Document:

exhibit4warrant.htm

Exhibit 4.2

 

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT OR (II) THE TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT.

 

THIS WARRANT IS SUBJECT TO THE CONDITION, AS DESCRIBED IN THE WARRANT PURCHASE AGREEMENT (AS DEFINED BELOW), THAT THE PURCHASE PRICE (AS DEFINED IN THE WARRANT PURCHASE AGREEMENT) LESS THE DEPOSIT (AS DEFINED IN THE WARRANT PURCHASE AGREEMENT) SHALL HAVE BEEN TIMELY RECEIVED BY THE CORPORATION (AS DEFINED BELOW) IN ACCORDANCE WITH THE TERMS OF THE WARRANT PURCHASE AGREEMENT.  IF THE PURCHASE PRICE LESS THE DEPOSIT IS NOT TIMELY RECEIVED BY THE CORPORATION IN ACCORDANCE WITH THE WARRANT PURCHASE AGREEMENT, THIS WARRANT SHALL TERMINATE AND BE NULL AND VOID AB INITIO.  ANY TRANSFEREE OR OTHER INTERESTED PARTY WITH RESPECT TO THIS WARRANT SHOULD VERIFY DIRECTLY WITH THE CORPORATION THAT THE FULL PURCHASE PRICE WAS TIMELY RECEIVED AND ACCORDINGLY THIS WARRANT WAS AND HAS REMAINED EFFECTIVE FROM THE DATE OF PURCHASE (AS DEFINED BELOW) TO THE DATE OF SUCH VERIFICATION.

 

J. C. PENNEY COMPANY, INC.

WARRANT

 

Purchaser:  Ronald Bruce Johnson

 

Date of Purchase:  June 13, 2011

 

Purchase Price:  $49,999,999.66

 

Number of Shares Underlying Warrant:  7,256,894

 

Exercise Price Per Share:  $29.92

 

THIS IS TO CERTIFY THAT Ronald Bruce Johnson (“Purchaser”) is entitled to purchase from J. C. Penney Company, Inc., a Delaware corporation (the “Corporation”), shares of the Corporation’s authorized common stock of 50¢ par value (the “Common Stock”), subject to the terms and conditions set forth in this Warrant (this “Warrant”) and the Warrant Purchase Agreement, dated as of the date hereof (the “Warrant Purchase Agreement”), by and between the Corporation and Purchaser.  The Date of Purchase of the Warrant, the number of shares issuable upon exercise of the Warrant (the “Warrant Shares”), and the Exercise Price per share are stated above. This Warrant was entered into prior to your election as an officer or director of the Corporation and is not governed by any other stock option or award plan previously adopted by the Corporation.

 

  

  

 

  

This Warrant and the Warrant Purchase Agreement set forth the terms of the agreement between you and the Corporation with respect to the Warrant.  By accepting this Warrant, you agree to be bound by all of the terms hereof.

 

1.  Definitions.  As used in this Agreement, the following terms have the meanings set forth below:

 

(a)  “Board of Directors” means the board of directors of the Corporation.

 

(b)  “Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in the State of Delaware are authorized or obligated by law or executive order to close.

 

(c)  “Change in Control” means the occurrence of any of the following: (1) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act), other than the Corporation or one of its subsidiaries, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the Corporation’s Voting Stock or other Voting Stock into which the Corporation’s Voting Stock is reclassified, consolidated, exchanged or changed, measured by voting power rather than number of shares; (2) the direct or indirect sale, 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 Corporation’s assets and the assets of its subsidiaries, taken as a whole, to one or more persons, other than the Corporation or one of its subsidiaries; or (3) the first day on which a majority of the members of the Board of Directors are not Continuing Directors.  Notwithstanding the foregoing, a transaction shall not be deemed to involve a Change of Control if (1) the Corporation becomes a direct or indirect wholly-owned subsidiary of a holding company and (2)(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 Corporation’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.

 

(d)  “Continuing Director” means, as of any date of determination, any member of the Board of Directors who (1) was a member of the Board of Directors on the date hereof or (2) was nominated for election, elected or appointed to the Board of Directors with the approval of a majority of the continuing directors who were members of the Board of Directors at the time of such nomination, election or appointment (either by a specific vote or by approval of the Corporation’s proxy statement in which such member was named as a nominee for election as a director).

 

(e)  “Date of Purchase” means the date designated as such in the first paragraph of this Warrant.

 

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

 

  

  

 

  

(g)  “Exercise Notice” means the written exercise notice in the form provided by the Board of Directors.

 

(h)     “Exercise Price” means the exercise price per share designated as such in the first paragraph of this Warrant.

 

(i)      “Expiration Date” means December 13, 2018.

 

(j)      “Immediate Family” means your child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships.

 

(k)     “Market Price” means the last reported sale price regular way or, in case no such reported sale takes place on such day, the average of the last closing bid and ask prices regular way, in either case on the trading date immediately prior to the date as of which “Market Price” is being determined on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and ask prices as furnished by two members of the Financial Industry Regulatory Authority, Inc. selected from time to time by the Corporation for that purpose. “Market Price” shall be determined without reference to after hours or extended hours trading. If the Common Stock is not listed and traded in a manner that the quotations referred to above are available for the period required hereunder, the Market Price per share of Common Stock shall be deemed to be the fair market value per share of Common Stock as determined in good faith by the Board of Directors in reliance on an opinion of a nationally recognized independent investment banking corporation retained by the Corporation for this purpose and certified in a resolution to Purchaser.

 

(l)   “NYSE” means The New York Stock Exchange.

 

(m)       “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.

 

2.  Exercisability.  Except as provided in Section 3, you may only exercise your Warrant after the sixth anniversary of the Purchase Date (June 13, 2017) (the “Exercise Date”) and before the Expiration Date; provided, that in no event shall this Warrant be exercisable unless the Purchase Price (less the Deposit) has been timely received by the Corporation in accordance with the terms of the Warrant Purchase Agreement.  To the extent it has not already been exercised, the Warrant shall terminate on the Expiration Date.

 

3.  Special Lifting of Restrictions and Change in Control.

 

(a)   Immediately prior to the effective date of a Change in Control or, if you become employed by the Corporation, upon the date of a termination of your employment with the Corporation for any reason, this Warrant shall be immediately exercisable and transferable, notwithstanding the restrictions enumerated in Sections 2 and 6.

 

  

  

 

  

(b)  Subject to Sections 5 and 7, this Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize, otherwise change its capital or business structure, to merge, consolidate, dissolve, liquidate, or sell or transfer all or any part of its business or assets.

 

4. Exercise of Warrant.

 

(a)  In order to exercise this Warrant with respect to all or any part of the Warrant Shares for which this Warrant is exercisable, you (or any other person or persons exercising the Warrant in accordance with the terms hereof) must take the following actions:

 

(i)  Execute and deliver to the Corporation an Exercise Notice in the form attached hereto as Exhibit A for the Warrant Shares for which the Warrant is exercised (the “Purchased Shares”) which Exercise Notice (1) states the number of Purchased Shares (which must be a whole number of shares) and (2) is signed or otherwise given by you (or any other authorized person exercising the Warrant).

 

(ii)  Pay the aggregate Exercise Price for the Purchased Shares, on the date of exercise, (1) in cash or an equivalent means acceptable to the Corporation, or (2) with shares of Common Stock owned by you and having a Market Price as of the date of exercise equal to the aggregate Exercise Price for the Purchased Shares, or (3) by any combination of clauses (1) and (2), or (4) by net issue exercise, pursuant to which the Corporation will issue to you the Purchased Shares, less a number of Warrant Shares with a Market Price as of the date of exercise equal to the Exercise Price for the Purchased Shares.

 

(iii)  Certify in a writing reasonably acceptable to the Corporation that you have complied with the provisions of Section 6 hereof at all times since the Date of Purchase and, if the Warrant is exercised in respect of fewer than the total Warrant Shares to which this Warrant then relates, that you will continue to comply with such covenants in respect of the Warrant Shares which remain subject to this Warrant.

 

(b)  To the extent you become employed by the Corporation or otherwise to the extent applicable in connection with the exercise of this Warrant, the Corporation shall require that you or your Permitted Transferee fund (or cause to be funded) to the Corporation the required minimum federal, state, and local income and/or employment tax withholding due by such means as the Corporation deems reasonable.  Your withholding rate with respect to the exercise of this Warrant may not be higher than the minimum statutory rate.

 

(c)  In no event may this Warrant be exercised for any fractional shares.  Fractional shares shall be satisfied in cash, including in connection with the payment of the Exercise Price with shares of Common Stock, net issue exercises or satisfying tax withholding obligations.

 

The Warrant shall not be deemed to have been exercised unless all of these requirements are satisfied.

 

  

  

 

  

 

5. Adjustment Provisions.

 

(a)  If at any time or from time to time, the Corporation shall subdivide as a whole (by reclassification, by a stock split, by the issuance of a distribution on stock payable in stock or otherwise, including a dividend designated as such by the Board of Directors) the number of shares of Common Stock then outstanding into a greater number of shares of Common Stock, then (a) the number of shares of Common Stock that may be acquired under the Warrant shall be increased proportionately and (b) the Exercise Price for each share of Common Stock subject to the Warrant shall be reduced proportionately.

 

(b)  If at any time or from time to time, the Corporation shall consolidate as a whole (by reclassification, reverse stock split, or otherwise) the number of shares of Common Stock then outstanding into a lesser number of shares of Common Stock, then (a) the number of shares of Common Stock that may be acquired under the Warrant shall be decreased proportionately, and (b) the Exercise Price for each share of Common Stock subject to the Warrant shall be increased proportionately.

 

(c)  If at any time or from time to time, the Corporation shall declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of other or additional stock or other securities or property) on the Common Stock, other than a regular quarterly or other periodic dividend or a dividend payable in shares of Common Stock, then the Exercise Price for each share of Common Stock subject to the Warrant shall be adjusted so that (i) the excess of the aggregate Market Price of the shares of Common Stock subject to the Warrant over the aggregate Exercise Price immediately after the dividend or distribution does not exceed the excess of the aggregate Market Price of the shares of Common Stock subject to the Warrant over the aggregate Exercise Price immediately before such dividend or distribution and (ii) the ratio of the Exercise Price to the Market Price of the shares of Common Stock subject to the Warrant immediately following the dividend or distribution is not greater than the ratio of the Exercise Price to the Market Price of the Common Stock subject to the Warrant immediately before the dividend or distribution.

 

(d)  Should any other change be made to the Common Stock by reason of any exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to the class of securities subject to this Warrant in such manner and to the extent deemed appropriate by the Board of Directors.

 

(e)  Whenever an adjustment is required as provided in this Section 5, the Corporation shall, within 30 days following such adjustment, prepare and give to you a written notice setting forth, in reasonable detail, the event requiring adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and, as applicable, the change in price and the number of shares of Common Stock, other securities, cash or property purchasable subject to the Warrant after giving effect to the adjustment.

 

(f)  Adjustments under Section 5(a), (b), (c) and (d) shall be made by the Board of Directors, and its determination as to what adjustments shall be made and the extent 

 

  

  

 

  

thereof shall be final, binding and conclusive.  No fractional interest shall be issued on account of any such adjustments.

 

6.  Transferability.  This Warrant may be assigned in whole or in part during the lifetime of the initial holder of this Warrant either as (a) a gift to one or more members of the Immediate Family of the initial holder of this Warrant or to a trust in which the initial holder of this Warrant and/or one or more such family members hold more than 50% of the beneficial interest or (b) pursuant to a domestic relations order in settlement of marital property rights.  The assigned portion shall be exercisable only by the person or persons who acquire a proprietary interest in the Warrant pursuant to such assignment.  The terms applicable to the assigned portion shall be the same as those in effect for this Warrant immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Board of Directors may deem appropriate. Except for assignments to a person or an entity expressly permitted pursuant to the first sentence of Section 6(a) above (a “Permitted Transferee”), the Warrant may not be assigned, transferred, pledged, or otherwise hypothecated by you or any Permitted Transferee.  Additionally, if you become employed by the Corporation, at any time you are an officer or director of the Corporation, you or any Permitted Transferee may not hedge or enter into any derivative or other transaction in respect of the Warrant Shares (the intention of the parties being that you, together with any Permitted Transferee, shall maintain a net long position in respect of the Warrant Shares).  You shall (i) cause any Permitted Transferee to comply with the covenants herein and (ii) upon the written request of the Corporation certify as to your compliance with the covenants herein from time to time.  Notwithstanding anything to the contrary herein, the covenants and limits on transferability in this Section 6 shall terminate on the earliest of (x) the Exercise Date, (y) if you become employed by the Corporation, the date of a termination of your employment with the Corporation for any reason, or (z) a Change in Control.

 

7.  Recapitalization, Reclassification, Consolidation or Merger.  In the event of any capital reorganization of the Corporation, any reclassification of the stock of the Corporation (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split up or combination of shares), or any consolidation or merger of the Corporation with or into another person (where the Corporation is not the surviving person or where there is a change in or distribution with respect to the Common Stock), each Warrant shall after such reorganization, reclassification, consolidation, or merger be exercisable for the kind and number of shares of stock or other securities or property of the Corporation or of the successor person resulting from such consolidation or surviving such merger, if any, to which the holder of the number of shares of Common Stock deliverable (immediately prior to the time of such reorganization, reclassification, consolidation or merger) upon exercise of such Warrant would have been entitled upon such reorganization, reclassification, consolidation or merger.  The provisions of this clause shall similarly apply to successive reorganizations, reclassifications, consolidations, or mergers.  The Corporation shall not effect any such reorganization, reclassification, consolidation or merger unless, prior to the consummation thereof, the successor person (if other than the Corporation) resulting from such reorganization, reclassification, consolidation or merger, shall assume, by written instrument, the obligation to deliver to the Holders of the Warrant such shares of stock, securities or assets, which, in accordance with the foregoing provisions, such Holders shall be entitled to receive upon such conversion.

 

  

  

 

  

8.  Delivery of Certificates of Stock. After the exercise of the Warrant the Corporation shall promptly issue and deliver a certificate representing the number of shares of Common Stock as to which the Warrant has been exercised after the Corporation receives from the holder of this Warrant (a) the Exercise Notice, (b) payment of the Exercise Price and (c) satisfaction of any required minimum tax withholding due in connection with exercise of the Warrant. The value of the shares of Common Stock shall not bear any interest owing to the passage of time.

 

9.  Rights as a Stockholder.  Neither you nor any Permitted Transferee shall have any right as a stockholder with respect to any shares covered by this Warrant unless and until a certificate representing those shares is issued in your name or the name of any Permitted Transferee.

 

10.  Remedies.  You shall be entitled to recover from the Corporation reasonable fees incurred in connection with the enforcement of the terms and provisions of this Warrant, whether by an action to enforce specific performance or for damages for its breach or otherwise.

 

11.  Right of the Corporation and Subsidiaries to Terminate Employment.  If you become employed by the Corporation, nothing contained in this Warrant shall confer upon you the right to continue in the employ of the Corporation or any subsidiary, or interfere in any way with the rights of the Corporation or any subsidiary to terminate your employment at any time.

 

12.  Exchange Act Compliance.  To the extent you become an officer or director of the Corporation and to the extent applicable, the Board of Directors and/or the Corporation shall take all steps necessary to ensure that the purchase and exercise of the Warrant are exempt from Section 16(b) of the Exchange Act.

 

13.  No Guarantee of Interests.  The Board of Directors and the Corporation do not guarantee the Common Stock of the Corporation from loss or depreciation.

 

14.  Severability.  If any provision of this Warrant is for any reason held to be illegal, invalid, or to violate any law or listing requirement applicable to the Corporation, the illegality, invalidity, or violation shall not affect the remaining provisions hereof, but such provision shall be fully severable and this Warrant shall be construed and enforced as if the illegal or invalid provision had never been included herein and you and the Corporation shall amend this Warrant, preserving, to the maximum extent reasonably possible, the intended economic effects of this Warrant as executed by the parties hereto.

 

15.  Amendment.  No amendment or waiver of any provision of this Warrant shall be effective unless it is in writing and signed by the party or parties hereto affected thereby, and then only in the specific instance and for the specific purpose stated therein.

 

16.  No Implied Waivers.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

  

  

 

  

17.  Notices.  All notices, consents, requests, instructions, approvals and other communications provided for herein and all legal process in regard hereto will be in writing and will be deemed validly given, made or served if (a) given by fax, when such fax is transmitted to the fax number set forth below and the appropriate confirmation is received, or (b) if given by any other means, when delivered in person, by overnight courier or five Business Days after being sent by registered or certified mail (postage prepaid, return receipt requested) as follows:

 

If to the Corporation:

J. C. Penney Company, Inc.

6501 Legacy Drive

Plano, Texas 75024

Attn:    Janet L. Dhillon, Executive Vice President, General Counsel and Secretary

Fax:     (972) 431-1977

With copies (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

155 N. Wacker Drive

Chicago, Illinois 60606-1720

Attn:    Charles W. Mulaney, Jr.

Attn:    Peter C. Krupp

Fax:     (312) 407-0411

If to Purchaser:

Ronald Bruce Johnson

285 Atherton Avenue

Atherton, California 94027

With copies (which shall not constitute notice) to:

Cooley LLP

101 California Street, 5th Floor

San Francisco, California 94111-5800

Attn:    Samuel M. Livermore

Attn:    Thomas Z. Reicher

Fax:     (415) 276-5743

18.  Waiver of Notice.  Any person entitled to notice hereunder may waive such notice.

 

19.  Successors.  This Warrant shall be binding upon you, your legal representatives, heirs, legatees and distributees, and upon the Corporation, its successors and assigns.

 

20.  Headings.  The titles and headings of Sections are included for convenience of reference only and are not to be considered in construction of the provisions hereof.

 

  

  

 

  

21.  Specific Performance.  The Corporation and Purchaser each acknowledge and agree that money damages would not be a sufficient remedy for any breach (or threatened breach) of this Warrant by it and that, in the event of any breach or threatened breach hereof, any non-breaching party will be entitled to seek injunctive and other equitable relief, without proof of actual damages, that any breaching party will not plead in defense thereto that there would be an adequate remedy at law, and that any breaching party agrees to waive any applicable right or requirement that a bond be posted by any non-breaching party. Such remedies will not be the exclusive remedies for a breach of this Warrant, but will be in addition to all other remedies available at law or in equity.

 

22.  Governing Law; Forum; Jurisdiction; Waiver of Jury Trial.  This Warrant and any controversy arising under or related to this Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the conflict of laws principles thereof. Each of the Corporation and Purchaser (a) irrevocably and unconditionally consents to the exclusive personal jurisdiction and venue of the Chancery Court of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction and venue by motion or other request for leave from any such court, (c) agrees that it shall not bring any action relating to this Warrant or otherwise in any court other than the Chancery Court of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware) and (d) irrevocably waives the right to trial by jury.

 

23.  Counterparts.  This Warrant may be executed by the parties hereto in separate counterparts (including by means of electronic transmission), each of which when so executed shall be an original, but all such counterparts shall together constitute one and the same instrument.

 

24.  No Third Party Beneficiaries.  This Warrant is solely for the benefit of the parties hereto and is not enforceable by any other persons.

 

25.  Word Usage.  Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Warrant dictates, the plural shall be read as the singular and the singular as the plural.

 

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IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by its duly authorized officer as of the Date of Purchase first above written.

 

J. C. PENNEY COMPANY, INC.

By:  /s/ Michael P. Dastugue 

      Michael P. Dastugue,

      Executive Vice President and

      Chief Financial Officer

ACKNOWLEDGED AND AGREED:

/s/ Ronald B. Johnson 

Ronald Bruce Johnson

 

  

  

 

  

EXHIBIT A

EXERCISE NOTICE

 

[To be executed only upon exercise of Warrant]

 

The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of ______ shares of Common Stock of J. C. Penney Company, Inc. pursuant to [describe method of payment of Exercise Price and tax withholding, if any] and herewith makes payment therefor in __________, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________ whose address is _________________________________________________________________________________________and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned.

 

_______________________________

(Name of Registered Owner)

_______________________________

(Signature of Registered Owner)

_______________________________

(Street Address)

_______________________________

(City)    (State)    (Zip Code)

 

NOTICE:      The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlarge­ment or any change whatsoever.changeofcontrolplan2011.htm

Exhibit 10.1

J. C. PENNEY CORPORATION, INC.

2011 CHANGE IN CONTROL PLAN

 

  

  

 

  

J. C. PENNEY CORPORATION, INC.

2011 CHANGE IN CONTROL PLAN

TABLE OF CONTENTS

 

	 Article	 	 	 	Page
	 ARTICLE ONE	 	INTRODUCTION	 	1
	 ARTICLE TWO 	 	DEFINITIONS	 	2
	 ARTICLE THREE 	 	ELIGIBILITY AND PARTICIPATION	 	10
	 ARTICLE FOUR	 	BENEFITS	 	11
	 ARTICLE FIVE 	 	AMENDMENT AND TERMINATION	 	19
	 ARTICLE SIX	 	MISCELLANEOUS	 	20
	 APPENDIX I	 	PARTICIPATING EMPLOYERS 	 	27

 

                               

                             

                               

                              

i

 

  

  

 

  

J. C. PENNEY CORPORATION, INC.

2011 CHANGE IN CONTROL PLAN

ARTICLE ONE

INTRODUCTION

	
1.01

	
Purpose Of Plan

The J. C. Penney Corporation, Inc. 2011 Change in Control Plan (the "Plan") consists primarily of (i) severance benefits, (ii) additional cash benefits after termination of employment to be paid outside of the Corporation’s non-qualified retirement plans and (iii) a cash amount payable at Employment Termination equal to the Corporation’s cost of health and welfare benefits the associate participated in immediately prior to the Change in Control.  The purpose and intent of the Plan is to attract and retain key associates and to improve associate productivity by reducing distractions resulting from a potential Change in Control situation, all of which are in the best interest of the Corporation, and J. C. Penney Company, Inc. and its stockholders.

Capitalized terms used throughout the Plan have the meanings set forth in Article Two except as otherwise defined in the Plan, or the context clearly requires otherwise.

 

	
1.02

	
Plan Status

The Plan is intended to be a plan providing Severance Pay and certain other benefits following a Change in Control.  The Plan is intended to be a top hat plan for a select group of management or highly compensated executives, subject only to the administration and enforcement provisions of   ERISA.  To the extent applicable, it is intended that portions of this Plan either comply with or be exempt from the provisions of Code section 409A.  This Plan shall be administered in a manner consistent with this intent and any provision that would cause this Plan to fail to either comply with or be exempt from Code section 409A, as the case may be, shall have no force and effect.

	
1.03

	
Entire Plan

This document, including any Appendix hereto, and any documents incorporated by reference set forth the provisions of the Plan effective as of the Effective Date, except as otherwise provided herein.

1

 

  

  

 

  

ARTICLE TWO

DEFINITIONS

	
2.01  

	
For purposes of this Plan, the following terms shall have the following meanings:

Accounting Firm shall mean a nationally recognized accounting firm, or actuarial, benefits or compensation consulting firm, (with experience in performing the calculations regarding the applicability of Section 280G of the Code and of the tax imposed by Section 4999 of the Code) selected by the Corporation prior to a Change in Control.

 

Beneficial Owner shall have the meaning set forth in Rule 13d 3 under the Exchange Act.

 

Board shall mean the Board of Directors of the Company.

 

 Change in Control shall mean the consummation of an event set forth in any one of the following paragraphs:

 (I)     any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities ac­quired directly from the Company) representing more than 30% of the combined voting power of the Company's then out­standing securities, excluding any Person who becomes such a Bene­ficial Owner in connection with a transaction described in clause (i) of paragraph (III) below; or

   (II)  during any consecutive twelve month period the following individuals cease for any reason to constitute a majority of the number of directors then serving: individ­uals who, on the date hereof, constitute the Board and any new direc­tor (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of direc­tors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previ­ously so approved or recommended; or;

(III)  there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or other entity, other than (i) a merger or consolidation which results in the voting securities of the Company outstanding immediately prior to such merger or consolidation contin­uing to represent

 

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 (either by remaining outstanding or by being con­verted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, more than 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or be­comes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company's then outstanding securities; or

(IV)  the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Com­pany of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.

Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions (i) immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions,  (ii)_which is an acquisition of Company voting securities by the Company that results in an increase in the combined voting power of the voting securities owned by any Person or (iii) which does not constitute a change in control event within the meaning of Code section 409A and Treasury Regulation section 1.409A-3(i)(5), or its successor, including a change in the ownership of the corporation, or a change in the effective control of the corporation, or a change in the ownership of a substantial portion of the assets of the corporation as those events are defined in Treasury Regulation sections 1.409A-3(i)(5)(v), (vi) and (vii), respectively.

 

Code shall mean the Internal Revenue Code of 1986, as amended, and the proposed, temporary and final Treasury regulations promulgated thereunder.  Reference to any section or subsection of the Code or the proposed, temporary or final Treasury regulations includes reference to any comparable or 

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succeeding provisions of any legislation or regulations that amend, supplement or replace such section or subsection.

Committee shall mean the Human Resources and Compensation Committee of the Board.

Company shall mean J. C. Penney Company, Inc., a Delaware corporation, or any successor company.

Compensation shall mean the sum of a Participant’s annual base salary rate, and the Participant’s target annual incentive compensation (at target), under the Management Incentive Compensation Program for the fiscal year, in either case as in effect on either (i) the date of the Change in Control, or (ii) as of the Participant’s Employment Termination date, whichever is greater.   If a Participant is employed by an affiliate or Subsidiary of the Corporation, Compensation shall include the same elements of pay to the extent the affiliate or Subsidiary maintains similar or comparable pay arrangements.

Corporation shall mean J. C. Penney Corporation, Inc., a Delaware corporation, or any successor company.

Direct Report shall mean each person who reports directly to the Chief Executive Officer of the Corporation and who is an officer of the Company or any affiliate or Subsidiary who is subject to the reporting requirements under Section 16(a) of the Exchange Act.

Effective Date shall mean the date when the Plan is approved by the Board.

Employment Termination shall be deemed to have occurred when a Participant has a Separation from Service within two years after a Change in Control as a result of either a Separation from Service for Good Reason or an Involuntary Separation from Service other than as a result of a Summary Dismissal.  An Employment Termination shall not include a termination by reason of the Participant’s death, disability, voluntary termination of employment (other than a Separation from Service for Good Reason), or Normal Retirement.

 

ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.  Reference to any section or subsection of ERISA or the regulations promulgated thereunder includes reference to any comparable or succeeding provisions of any legislation or regulations that amend, supplement or replace such section or subsection.

 

Exchange Act shall mean the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder.  Reference to any section or subsection of the Exchange Act or the regulations promulgated thereunder

 

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includes reference to any comparable or succeeding provisions of any legislation or regulations that amend, supplement or replace such section or subsection.

Excise Tax shall mean, collectively, (i) the tax imposed by section 4999 of the Code by reason of being “contingent on a change in ownership or control” of the Company, within the meaning of section 280G of the Code, or (ii) any similar tax imposed by state or local law, or (iii) any interest or penalties with respect to any excise tax described in clause (i) or (ii).

Executive Board shall mean the Executive Board of the Corporation as such may be constituted from time to time.

Good Reason shall mean a condition resulting from any of the actions listed below taken by a Service Recipient with respect to a Participant without the Participant’s consent and within two years after the Change in Control:

(a)    a material decrease in the Participant’s salary or incentive compensation opportunity (the amount paid at target as a percentage of salary under the Management Incentive Compensation Program) as in effect immediately prior to the Change in Control, or

(b)    failure by the Service Recipient to pay the Participant a material portion of the Participant’s current base salary, or incentive compensation within seven days of its due date, or

(c)  a material adverse change in the Participant’s reporting responsibilities, duties, or authority as compared with pre-Change in Control responsibilities, duties, or authority, or

(d)  a material diminution in the authority, duties, or responsibilities of the supervisor to whom the Participant is required to report, including a requirement that a Participant report to a corporate officer or employee instead of reporting directly to the Board or the Board of the Corporation, as the case may be, or

(e)   a material diminution in the budget over which the Participant retains authority as compared to the pre-Change in Control budget, or

(f)    the Service Recipient’s requiring the Participant to change the principal location at which the Participant must perform services to a location that is more than 50 miles from the location where the Participant performed such services immediately prior to the Change in Control, or

(g)    discontinuance of any material paid time off policy, fringe benefit, welfare benefit, incentive compensation, equity compensation, or retirement 

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plan (without substantially equivalent compensating remuneration or a plan or policy providing substantially similar benefits) in which the Participant participates or any action that materially reduces such Participant’s benefits or payments under such plans, as in effect immediately before the Change in Control, provided, that in either case such discontinuance or other action results in a material decrease in the Participant’s overall compensation.

In order to constitute “Good Reason” the Participant must provide notice to the Corporation of the existence of the condition described above within 90 days of the initial existence of the condition, where upon the Corporation will have 30 days, following the notice of the condition by the Participant, during which it or the appropriate Service Recipient may remedy the condition and not be required to pay any amount owed under this Plan.  Any Separation from Service as a result of a Good Reason condition must occur as of the later of (i) two years after the Change in Control, or (ii) 180 days after the  initial existence of the condition that constitutes “Good Reason” in order for benefits to be due under this Plan.

Gross-Up Payment shall mean, as provided in Code section 409A and Treasury Regulation section 1.409A-3(i)(1)(v), a payment to reimburse the Participant in an amount equal to all or a designated portion of the Federal, state, local, or foreign taxes imposed upon the Participant as a result of compensation paid or made available to the Participant by the Service Recipient, including the amount of additional taxes imposed upon the Participant due to the Service Recipient's payment of the initial taxes on such compensation.

Involuntary Separation from Service shall mean Separation from Service due to the independent exercise of the unilateral authority of the Service Recipient to terminate the Participant's services, other than due to the Participant’s implicit or explicit request, where the Participant was willing and able to continue performing services, within the meaning of Code section 409A and Treasury Regulation section 1.409A-1(n)(1).

 

Management Incentive Compensation Program shall mean the J. C. Penney Corporation, Inc. Management Incentive Compensation Program effective December 31, 2007, as such may be amended from time to time, and any successor plan or program.

 

Mirror Savings Plan shall mean the J. C. Penney Corporation, Inc. Mirror Savings Plan, as amended and restated effective December 31, 2009 and as further amended through December 9, 2008, as such may be further amended from time to time, and any successor plan or program.

 

Normal Retirement shall mean retirement at or after a Participant’s normal retirement date as that term is defined in version of the J. C. Penney 

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Corporation, Inc. Pension Plan in effect immediately prior to a Change in Control.

 

Participant shall mean each person who becomes eligible to participate in the Plan pursuant to the requirements of Section 3.01 of the Plan.

Participating Employer shall mean the Corporation and any Subsidiary or affiliate of the Corporation that is designated as a Participating Employer under the Plan by the Board, excluding, however, any division of the Corporation or of a Subsidiary or affiliate that is designated by the Board as ineligible to participate in the Plan.  Appendix I contains a list of the Participating Employers currently participating in the Plan that have adopted the Plan pursuant to Article Six.

Person shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their owner­ship of stock of the Company.

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

Service Recipient shall mean the Corporation, for whom the services are performed and with respect to whom the legally binding right to compensation arises, and all persons with whom the Corporation would be considered a single employer under Code section 414(b) (employees of controlled group of corporations), and all persons with whom the Corporation would be considered a single employer under Code section 414(c) (employees of partnerships, proprietorships, etc., under common control), using the “at least 

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50 percent” ownership standard, within the meaning of Code section 409A and Treasury Regulation section 1.409A-1(h)(3).

 

Severance Benefits shall mean Severance Pay and the other benefits described in Article Four of the Plan payable to a Participant.

Severance Benefits Limitation shall mean 2.99 times the sum of (a) the annual base salary rate of a Participant, as in effect immediately prior to the date of the Participant’s Employment Termination, plus (b) the Participant’s target annual incentive compensation (at target) under the Management Incentive Compensation Program for the fiscal year in which an Employment Termination occurs.

Severance Multiple shall mean the multiple in the table below that corresponds to the Participant’s position as of the date of the Participant’s Employment Termination:

	
Position

	
Severance Multiple

	
Chief Executive Officer

	
2.99

	
Direct Report

	
2.99

	
Other Executive Vice Presidents

	
2.5

	
Senior Vice Presidents

	
2.0

Severance Pay shall mean the cash severance payments payable to a Participant pursuant to Section 4.01 of the Plan.

Subsidiary shall mean any entity in which the Company, directly or indirectly, beneficially owns 50% or more of the securities entitled to vote generally in the election of directors.

Summary Dismissal shall mean a termination due to:

(a)           any negligent or willful, material violation of any applicable securities laws (including the Sarbanes-Oxley Act of 2002);

(b)           any intentional act of fraud or embezzlement from the Corporation or Company;

(c)           a conviction of or entering into a plea of nolo contendere to a felony that occurs during or in the course of the Participant’s employment with the Corporation;

(d)           any material breach of a written covenant or agreement with the Corporation that is not cured within 30 days after written notice thereof from the Corporation; and

 

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(e)           willful and continued failure of the Participant to substantially perform the Participant’s duties for the Corporation (other than as a result of incapacity due to physical or mental illness) or to materially comply with Corporation or Company policy after written notice, in either case, from the Corporation and a 30-day opportunity to cure.

For purposes hereof, an act, or failure to act, shall not be deemed to be “willful” or “intentional” unless it is done, or omitted to be done, by the Participant in bad faith or without a reasonable belief that the action or omission was in the best interests of the Corporation.

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ARTICLE THREE

ELIGIBILITY AND PARTICIPATION

3.01          Eligibility

Each person who is appointed to the Executive Board by the Board on or after the Effective Date and prior to the occurrence of a Change in Control will be a Participant in the Plan.  For clarity purposes, any individual participating in the J. C. Penney Corporation, Inc. 2007 Change in Control Plan, the J. C. Penney Corporation, Inc. 2008 Change in Control Plan, or the J. C. Penney Corporation, Inc. 2009 Change in Control Plan shall not be eligible to participate in this Plan and will, instead, continue to participate in the applicable plan so long as such individual continues to meet the applicable eligibility requirements of such plan.

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ARTICLE FOUR

SEVERANCE BENEFITS

4.01           Severance Pay

Except as otherwise provided in Section 4.09, on an Employment Termination and the receipt of a Participant’s executed, written release of claims, in such form as may be required by the Corporation, a Participant shall become entitled to Severance Pay equal to the sum of (i) the Participant’s Compensation multiplied by the Participant’s Severance Multiple, and (ii) an amount equal to the greater of the Corporation’s annual contribution toward the Participant’s premium cost for active associate medical, dental and life insurance coverage, if any, as of the date of the (A) Change in Control, or (B) Employment Termination multiplied by the Severance Multiple.  Such lump sum Corporation contribution toward medical, dental and life insurance coverage for the Severance Multiple will be grossed-up for federal income taxes using the applicable federal income tax rate that applied to the Participant for his/her prior year’s Compensation.

Severance Pay shall be paid in a lump sum within 60 days following the Participant’s Employment Termination, provided that the Participant has executed and submitted a written release of claims, in the form prescribed by the Corporation, and the statutory period during which the Participant is entitled to revoke the written release of claims has expired prior to payment during the 60-day period, and further provided that the payment will be made in the second taxable year if the 60-day period begins in one taxable year and ends in the subsequent taxable year.

If a Participant is a party to any agreement or contract between the Participant and the Corporation or an affiliate or Subsidiary that provides for the payment of any cash severance payments in the event of the Participant’s termination of employment ("contract payments"), Severance Pay otherwise payable to the Participant under this Section 4.01 shall be reduced by the amount of such contract payments.  If the Participant receives payments and benefits pursuant to this Section 4.01, the Participant shall not be entitled to any severance pay or benefits under any severance plan, program or policy of the Company or an affiliate or Subsidiary, unless otherwise specifically provided therein in a specific reference to this Plan.  For purposes of the preceding sentence, the reference in the Executive Termination Pay Agreement to the receipt of all benefits in this Plan shall mean the receipt of all benefits that are payable under this Plan by the deadline for payment under Section 1.3(a) of the Executive Termination Pay Agreement. In applying the offset described in this paragraph, any reduction in benefits shall be made in a manner consistent with the requirements of Code section 409A.

 

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To the extent applicable, Severance Pay will be reduced as provided in Section 4.10 hereof.

4.02           Incentive Compensation

A Participant who is covered under the Management Incentive Compensation Program and who becomes entitled to Severance Pay under this Plan shall be paid a lump sum equal to the average of the Participant’s actual annual incentive compensation payments under the Management Incentive Compensation Program  for the three fiscal years immediately preceding the fiscal year in which the Employment Termination occurs; provided, however, if the Employment Termination occurs on the last day of the Corporation’s fiscal year the Participant shall be paid the higher of (a) the Participant’s average annual incentive compensation, as determined above, or (b) the actual annual incentive compensation earned under the Management Incentive Compensation Program. Notwithstanding the foregoing, if the Participant has elected to defer a portion of the annual incentive to be paid under the Management Incentive Compensation Program for the fiscal year under the Mirror Savings Plan, then that portion of the prorated incentive compensation will be deferred and paid in accordance with the terms of the Mirror Savings Plan, and the remaining portion of the prorated incentive compensation will be paid in a lump sum under this Section.  Such lump sum shall be paid at the same time as the Severance Pay payable under Section 4.01.  The prorated portion of any annual incentive compensation payable under the Management Incentive Compensation Program pursuant to this Section 4.02 shall be determined by multiplying the total annual incentive compensation payable under the Management Incentive Compensation Program, as determined under this Section 4.02, by a fraction the numerator of which is the total number of days from the beginning of the applicable incentive compensation period until the date of the Participant’s Employment Termination and the denominator of which is 365.  To the extent applicable, prorated incentive compensation will be reduced as provided in Section 4.10 hereof.

4.03           Retiree Medical, Dental, Gold Card, and Long Term Care Eligibility

	
  

	
Except as otherwise provided in Section 4.09, for the purpose of determining eligibility for retiree coverage under the J. C. Penney Corporation, Inc. Health and Welfare Benefit Plan (“H&W Plan”), a Participant who is covered under the H&W Plan and who becomes entitled to Severance Pay shall be provided with up to 12 months of additional age and service credit under the H&W Plan to reach a critical age, date or points for retiree eligibility purposes to the same extent as an involuntary termination resulting from a reduction in force would receive under the terms of the H&W Plan.  This provision shall apply to retiree eligibility for medical, dental, long term care insurance and the associate discount benefits provided under the H&W Plan.  Any insurance 

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benefits shall be paid solely from the insurance policy or policies provided under said plan.

 

	
4.04

	
Associate-Paid Retiree Term Life Insurance Eligibility

	
  

	
Except as otherwise provided in Section 4.09, notwithstanding any provision of the J. C. Penney Corporation, Inc. Voluntary Employees’ Beneficiary Association (“VEBA”) Life and Disability Benefit Plan to the contrary, if a Participant becomes entitled to Severance Pay under this Plan, the Participant shall be provided with up to 12 months of additional age and service credit under the terms of the life insurance portion of the VEBA Life and Disability Benefit Plan to reach a critical age, date or points for retiree eligibility purposes to the same extent as an involuntary termination resulting from a reduction in force would receive under the terms of such plan.  Retiree life insurance benefits shall be paid solely from the insurance policy or policies provided under said plan.

4.05            Non-Qualified Retirement Plans

Except as otherwise provided in Section 4.09, if a Participant becomes entitled to Severance Pay under this Plan, a Participant will receive an immediate lump sum payment within 30 days after Employment Termination, subject to any reduction provided for under Section 4.10 hereof, of any incremental benefit provided outside the terms of the applicable retirement plan calculated as follows. All other amounts payable under the terms of the applicable retirement plan, shall be paid to the Participant at the time and in the form and manner provided under the terms of the applicable plan.  If a Participant:

	
(a)  

	
is a participant in the Corporation’s Supplemental Retirement Plan for Management Profit-Sharing Associates (“SRP”), or was a participant immediately prior to such plan’s termination following a Change in Control, the Participant will receive an incremental benefit equal the difference between (i) the Participant’s benefit under the terms of the SRP as a result of vesting under that plan determined as of the date of the Participant’s Employment Termination, and (ii) the Participant’s benefit under the terms of the SRP (A) after crediting the Participant with a number of years equal to the Participant’s Severance Multiple as additional age and service credit under the SRP from either the date of such plan’s termination or the date of the Participant’s Employment Termination, as applicable, to make the Participant eligible for a benefit under the SRP, and if eligible, to provide the Participant with the highest benefit available under the SRP as though the entire amount of the Participant’s incremental benefit were provided under the SRP (including any offsets under such plan or offsets calculated under (b) or (c) of this Section 4.05),  and (B) using the higher of the Participant’s Compensation or actual Average Final 

 

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Compensation under the SRP, as the Participant’s Average Final Compensation for purposes of such calculation; and/or

 

	
(b)  

	
is a participant in the Corporation’s Benefit Restoration Plan (“BRP”), or was a participant immediately prior to such plan’s termination following a Change in Control, the Participant will receive an incremental benefit equal the difference between (i) the Participant’s benefit under the terms of the BRP as a result of vesting under that plan determined as of the date of the Participant’s Employment Termination, and (ii) the Participant’s benefit under the terms of the BRP (A) after crediting the Participant with a number of years equal to the Participant’s Severance Multiple as additional age and service credit under the BRP from either the date of such plan’s termination or the date of the Participant’s Employment Termination, as applicable, to make the Participant eligible for a benefit under the BRP, and if eligible, to provide the Participant with the highest benefit available under the BRP as though the entire amount of the Participant’s incremental benefit were provided under the BRP,  and (B) using the higher of the Participant’s Compensation or actual Average Final Compensation under the BRP, as the Participant’s Average Final Compensation for purposes of such calculation; and/or

	
(c)  

	
is a participant in the Mirror Savings Plan, or was a participant immediately prior to such plan’s termination following a Change in Control, the Participant will receive an incremental benefit equal to the difference between (i) the Corporation’s matching contributions actually paid under the Mirror Savings Plan as a result of the vesting of such matching contributions under that plan determined as of the date of the Participant’s Employment Termination, and (ii) the Corporation’s matching contributions under the Mirror Savings Plan after providing the Participant with additional Corporation matching contributions under that plan for each year in the Participant’s Severance Multiple, and assuming the same Corporation matching  contribution rate as in effect at the time of the Change in Control to provide the Participant with the highest benefit available under the Mirror Savings Plan using (A) the Participant’s Compensation for each year of the Severance Multiple, and (B) the Participant’s Mirror Savings Plan deferral election in effect immediately prior to that plan’s termination date or the Participant’s Employment Termination, as applicable, to determine Participant’s contribution and the Corporation’s matching contribution as though the entire amount of the Participant’s incremental matching contribution benefit were provided under such plan;

provided, however, that if and to the extent a Participant is otherwise entitled to receive any additional age and/or service credit under any such plan as a 

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result of Employment Termination, the additional age and/or service credit otherwise provided under this Section 4.05 shall not be counted twice for purposes of determining eligibility.

	
4.06  

	
Legal Fees

All expenses of a Participant incurred in enforcing the Participant’s rights and/or to recover the Participant’s benefits under this Article Four, including but not limited to, attorney's fees, court costs, arbitration costs, and other expenses shall be paid by the Corporation, in accordance with Code section 409A and Treasury Regulation section 1.409A-3(i)(1)(iv)(A) and shall meet the requirements below.  The Corporation shall reimburse the Participant for any such fees, costs or expenses, promptly upon delivery of reasonable documentation, provided, however, all invoices for reimbursement of fees, costs or expenses must be submitted to the Corporation and paid in a lump sum payment by the end of the calendar year following the calendar year in which the fee, cost or expense was incurred.  To be eligible for reimbursement, all fees, costs or expenses must be incurred within a 10 year period following the latest of a Change in Control or Employment Termination that gives rise to a benefit under this Plan.  The amount of fees, costs or expenses paid or eligible for reimbursement in one year under this Section 4.06 shall not affect the fees, costs or expenses paid or eligible for reimbursement in any other taxable year.  The right to payment or reimbursement under this Section 4.06 is not subject to liquidation or exchange for another benefit.

4.07           Outplacement Services/Financial Counseling

Except as otherwise provided in Section 4.09, following an Employment Termination, a Participant will be paid a lump sum payment in cash of $25,000 to allow the Participant to pay for outplacement and financial counseling services.  Such lump sum will be paid with the Severance Pay payable under Section 4.01.  To the extent applicable, the benefit will be reduced as provided in Section 4.10 hereof.

4.08           Special Bonus Hours

Except as otherwise provided in Section 4.09, in the event of an Employment Termination, a Participant will be paid for special bonus hours, if the Participant is also a participant in the Corporation’s Paid Time Off Policy (“PTO Policy”) to the same extent as an involuntary termination resulting from a reduction in force would receive under the terms of the PTO Policy.  Such payment will be determined in accordance with the provisions of the PTO Policy and paid within 30 days after the Participant’s Employment Termination date.

 

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4.09           Severance Benefits Limitation

	
  

	
Notwithstanding any other provision of the Plan to the contrary, the total of the Severance Benefits provided under Sections 4.01, 4.03, 4.04, 4.05, 4.07, and 4.08 shall not be greater than an amount equal to the Severance Benefits Limitation.  In the event that the total value of such Severance Benefits exceeds the Severance Benefits Limitation, such Severance Benefits will be provided in the following order until the Severance Benefits Limitation is met:  Sections 4.01, 4.05, 4.07, 4.08, 4.03, and then 4.04.  Once the Severance Benefits Limitation is met, no additional Severance Benefits shall be provided under the aforesaid provisions.  The Severance Benefits Limitation shall not apply to the benefits provided in Sections 4.02 and 4.06.

4.10           Determination of Excise Tax; No Gross-Up Payments

(a)  Anything in the Plan to the contrary notwithstanding, if it shall be determined that any payment or distribution by the Corporation or an affiliate or Subsidiary to or for the benefit of the Participant, whether paid or payable or distributed or distributable pursuant to the terms of the Plan or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing, but excluding any payment or benefit not provided due to the application of the Severance Benefits Limitation under Section 4.09 (a “Payment”), would be subject to the Excise Tax, then the payments and benefits to be paid or provided under this Plan may be reduced (or repaid to the Corporation, if previously paid or provided) as provided below.  In no event shall the Participant be entitled to receive a Gross-Up Payment or Excise Tax reimbursement.  For purposes of this Section 4.10, the terms “excess parachute payment” and “parachute payment” will have the meanings assigned to them by Section 280G of the Code.

(b) All determinations required to be made under this Section 4.10, including whether an Excise Tax is payable by the Participant and the amount of such Excise Tax shall be made by the Accounting Firm. The Accounting Firm shall make an initial determination at the time of a Change in Control.  In addition, the Corporation shall direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Corporation and the Participant within 15 calendar days after the date of the Participant’s Employment Termination, if applicable, and any other such time or times as may be requested by the Corporation or the Participant.

(c)  The Accounting Firm shall calculate the amount of any “parachute payment” and “excess parachute payment” due to the Participant after taking into account the application of Section 4.09 and the related Excise Tax.  The 

 

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Accounting Firm also shall calculate a “reduced payment amount” by reducing the Participant’s payments and benefits under this Plan (which could require repayment of amounts previously paid or provided to the Participant) to the minimum extent necessary so that no portion of any Payment, as so reduced or repaid, constitutes an “excess parachute payment.” If the Accounting Firm determines that any Excise Tax is payable by the Participant, then the Participant shall receive either (i) all Payments otherwise due to him or her or (ii) the reduced payment amount described in the preceding sentence, whichever will provide him or her with the greater after-tax economic benefit taking into account for these purposes any applicable Excise Tax.  If the Accounting Firm determines that no Excise Tax is payable by the Participant, it shall, at the same time as it makes such determination, furnish the Participant with an opinion that he/she has substantial authority not to report any Excise Tax on The Participant’s federal, state, local income or other tax return.

(d) The Corporation and the Participant shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Corporation or the Participant, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by paragraph (c) hereof.  Any reasonable determination by the Accounting Firm as to the amount of the Excise Tax, “parachute payment,” “excess parachute payment,” or “reduced payment amount” (and supported by the calculations done by the Accounting Firm) shall be binding upon the Corporation and the Participant.

(e)  The federal, state and local income or other tax returns filed by the Participant shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax, if any, payable by the Participant.  The Participant shall make proper payment of the amount of any Excise Tax, and at the request of the Corporation, provide to the Corporation true and correct copies (with any amendments) of his/her federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Corporation, evidencing such payment.

(f)  The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by this Section 4.10 shall be borne by the Corporation. If such fees and expenses are initially paid by the Participant, the Corporation shall reimburse the Participant the full amount of such fees and expenses within five business days after receipt from the Participant of a statement therefor and reasonable evidence of the Participant’s payment thereof. Any reimbursement or payment of such fees and expenses will be made by the Corporation in accordance with Code section 

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409A and Treasury Regulation section 1.409A-3(i)(1)(iv)(A) and shall meet the requirements below. The Corporation shall reimburse the Participant for any such fees and expenses, promptly upon delivery of reasonable documentation, provided, however, all invoices for reimbursement of fees and expenses must be submitted to the Corporation and paid in a lump sum payment by the end of the calendar year following the calendar year in which the fee or expense was incurred.  To be eligible, all fees and expenses must be incurred within a 20 year period following the latest of a Change in Control or Employment Termination that gives rise to a benefit under this Plan.  The amount of fees and expenses paid or eligible for reimbursement in one year under this Section 4.10(f) shall not affect the fees and expenses paid or eligible for reimbursement in any other taxable year.  The right to payment or reimbursement under this Section 4.10(f) is not subject to liquidation or exchange for another benefit.

(g)  Appropriate adjustments will be made to amounts previously paid to the Participant, or to amounts not paid pursuant to paragraph (c), as the case may be, to reflect properly any subsequent changes to the calculations described above in paragraph (c).  In the event that any payment or benefit is required to be reduced or repaid pursuant to paragraph (c), reductions will be made, to the extent necessary, and in the following order to any payments otherwise owed to the Participant under Sections 4.01, 4.02 (excluding any amount elected to be deferred under the Mirror Savings Plan), 4.05 and 4.07 of the Plan (to the extent not previously paid).  In reducing benefits, the reduction shall be made in a manner that complies with the requirements of Code section 409A and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero.  In the event that additional amounts are owed to the Corporation after the imposition of such reductions, the Participant shall be required to repay to the Corporation the additional amount owed within 30 days of the determination being made by the Accounting Firm.

 

 

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ARTICLE FIVE

AMENDMENT AND TERMINATION

5.01           Amendment

The Plan may be amended by the Board at any time; provided, however, that

(a)  any amendment that would have an adverse effect on any Participant’s Plan benefits and/or rights, except as may be otherwise required to comply with changes in applicable laws or regulations, including, but not limited to, Code section 409A, or

(b)  any amendment within one year before or two years after a Change 

in Control,

cannot be applied to any Participant who would be adversely affected by such amendment without such Participant’s consent.   After a Change in Control, any amendment shall also require the consent of the Committee.

 

 

5.02            Termination

The Plan shall continue indefinitely after the Effective Date, unless the  Board shall decide to terminate the Plan by duly adopting resolutions terminating the Plan; provided, however, following the commencement of any discussion with a third party that ultimately results in a Change in Control, the Plan shall continue subject to Section 5.01, until such time as the Corporation and each affiliate or Subsidiary (as appropriate) shall have fully performed all of their obligations under the Plan with respect to all Participants, and shall have paid all Severance Benefits under the Plan in full to all Participants.

 

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ARTICLE SIX

MISCELLANEOUS

6.01           Participant Rights

The Corporation and each affiliate or Subsidiary intend this Plan to constitute a legally enforceable obligation between (a) the Corporation or an affiliate or Subsidiary (as appropriate) and (b) each Participant.

It is also intended that the Plan shall confer vested and non-forfeitable rights for each Participant to receive benefits to which the Participant is entitled under the terms of the Plan with Participants being third party beneficiaries.

Except as provided in the definitions of Summary Dismissal or Good Reason, nothing in this Plan shall be construed to confer on any Participant any right to continue in the employ of the Corporation or an affiliate or Subsidiary or to affect in any way the right of the Corporation or an affiliate or Subsidiary to terminate a Participant’s employment without prior notice at any time for any reason or no reason.

6.02            Authority of Committee

The Committee is responsible for administering the Plan.  The Committee will have the full authority and discretion necessary to accomplish that purpose, including, without limitation, the authority and discretion to:  (i) resolve all questions relating to the eligibility of Executive Board members to become or continue as Participants, (ii) determine the amount of benefits, if any, payable to Participants under the Plan and determine the time and manner in which such benefits are to be paid, to either comply with or be exempt from Code section 409A, as the case may be, (iii) engage any administrative, legal, tax, actuarial, accounting, clerical, or other services it deems appropriate in administering the Plan, (iv) construe and interpret the Plan, supply omissions from, correct deficiencies in and resolve inconsistencies or ambiguities in the language of the Plan, resolve inconsistencies or ambiguities between the provisions of this document, and adopt rules for the administration of the Plan that are not inconsistent with the terms of the Plan document and that are intended to make any benefits provided under the Plan either comply with or be exempt from Code section 409A, as the case may be, (v) compile and maintain all records it determines to be necessary, appropriate or convenient in connection with the administration of the Plan, and (vi) resolve all questions of fact relating to any matter for which it has administrative responsibility.  The Committee shall perform all of the duties and may exercise all of the powers and discretion that the Committee deems necessary or appropriate for the proper administration of the Plan, and shall do so in a uniform, nondiscriminatory manner.  Any failure by the Committee to apply any 

 

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provisions of this Plan to any particular situation shall not represent a waiver of the Committee’s authority to apply such provisions thereafter.  Every interpretation, choice, determination or other exercise of any power or discretion given either expressly or by implication to the Committee shall be conclusive and binding upon all parties having or claiming to have an interest under the Plan or otherwise directly or indirectly affected by such action, without restriction, however, on the right of the Committee to reconsider and redetermine such action.  Any decision rendered by the Committee and any review of such decision shall be limited to determining whether the decision was so arbitrary and capricious as to be an abuse of discretion.  The Committee may adopt such rules and procedures for the administration of the Plan as are consistent with the terms hereof.

6.03            Claims Procedure

A.  Allocation of Claims Responsibility:  With respect to any claim for benefits that are provided exclusively under this Plan, the claim shall be approved or denied by the Committee within 60 days following the receipt of the information necessary to process the claim.  In the event the Committee denies a claim for benefits in whole or in part, it will give written notice of the decision to the claimant or the claimant’s authorized representative, which notice will set forth in a manner calculated to be understood by the claimant, stating the specific reasons for such denial, make specific reference to the pertinent Plan provisions on which the decision was based, and provide any other additional information, as applicable, required by 29 Code of Federal Regulations section 2560.503-1 applicable to the Plan.

With respect to any claim for benefits that, under the terms of the Plan, are provided under another employee benefit plan maintained by the Corporation (i.e., life insurance, H&W Plan, PTO/MTO Policy, Pension, Savings, Mirror Savings, BRP, and SRP benefits), the Committee shall determine claims regarding the Participant's eligibility under the Plan in accordance with the preceding paragraph, but the administration of any other claim with respect to such benefits (including the amount of such benefits) shall be subject to the claims procedure specified in such other employee benefit plan or program.

B.  Litigation or Appeal  In the event the Committee denies a claim in whole or in part for benefits that are provided exclusively under the Plan, or denies a claim regarding the claimant’s eligibility under the Plan, Participants will then be allowed to file a lawsuit in federal court as provided under ERISA.

Appeals with respect to any claim for benefits that, under the terms of the Plan, are provided under another employee benefit plan maintained by the Corporation (i.e., life insurance, H&W Plan, PTO/MTO Policy, Pension, Savings, Mirror Savings, BRP, and SRP benefits), shall be subject to the claims and appeals procedure specified in such other employee benefit plan.

 

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6.04

	
Records and Reports

The Committee will maintain adequate records of all of their proceedings and acts and all such books of account, records, and other data as may be necessary for administration of the Plan.  The Committee will make available to each Participant upon request such of the Plan's records as pertain to him/her for examination at reasonable times during normal business hours.

	
6.05

	
Reliance on Tables, Etc.

 In administering the Plan, the Committee is entitled to the extent permitted by law to rely conclusively upon all tables, valuations, certificates, opinions and reports that are furnished by accountants, legal counsel or other experts employed or engaged by the Committee.  The Committee will be fully protected in respect of any action taken or suffered by the Committee in good faith reliance upon all such tables, valuations, certificates, reports, opinions or other advice.  The Committee is also entitled to rely upon any data or information furnished by a Participating Employer or by a Participant as to any information pertinent to any calculation or determination to be made under the provisions of the Plan, and, as a condition to payment of any benefit under the Plan the Committee may request a Participant to furnish such information as it deems necessary or desirable in administering the Plan.

	
6.06

	
Availability of Plan Information and Documents

Any Participant having a question concerning the administration of the Plan or the Participant's eligibility for participation in the Plan or for the payment of benefits under the Plan may contact the Committee and request a copy of the Plan document.  Each Participating Employer will keep copies of this Plan document, exhibits and amendments hereto, and any related documents on file in its administrative offices, and such documents will be available for review by a Participant or a designated representative of the Participant at any reasonable time during regular business hours.  Reasonable copying charges for such documents will be paid by the requesting party.

	
6.07

	
Expenses

All Plan administration expenses incurred by the Committee shall be paid by the Corporation and all other administration expenses incurred by the Corporation or an affiliate or Subsidiary shall be paid by the Corporation or an affiliate or Subsidiary (as appropriate).

 

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6.08

	
Adoption Procedure for Participating Employer

Any Subsidiary or affiliate of the Corporation may become a Participating Employer under the Plan provided that (i) the Board approves the adoption of the Plan by the Subsidiary or affiliate and designates the Subsidiary or affiliate as a Participating Employer in the Plan and (ii) by appropriate resolutions of the board of directors or other governing body of the Subsidiary or affiliate, the Subsidiary or affiliate agrees to become a Participating Employer under the Plan and also agrees to be bound by any other terms and conditions that may be required by the Board or the Committee, provided that such terms and conditions are not inconsistent with the purposes of the Plan.  A Participating Employer may withdraw from participation in the Plan, subject to approval by the Committee, by providing written notice to the Committee that withdrawal has been approved by the board of directors or other governing body of the Participating Employer; provided, however, following the commencement of any discussion with a third party that ultimately results in a Change in Control, the Committee shall have no authority to approve the withdrawal of any Participating Employer until such time as the Corporation and each affiliate or Subsidiary (as appropriate) shall have fully performed all of their obligations under the Plan with respect to all Participants, and shall have paid all Severance Benefits under the Plan in full to all Participants.  The Board may at any time remove a Participating Employer from participation in the Plan by providing written notice to the Participating Employer that it has approved removal; provided, however, following the commencement of any discussion with a third party that ultimately results in a Change in Control, the Board shall have no authority to remove or approve the withdrawal of any Participating Employer until such time as the Corporation and each affiliate or Subsidiary (as appropriate) shall have fully performed all of their obligations under the Plan with respect to all Participants, and shall have paid all Severance Benefits under the Plan in full to all Participants. The Board will act in accordance with this Article pursuant to unanimous written consent or by majority vote at a meeting.

 6.09          Effect on Other Benefits

Except as otherwise provided herein, the Plan shall not affect any Participant’s rights or entitlement under any other retirement or employee benefit plan offered to him/her by the Corporation or an affiliate  or Subsidiary (as appropriate) as of the Participant’s Employment Termination.

6.10           Successors

The Plan shall be binding upon any successor in interest of the Corporation or an affiliate or Subsidiary (as appropriate) and shall inure to the benefit of, and be enforceable by, a Participant’s assigns or heirs.

 

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6.11

	
Severability

The various provisions of the Plan are severable and any determination of invalidity or unenforceability of any one provision shall not have any effect on the remaining provisions.

6.12            Construction

In determining the meaning of the Plan, words imparting the masculine gender shall include the feminine and the singular shall include the plural, unless the context requires otherwise.  Headings of sections and subsections of the Plan are for convenience only and are not intended to modify or affect the meaning of the substantive provisions of the Plan.

6.13            References to Other Plans and Programs

Each reference in the Plan to any plan, policy or program, the Plan or document of the Corporation or an affiliate or Subsidiary, shall include any amendments or successor provisions thereto without the necessity of amending the Plan for such changes.

	
6.14  

	
       Notices

(a)  General.  Notices and all other communications contemplated by this Plan shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid.   In the case of the Participant, (i) mailed notices shall be addressed to the Participant at the Participant’s home address that was most recently communicated to the Corporation in writing or (ii) in the case of a Participant who is an employee, distributed to the employee at his/her place of employment in compliance with 29 Code of Federal Regulations section 2520.104b-1(c).  In the case of the Corporation, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its General Counsel at J.C. Penney Corporation, Inc., 6501 Legacy Drive, Plano, Texas 75024.

 

(b)  Notice of Termination.  Any notice of Summary Dismissal by the Corporation or by the Participant for Good Reason shall be communicated by a notice of termination to the other party given in accordance with this Section 6.14.   Such notice shall indicate the specific termination provision in this Plan relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide 

 

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the basis for termination under the provision so indicated, and shall specify the Employment Termination date.

 

6.15        No Duty to Mitigate

The Participant shall not be required to mitigate the amount of any payment contemplated under this Plan, nor shall such payment be reduced by any earnings that the Participant may receive from any other source.

6.16           Employment Taxes

All payments made pursuant to this Plan shall be subject to withholding of applicable income and employment taxes.

6.17            Section 409A Compliance

The Plan is intended to comply with the “involuntary separation pay exception” to Code section 409A.  Payments to Participants are also intended, where possible, to comply with the "short term deferral exception" to Code section 409A. Accordingly, the provisions of the Plan applicable to Severance Pay and the determination of the Participant’s Termination of Employment shall be applied, construed and administered so that the Severance Pay qualifies in all instances for one or both of those exceptions, to the maximum extent allowable.

If, and to the extent any payment or benefit under the Plan should be deemed to be an item of deferred compensation subject to the requirements of Code section 409A, the provisions of the Plan applicable to that  payment or benefit shall be applied, construed and administered so that such payment or benefit is made or provided in compliance with the applicable requirements of Code section 409A and its corresponding regulations.  Any payment from the Plan that is subject to the requirements of section 409A may only be made in a manner and upon an event permitted by section 409A, including the requirement that deferred compensation payable to a “specified employee” of a publicly traded company be postponed for six months after separation from service.  Payments upon Employment Termination may only be made upon a “separation from service”, as determined in accordance with Code section 409A and the Treasury Regulations thereunder. In addition, should there arise any ambiguity as to whether any other provisions of the Plan would contravene one or more applicable requirements or limitations of Code section 409A and the Treasury Regulations thereunder, such provisions shall be interpreted, administered and applied in a manner that complies with the applicable requirements of Code section 409A and the Treasury Regulations thereunder.

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6.18           Governing Law

Except to the extent that the Plan may be subject to the provisions of ERISA, the Plan will be construed and enforced according to the laws of the State of Texas, without giving effect to the conflict of laws principles thereof.  Except as otherwise required by ERISA, every right of action by an Associate with respect to the Plan shall be barred after the expiration of three years from the date of termination of employment or the date of receipt of the notice of denial of a claim for benefits or eligibility, if earlier.  In the event ERISA's limitation on legal action does not apply, the laws of the State of Texas with respect to the limitations of legal actions shall apply and the cause of action must be brought no later than four years after the date the action accrues.

 

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APPENDIX I

Participating Employers

J.C. Penney Corporation, Inc.

J.C. Penney Company, Inc.

JCPenney Puerto Rico, Inc.

JCP Logistics, Inc.

JCP Media, Inc.

JCP Procurement, Inc.

J C Penney Purchasing Corporation, Inc.

JCP Construction Services, Inc.

Gifting Grace, Inc.

CLAD, Inc.

 

 

 

 

 

 

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