J. C. Penney Company, Inc. Deferred Compensation Plan for Directors


    Exhibit
      10.4


    J.
      C.
      Penney Company, Inc.

    Deferred
      Compensation Plan for Directors

    As
      amended and restated effective December 31, 2007 

    


    
      	1.
                	
              Purpose
                of Plan

            


    

    


    The
      purpose of the J. C. Penney Company, Inc. Deferred Compensation Plan for
      Directors ("Plan") is to provide a procedure whereby a member of the Board
      of
      Directors of J. C. Penney Company, Inc. ("Company") who is not an associate
      of
      the Company or any of its subsidiaries ("Director") may defer the payment of
      all
      or a specified portion of the compensation payable to the Director for services
      as a Director, including the annual retainer, meeting fees, and fees payable
      to
      a Director for services above and beyond those services in connection with
      his
      or her Board and committee responsibilities ("Fees"). Deferred Fees will be
      subject to Social Security Self-Employment tax in the year the Fees are paid
      irrespective of when such Fees are earned. A
      Director who elects to defer the payment of Fees will be eligible to make a
      deductible Keogh Plan contribution with respect to such Fees in the year such
      Fees are actually paid to the Director.

    


    
      	2.
                	
              Administration

            


    

    


    The
      Plan
      shall be administered by a committee ("Committee") consisting of one or more
      persons appointed from time to time by the Board of Directors out of those
      members of the Board of Directors who have never been participants under the
      Plan. The Committee shall have plenary authority in its discretion, but subject
      to the express provisions of the Plan, to interpret the Plan, to prescribe,
      amend, and rescind rules and regulations relating to it, and to make all other
      determinations deemed necessary or advisable for the administration of the
      Plan.
      The determinations of the Committee on the foregoing matters shall be conclusive
      and binding on all interested parties.

    


    
      	3.
                	
              Election
                to Defer

            


    

    


     

    3.1     A
      Director
      may elect annually to defer payment of all or a specified portion of any
      unearned Fees. This election to defer must be made by December 31 of the
      calendar year prior to the calendar year that the election becomes effective
      for
      the Fees earned in such calendar year, and the election shall become irrevocable
      on December 31 of the year in which the election is made. Such election shall
      be
      effective January 1 of the calendar year following the calendar year of
      election. For purposes of Section 3.1 and 3.2, Fees will be treated as earned
      in
      the period during which the services giving rise to such Fees are
      performed.

     

    3.2     A
      newly
      eligible Director may make an election to defer payment of all or a specified
      portion of any unearned Fees for the current year of appointment if the election
      is made within 30 days of the effective date of election to the Board. A
      Director will not be treated as newly eligible if the Director is otherwise
      eligible to participate in an agreement, method, 

     

    
      
        
        

      

      
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    program,
      or other arrangement that would be aggregated with this Plan under section
      409A
      of the Internal Revenue Code of 1986, as amended (”Code”) or Treasury Regulation
      section 1.409A-1(c)(2), or its successor. A Director who has terminated board
      service and is subsequently re-elected to the Board will be deemed to be newly
      eligible to the extent permitted under Code section 409A or Treasury Regulation
      section 1.409A-2(a)(7), or its successor. If the election to defer is not made
      within 30 days, or the Director is not otherwise newly eligible, the Director
      will be allowed to make an election for the deferral of unearned Fees for the
      following year in accordance with Section 3.1 above. 

     

    3.3     A
      Director’s
      election to defer will remain in effect from year to year until he or she files
      a new election in accordance with Section 3.1 or gives notice to terminate
      such
      election. In order for a termination of an election to become effective for
      a
      calendar year, the notice to terminate the election must be received prior
      to
      the election becoming irrevocable on the preceding December 31. An election
      to
      defer cannot be terminated once the election becomes effective for the calendar
      year, except due to an unforeseeable emergency as defined in Section
      6.2.

     

    
      	4.
                	
              Directors'
                Accounts

            


    

    


    4.1    There
      shall
      be established for each Director participating in the Plan an account on the
      books of the Company, to be designated as such Director's deferred compensation
      account ("Account"). Unless and until a Change of Control (as defined
      hereinafter) shall be deemed to have occurred, all amounts deferred pursuant
      to
      the Plan, together with any further amounts accrued thereon, as hereinafter
      provided, shall be held in the general funds of the Company and shall be
      credited to the Director's Account. The Company shall furnish quarterly or
      upon
      request to each participating Director a statement of such Director's Account.
      

    


    4.2     Change
      in
      Control. 

    


    (a) In
      the event a Change in Control (as defined in Section 4.2(c) below) shall be
      deemed to have occurred, the Company's liability for benefits under the Plan
      shall be funded under an irrevocable trust, to the extent permitted under Code
      section 409A, and as described in Section 4.2(b) below, which shall be subject
      to the claims of the Company's general creditors so that Eligible Directors
      will
      not be currently taxed upon the funding of such benefits.

    


    (b) Grantor
      Trust. To the extent permitted by Code section 409A and the regulations
      thereunder, the Board of Directors will have the authority to transfer assets
      of
      the Company, or its affiliates or subsidiaries in an amount sufficient to pay
      benefits that have accrued under the Plan up to the date of a Change in Control,
      as described in Section 4.2(c), to a grantor trust to be established by the
      Company for the purpose of paying benefits hereunder; and the Director’s Account
      shall thereafter be paid to the Director from such trust in accordance with
      the
      terms of the Plan. On each anniversary date of the date of the Change of
      Control, to the extent permitted by Code section 409A and the regulations
      thereunder, the Company shall transfer to the grantor trust an amount necessary
      to pay all benefits accrued under the Plan during the preceding twelve
      months.

     

    (c) Change
      in Control Event. For the purpose of determining whether a
      Change in Control has occurred with respect to the Plan, a Change in Control
      means a Change in Control within the meaning of Code section 409A and Treasury
      Regulation section 1.409A-3(i)(5), or its successor, including a change in
      the
      ownership of the corporation, a change in the effective control of the
      corporation, or a change in the ownership of a substantial portion of the assets
      of the corporation as such terms are defined in Treasury Regulation sections
      1.409A-3(i)(5)(v), (vi) 


    
      
        
        

      

      
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    and
      (vii). For this purpose, “corporation” has the meaning given in Treasury
      Regulation section 1.409A-3(i)(5)(ii), or its successor.

      


      4.3     If
        a Director
        should make the one-time election under the J. C. Penney Company, Inc.
        Retirement Plan for Non-Associate Directors to cease participation in that
        plan
        and to transfer his or her accrued benefit under that plan to this Plan,
        the
        amount so transferred, together with any further amounts accrued thereon
        (“Retirement Transfer”), shall be a part of the Director’s Account.
        Notwithstanding the foregoing, no Retirement Transfers to this Plan shall
        be
        made after 1997. 

       
4.4     Effective
      with
      respect to calendar quarters ending after December 31, 1988, a Director may
      elect that all but not a part of the balance in his or her Account be determined
      by reference to one of the following factors ("Factors"):

    


    (a)
       the addition of interest, to be accrued during each such quarter and to be
      credited to such Account on the first business day following the end of such
      quarter on the basis of the average balance in such Account during such quarter,
      at a rate equal, also at such Director's election, to either; 

    


    (1)
 the
      average annual rate
      payable for one-year United States Treasury Notes issued during such quarter,
      or


    


    (2) the
      annual rate in effect for
      such quarter under the Interest income Account of the J. C. Penney Corporation,
      Inc. Savings, Profit-Sharing, and Stock Ownership Plan; or

     

    (b)
 a
      number of units ("Units"),
      to be determined and valued in accordance with the fair market value of shares
      of the Company's Common Stock of 50¢ par value ("Common Stock"), the method of
      such determination and valuation being set forth in Attachment A to the
      Plan.

    


    4.5    The
      Director's election as to the Factor to be referenced to determine the balance
      in his or her Account and any change in such election, shall be effective on
      the
      first day of the calendar quarter following receipt by the Secretary of the
      Company, or his or her designee, of written notice thereof; provided, however,
      that in the absence of any such election, the Factor for a Director's Account
      shall be deemed to be the Savings Plan Interest Income Account described in
      Section 4.4(a)(2). 

    


    5.    
      Payment from Directors' Accounts

    


    5.1     For
      amounts
      commencing distribution on or after January 1, 2008, a Director may receive
      payment from his or her Director’s Account due to separation from service on the
      Board, death, unforeseeable emergency, or disability. The Director’s Account
      will be paid in a single lump sum on the first day of the month following the
      earlier of: (a) a separation from service within the meaning of Code section
      409A and Treasury Regulation section 1.409A-1(h), or its successor, from the
      Board; or (b) death; or (c); unforeseeable emergency within the meaning of
      Code
      section 409A and Treasury Regulation section 1.409A-3(i)(3), or its successor,
      or (d) disability within the meaning of Code section 409A and Treasury
      Regulation section 1.409A-3(i)4), or its successor. Notwithstanding the
      foregoing, in the event the Account of a Director who should become a specified
      employee (as defined below) becomes payable due to the Director’s separation
      from service (as defined above) for reasons other than 

     

    
      
        
        

      

      
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    due
      to
      the Director’s death or disability (as defined above), payment of the Director’s
      Account shall be made the first day of the 7th month following the
      month in which
      occurs the Director’s separation from service. A specified employee shall have
      the meaning within Code section 409A and as determined in accordance with the
      rules of the Board of Directors in resolutions dated December 12,
      2007.

     

    5.2     Notwithstanding
      the
      foregoing, if an election to defer is made on or after September 25, 1984 and
      on
      or before December 31, 2004, and the distribution of the balance of these
      accounts began before January 1, 2008 and will not be completely distributed
      as
      of January 1, 2008, payment of the balance in a Director's Account shall be
      made
      in 10 annual installments. Any installment payments owed to a Director, as
      of
      January 1, 2008, shall be paid on the first business day of 2008 (or as soon
      as
      practicable thereafter, but no later than the time required for payment under
      Treasury Regulation section 1.409A-3(d), or its successor) and of each
      succeeding calendar
      year until the entire remaining balance in a Director's Account shall have
      been
      paid. During any period in which a balance remains in a Director's Account,
      such
      remaining balance shall continue to be determined by the Factor which is then
      in
      effect for such Director until further changed by such Director. When a Director
      is to receive the balance of his or her Account in annual installments, each
      such annual installment shall be a fraction of the balance in such Account
      on
      the date such annual installment is to be paid, the numerator of which is one
      and the denominator of which is the total number of installments then remaining
      to be paid as of January 1, 2008.

     

    5.3     A
      director
      shall not have the right to elect a subsequent deferral of payment to a date
      beyond the payment event. Any payments from a Director's Account shall be made
      in cash, and in no event shall shares of Company Stock be issued to a Director,
      even if such Director shall have elected to have the value of his or her Account
      determined by reference to the Unit Factor.

    


    5.4     Except
      as
      provided in Code section 409A, Treasury Regulation section 1.409A-3(j)(4) or
      its
      successor, this Section, and Section 5.5, neither the Director nor the Company
      can accelerate the time or schedule of any payment or amount scheduled to be
      paid pursuant to the terms of the Plan. The Committee will have the discretion
      to accelerate payments in accordance with the provisions of Code section 409A
      and Treasury Regulation section 1.409A-3(j)(4), or its successor (provided
      that
      only the Board of Directors of the Company will have the discretion to
      accelerate payments in accordance with the provisions of Treasury Regulation
      section 1.409A-3(j)(4)(ix) or its successor). 

    


    5.5     If
      a
      Director’s Account when combined with the Director’s interest in any other
      agreements, methods, programs, or other arrangements with respect to which
      deferrals of compensation are treated as having been deferred under a single
      nonqualified deferred compensation plan under Code section 409A and Treasury
      Regulation section 1.409A-1(c)(2), or its successor, is equal to or less than
      the applicable dollar amount under Code section 402(g)(1)(B), in effect for
      the
      year of distribution, the Committee will distribute the benefit in the form
      of
      an immediate lump sum payment, provided that the payment results in the
      termination and liquidation of the entirety of the Director’s interest under
      this Plan and all other agreements, methods, programs, or other arrangements
      aggregated with this Plan and is in accordance with Treasury Regulation section
      1.409A-3(j)(4)(v), or its successor. 

    


    
      
        
        

      

      
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    6.      
      Payment in Event of Death, Unforeseeable Emergency, or
      Disability

    


    6.1     If
      a Director
      should die before the balance in his or her Account shall have been paid in
      full, the balance of the Director’s Account then remaining shall be paid in a
      single lump sum to his or her designated beneficiary or beneficiaries following
      the Director’s date of death, or, if later, as soon as administratively feasible
      after satisfactory proof of death is received by the Secretary of the Company,
      but in all event within the time required by Code section 409A. A Director
      may
      designate one or more beneficiaries (which may be an entity other than a natural
      person) to receive any payments to be made upon the Director's death. At any
      time, and from time to time, any such designation may be changed or canceled
      by
      the Director without notice to or the consent of any beneficiary. Any such
      designation, change, or cancellation shall be effective upon receipt by the
      Secretary of the Company of written notice thereof. If a Director designates
      more than one beneficiary, any payments to such beneficiaries shall be made
      in
      equal shares unless the Director has designated otherwise. If no beneficiary
      has
      been named by the Director, or if the designated beneficiary or beneficiaries
      shall have predeceased him or her, or shall no longer exist, the balance shall
      be paid to the Director's estate.

    


    6.2     A
      Director
      may request a single-sum distribution to satisfy a severe financial hardship
      resulting from an unforeseeable event or emergency beyond his control. The
      distribution shall be limited to the amount necessary to satisfy the severe
      financial hardship (including any applicable federal, state or local taxes
      attributable to such distribution), and shall not exceed the current value
      of
      the Director’s Account. An unforeseeable event or emergency shall have the
      meaning as is defined within Treasury Regulation section 1.409A-3(i)(3), or
      its
      successor. The determination of the existence of a severe financial hardship
      and
      the approval of an unforeseeable emergency distribution shall be made by the
      Committee. Approval shall be given only if, taking into account all of the
      facts
      and circumstances, continued deferral of benefits or adherence to the Plan's
      payment schedule would result in a severe financial hardship to the Participant
      or Beneficiary. Approval shall not be granted if such hardship is or may be
      relieved through insurance, by liquidation of his or her assets (to the extent
      such liquidation would not itself cause severe financial hardship), or by
      terminating his or her election to defer. The amount of payment permitted
      hereunder shall in no event exceed the amount permitted under Treasury
      Regulation section 1.409A-3(i)(3)(ii), or its successor.

    


    6.3     Upon
      a
      Director’s disability, the Committee shall direct the Company to pay in a lump
      sum to a Director the balance of the Director’s Account. Disability shall have
      the meaning as that term is defined within Treasury Regulation section
      1.409A-3(i)(4), or its successor. The determination of the existence of a
      disability shall be made by the Committee. 

    


    7.     
      Termination of Election to Defer

    


    A
      Director may on an annual basis terminate his or her election to defer payment
      of Fees only if the election has not become irrevocable and effective (except
      in
      the event of an unforeseeable emergency). Such termination shall become
      effective on the following January 1 following any year after receipt of written
      notice of such election to terminate deferrals by the Secretary of the Company,
      or his or her designee; provided, however, that any balance


    
      
        
        

      

      
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     in
      the Account of a Director prior to the effective date of
      termination of an election to defer shall not be affected thereby and shall
      be
      paid only in accordance with Sections 5 and 6. A Director who has filed a
      termination of election to defer or whose election to defer has been terminated
      in accordance with Section 6 may thereafter again file an election to defer
      in
      accordance with Section 3.

     

    8.     
      Nonassignability


    During
      a
      Director's lifetime, the right to the balance in his or her Account shall not
      be
      transferable or assignable. Nothing contained in the Plan shall create, or
      be
      deemed to create, a trust, actual or constructive, for the benefit of a Director
      or his or her beneficiary, or shall give, or be deemed to give, to any Director
      or his or her beneficiary any interest in any specific assets of the Company.
      

    


    9.    
      Amendment

    


    The
      Board
      of Directors of the Company may, at any time, without the consent of the
      participants, amend, suspend, or terminate the Plan. Subject to the terms of
      this Plan, including Section 5.4, and any applicable laws and regulations,
      no
      amendment, suspension, or termination of the Plan shall operate to annul an
      election already in effect for the then current calendar year or for any
      preceding calendar year and Fees shall continue to be deferred until the end
      of
      such current calendar year in accordance with a Director's then current
      election; and the balance in the Director's Account shall continue to be payable
      in accordance with a Director's then current election and, until paid, to be
      measured by a factor to be determined from time to time by the
      Committee.

    


    10.     
      Governing Law

    


    The
      Plan
      shall be construed and enforced according to the laws of the State of New York,
      and all the provisions thereof shall be administered according to the laws
      of
      said State.

    


    11.     
      Severability of Provisions

    


    If
      any of
      the provisions of the Plan or the application thereof to any Director shall
      be
      held invalid, neither the remainder of the Plan nor its application to any
      other
      Director shall be affected thereby.

    


    12.      Effective
      Date

    


    The
      amended and restated Plan shall become effective at 11:59 p.m. on December
      31,
      2007. This Plan was originally adopted on August 28, 1979; and was amended
      on
      September 25, 1984; June 28, 1988; February 28, 1989; July 8, 1992; and April
      9,
      1997.

    
      
        
        

      

      
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    Attachment
      A

    


    General

    Units
      shall be measured by reference to the fair market value of a share of Company
      Stock.

    


    Fair
      Market Value

    For
      purposes of the Plan, the fair market value ("Fair Market Value") of a share
      of
      Company Stock shall be the closing market price for that date as reported in
      the
      composite transaction table covering transactions of New York Stock Exchange
      listed-securities or such other amount as the Plan Committee shall ascertain
      reasonably to represent such Fair Market Value.

    


    Calculation
      of Units

    The
      number of Units, to be calculated to the nearest thousandth of a Unit, shall
      be
      determined (1) on the effective date of the election of the Unit Factor, by
      dividing (a) the balance, if any, then in a Director's account by (b) the Fair
      Market Value of a Share of Company Stock on the last trading day prior to the
      date of election of such Factor and (2) as to Fees deferred thereafter, by
      dividing (a) the amount of such deferred Fees on any date on which such Fees
      would otherwise have been paid by (b) the Fair Market Value of a share of
      Company Stock on the last trading day prior to the date such deferred Fees
      would
      otherwise have been paid.

    


    Cash
      Dividends

    Whenever
      a cash dividend is paid on a share of Company Stock, the number of Units in
      a
      Director's Account shall be increased by a number determined by dividing (1)
      the
      product of (a) the number of such Units times (b) an amount equal to the amount
      of the cash dividend paid on a share of Company Stock by (2) the Fair Market
      Value of a share of Company Stock on the last trading date prior to the
      appropriate dividend payment date.

    


    Adjustments

    In
      the
      event of any change in the outstanding Company Stock by reason of a stock
      dividend, stock split, recapitalization, merger, consolidation, combination
      or
      exchange of shares, spin-off, distribution to holders of Company Stock (other
      than cash dividends), or the like, the Plan Committee shall adjust appropriately
      the number of Units credited to a Director's Account.

    


    Valuation
      of Account Balance Referenced to Units

    If
      a
      Director has elected to have his or her Account balance determined by reference
      to the Unit Factor, then the value at any time of the balance in such Account
      shall be determined by multiplying (1) the number of Units in such Account
      by
      (2) the Fair Market Value of a share of Company Stock on the last trading day
      prior to the date such value is determined.

    
 

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     JCPenney
      Board of Directors Compensation and Benefit Programs