Document:

Exhibit
      4.4

     

    e.Digital
      Corporation

    SPECIAL
      STOCK OPTION GRANT NOTICE

    

        e.Digital
      Corporation (the “Company”) hereby grants to the Optionee named below, an
      employee of the Company, as an inducement material to the Optionee’s continuing
      employment with the Company, a stock option to purchase the number of shares
      of
      the Company’s common stock set forth below. This option is subject to all of the
      terms and conditions as set forth herein and the Stock Option Agreement
      (attached hereto), which is incorporated herein in its entirety.

    

      
        	
                Optionee:

              	
                Pat
                  Nunally

              
	
                Grant
                  No:

              	
                S-04

              
	
                Date
                  of Grant:

              	
                10/2/2006

              
	
                Shares
                  Subject to Option:

              	
                250,000
                  common shares

              
	
                Exercise
                  Price Per Share:

              	
                $0.16

              
	
                Expiration
                  Date:

              	
                10/2/2010

              
	
                Intended
                  to be Incentive Stock Option:

              	
                No

              
	 	 
	
                VESTING
                  SCHEDULE:

              	 
	
                Vesting
                  Start Date

              	
                Vesting
                  Schedule

              
	
                (on
                  performance)

              	
                Subject
                  to continuing Service (as defined in the Stock Option Agreement)
                  this
                  option becomes exercisable with respect to the Shares Subject to
                  Option
                  only upon e.Digital’s receipt of an aggregate of twenty-five million
                  ($25,000,000) dollars in licensing fees resulting from any Contingency
                  Representation Agreement with a law firm partner (net after all
                  costs,
                  attorneys fees and expenses) prior to the Expiration
                  Date.

              

      

    

     

    ADDITIONAL
      TERMS/ACKNOWLEDGMENTS: This grant is a part of a total grant of 750,000 shares
      by the Board as an inducement to your continued consultancy with the Company
      with the balance documented in a separate option agreement. The undersigned
      Optionee acknowledges receipt of, and represents that the Optionee has read,
      understands, accepts and agrees to the terms of this Grant Notice and the Stock
      Option Agreement. Optionee hereby accepts the Option subject to all of its
      terms
      and conditions and further acknowledges that as of the Date of Grant, this
      Grant
      Notice and the Stock Option Agreement set forth the entire understanding between
      Optionee and the Company regarding the acquisition of stock in the Company
      and
      supersede all prior oral and written agreements pertaining to this particular
      option.

    

    NOTE:
      THE
      OPTIONEE IS SOLELY RESPONSIBLE FOR ANY ELECTION TO EXERCISE THE OPTION, AND
      THE
      COMPANY SHALL HAVE NO OBLIGATION WHATSOEVER TO PROVIDE NOTICE TO THE OPTIONEE
      OF
      ANY MATTER, INCLUDING, BUT NOT LIMITED TO, THE DATE THE OPTION
      TERMINATES.

    

      
        	
                e.Digital
                  Corporation:

              	
                Optionee:

              
	 	 
	 	 
	
                By:
                  /s/W. A. Blakeley

              	
                /s/Pat
                  Nunally

              
	
                President

              	 

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    e.Digital
      Corporation

    SPECIAL
      STOCK OPTION AGREEMENT

    

    Pursuant
      to the Grant Notice and this Stock Option Agreement (“Agreement”), e.Digital
      Corporation (the “Company”) has granted to the Optionee named in the Grant
      Notice (“you” or the “Optionee”) an Option to purchase the number of shares of
      the Company’s common stock (“Stock”) indicated in the Grant Notice at the
      exercise price indicated in the Grant Notice.

    

    The
      details of this Option are as follows:

    

    1.
      Definitions And Construction.

    

    1.1
      Definitions. Whenever used herein, the following terms shall have their
      respective meanings set forth below:

    

    (a)
      “Affiliate” means (i) an entity, other than a Parent Corporation, that directly,
      or indirectly through one or more intermediary entities, controls the Company
      or
      (ii) an entity, other than a Subsidiary Corporation, that is controlled by
      the
      Company directly, or indirectly through one or more intermediary entities,
      or
      (iii) an entity which the Board designates as an Affiliate. For this purpose,
      the term “control” (including the term “controlled by”) means the possession,
      direct or indirect, of the power to direct or cause the direction of the
      management and policies of the relevant entity, whether through the ownership
      of
      voting securities, by contract or otherwise; or shall have such other meaning
      assigned such term for the purposes of registration on Form S-8 under the
      Securities Act.

    

    (b)
      “Board” means the Board of Directors of the Company. If one or more Committees
      have been appointed by the Board to administer outstanding stock options,
“Board” also means such Committee(s).

    

    (c)
      A
“Change In Control” means the occurrence of any of the following
      events:

    (i) The
      agreement to acquire or a tender offer that is accepted for beneficial ownership
      (within the meaning of Rule 13d-3 promulgated under the Exchange Act) by any
      individual, entity or group (within the meaning of section 13(d)(3) or 14(d)(2)
      of the Exchange Act) (a “Person”), of 50% or more of either (x) the then
      outstanding shares of Stock (the “Outstanding Stock”) or (y) the combined voting
      power of the then outstanding voting securities of the Company entitled to
      vote
      generally in the election of directors (the “Outstanding Company Voting
      Securities”); provided, however, that for purposes of this subsection (i), the
      following acquisitions shall not constitute a Change in Control: (A) any
      acquisition directly from the Company, (B) any acquisition by the Company,
      (C)
      any acquisition by any employee benefit plan (or related trust) sponsored or
      maintained by the Company or any corporation controlled by the Company, (D)
      any
      acquisition by any corporation pursuant to a transaction which complies with
      clauses (A), (B) and (C) of paragraph (iii) below; or

    (ii) Individuals
      who constitute the Incumbent Board cease for any reason to constitute at least
      a
      majority of the Board; or

    

    (iii) Consummation
      of a reorganization, merger or consolidation or sale or other disposition of
      all
      or substantially all of the assets of the Company or an acquisition of assets
      of
      another corporation (a “Business Combination”), in each case, unless, following
      such Business Combination, (A) the Outstanding Stock and Outstanding Company
      Voting Securities immediately prior to such Business Combination represent
      or
      are converted into or exchanged for securities which represent or are
      convertible into more than 50% of, respectively, the then outstanding shares
      of
      common stock and the combined voting power of the then outstanding voting
      securities entitled to vote generally in the election of directors, as the
      case
      may be, of the corporation resulting from such Business Combination (including,
      without limitation, a corporation which as a result of such transaction owns
      the
      Company, or all or substantially all of the Company’s assets either directly or
      through one or more subsidiaries), (B) no Person (excluding any employee benefit
      plan (or related trust) of the Company or the corporation resulting from such
      Business Combination) beneficially owns, directly or indirectly, 20% or more
      of,
      respectively, the then outstanding shares of common stock of the corporation
      resulting from such Business Combination or the combined voting power of the
      then outstanding voting securities of such corporation except to the extent
      that
      such ownership of the Company existed prior to the Business Combination and
      (C)
      at least a majority of the members of the board of directors of the corporation
      resulting from such Business Combination were members of the Incumbent Board
      at
      the time of the execution of the initial agreement, or of the action of the
      Board, providing for such Business Combination; or

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (iv) Consummation
      of a reorganization, merger or consolidation or sale or other disposition of
      all
      or substantially all of the assets of the Company (a “Business Combination”),
      unless, following such Business Combination, the Outstanding Stock and
      Outstanding Company Voting Securities immediately prior to such Business
      Combination represent or are converted into or exchanged for securities which
      represent or are convertible into more than 50% of, respectively, the then
      outstanding shares of common stock and the combined voting power of the then
      outstanding voting securities entitled to vote generally in the election of
      directors, as the case may be, of the corporation resulting from such Business
      Combination (including, without limitation, a corporation which as a result
      of
      such transaction owns the Company, or all or substantially all of the Company’s
      assets either directly or through one or more subsidiaries); or

    

    (v) Approval
      by the stockholders of the Company of a complete liquidation or dissolution
      of
      the Company.

    

    (d)
      “Code” means the Internal Revenue Code of 1986, as amended, and any applicable
      regulations promulgated thereunder.

    

    (e)
      “Committee” means the Compensation Committee or other committee of the Board
      duly appointed to administer this Agreement and having such powers as shall
      be
      specified by the Board. Unless the powers of the Committee have been
      specifically limited, the Committee shall have all of the powers of the Board
      granted herein.

    

    (f)
      “Company” means e.Digital Corporation, a Delaware corporation, or any
      Successor.

    

    (g)
      “Consultant” means a person engaged to provide consulting or advisory services
      (other than as an Employee or a Director) to a Participating
      Company.

    

    (h)
      “Director” means a member of the Board or of the board of directors of any other
      Participating Company.

    

    (i)
      “Disability” means the Optionee has been determined by the long-term disability
      insurer of the Participating Company Group as eligible for disability benefits
      under the long-term disability plan of the Participating Company Group or the
      Optionee has been determined eligible for Supplemental Security Income benefits
      by the Social Security Administration of the United States of
      America.

    

    (j)
      “Employee” means any person treated as an employee (including an Officer or a
      Director who is also treated as an employee) in the records of a Participating
      Company. The Company shall determine in good faith and in the exercise of its
      discretion whether the Optionee has become or has ceased to be an Employee
      and
      the effective date of the Optionee’s employment or termination of employment, as
      the case may be.

    

    (k)
      “Exchange Act” means the Securities Exchange Act of 1934, as
      amended.

    

    (l)
“Fair
      Market Value” means, as of any date, the value of the Stock determined as
      follows:

    

    (vi) if
      shares
      of Stock of the same class are listed or admitted to unlisted trading privileges
      on any national or regional securities exchange at the date of determining
      the
      Fair Market Value, then the last reported sale price, regular way, on the
      composite tape of that exchange on that business day or, if no such sale takes
      place on that business day, the average of the closing bid and asked prices,
      regular way, in either case as reported in the principal consolidated
      transaction reporting system with respect to securities listed or admitted
      to
      unlisted trading privileges on that securities exchange or, if no such closing
      prices are available for that day, the last reported sale price, regular way,
      on
      the composite tape of that exchange on the last business day before the date
      in
      question; or

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (vii) if
      shares
      of Stock of the same class are not listed or admitted to unlisted trading
      privileges as provided in subparagraph (i) and if sales prices for shares of
      Stock of the same class in the over-the-counter market are reported by the
      OTC
      Bulletin Board (“OTCBB”) as of the date of determining the Fair Market Value,
      then the last reported sales price so reported on that business day or, if
      no
      such sale takes place on that business day, the average of the high bid and
      low
      asked prices so reported or, if no such prices are available for that day,
      the
      last reported sale price so reported on the last business day before the date
      in
      question; or

    

    (viii) if
      shares
      of Stock of the same class are not listed or admitted to unlisted trading
      privileges as provided in subparagraph (i) and sales prices for shares of Stock
      of the same class are not reported by the OTCBB (or a similar system then in
      use) as provided in subparagraph (ii), and if bid and asked prices for shares
      of
      Stock of the same class in the over-the-counter market are reported by OTCBB
      (or, if not so reported, by the National Quotation Bureau Incorporated) as
      of
      the date of determining the Fair Market Value, then the average of the high
      bid
      and low asked prices on that business day or, if no such prices are available
      for that day, the average of the high bid and low asked prices on the last
      business day before the date in question; or

    

    (ix) if
      shares
      of Stock of the same class are not listed or admitted to unlisted trading
      privileges as provided in subparagraph (i) and sales prices or bid and asked
      prices therefor are not reported by OTCBB (or the National Quotation Bureau
      Incorporated) as provided in subparagraph (ii) or subparagraph (iii) as of
      the
      date of determining the Fair Market Value, then the value determined in good
      faith by the Committee, which determination shall be conclusive for all
      purposes; or if shares of Stock of the same class are listed or admitted to
      unlisted trading privileges as provided in subparagraph (i) or sales prices
      or
      bid and asked prices therefor are reported by OTCBB (or the National Quotation
      Bureau Incorporated) as provided in subparagraph (ii) or subparagraph (iii)
      as
      of the date of determining the Fair Market Value, but the volume of trading
      is
      so low that the Board of Directors determines in good faith that such prices
      are
      not indicative of the fair value of the Stock, then the value determined in
      good
      faith by the Committee, which determination shall be conclusive for all purposes
      notwithstanding the provisions of subparagraphs (i), (ii) or (iii).

    

    (m)
      “Incentive Stock Option” means an Option intended to be (as set forth in the
      Option Agreement) and which qualifies as an incentive stock option within the
      meaning of Section 422(b) of the Code.

    

    (n)
      “Insider” means an Officer, a Director of the Company or other person whose
      transactions in Stock are subject to Section 16 of the Exchange
      Act.

    

    (o)
      “Non-Control Affiliate” means any entity in which any Participating Company has
      an ownership interest and which the Board shall designate as a Non-Control
      Affiliate.

    

    (p)
      “Officer” means any person designated by the Board as an officer of the
      Company.

    

    (q)
      An
“Ownership Change Event” shall be deemed to have occurred if any of the
      following occurs with respect to the Company: (i) the direct or indirect sale
      or
      exchange in a single or series of related transactions by the stockholders
      of
      the Company of more than fifty percent (50%) of the voting stock of the Company;
      (ii) a merger or consolidation in which the Company is a party; (iii) the sale,
      exchange, or transfer of all or substantially all, as determined by the Board
      in
      its discretion, of the assets of the Company; or (iv) a liquidation or
      dissolution of the Company.

    

    (r)
      “Parent Corporation” means any present or future “parent corporation” of the
      Company, as defined in Section 424(e) of the Code.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (s)
      “Participating Company” means the Company or any Parent Corporation or
      Subsidiary Corporation or Affiliate.

    

    (t)
      “Participating Company Group” means, at any point in time, all entities
      collectively which are then Participating Companies.

    

    (u)
“Rule
      16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time, or
      any successor rule or regulation.

    

    (v)
      “Securities Act” means the Securities Act of 1933, as amended.

    

    (w)
      “Service” means

    

    (i)
      the
      Optionee’s employment or service with the Participating Company Group, whether
      in the capacity of an Employee, a Director or a Consultant. The Optionee’s
      Service shall not be deemed to have terminated merely because of a change in
      the
      capacity in which the Optionee renders Service to the Participating Company
      Group or a change in the Participating Company for which the Optionee renders
      such Service, provided that there is no interruption or termination of the
      Optionee’s Service. Furthermore, only to such extent as may be provided by the
      Company’s leave policy, the Optionee’s Service with the Participating Company
      Group shall not be deemed to have terminated if the Optionee takes any military
      leave, sick leave, or other leave of absence approved by the Company.
      Notwithstanding the foregoing, a leave of absence shall be treated as Service
      for purposes of vesting only to such extent as may be provided by the Company’s
      leave policy. The Optionee’s Service shall be deemed to have terminated either
      upon an actual termination of Service or upon the entity for which the Optionee
      performs Service ceasing to be a Participating Company; except that if the
      entity for which Optionee performs Service is a Subsidiary Corporation and
      ceases to be a Participating Company as a result of the distribution of the
      voting stock of such Subsidiary Corporation to the stockholders of the Company,
      Service shall not be deemed to have terminated as a result of such distribution.
      Subject to the foregoing, the Company, in its discretion, shall determine
      whether the Optionee’s Service has terminated and the effective date of such
      termination.

    

    (ii)
      Notwithstanding any other provision of this Section, an Optionee’s Service shall
      not be deemed to have terminated merely because the Participating Company for
      which the Optionee renders Service ceases to be a member of the Participating
      Company Group by reason of a Spinoff Transaction, nor shall Service be deemed
      to
      have terminated upon resumption of Service from the Spinoff Company to a
      Participating Company. For all purposes under this Agreement, the Optionee’s
      Service shall include Service, whether in the capacity of an Employee, Director
      or a Consultant, for the Spinoff Company provided the Optionee was employed
      by
      the Participating Company Group immediately prior to the Spinoff Transaction.
      Notwithstanding the foregoing, if the Company’s auditors determine that the
      provisions or operation of the preceding two sentences would cause the Company
      to incur a compensation expense and provided further that in the absence of
      the
      preceding two sentences no such compensation expense would be incurred, then
      the
      two preceding sentences shall be without force or effect, and the vesting and
      exercisability of each outstanding Option and any shares acquired upon the
      exercise thereof shall be determined under any other applicable provision of
      this Agreement.

    

    (x)
      “Spinoff Company” means a Participating Company which ceases to be such as a
      result of a Spinoff Transaction.

    

    (y)
      “Spinoff Transaction” means a transaction in which the voting stock of an entity
      in the Participating Company Group is distributed to the shareholders of a
      parent corporation as defined by Section 424(e) of the Code, of such
      entity.

    

    (z)
      “Stock” means the common stock of the Company, as adjusted from time to time in
      accordance with Section 9.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (aa)
      “Subsidiary Corporation” means any present or future “subsidiary corporation” of
      the Company, as defined in Section 424(f) of the Code.

    

    (bb)
      “Successor” means a corporation into or with which the Company is merged or
      consolidated or which acquires all or substantially all of the assets of the
      Company and which is designated by the Board as a Successor for purposes of
      this
      Agreement.

    

    1.2
      Construction. Captions and titles contained herein are for convenience only
      and
      shall not affect the meaning or interpretation of any provision of this
      Agreement. Except when otherwise indicated by the context, the singular shall
      include the plural and the plural shall include the singular. Use of the term
      “or” is not intended to be exclusive, unless the context clearly requires
      otherwise.

    

    2.
      Vesting. Except as otherwise provided in this Agreement, this option will vest
      as provided in the Grant Notice.

    

    3.
      Exercise Of The Option.

    

    3.1
      Method Of Exercise. You may exercise the vested portion of this Option at any
      time prior to the expiration of the Option by delivering a notice of exercise
      in
      such form as may be designated by the Company from time to time together with
      the exercise price to the Secretary of the Company, or to such other person
      as
      the Company may designate, during regular business hours and prior to the
      expiration of the Option, together with such additional documents as the Company
      may then require.

    

    3.2
      Method Of Payment. Payment of the exercise price may be by cash (or check),
      or
      pursuant to a program developed under Regulation T as promulgated by the Federal
      Reserve Board which, prior to the issuance of Stock, results in either the
      receipt of cash (or check) by the Company or the receipt of irrevocable
      instructions to a broker which provides for the payment of the aggregate
      exercise price to the Company, or a combination of the above methods, as the
      Company may designate from time to time. The Company reserves, at any and all
      times, the right, in the Company’s sole and absolute discretion, to establish,
      decline to approve or terminate any program or procedures for the exercise
      of
      Options by means of a Cashless Exercise.

    

    3.3
      Tax
      Withholding. By exercising this Option you agree that as a condition to any
      exercise of this Option, the Company may withhold from your pay and any other
      amounts payable to you, or require you to enter an arrangement providing for
      the
      payment by you to the Company of any tax withholding obligation of the Company
      arising by reason of (1) the exercise of this Option; or (2) the disposition
      of
      Stock acquired upon such exercise.

    

    3.4
      Responsibility For Exercise. You are responsible for taking any and all actions
      as may be required to exercise this Option in a timely manner and for properly
      executing any such documents as may be required for exercise in accordance
      with
      such rules and procedures as may be established from time to time. By signing
      this Agreement you acknowledge that information regarding the procedures and
      requirements for this exercise of the Option is available to you on request.
      The
      Company shall have no duty or obligation to notify you of the expiration date
      of
      this Option.

    

    4.
      Securities Law Compliance. Notwithstanding anything to the contrary contained
      herein, this Option may not be exercised unless the Stock issuable upon exercise
      of this Option is then registered under the Securities Act or, if such Stock
      is
      not then so registered, the Company has determined that such exercise and
      issuance would be exempt from the registration requirements of the Securities
      Act.

    

    5.
      Termination Of The Option. The term of this Option commences on the Date of
      Grant (as specified in the Grant Notice) and expires and shall no longer be
      exercisable upon the earliest of:

    

    5.1
      the
      Expiration Date indicated in the Grant Notice;

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    5.2
      the
      last day for exercising the Option following termination of your Service as
      described in Section 6 below; or

    

    5.3
      a
      Change of Control, to the extent provided in Section 7 below.

    

    6.
      Effect
      Of Termination Of Service.

    

    6.1
      Option Exercisability. Subject to earlier termination of the Option as otherwise
      provided herein, the Option shall be exercisable after the Optionee’s
      termination of Service only during the applicable time period determined in
      accordance with this Section 6 and thereafter shall terminate.

    

    (a)
      Disability. If the Optionee’s Service terminates because of the Disability of
      the Optionee, the Option shall continue for a period of one year from
      termination of employment resulting from such Disability and may be exercised
      by
      the Optionee at any time during the one year period but in any event no later
      than the Expiration Date.

    

    (b)
      Death. If the Optionee’s Service terminates because of the death or because of
      the Disability of the Optionee and such termination is subsequently followed
      by
      the death of the Optionee, (A) the exercisability and vesting of the Option
      shall be accelerated effective upon the Optionee’s death, and (B) the Option, to
      the extent unexercised and exercisable on the date of the Optionee’s death, may
      be exercised by the Optionee’s legal representative or other person who acquired
      the right to exercise the Option by reason of the Optionee’s death at any time
      prior to the expiration of twelve (12) months after the date of the Optionee’s
      death, but in any event no later than the Expiration Date.

    

    (c)
      Termination After Change In Control. If the Optionee’s Service ceases as a
      result of Termination After Change in Control (as defined below), then (A)
      the
      exercisability and vesting of the Option shall be accelerated effective as
      of
      the date on which the Optionee’s Service terminated, and (B) the Option, to the
      extent unexercised and exercisable on the date on which the Optionee’s Service
      terminated, may be exercised by the Optionee (or the Optionee’s guardian or
      legal representative) at any time prior to the expiration of six (6) months
      after the date on which the Optionee’s Service terminated, but in any event no
      later than the Expiration Date.

    

    (e)
      Other
      Termination Of Service. If the Optionee’s Service with the Participating Company
      Group terminates for any reason except Disability, death, Transfer to a
      Non-Control Affiliate, or Termination after Change in Control, the Option,
      to
      the extent unexercised and exercisable by the Optionee on the date on which
      the
      Optionee’s Service terminates, may be exercised by the Optionee at any time
      prior to the expiration of 90 days after the date on which the Optionee’s
      Service terminates, but in any event no later than the Expiration
      Date.

    

    6.2
      Extension If Exercise Prevented By Law. Notwithstanding the foregoing, other
      than termination for Cause, if the exercise of an Option within the applicable
      time periods set forth in Section 6.1 is prevented by the provisions of Section
      4 above, the Option shall remain exercisable until three (3) months after the
      date the Optionee is notified by the Company that the Option is exercisable,
      but
      in any event no later than the Expiration Date.

    

    6.3
      Extension If Optionee Subject To Section 16(b). Notwithstanding the foregoing,
      other than termination for Cause, if a sale within the applicable time periods
      set forth in Section 6.1 of shares acquired upon the exercise of the Option
      would subject the Optionee to suit under Section 16(b) of the Exchange Act,
      the
      Option shall remain exercisable until the earliest to occur of (i) the tenth
      (10th) day following the date on which a sale of such shares by the Optionee
      would no longer be subject to such suit, (ii) the one hundred and ninetieth
      (190th) day after the Optionee’s termination of Service, or (iii) the Expiration
      Date.

    

    6.4
      Certain Definitions.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (a)
      “Cause” shall mean any of the following: (1) the Optionee’s theft, dishonesty,
      or falsification of any Participating Company documents or records; (2) the
      Optionee’s improper use or disclosure of a Participating Company’s confidential
      or proprietary information; (3) any action by the Optionee which has a
      detrimental effect on a Participating Company’s reputation or business; (4) the
      Optionee’s failure or inability to perform any reasonable assigned duties after
      written notice from a Participating Company of, and a reasonable opportunity
      to
      cure, such failure or inability; (5) any material breach by the Optionee of
      any
      employment or service agreement between the Optionee and a Participating
      Company, which breach is not cured pursuant to the terms of such agreement;
      (6)
      the Optionee’s conviction (including any plea of guilty or nolo contendere) of
      any criminal act which impairs the Optionee’s ability to perform his duties with
      a Participating Company; or (7) violation of a material Company
      policy.

    

    (b)
“Good
      Reason” shall mean any one or more of the following:

    

    (i)
      without the Optionee’s express written consent, the assignment to the Optionee
      of any duties, or any limitation of the Optionee’s responsibilities,
      substantially inconsistent with the Optionee’s positions, duties,
      responsibilities and status with the Participating Company Group immediately
      prior to the date of the Change in Control;

    

    (ii)
      without the Optionee’s express written consent, the relocation of the principal
      place of the Optionee’s employment or service to a location that is more than
      fifty (50) miles from the Optionee’s principal place of employment or service
      immediately prior to the date of the Change in Control, or the imposition of
      travel requirements substantially more demanding of the Optionee than such
      travel requirements existing immediately prior to the date of the Change in
      Control;

    

    (iii)
      any
      failure by the Participating Company Group to pay, or any material reduction
      by
      the Participating Company Group of, (A) the Optionee’s base salary in effect
      immediately prior to the date of the Change in Control (unless reductions
      comparable in amount and duration are concurrently made for all other employees
      of the Participating Company Group with responsibilities, organizational level
      and title comparable to the Optionee’s), or (B) the Optionee’s bonus
      compensation, if any, in effect immediately prior to the date of the Change
      in
      Control (subject to applicable performance requirements with respect to the
      actual amount of bonus compensation earned by the Optionee);

    

    (iv)
      any
      failure by the Participating Company Group to (A) continue to provide the
      Optionee with the opportunity to participate, on terms no less favorable than
      those in effect for the benefit of any employee or service provider group which
      customarily includes a person holding the employment or service provider
      position or a comparable position with the Participating Company Group then
      held
      by the Optionee, in any benefit or compensation plans and programs, including,
      but not limited to, the Participating Company Group’s life, disability, health,
      dental, medical, savings, profit sharing, stock purchase and retirement plans,
      if any, in which the Optionee was participating immediately prior to the date
      of
      the Change in Control, or their equivalent, or (B) provide the Optionee with
      all
      other fringe benefits (or their equivalent) from time to time in effect for
      the
      benefit of any employee group which customarily includes a person holding the
      employment or service provider position or a comparable position with the
      Participating Company Group then held by the Optionee;

    

    (v)
      any
      breach by the Participating Company Group of any material agreement between
      the
      Optionee and a Participating Company concerning Optionee’s employment;
      or

    

    (vi)
      any
      failure by the Company to obtain the assumption of any material agreement
      between the Optionee and the Company concerning the Optionee’s employment by a
      successor or assign of the Company.

    

    (c)
      “Termination After Change In Control” shall mean either of the following events
      occurring within twenty-four (24) months after a Change in Control:

    

    (i)
      termination by the Participating Company Group of the Optionee’s Service with
      the Participating Company Group for any reason other than for Cause;
      or

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (ii)
      the
      Optionee’s resignation for Good Reason from all capacities in which the Optionee
      is then rendering Service to the Participating Company Group within a reasonable
      period of time following the event constituting Good Reason.

    

    Notwithstanding
      any provision herein to the contrary, Termination After Change in Control shall
      not include any termination of the Optionee’s Service with the Participating
      Company Group which (1) is for Cause; (2) is a result of the Optionee’s death or
      Disability; (3) is a result of the Optionee’s voluntary termination of Service
      other than for Good Reason; or (4) occurs prior to the effectiveness of a Change
      in Control.

    

    7.
      Change
      In Control. In the event of a Change in Control, the surviving, continuing,
      successor, or purchasing corporation or other business entity or parent thereof,
      as the case may be (the “Acquiring Corporation”), may, without the consent of
      the Optionee, either assume the Company’s rights and obligations the Option or
      substitute for the Option substantially equivalent options for the Acquiring
      Corporation’s stock. In the event the Acquiring Corporation elects not to assume
      or substitute for the Option in connection with a Change in Control, the
      exercisability and vesting of the Option shall be accelerated, effective as
      of
      the date ten (10) days prior to the date of the Change in Control. The exercise
      or vesting of this Option that was permissible solely by reason of this Section
      shall be conditioned upon the consummation of the Change in Control. To the
      extent this Option is neither assumed or substituted for by the Acquiring
      Corporation in connection with the Change in Control nor exercised as of the
      date of the Change in Control, it shall terminate and cease to be outstanding
      effective as of the date of the Change in Control. Notwithstanding the
      foregoing, shares acquired upon exercise of the Option prior to the Change
      in
      Control and any consideration received pursuant to the Change in Control with
      respect to such shares shall continue to be subject to all applicable provisions
      of the Agreement. Furthermore, notwithstanding the foregoing, if the corporation
      the stock of which is subject to the Option immediately prior to an Ownership
      Change Event described in Section 1.1(q)(i) constituting a Change in Control
      is
      the surviving or continuing corporation and immediately after such Ownership
      Change Event less than fifty percent (50%) of the total combined voting power
      of
      its voting stock is held by another corporation or by other corporations that
      are members of an affiliated group within the meaning of Section 1504(a) of
      the
      Code without regard to the provisions of Section 1504(b) of the Code, the Option
      shall not terminate unless the Board otherwise provides in its
      discretion.

    

    8.
      Option
      Not A Service Contract. This Option is not an employment or service contract
      and
      nothing in this Agreement or the Grant Notice shall be deemed to create in
      any
      way whatsoever any obligation on your part to continue in the service of the
      Company, or of the Company to continue your service with the Company. In
      addition, nothing in your Option shall obligate the Company, its stockholders,
      Board, Officers or Employees to continue any relationship which you might have
      as a Director or Consultant for the Company.

    

    9.
      Adjustments For Changes In Capital Structure. In the event of any stock
      dividend, stock split, reverse stock split, recapitalization, combination,
      reclassification or similar change in the capital structure of the Company,
      appropriate adjustments shall be made in the number and class of shares subject
      to the Option and in the exercise price per share of the Option. If a majority
      of the shares of Stock are exchanged for, converted into, or otherwise become
      (whether or not pursuant to an Ownership Change Event) shares of another
      corporation (the “New Shares”), the Board may unilaterally amend this Agreement
      to provide that the Option is exercisable for New Shares. In the event of any
      such amendment, the number of shares subject to, and the exercise price per
      share of, the Option shall be adjusted in a fair and equitable manner as
      determined by the Board, in its discretion. Notwithstanding the foregoing,
      any
      fractional share resulting from an adjustment pursuant to this Section shall
      be
      rounded down to the nearest whole number, and in no event may the exercise
      price
      of the Option be decreased to an amount less than the par value, if any, of
      the
      Stock subject to the Option.

    

    10.
      Representations. By executing this Agreement, you hereby warrant and represent
      that you are acquiring this Option for your own account and that you have no
      intention of distributing, transferring or selling all or any part of this
      Option except in accordance with the terms of this Agreement and Section
      25102(f) of the California Corporations Code. You also hereby warrant and
      represent that you have either (i) preexisting personal or business
      relationships with the Company or any of its officers, directors or controlling
      persons, or (ii) the capacity to protect your own interests in connection with
      the grant of this Option by virtue of the business or financial expertise of
      you
      or any of your professional advisors who are unaffiliated with and who are
      not
      compensated by the Company or any of its affiliates, directly or
      indirectly.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    11.
      Notices. Any notices provided for in this Agreement or the Grant Notice shall
      be
      given in writing and shall be deemed effectively given upon receipt or, in
      the
      case of notices delivered by the Company to you, five (5) days after deposit
      in
      the United States mail, postage prepaid, addressed to you at the last address
      you provided to the Company.

    

    12.
      Transferability. This Option shall not be transferable in any manner (including
      without limitation, sale, alienation, anticipation, pledge, encumbrance, or
      assignment) other than, (i) by will or by the laws of descent and distribution,
      (ii) by written designation of a beneficiary, in a form acceptable to the
      Company, with such designation taking effect upon the death of the Optionee,
      (iii) by delivering written notice to the Company, in a form acceptable to
      the
      Company (including such representations, warranties and indemnifications as
      the
      Company shall require the Optionee to make to protect the Company’s interests
      and ensure that this Option has been transferred under the circumstances
      approved by the Company), by gift to the Optionee’s spouse, former spouse,
      children, stepchildren, grandchildren, parent, stepparent, grandparent, sibling,
      niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
      brother-in-law, or sister-in-law, persons having one of the foregoing types
      of
      relationship with the Optionee due to adoption, any person sharing the
      Optionee’s household (other than a tenant or employee), a foundation in which
      these persons or the Optionee control the management of assets, and any other
      entity in which these persons (or the Optionee) own more than fifty percent
      of
      the voting interests. A transfer to an entity in which more than fifty percent
      of the voting interests are owned by these persons (or the Optionee) in exchange
      for an interest in that entity is specifically included as a permissible type
      of
      transfer. In addition, a transfer to a trust created solely for the benefit
      (i.e., the Optionee and/or any or all of the foregoing persons hold more than
      50
      percent of the beneficial interest in the trust) of the Optionee and/or any
      or
      all of the foregoing persons is also a permissible transferee, or (iv) such
      other transferees as may be authorized by the Board in its sole and absolute
      discretion. During the Optionee’s life this Option is exercisable only by the
      Optionee or a transferee satisfying the above conditions. Except in the event
      of
      the Optionee’s death, upon transfer of this Option to any or all of the
      foregoing persons, the Optionee is liable for any and all taxes due upon
      exercise of this transferred Option. At no time will a transferee who is
      considered an affiliate under Rule 144(a)(1) be able to sell any or all such
      Stock without complying with Rule 144. The right of a transferee to exercise
      the
      transferred portion of this Option shall terminate in accordance with the
      Optionee’s right of exercise under this Option and is further subject to such
      representations, warranties and indemnifications from the transferee that the
      Company requires the transferee to make to protect the Company’s interests and
      ensure that this Option has been transferred under the circumstances approved
      by
      the Company. Once a portion of this Option is transferred, no further transfer
      may be made of that portion of this Option.

    

    13.
      Arbitration. Any dispute or claim concerning the Option, the Grant Notice or
      this Agreement shall be fully, finally and exclusively resolved by binding
      arbitration conducted by the American Arbitration Association pursuant to the
      commercial arbitration rules in San Diego, California. By accepting the Option,
      the Optionee and the Company waive their respective rights to have any such
      disputes or claims tried by a judge or jury.

    

    14.
      Amendment. The Board may amend your Option at any time, provided no such
      amendment may adversely affect the Option or any unexercised portion of your
      Option, without your consent unless such amendment is necessary to comply with
      any applicable law or government regulation. No amendment or addition to this
      Agreement shall be effective unless in writing or, in such electronic form
      as
      may be designated by the Company.Executive Termination Pay Agreement

    Exhibit
      10.1

    
 

    As
      Amended and Restated 

    Effective
      September 21, 2007

    

    FORM
      OF

    

    EXECUTIVE
      TERMINATION PAY AGREEMENT 

    

    This
      Executive Termination Pay Agreement (the “Agreement”), dated as of
      _____________, 2007 is between J. C. Penney Corporation, Inc.
      (“Corporation”) and the undersigned member of the Corporation’s Executive Board
      (the “Executive”).

    

    WHEREAS,
      in order to achieve its long-term objectives, the Corporation recognizes that
      it
      is essential to attract and retain superior executives to serve on its Executive
      Board;

    

    WHEREAS,
      in order to induce the Executive [to continue] to serve in the Executive’s
      position with the Corporation, the Corporation desires to provide the Executive
      with the right to receive certain benefits in the event the Executive’s
      employment is terminated, on the terms and subject to the conditions hereinafter
      set forth;

    

    NOW,
      THEREFORE, in consideration of the promises and of the mutual covenants herein
      contained, it is agreed as follows: 

    

    
      	1.  	
              Termination
                Payments and Benefits.

            

    

     

    
      	1.1  	
              Death
                or Permanent Disability.
                In the event of a Separation from Service due to death, or in the
                event of
                a Separation from Service within 30 days following a determination
                of
                Permanent Disability (as defined in Section 2) of the Executive,
                then as
                soon as practicable or within the period required by law, but in
                no event
                later than 30 days after Separation from Service, the Corporation
                shall
                pay any (a) accrued and unpaid Base Salary (as defined in Section
                2) and
                vacation to which the Executive was entitled as of the effective
                date of
                termination of the Executive’s employment with the Corporation
                (collectively, the “Compensation Payments”) and (b) the target annual
                incentive (at $1.00 per unit) under the Corporation’s Management Incentive
                Compensation Program (or any successor plan) for the fiscal year
                in which
                the date of death or the determination of Permanent Disability occurs,
                prorated for the actual period of service for that fiscal year (the
                “Prorated Bonus”). Notwithstanding the foregoing, if the Executive has
                elected to defer under the Corporation’s Mirror Savings Plan (or any
                successor plan) a portion of the annual incentive to be paid under
                the
                Corporation’s Management Incentive Compensation Program for the fiscal
                year, then that portion of the Prorated Bonus will be deferred and
                paid in
                accordance with the terms of the Corporation’s Mirror Savings Plan, and
                the remaining portion of the Prorated Bonus will be paid in a lump
                sum
                under this Section. The payment of any death benefits or disability
                benefits under any employee benefit or compensation plan that is
                maintained by the Corporation for the Executive’s benefit shall be
                governed by the terms of such plan.

            

    

     

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

     

    
      	1.2  	
              Involuntary
                Separation from Service for Cause; Voluntary Separation from Service
                by
                the Executive. In
                the event of the Involuntary Separation from Service (as defined
                in
                Section 2) of the Executive for Cause (as defined in Section 2) or
                voluntary Separation from Service by the Executive, the Corporation
                shall
                pay the Compensation Payments to the Executive as soon as practicable
                or
                within the period required by law, and the Executive shall be entitled
                to
                no other compensation, except as otherwise due to the Executive under
                applicable law, applicable plan or program. The Executive shall not
                be
                entitled to the payment of any bonuses for any portion of the fiscal
                year
                in which such Separation from Service
                occurs.

            

    

     

    
      	1.3  	
              Involuntary
                Separation from Service without
                Cause.

            

    

     

    
      	(a)  	
              Form
                and Amount.
                In the event of the Involuntary Separation from Service of the Executive
                without Cause, the Corporation shall pay the Compensation Payments
                to the
                Executive as soon as practicable or within the period required by
                law. In
                addition, conditioned upon receipt of the Executive’s written release of
                claims in such form as may be required by the Corporation and the
                expiration of any applicable period during which the Executive can
                rescind
                or revoke such release, the Corporation shall pay the Executive a
                lump sum
                as severance pay within 14 days thereafter. In no event will severance
                pay
                be paid later than two and one-half months after the end of the
                Executive’s tax year in which the Involuntary Separation from Service
                occurs. The lump sum severance pay will be equal to (i) the Prorated
                Bonus, except as provided below, (ii) the Executive’s monthly salary and
                the target annual incentive (at $1.00 per unit) under the Corporation’s
                Management Incentive Compensation Program for the Severance Period
                (as
                defined in Section 2), (iii) the Corporation’s portion of the premium cost
                of Medical, Dental, and Corporation Paid Life Insurance Plans coverage
                for
                the Severance Period as provided in Section 1.3(b), (iv) Special
                Bonus
                Hours to the extent provided under Section 1.3(c), and (v) $25,000
                to pay
                for outplacement services and financial counseling services.
                Notwithstanding the foregoing, if the Executive has elected to defer
                under
                the Corporation’s Mirror Savings Plan a portion of the annual incentive to
                be paid under the Corporation’s Management Incentive Compensation Program
                for the fiscal year, then that portion of the Prorated Bonus will
                be
                deferred and paid in accordance with the terms of the Corporation’s Mirror
                Savings Plan, and the remaining portion of the Prorated Bonus will
                be paid
                in a lump sum under this Section. In addition to the lump sum payments
                provided for herein, following an Involuntary Separation from Service,
                the
                Corporation shall also provide to the Executive Accelerated Vesting
                as
                provided in Section 1.3(d).

            

    

     

     

    
      
        2

      

      
        
        

        
        

      

      
        
        

      

    

     

    
      	(b)  	
              Health
                Care and Life Insurance.
                Following an Involuntary Separation from Service, the Executive will
                receive a lump sum payment equal to the Corporation’s premium cost for the
                Executive’s active Associate Medical, Dental and Life Insurance Plans
                coverage, if any, as in effect on the day prior to the effective
                date of
                the Executive’s Involuntary Separation from Service, in an amount based on
                the entire Severance Period. Such amount shall be grossed-up for
                applicable federal income taxes using the applicable federal income
                tax
                rate that applied to the Executive for the taxable year prior to
                the year
                in which the Involuntary Separation from Service shall have
                occurred.

            

    

     

    
      	(c)  	
              Special
                Bonus Hours.
                Following an Involuntary Separation from Service, the Corporation
                shall
                pay the Executive a lump sum payment for Special Bonus Hours, if
                the
                Executive is a participant in the Corporation’s Paid Time Off Policy (“PTO
                Policy”). Such payment shall be determined in accordance with the
                provisions of the PTO Policy applicable to an involuntary termination
                resulting from a reduction in
                force.

            

    

     

    
      	 	
              (d)

            	
              Accelerated
                Vesting.
                Effective on the Involuntary Separation from Service date, all Long
                Term
                Incentive stock awards and stock options in the Executive’s name shall be
                immediately vested. To the extent applicable, if the Executive has
                elected
                to make a deferral under the Corporation’s equity compensation plan (or
                any successor plan), then such deferral will be paid in accordance
                with
                the terms of the Corporation’s equity compensation
                plan.

            

    

    

    
      	1.4  	
              Section
                409A.
                To the extent applicable, it is intended that portions of this Agreement
                either comply with or be exempt from the provisions of Section 409A
                of the
                Code (as defined in Section 2). Any provision of this Agreement that
                would
                cause this Agreement to fail to comply with or be exempt from Code
                section
                409A shall have no force and effect until such provision is either
                amended
                to comply with or be exempt from Code section 409A (which amendment
                may be
                retroactive to the extent permitted by Code section 409A and the
                Executive
                hereby agrees not to withhold consent unreasonably to any amendment
                requested by the Corporation for the purpose of either complying
                with or
                being exempt from Code section 409A).

            

    

     

    
      	1.5  	
              Forfeiture.
                Notwithstanding the foregoing provisions of this Section 1, in addition
                to
                any remedies to which the Corporation is entitled, any right of the
                Executive to receive termination payments and benefits under
                Section 1 shall be forfeited to the extent of any amounts payable or
                benefits to be provided after a breach of any covenant set forth
                in
                Section 3. 

            

    

     

     

    
      
        3

      

      
        
        

        
        

      

      
        
        

      

    

     

    
      	1.6  	
              Non-Eligibility
                For Other Company Separation Pay Benefits.
                The benefits provided for herein are intended to be in lieu of, and
                not in
                addition to, other separation pay benefits to which the Executive
                might be
                entitled, including those under the Corporation’s Separation Pay Plan, or
                any successor plan or program offered by the Corporation, which the
                Executive hereby waives. If the Executive receives benefits under
                the
                Corporation’s Change in Control Plan (the “CIC Plan”), in the event of
                Employment Termination (as defined in the CIC Plan), the covenants
                set
                forth in Section 3 hereof shall automatically terminate and, if the
                Executive shall receive all benefits to which the Executive is entitled
                under the CIC Plan, the Executive waives all benefits
                hereunder.

            

    

     

    
      	1.7  	
              Corporation’s
                Right of Offset.
                If the Executive is at any time indebted to the Corporation, or otherwise
                obligated to pay money to the Corporation for any reason, to the
                extent
                exempt from or otherwise permitted by Code section 409A and the Treasury
                Regulations thereunder, including Treasury Regulation section
                1.409A-3(j)(4)(xiii) or any successor thereto, the Corporation, at
                its
                election, may offset amounts otherwise payable to the Executive under
                this
                Agreement, including, but without limitation, Base Salary and incentive
                compensation payments, against any such indebtedness or amounts due
                from
                the Executive to the Corporation, to the extent permitted by
                law.

            

    

     

    
      	1.8  	
              Mitigation.
                In the event of the Involuntary Separation from Service of the Executive,
                the Executive shall not be required to mitigate damages by seeking
                other
                employment or otherwise as a condition to receiving termination payments
                or benefits under this Agreement. No amounts earned by the Executive
                after
                the Executive’s Involuntary Separation from Service, whether from
                self-employment, as a common law employee, or otherwise, shall reduce
                the
                amount of any payment or benefit under any provision of this Agreement.
                

            

    

     

    
      	1.9  	
              Resignations.
                Except to the extent requested by the Corporation, upon any termination
                of
                the Executive’s employment with the Corporation, the Executive shall
                immediately resign all positions and directorships with the Corporation
                and each of its subsidiaries and
                affiliates.

            

    

     

    
      	2.  	
              Certain
                Definitions.
                

            

    

     

    As
      used in this Agreement, the following terms shall have the following
      meanings:

     

    
      	2.1  	
              “Agreement”
                shall mean this Executive Termination Pay
                Agreement.

            

    

     

    
      	2.2  	
              “Base
                Salary”
                shall mean the Executive’s annual base salary as in effect at the
                effective date of termination of the Executive’s termination of employment
                with the Corporation.

            

    

     

    
      
        4

      

      
        
        

        
        

      

      
        
        

      

    

     

    
      	2.3  	
              “Cause”
                shall mean (a) an intentional act of fraud, embezzlement, theft or
                any
                other material violation of law that occurs during or in the course
                of
                Executive’s employment with the Corporation; (b) intentional damage to the
                Corporation’s assets; (c) intentional disclosure of the Corporation’s
                confidential information contrary to Corporation’s policies; (d) material
                breach of Executive’s obligations under this Agreement; (e) intentional
                engagement in any competitive activity which would constitute a breach
                of
                Executive’s duty of loyalty or of Executive’s obligations under this
                Agreement; (f) the willful and continued failure to substantially
                perform
                Executive’s duties for the Corporation (other than as a result of
                incapacity due to physical or mental illness); or (g) intentional
                breach
                of any of Corporation’s policies or willful conduct by Executive that is
                in either case demonstrably and materially injurious to Corporation,
                monetarily or otherwise; provided, however, that termination for
                Cause
                based on clause (d) shall not be effective unless the Executive shall
                have written notice from the Chief Executive Officer of the Corporation
                (which notice shall include a description of the reasons and circumstances
                giving rise to such notice) not less than 30 days prior to the Executive’s
                termination and the Executive has failed after receipt of such notice
                to
                satisfactorily discharge the Executive’s duties. For purposes hereof, an
                act, or a failure to act, shall not be deemed “willful” or “intentional”
                unless it is done, or omitted to be done, by the Executive in bad
                faith or
                without a reasonable belief that the Executive’s action or omission was in
                the best interest of Corporation. Failure to meet performance standards
                or
                objectives, by itself, does not constitute “Cause.” “Cause” also includes
                any of the above grounds for dismissal regardless of whether the
                Corporation learns of it before or after terminating Executive’s
                employment. 

            

    

     

    
      	2.4  	
              “Code”
                shall mean the Internal Revenue Code of 1986, as amended, including
                proposed, temporary or final regulations or any other guidance issued
                by
                the Secretary of the Treasury or the Internal Revenue Service with
                respect
                thereto.

            

    

     

    
      	2.5  	
              “CIC
                Plan”
                shall have the meaning ascribed thereto in Section
                1.6.

            

    

     

    
      	2.6  	
              “Compensation
                Payments”
                shall have the meaning ascribed thereto in Section
                1.1.

            

    

     

    
      	2.7  	
              “Competing
                Business”
                shall have the meaning ascribed thereto in
                Section 3.4.

            

    

     

    
      	2.8  	
              “Corporation”
                shall
                mean J.C. Penney Corporation, Inc. 

            

    

     

    
      	2.9  	
              “Executive”
                shall mean the undersigned member of the Corporation’s Executive
                Board.

            

    

     

    
      	2.10  	
              “Involuntary
                Separation from Service”
                shall mean Separation from Service due to the independent exercise
                of the
                unilateral authority of the Service Recipient to terminate the Executive's
                services, other than due to 

            

    

     

    
      
        5

      

      
        
        

        
        

      

      
        
        

      

    

     

    
      	  	
              the
                Executive’s implicit or explicit request, where the Executive was willing
                and able to continue performing services,
                within the meaning of Code section 409A and Treasury Regulation section
                1.409A-1(n)(1) or any successor thereto. 

            

    

     

    
      	2.11  	
              “Permanent
                Disability” means
                the Executive is unable 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,
                within the meaning of Code section 409A and Treasury Regulation section
                1.409A-3(i)(4)(i)(A) or any successor thereto.
                A determination of Permanent Disability, for purposes of payment
                under
                this Agreement, will be made by the Corporation’s disability insurance
                plan administrator or insurer.

            

    

     

    
      	2.12  	
              “Proprietary
                Information”
                shall have the meaning ascribed thereto in Section
                3.

            

    

     

    
      	2.13
               	
              “Prorated
                Bonus” shall
                have the meaning ascribed thereto in Section
                1.1.

            

    

     

    
      	2.14  	
              “PTO
                Policy”
                shall have the meaning ascribed thereto in Section
                1.3.

            

    

     

    
      	2.15  	
              “Separation
                from Service”
                within the meaning of Code section 409A and Treasury Regulation section
                1.409A-1(h) or any successor thereto, shall
                mean
                the date an Executive retires, dies or otherwise has a termination
                of
                employment with the Service Recipient. In accordance with Treasury
                Regulation section 1.409A-1(h) or any successor thereto, if an Executive
                is on a period of leave that exceeds six months and the Executive
                does not
                retain a right to reemployment under an applicable statute or by
                contract,
                the employment relationship is deemed to terminate on the first date
                immediately following such six-month period, and also, an Executive
                is
                presumed to have separated from service where the level of bona fide
                services performed (whether as an employee or an independent contractor)
                decreases to a level equal to 20 percent or less of the average level
                of
                services performed (whether as an employee or an independent contractor)
                by the Executive during the immediately preceding 36-month period
                (or the
                full period of service to the Service Recipient if the employee has
                been
                providing services for less than the 36-month period).
                

            

    

     

    
      	 	
              2.16

            	
              “Service
                Recipient” shall mean the person, within the meaning of Treasury
                Regulation section 1.409A-1(g)
                or any successor thereto,
                for whom the services are performed and with respect to whom the
                legally
                binding right to compensation arises, and all persons with whom such
                person would be considered a single employer under Code section 414(b)
                (employees of controlled group of corporations), and all persons
                with whom
                such person would be considered a single employer under Code section
                414(c) (employees of partnerships, proprietorships, etc., under common
                control), using the “at least 50 percent” ownership standard,
                

            

    

     

    
      
        6

      

      
        
        

        
        

      

      
        
        

      

    

     

    
      	 	
               

            	
              within
                the meaning of Code section 409A and Treasury Regulation section
                1.409A-1(h)(3) or any successor
                thereto.

            

    
      	 	
              2.17

            	
              “Severance
                Period”
                shall mean the following period, based on the Executive’s title at the
                time of termination of the Executive’s employment with the
                Corporation:

            

    

     

    Title                          Severance
      Period

    

    Executive
      Vice Presidents and above               18
      months

    Senior
      Vice President                            12
      months

    

    
      	3.  	
              Covenants
                and Representations of the Executive.
                The Executive hereby acknowledges that the Executive’s duties to the
                Corporation require access to and creation of the Corporation’s
                confidential or proprietary information and trade secrets (collectively,
                the “Proprietary Information”). The Proprietary Information has been and
                will continue to be developed by the Corporation and its subsidiaries
                and
                affiliates at substantial cost and constitutes valuable and unique
                property of the Corporation. The Executive further acknowledges that
                due
                to the nature of the Executive’s position, the Executive will have access
                to Proprietary Information affecting plans and operations in every
                location in which the Corporation (and its subsidiaries and affiliates)
                does business or plans to do business throughout the world, and the
                Executive’s decisions and recommendations on behalf of the Corporation may
                affect its operations throughout the world. Accordingly, the Executive
                acknowledges that the foregoing makes it reasonably necessary for
                the
                protection of the Corporation’s business interests that the Executive
                agree to the following covenants:

            

    

     

    
      	3.1  	
              Confidentiality.
                The Executive hereby covenants and agrees that the Executive shall
                not,
                without the prior written consent of the Corporation, during the
                Executive’s employment with the Corporation or at any time thereafter
                disclose to any person not employed by the Corporation, or use in
                connection with engaging in competition with the Corporation, any
                Proprietary Information of the
                Corporation.

            

    

     

    
      	(a)  	
              It
                is expressly understood and agreed that the Corporation’s Proprietary
                Information is all nonpublic information relating to the Corporation’s
                business, including but not limited to information, plans and strategies
                regarding suppliers, pricing, marketing, customers, hiring and
                terminations, employee performance and evaluations, internal reviews
                and
                investigations, short term and long range plans, acquisitions and
                divestitures, advertising, information systems, sales objectives
                and
                performance, as well as any other nonpublic information, the nondisclosure
                of which may provide a competitive or economic advantage to the
                Corporation. Proprietary Information shall not be deemed to have
                become
                public for purposes of this Agreement where it has been disclosed
                or made
                public by or through anyone acting in violation of
                a

            

    

     

     

    
      
        7

      

      
        
        

        
        

      

      
        
        

      

    

     

    
      	 	
              contractual,
                ethical, or legal responsibility to maintain its
                confidentiality.

            

    

     

    
      	(b)  	
              In
                the event the Executive receives a subpoena, court order or other
                summons
                that may require the Executive to disclose Proprietary Information,
                on
                pain of civil or criminal penalty, the Executive will promptly give
                notice
                to the Corporation of the subpoena or summons and provide the Corporation
                an opportunity to appear at the Corporation’s expense and challenge the
                disclosure of its Proprietary Information, and the Executive shall
                provide
                reasonable cooperation to the Corporation for purposes of affording
                the
                Corporation the opportunity to prevent the disclosure of the Corporation’s
                Proprietary Information.

            

    

     

    
      	3.2  	
              Nonsolicitation
                of Employees.
                The Executive hereby covenants and agrees that during the Executive’s
                employment with the Corporation and for a period equal to the Severance
                Period thereafter, the Executive shall not, without the prior written
                consent of the Corporation, on the Executive’s own behalf or on the behalf
                of any person, firm or company, directly or indirectly, attempt to
                influence, persuade or induce, or assist any other person in so persuading
                or inducing, any of the employees of the Corporation (or any of its
                subsidiaries or affiliates) to give up his or her employment with
                the
                Corporation (or any of its subsidiaries or affiliates), and the Executive
                shall not directly or indirectly solicit or hire employees of the
                Corporation (or any of its subsidiaries or affiliates) for employment
                with
                any other employer.

            

    

     

    
      	3.3  	
              Noninterference
                with Business Relations. The
                Executive hereby covenants and agrees that during the Executive’s
                employment with the Corporation and for a period equal to the Severance
                Period thereafter, the Executive shall not, without the prior written
                consent of the Corporation, on the Executive’s own behalf or on the behalf
                of any person, firm or company, directly or indirectly, attempt to
                influence, persuade or induce, or assist any other person in so persuading
                or inducing, any person, firm or company to cease doing business
                with,
                reduce its business with, or decline to commence a business relationship
                with, the Corporation (or any of its subsidiaries or
                affiliates).

            

    

     

    
      	3.4  	
              Noncompetition.
                

            

    

     

    
      	(a)  	
              The
                Executive covenants that during the Executive’s employment with the
                Corporation and, in the event the Executive will receive or has received
                the severance benefits provided for in Section 1.3, for a period
                equal to
                the Severance Period thereafter, the Executive will not undertake
                work for
                a Competing Business, as defined in Section 3.4(b). For purposes
                of this
                covenant, “undertake work for” shall include performing services, whether
                paid or unpaid, in any capacity, including as an officer, director,
                owner,
                consultant, 

            

    

     

    
      
        8

      

      
        
        

        
        

      

      
        
        

      

    

     

    
      	 	
              employee,
                agent or representative, where such services involve the performance
                of
                similar duties or oversight responsibilities as those performed by
                the
                Executive at any time during the 12-month period preceding the Executive’s
                termination from the Corporation for any reason. Notwithstanding
                the
                foregoing, the Executive may waive the benefits under Section 1.3
                by
                providing a written notice to the Corporation’s General Counsel and will
                then not be subject to this
                Section 3.4.

            

    

     

    
      	(b)  	
              As
                used in this Agreement, the term “Competing Business” shall mean any
                business that, at the time of the
                determination:

            

    

     

    
      	 	
              (i)

            	
              operates
                (A) any retail department store, specialty store, or general merchandise
                store; (B) any retail catalog, telemarketing, or direct mail business;
                (C)
                any Internet-based or other electronic department store or general
                merchandise retailing business; (D) any other retail business that
                sells
                goods, merchandise, or services of the types sold by the Corporation,
                including its divisions, affiliates, and licensees; or (E) any business
                that provides buying office or sourcing services to any business
                of the
                types referred to in this Section 3.4(b)(i);
                and

            

    

     

    
      	 	
              (ii)

            	
              conducts
                any business of the types referred to in Section 3.4(b)(i) in the
                United States, Commonwealth of Puerto Rico, or another country in
                which
                the Corporation, including its divisions, affiliates, and licensees,
                conducts a similar business.

            

    

     

    
      	3.5  	
              Injunctive
                Relief.
                If the Executive shall breach any of the covenants contained in this
                Section 3, the Corporation shall have no further obligation to make
                any
                payment to the Executive pursuant to this Agreement and may recover
                from
                the Executive all such damages as it may be entitled to at law or
                in
                equity. In addition, the Executive acknowledges that any such breach
                is
                likely to result in immediate and irreparable harm to the Corporation
                for
                which money damages are likely to be inadequate. Accordingly, the
                Executive consents to injunctive and other appropriate equitable
                relief
                without the necessity of bond in excess of $500.00 upon the institution
                of
                proceedings therefor by the Corporation in order to protect the
                Corporation’s rights hereunder.

            

    

     

     

    
      
        9

      

      
        
        

        
        

      

      
        
        

      

    

     

    
      	4.  	
              Employment-at-Will.
                Notwithstanding any provision in this Agreement to the contrary,
                the
                Executive hereby acknowledges and agrees that the Executive’s employment
                with the Corporation is for an unspecified duration and constitutes
                “at-will” employment, and the Executive further acknowledges and agrees
                that this employment relationship may be terminated at any time,
                with or
                without Cause or for any or no Cause, at the option either of the
                Corporation or the Executive. 

            

    

     

    
      	5.  	
              Miscellaneous
                Provisions.

            

    

     

    
      	5.1  	
              Dispute
                Resolution.
                Any dispute between the parties under this Agreement shall be resolved
                (except as provided below) through informal arbitration by an arbitrator
                selected under the rules of the American Arbitration Association
                for
                arbitration of employment disputes (located in the city in which
                the
                Corporation’s principal executive offices are based) and the arbitration
                shall be conducted in that location under the rules of said Association.
                Each party shall be entitled to present evidence and argument to
                the
                arbitrator. The arbitrator shall have the right only to interpret
                and
                apply the provisions of this Agreement and may not change any of
                its
                provisions, except as expressly provided in Section 3.4 and only
                in the
                event the Corporation has not brought an action in a court of competent
                jurisdiction to enforce the covenants in Section 3. The arbitrator
                shall
                permit reasonable pre-hearing discovery of facts, to the extent necessary
                to establish a claim or a defense to a claim, subject to supervision
                by
                the arbitrator. The determination of the arbitrator shall be conclusive
                and binding upon the parties and judgment upon the same may be entered
                in
                any court having jurisdiction thereof. The arbitrator shall give
                written
                notice to the parties stating the arbitrator’s determination, and shall
                furnish to each party a signed copy of such determination. The expenses
                of
                arbitration shall be borne equally by the Corporation and the Executive
                or
                as the arbitrator equitably determines consistent with the application
                of
                state or federal law; provided, however, that the Executive’s share of
                such expenses shall not exceed the maximum permitted by law. To the
                extent
                applicable, in accordance with Code section 409A and Treasury Regulation
                section 1.409A-3(i)(1)(iv)(A)
                or any successor thereto,
                any payments or reimbursement of arbitration expenses which the
                Corporation is required to make under the foregoing provision shall
                meet
                the requirements below. The Corporation shall reimburse the Executive
                for
                any such expenses, promptly upon delivery of reasonable documentation,
                provided, however, all invoices for reimbursement of expenses must
                be
                submitted to the Corporation and paid in a lump sum payment by the
                end of
                the calendar year following the calendar year in which the expense
                was
                incurred. All expenses must be incurred within a 20 year period following
                the Separation from Service. The amount of expenses paid or eligible
                for
                reimbursement in one year under this Section 5.1 shall not affect
                the
                expenses paid or eligible for reimbursement in any other taxable
                year. The
                right to payment or reimbursement under this

            

    

     

     

    
      
        10

      

      
        
        

        
        

      

      
        
        

      

    

     

    Section
      5.1 shall not be subject to liquidation or exchange for
      another benefit.

     

    Any
      arbitration or action pursuant to this Section 5.1 shall be governed by and
      construed in accordance with the substantive laws of the State of Texas and,
      where applicable, federal law, without giving effect to the principles of
      conflict of laws of such State. The mandatory arbitration provisions of this
      Section 5.1 shall supersede in their entirety the J.C. Penney Alternative,
      a
      dispute resolution program generally applicable to employment
      terminations.

     

    Notwithstanding
      the foregoing, the Corporation shall not be required to seek or participate
      in
      arbitration regarding any actual or threatened breach of the Executive’s
      covenants in Section 3, but may pursue its remedies, including injunctive
      relief, for such breach in a court of competent jurisdiction in the city in
      which the Corporation’s principal executive offices are based, or in the sole
      discretion of the Corporation, in a court of competent jurisdiction where the
      Executive has committed or is threatening to commit a breach of the Executive’s
      covenants, and no arbitrator may make any ruling inconsistent with the findings
      or rulings of such court.

     

    
      	5.2  	
              Binding
                on Successors; Assignment.
                This Agreement shall be binding upon and inure to the benefit of
                the
                Executive, the Corporation and each of their respective successors,
                assigns, personal and legal representatives, executors, administrators,
                heirs, distributees, devisees, and legatees, as applicable; provided
                however, that neither this Agreement nor any rights or obligations
                hereunder shall be assignable or otherwise subject to hypothecation
                by the
                Executive (except by will or by operation of the laws of intestate
                succession) or by the Corporation except that the Corporation may
                assign
                this Agreement to any successor (whether by merger, purchase or otherwise)
                to all or substantially all of the stock, assets or businesses of
                the
                Corporation, if such successor expressly agrees to assume the obligations
                of the Corporation hereunder.

            

    

     

    
      	5.3  	
              Governing
                Law.
                This
                Agreement shall be governed, construed, interpreted, and enforced
                in
                accordance with the substantive law of the State of Texas and federal
                law,
                without regard to conflicts of law principles, except as expressly
                provided herein. In the event the Corporation exercises its discretion
                under Section 5.1 to bring an action to enforce the covenants contained
                in
                Section 3 in a court of competent jurisdiction where the Executive
                has
                breached or threatened to breach such covenants, and in no other
                event,
                the parties agree that the court may apply the law of the jurisdiction
                in
                which such action is pending in order to enforce the covenants to
                the
                fullest extent
                permissible.

            

    

     

    
      
        11

      

      
        
        

        
        

      

      
        
        

      

    

     

    
      	5.4  	
              Severability.
                Any provision of this Agreement that is deemed invalid, illegal or
                unenforceable in any jurisdiction shall, as to that jurisdiction,
                be
                ineffective, to the extent of such invalidity, illegality or
                unenforceability, without affecting in any way the remaining provisions
                hereof in such jurisdiction or rendering that or any other provisions
                of
                this Agreement invalid, illegal or unenforceable in any other
                jurisdiction. If any covenant in Section 3 should be deemed invalid,
                illegal or unenforceable because its time, geographical area, or
                restricted activity, is considered excessive, such covenant shall
                be
                modified to the minimum extent necessary to render the modified covenant
                valid, legal and enforceable.

            

    

     

    
      	5.5  	
              Notices.
                For all purposes of this Agreement, all communications required or
                permitted to be given hereunder shall be in writing and shall be
                deemed to
                have been duly given when hand delivered or dispatched by electronic
                facsimile transmission (with receipt thereof confirmed), or five
                business
                days after having been mailed by United States registered or certified
                mail, return receipt requested, postage prepaid, or three business
                days
                after having been sent by a nationally recognized overnight courier
                service, addressed to the Corporation at its principal executive
                office,
                c/o the Corporation’s General Counsel, and to the Executive at the
                Executive’s principal residence, or to such other address as any party may
                have furnished to the other in writing and in accordance herewith,
                except
                that notices of change of address shall be effective only upon
                receipt.

            

    

     

    
      	5.6  	
              Counterparts.
                This Agreement may be executed in several counterparts, each of which
                shall be deemed to be an original, but all of which together shall
                constitute one and the same
                Agreement.

            

    

     

    
      	5.7  	
              Entire
                Agreement.
                The terms of this Agreement are intended by the parties to be the
                final
                expression of their agreement with respect to the Executive’s employment
                by the Corporation and may not be contradicted by evidence of any
                prior or
                contemporaneous agreement. The parties further intend that this Agreement
                shall constitute the complete and exclusive statement of its terms
                and
                that no extrinsic evidence whatsoever may be introduced in any judicial,
                administrative, or other legal proceedings to vary the terms of this
                Agreement. 

            

    

     

    
      	5.8  	
              Amendments;
                Waivers.
                This Agreement may not be modified, amended, or terminated except
                by an
                instrument in writing, approved by the Corporation and signed by
                the
                Executive and the Corporation. Failure on the part of either party
                to
                complain of any action or omission, breach or default on the part
                of the
                other party, no matter how long the same may continue, shall never
                be
                deemed to be a waiver of any rights or remedies hereunder, at law
                or in
                equity. The Executive or the Corporation may waive compliance by
                the other
                party with any provision of this Agreement that such other party
                was or is
                obligated to comply with or perform only through an executed writing;
                provided, however, that such waiver shall not

            

    

     

     

    
      
        12

      

      
        
        

        
        

      

      
        
        

      

    

     

    operate
      as a waiver of, or estoppel with respect to, any other or
      subsequent failure.

     

    
      	5.9  	
              No
                Inconsistent Actions.
                The parties hereto shall not voluntarily undertake or fail to undertake
                any action or course of action that is inconsistent with the provisions
                or
                essential intent of this Agreement. Furthermore, it is the intent
                of the
                parties hereto to act in a fair and reasonable manner with respect
                to the
                interpretation and application of the provisions of this
                Agreement.

            

    

     

    
      	5.10  	
              Headings
                and Section References.
                The headings used in this Agreement are intended for convenience
                or
                reference only and shall not in any manner amplify, limit, modify
                or
                otherwise be used in the construction or interpretation of any provision
                of this Agreement. All section references are to sections of this
                Agreement, unless otherwise noted.

            

    

     

    
      	5.11  	
              Beneficiaries.
                The Executive shall be entitled to select (and change, to the extent
                permitted under any applicable law) a beneficiary or beneficiaries
                to
                receive any compensation or benefit payable hereunder following the
                Executive’s death, and may change such election, in either case by giving
                the Corporation written notice thereof in accordance with Section
                5.5. In
                the event of the Executive’s death or a judicial determination of the
                Executive’s incompetence, reference in this Agreement to the “Executive”
                shall be deemed, where appropriate, to be the Executive’s beneficiary,
                estate or other legal
                representative.

            

    

     

    
      	5.12  	
              Withholding.
                The Corporation shall be entitled to withhold from payment any amount
                of
                withholding required by law.

            

    

     

    

    IN
      WITNESS WHEREOF, the parties have executed this Agreement as of the

    date
      and year first above written.

     

    J.
      C. Penney Corporation, Inc.

    

    By: 

    Name:                                 
            

    Title:                                                                                 
      

    

    Executive

     

                                                   

     

     

     

     

     

     

    13

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