to bankruptcy, they will continue to be included in the relative TSR calculation by force ranking them at the bottom of the array. If any companies are no longer publicly traded due to acquisition, they will be excluded from the calculation


(b)    For purposes of determining whether the performance goals for Comparable Sales and ROIC have been met, the calculation of the Company’s actual Comparable Sales and ROIC will be adjusted to exclude the following, if they were not included in the Company’s business plan:


		
	(i)
	asset impairment charges (as determined under GAAP);


		
	(ii)
	income, gains, expenses, losses, cash inflows and cash outflows resulting from material restructuring charges (as reported in the Company’s quarterly earnings releases and filings with the Securities and Exchange Commission (SEC) and reviewed by the Company’s independent auditors); 


		
	(iii)
	income, gains, expenses, losses, cash inflows and cash outflows attributable to any division, business segment, material business operation, subsidiary, affiliate or material group of stores that are acquired;  


		
	(iv)
	income, gains, expenses, losses, cash inflows and cash outflows from the sale or disposition of any division, business segment, material business operation, subsidiary, affiliate or material group of stores;


		
	(v)
	income, gains, expenses, losses, cash inflows and cash outflows resulting from unusual or infrequently occurring items [as reported in the Company’s quarterly earnings releases and filings with the SEC and reviewed by the Company’s independent auditors];


		
	(vi)
	store closing costs (as reported in the Company’s quarterly earnings releases and filings with the SEC and reviewed by the Company’s independent auditors);  


		
	(vii)
	material tax assessments for which a reserve or liability was not previously recorded in the Company’s financial statements; 


		
	(viii)
	unplanned tax law changes which have a material impact on the company; and


		
	(ix)
	changes in accounting principles (as determined under GAAP).




The adjustments for each one of the items listed above will only be made if the item was not included or was materially different than expected in the preparation of the Company’s 2018-2020 Business Plans.  No adjustment for an item listed above will be made if the item was included and was appropriately taken into account in the preparation of the Company’s 2018-2020 Business Plan.  For example, if the Company’s Business Plan was prepared based on the Company acquiring a business segment and the acquisition of the business segment occurs as planned, no adjustment will be made to exclude the income, gains, expenses, losses, cash inflows and cash outflows attributable to that business segment.


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To the extent a disposition, financing or material contract change was not correctly taken into account in the preparation of the Company’s fiscal 2018-2020 Business Plans determined as of March 23, 2018, including the failure to take a disposition, financing or material contract change into account at all or the fact that all or a portion of the disposition, financing or material contract change occurred earlier or later than planned, or did not occur at all, adjustments shall be made to the planned Sales and ROIC in order to accurately take the actual disposition, financing or material contract change into account.  For this purpose, (i) a “disposition” means a substantial divestiture of assets or a disposition of a division, segment, business operation, subsidiary, affiliate or store, (ii) a “financing” means a major financing or refinancing and (iii) a “material contract change” means the cancellation, amendment, or renegotiation of a pre-existing contract that will have a material impact on the Company’s financial results.  For example, if a disposition was not taken into account in the preparation of the Company’s fiscal 2018-2020 Business Plans, determined as of March 23, 2018, the Company’s planned Sales and ROIC shall be adjusted to exclude the planned Sales and ROIC attributable to the corresponding assets or division, segment, business operation, subsidiary, affiliate or store from the date of disposition until the end of the Company’s fiscal year.  
(c)    In all cases the Compensation Committee shall certify whether the Company has achieved the specified levels of average Comparable Sales Growth, average ROIC and relative TSR as soon as administratively feasible following the end of the Performance Period.  For purposes of these Terms and Conditions and the Award Letter, “Performance Vesting Date” means the later of (1) the last day of the Performance Period and (2) the date on which the Compensation Committee certifies the levels of achievement of the applicable Performance Goals.


(d)    From time to time, the Company may adopt accounting standards, consistent with GAAP, which may impact the performance measures used in the Macy’s, Inc. Senior Executive Compensation Plan. If this occurs and the adoption of such standards was not included in the financial plans used to develop the performance ranges (outstanding, target, threshold and below threshold) for each measure, then actual performance results shall be adjusted to exclude the impact of the adoption of the accounting standards. 


4.      Forfeiture of Performance Units. 


(a)  Termination of Employment.  Except as the Board may determine on a case-by-case basis or as provided below, all unvested Performance Units shall be forfeited if Grantee ceases to be continuously employed by the Company at any time prior to the end of the Performance Period. The continuous employment of Grantee shall not be deemed to have been interrupted by reason of the transfer of Grantee’s employment among the Company and its subsidiaries, divisions or affiliates or a leave of absence approved by the Company. In the event of a termination for Cause (as defined in Section 17), all unvested Performance Units shall be immediately forfeited. 


(b)  Death, Disability, Retirement or Involuntary Termination.  Except as the Board may determine on a case-by-case basis: 


(i)  If the Performance Units have not been converted pursuant to Section 4(c)(i) or (ii) below, in the event Grantee retires at least six months after the Date of Grant, on or after age 62 with at least five years of vesting service (“Retirement”), and complies with the provisions of Section 4(d) below, then on the Performance Vesting Date, a pro rata portion of the percentage of Performance Units that become vested as determined under Section 3 above will vest (i.e., prorated from the Commencement Date through the date of Retirement based on the number of 


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completed months of service during the Performance Period divided by 36). If the Performance Units have been converted pursuant to Section 4(c)(i) or (ii) below on or before the last day of the Performance Period and Grantee is a Retirement Eligible Grantee on or before the last day of the Performance Period, 100% of the Performance Units as so converted will vest on the latter of the Change in Control and the date Grantee becomes a Retirement-Eligible Grantee; 


(ii)  If the Performance Units have not been converted pursuant to Section 4(c)(i) or (ii) below, in the event Grantee dies or becomes Disabled during the Performance Period, on the Performance Vesting Date, a pro rata portion of the percentage of Performance Units that become vested as determined under Section 3 will vest (i.e., prorated from the Commencement Date through the date of death or Disability based on the number of completed months of service during the Performance Period divided by 36).  If the Performance Units have been converted pursuant to Section 4(c)(i) or (ii) below and Grantee dies or becomes Disabled on or before the last day of the Performance Period, 100% of the Performance Units as so converted will vest on the latter of the Change in Control and the date of death or Disability; and;
(iii)  If (A) the Performance Units have not been converted pursuant to Section 4(c)(i) or (ii) below, (B) as of the Date of Grant, Grantee is a participant in the Company’s Senior Executive Severance Plan, (C) Grantee’s employment is terminated by the Company without Cause other than as described in Section 4(c)(iii) (such termination, with respect to a Senior Executive Severance Plan participant, an “Involuntary Termination”), and (D) Grantee complies with the provisions of Section 4(d) below, then on the Performance Vesting Date, a pro rata portion of the percentage of Performance Units that become vested as determined under Section 3 above will vest (i.e., prorated from the Commencement Date through the first anniversary of the date of termination of employment based on the number of completed months of service during the Performance Period plus the one-year period following termination of employment divided by 36). 
(c)  Change in Control. In the event of a Change in Control (as defined in the Plan) prior to the last day of the Performance Period, Performance Units will convert to time-based restricted stock units without proration for the percentage of the Performance Period that has elapsed since the Commencement Date, as follows:


(i)  If the Change in Control occurs prior to the 24-month anniversary of the Commencement Date, then 100% of the Target award number of Performance Units shall convert to time-based restricted stock units (plus an additional number of shares of time-based restricted stock units representing the dividend equivalents payable on that Target award number of Performance Units from the Commencement Date to the date of the Change in Control);


(ii)  If the Change in Control occurs on or after the 24-month anniversary of the Commencement Date, the conversion of Performance Units to time-based restricted stock units (and the corresponding conversion of dividend equivalents payable on those Performance Units to time-based restricted stock units) will be based on (a) the Company’s Comparable Sales Growth and ROIC performance determined under Section 3 above from the Commencement Date through the first 24 months of the Performance Period, plus the Company’s performance determined under Section 3 above during any completed fiscal quarter thereafter to the date of the Change in Control and (b) the Company’s relative TSR as of the date of the Change in Control. 


(iii)  Except as set forth in Section 4(b)(i) or (ii) above, Performance Units as converted pursuant to Section 4(c)(i) or (ii) above will vest as follows:


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(A)    If Performance Units as converted pursuant to Section 4(c)(i) or (ii) above are not assumed or replaced by the acquiror/continuing entity on terms deemed appropriate by the Compensation Committee, the Converted Units will vest on or immediately prior to the closing of the Change in Control; 


(B)    The Performance Units as converted pursuant to Section 4(c)(i) or (ii) above will vest on the last day of  the Performance Period (the “Normal Vesting Date”), if vesting has not otherwise accelerated as provided pursuant to Section 4(b)(i) or (ii) above or 4(c)(iii)(C) below; or


(C)    If, within the 24-month period following the Change in Control, Grantee is terminated by the Company or the continuing entity without Cause or if Grantee voluntarily terminates employment with Good Reason and is a participant in the Company’s Change in Control Plan (a “Qualifying Termination”), the Performance Units as converted pursuant to Section 4(c)(i) or (ii) above will vest on the date of such Qualifying Termination.


(d)  Violation of Restrictive Covenants.  All unvested Performance Units shall be forfeited immediately upon the occurrence of any of the following events. If there are no unvested Performance Units outstanding at the time a restrictive covenant is violated, the Company may pursue other legal remedies.


(i)  Following voluntary Retirement or Involuntary Termination and prior to the later of (a) the settlement date for the Performance Units or (b) two years following Retirement or one year following Involuntary Termination, as applicable, Grantee renders personal services to a Competing Business (as defined in Section 17) in any manner, including, without limitation, as employee, agent, consultant, advisor, independent contractor, proprietor, partner, officer, director, manager, owner, financer, joint venturer or otherwise; or


(ii)  Following  voluntary or involuntary Retirement or Involuntary Termination and prior to the later of (a) the settlement date for the Performance Units or (b) two years following Retirement or Involuntary Termination, Grantee directly or indirectly solicits or otherwise entices any of the Company’s employees to resign from their employment with the Company, whether individually or as a group; or 


(iii)  At any time following voluntary or involuntary Retirement or Involuntary Termination, Grantee discloses or provides to any third party, or uses, modifies, copies or adapts any of the Company’s Confidential Information (defined in Section 17).


An involuntary Retirement occurs when the employment of a Grantee who satisfies the age and years of service criteria described in Section 4(b) above is terminated by the Company without Cause (as defined in Section 17) or is terminated by Grantee with Good Reason (as defined in Section 17) within the 24-month period following a Change in Control. 


5.    Dividend, Voting and Other Rights.  Grantee shall have no rights of a stockholder with respect to the Performance Units prior to the date on which shares of Common Stock are issued in settlement thereof, including the right to vote any of the Performance Units. An amount representing dividends payable on shares of Common Stock with respect to the award of Performance Units on a 


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dividend record date shall be deemed reinvested in Common Stock and credited to Grantee as restricted stock units (rounded to the nearest whole share) as of the dividend payment date.  The Performance Units are subject to adjustment to prevent dilution or enlargement of the rights of Grantee that would otherwise result from changes in the capital structure of the Company or from certain corporate events as provided in Section 14 of the Plan.  Any restricted stock units or additional Performance Units credited to Grantee pursuant to this Section 5, including by reason of any adjustments under Section 14 of the Plan, will be subject to the terms and restrictions (including vesting) set forth in these Terms and Conditions.


6.    Settlement of Performance Units.  The Company shall issue or deliver to Grantee a number of whole shares of unrestricted Common Stock equal to the number of vested Performance Units (including any Performance Units as converted pursuant to Section 4(c)(i) or (ii) above) and the related restricted stock units attributed to any dividend equivalents on those Performance Units as soon as practicable following either (i) the Performance Vesting Date or Normal Vesting Date (as applicable), or (ii) if the Performance Units (including any Performance Units as converted pursuant to Section 4(c)(i) or (ii) above) become vested and earned or deemed vested and earned prior thereto upon an event contemplated by Section 4(b) or 4(c)(iii), the date of such event, and in the case of either clause (i) or (ii) of this Section 6, within the “short-term deferral” period determined under Treasury Regulation Section 1.409A-1(b)(4), with the applicable vesting date being referred to herein as the “Vesting Date.”  Such shares of unrestricted Common Stock shall be credited as book entry shares to Grantee’s trading account.  For the sake of clarity, the settlement and payment of Performance Units (including any Performance Units as converted pursuant to Section 4(c)(i) or (ii) above) and the related restricted stock units attributed to any dividend equivalents on those Performance Units is intended to comply with Treasury Regulation Section 1.409A-1(b)(4), and these Terms and Conditions and the Award Letter will be construed and administered in such a manner.  As a result, notwithstanding any provision in these Terms and Conditions and the Award Letter to the contrary, the settlement and payment of Performance Units (including any Performance Units as converted pursuant to Section 4(c)(i) or (ii) above) and the related restricted stock units attributed to any dividend equivalents on those Performance Units will be made in all events no later than the date that is the 15th day of the third calendar month of the applicable year following the year in which the Performance Units (including any Performance Units as converted pursuant to Section 4(c)(i) or (ii) above) and the related restricted stock units attributed to any dividend equivalents on those Performance Units are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulation Section 1.409A-1(d).  In the event Performance Units (including any Performance Units as converted pursuant to Section 4(c)(i) or (ii) above) and any related restricted stock units attributed to any dividend equivalents on those Performance Units are not earned or do not become vested, those Performance Units (including any Performance Units as converted pursuant to Section 4(c)(i) or (ii) above) and the related restricted stock units attributed to any dividend equivalents on those Performance Units, shall be forfeited.  


7.    Clawback.  Any incentive-based compensation received by Grantee from the Company hereunder or otherwise shall be subject to recovery by the Company in the circumstances and manner provided in any Incentive-Based Compensation Recovery Policy that may be adopted or implemented by the Company and in effect from time to time on or after the date hereof, and Grantee shall effectuate any such recovery at such time and in such manner as the Company may specify. For purposes of this Agreement, the term “Incentive-Based Compensation Recovery Policy” means any policy of the type contemplated by Section 10D of the Securities Exchange Act of 1934, any rules or regulations of the Securities and Exchange Commission adopted pursuant thereto, or any related rules or listing standards of any national securities exchange or national securities association applicable to the Company. Until the Company adopts an Incentive-Based Compensation Recovery Policy, the following clawback provision shall apply: 


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In the event that, within three years of the end of the Performance Period and settlement of vested Performance Units, the Company restates its financial results with respect to the Company’s performance during the Performance Period to correct a material error that the Compensation Committee determines is the result of fraud or intentional misconduct, then the Compensation Committee, in its discretion, may require Grantee to repay to the Company all income, if any, derived from the Performance Units.


8.    No Employment Contract.  Nothing contained in the Award Letter or these Terms and Conditions shall confer upon Grantee any right with respect to continued employment by the Company, or limit or affect the right of the Company to terminate the employment or adjust the compensation of Grantee.


9.    Taxes and Withholding.  If the Company is required to withhold any federal, state, local or foreign tax in connection with the issuance or vesting of, or other event triggering a tax obligation with respect to, any Performance Units or the issuance of any unrestricted shares of Common Stock or other securities following vesting pursuant to the Award Letter or these Terms and Conditions, it shall be a condition to such vesting, issuance or event that Grantee pay or make provisions that are satisfactory to the Company for payment of the tax. Unless Grantee makes alternative arrangements satisfactory to the Company prior to the vesting of the Performance Units or the issuance of shares of unrestricted Common Stock or other event triggering a tax obligation, Grantee will satisfy the statutory tax withholding obligations by providing for the sale of enough shares to generate proceeds that will satisfy the withholding obligation or surrendering to the Company a portion of the shares of Common Stock that are issued or transferred to Grantee following the Vesting Date for credit against the withholding obligation at the Market Value per Share of such shares on the Vesting Date.  In accordance with Section 16 of the Plan, in no event will the fair market value of the shares of Common Stock to be withheld or delivered pursuant to this Section 9 to satisfy applicable withholding taxes exceed the amount of taxes required to be withheld based on the maximum statutory tax rates in the applicable taxing jurisdiction.


10.    Limitations on Transfer of Performance Units.  


(a)  The Performance Units may not be transferred or assigned by Grantee until they vest other than (i) upon death, by will or the laws of descent and distribution, (ii) pursuant to a qualified domestic relations order or (iii) to a fully revocable trust to which Grantee is treated as the owner for federal income tax purposes. 
 
(b)  If Grantee is eligible to earn Long-Term Incentive Awards under the Macy’s, Inc. Senior Executive Compensation Plan (or any successor plan) or is a Non-Employee Director, the Performance Units or any interest therein may be transferred by Grantee, without payment of consideration therefor by the transferee, to any one or more members of the immediate family of Grantee (as defined in Rule 16a-1(e) under the Securities Exchange Act of 1934), or to one or more trusts established solely for the benefit of one or more members of the immediate family of Grantee or to one or more partnerships in which the only partners are members of the immediate family of Grantee. No transfer under this Section 10(b) will be effective until notice of transfer is delivered to the Company describing the terms and conditions of the proposed transfer, and the Company determines that the proposed transfer complies with the terms of the Plan, these Terms and Conditions and any terms and conditions made applicable to the transfer by the Company or Board at the time of the proposed transfer. Any transferee under this Section 10(b) shall be subject to the same terms and conditions hereunder as would apply to Grantee. Any purported transfer that does not comply with the requirements of this Section 10(b) shall be void and 


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unenforceable against the Company, and the purported transferee shall obtain no rights to or interest in the Performance Units.


(c)  Notwithstanding anything to the contrary contained in any agreement, award letter and/or terms and conditions applicable to a previous grant of performance units by the Company to Grantee, all such performance units previously granted to Grantee shall be transferable consistent with the terms and conditions applicable to the transfer of the Performance Units as contained herein.


10.    Compliance with Law.  The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, that the Company shall not be obligated to issue any Performance Units or shares of unrestricted Common Stock or other securities pursuant to the Award Letter and these Terms and Conditions if the issuance thereof would result in a violation of any such law.


11.    Relation to Other Benefits.  Any economic or other benefit to Grantee under the Award Letter and these Terms and Conditions shall not be taken into account in determining any benefits to which Grantee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company.


12.    Amendments.  Any amendment to the Plan shall be deemed to be an amendment to these Terms and Conditions to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of Grantee under the Award Letter and these Terms and Conditions without Grantee’s consent.


13.    Severability.  In the event that any provisions of these Terms and Conditions shall be invalidated for any reason by a court of competent jurisdiction, the invalidated provision shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.


14.    Relation to Plan.  


(a)  General.  These Terms and Conditions are subject to the terms and conditions of the Plan. In the event of any inconsistent provisions between these Terms and Conditions and the Plan, the Plan shall govern. Capitalized terms used herein without definition shall have the meanings assigned to them in the Plan. All references in these Terms and Conditions to the Company shall include, unless the context in which it is used suggests otherwise, its subsidiaries, divisions and affiliates.


(b)  Compliance with Section 409A of the Code.  The Company and Grantee acknowledge that, to the extent applicable, it is intended that the performance units covered by these Terms and Conditions comply with the provisions of Section 409A of the Code, and the Performance Units (including any Performance Units as converted pursuant to Section 4(c)(i) or (ii) above) shall be administered in a manner consistent with this intent.  Any amendments made to comply with Section 409A of the Code may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Company without the consent of Grantee.  In any case, Grantee shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed in connection with these Terms and Conditions and the Award Letter (including any taxes and penalties under Section 409A of the Code), and the Company shall not have any obligation to indemnify or otherwise hold Grantee harmless from any or all of such taxes or penalties.  Each payment under these Terms and Conditions and the Award Letter shall be treated as a separate payment for purposes of Section 409A of the Code.  Any 


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reference herein to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.


15.    Successors and Assigns.  The provisions of the Award Letter and these Terms and Conditions shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and permitted assigns of Grantee and the successors and assigns of the Company.


16.    Governing Law.  The interpretation, performance, and enforcement of the Award Letter and these Terms and Conditions shall be governed by the laws of the State of Delaware, without giving effect to its principles of conflict of laws.


17.    Definitions.


(a)  “Cause” shall mean that Grantee has committed prior to termination of employment any of the following acts:


(i)  An intentional act of fraud, embezzlement, theft, or any other material violation of law in connection with Grantee’s duties or in the course of Grantee’s employment;


(ii)  Intentional wrongful damage to material assets of the Company;


(iii)  Intentional wrongful disclosure of material confidential information of the Company;


(iv)  Intentional wrongful engagement in any competitive activity that would constitute a material breach of the duty of loyalty; 


(v)  Intentional breach of any stated material employment policy of the Company; or


(vi)  Intentional neglect by Grantee of Grantee’s duties and responsibilities. 


(b)  “Competing Business” shall mean:


(i)  any of the following named companies, or any other business into which such company is merged, consolidated, or otherwise combined, and the subsidiaries, affiliates and successors of each such company:


	
			
	Amazon
	J.C. Penney
	Sears

	Burlington Coat Factory
	Kohl’s
	Target

	Dillard’s
	Nordstrom
	TJX

	Hudson’s Bay
	Ross Stores
	Walmart






or


(ii)  any business or enterprise engaged in the business of retail sales that (1) had annual revenues for its most recently completed fiscal year of at least $4.0 billion; and (2) both (i) offers a category or categories of merchandise (e.g., Fine Jewelry, Cosmetics, Kids, Big Ticket, 


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Housewares, Men’s, Dresses), any of which are offered by the Company (and its subsidiaries, divisions or controlled affiliates), and (ii) the revenue derived by such other retailer during such retailer’s most recently ended fiscal year from such category or categories of merchandise represent(s), in the aggregate, more than 50% of the Company’s (and its subsidiaries, divisions or controlled affiliates) total revenues for the most recently completed fiscal year derived from the same category or categories of merchandise.


(c)  “Confidential Information” shall mean any data or information that is material to the Company and not generally known to the public, including, without limitation: (i) price, cost and sales data; (ii) the identities and locations of vendors and consultants furnishing materials and services to the Company and the terms of vendor or consultant contracts or arrangements; (iii) lists and other information regarding customers and suppliers; (iv) financial information that has not been released to the public; (v) future business plans, marketing or licensing strategies, and advertising campaigns; or (vi) information about the Company’s employees and executives, as well as the Company’s talent strategies including but not limited to compensation, retention and recruiting initiatives.


(d)  “Disability” shall mean Grantee’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.


(e)  “Good Reason” shall mean, without Grantee’s consent, the occurrence of any of the following events:


(i)  A material diminution in Grantee’s base compensation;


(ii)  A material diminution in Grantee’s authority, duties or responsibilities;


(iii)  A material change in the geographic location at which Grantee must perform Grantee’s services; or


(iv)  Any other action or inaction that constitutes a material breach by the Company of an agreement under which Grantee provides services.


Notwithstanding the foregoing, in order to terminate for Good Reason, (x) Grantee must provide the Company with written notice of the event(s) or condition(s) constituting Good Reason within ninety (90) days following the existence of such event(s) or condition(s), (y) the Company must be given thirty (30) days to cure such event(s) or condition(s), and (z) Grantee must actually terminate employment for Good Reason within sixty (60) days following the end of the Company’s cure period.


(f)    “Retirement-Eligible Grantee” means with respect to a Performance Unit that is outstanding at least six months after the Date of Grant a Grantee who is age 62 with at least five years of vesting service.


18.    Data Privacy.  Grantee hereby explicitly accepts the grant of Performance Units and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in the Award Letter and these Terms and Conditions by and among the Company and its subsidiaries and affiliates for the exclusive purpose of implementing, administering and managing Grantee’s participation in the Plan. 




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(a)  Grantee understands that the Company holds certain personal information about Grantee, including, but not limited to, Grantee’s name, home address and telephone number, date of birth, social security number or other identification number, salary, nationality, job title, shares of Common Stock held, details of all grants of Performance Units or any other entitlement to shares of Common Stock awarded, canceled, exercised, vested, unvested or outstanding in Grantee’s favor, for the purpose of implementing, administering and managing the Plan (the “Data”).


(b)  Grantee understands that the Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the United States or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the United States. Grantee understands that Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting Grantee’s local human resources representative. 


(c)  Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing Grantee’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom Grantee may elect to deposit any shares of Common Stock acquired. 


(d)  Grantee understands that Data will be held only as long as is necessary to implement, administer and manage Grantee’s participation in the Plan. 


(e)  Grantee understands that Grantee may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing Grantee’s local human resources representative. 


(f)  Grantee understands, however, that refusing or withdrawing Grantee’s consent may affect Grantee’s ability to participate in the Plan. 


19.    Acceptance of Award.  By accepting this award, Grantee agrees that during the term of Grantee’s employment with the Company and for the twelve (12) month period (24 month period for Chairman and CEO) beginning on the date that Grantee’s employment with the Company ceases for any reason, Grantee shall not act in any capacity (whether as an employee, agent, consultant, advisor, independent contractor, proprietor, partner, officer, director, manager, owner, financier, joint venturer, or otherwise), for any of the following companies, or any business into which such company is merged, consolidated, or otherwise combined:  Amazon, Burlington Coat Factory, Dillard’s, Hudson’s Bay, J.C. Penney, Kohl’s, Nordstrom, Ross Stores, Sears, Target. TJX  and Walmart or a Restricted Business.  A “Restricted Business” means any business or enterprise engaged in the business of retail sales that had annual revenues for its most recently completed fiscal year of at least $4 billion; and both (i) offers a category or categories of merchandise (e.g., Fine Jewelry, Cosmetics, Kids, Big Ticket, Housewares, Men’s, Dresses), any of which are offered in stores, online or through an alternate channel directly by the Company, and (ii) revenue derived by such other retailer during such retailer’s most recently ended fiscal year from such category or categories of merchandise represent(s), in the aggregate, more than 50% of the Company’s total revenues for the most recently completed fiscal year derived from the same category or categories of merchandise.








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