Document:

NONQUALIFIED STOCK OPTION AGREEMENT

Exhibit 10.1

 

NONQUALIFIED STOCK OPTION AGREEMENT

 

            This
AGREEMENT (the "Agreement") is made as of <ISSUE DATE>
(the "Date of Grant") by and between MACY’S, INC., a Delaware corporation (the "Company"), and
<NAME> (the "Optionee").

 

            1.         Grant of Stock Option. 
Subject to and upon the terms, conditions, and restrictions set forth in this
Agreement and in the Company's 2009 Omnibus Incentive Compensation Plan (the
"Plan"), as amended from time to time, the Company hereby grants to
the Optionee as of the Date of Grant a stock option (the "Option") to
purchase <SHARES> Common Shares (the "Optioned
Shares").  The Option may be exercised from time to time in accordance
with the terms of this Agreement.  The price at which the Optioned Shares may
be purchased pursuant to this Option shall be <$GRANT PRICE> per
share subject to adjustment as hereinafter provided (the "Option
Price").  The Option is intended to be a nonqualified stock option and
shall not be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Code, or any successor provision
thereto.

 

            2.         Term of Option.  The
term of the Option (the “Term”) shall commence on the Date of Grant and, unless
earlier terminated in accordance with Section 7 hereof, shall expire at the
close of business on the date which is ten (10) years from the Date of Grant.

 

            3.         Right to Exercise. 
Subject to the expiration or earlier termination of the Option as provided
herein, on <DATE> and on each of the first, second and third
anniversary of such date, the number of Optioned Shares equal to twenty-five
percent (25%) multiplied by the initial number of Optioned Shares specified in
this Agreement shall vest (become exercisable) on a cumulative basis until the
Option is fully exercisable. To the extent the Option is exercisable, it may be
exercised in whole or in part.  In no event shall the Optionee be entitled to
acquire a fraction of an Optioned Share pursuant to this Option.  

 

            4.         Limitations on Transfer of
Option.  

 

(a) 
The Option granted hereby shall be neither
transferable nor assignable by the Optionee other than 

 

(i) upon death, by will or by the laws of
descent and distribution, 

(ii) pursuant to a qualified domestic
relations order, or 

(iii) to a fully revocable trust to which
the Optionee is treated as the owner for federal income tax purposes, 

 

and may be
exercised, during the lifetime of the Optionee, only by the Optionee, or in the
event of his or her legal incapacity, by his or her guardian or legal
representative acting on behalf of the Optionee in a fiduciary capacity under
state law and court supervision.  

 

(b) 
Notwithstanding Section 4(a), the Option or any interest therein may be
transferred by the Optionee, without payment of consideration therefore by the
transferee, to any one or more members of the immediate family of the Optionee
(as defined in Rule 16a-1(e) under the Securities Exchange Act of 1934), or to
one or more trusts established solely for the benefit of one or more members of
the immediate family of the Optionee or to one or more partnerships in which
the only partners are such members of the immediate family of the Optionee.  No
transfer under this Section 4(b) will be effective until notice of such
transfer is delivered to the Company describing the terms and conditions of the
proposed transfer, and the Company determines that the proposed transfer
complies with the terms of the Plan and this Agreement and with any terms and
conditions made applicable to the transfer by the Company or Board at the time
of the proposed transfer.  Any transferee under this Section 4(b) shall be
subject to the same terms and conditions hereunder as would apply to the
Optionee and to such other terms and conditions made applicable to the
transferee pursuant to this Agreement or by the Board.  Any purported transfer
that does not comply with the requirements of this Section 4(b) shall be void
and unenforceable against the Company and the purported transferee shall not
obtain any rights to or interest in the Option.

 

(c) 
Notwithstanding anything to the contrary contained in any Non-Qualified Stock
Option Agreement previously entered into between the Company and the Optionee
covering the grant of stock options by the Company to the Optionee, all such
stock options previously granted to Optionee by the Company shall be
transferable consistent with the terms and conditions applicable to the
transfer of the Option as contained herein.

 

           5.         Notice of Exercise; Payment. 
To the extent then exercisable, the Option may be exercised by written notice
to the Company stating the number of Optioned Shares for which the Option is
being exercised and the intended manner of payment.  As a further condition
precedent to the exercise of this Option, the Optionee shall comply with all
regulations and the requirements of any regulatory authority having control of,
or supervision over, the issuance of Common Shares and in connection therewith
shall execute any documents which the Board shall in its sole discretion deem
necessary or advisable.

 

(a) 
Payment equal to the aggregate Option Price of the Optioned Shares being
exercised shall be tendered in full with the notice of exercise to the Company
in cash in the form of currency or check or other cash equivalent acceptable to
the Company.  As soon as practicable after receipt of such notice, but in any
event no later than thirty (30) days after receipt, the Company shall direct
the due issuance of the Optioned Shares so purchased.  

 

(b) 
With the agreement of the Company, the requirement of payment in cash shall be
deemed satisfied if the Optionee makes arrangements that are satisfactory to
the Company with a broker that is a member of the National Association of
Securities Dealers, Inc. to sell a sufficient number of Optioned Shares which
are being purchased pursuant to the exercise, so that the net proceeds of the
sale transaction will  at least equal the amount of the aggregate Option Price,
plus interest at the “applicable Federal rate” within the meaning of that term
under Section 1274 of the Code, or any successor provision thereto, for the
period from the date of exercise to the date of payment, and pursuant to which
the broker undertakes to deliver to the Company the amount of the aggregate
Option Price, plus such interest, not later than the date on which the sale
transaction will settle in the ordinary course of business (this payment
mechanism is referred to as the “Cashless Exercise Program”).  

 

(c) 
In the event that the Company does not have a Cashless Exercise Program in
effect at the time the Company receives notice of exercise from the Optionee,
the Optionee may also tender the Option Price by (i) the actual or constructive
transfer to the Company of nonforfeitable, non-restricted Common Shares that
have been owned by the Optionee for more than six (6) months prior to the date
of exercise, or (ii) by any combination of the foregoing methods of payment,
including a partial tender in cash and a partial tender in nonforfeitable,
nonrestricted Common Shares.  Nonforfeitable, nonrestricted Common Shares that
are transferred by the Optionee in payment of all or any part of the Option
Price shall be valued on the basis of their Market Value per Share.  

 

           6.         Termination of Agreement. 
Except as provided in Section 7 below, this Agreement and the Option granted
hereby shall terminate automatically and without further notice, and,
accordingly, any and all rights granted to Optionee and any and all obligations
undertaken by the Company hereunder with regard to any vested but unexercised
Optioned Shares shall terminate at the end of the Term of the Option.  Optioned
Shares that are not exercised prior to the end of the Term of the Option are
immediately forfeited and may no longer be exercised.

 

           7.         Vesting and Exercisability
Following Certain Events.  Subject to Section 6 above, the Optionee (or his
or her guardian, legal representative, estate or beneficiary, as applicable)
shall have the right to exercise the Option following the occurrence of certain
events, as follows:

 

(a)
 Termination of Employment Without Cause.  Except as otherwise provided in
Sections 7(c) through 7(i) below, or as provided on a case-by-case basis by the
Board, if the Optionee’s employment with the Company is terminated without
cause (as hereafter defined in Section 20), any vested, but unexercised
Optioned Shares shall continue to be exercisable through the earlier to occur
of ninety (90) days following the effective date of such termination of
employment or the expiration of the Term of the Option.  Any Optioned Shares
that were not vested as of the effective date of such termination are forfeited.

 

(b) 
Termination of Employment for Cause.  In the event that the Optionee’s
employment with the Company is terminated for cause (as hereafter defined in
Section 20), all Optioned Shares (vested or unvested) shall immediately be
forfeited as of the effective date of such termination.

 

(c) 
Death During Active Employment of Optionee Under Age 55 or With Less Than 10
Years of Vesting Service.  If the Optionee is under the age of 55, or at
any age with less than ten (10) years of vesting service, and dies while in the
employ of the Company, all unvested Optioned Shares vest and become immediately
exercisable in full.  Those Optioned Shares and any other vested, but
unexercised Optioned Shares shall continue to be exercisable through the
earlier to occur of three (3) years after the Optionee’s death or the
expiration of the Term of the Option.  

 

(d) 
Death During Active Employment of Optionee Age 55-61 With at Least 10 Years
of Vesting Service. If the Optionee is age 55 to 61 with at least ten (10)
years of vesting service and dies while in the employ of the Company, all
unvested Optioned Shares vest and become immediately exercisable in full.  Those
Optioned Shares shall continue to be exercisable through the earlier to occur
of three (3) years after the Optionee’s death or the expiration of the Term of
the Option. Any vested, but unexercised Optioned Shares as of the date of death
shall continue to be exercisable through the expiration of the Term of the
Option.

 

(e) 
Death During Active Employment of Optionee Age 62 or Over With at Least 10
Years of Vesting Service. 
If the Optionee is age 62 or over with at least ten (10) years of vesting
service and dies while in the employ of the Company, all unvested Optioned
Shares vest and become immediately exercisable in full. Those Optioned Shares
and any vested, but unexercised Optioned Shares as of the date of death shall
continue to be exercisable through the expiration of the Term of the Option.  

 

(f) 
Death Within 90 Days Following Termination of Employment of Optionee Under
Age 55 or With Less Than 10 Years of Vesting Service.  If the Optionee is
under the age of 55, or at any age with less than ten (10) years of vesting
service, and dies within ninety (90) days after termination of employment, all
vested, but unexercised Optioned Shares as of the date of death shall continue
to be exercisable through the earlier to occur of ninety (90) days after the
date of the Optionee’s death or the expiration of the Term of the Option. Provided,
however, that if the Optionee’s death occurs within one (1) year of the
Date of Grant, the Option shall terminate upon the date of death.

 

(g) 
Retirement.  If the Optionee retires under a Company sponsored IRS
qualified retirement plan

 

(i) at age 55 through 61 with at least
ten (10) years of vesting service, then

 

(1) 
any vested, but unexercised Optioned Shares as of the effective date of such
retirement shall continue to be exercisable through the expiration of the Term
of the Option; and

 

(2) 
any Optioned Shares that were not vested as of the effective date of such
retirement are forfeited; and

 

(ii) at age 62 or over with at least ten
(10) years of vesting service, then

 

(1) 
any vested, but unexercised Optioned Shares as of the effective date of such
retirement shall continue to be exercisable through the expiration of the Term
of the Option; and

 

(2) 
any Optioned Shares that were not vested as of the effective date of such
retirement shall continue to vest in accordance with Section 3 above, and shall
be exercisable through the expiration of the Term of the Option;

 

provided,
however, that if the
Optionee is a party to an employment agreement with the Company immediately
prior to such retirement and renders personal services to a Competing Business
(as hereafter defined) in a manner, including, without limitation, as owner,
partner, director, trustee, officer, employee, consultant or adviser thereto at
any time within one year following such retirement, then all Option Shares
(vested and unvested) shall be forfeited as of the first date on which such
engagement commenced. The provisions of this Section 7(g) continue to apply if
the Optionee dies following retirement.

 

(h) 
Disability.  If the Optionee becomes permanently and totally disabled
while an active employee of the Company, all unvested Optioned Shares vest and become
immediately exercisable in full.  Those Optioned Shares and any other vested,
but unexercised Optioned Shares shall continue to be exercisable through the
expiration of the Term of the Option.

 

(i) 
Termination
Following a Change in Control. 
If, within the twenty-four (24) month period following a Change in Control (as
hereafter defined in Section 20), the Optionee’s employment is terminated by
the Company without Cause (as hereafter defined in Section 20) or if the
Optionee voluntarily terminates employment with Good Reason (as hereafter
defined in Section 20), then all unvested Optioned Shares vest and become immediately
exercisable in full.  Those Optioned Shares and any other vested, but
unexercised Optioned Shares shall continue to be exercisable through the
earlier to occur of ninety (90) days following termination of employment or
expiration of the Term of the Option.  Provided, however,
that if the Optionee is over age 55 and has at least ten (10) years of vesting
service as of the effective date of such termination, the provisions of Section
7(g) governing exercisability of vested, but unexercised Optioned Shares following
retirement shall apply.

 

For the purposes
of this Agreement, the continuous employment of the Optionee with the Company
shall not be deemed to have been interrupted, and the Optionee shall not be
deemed to have ceased to be an employee of the Company, by reason of the
transfer of his employment among the Company, its Subsidiaries, divisions and
affiliates, or a leave of absence approved by the Company.

 

           8.         No Employment Contract. 
Nothing contained in this Agreement shall confer upon the Optionee any right
with respect to continuance of employment by the Company, nor limit or affect
in any manner the right of the Company to terminate the employment or adjust
the compensation of the Optionee.

 

           9.         Taxes
and Withholding.  If the Company shall be required to withhold any federal,
state, local or foreign tax in connection with the exercise of the Option, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to such exercise that the Optionee pay the tax or make
provisions that are satisfactory to the Company for the payment thereof.  In
the case of the exercise of an Option that has been transferred pursuant to
Section 4(b), no Optioned Shares shall be issued by the Company unless the
exercise of the Option is accompanied by sufficient payment, as determined by
the Company, to satisfy any applicable withholding tax obligations or by other
arrangements satisfactory to the Company to provide for such payment.  

 

           10.       Compliance with Law. 
The Company shall make reasonable efforts to comply with all applicable federal
and state securities laws; provided, however, notwithstanding any other
provision of this Agreement, the Option shall not be exercisable if the
exercise thereof would result in a violation of any such law.

 

           11.       Adjustments.  The Board
may make or provide for such adjustments in the number of Optioned Shares
covered by this Option, in the Option Price applicable to such Option, and in
the kind of shares covered thereby, as the Board may determine is equitably
required to prevent dilution or enlargement of the Optionee's rights that
otherwise would result from a) any stock dividend, stock split, combination of
shares, recapitalization, or other change in the capital structure of the
Company, b) any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation, or other distribution of
assets or issuance of rights or warrants to purchase securities, or c) any
other corporate transaction or event having an effect similar to any of the
foregoing; provided however, that no such adjustment in the number of Optioned
Shares will be made unless such adjustment would change by more than 5% the
number of Optioned Shares issuable upon exercise of this Option; provided,
further, however, that any adjustment which by reason of this Section 11 is not
required to be made currently will be carried forward and taken into account in
any subsequent adjustment.  In the event of any such transaction or event, the
Board may provide in substitution for this Option such alternative
consideration as it may determine to be equitable in the circumstances and may
require in connection therewith the surrender of this Option.

 

           12.       Availability of Common
Shares.  The Company shall at all times until the expiration of the Option
reserve and keep available, either in its treasury or out of its authorized but
unissued Common Shares, the full number of Optioned Shares deliverable upon the
exercise of this Option.

 

           13.       Relation to Other Benefits. 
Any economic or other benefit to the Optionee under this Agreement shall not be
taken into account in determining any benefits to which the Optionee may be
entitled under any profit-sharing, retirement or other benefit or compensation
plan maintained by the Company and shall not affect the amount of any life
insurance coverage available to any beneficiary under any life insurance plan
covering employees of the Company.

 

           14.       Amendments.  Any
amendment to the Plan shall be deemed to be an amendment to this Agreement to
the extent that the amendment is applicable hereto; provided, however, that no
amendment shall adversely affect the rights of the Optionee under this
Agreement without the Optionee's consent.

 

           15.       Severability.  In the
event that one or more of the provisions of this Agreement shall be invalidated
for any reason by a court of competent jurisdiction, any provision so
invalidated shall be deemed to be separable from the other provisions hereof,
and the remaining provisions hereof shall continue to be valid and fully
enforceable.

 

 

           16.       Relation to Plan.

 

(a) 
General. This Agreement is subject to the terms and conditions of the
Plan.  In the event of any inconsistent provisions between this Agreement and
the Plan, the Plan shall govern.  Capitalized terms used herein without
definition shall have the meanings assigned to them in the Plan.  The Board
acting pursuant to the Plan shall, except as expressly provided otherwise
herein, have the right to determine the response to any questions which arise
in connection with this Option or its exercise.  All references in this
Agreement to the “Company” shall be deemed to include, unless the context in
which it is used suggests otherwise, its subsidiaries, divisions and
affiliates.

 

(b) 
Compliance with Section 409A of the Code.  The Company and the Optionee acknowledge
that, to the extent applicable, it is intended that the options covered by this
option agreement comply with the provisions of Section 409A of the Code, and
the options shall be administered in a manner consistent with this intent.  Any
amendments made to comply with Section 409A of the Code may be retroactive to
the extent permitted by Section 409A of the Code and may be made by the Company
without the consent of the Optionee.  Any reference herein to Section 409A of
the Code will also include any proposed, temporary or final regulations, or any
other guidance, promulgated with respect to such Section by the U.S. Department
of the Treasury or the Internal Revenue Service.

 

           17.       Successors and Assigns. 
Subject to Section 4 hereof, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors, administrators, heirs,
legal representatives and assigns of the Optionee including any transferee pursuant
to Section 4(b), and the successors and assigns of the Company; provided,
however, that a transferee pursuant to Section 4(b) shall not transfer the
Option other than by will or by the laws of descent and distribution unless the
Company consents in writing to such transfer.

 

            18.       Governing
Law.  The interpretation, performance, and enforcement of this Agreement
shall be governed by the laws of the State of Delaware, without giving effect
to the principles of conflict of laws thereof.

 

           19.       Notices.  Any notice to
the Company provided for herein shall be in writing to the Company, marked to
the attention of the Corporate Controller at 7 West Seventh Street, Cincinnati, Ohio 45202 and any notice to the Optionee shall be addressed to said Optionee
at his or her address currently on file with the Company.  Except as otherwise
provided herein, any written notice shall be deemed to be duly given if and
when delivered personally or deposited in the United States mail, first class
registered mail, postage and fees prepaid, and addressed as aforesaid.  Any
party may change the address to which notices are to be given hereunder by
written notice to the other party as herein specified (provided that for this
purpose any mailed notice shall be deemed given on the third business day
following deposit of the same in the United States mail).

 

           20.       Definitions.

 

   (a) 
“Cause” shall mean the Optionee shall have committed prior to
termination of employment any of the following acts:

 

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

 

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

 

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

 

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

 

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

 

(vi)  intentional neglect by the Optionee
of the Optionee’s duties and responsibilities.

 

      (b)  “Competing Business”
shall mean

 

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

 

	
  Abercrombie
  & Fitch

  	
  The Gap

  	
  Ross Stores

  
	
  Bed, Bath
  & Beyond

  	
  J.C. Penney

  	
  Saks

  
	
  Belk’s

  	
  Kohl’s

  	
  Sears

  
	
  Burlington Coat Factory

  	
  Limited Brands

  	
  Target

  
	
  Bon-Ton Stores

  	
  Nordstrom

  	
  TJX

  
	
  Dillard’s

  	
  Neiman-Marcus

  	
  Walmart

  

 

or

 

(ii) any retailer that (1) had annual
revenues for its most recently completed fiscal year of at least $2.5 billion;
and (2) both (i) offers a category or categories of merchandise (e.g., Fine
Jewelry, Cosmetics, Kids, Big Ticket, Housewares, Men’s, Dresses), any of which
are offered by the Company (and its subsidiaries, divisions or controlled
affiliates), and (ii) the revenue derived by such other retailer during such
retailer’s most recently ended fiscal year from such category or categories of
merchandise represent(s) , in the aggregate, more than 50% f the Company’s (and
its subsidiaries, divisions or controlled affiliates) total revenues for the
most recently completed fiscal year derived from the same category or
categories of merchandise.

 

   (c) 
“Change in Control” shall mean the occurrence of any of the following
events:

 

(i)  The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”)
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 30% or more of the combined voting power of the
then-outstanding securities of the Company entitled to vote generally in the
election of directors (the “Voting Stock”); provided, however, that for
purposes of this subsection (i), the following acquisitions will not constitute
a Change of Control:  (A) any acquisition of Voting Stock directly from the
Company that is approved by a majority of the Incumbent Board (as defined in
subsection (ii) below); (B) any acquisition of Voting Stock by any entity in
which the Company, directly or indirectly, beneficially owns 50% or more
ownership or other equity interest (a “Subsidiary”); (C) any acquisition of
Voting Stock by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary; or (D) any acquisition of Voting
Stock by any Person pursuant to a transaction that complies with clauses (A),
(B) and (C) of subsection (iii) below; provided further, that:  (X) if any
Person is or becomes the beneficial owner of 30% or more of the Voting Stock as
a result of a transaction described in clause (A) of this subsection (i), and
such Person thereafter becomes the beneficial owner of any additional shares of
Voting Stock, and after obtaining such additional beneficial ownership
beneficially owns 30% or more of the Voting Stock, other than in an acquisition
of Voting Stock directly from the Company that is approved by a majority of the
Incumbent Board or other than as a result of a stock dividend, stock split or
similar transaction effected by the Company in which all holders of Voting
Stock are treated equally, such subsequent acquisition will be treated as a
Change in Control; and (Y) a Change in Control will not be deemed to have
occurred if a Person is or becomes the beneficial owner of 30% or more of the
Voting Stock as a result of a reduction in the number of shares of Voting Stock
outstanding pursuant to a transaction or series of transactions approved by a
majority of the Incumbent Board unless and until such Person thereafter becomes
the beneficial owner of any additional shares of Voting Stock, and after
obtaining such additional beneficial ownership beneficially owns 30% or more of
the Voting Stock, other than as a result of a stock dividend, stock split or
similar transaction effected by the Company in which all holders of Voting
Stock are treated equally; or 

 

(ii)  Individuals who, on the effective date
of the Plan, constitute the Board of Directors of the Company (as modified by
this subsection (ii), the “Incumbent Board”) cease for any reason to constitute
at least a majority of the Board of Directors of the Company (the “Board”); provided,
however, that any individual becoming a director after the effective date
of the Plan whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board (either by a specific vote or by approval of
the proxy statement of the Company in which such person is named as a nominee
for director, without objection to such nomination) shall be considered as
though such individual were a member of the Incumbent Board such effective date,
but excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

 

(iii)  The consummation of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (each, a “Business
Combination”), unless, in each case, immediately following such Business
Combination, (A) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Voting Stock immediately prior
to such Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, an
entity that as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or
more subsidiaries) in substantially the same proportions relative to each other
as their ownership, immediately prior to such Business Combination, of the
Voting Stock, (B) no Person (excluding any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Subsidiary or such entity
resulting from such Business Combination) beneficially owns, directly or
indirectly, 30% or more of, respectively, the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors of the entity resulting from such Business Combination except to the
extent that such ownership existed prior to the Business Combination, and (C)
at least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or

 

(iv)  Approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company.

 

   (d) 
“Good Reason” shall mean:

 

(i)  a material diminution in the Optionee’s
base compensation;

 

(ii)  a material diminution in the Optionee’s
authority, duties or responsibilities;

 

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

 

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

 

            IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed on its
behalf by its duly authorized officer, and Optionee has also executed this
Agreement in duplicate, as of the day and year first above written.

 

   

  MACY’S, INC.

   

   

  
                                 
  By:  ______________________

                          Dennis J. Broderick

	 

  
	                                                                
	Title: Executive Vice President and General Counsel

 

	
  

  

 

 

                                                                                                       ____________________________________        

                                                                                                                    OptioneeRESTRICTED STOCK AGREEMENT

Exhibit 10.2

 

PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT

 

 

This
AGREEMENT (the “Agreement”) made as of _______________(the “Date of Grant”) by
and between MACY’S, INC., a Delaware corporation (the “Company”), and ____________
(the “Grantee”).

 

            1.         Grant of Performance-Based Restricted
Stock Units.  Subject to and upon the terms, conditions, and restrictions
set forth in this Agreement and in the Company’s 2009 Omnibus Incentive
Compensation Plan (the “Plan”), as amended from time to time, the Company
hereby grants to the Grantee a “Target” award of  [insert target number of
Performance Units] Performance-Based Restricted Stock Units (“Performance
Units”).  Each Performance Unit represents the right to receive one share of
the common stock of the Company (“Common Stock”), subject to the terms and
conditions set forth below. 

 

            2.         Limitations on Transfer of Performance
Units; Performance Period.  

 

(a) 
During the Performance Period hereinafter described, the Performance Units may
not be transferred, sold, pledged, exchanged, assigned or otherwise encumbered
or disposed of by the Grantee, except to the Company, until they are earned and
become nonforfeitable (“Vest”) in accordance with Section 3; provided, however,
that the Grantee’s interest in the Performance Units may be transferred at any
time by will or the laws of descent and distribution.

 

(b) 
The Performance Period shall commence on January 31, 2010 (the “Commencement
Date”) and, except as otherwise provided in this Agreement, will expire in full
on February 2, 2013.

 

            3.         Vesting
of Performance Units.  

 

(a) 
Subject to potential reduction as set forth in Section 3(b) below, one hundred
and fifty percent (150%) of the Target award of Performance Units will be Vested
on the date (“Vesting Date”) that the Compensation Committee certifies that the
Company has achieved a Cumulative EBITDA (as defined below) level of at least $7
billion over the Performance Period, provided that the Grantee is continuously
employed by the Company through the Vesting Date. If the Company does not
achieve a Cumulative EBITDA level of at least $7 billion over the Performance
Period, then all Performance Units are forfeited as of the end of the
Performance Period. In all cases the Compensation Committee shall certify
whether the Company has achieved the specified level of Cumulative EBITDA as
soon as administratively feasible following the end of the Performance Period
but in no event later than two and a half months following the end of the
Performance Period. 

 

(i) “Cumulative EBITDA” is defined as Earnings Before
Interest, Taxes, Depreciation and Amortization, which is equal to the sum of
operating income and depreciation and amortization as reported in the Company’s
financial statements included in its annual Form 10-K, adjusted to eliminate
the effects of asset impairments, restructurings, discontinued operations,
extraordinary items, acquisitions, divestitures, other unusual or non-recurring
items, and the cumulative effect of tax or accounting changes, as determined in
accordance with generally accepted accounting principles, as applicable.

 

(b) 
The actual number of Performance Units that become Vested based on achieving
the level of Cumulative EDITDA during the Performance Period may be reduced by
the Compensation Committee in its sole and absolute discretion based on such
factors as the Compensation Committee determines to be appropriate and/or
advisable including without limitation the Company’s achievement of EBITDA
Margin and Return on Invested Capital (“ROIC”) goals for the Performance
Period. It is the current intention of the Compensation Committee that the
Compensation Committee will exercise its discretion to reduce the number of
Performance Units that will Vest based on the Company’s achievement of the
EBITDA Margin and ROIC goals during the Performance Period, weighted 70% and
30% respectively, as set forth in the following schedule.  However, the
Compensation Committee reserves the right to deviate from such schedule based
on achievement of EBITDA Margin and ROIC and may adjust the number of
Performance Units that Vest based on such other factors as the Compensation
Committee in its sole and absolute discretion determines to be appropriate
and/or advisable; provided, however, that it is the intention of the
Compensation Committee that it will deviate from such EBITDA Margin and ROIC
schedule only in extreme and unusual circumstances. 

 

	
   

  	
   

  	
  EBITDA Margin
  (70%)

  	
   

  	
  ROIC (30%)

  
	
  Performance Level*

  	
   

  	
  3-year Average

  	
  Vesting Percentage

  	
   

  	
  3-year Average

  	
  Vesting Percentage

  
	
  Outstanding

  	
   

  	
           ≥12.8%

  	
            150%

  	
   

  	
           ≥18.8%

  	
              150%

  
	
  Target

  	
   

  	
              12.3%

  	
            100%

  	
   

  	
              17.8%

  	
              100%

  
	
  Threshold

  	
   

  	
              11.8%

  	
              50%

  	
   

  	
              16.8%

  	
                50%

  
	
  Below Threshold

  	
   

  	
           <11.8%

  	
                0%

  	
   

  	
           <16.8%

  	
                  0%

  

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

 

(i)  “EBITDA Margin” is defined as EBITDA (as adjusted
as described in Section 3(a) above) divided by Net Sales (as reported in the
Company’s financial statements included in its annual Form 10-K).  EBITDA
Margin will be measured on a three-year average basis (i.e., the average of
fiscal 2010, fiscal 2011 and fiscal 2012 annual EBITDA Margin).

 

(ii)  “Return on Invested Capital” is defined as
EBITDAR (EBITDA, adjusted as described above, plus Net Rent Expense) divided by
Total Average Gross Investment.  Net Rent Expense represents rent expense as
reported in the Company’s financial statements included in its Form 10-K less
the deferred rent amortization related to contributions received from
landlords. Total Average Gross Investment is equal to the sum of Gross
Property, Plant and Equipment (PPE) plus Capitalized Value of Non-Capitalized
Leases plus Working Capital plus Other Assets, each as reported in the Company’s
financial statements in the applicable Form 10-K or Form 10-Q. Gross PPE will
be determined using a two-point average (i.e., beginning and end of year).
Capitalized Value of Non-Capitalized Leases will be calculated as 8 x Net Rent
Expense. Working Capital components and Other Assets will be determined using a
four-point (i.e., quarterly) average. ROIC will be measured on a three-year
average basis (i.e., the average of fiscal 2010, fiscal 2011 and fiscal 2012
annual ROIC).

 

            4.  Forfeiture of Performance Units.  (a) Termination
of Employment.  Notwithstanding the provisions of Section 3 above,
and except as the Board may determine on a case-by-case basis or as provided
below, all unvested Performance Units shall be forfeited if the Grantee ceases
to be continuously employed by the Company for any reason at any time prior to
the end of the Performance Period.  For the purposes of this Agreement the
continuous employment of the Grantee with the Company shall not be deemed to
have been interrupted, and the Grantee shall not be deemed to have ceased to be
an employee of the Company, by reason of the transfer of the Grantee’s employment
among the Company and its Subsidiaries, divisions or affiliates or a leave of
absence approved by the Company.  In the event of a termination for cause (as
hereafter defined), all unvested Performance Units shall be immediately
forfeited.  

 

(b)
 Death, disability or retirement. Notwithstanding the provisions of
Section 3 above, and except as the Board may determine on a case-by-case basis
or as provided below, in the event the Grantee retires on or after age 62 with
at least 10 years of service, dies or becomes permanently and totally disabled
during the Performance Period, the Grantee (or his or her estate, as
appropriate) will receive at the end of the Performance Period the percentage
of Performance Units determined under Section 3 above, prorated from the
Commencement Date through the date of such retirement, death or disability
based on the number of completed months of service during the Performance
Period divided by 36. 

 

(c)
Change in Control.  In the event of a Change in Control (as hereafter
defined), Performance Units will convert to time-based restricted stock without
proration for the percentage of the Performance Period that has elapsed since
the Commencement Date, as follows:

 

(i)  If the Change in Control occurs prior to the
24-month anniversary of the Commencement Date, then 100% of the Target award
number of Performance Units shall convert to time-based restricted stock;

 

(ii)  If the Change in Control occurs after the
24-month anniversary of the Commencement Date, the conversion of Performance
Units to time-based restricted stock will be based on the Company’s performance
determined under Section 3 above from the Commencement Date through the first
24 months of the Performance Period, plus the Company’s performance determined
under Section 3 above during any completed fiscal quarter thereafter to the
date of the Change in Control. 

 

(iii) The vesting of the time-based restricted stock
as so converted:

•        
Will be accelerated if, within the
24-month period following the Change in Control, the Grantee is terminated by
the Company or the continuing entity without cause or if the Grantee
voluntarily terminates employment with Good Reason;

•        
Will be accelerated at the Change
in Control if awards are not assumed or replaced by the acquiror/continuing
entity on terms deemed by the Compensation Committee to be appropriate; and

•        
Will occur on the third
anniversary of the Date of Grant, if Vesting has not otherwise been accelerated
as provided above.

 

            5.         Dividend, Voting and Other Rights. 
Except as otherwise provided herein, prior to Vesting the Grantee shall not
have any of the rights of a stockholder with respect to the Performance Units,
including the right to vote any of the Performance Units. An amount
representing dividends payable on shares of Common Stock equal in number to one
hundred and fifty percent (150%) of the Target award of Performance Units on a
dividend record date shall be deemed reinvested in Common Stock and credited to
the Grantee as restricted stock units as of the dividend payment date. If there
is any change in the outstanding Common Stock of the Company by reason of a
stock dividend, stock split, combination of shares, recapitalization, merger,
consolidation, separation or reorganization or any other change in the capital
structure of the Company, the Compensation Committee shall determine the
appropriate adjustment to the Performance Units, if any, needed to reflect such
change. Any restricted stock units or additional Performance Units credited to
the Grantee pursuant to this Section 5 will be subject to the terms and
restrictions set forth in this Agreement.

 

            6.         Settlement of Performance Units.  As
soon as administratively feasible following the end of the Performance Period
and certification by the Compensation Committee as to the level of achievement
of the Cumulative EBITDA, EBITDA Margin and ROIC performance goals, but in no
event later than two and a half months after the end of the Performance Period,
the Company shall cause to be paid to the Grantee:

 

(i)  a number of shares of unrestricted Common Stock
equal to the number of Performance Units to which the Grantee is entitled, with
a cash component representing fractional shares, if any, plus

 

(ii) a number of shares of Common Stock equal to the
number of restricted stock units attributed to earned dividend equivalents on
those Performance Units, with a cash component representing fractional shares,
if any.

 

Such shares of Common Stock shall
be credited as book entry shares to the Grantee’s trading account, unless the
Grantee requests stock certificates, in which case the Company shall deliver to
the Grantee stock certificates representing such Common Stock. In the event
Performance Units are not earned, those Performance Units, and the related
restricted stock units attributed to dividend equivalents on those Performance
Units, shall be forfeited.

 

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

 

            8.         No Employment Contract.  Nothing
contained in this Agreement shall confer upon the Grantee any right with
respect to continuance of employment by the Company, or limit or affect in any
manner the right of the Company to terminate the employment or adjust the
compensation of the Grantee.

 

            9.         Taxes and Withholding.  If the
Company shall be required to withhold any federal, state, local or foreign tax
in connection with the issuance or Vesting of any Performance Units or the
issuance of any unrestricted shares of Common Stock or other securities following
Vesting pursuant to this Agreement, it shall be a condition to such Vesting or
issuance that the Grantee pay the tax or make provisions that are satisfactory
to the Company for the payment thereof.  Unless the Grantee makes alternative
arrangements satisfactory to the Company prior to the Vesting of the Performance
Units or the issuance of shares of unrestricted Common Stock, as the case may
be, the Grantee will satisfy the minimum statutory tax withholding obligations
by surrendering to the Company a portion of the shares of nonforfeitable and unrestricted
Common Shares that are issued or transferred to the Grantee hereunder following
the Vesting Date, and the shares of Common Stock so surrendered by the Grantee
shall be credited against any such withholding obligation at the Market Value
per Share of such shares of Common Stock on the Vesting Date.

 

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

 

            11.        Relation to Other Benefits.  Any
economic or other benefit to the Grantee under this Agreement shall not be
taken into account in determining any benefits to which the Grantee may be
entitled under any profit-sharing, retirement or other benefit or compensation
plan maintained by the Company and shall not affect the amount of any life
insurance coverage available to any beneficiary under any life insurance plan
covering employees of the Company.  

 

            12.        Amendments.  Any Amendment to the
Plan shall be deemed to be an amendment to this Agreement to the extent that
the amendment is applicable hereto; provided, however, that no amendment shall
adversely affect the rights of the Grantee under this Agreement without the
Grantee’s consent.

 

            13.        Severability.  In the event that one
or more of the provisions of this Agreement shall be invalidated for any reason
by a court of competent jurisdiction, any provision so invalidated shall be
deemed to be separable from the other provisions hereof, and the remaining
provisions hereof shall continue to be valid and fully enforceable.

 

            14.        Relation to Plan; Miscellaneous. 
This Agreement is subject to the terms and conditions of the Plan.  In the
event of any inconsistent provisions between this Agreement and the Plan, the
Plan shall govern.  Capitalized terms used herein without definition shall have
the meanings assigned to them in the Plan.  All references in this Agreement to
the Company shall be deemed to include, unless the context in which it is used
suggests otherwise, its subsidiaries, divisions and affiliates.

 

            15.        Successors and Assigns.  Subject to
Section 2 hereof, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of the Grantee and the successors and assigns of
the Company.

 

            16.        Governing Law.  The interpretation,
performance, and enforcement of this Agreement shall be governed by the laws of
the State of Delaware.

 

            17.        Definitions.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(b) 
“Good Reason” shall mean:

 

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

 

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

 

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

 

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

 

(c) 
“Change in Control” shall mean the occurrence of any of the following events:

 

(i)  The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 30% or more of the combined voting power of the then-outstanding securities
of the Company entitled to vote generally in the election of directors (the
“Voting Stock”); provided, however, that for purposes of this subsection (i),
the following acquisitions will not constitute a Change of Control:  (A) any
acquisition of Voting Stock directly from the Company that is approved by a
majority of the Incumbent Board (as defined in subsection (ii) below); (B) any
acquisition of Voting Stock by any entity in which the Company, directly or
indirectly, beneficially owns 50% or more ownership or other equity interest (a
“Subsidiary”); (C) any acquisition of Voting Stock by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any Subsidiary; or
(D) any acquisition of Voting Stock by any Person pursuant to a transaction
that complies with clauses (A), (B) and (C) of subsection (iii) below; provided
further, that:  (X) if any Person is or becomes the beneficial owner of 30% or
more of the Voting Stock as a result of a transaction described in clause (A)
of this subsection (i), and such Person thereafter becomes the beneficial owner
of any additional shares of Voting Stock, and after obtaining such additional
beneficial ownership beneficially owns 30% or more of the Voting Stock, other
than in an acquisition of Voting Stock directly from the Company that is
approved by a majority of the Incumbent Board or other than as a result of a
stock dividend, stock split or similar transaction effected by the Company in
which all holders of Voting Stock are treated equally, such subsequent
acquisition will be treated as a Change in Control; and (Y) a Change in Control
will not be deemed to have occurred if a Person is or becomes the beneficial
owner of 30% or more of the Voting Stock as a result of a reduction in the
number of shares of Voting Stock outstanding pursuant to a transaction or
series of transactions approved by a majority of the Incumbent Board unless and
until such Person thereafter becomes the beneficial owner of any additional
shares of Voting Stock, and after obtaining such additional beneficial
ownership beneficially owns 30% or more of the Voting Stock, other than as a
result of a stock dividend, stock split or similar transaction effected by the
Company in which all holders of Voting Stock are treated equally; or 

 

(ii)  Individuals who, on the effective date of the
Plan, constitute the Board of Directors of the Company (as modified by this
subsection (ii), the “Incumbent Board”) cease for any reason to constitute at
least a majority of the Board of Directors of the Company (the “Board”); provided,
however, that any individual becoming a director after the effective
date of the Plan whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a
nominee for director, without objection to such nomination) shall be considered
as though such individual were a member of the Incumbent Board such effective
date, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board; or

 

(iii)  The consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (each, a “Business Combination”), unless, in each case, immediately
following such Business Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Voting Stock immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the entity resulting from such Business Combination
(including, without limitation, an entity that as a result of such transaction
owns the Company or all or substantially all of the Company’s assets either
directly or through one or more subsidiaries) in substantially the same
proportions relative to each other as their ownership, immediately prior to
such Business Combination, of the Voting Stock, (B) no Person (excluding any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any Subsidiary or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 30% or more of, respectively, the
combined voting power of the then-outstanding securities entitled to vote
generally in the election of directors of the entity resulting from such
Business Combination except to the extent that such ownership existed prior to
the Business Combination, and (C) at least a majority of the members of the
board of directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or

 

(iv)  Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.

 

            IN WITNESS
WHEREOF, the Company has caused this Agreement to be executed on its behalf by
its duly authorized officer, and Grantee has also executed this Agreement in
duplicate, as of the day and year first above written.

 

 

 

MACY’S,
INC.

 

 

By:
___________________________________

                                                                             
Dennis J. Broderick

Title: Executive Vice President, General Counsel and
Secretary

 

 

 

______________________________________

_______________________,
Grantee

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