Document:

Exhibit 10.2 Text of 2014 Equity Plan

EXHIBIT 10.2
UNION BANKSHARES, INC.
 2014 EQUITY INCENTIVE PLAN - TABLE OF CONTENTS 
	
						
	ARTICLE 1
	 
	 
	PURPOSE
	3

	 
	1.1
	

	 
	General
	3

	ARTICLE 2
	 
	 
	DEFINITIONS
	3

	 
	2.1
	

	 
	Definitions
	3

	ARTICLE 3
	 
	 
	EFFECTIVE TERM OF PLAN
	7

	 
	3.1
	

	 
	Effective Date
	7

	 
	3.2
	

	 
	Termination of Plan
	7

	ARTICLE 4
	 
	 
	ADMINISTRATION
	7

	 
	4.1
	

	 
	Committee
	7

	 
	4.2
	

	 
	Action and Interpretations by the Committee
	7

	 
	4.3
	

	 
	Authority of Committee
	8

	 
	4.4
	

	 
	Award Certificates
	8

	 
	4.5
	

	 
	Indemnification
	8

	ARTICLE 5
	 
	 
	SHARES SUBJECT TO THE PLAN
	8

	 
	5.1
	

	 
	Number of Shares
	8

	 
	5.2
	

	 
	Share Counting
	8

	 
	5.3
	

	 
	Stock Distributed
	9

	 
	5.4
	

	 
	Limitation on Awards
	9

	ARTICLE 6
	 
	 
	ELIGIBILITY
	9

	 
	6.1
	

	 
	General
	9

	 
	6.2
	

	 
	Special Rule for Incentive Stock Options
	9

	ARTICLE 7
	 
	 
	STOCK OPTIONS
	10

	 
	7.1
	

	 
	General
	10

	 
	7.2
	

	 
	Incentive Stock Options
	10

	ARTICLE 8
	 
	 
	RESTRICTED STOCK and RESTRICTED STOCK UNITS 
	11

	 
	8.1
	

	 
	Grant of Restricted Stock and Restricted Stock Units
	11

	 
	8.2
	

	 
	Issuance and Restrictions
	11

	 
	8.3
	

	 
	Dividends on Restricted Stock
	11

	 
	8.4
	

	 
	Grant of Dividend Equivalents
	11

	 
	8.5
	

	 
	Restrictions on Transfer
	11

	 
	8.6
	

	 
	Termination and Forfeiture
	11

	 
	8.7
	

	 
	Delivery of Restricted Stock
	12

	ARTICLE 9
	 
	 
	PERFORMANCE AWARDS
	12

	 
	9.1
	

	 
	Grant of Performance Awards
	12

	 
	9.2
	

	 
	Performance Goals
	12

	 
	9.3
	

	 
	Grant of Performance Awards to Covered Employees
	14

	 
	9.4
	

	 
	Certification of Performance Goals
	14

	ARTICLE 10
	 
	 
	PROVISIONS APPLICABLE TO AWARDS
	14

	 
	10.1
	

	 
	Term of Award
	14

	 
	10.2
	

	 
	Form of Payment for Awards
	14

	 
	10.3
	

	 
	Limitations on Transfer
	14

	 
	10.4
	

	 
	Beneficiaries
	14

	 
	10.5
	

	 
	Stock Trading Restrictions
	14

	 
	10.6
	

	 
	Acceleration upon Death or Disability
	15

	 
	10.7
	

	 
	Effect of a Change in Control
	15

	 
	10.8
	

	 
	Acceleration for Other Reasons
	16

	 
	10.9
	

	 
	Forfeiture Events; Recoupment
	16

1

	
						
	 
	10.10
	

	 
	Substitute Awards
	16

	   ARTICLE 11
	 
	 
	CHANGES IN CAPITAL STRUCTURE
	16

	 
	11.1
	

	 
	Mandatory Adjustments
	16

	 
	11.2
	

	 
	Discretionary Adjustments
	17

	 
	11.3
	

	 
	General
	17

	   ARTICLE 12
	 
	 
	AMENDMENT, MODIFICATION AND TERMINATION
	17

	 
	12.1
	

	 
	Amendment, Modification and Termination
	17

	 
	12.2
	

	 
	Modification of Outstanding Awards 
	17

	 
	12.3
	

	 
	Compliance Amendments
	18

	   ARTICLE 13
	 
	 
	GENERAL PROVISIONS
	18

	 
	13.1
	

	 
	No Enlargement of Rights
	18

	 
	13.2
	

	 
	Withholding
	18

	 
	13.3
	

	 
	Special Provisions Related to Code Section 409A
	18

	 
	13.4
	

	 
	Unfunded Status of Awards
	19

	 
	13.5
	

	 
	Relationship to Other Benefits
	19

	 
	13.6
	

	 
	Expenses
	19

	 
	13.7
	

	 
	Titles and Headings
	19

	 
	13.8
	

	 
	Gender and Number
	19

	 
	13.9
	

	 
	Fractional Shares
	19

	 
	13.10
	

	 
	No Liability of Company
	20

	 
	13.11
	

	 
	Governing Law
	20

	 
	13.12
	

	 
	Additional Provisions
	20

	 
	13.13
	

	 
	No Limitations on Rights of Company
	20

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UNION BANKSHARES, INC.
2014 EQUITY INCENTIVE PLAN

ARTICLE 1
PURPOSE

1.1.    GENERAL.  The purpose of the Union Bankshares, Inc. 2014 Equity Incentive Plan (the “Plan”) is to promote the success, and enhance the value, of Union Bankshares, Inc. (the “Company”), by linking the personal interests of officers and directors of the Company or any Affiliate (as defined below) to those of Company stockholders and by providing such persons with an incentive for outstanding performance.  The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, hire and retain the services of officers and directors upon whose judgment, interest, and special effort the successful operation of the Company’s business is largely dependent.  Accordingly, the Plan permits the grant of incentive awards from time to time to selected officers, non-employee directors and certain prospective employees of the Company and its Affiliates. 

ARTICLE 2
DEFINITIONS

2.1.    DEFINITIONS.  When a word or phrase appears in this Plan with the initial letter capitalized, and the word or phrase does not commence a sentence, the word or phrase shall generally be given the meaning ascribed to it in this Section or in Section 1.1 unless a clearly different meaning is required by the context.  The following words and phrases shall have the following meanings:

•“Affiliate” means (i) any Subsidiary or Parent, or (ii) an entity that directly or through one or more intermediaries controls, is controlled by, or is under common control with, the Company, as determined by the Committee.

•“Award” means any Option, Restricted Stock, Restricted Stock Unit or Dividend Equivalent granted to a Participant under the Plan.

•“Award Certificate” means a written document, in such form as the Committee prescribes from time to time, setting forth the terms and conditions of an Award.  Award Certificates may be in the form of individual award agreements or certificates or a program document describing the terms and provisions of an Award or series of Awards under the Plan.  The Committee may provide for the use of electronic, internet or other nonpaper Award Certificates, and the use of electronic, internet or other nonpaper means for the acceptance thereof and actions thereunder by a Participant.

•“Beneficial Owner” shall have the meaning given such term in Rule 13d-3 of the General Rules and Regulations under the 1934 Act.

•“Board” means the Board of Directors of the Company.

•“Cause” as a reason for a Participant’s termination of employment shall have the meaning assigned such term in the employment, severance, change in control, or similar agreement, if any, between such Participant and the Company or an Affiliate, provided, however that if there is no such employment, severance, change in control, or similar agreement in which such term is defined, and unless otherwise defined in the applicable Award Certificate, “Cause” shall mean any of the following acts by the Participant, as determined by the Committee: gross neglect of duty; prolonged absence from duty without the consent of the Company; material breach by the Participant of any published Company or Affiliate personnel policy, code of conduct or code of ethics; or willful misconduct, misfeasance or malfeasance of duty which is reasonably determined to be detrimental to the Company; or conviction of a felony or entering of a plea of nolo contendere to a felony. With respect to a Participant’s termination of directorship, “Cause” means an act or failure to act that constitutes cause for removal of a director under applicable Vermont law.  The determination of the Committee as to the existence of “Cause” shall be conclusive on the Participant and the Company.

•“Change in Control” means and includes the occurrence of any one of the following events:

(i)    individuals who, on the Effective Date, constitute the Board of Directors of the Company (the “Incumbent Directors”) cease for any reason to constitute at least a majority of such Board, provided that any person becoming a director after the Effective Date and whose election or nomination for election was approved 

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by a vote of at least a majority of the Incumbent Directors then on the Board shall be deemed an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to the election or removal of directors (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director; or

(ii)    if any Person, or group of Persons acting in concert, is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Company Voting Securities representing more than fifty percent (50%) of the combined voting power of the Company Voting Securities; provided, however, that notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred by virtue of any of the following acquisitions of Company Voting Securities: (A) by the Company or any Affiliate; (B) by any employee benefit plan or trust sponsored, maintained or created by the Company or any Affiliate; (C) by any underwriter temporarily holding Company Voting Securities pursuant to an offering of such securities; (D) by any beneficial owner whose increase in the percentage ownership of outstanding Company Voting Securities is as a result of a repurchase of securities by the Company; or (E) pursuant to a transaction in which Company Voting Securities are acquired from the Company in a transaction approved by a majority of the Incumbent Directors; or

(iii)    consummation of a merger, consolidation share exchange or similar form of corporate transaction involving the Parent or a Subsidiary (a “Reorganization”), unless immediately following such Reorganization, all three of the following conditions are satisfied: (A) immediately following the consummation of the Reorganization more than fifty percent (50%) of the total voting power of the resulting corporation (the “Surviving Corporation”) or, if applicable, its ultimate parent corporation (the “Surviving Parent Corporation”) is held by Persons who were the holders of Company Voting Securities outstanding immediately prior to such Reorganization; (B) no person (other than any employee benefit plan or trust sponsored, maintained or created by the Surviving Corporation or the Surviving Parent Corporation) is or becomes the beneficial owner, directly or indirectly, of thirty percent (30%) or more of the total voting power of the outstanding voting securities of the Surviving Parent Corporation (or, if there is no Surviving Parent Corporation, the Surviving Corporation); and (C) at least a majority of the members of the board of directors of the Surviving Parent Corporation (or, if there is no Surviving Parent Corporation, the Surviving Corporation) are individuals who were Incumbent Directors of the Company at the time of the Company Reorganization Board’s approval of the execution of the initial agreement providing for such Reorganization; or

(iv)    consummation of the sale, directly or indirectly, of all or substantially all of the banking assets of the Company to an entity not owned or controlled (directly or indirectly) by the Company’s stockholders; or

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

•“Code” means the Internal Revenue Code of 1986, as amended from time to time.  For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.

•“Committee” means the Compensation Committee of the Board.

•“Company” means Union Bankshares, Inc., a Vermont corporation, or any successor corporation.

•“Company Voting Securities” means securities of the Company eligible to vote in the election of directors of the Company.

•“Continuous Status as a Participant” means the absence of any interruption or termination of service as an officer or director of the Company or any Affiliate, as applicable; provided, however, that for purposes of an Incentive Stock Option “Continuous Status as a Participant” means the absence of any interruption or termination of service as an employee of the Company or any Parent or Subsidiary, as applicable, pursuant to applicable tax regulations.  Continuous Status as a Participant shall not be considered interrupted in the following cases: (i) a Participant transfers employment between the Company and an Affiliate or between Affiliates; or (ii) in the discretion of the Committee as specified at or prior to such occurrence, in the case of a spin-off, sale or disposition of the Participant’s employer from 

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the Company or any Affiliate; or (iii) any leave of absence authorized in writing by the Company prior to its commencement; provided, however, that for purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract.  If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 91st day of such leave any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Non-Qualified Stock Option.  Whether military, government or other service or other leave of absence shall constitute a termination of Continuous Status as a Participant shall be determined in each case by the Committee at its discretion, and any determination by the Committee shall be final and conclusive. 

•“Covered Employee” means a covered employee as defined in Code Section 162(m)(3).

•“Disability” of a Participant means any mental or physical condition with respect to which the grantee qualified for and receives benefits under a long-term disability plan of the Company or Subsidiary, or in the absence of such a long-term disability plan or coverage under such plan, “Disability” shall mean a physical or mental condition which, in the sole discretion of the Committee, is reasonably expected to be of indefinite duration and to substantially prevent the grantee from fulfilling his or her duties or responsibilities to the Company or a Subsidiary.  If an Award is determined to be subject to Code Section 409A, then notwithstanding anything else herein to the contrary “Disability” or “Disabled” shall mean that the Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Participant’s employer; or (iii) is determined to be totally disabled by the Social Security Administration.  If the determination of Disability relates to an Incentive Stock Option, Disability means Permanent and Total Disability as defined in Code Section 22(e)(3).  Except to the extent prohibited (if applicable) by Code Section 409A, in the event of a dispute, the determination of whether a Participant is Disabled will be made by the Committee and may be supported by the advice of a physician competent in the area to which such Disability relates.

•“Dividend Equivalent” means a right granted to a Participant under section 8.4 in conjunction with the grant of Restricted Stock Units.

•“Effective Date” has the meaning assigned such term in Section 3.1.

•“Eligible Person” means an officer or Nonemployee director of the Company or any Affiliate, or any prospective employee of the Company or any Affiliate who will be an officer upon his or her date of hire..

•“Exchange” means The NASDAQ Stock Market or any other national securities exchange on which the Stock may from time to time be listed or traded.

•“Fair Market Value,” on any date, means (i) if the Stock is listed on an Exchange, the closing sales price on such Exchange or over such system on such date or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported, or (ii) if the Stock is not listed on an Exchange, the mean between the bid and offered prices as quoted by the applicable interdealer quotation system for such date, provided that if the Stock is not quoted on such interdealer quotation system or it is determined that the fair market value is not properly reflected by such quotations, Fair Market Value will be determined by such other method as the Committee determines in good faith to be reasonable and in compliance with Code Sections 409A and 162(m).

•“Full Value Award” means an Award of Restricted Stock or an award of a Restricted Stock Unit which is or may be settled by the issuance of Stock (or at the discretion of the Committee, settled in cash valued by reference to Stock value).

•“Good Reason” (or a similar term denoting constructive termination) has the meaning, if any, assigned such term in the employment, severance, change in control or similar agreement, if any, in effect at the time of such constructive termination between a Participant and the Company or an Affiliate; provided, however, that if there is no such employment, severance, change in control or similar agreement in which such term is defined, “Good Reason” shall have the meaning, if any, given such term in the applicable Award Certificate.  If not defined in either such document, the term “Good Reason” as used herein shall not apply to a particular Award.

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•“Grant Date” of an Award means the first date on which all necessary corporate action has been taken to approve the grant of the Award as provided in this Plan, or such later date as is determined and specified as part of that authorization process.  Notice of the grant shall be a provided to the Participant within a reasonable time after the Grant Date.

•“Incentive Stock Option” means an Option that is intended to be an incentive stock option and meets the requirements of Code Section 422 or any successor provision.

•“Incumbent Directors” has the meaning specified above in the definition of “Change in Control.”

•“Independent Directors” means those members of the Board of Directors who qualify at any given time as (i) “independent” directors under Nasdaq Stock Market Rule 5605(a)(2), (ii) “nonemployee” directors under Rule 16b-3 of the 1934 Act, and (iii) “outside” directors under Code Section 162(m).

•“Nonemployee Director” means a director of the Company or an Affiliate who is not a common law employee of the Company or an Affiliate.

•“Non-Qualified Stock Option” means an Option that is not an Incentive Stock Option.

•“Option” means a right granted to a Participant under Article 7 of the Plan to purchase Stock at a specified price during specified time periods.  An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.

•“Parent” means a corporation, limited liability company, partnership or other entity which owns of record or beneficially a majority of the outstanding voting stock or voting power of the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Parent shall have the meaning set forth in Code Section 424(e).

• “Participant” means a person who, as an officer or director of the Company or any Affiliate, or as a prospective employee of the Company or an Affiliate, has been granted an Award under the Plan; provided, however, that in the case of the death of a Participant, the term “Participant” refers to a beneficiary designated pursuant to Section 10.4 or the legal guardian or other legal representative acting in a fiduciary capacity on behalf of the Participant under applicable state law and court supervision.

•“Performance Award” means any award granted under the Plan pursuant to Article 9.

• “Person” means any individual, entity or group, within the meaning of Section 3(a)(9) of the 1934 Act and as used in Section 13(d)(3) or 14(d)(2) of the 1934 Act.

• “Plan” means the Union Bankshares, Inc. 2014 Equity Incentive Plan, as amended from time to time.

•“Restricted Stock” means Stock granted to a Participant under Article 8 that is subject to such restrictions as are specified in the related Award Certificate, and to risk of forfeiture.

•“Restricted Stock Unit” means a right granted to a Participant under Article 8 to receive shares of Stock (or the equivalent value in cash if the Committee so provides) in the future, which right is subject to such restrictions as are specified in the related Award Certificate, and to risk of forfeiture.

•“Retirement” means a Participant’s voluntary termination of employment with the Company or an Affiliate after attaining any normal retirement age specified in any pension, profit sharing or other retirement program sponsored by the Company or an Affiliate, or, in the event of the inapplicability thereof with respect to the Participant in question, after attaining age 65 with at least five years of service with the Company or its Affiliates.

•“Section 162(m) Exemption” means the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Code Section 162(m)(c) or any successor provision.

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•“Substitute Award” has the meaning assigned to such term in Section 10.10.

•“Shares” means shares of the Company’s Stock.  If there has been an adjustment or substitution pursuant to Section 11.1, the term “Shares” shall also include any shares of stock or other securities that are substituted for Shares or into which Shares are adjusted pursuant to Section 11.1.

•“Stock” means the $2.00 par value common stock of the Company and such other securities of the Company as may be substituted for Stock pursuant to Section 11.1.

•“Subsidiary” means any corporation, limited liability company, partnership or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Subsidiary shall have the meaning set forth in Code Section 424(f).

•“1933 Act” means the federal Securities Act of 1933, as amended from time to time.

•“1934 Act” means the federal Securities Exchange Act of 1934, as amended from time to time.

ARTICLE 3
EFFECTIVE TERM OF PLAN

3.1.    EFFECTIVE DATE.  The Plan shall be effective as of the date it is approved by the stockholders of the Company (the “Effective Date”). No Award shall be made prior to the Effective Date.

3.2.    TERMINATION OF PLAN.  The Plan shall terminate on the tenth anniversary of the Effective Date unless earlier terminated as provided herein.  The termination of the Plan on such date shall not affect the validity of any Award outstanding on the date of termination, which shall continue to be governed by the applicable terms and conditions of this Plan.  Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten (10) years after the earlier of (i) adoption of this Plan by the Board, or (ii) the Effective Date.

ARTICLE 4
ADMINISTRATION

4.1.    COMMITTEE.  The Plan shall be administered by the Compensation Committee appointed by the Board, which shall consist of at least three directors, each of whom shall be an Independent Director. In its discretion, the Board may reserve to itself any or all of the authority and responsibility of the Committee under the Plan or may act as administrator of the Plan for any and all purposes.  To the extent the Board has reserved any authority and responsibility or during any time that the Board is acting as administrator of the Plan, (i) only those members of the Board who qualify as Independent Directors shall participate in any determinations or votes relating to the administration of the Plan (including the granting of any Award); and (ii) the Board (acting through its Independent Directors) shall have all the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4.1) shall include the Board.  The mere fact that a Committee member or Board member shall fail to qualify as an Independent Director or shall fail to abstain from any action in administering the Plan shall not invalidate any Award made hereunder which is otherwise validly made under the Plan.  To the extent any action of the Board under the Plan conflicts with actions taken by the Committee, the actions of the Board shall control. 

4.2.    ACTION AND INTERPRETATIONS BY THE COMMITTEE.  For purposes of administering the Plan, the Committee may from time to time adopt rules, regulations, guidelines and procedures for carrying out the provisions and purposes of the Plan and make such other determinations, not inconsistent with the Plan, as the Committee may deem appropriate.  The Committee’s interpretation of the Plan, any Awards granted under the Plan, any Award Certificate and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.  Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Company’s or an Affiliate’s independent certified public accountants, Company counsel or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

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4.3.    AUTHORITY OF COMMITTEE.  Except as provided in Section 4.1, the Committee shall have the exclusive power, authority and discretion to:

		
	(a)
	Grant Awards;

		
	(b)
	Designate Participants from among Eligible Persons;

		
	(c)
	Determine the type or types of Awards to be granted to each Participant;

 
		
	(d)
	Determine the number of Awards to be granted and the number of Shares or dollar amount to which an Award will relate;

		
	(e)
	Determine the terms and conditions of any Award granted under the Plan;

		
	(f)
	Prescribe the form of each Award Certificate, which need not be identical for each Participant;

		
	(g)
	Decide all other matters that must be determined in connection with an Award;

		
	(h)
	Establish, adopt or revise any rules, regulations, guidelines or procedures as it may deem necessary or advisable to administer the Plan;

		
	(i)
	Make all other decisions, determinations and interpretations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan; and

		
	(j)
	Amend the Plan or any Award Certificate as provided herein; and

4.4.    AWARD CERTIFICATES.  Each Award shall be evidenced by an Award Certificate.  Each Award Certificate shall include such provisions, not inconsistent with the Plan, as may be specified by the Committee.

4.5.    INDEMNIFICATION.  Each person who is or shall have been a member of the Committee, or of the Board, or an officer of the Company to whom authority was delegated in accordance with Article 4 shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s charter or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

ARTICLE 5
SHARES SUBJECT TO THE PLAN

5.1.    NUMBER OF SHARES.  Subject to adjustment as provided in Sections 5.2 and Section 11.1, the aggregate number of Shares reserved and available for issuance pursuant to Awards granted under the Plan shall be 50,000. It is intended that upon the Effective Date (i) no further Awards shall be made under the Company’s 2008 Incentive Stock Option Plan; (ii) any Awards of Incentive Stock Options made on or after such Effective Date shall be deemed to be made under this Plan; and (iii) any outstanding awards of incentive stock options granted under the 2008 Incentive Stock Option Plan shall continue to be governed by the terms of such plan.

5.2.    SHARE COUNTING.  Shares covered by an Award shall be subtracted from the Plan share reserve as of the date of grant, but shall be added back to the Plan share reserve in accordance with the following provisions:

		
	(a)
	To the extent that an Award is canceled, terminates, expires, is forfeited or lapses for any reason, any unissued or forfeited Shares subject to the Award will be added back to the Plan share reserve and will again be available for issuance pursuant to Awards granted under the Plan.

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	(b)
	Shares subject to Awards settled in cash will be added back to the Plan share reserve and will again be available for issuance pursuant to Awards granted under the Plan.

		
	(c)
	Shares withheld from an Award or delivered by a Participant to satisfy minimum tax withholding requirements will be added back to the Plan share reserve and will again be available for issuance pursuant to Awards granted under the Plan.

		
	(d)
	If the Participant pays the exercise price of an Option by delivering Shares to the Company (by either actual delivery or attestation), the number of Shares so delivered by the Participant shall be added back to the Plan share reserve and will again be available for issuance pursuant to awards granted under the Plan. 

		
	(e)
	To the extent that the full number of Shares subject to an Option is not issued upon exercise of the Option for any reason, including by reason of net-settlement of the Award, only the number of Shares issued and delivered upon exercise of the Option shall be subtracted from the Plan share reserve.

		
	(f)
	To the extent that the full number of Shares subject to an Award other than an Option is not issued or does not vest for any reason, including by reason of failure to achieve performance goals in whole or in part, only the number of Shares that have vested shall be considered for purposes of determining the number of Shares remaining available for issuance pursuant to Awards granted under the Plan and any shares forfeited will again be available for issuance pursuant to Awards granted under the Plan.

		
	(g)
	Substitute Awards granted pursuant to Section 10.10 of the Plan shall not count against the Shares otherwise available for issuance under the Plan under Section 5.1.

5.3.    STOCK DISTRIBUTED.  Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.

5.4.    LIMITATION ON AWARDS.  Notwithstanding any provision in the Plan to the contrary (but subject to adjustment as provided in Section 11.1):

		
	(a)
	Grants of Options.  The maximum aggregate number of Shares subject to Options granted under the Plan in any 12-month period to any one Participant shall be 7,000.

		
	(b)
	Grants of Restricted Stock or Restricted Stock Units.  The maximum aggregate number of Shares underlying of Awards of Restricted Stock and Restricted Stock Units granted under the Plan in any 12-month period to any one Participant shall be 5,000.

		
	(c)
	Exercise of Incentive Stock Options. The maximum number of Shares that may be issued upon exercise of Incentive Stock Options granted under the Plan shall be 50,000

ARTICLE 6
ELIGIBILITY

6.1.    GENERAL.  Awards may be granted only to Eligible Persons who are selected by the Committee from time to time.  

6.2.    SPECIAL RULE FOR INCENTIVE STOCK OPTIONS.  Notwithstanding anything in this Plan to the contrary, (i) Incentive Stock Options may be granted only to Eligible Persons who are employees of the Company or a Parent or Subsidiary as defined in Code Sections 424(e) and (f); and (ii) Eligible Persons who are service providers to an Affiliate may be granted Options under this Plan only if the Affiliate qualifies as an “eligible issuer of service recipient stock” within the meaning of §1.409A-1(b)(5)(iii)(E) of the final regulations under Code Section 409A.

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ARTICLE 7
STOCK OPTIONS

7.1.    GENERAL.  Options granted under the Plan shall be in such form as the Committee may from time to time approve.  Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options.  Stock Options granted pursuant to the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable:

		
	(a)
	Exercise Price.  The exercise price per Share under an Option shall be determined by the Committee, provided, however, that the exercise price for any Option (other than an Option issued as a Substitute Award pursuant to Section 10.10) shall not be less than the Fair Market Value of the underlying stock as of the Grant Date. If the Participant owns or is deemed to own (by reason of the attribution rules of Code Section 424(d)) more than 10 percent of the combined voting power of all classes of stock of the Company or any Parent or Subsidiary and an Incentive Stock Option is granted to Participant, the option price of such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value on the Grant Date.

		
	(b)
	Prohibition on Repricing.  Except as otherwise provided in Section 11.1, the exercise price of an Option may not be reduced, directly or indirectly by cancellation and regrant or otherwise, without the prior approval of the stockholders of the Company.

		
	(c)
	Time and Conditions of Exercise.  The Committee shall determine the time or times at which an Option may be exercised in whole or in part, subject to Section 7.1(e).  The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised or vested. If the Option is intended to qualify as an Incentive Stock Option under Code Section 422, the aggregate Fair Market Value (determined as of the Grant Date) of the shares of Stock with respect to which Incentive Stock Options granted under this Plan and any other plan of the Company or its Affiliates become exercisable for the first time by a Participant during any calendar year shall not exceed $100,000.  To the extent that any Option exceeds this limitation, it shall be deemed to constitute a Non-Qualified Stock Option.

		
	(d)
	Exercise and Payment.  The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation, cash, Shares, or other property, and the methods by which Shares shall be delivered or deemed to be delivered to Participants. Any Shares surrendered or withheld in full or partial payment of the exercise price of an Option, or in payment of tax withholdings shall be valued at their Fair Market Value on the date of exercise. 

		
	(e)
	Exercise Term.   No Option granted under the Plan shall be exercisable for more than ten years from the Grant Date, provided, however, that if the Option is intended to qualify as an Incentive Stock Option and the Participant owns or is deemed to own (by reason of the attribution rules of Code Section 424(d)) more than 10 percent of the combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of such Option shall be no more than five (5) years from the Grant Date.

		
	(f)
	No Deferral Feature.  No Option shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the Option.

		
	(g)
	No Dividends or Dividend Equivalents.  No Option shall provide for Dividends or Dividend Equivalents.

7.2.    INCENTIVE STOCK OPTIONS.  

		
	(a)
	General.  The terms of any Incentive Stock Options granted under the Plan must comply with the requirements of Code Section 422.  To the extent that an Option does not satisfy all of the requirements of Code Section 422, such Option shall be deemed a Non-Qualified Stock Option. No Incentive Stock Option shall be granted after March 19, 2024.

		
	(b)
	Termination of Continuous Service.  Without limiting the generality of the foregoing, an Incentive Stock Option shall be subject to the following provisions:

		
	(i)
	Termination for Reasons Other Than Cause, Death, Disability. If the Participant’s Continuous Service is terminated for any reason other than Cause, death or Disability, the Participant may exercise the 

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Option, but only within such period of time ending on the earlier of: (a) the date three (3) months 
following the termination of the Participant’s Continuous Service or (b) the Option expiration date.

		
	(ii)
	Termination for Cause.  If the Participant’s Continuous Service is terminated for Cause, the Option (whether vested or unvested) shall immediately terminate and cease to be exercisable.

		
	(iii)
	Termination Due to Disability.  If the Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise the Option, but only within such period of time ending on the earlier of (a) the date twelve (12) months following the Participant’s termination of Continuous Service or (b) the Option expiration date.

		
	(iv)
	Termination Due to Death.  If the Participant’s Continuous Service terminates as a result of the Participant’s death, the Option may be exercised by the Participant’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance by the person designated to exercise the Option upon the Participant’s death during the time period ending on the Option expiration date, or such shorter period (if any) specified in the Award Certificate.

ARTICLE 8
RESTRICTED STOCK AND RESTRICTED STOCK UNITS

8.1.    GRANT OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS.  The Committee is authorized to make Awards of Restricted Stock and Restricted Stock Units to Participants in such amounts and subject to such terms and conditions as may be determined by the Committee in its discretion.  An Award of Restricted Stock or Restricted Stock Units shall be evidenced by an Award Certificate setting forth the terms, conditions, and restrictions applicable to the Award.

8.2.    ISSUANCE AND RESTRICTIONS.  Restricted Stock or Restricted Stock Units shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock).  These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of performance goals, time-based vesting restrictions or otherwise, as the Committee determines at the time of the grant of the Award. Restricted Stock Awards granted hereunder are intended to comply with Code Section 83 and are intended to be exempt from the application of Code Section 409A.  Except as otherwise provided herein or in an Award Certificate, the Participant shall have all of the rights of a stockholder with respect to any Award of the Restricted Stock, including voting rights, and the Participant shall have none of the rights of a stockholder with respect to Restricted Stock Units until such time as Shares of Stock are issued to the Participant in settlement of the Restricted Stock Units following satisfaction of any vesting and other conditions specified in the Award Certificate.  

8.3.    DIVIDENDS ON RESTRICTED STOCK.  Unless otherwise provided in the applicable Award Certificate, Awards of Restricted Stock will be entitled to full dividend rights and any cash or stock dividends paid thereon will be paid or distributed to the Participant when and as paid to the stockholders generally, and in no event later than the 15th day of the third month following the end of the calendar year in which the dividends are paid to stockholders.

8.4.    GRANT OF DIVIDEND EQUIVALENTS.  The Committee is authorized to grant Dividend Equivalents with respect to Awards of Restricted Stock Units granted hereunder, subject to such terms and conditions, including vesting, as may be determined by the Committee.  Dividend Equivalents shall entitle the Participant to receive payments equal to dividends with respect to all or a portion of the number of Shares subject to an Award of Restricted Stock Units, as determined by the Committee.   Dividend Equivalents shall vest and be distributed when and to the extent the underlying Restricted Stock Unit Award vests.  The Committee may provide in the Award Certificate that prior to vesting, Dividend Equivalents shall accrue and be deemed to have been reinvested in additional Shares, or otherwise reinvested.   Unless otherwise provided in the applicable Award Certificate, Dividend Equivalents will be paid or distributed no later than the 15th day of the third month following the later of (i) the end of the calendar year in which the corresponding dividends were paid to stockholders, or (ii) the end of the first calendar year during which the Participant’s right to such Dividends Equivalents is no longer subject to a substantial risk of forfeiture.

8.5.    RESTRICTIONS ON TRANSFER.  Neither Restricted Stock nor Restricted Stock Units may be sold, assigned, transferred, pledged or otherwise encumbered or disposed of during the applicable restriction period. 

8.6.    TERMINATION AND FORFEITURE.  Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter or as otherwise provided in this Plan, upon termination of Continuous Status as a Participant during the applicable restriction period or upon failure to satisfy applicable performance goals during the applicable restriction period, 

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Restricted Stock and Restricted Stock Units that are at that time subject to such restrictions shall be forfeited.  Any Restricted Stock forfeited by a Participant shall be redeemed and cancelled by the Company, without payment of consideration to the Participant, and the escrow agent shall be authorized to deliver the certificates representing such Shares to the Company for cancellation. 

8.7.    DELIVERY OF RESTRICTED STOCK.  Shares of Restricted Stock shall be delivered to the Participant at the time of grant either by book-entry registration or by delivering to the Participant, or a custodian or escrow agent (including, without limitation, the Company, an Affiliate or one or more employees of the Company or Affiliate) designated by the Committee, a stock certificate or certificates registered in the name of the Participant.  Unless otherwise determined by the Committee, the Participant shall deposit the certificates representing the Shares awarded as Restricted Stock that have not yet vested, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Trust Department of Union Bank as the Company’s agent and such Shares shall be released from escrow and delivered to the Participant only upon authorization of the Committee upon vesting of the Shares.  Certificates representing shares of Restricted Stock may bear such restrictive legends as the Committee deems appropriate.

ARTICLE 9
PERFORMANCE AWARDS

9.1.    GRANT OF PERFORMANCE AWARDS.  The Committee is authorized to grant any Award under this Plan, with performance-based vesting criteria, on such terms and conditions as may be selected by the Committee.  Any such Awards with performance-based vesting criteria are sometimes referred to herein as Performance Awards. The Committee shall have the complete discretion to determine the number of Performance Awards granted to each Participant, subject to Section 5.4, and to designate the provisions of such Performance Awards as provided in Section 4.3.  All Performance Awards shall be evidenced by an Award Certificate. 

9.2.    PERFORMANCE GOALS.  

		
	(a)
	Business Criteria.  The Committee may establish performance goals for Performance Awards which may be based on any one or more of the following criteria, as selected by the Committee:

•basic earnings per share;
•basic cash earnings per share;
•diluted earnings per share;
•core earnings per share;
•diluted cash earnings per share;
•net income;
•cash earnings;
•net interest income;
•noninterest income;
•general and administrative expense to average assets ratio;
•cash general and administrative expense to average assets ratio;
•efficiency ratio;
•cash efficiency ratio;
•return on average assets;
•core return on average assets;
•cash return on average assets;
•return on average stockholders’ equity;
•cash return on average stockholders’ equity;
•core return on equity;
•return on average tangible stockholders’ equity;
•cash return on average tangible stockholders’ equity;
•core earnings;
•operating income;

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•operating efficiency ratio;
•net interest margin;
•growth in assets, loans (including home equity lines of credit), or deposits;
•loan production volume;
•nonperforming loans;
•cash flow;
•capital preservation (core or risk-based);
•interest rate risk exposure-net portfolio value;
•interest rate risk-sensitivity;
•liquidity parameters;
		
	•
	strategic business objectives, consisting of one or more objectives based upon meeting specified cost targets, business expansion goals, and goals relating to acquisitions or divestitures, or goals relating to capital raising and capital management;

•stock price (including, but not limited to, growth measures and total stockholder return);
•operating expense as a percentage of average assets;
•core deposits as a percentage of total deposits;
•net charge-off percentage;
•average percentage past due;
•classified assets to total assets;
•compliance/audit exam findings;
•capital ratio;
•revenue growth;
•tangible book value per diluted share;
•management achievement of strategic plan goals;
•system knowledge & utilization of core applications;
•customer service survey; or
•any combination of the foregoing.

Performance goals may be based on the performance of the Company as a whole or on any one or more Subsidiaries or business units of the Company or a Subsidiary and may be measured relative to a peer group, an index, or a business plan.  In establishing any performance measures, the Committee may provide for the exclusion of the effects of the following items, to the extent identified in the audited financial statements of the Company, including footnotes, or in the Management’s Discussion and Analysis section of the Company’s annual report:  (i) extraordinary, unusual, and/or nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) changes in tax laws or accounting principles, regulations or laws; or (iv) mergers or acquisitions. To the extent not specifically excluded, such effects shall be included in any applicable performance measure. 

		
	(b)
	Adjustments. Pursuant to this Section 9.2, in certain circumstances the Committee may adjust performance measures under outstanding Awards; provided, however, that notwithstanding anything herein to the contrary, no adjustment may be made with respect to an Award to a Covered Employee that is intended to be performance-based compensation within the meaning of Code Section 162(m) as contemplated in Section 9.3, except to the extent the Committee exercises such negative discretion as is permitted under applicable law for purposes of an exception under Code Section 162(m).  If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company or the manner in which the Company or an Affiliate conducts its business, or other events or circumstances render performance goals to be unsuitable, the Committee may modify such performance goals in whole or in part, as the Committee deems appropriate.  If a Participant is promoted, demoted or transferred to a different business unit or function during a performance period, the Committee may determine that the performance goals or performance period are no longer appropriate and may (i) adjust, change or eliminate the performance goals or the applicable performance period as it deems appropriate to make such goals and period comparable to the initial goals and period, or (ii) make a cash payment to the participant in an amount determined by the Committee.

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9.3.    GRANT OF PERFORMANCE AWARDS TO COVERED EMPLOYEES.  With respect to each Performance Award granted to a Covered Employee that is intended by the Committee to qualify as a “performance-based award” under Code Section 162(m), the Committee shall select, within the first 90 days of a performance period (or, if shorter, within the maximum period allowed under Section 162(m) of the Code) the performance criteria for such grant from among those criteria enumerated in Section 9.2, and the achievement targets with respect to each performance criterion (including a threshold level of performance below which no amount will become payable with respect to such Award). Each such Performance Award will specify the amount payable, or the formula for determining the amount payable, upon achievement of the various applicable performance targets. The performance criteria established by the Committee may be (but need not be) different for each performance period and different goals may be applicable to Performance Awards to different Covered Employees.  Maximum Awards to Covered Employees are subject to the limitations in Section 4.2 of this Plan.  Notwithstanding anything herein to the contrary, no Award that is intended by the Committee to be considered performance-based compensation under Code Section 162(m) shall be granted under terms that will permit its accelerated vesting upon Retirement or other termination of service (other than death or Disability or a Change in Control).

9.4.    CERTIFICATION OF PERFORMANCE GOALS.  Any payment of a Performance Award to a Covered Employee granted pursuant to Section 9.3 shall be conditioned on the written certification of the Committee in each case that the performance goals and any other material conditions were satisfied.  Except as specifically provided in Section 9.3, no Performance Award to a Covered Employee under Section 9.3 or by an employee who in the reasonable judgment of the Committee may be a Covered Employee on the date of payment, may be amended, nor may the Committee exercise any discretionary authority it may otherwise have under the Plan with respect to such Award, in any manner to waive the achievement of the applicable performance goal or to increase the amount payable pursuant thereto or the value thereof, or otherwise in a manner that would cause such Performance Award to cease to qualify as performance-based compensation under Code Section 162(m).

ARTICLE 10
PROVISIONS APPLICABLE TO AWARDS

10.1.    TERM OF AWARD.  Subject to Section 7.1(e) with respect to Options, the term of each Award shall be for the period as determined by the Committee and specified in the applicable Award Certificate.

10.2.    FORM OF PAYMENT FOR AWARDS.  At the discretion of the Committee, payment of Awards may be made in cash, Stock, a combination of cash and Stock, or any other form of property as the Committee shall determine.  In addition, payment of Awards may include such terms, conditions, restrictions and/or limitations, if any, as the Committee deems appropriate, including, in the case of Awards paid in the form of Stock, restrictions on transfer and forfeiture provisions.  Further, payment of Awards may be made in the form of a lump sum, or in installments, as determined by the Committee.

10.3.    LIMITATIONS ON TRANSFER.  No right or interest of a Participant in any unexercised or unvested restricted Award may be assigned, transferred, pledged, encumbered, or hypothecated to or in favor of any party other than the Company or an Affiliate, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or an Affiliate.  No unexercised or restricted Award shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution or, except in the case of an Incentive Stock Option, pursuant to a domestic relations order that would satisfy Code Section 414(p)(1)(A) if such Section applied to an Award under the Plan; provided, however, that the Committee may (but need not) permit other transfers (other than transfers for value) where the Committee concludes that such transferability (i) does not result in accelerated taxation, (ii) does not cause any Option intended to be an Incentive Stock Option to fail to be described in Code Section 422(b), and (iii) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, state or federal tax or securities laws applicable to transferable Awards. 

10.4.    BENEFICIARIES.  Notwithstanding Section 10.3, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death.  A beneficiary, legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Certificate applicable to the Participant, except to the extent the Plan and Award Certificate otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee.  If no beneficiary has been designated or survives the Participant, payment shall be made to the Participant’s estate.  Subject to the foregoing, a Participant may change or revoke a beneficiary designation at any time provided the change or revocation is filed with the Committee.

10.5.    STOCK TRADING RESTRICTIONS.  All Stock issuable under the Plan shall be subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal or state securities laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, 

14

or traded.  The Committee may place legends on any Stock certificate or issue instructions to the transfer agent to reference restrictions applicable to the Stock.

10.6.    ACCELERATION UPON DEATH OR DISABILITY.  Except as otherwise provided in the Award Certificate, or in Section 10.8 with respect to Awards of Restricted Stock and Restricted Stock Units, upon the termination of a person’s Continuous Status as a Participant by reason of death or Disability:

(i)    all of that Participant’s outstanding Options shall become fully exercisable, and shall thereafter remain exercisable for the applicable period specified in Section 7.2;
 
            (ii)    all time-based vesting restrictions on that Participant’s outstanding Awards shall lapse, and the Awards shall be deemed to vest as of the date of termination; and

(iii)    all performance criteria under all of that Participant’s outstanding performance-based Awards shall be deemed to have been satisfied as of the date of termination, as follows:

(A)    if the date of termination occurs during the first half of the applicable performance period, all relevant performance goals will be deemed to have been achieved at the “target” level, and

(B)    if the date of termination occurs during the second half of the applicable performance period, the actual level of achievement of all relevant performance goals against target will be measured as of the end of the calendar quarter immediately preceding the date of termination, and

(C)    in either such case, there shall be a prorata payout to the Participant or his or her estate within sixty (60) days following the date of termination (unless a later date is required by Section 13.3 hereof), based upon the length of time within the performance period that has elapsed prior to the date of termination. 

To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be Non-Qualified Stock Options.

10.7.    EFFECT OF A CHANGE IN CONTROL.  The provisions of this Section 10.7 shall apply in the case of a Change in Control, unless otherwise provided in the Award Certificate or any separate agreement with a Participant governing an Award.

(a)    Awards not Assumed or Substituted by Surviving Entity.  Upon the occurrence of a Change in Control, and except with respect to any Awards assumed by the Surviving Entity or otherwise equitably converted or substituted in connection with the Change in Control in a manner approved by the Committee or the Board: (i) outstanding Options shall become fully exercisable, (ii) time-based vesting restrictions on outstanding Awards shall lapse, and (iii) the target payout opportunities attainable under outstanding Performance Awards shall be deemed to have been fully earned as of the effective date of the Change in Control based upon (A) an assumed achievement of all relevant performance goals at the “target” level if the Change in Control occurs during the first half of the applicable performance period, or (B) the actual level of achievement of all relevant performance goals against target measured as of the date of the Change in Control, if the Change in Control occurs during the second half of the applicable performance period, and, in either such case, subject to Section 13.3, there shall be a prorata payout to Participants within sixty (60) days following the Change in Control (unless a later date is required by Section 13.3 hereof), based upon the length of time within the performance period that has elapsed prior to the Change in Control.  Any Awards shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award Certificate.  To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be Non-Qualified Stock Options.

(b)    Awards Assumed or Substituted by Surviving Entity.  With respect to Awards assumed by the Surviving Entity or otherwise equitably converted or substituted in connection with a Change in Control: if within two years after the effective date of the Change in Control, a Participant’s employment is terminated without Cause or the Participant resigns for Good Reason, then (i) all of that Participant’s outstanding Options and other Awards in the nature of rights that may be exercised shall become fully exercisable, (ii) all time-based vesting restrictions on the his or her outstanding Awards shall lapse, and (iii) the target payout opportunities attainable under all outstanding Performance Awards of that Participant shall be deemed to have been fully earned as of the date of termination based upon (A) an assumed achievement of all relevant performance goals at the “target” level if the date of termination occurs during the first half of the applicable performance period, or (B) the actual level of achievement of all relevant performance goals against target, if the date of termination occurs during the second half of the applicable performance period, and, in either such case, there shall 

15

be a prorata payout to such Participant within sixty (60) days following the date of termination of employment (unless a later date is required by Section 13.3 hereof), based upon the length of time within the performance period that has elapsed prior to the date of termination of employment.  With regard to each Award, a Participant shall not be considered to have resigned for Good Reason unless either (i) the Award Certificate includes such provision or (ii) the Participant is party to an employment, severance, change in control or similar agreement with the Company or an Affiliate that includes provisions in which the Participant is permitted to resign for Good Reason.  Any Awards shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Award Certificate.  To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be Non-Qualified Stock Options.

10.8.    ACCELERATION FOR OTHER REASONS.  Regardless of whether an event has occurred as described in Sections 10.6 or 10.7 above, the Committee may in its sole discretion at any time determine that, upon the termination of service of a Participant, or the occurrence of a Change in Control, all or a portion of such Participant’s Options shall become fully or partially exercisable, that all or a part of the restrictions on all or a portion of the Participant’s outstanding Awards of Restricted Stock or Restricted Stock Units shall lapse, and/or that any performance-based criteria with respect to any Awards held by that Participant shall be deemed to be wholly or partially satisfied, in each case, as of such date as the Committee may, in its sole discretion, declare.  In exercising its discretion pursuant to this Section 10.8, the Committee may provide for nonuniform treatment among Participants (whether or not similarly situated) and among Awards granted to a Participant. Notwithstanding anything herein to the contrary, the Committee may not waive any performance-based criteria with respect to an Award to a Covered Employee intended to qualify as performance-based compensation under Code Seciton 162(m), nor shall satisfaction of such criteria be deemed to have been accelerated, other than in connection with such Covered Employee’s death or Disability or a Change in Control.

10.9.    FORFEITURE EVENTS; RECOUPMENT.  

(a)    Forfeiture. The Committee may specify in an Award Certificate that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of employment for Cause, violation of material Company or Affiliate policies, breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company or any Affiliate.

(b)    Recoupment. All Awards (including Awards that have vested in accordance with the Award Certificate) shall be subject to the terms and conditions, if applicable, of any recoupment policy adopted by the Company from time to time or recoupment requirement imposed under applicable laws, rules or regulations or any applicable securities exchange listing standards.

10.10.    SUBSTITUTE AWARDS.  The Committee may grant Awards under the Plan in substitution for stock and stock-based awards held by employees of another entity who become employees of the Company or an Affiliate as a result of a merger or consolidation of the former employing entity with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the former employing corporation.  The Committee may direct that the Substitute Awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances.

ARTICLE 11
CHANGES IN CAPITAL STRUCTURE

11.1.    MANDATORY ADJUSTMENTS.  In the event of an internal reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, spin-off, rights offering, or large nonrecurring cash dividend or similar extraordinary event affecting the Stock, the authorization limitations under Sections 5.1 and 5.4 shall be adjusted proportionately, and the Committee shall make such adjustments to the Plan and Awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such event.  Action by the Committee may include: (i) adjustment of the number and kind of shares that may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the exercise price of outstanding Awards or the performance goals or other measures to be used to determine the amount of the benefit payable on an Award; and (iv) any other adjustments that the Committee determines to be equitable.  Notwithstanding the foregoing, the Committee shall not make any adjustments to outstanding Options that would constitute a modification or substitution of the stock right under Treas. Reg. Sections 1.409A-1(b)(5)(v) that would be treated as the grant of a new stock right or change in the form of payment for purposes of Code Section 409A.  Without limiting the foregoing, 

16

in the event of a subdivision of the outstanding Stock (stock-split), a declaration of a dividend payable in Shares, or a combination or consolidation of the outstanding Stock into a lesser number of Shares, the authorization limitations under Sections 5.1 and 5.4 shall automatically be adjusted proportionately, the Shares then subject to each Award and the exercise price of each outstanding Option shall automatically, without the necessity for any additional action by the Committee, be adjusted proportionately. Any adjustment under this Section to the number of Shares subject to an Award may provide for the number of Shares to be rounded up or down to the next whole Share, as the Committee may determine in its discretion.

11.2.    DISCRETIONARY ADJUSTMENTS.  Upon the occurrence or in anticipation of any corporate event or transaction involving the Company (including, without limitation, any merger,  combination or exchange of shares), the Committee may, in its sole discretion, provide (i) that Awards will be settled in cash rather than Stock, (ii) that Awards will become immediately vested and exercisable and will expire after a designated period of time to the extent not then exercised, (iii) that Awards will be assumed by another party to a transaction or otherwise be equitably converted or substituted in connection with such transaction, (iv) that outstanding Awards may be settled by payment in cash or cash equivalents equal to the excess of the Fair Market Value of the underlying Stock, as of a specified date associated with the transaction, over the exercise price of the Award, or (vi) any combination of the foregoing.  The Committee’s determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated.

11.3.    GENERAL.  Any discretionary adjustments made pursuant to this Article 11 shall be subject to the provisions of Section 12.2.  To the extent that any adjustments made pursuant to this Article 11 cause Incentive Stock Options to cease to qualify as Incentive Stock Options, such Options shall be deemed to be Non-Qualified Stock Options (Again).

ARTICLE 12
AMENDMENT, MODIFICATION AND TERMINATION

12.1.    AMENDMENT, MODIFICATION AND TERMINATION.  The Board or the Committee may, at any time and from time to time, amend, modify or terminate the Plan without stockholder approval; provided, however, that if an amendment to the Plan would, in the reasonable opinion of the Board or the Committee, either (i) materially increase the number of Shares available under the Plan; (ii) expand the types of awards under the Plan, (iii) materially expand the class of participants eligible to participate in the Plan; (iv) materially extend the term of the Plan, or (v) otherwise constitute a material change requiring stockholder approval under applicable laws, policies or regulations or the applicable listing or other requirements of an Exchange, then such amendment shall be subject to stockholder approval; and provided, further, that the Board or Committee may condition any other amendment or modification on the approval of stockholders of the Company for any reason, including by reason of such approval being necessary or deemed advisable (i) to comply with the listing or other requirements of an Exchange, or (ii) to satisfy any other tax, securities or other applicable laws, policies or regulations.

12.2.    MODIFICATION OF OUTSTANDING AWARDS.  At any time and from time to time, the Committee may amend, modify or terminate any outstanding Award without approval of the Participant; provided, however:

(a)    Subject to the terms of the applicable Award Certificate, such amendment, modification or termination shall not, without the Participant’s consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination (with the per-share value of an Option for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment or termination over the exercise or base price of such Award);

(b)    The original term of an Option may not be extended without the prior approval of the stockholders of the Company;

(c)    Except as otherwise provided in Section 11.1, the exercise price of an Option may not be reduced, directly or indirectly, without the prior approval of the stockholders of the Company; and

(d)    No termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under the Plan, without the written consent of the Participant affected thereby.  An outstanding Award shall not be deemed to be “adversely affected” by a Plan amendment if such amendment would not reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment (with the per-share value of an Option for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment over the exercise or base price of such Award).

17

12.3.    COMPLIANCE AMENDMENTS.  Notwithstanding anything in the Plan or in any Award Certificate to the contrary, the Board may amend the Plan or an Award Certificate, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or Award Certificate to any present or future law relating to plans of this or similar nature (including, but not limited to, Sections 409A and 162(m) of the Code), and to the administrative regulations and rulings promulgated thereunder.  By accepting an Award under this Plan, a Participant agrees to any amendment made pursuant to this Section 12.3 to any Award granted under the Plan without further consideration or action.

ARTICLE 13
GENERAL PROVISIONS

13.1.    NO ENLARGEMENT OF RIGHTS.

(a)    No Participant or any Eligible Person shall have any claim to be granted any Award under the Plan.  Neither the Company, its Affiliates nor the Committee is obligated to treat Participants or Eligible Persons uniformly, and determinations made under the Plan may be made by the Committee selectively among Eligible Persons who receive, or are eligible to receive, Awards (whether or not such Eligible Persons are similarly situated). 

(b)    Nothing in the Plan, any Award Certificate or any other document or statement made with respect to the Plan, shall interfere with or limit in any way the right of the Company or any Affiliate to terminate any Participant’s employment or status as an officer, or any Participant’s service as a director, at any time, nor confer upon any Participant any right to continue as an employee, officer, or director of the Company or any Affiliate, whether for the duration of a Participant’s Award or otherwise.

(c)    Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company or any Affiliate and, accordingly, subject to Article 12, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company or an of its Affiliates.

(d)    No Award shall be deemed to give a Participant any of the rights of a stockholder of the Company unless and until Shares are in fact issued to such person in connection with such Award.

13.2.    WITHHOLDING.  The Company or any Affiliate shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising as a result of the Plan.  With respect to withholding required upon any taxable event under the Plan, the Committee may, at the time the Award is granted or thereafter, require or permit that any such withholding requirement be satisfied, in whole or in part, by withholding from the Award Shares having a Fair Market Value on the date of withholding equal to the minimum amount (and not any greater amount) required to be withheld for tax purposes, all in accordance with such procedures as the Committee establishes.  All such elections shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

13.3.    SPECIAL PROVISIONS RELATED TO CODE SECTION 409A.

(a)    General. It is intended that the payments and benefits provided under the Plan and any Award shall either be exempt from the application of, or comply with, the requirements of Code Section 409A.  The Plan and all Award Certificates shall be construed in a manner that effects such intent.  Nevertheless, the tax treatment of the benefits provided under the Plan or any Award is not warranted or guaranteed.  Neither the Company, its Affiliates nor their respective directors, officers or employees (other than in his or her capacity as a Participant) shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any Participant or other taxpayer as a result of the Plan or any Award.

(b)    Definitional Restrictions. Notwithstanding anything in the Plan or in any Award Certificate to the contrary, to the extent that any amount or benefit that would constitute nonexempt “deferred compensation” for purposes of Code Section 409A would otherwise be payable or distributable, or a different form of payment (e.g., lump sum or installment) would be effected, under the Plan or any Award Certificate by reason of the occurrence of a Change in Control, or the Participant’s Disability or separation from service, such amount or benefit will not be payable or distributable to the Participant, and/or such different form of payment will not be effected, by reason of such circumstance unless the circumstances giving rise to such Change in Control, Disability or separation from service meet any description 

18

or definition of “change in control event”, “disability” or “separation from service”, as the case may be, in Code Section 409A and applicable regulations (without giving effect to any elective provisions that may be available under such definition).  This provision does not prohibit the vesting of any Award upon a Change in Control, Disability or separation from service, however defined.  If this provision prevents the payment or distribution of any amount or benefit, such payment or distribution shall be made on the next earliest payment or distribution date or event specified in the Award Certificate that is permissible under Code Section 409A.  If this provision prevents the application of a different form of payment of any amount or benefit, such payment shall be made in the same form as would have applied absent such designated event or circumstance.

(c)    Allocation among Possible Exemptions. If any one or more Awards granted under the Plan to a Participant could qualify for any separation pay exemption described in Treas. Reg. Section 1.409A-1(b)(9), but such Awards in the aggregate exceed the dollar limit permitted for the separation pay exemptions, the Company (acting through the Committee) shall determine which Awards or portions thereof will be subject to such exemptions.

(d)    Six-Month Delay in Certain Circumstances. Notwithstanding anything in the Plan or in any Award Certificate to the contrary, if any amount or benefit that would constitute nonexempt “deferred compensation” for purposes of Code Section 409A would otherwise be payable or distributable under this Plan or any Award Certificate by reason of a Participant’s separation from service during a period in which the Participant is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Committee under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):

(i)    the amount of such nonexempt deferred compensation that would otherwise be payable during the six-month period immediately following the Participant’s separation from service will be accumulated through and paid or provided on the first day of the seventh month following the Participant’s separation from service (or, if the Participant dies during such period, within 30 days after the Participant's death) (in either case, the “Required Delay Period”); and

(ii)    the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period.

For purposes of this Plan, the term “Specified Employee” has the meaning given such term in Code Section 409A and the final regulations thereunder, provided, however, that, as permitted in such final regulations, the Company’s Specified Employees and its application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Board or any committee of the Board, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Company, including this Plan.

13.4.    UNFUNDED STATUS OF AWARDS.  The Plan is intended to be an “unfunded” plan for incentive and deferred compensation.  With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Certificate shall give the Participant any rights that are greater than those of a general creditor of the Company or any Affiliate.  This Plan is not intended to be subject to ERISA.

13.5.    RELATIONSHIP TO OTHER BENEFITS.  No Award under the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Company or any Affiliate unless provided otherwise in such other plan.

13.6.    EXPENSES.  The expenses of administering the Plan shall be borne by the Company and its Affiliates.

13.7.    TITLES AND HEADINGS.  The titles and headings of the Sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

13.8.    GENDER AND NUMBER.  Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.

13.9.    FRACTIONAL SHARES.  No fractional Shares shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding up or down.

19

13.10.    NO LIABILITY OF COMPANY.  The Company and any Affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant, beneficiary or any other person as to: (a) the nonissuance or sale of Shares as to which the Company has been unable to obtain, from any regulatory body having jurisdiction over the matter, the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder; (b) any tax consequence to any Participant, beneficiary or other person including, without limitation, due to the receipt, vesting, exercise or settlement of any Award granted hereunder; or (c) any provision of law or legal restriction that prohibits or restricts the transfer of Shares issued pursuant to any Award. 

13.11.    GOVERNING LAW.  To the extent not governed by federal law, the Plan and all Award Certificates shall be construed in accordance with and governed by the laws of the State of Vermont.

13.12.    ADDITIONAL PROVISIONS.  Each Award Certificate may contain such other terms and conditions as the Committee may determine; provided that such other terms and conditions are not inconsistent with the provisions of the Plan.

13.13.    NO LIMITATIONS ON RIGHTS OF COMPANY.  The grant of any Award shall not in any way affect the right or power of the Company to make adjustments, reclassifications or changes in its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets.  The Plan shall not restrict the authority of the Company, for proper corporate purposes, to issue or assume awards, other than under the Plan, to or with respect to any person.  If the Committee so directs, the Company may issue or transfer Shares to an Affiliate, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Affiliate will transfer such Shares to a Participant in accordance with the terms of an Award granted to such Participant and specified by the Committee pursuant to the provisions of the Plan.

The foregoing is hereby acknowledged as being the Union Bankshares, Inc. 2014 Equity Incentive Plan as adopted by the Board on March 19, 2014 and by the stockholders on _____________, 2014.

UNION BANKSHARES, INC.
	
			
	By:
	 
	 

	 
	 
	 

	Its:
	 
	 

20Exhibit 4.2

 

 

 

Macy’s Retail
Holdings, Inc., as Issuer

 

and

 

Macy’s Inc., as Guarantor

 

and

 

The Bank of New
York Mellon Trust Company, N.A., as Trustee

 

SIXTH SUPPLEMENTAL
TRUST INDENTURE

 

Dated
as of May 23, 2014

 

Supplementing that
certain

 

Indenture

 

Dated as of
January 13, 2012

 

Authorizing the
Issuance and Delivery of Senior Securities

 

consisting of

 

$500,000,000
aggregate principal amount of 3.625% Senior Notes Due 2024

 

RECITALS......................................................................................................................................... 1

[Form of Face of Security].................................................................................................. 2

[Form of Reverse of Security]........................................................................................... 4

ARTICLE I......... ISSUANCE OF SENIOR NOTES........................................................................ 8

Section 1.1........... Issuance Of Senior Notes; Principal
Amount; Maturity; 

                             Additional Senior Notes.............................................................................. 8

Section 1.2........... Interest On The Senior Notes; Payment
Of Interest..................................... 9

Section 1.3........... Execution, Authentication And Delivery
Of Securities................................. 10

ARTICLE II........ CERTAIN DEFINITIONS................................................................................... 10

Section 2.1........... Certain Definitions..................................................................................... 10

ARTICLE III...... CERTAIN COVENANTS.................................................................................... 19

Section 3.1........... Liens........................................................................................................ 19

Section 3.2........... Sale And Leaseback Transactions............................................................. 19

Section 3.3........... Permitting Unrestricted Subsidiaries To
Become Restricted Subsidiaries......20

Section 3.4........... Payment Office......................................................................................... 21

ARTICLE IV...... ADDITIONAL EVENTS OF DEFAULT............................................................. 21

Section 4.1........... Additional Events Of Default..................................................................... 21

ARTICLE V........ DEFEASANCE................................................................................................... 22

Section 5.1........... Applicability Of Article V Of The
Indenture...............................................22

ARTICLE VI...... REDEMPTION OF SENIOR NOTES................................................................ 22

Section 6.1........... Right Of Redemption............................................................................... 22

ARTICLE VII..... CHANGE OF CONTROL.................................................................................. 23

Section 7.1........... Repurchase At The Option Of Holders.................................................... 23

ARTICLE VIII... MISCELLANEOUS............................................................................................ 24

Section 8.1........... Reference To And Effect On The
Indenture............................................. 24

Section 8.2........... Waiver Of Certain Covenants.................................................................. 24

Section 8.3........... Supplemental Indenture May Be Executed
In Counterparts...................... 24

Section 8.4........... Effect Of Headings.................................................................................. 24

 

Sixth Supplemental Trust Indenture, dated as of May 23, 2014, among Macy’s Retail Holdings, Inc., a
corporation duly organized and existing under the laws of the State of New
York, as issuer (the “Company”), Macy’s, Inc., a corporation duly
organized and existing under the laws of the State of Delaware, as guarantor
(the “Guarantor”), and The Bank of New York Mellon Trust Company, N.A.,
a national banking association duly incorporated under the laws of the United
States of America, as Trustee (the “Trustee”), (this “Supplemental
Indenture”) to the Indenture, dated as of January 13, 2012, among the
Company, the Guarantor and the Trustee (as supplemented hereby, the “Indenture”).

RECITALS

A.            The Company has duly
authorized the execution and delivery of the Indenture to provide for the
issuance from time to time of its unsecured debentures, notes, or other
evidences of indebtedness (the “Securities”) to be issued in one or more
series as provided for in the Indenture.

B.            The Guarantor has fully
and unconditionally guaranteed, to the extent set forth in the Indenture and
subject to the provisions of the Indenture, the due and punctual payment of
each series of Securities issued thereunder.

C.            The Indenture provides
that the Securities of each series shall be in substantially the form set forth
in the Indenture, or in such other form as may be established by or pursuant to
a Board Resolution or in one or more indentures supplemental thereto, in each
case with such appropriate insertions, omissions, substitutions, and other
variations as are required or permitted by the Indenture, and may have such
letters, numbers, or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any securities
exchange or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution thereof.

D.            The Company shall issue
and deliver, and the Trustee shall authenticate, Securities denominated “3.625%
Senior Notes Due 2024” (the “Senior Notes”) pursuant to the terms of
this Supplemental Indenture and substantially in the form set forth below, in
each case with such appropriate insertions, omissions, substitutions, and other
variations as are required or permitted by the Indenture and this Supplemental
Indenture, and with such letters, numbers, or other marks of identification and
such legends or endorsements placed thereon as may be required to comply with
the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.

 

[Form of Face of Security]

This Security is a Global Security
within the meaning of the Indenture hereinafter referred to and is registered
in the name of a Depositary or a nominee thereof.  This Security may not be
transferred to, or registered or exchanged for Securities registered in the
name of any Person other than the Depositary or a nominee thereof, and no such
transfer may be registered, except in the limited circumstances described in
the Indenture.  Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, this Security shall be a Global
Security subject to the foregoing, except in such limited circumstances.

Macy’s
Retail Holdings, Inc.

3.625% Senior Notes Due 2024

Guaranteed
As To Payment Of Principal, Premium, If Any, And Interest By 

Macy’s, Inc.       

	
  No. __

  	
  $___________
  

  Cusip
  No. 55616X AL1

  ISIN
  No. US55616XAL10

  

MACY’S RETAIL HOLDINGS, INC., a
corporation duly organized and existing under the laws of the State of New York
(hereinafter called the “Company”, which term includes any successor
Person under the Indenture hereinafter referred to), for value received, hereby
promises to pay to Cede & Co., or registered assigns, the principal sum of
$__________ on June 1, 2024 and to pay interest thereon from May 23, 2014 or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, semiannually on June 1 and December 1 of each year,
commencing on December 1, 2014, at the rate of 3.625% per annum, until the
principal hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which will be May 15 or
November 15 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date.  Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof will be given to Holders of Securities of this
series not less than 10 calendar days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this series
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture.

MACY’S, INC., a corporation duly organized
and existing under the laws of the State of Delaware (hereinafter called the “Guarantor”,
which term includes any successor Person under the Indenture hereinafter
referred to), has fully and unconditionally guaranteed, to the extent set forth
in the Indenture and subject to the provisions of the Indenture, the due and
punctual payment of each series of Securities issued thereunder (the “Guarantee”). 
The obligations of the Guarantor to the Holders and to the Trustee pursuant to
the Guarantee are expressly set forth in Article XII of the Indenture and
reference is hereby made to the Indenture for the precise terms of the
Guarantee.

Subject, in the case of any Global
Security, to any applicable requirements of the Depositary, payment of the
principal of and any such interest on this Security will be made at the office
or agency of the Company maintained for the purpose in New York, New York, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however,
that at the option of the Company payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address appears in
the Security Register.

REFERENCE IS HEREBY MADE TO THE FURTHER
PROVISIONS SET FORTH ON THE REVERSE HEREOF.  SUCH PROVISIONS WILL FOR ALL
PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH IN THIS PLACE.

This Security will not be valid or
become obligatory for any purpose until the certificate of authentication
herein has been signed manually by the Trustee under said Indenture.

In Witness Whereof, the Company has
caused this instrument to be duly executed in accordance with the Indenture.

MACY’S RETAIL HOLDINGS, INC.

 

 

 

Date Issued:                                                          By:
                                                                    

 

 

 

The Guarantor has fully and
unconditionally guaranteed, to the extent set forth in the Indenture and
subject to the provisions of the Indenture, the due and punctual payment of
each series of Securities issued thereunder.  In case of the failure of the
Company punctually to make any such payment, the Guarantor hereby agrees to
cause such payment to be made punctually.

The obligations of the Guarantor to the
Holders and to the Trustee pursuant to the Guarantee are expressly set forth in
Article XII of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Guarantee.

 

            In Witness Whereof, the Guarantor has caused
this instrument to be duly executed in accordance with the Indenture.

 

MACY’S, INC.

 

 

 

Date Issued:                                                          By:
                                                                    

 

 

[Form of Reverse of Security]

Macy’s
Retail Holdings, Inc.

This Security is one of a duly
authorized issue of securities of the Company (herein called the “Securities”)
issued and to be issued in one or more series under an Indenture, dated as of
January 13, 2012 (herein called the “Base Indenture”), by and among the
Company, Macy’s, Inc., as guarantor (the “Guarantor”), and The Bank of
New York Mellon Trust Company, N.A., a national banking association, as Trustee
(herein called the “Trustee”, which term includes any successor trustee
under the Indenture), as amended and supplemented by the Sixth Supplemental
Trust Indenture, dated as of May 23, 2014, among the Company, the Guarantor and
the Trustee (the “Supplemental Indenture” and, together with the Base
Indenture, the “Indenture”), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties, and immunities thereunder of the
Company, the Guarantor, the Trustee, and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof,
initially limited in aggregate principal amount to $500,000,000.  Subject to
compliance with Section 1.1(c) of the Supplemental Indenture, the Company is
permitted to issue Additional Senior Notes under the Indenture in an unlimited
principal amount.  Any such Additional Senior Notes that are actually issued
shall be treated as issued and outstanding Securities of this series for all
purposes of the Indenture, unless the context clearly indicates otherwise.

Prior to March 1, 2024, the Securities
of this series are redeemable in whole or in part, at the option of the Company
at any time and from time to time, on not less than 30 or more than 60 days’
prior notice transmitted to the Holders of the Securities of this series, at a
Redemption Price equal to the greater of (i) 100% of the principal amount
of the Securities of this series to be redeemed and (ii) the sum of the
present values of the Remaining Scheduled Payments thereon discounted to the
Redemption Date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate plus 20 basis points, together in
either case with accrued interest on the principal amount being redeemed to the
Redemption Date.

“Comparable Treasury Issue” means
the United States Treasury security selected by an Independent Investment
Banker that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining term of the Securities of
this series.  “Independent Investment Banker” means one of the Reference
Treasury Dealers appointed by the Company.

“Comparable Treasury Price”
means, with respect to any Redemption Date, (i) the average of the bid and
asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) on the third business day preceding such
Redemption Date, as set forth in the daily statistical release (or any
successor release) published by the Federal Reserve Bank of New York and
designated “Composite 3:30 p.m. Quotations for U.S. Government Securities”
or (ii) if such release (or any successor release) is not published or
does not contain such prices on such business day, (a) the average of the
Reference Treasury Dealer Quotations for such Redemption Date, after excluding
the highest and lowest of such Reference Treasury Dealer Quotations, or
(b) if the Company obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations.

“Reference Treasury Dealer” means
each of Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and
Merrill Lynch, Pierce, Fenner & Smith Incorporated and their respective
successors and one other nationally recognized investment banking firm that is
a primary U.S. Government securities dealer in New York City (a “Primary
Treasury Dealer”) specified from time to time by the Company, except that
if any of the foregoing ceases to be a Primary Treasury Dealer, the Company is
required to designate as a substitute another nationally recognized investment
banking firm that is a Primary Treasury Dealer.

“Reference Treasury Dealer Quotations”
means, with respect to each Reference Treasury Dealer and any Redemption Date,
the average, as determined by the Company, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Company by such Reference Treasury
Dealer as of 3:30 p.m., New York City time, on the third Business Day
preceding such Redemption Date.

“Remaining Scheduled Payments”
means, with respect to each Security of this series to be redeemed, the
remaining scheduled payments of the principal thereof and interest thereon that
would be due after the related Redemption Date but for such redemption, except
that, if such Redemption Date is not an interest payment date with respect to
such Security, the amount of the next succeeding scheduled interest payment
thereon will be reduced by the amount of interest accrued thereon to such
Redemption Date.

“Treasury Rate” means, with
respect to any Redemption Date, the rate per annum equal to the semi-annual
equivalent yield to maturity (computed as of the second business day
immediately preceding such Redemption Date) of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as a percentage
of its principal amount) equal to the Comparable Treasury Price for such
redemption date.

At any time on and after March 1, 2024,
the Company may, at its option, redeem the Securities in whole or in part on
not less than 30 nor more than 60 days’ prior notice transmitted to the holders
of the Securities of this series to be redeemed.  The Securities will be so
redeemable at a Redemption Price equal to 100% of the principal amount of the
Securities to be redeemed plus accrued and unpaid interest on the Securities to
be redeemed to the Redemption Date.

On and after any Redemption Date,
interest will cease to accrue on the Securities of this series or any portion
thereof called for redemption.  On or prior to any Redemption Date, the Company
shall deposit with a paying agent money sufficient to pay the Redemption Price
of and accrued interest on the Securities of this series to be redeemed on such
date.  If less than all the Securities of this series are to be redeemed, (a)
if such Securities are represented by Global Securities, the Securities of this
series to be redeemed shall be selected for redemption in accordance with the
customary procedures of The Depository Trust Company, a New York corporation (“DTC”),
or (b) if such Securities are represented by Securities in certificated form,
the Securities of this series to be redeemed shall be selected by the Trustee
by such method as the Trustee shall deem fair and appropriate in accordance
with methods generally used at the time of selection by fiduciaries in similar
circumstances.

If a Change of Control Triggering Event
occurs, unless the Company has exercised its right to redeem the Securities of
this series, the Holders of the Securities of this series will have the right
to require the Company to repurchase all or any part (equal to $2,000 or an
integral multiple of $1,000 in excess thereof) of their Securities of this
series pursuant to the Change of Control Offer, on the terms set forth in the
Indenture.  In the Change of Control Offer, the Company will offer payment in
cash equal to 101% of the aggregate principal amount of the Securities of this
series repurchased plus accrued and unpaid interest, if any, on the Securities
of this series repurchased, to the date of purchase in accordance with the
terms of the Indenture.

The Indenture contains provisions for
defeasance at any time of (a) the entire indebtedness evidenced by this
Security or (b) certain restrictive covenants and Events of Default with
respect to this Security, in each case upon compliance with certain conditions
set forth in the Indenture.

If an Event of Default with respect to
Securities of this series shall occur and be continuing, the principal of the
Securities of this series may be declared due and payable in the manner and
with the effect provided in the Indenture.

The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the Guarantor and the rights of
the Holders of the Securities of each series to be affected under the Indenture
at any time by the Company, the Guarantor and the Trustee with the consent of
the Holders of a majority in principal amount of the Securities at the time
Outstanding of each series to be affected.  The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences.  Any such consent or waiver by the Holder of
this Security will be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.

As provided in and subject to the
provisions of the Indenture, the Holder of this Security will not have the
right to institute any proceeding with respect to the Indenture or for the
appointment of a receiver or trustee or for any other remedy thereunder unless
such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in aggregate principal amount of the Securities of
this series at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity, and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities of
this series at the time Outstanding a direction inconsistent with such request
and shall have failed to institute such proceeding for 60 calendar days after
receipt of such notice, request, and offer of indemnity. The foregoing shall
not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest
hereon on or after the respective due dates expressed herein.

No reference herein to the Indenture and
no provision of this Security or of the Indenture will alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of and any premium and interest on this Security at the times, place,
and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject
to certain limitations therein set forth, the transfer of this Security is
registerable in the Security Register, upon surrender of this Security for
registration of transfer at the office or agency of the Company in any place
where the principal of and any premium and interest on this Security are
payable, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and thereupon
one or more new Securities of this series and of like tenor, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.

The Securities of this series are
issuable only in registered form without coupons in denominations of $2,000 and
integral multiples of $1,000.  As provided in the Indenture and subject to
certain limitations therein set forth, Securities of this series are exchangeable
for a like aggregate principal amount of Securities of this series and of like
tenor of a different authorized denomination, as requested by the Holder
surrendering the same.

No service charge shall be made for any
such registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.

Prior to due presentment of this
Security for registration of transfer, the Company, the Guarantor, the Trustee,
and any agent of the Company, the Guarantor or the Trustee may treat the Person
in whose name this Security is registered as the owner hereof for all purposes,
whether or not this Security shall be overdue, and neither the Company, the
Guarantor, the Trustee, nor any such agent will be affected by notice to the
contrary.

Unless this Security is presented by an
authorized representative of DTC, to the Company or its agent for registration
of transfer, exchange, or payment, and any Security issued is registered in the
name of Cede & Co. or such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co., or to such
other entity as is requested by an authorized representative of DTC) any
transfer, pledge, or other use hereof for value or otherwise by or to any
person is wrongful because the registered owner hereof, Cede & Co., has an
interest herein.

All terms used in this Security that are
defined in the Indenture shall have the respective meanings assigned to them in
the Indenture.

The Trustee’s certificate of
authentication shall be in substantially the following form:

Trustee’s Certificate Of
Authentication

This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.

Dated:                                                 

THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Trustee

 

 

 

By: _________________________________________ 

       Authorized Officer

 

All acts and things necessary to make
the Senior Notes, when the Senior Notes have been executed by the Company and
the Guarantor and authenticated by the Trustee and delivered as provided in the
Indenture and this Supplemental Indenture, the valid, binding, and legal
obligations of the Company and the Guarantor and to constitute these presents a
valid indenture and agreement according to its terms, have been done and
performed, and the execution and delivery by the Company and the Guarantor of
the Indenture and this Supplemental Indenture and the issue hereunder of the
Senior Notes have in all respects been duly authorized; and the Company and the
Guarantor , in each case in the exercise of legal right and power in it vested,
have executed and delivered the Indenture and are executing and delivering this
Supplemental Indenture and propose to make, execute, issue, and deliver the
Senior Notes.

NOW, THEREFORE, THIS SUPPLEMENTAL
INDENTURE WITNESSETH:

In order to declare the terms and
conditions upon which the Senior Notes are authenticated, issued, and
delivered, and in consideration of the premises and of the purchase and
acceptance of the Senior Notes by the Holders thereof, it is mutually agreed,
for the equal and proportionate benefit of the respective Holders from time to
time of the Senior Notes, as follows:

ARTICLE I  ISSUANCE OF SENIOR NOTES.

Section 1.1           
Issuance Of Senior Notes; Principal Amount; Maturity; Additional Senior
Notes.

(a)           On May 23, 2014, the Company shall issue and deliver to the Trustee, and
the Trustee shall authenticate, Senior Notes substantially in the form set
forth above, in each case with such appropriate insertions, omissions,
substitutions, and other variations as are required or permitted by the
Indenture and this Supplemental Indenture, and with such letters, numbers, or
other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such Senior
Notes, as evidenced by their execution of such Senior Notes.

(b)              
The Senior Notes shall be issued in the initial aggregate principal
amount of $500,000,000 and shall mature on June 1, 2024.

(c)               Subject to the terms and conditions contained herein, the Company may
from time to time, without the consent of the existing Holders of Senior Notes
create and issue additional senior notes (the “Additional Senior Notes”)
having the same terms and conditions as the Senior Notes in all respects,
except for issue date, issue price and the first payment of interest thereon. 
Such Additional Senior Notes, at the Company’s determination and in accordance
with the provisions of the Indenture, will be consolidated with and form a
single series with the previously outstanding Senior Notes for all purposes
under the Indenture, including, without limitation, amendments, waivers and
redemptions.  The aggregate principal amount of the Additional Senior Notes, if
any, shall be unlimited.  

Section 1.2           
Interest On The Senior Notes; Payment Of Interest.

(a)           The Senior Notes shall bear interest at the rate of 3.625% per annum
from May 23, 2014, except in the case of Senior Notes delivered pursuant to
Sections 2.05 or 2.07 of the Indenture, which shall bear interest from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, until the principal thereof is paid or made available for payment.  Such
interest shall be payable semiannually on June 1 and December 1 of each year
commencing December 1, 2014.

(b)              
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date shall, as provided in the Indenture, be paid to the
Person in whose name a Senior Note (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be May 15 or November 15 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.  Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the Holder on such Regular Record Date and may either be paid to
the Person in whose name the Senior Note (or one or more Predecessor Securities)
is registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of the Senior Notes not less than 10 calendar days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Senior Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.

(c)               Subject, in the case of any Global Security, to any applicable
requirements of the Depositary, payment of the principal of (and premium, if
any) and any interest on the Senior Notes shall be made in immediately
available funds.

Section 1.3           
Execution, Authentication And Delivery Of Securities.

The Senior Notes will be executed (which
signatures may be via facsimile) (a) on behalf of the Company by any one of the
President, the Chief Financial Officer, or any Vice President of the Company,
and (b) on behalf of the Guarantor by any one of the President, the Chief
Financial Officer or any Vice President of the Guarantor.

ARTICLE II  CERTAIN DEFINITIONS.

Section 2.1           
Certain Definitions.

The terms defined in this Section 2.1
(except as herein otherwise expressly provided or unless the context of this
Supplemental Indenture otherwise requires) for all purposes of this
Supplemental Indenture and of any indenture supplemental hereto have the
respective meanings specified in this Section 2.1.  All accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP.  All other terms used in this Supplemental Indenture that are defined in
the Indenture or the Trust Indenture Act, either directly or by reference
therein (except as herein otherwise expressly provided or unless the context of
this Supplemental Indenture otherwise requires), have the respective meanings
assigned to such terms in the Indenture or the Trust Indenture Act, as the case
may be, as in force at the date of this Supplemental Indenture as originally
executed.

“Bank Facilities” means the
Credit Agreement, dated as of May 10, 2013, among Macy’s, Inc., Macy’s Retail
Holdings, Inc., the lenders party thereto, JPMorgan Chase Bank, N.A.,  as
administrative agent and paying agent, and Bank of America, N.A., as
administrative agent, as the same may be amended, supplemented or otherwise
modified from time to time.

“Cash Equivalent” means:
(a) obligations issued or unconditionally guaranteed as to principal and
interest by the United States of America or by any agency or authority
controlled or supervised by and acting as an instrumentality of the United
States of America; (b) obligations (including, but not limited to, demand
or time deposits, bankers’ acceptances and certificates of deposit) issued by a
depository institution or trust company or a wholly owned Subsidiary or branch
office of any depository institution or trust company, provided that
(i) such depository institution or trust company has, at the time of the
Company’s or any Restricted Subsidiary’s Investment therein or contractual
commitment providing for such Investment, capital, surplus, or undivided
profits (as of the date of such institution’s most recently published financial
statements) in excess of $100.0 million and (ii) the commercial paper of
such depository institution or trust company, at the time of the Company’s or
any Restricted Subsidiary’s Investment therein or contractual commitment
providing for such Investment, is rated at least A1 by S&P, P-1 by Moody’s
or F1 by Fitch; (c) debt obligations (including, but not limited to,
commercial paper and medium term notes) issued or unconditionally guaranteed as
to principal and interest by any corporation, state, or municipal government or
agency or instrumentality thereof, or foreign sovereignty, if the commercial
paper of such corporation, state, or municipal government or foreign
sovereignty, at the time of the Company’s or any Restricted Subsidiary’s
Investment therein or contractual commitment providing for such Investment, is rated
at least A1 by S&P, P‐1 by Moody’s or F1 by Fitch; (d) repurchase
obligations with a term of not more than seven days for underlying securities
of the type described above entered into with a depository institution or trust
company meeting the qualifications described in clause (b) above; and
(e) Investments in money market or mutual funds that invest predominantly
in Cash Equivalents of the type described in clauses (a), (b), (c), and (d)
above; provided, however, that, in the case of clauses (a) through (c) above,
each such Investment has a maturity of one year or less from the date of
acquisition thereof.

“Change of Control” means the
occurrence of any of the following: (1) the direct or indirect sale, lease,
transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the properties or assets of the Guarantor and its
subsidiaries taken as a whole to any Person other than the Guarantor or one of its
subsidiaries; (2) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any Person
becomes the beneficial owner, directly or indirectly, of more than 50% of the
then outstanding number of shares of the Guarantor’s Voting Stock or other
Voting Stock into which the Voting Stock of the Guarantor is reclassified,
consolidated, exchanged or changed, measured by voting power rather than number
of shares; (3) the Guarantor consolidates with, or merges with or into, any
Person, or any Person consolidates with, or merges with or into the Guarantor,
in any such event pursuant to a transaction in which any of the outstanding
shares of the Guarantor’s Voting Stock or the Voting Stock of such other Person
is converted into or exchanged for cash, securities or other property, other
than any such transaction where the shares of the Guarantor’s Voting Stock
outstanding immediately prior to such transaction constitute, or are converted
into or exchanged for, a majority of the Voting Stock of the resulting or
surviving Person or any direct or indirect parent company of the resulting or
surviving Person immediately after giving effect to such transaction; (4) the
first day on which a majority of the members of the Guarantor’s Board of
Directors are not Continuing Directors; or (5) the adoption of a plan providing
for the liquidation or dissolution of the Guarantor.  Notwithstanding the
foregoing, a transaction shall not be deemed to involve a Change of Control
under clause (2) above if (i) the Guarantor becomes a direct or indirect wholly
owned subsidiary of a holding company and (ii)(A) the direct or indirect
holders of the Voting Stock of such holding company immediately following that
transaction are substantially the same as the holders of the Guarantor’s Voting
Stock immediately prior to that transaction or (B) immediately following that
transaction no Person (other than a holding company satisfying the requirements
of this sentence) is the beneficial owner, directly or indirectly, of more than
50% of the Voting Stock of such holding company.  The term “Person,” as
used in this definition, has the meaning given thereto in Section 13(d)(3) of
the Exchange Act.

“Change of Control Triggering Event”
means the occurrence of both a Change of Control and a Rating Event.

“Consolidated Net Tangible Assets”
means total assets (less depreciation and valuation reserves and other reserves
and items deductible from gross book value of specific asset accounts under
GAAP) after deducting therefrom (i) all current liabilities and (ii) all
goodwill, trade names, trademarks, patents, unamortized debt discount,
organization expenses, and other like intangibles, all as set forth on the most
recent balance sheet of the Company and its consolidated Subsidiaries and
computed in accordance with GAAP.

“Continuing Directors” means, as
of any date of determination, any member of the Board of Directors of the
Guarantor who (1) was a member of such Board of Directors on the date of this Supplemental
Indenture; or (2) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who were
members of such Board of Directors at the time of such nomination or election
(either by a specific vote or by approval of the Guarantor’s proxy statement in
which such member was named as a nominee for election as a director, without
objection to such nomination).

“Existing Indebtedness” means all
Indebtedness under or evidenced by:

-  the Senior Notes;

-  the Company’s 7.875% Senior notes due
2015;

-  the Company’s 6.375% Senior notes due
2037;

-  the Company’s 5.90% Senior notes due
2016;

-  the Company’s 5.75% Senior notes due
2014;

-  the Company’s 6.9% Senior debentures
due 2029;

-  the Company’s 6.7% Senior debentures
due 2034;

-  the Company’s 7.45% Senior debentures
due 2017;

-  the Company’s 6.65% Senior debentures
due 2024;

-  the Company’s 7.0% Senior debentures
due 2028;

-  the Company’s 8.75% Senior debentures
due 2029;

-  the Company’s 6.9% Senior debentures
due 2032;

-  the Company’s 8.5% Senior debentures
due 2019;

-  the Company’s 6.7% Senior debentures
due 2028;

-  the Company’s 7.875% Senior
debentures due 2030;

-  the Company’s 7.875% Senior
debentures due 2036;

-  the Company’s 6.79% Senior debentures
due 2027;

-  the Company’s 8.125% Senior
debentures due 2035;

-  the Company’s 7.45% Senior debentures
due 2016;

-  the Company’s 7.50% Senior debentures
due 2015;

-  the Company’s 10.25% Senior
debentures due 2021;

-  the Company’s 7.6% Senior debentures
due 2025;

-  the Company’s 9.5% amortizing
debentures due 2021;

-  the Company’s 9.75% amortizing
debentures due 2021;

-  the Company’s 3.875% Senior Notes due
2022;

-  the Company’s 5.125% Senior Notes due
2042;

-  the Company’s 2.875% Senior Notes due
2023;

-  the Company’s 4.30% Senior Notes due
2043;

-  the Company’s 4.375% Senior Notes due
2023;

-  Capital Lease Obligations of the
Company and its Restricted Subsidiaries existing on the date of issuance of the
Senior Notes; and

-  the other secured Indebtedness of the
Company or secured or unsecured Indebtedness of its Restricted Subsidiaries
existing on the date of issuance of the Senior Notes.

“Fitch” means Fitch Ratings, Inc.
or its successor.

“Indebtedness” means, as applied to
any Person, without duplication:

(a)           all obligations of such
Person for borrowed money;

(b)           all obligations of such
Person for the deferred purchase price of property or services (other than
property and services purchased, and expense accruals and deferred compensation
items arising, in the ordinary course of business);

(c)           all obligations of such
Person evidenced by notes, bonds, debentures, mandatorily redeemable preferred
stock or other similar instruments (other than performance, surety and appeals bonds
arising in the ordinary course of business);

(d)           all payment obligations
created or arising under any conditional sale, deferred price or other title
retention agreement with respect to property acquired by such Person (unless
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property);

(e)           any capital lease
obligation of such Person;

(f)            all reimbursement,
payment or similar obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities (other than letters of
credit in support of trade obligations or incurred in connection with public
liability insurance, workers’ compensation, unemployment insurance, old-age
pensions and other social security benefits other than in respect of employee
benefit plans subject to ERISA);

(g)           all obligations of such
Person, contingent or otherwise, under any guarantee by such Person of the
obligations of another Person of the type referred to in clauses (a) through
(f) above; and 

(h)           all obligations referred
to in clauses (a) through (f) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage or security interest in property (including without limitation
accounts, contract rights and general intangibles) owned by such Person and as
to which such Person has not assumed or become liable for the payment of such
obligations other than to the extent of the property subject to such mortgage
or security interest; except that Indebtedness of the type referred to in
clauses (g) and (h) above will be included within the definition of “Indebtedness”
only to the extent of the least of (a) the amount of the underlying Indebtedness
referred to in the applicable clause (a) through (f) above; (b) in the case of
clause (g), the limit on recoveries, if any, from such Person under obligations
of the type referred to in clause (g) above; and (c) in the case of clause (h),
the aggregate value (as determined in good faith by the Company’s Board of
Directors) of the security for such Indebtedness.

“Investment” means, with respect
to any Person, any direct or indirect loan or other extension of credit or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any capital stock,
bonds, notes, debentures, or other securities or evidences of Indebtedness
issued by any other Person.  The amount of any Investment shall be the original
cost thereof, plus the cost of all additions thereto, without any adjustments
for increases or decreases in value, write-ups, write-downs, or write-offs with
respect to such Investment.

“Investment Grade Rating” means a
rating equal to or higher than BBB- (or the equivalent) by Fitch, Baa3 (or the
equivalent) by Moody’s and BBB- (or the equivalent) by S&P.

“Lien” means any mortgage, deed
of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), security interest, or preference, priority, or other
security agreement or preferential arrangement of any kind or nature whatsoever
intended to assure payment of any Indebtedness or other obligation, including
without limitation any conditional sale, deferred purchase price, or other
title retention agreement, the interest of a lessor under a Capital Lease
Obligation, any financing lease having substantially the same economic effect
as any of the foregoing, and the filing, under the Uniform Commercial Code or
comparable law of any jurisdiction, of any financing statement naming the owner
of the asset to which such Lien relates as debtor.

“Moody’s” means Moody’s Investors
Service, Inc. or its successor.

“Notice” means, with respect to
an Offer to Purchase, a written notice stating:

(a)           the Section of this
Supplemental Indenture pursuant to which such Offer to Purchase is being made;

(b)           the applicable Purchase
Amount (including, if less than all the Senior Notes, the calculation thereof
pursuant to the Section hereof requiring such Offer to Purchase);

(c)           the applicable Purchase
Date;

(d)           the purchase price to be
paid by the Company for each $1,000 principal amount at maturity of Senior
Notes accepted for payment (as specified in this Supplemental Indenture);

(e)           that the Holder of any
Senior Note may tender for purchase by the Company all or any portion of such
Senior Note equal to $2,000 principal amount or an integral multiple of $1,000
in excess thereof;

(f)            the place or places where
Senior Notes are to be surrendered for tender pursuant to such Offer to
Purchase;

(g)           any Senior Note not
tendered or tendered but not purchased by the Company pursuant to such Offer to
Purchase shall continue to accrue interest as set forth in such Senior Note and
this Supplemental Indenture;

(h)           that on the Purchase Date
the purchase price shall become due and payable upon each Senior Note (or
portion thereof) selected for purchase pursuant to such Offer to Purchase and
that interest thereon shall cease to accrue on and after the Purchase Date;

(i)            that each Holder electing
to tender a Senior Note pursuant to such Offer to Purchase shall be required to
surrender such Senior Note at the place or places specified in the Notice prior
to the close of business on the fifth Business Day prior to the Purchase Date
(such Senior Note being, if the Company or the Trustee so requires, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or its attorney duly authorized in writing);

(j)            that (i) if Senior Notes
(or portions thereof) in an aggregate principal amount less than or equal to
the Purchase Amount are duly tendered and not withdrawn pursuant to such Offer
to Purchase, the Company shall purchase all such Senior Notes and (ii) if
Senior Notes in an aggregate principal amount in excess of the Purchase Amount
are duly tendered and not withdrawn pursuant to such Offer to Purchase, (A) the
Company shall purchase Senior Notes having an aggregate principal amount equal
to the Purchase Amount and (B) the particular Senior Notes (or portions
thereof) to be purchased shall be selected by such method as the Trustee shall
deem fair and appropriate and which may provide for the selection for purchase
of portions (equal to $2,000 or an integral multiple of $1,000 in excess
thereof) of the principal amount of Senior Notes of a denomination larger than
$2,000;

(k)           that, in the case of any
Holder whose Senior Note is purchased only in part, the Company shall execute,
and the Trustee shall authenticate and deliver to the Holder of such Senior
Note without service charge, a new Senior Note or Senior Note of any authorized
denomination as requested by such Holder in an aggregate principal amount equal
to and in exchange for the unpurchased portion of the Senior Note so tendered;
and

(l)            any other information
required by applicable law to be included therein.

“Offer to Purchase” means an
offer to purchase Senior Notes pursuant to and in accordance with a Notice, in
the aggregate Purchase Amount, on the Purchase Date, and at the purchase price
specified in such Notice (as determined pursuant to this Supplemental
Indenture).  Any Offer to Purchase shall remain open from the time of mailing
of the Notice until the Purchase Date, and shall be governed by and effected in
accordance with, and the Company and the Trustee shall perform their respective
obligations specified in, the Notice for such Offer to Purchase.

“Permitted Liens” means:  (a)
Liens (other than Liens on inventory) securing (A) Existing Indebtedness;
(B) Indebtedness under the Bank Facilities in an aggregate principal amount at
any one time not to exceed $2,800.0 million, less (i) principal payments
actually made by the Company on any term loan facility under such Bank
Facilities (other than principal payments made in connection with or pursuant
to a refinancing of the Bank Facilities in compliance with clause (a)(I) below)
and (ii) any amounts by which any revolving credit facility commitments under
the Bank Facilities are permanently reduced (other than permanent reductions
made in connection with or pursuant to a refinancing of the Bank Facilities in
compliance with clause (a)(I) below), except that under no circumstances shall
the total allowable indebtedness under this clause (a)(B) be less than $1,825
million (subject to increase from and after the date hereof at a rate,
compounded annually, equal to 3% per annum) if incurred for the purpose of
providing the Company and its Subsidiaries with working capital, including
without limitation, bankers’ acceptances, letters of credit, and similar
assurances of payment whether as part of the Bank Facilities or otherwise; (C) Indebtedness
existing as of the date hereof of any Subsidiary of the Company engaged
primarily in the business of owning or leasing real property; (D) Indebtedness
incurred for the purpose of financing store construction and remodeling or
other capital expenditures; (E) Indebtedness in respect of the deferred
purchase price of property or arising under any conditional sale or other title
retention agreement; (F) Indebtedness of a Person acquired by the Company or a
Subsidiary of the Company at the time of such acquisition; (G) to the extent
deemed to be “Indebtedness”, obligations under swap agreements, cap
agreements, collar agreements, insurance agreements, or any other agreement or
arrangement, in each case designed to provide protection against fluctuations
in interest rates, the cost of currency or the cost of goods (other than
inventory); (H) other Indebtedness in outstanding amounts not to exceed, in the
aggregate, the greater of $750.0 million and 12.5% of Consolidated Net Tangible
Assets of the Company and the Restricted Subsidiaries at any particular time;
and (I) Indebtedness incurred in connection with any extension, renewal,
refinancing, replacement or refunding (including successive extensions,
renewals, refinancings, replacements or refundings), in whole or in part, of
any Indebtedness of the Company or the Restricted Subsidiaries; provided that
the principal amount of the Indebtedness so incurred does not exceed the sum of
the principal amount of the Indebtedness so extended, renewed, refinanced,
replaced or refunded, plus all interest accrued thereon and all related fees
and expenses (including any payments made in connection with procuring any
required lender or similar consents); (b) Liens incurred and pledges and
deposits made in the ordinary course of business in connection with liability
insurance, workers’ compensation, unemployment insurance, old-age pensions and
other social security benefits other than in respect of employee benefit plans
subject to the Employee Retirement Income Security Act of 1974, as amended; (c)
Liens securing performance, surety and appeal bonds and other obligations of
like nature incurred in the ordinary course of business; (d) Liens on goods and
documents securing trade letters of credit; (e) Liens imposed by law, such as
carriers’, warehousemen’s, mechanics’, materialmen’s and vendors’ Liens,
incurred in the ordinary course of business and securing obligations which are
not yet due or which  are being contested in good faith by appropriate
proceedings; (f) Liens securing the payment of taxes, assessments and
governmental charges or levies, either (i) not delinquent or (ii) being
contested in good faith by appropriate legal or administrative proceedings and
as to which adequate reserves shall have been established on the books of the
relevant Person in conformity with GAAP; (g) zoning restrictions, easements,
rights of way, reciprocal easement agreements, operating agreements, covenants,
conditions or restrictions on the use of any parcel of property that are routinely
granted in real estate transactions or do not interfere in any material respect
with the ordinary conduct of the business of the Company and its Subsidiaries
or the value of such property for the purpose of such business; (h) Liens on
property existing at the time such property is acquired; (i) purchase money
Liens upon or in any property acquired or held in the ordinary course of
business to secure Indebtedness incurred solely for the purpose of financing
the acquisition of such property; (j) Liens on the assets of any Subsidiary of
the Company at the time such Subsidiary is acquired; (k) Liens with respect to
obligations in outstanding amounts not to exceed $100.0 million at any
particular time and that (i) are not incurred in connection with the borrowing
of money or obtaining advances or credit (other than trade credit in the
ordinary course of business) and (ii) do not in the aggregate interfere in any
material respect with the ordinary conduct of the business of the Company and
its Subsidiaries; and (l) without limiting the ability of the Company or any
Restricted Subsidiary to create, incur, assume or suffer to exist any Lien
otherwise permitted under any of the foregoing clauses, any extension, renewal
or replacement, in whole or in part, of any Lien described in the foregoing
clauses; provided that any such extension, renewal or replacement Lien is
limited to the property or assets covered by the Lien extended, renewed or
replaced or substitute property or assets, the value of which is determined by
the Board of Directors of the Company to be not materially greater than the
value of the property or assets for which the substitute property or assets are
substituted.

“Purchase Amount” means the
aggregate outstanding principal amount of the Senior Notes required to be
offered to be purchased by the Company pursuant to an Offer to Purchase.

“Purchase Date” means, with
respect to any Offer to Purchase, a date specified by the Company in such Offer
to Purchase not less than 30 calendar days or more than 60 calendar days after
the date of the mailing of the Notice of such Offer to Purchase (or such other
time period as is necessary for the Offer to Purchase to remain open for a
sufficient period of time to comply with applicable securities laws).

“Rating Agencies” means (1) each
of Fitch, Moody’s and S&P; and (2) if any of Fitch, Moody’s or S&P
ceases to rate the Senior Notes or fails to make a rating of the Senior Notes
publicly available for reasons outside of the Company’s control, a “nationally
recognized statistical rating organization” within the meaning of Rule
15c3-1(c)(2)(vi)(F) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), selected by the Company (as certified by a resolution
of its Board of Directors) as a replacement agency for Fitch, Moody’s or
S&P, or all of them, as the case may be.

“Rating Event” means the rating
on the Senior Notes is lowered by at least two of the three Rating Agencies and
the Senior Notes are rated below an Investment Grade Rating by at least two of
the three Rating Agencies, on any day during the period (which period will be
extended so long as the rating of the applicable Senior Notes is under publicly
announced consideration for a possible downgrade by any of the Rating Agencies)
commencing 60 days prior to the first public notice of the occurrence of a
Change of Control or the intention of the Guarantor to effect a Change of
Control and ending 60 days following consummation of such Change of Control.

“Restricted Subsidiary” means any
Subsidiary of the Company other than an Unrestricted Subsidiary.

“S&P” means Standard &
Poor’s Ratings Services, a division of McGraw Hill Financial, Inc., or its
successor.

“Sale and Leaseback Transaction”
means, with respect to any Person, an arrangement with any bank, insurance
company, or other lender or investor or to which such lender or investor is a
party providing for the leasing pursuant to a Capital Lease by such Person or
any Subsidiary of such Person of any property or asset of such Person or such
Subsidiary which has been or is being sold or transferred by such Person or
such Subsidiary to such lender or investor or to any Person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset.

“Senior Indebtedness” means any
Indebtedness of the Company or its Subsidiaries other than Subordinated
Indebtedness.

“Significant Subsidiary” means
any Subsidiary that accounts for (a) 10.0% or more of the total consolidated
assets of any Person and its Subsidiaries as of any date of determination or
(b) 10.0% or more of the total consolidated revenues of any Person and its
Subsidiaries for the most recently concluded fiscal quarter.

“Subordinated Indebtedness” means
any Indebtedness of the Company which is expressly subordinated in right of
payment to the Senior Notes or any Indebtedness of the Guarantor which is
expressly subordinated in right of payment to the Guarantee.

“Unrestricted Subsidiary” means
(a) Macy’s Credit and Customer Services, Inc., (b) any Subsidiary of the
Company the primary business of which consists of, and is restricted by the
charter, partnership agreement, or similar organizational document of such
Subsidiary to, financing operations on behalf of the Company and its
Subsidiaries, and/or purchasing accounts receivable or direct or indirect
interests therein, and/or making loans secured by accounts receivable or direct
or indirect interests therein (and business related to the foregoing), or which
is otherwise primarily engaged in, and restricted by its charter, partnership
agreement, or similar organizational document to, the business of a finance
company (and business related thereto), which, in accordance with the
provisions of this Supplemental Indenture, has been designated by Board Resolution
of the Company as an Unrestricted Subsidiary, in each case unless and until any
of the Subsidiaries of the Company referred to in the foregoing clauses (a) and
(b) is, in accordance with the provisions of this Supplemental Indenture,
designated by a Board Resolution of the Company as a Restricted Subsidiary, and
(c) any Subsidiary of the Company of which, in the case of a corporation, more
than 50% of the issued and outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or
classes of such corporation has or might have voting power upon the occurrence
of any contingency), or, in the case of any partnership or other legal entity,
more than 50% of the ordinary equity capital interests, is at the time directly
or indirectly owned or controlled by one or more Unrestricted Subsidiaries and
the primary business of which consists of, and is restricted by the charter,
partnership agreement, or similar organizational document of such Subsidiary
to, financing operations on behalf of the Company and its Subsidiaries, and/or
purchasing accounts receivable or direct or indirect interests therein, and/or
making loans secured by accounts receivable or direct or indirect interests
therein (and business related to the foregoing), or which is otherwise
primarily engaged in, and restricted by its charter, partnership agreement or
similar organizational document to, the business of a finance company (and
business related thereto).

“Voting Stock” means, with
respect to any specified “Person” (as that term is used in
Section 13(d)(3) of the Exchange Act) as of any date, the capital stock of
such Person that is at the time entitled to vote generally in the election of
the board of directors of such Person.

ARTICLE III  CERTAIN COVENANTS.

The following covenants shall be
applicable to the Company for so long as any of the Senior Notes are
Outstanding.  Nothing in this paragraph will, however, affect the Company’s
rights or obligations under any other provision of the Indenture or this
Supplemental Indenture.

Section 3.1           
Liens.

The Company shall not, and shall not
permit any Restricted Subsidiary to, create, incur, assume, or suffer to exist
any Liens upon any of their respective assets, other than Permitted Liens,
unless the Senior Notes are secured by an equal and ratable Lien on the same
assets.

Section 3.2           
Sale And Leaseback Transactions.

The Company shall not, and shall not
permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction unless the net cash proceeds therefrom are applied as follows:  to
the extent that the aggregate amount of net cash proceeds (net of all legal,
title, and recording tax expenses, commissions, and other fees and expenses
incurred, and all federal, state, provincial, foreign, and local or other taxes
and reserves required to be accrued as a liability, as a consequence of such
Sale and Leaseback Transaction, net of all payments made on any Indebtedness
that is secured by the assets subject to such Sale and Leaseback Transaction in
accordance with the terms of any Liens upon or with respect to such assets or
which must by the terms of such Lien, or in order to obtain a necessary consent
to such Sale and Leaseback Transaction or by applicable law be repaid out of
the proceeds from such Sale and Leaseback Transaction, and net of all
distributions and other payments made to minority interest holders in
Subsidiaries or joint ventures as a result of such Sale and Leaseback
Transaction) from such Sale and Leaseback Transaction that shall not have been
reinvested in the business of the Company or its Subsidiaries or used to reduce
Senior Indebtedness of the Company or its Subsidiaries within 12 months of the
receipt of such proceeds (with Cash Equivalents being deemed to be proceeds
upon receipt of such Cash Equivalents and cash payments under promissory notes
secured by letters of credit or similar assurances of payment issued by
commercial banks of recognized standing being deemed to be proceeds upon
receipt of such payments) shall exceed $100.0 million (“Excess Sale Proceeds”)
from time to time, the Company shall offer to repurchase pursuant to an Offer
to Purchase Senior Notes with such Excess Sale Proceeds (on a pro rata basis
with any other Senior Indebtedness of the Company or its Subsidiaries required
by the terms of such Indebtedness to be repurchased with such Excess Sale
Proceeds, based on the principal amount of such Senior Indebtedness required to
be repurchased) at 100% of principal amount, plus accrued and unpaid interest,
and to pay related costs and expenses. Such Offer to Purchase shall be made by
mailing of a Notice to the Trustee and to each Holder of Senior Notes at the
address appearing in the Security Register, by first class mail, postage
prepaid, by the Company or, at the Company’s request, by the Trustee in the
name and at the expense of the Company, on a date selected by the Company not
later than 12 months from the date such Offer to Purchase is required to be
made pursuant to the immediately preceding sentence.  To the extent that the
aggregate purchase price for Senior Notes or other Senior Indebtedness tendered
pursuant to such offer to repurchase is less than the aggregate purchase price
offered in such offer, an amount of Excess Sale Proceeds equal to such
shortfall shall cease to be Excess Sale Proceeds and may thereafter be used for
general corporate purposes.  On the Purchase Date, the Company shall (i) accept
for payment Senior Notes or portions thereof tendered pursuant to the Offer to
Purchase in an aggregate principal amount equal to the Purchase Amount
(selected by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for purchase of portions (equal to $2,000
or an integral multiple of $1,000 in excess thereof) of the principal amount of
Senior Notes of a denomination larger than $2,000), (ii) deposit with the
Paying Agent money sufficient to pay the purchase price of all Senior Notes or
portions thereof so accepted, and (iii) deliver to the Trustee Senior Notes so
accepted. The Paying Agent shall promptly mail to the Holders of Senior Notes
so accepted payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to such Holders a new Senior Note equal in
principal amount to any unpurchased portion of each Senior Note surrendered.

Election of the Offer to Purchase by a
Holder of Senior Notes shall (unless otherwise provided by law) be
irrevocable.  The payment of accrued interest as part of any repurchase price
on any Purchase Date shall be subject to the right of Holders of record of
Senior Notes on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to such Purchase Date.

If an Offer to Purchase Senior Notes is
made, the Company shall comply with all tender offer rules, including but not
limited to Section 14(e) of the Exchange Act and Rule 14e-1 thereunder, to the
extent applicable to such Offer to Purchase.  To the extent that the provisions
of any securities laws or regulations conflict with the provisions of the
Indenture related to limitations on Sale and Leaseback Transactions, the
Company shall comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under the provisions of the
Indenture related to limitations on Sale and Leaseback Transactions by virtue
of such conflicts.

Section 3.3           
Permitting Unrestricted Subsidiaries To Become Restricted Subsidiaries.

The Company shall not permit any
Unrestricted Subsidiary to be designated as a Restricted Subsidiary unless such
Subsidiary is otherwise in compliance with all provisions of the Indenture and
this Supplemental Indenture that apply to Restricted Subsidiaries.

Section 3.4           
Payment Office.

The Company shall cause a Payment Office
for the Senior Notes to be maintained at all times in New York, New York.

ARTICLE IV  ADDITIONAL EVENTS OF DEFAULT.

Section 4.1           
Additional Events Of Default.

In addition to the Events of Default set
forth in the Indenture, the term “Event of Default,” whenever used in
the Indenture or this Supplemental Indenture with respect to the Senior Notes,
means any one of the following events (whatever the reason for such Event of
Default and whether it may be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree, or order of any court or any order,
rule, or regulation of any administrative or governmental body):

(a)               
the failure to redeem the Senior Notes when required pursuant to the
terms and conditions thereof or to pay the repurchase price for Senior Notes to
be repurchased in accordance with Section 3.2 of this Supplemental Indenture;

(b)              
any nonpayment at maturity or other default under any agreement or
instrument relating to any other Indebtedness of the Company or any of its
Restricted Subsidiaries (the unpaid principal amount of which is not less than
$100.0 million), and, in any such case, such default (i) continues beyond any
period of grace provided with respect thereto and (ii) results in such
Indebtedness becoming due prior to its stated maturity or occurs at the final
maturity of such Indebtedness; provided, however, that, subject to the
provisions of Section 9.01 and 8.08 of the Indenture, the Trustee shall not be
deemed to have knowledge of such nonpayment or other default unless either (1)
a Responsible Officer of the Trustee has actual knowledge of nonpayment or
other default or (2) the Trustee has received written notice thereof from the
Company, from any Holder, from the holder of any such Indebtedness or from the
trustee under the agreement or instrument, relating to such Indebtedness;

(c)               
the entry of one or more final judgments or orders for the payment of
money against the Company, the Guarantor or any of their respective Restricted
Subsidiaries, which judgments and orders create a liability of $100.0 million
or more in excess of insured amounts and have not been stayed (by appeal or
otherwise), vacated, discharged, or otherwise satisfied within 60 calendar days
of the entry of such judgments and orders;

(d)              
the Guarantee ceases to be in full force and effect (except as
contemplated by the terms of the Indenture) or is declared in a judicial
proceeding to be null and void, or the Guarantor denies or disaffirms in
writing its obligation under the Guarantee; and

(e)               
Events of Default of the type and subject to the conditions set forth in
clauses (vii) and (viii) of Section 8.01(a) of the Indenture in respect of any
Significant Subsidiary or, in related events, any group of Subsidiaries of the
Company or Guarantor which, if considered  in the aggregate, would be a
Significant Subsidiary of the Company or Guarantor.

ARTICLE V  DEFEASANCE.

Section 5.1           
Applicability Of Article V Of The Indenture.

(a)               
The Senior Notes shall be subject to Defeasance and Covenant Defeasance
as provided in Article V of the Indenture; provided, however, that no
Defeasance or Covenant Defeasance shall be effective unless and until:

(i)                
there shall have been delivered to the Trustee the opinion of a
nationally recognized independent public accounting firm certifying the sufficiency
of the amount of the moneys, U.S. Government Obligations, or a combination
thereof, placed on deposit to pay, without regard to any reinvestment, the
principal of and any premium and interest on the Senior Notes on the Stated
Maturity thereof or on any earlier date on which the Senior Notes shall be
subject to redemption;

(ii)              
there shall have been delivered to the Trustee the certificate of a
Responsible Officer of the Company certifying, on behalf of the Company, to the
effect that such Defeasance or Covenant Defeasance shall not result in a breach
or violation of, or constitute a default under, any agreement to which the
Company is a party or violate any law to which the Company is subject; and

(iii)            
No Event of Default or event that (after notice or lapse of time or
both) would become an Event of Default shall have occurred and be continuing at
the time of such deposit or, with regard to any Event of Default or any such
event specified in Sections 8.01(a)(vii) and (viii), at any time on or
prior to the 124th calendar day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until after such
124th calendar day).

(b)              
Upon the exercise of the option provided in Section 5.01 of the
Indenture to have Section 5.03 of the Indenture applied to the Outstanding
Senior Notes, in addition to the obligations from which the Company shall be
released specified in the Indenture, the Company shall be released from its
obligations under Article III hereof.

ARTICLE VI  REDEMPTION OF SENIOR NOTES.

Section 6.1           
Right Of Redemption.

The Senior Notes may be redeemed by the
Company in accordance with the provisions of the form of Senior Note set forth
herein.

ARTICLE VII  CHANGE OF CONTROL

Section 7.1           
Repurchase At The Option Of Holders.

If a Change of Control Triggering Event
occurs, unless the Company has exercised its right to redeem the Senior Notes,
Holders of Senior Notes will have the right to require the Company to
repurchase all or any part (equal to $2,000 or an integral multiple of $1,000
in excess thereof) of their Senior Notes pursuant to the offer described below
(the “Change of Control Offer”).  In the Change of Control Offer, the
Company shall offer payment in cash equal to 101% of the aggregate principal
amount of Senior Notes repurchased plus accrued and unpaid interest, if any, on
the Senior Notes repurchased, to the date of purchase (the “Change of
Control Payment”).  Within 30 days following any Change of Control
Triggering Event or, at the option of the Company, prior to any Change of
Control, but after public announcement of the transaction or transactions that
constitute or may constitute the Change of Control, the Company shall mail a
notice to Holders of Senior Notes describing the transaction or transactions
that constitute or may constitute the Change of Control Triggering Event and
offering to repurchase the Senior Notes on the date specified in the notice,
which date will be no earlier than 30 days and no later than 60 days from the
date such notice is mailed (the “Change of Control Payment Date”),
pursuant to the procedures required by the Indenture and described in such
notice, which offer will constitute the Change of Control Offer. The notice
will, if mailed prior to the date on which the Change of Control occurs, state
that the Change of Control Offer is conditioned on the Change of Control
Triggering Event occurring on or prior to the applicable Change of Control
Payment Date.

On the Change of Control Payment Date,
the Company shall be required, to the extent lawful, to:

(a)           accept for payment all Senior Notes or portions of Senior Notes properly
tendered pursuant to the Change of Control Offer;

(b)              
deposit with the paying agent an amount equal to the Change of Control
Payment in respect of all Senior Notes or portions of Senior Notes properly
tendered; and

(c)               
deliver or cause to be delivered to the Trustee the Senior Notes
properly accepted together with an Officers’ Certificate stating the aggregate
principal amount of Senior Notes or portions of Senior Notes being purchased.

The Company shall not be required to
make a Change of Control Offer upon the occurrence of a Change of Control
Triggering Event if a third party makes such an offer in the manner, at the
times and otherwise in compliance with the requirements for an offer made by
the Company and the third party repurchases all Senior Notes properly tendered
and not withdrawn under its offer.  In addition, the Company shall not be
required to repurchase any Senior Notes if it has given written notice of a
redemption in whole of the Senior Notes.

The Company shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent those laws and regulations are
applicable in connection with the repurchase of the Senior Notes as a result of
a Change of Control Triggering Event.  To the extent that the provisions of any
securities laws or regulations conflict with the Change of Control provisions
of the Indenture, the Company shall be required to comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this Article VII by virtue of such compliance.

ARTICLE VIII  MISCELLANEOUS.

Section 8.1           
Reference To And Effect On The Indenture.

This Supplemental Indenture shall be
construed as supplemental to the Indenture and all the terms and conditions of
this Supplemental Indenture shall be deemed to be part of the terms and
conditions of the Indenture.  Except as set forth herein, the Indenture
heretofore executed and delivered is hereby (i) incorporated by reference in
this Supplemental Indenture and (ii) ratified, approved and confirmed.

Section 8.2           
Waiver Of Certain Covenants.

The Company may omit in any particular
instance to comply with any term, provision, or condition set forth in Article
III hereof if the Holders of a majority in principal amount of the Outstanding
Senior Notes shall, by Act of such Holders, either waive such compliance in
such instance or generally waive compliance with such term, provision or
condition, but no such waiver shall extend to or affect such term, provision,
or condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such term, provision, or condition shall remain in
full force and effect.

Section 8.3           
Supplemental Indenture May Be Executed In Counterparts.

This instrument may be executed in any
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.

Section 8.4           
Effect Of Headings.

The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.

 

IN WITNESS WHEREOF, the parties hereto
have caused this Supplemental Indenture to be duly executed, and their
respective corporate seals to be hereunto affixed and attested, all as of the
day and year first above written.

[Seal]

MACY’S RETAIL
HOLDINGS, INC.,

as Issuer

 

 

By:       /s/
Dennis J. Broderick

Name:  Dennis J. Broderick 

Title:    President

 

Attest:

  

/s/ Susan P. Storer

Name:  Susan P. Storer

Title:    Assistant Treasurer

[Seal]

 

MACY’S, INC.,

as Guarantor

 

 

By:       /s/
Dennis J. Broderick

Name:  Dennis J. Broderick 

Title:    Executive Vice President, General Counsel

             and Secretary

 

Attest:

  

/s/ Susan P. Storer

Name:  Susan P. Storer

Title:    Assistant Treasurer

[Seal]

 

 

THE BANK OF
NEW YORK MELLON TRUST COMPANY, N.A.,

as Trustee

 

 

By:       /s/
Julie Hoffman-Ramos  

Name:  Julie Hoffman-Ramos

Title:    Vice President

 

Attest:

  

/s/ James J. Prichard

Name:  James J. Prichard

Title:    Vice President

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