Document:

Supplemental Retirement Program for Management Profit-Sharing Associates of
      J. C. Penney Corporation, Inc.

    Exhibit
      10.2

    

    

    

    

    SUPPLEMENTAL
      RETIREMENT PROGRAM FOR

    

    MANAGEMENT
      PROFIT-SHARING ASSOCIATES OF

    

    J.
      C. PENNEY CORPORATION, INC.

    

    

    

    

    AS
      AMENDED AND RESTATED EFFECTIVE DECEMBER 31, 2007 at 11:59 p.m.

    

    

     

     

     

     

     

     

     

     

     

     

    
 

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    
      
        1

      

      
        
        

        
        

      

      
        
        

      

    

     

     

    SUPPLEMENTAL
      RETIREMENT PROGRAM FOR

    MANAGEMENT
      PROFIT-SHARING ASSOCIATES OF

    J.
      C. PENNEY CORPORATION, INC.

    

    Adopted
      Effective January 1, 1978

    

    As
      Amended and Restated Effective December 31, 2007 at 11:59
      p.m.

    

    

    TABLE
      OF CONTENTS

    

    
      
        	Article	 	 	 Page
	 	 	 	 
	 ARTICLE I.	 	INTRODUCTION........................................................................................	4 
	 	 	 	 
	
                ARTICLE II.

              	 	DEFINITIONS............................................................................................	5
	 	 	 	 
	
                ARTICLE
                  III.

              	
              	PARTICIPATION.......................................................................................	15
	 	 	 	 
	ARTICLE
                IV.	 	BENEFITS..................................................................................................	16
	 	 	 	 
	
                (1)

              	 	At
                Early,
                Traditional, or Late Retirement
                Date.......................................	16
	
                (2)

              	 	
                Minimum
                  Benefit.......................................................................................

              	18
	
                (3)

              	 	Social
                Securitiy
                Make-up..........................................................................	20
	
                (4)

              	 	Death
                Benefit.............................................................................................	20
	
                (5)

              	 	Life
                Insurance
                Coverage...........................................................................	21
	
                (6)

              	 	Nonduplication
                of
                Benefits.......................................................................	21
	
                (7)

              	 	Change
                in
                Control
                Plan.............................................................................	22
	
                (8)

              	 	Benefits for Certain
                Former Financial Services Plan Participants......	22
	 	 	 	 
	
                ARTICLE
                  V.

              	 	FORM
                AND
                COMMENCEMENT OF BENEFIT PAYMENTS..............	23 
	
                 

              	 	 	 
	
                (1)

              	 	Form
                of
                Benefit
                Payment..........................................................................	23
	
                (2)

              	
              	Payment
                Events.........................................................................................	23
	
                (3)

              	 	Payment
                Commencement
                Date..............................................................	23
	
                (4)

              	 	Delay
                for
                Specified
                Employees...............................................................	23
	
                (5)

              	 	Subsequent
                Changes in Time and Form of Payment...........................	24
	
                (6)

              	 	Prohibition
                on Acceleration of
                Payment.................................................	24
	
                (7)

              	 	Limited
                Cashouts......................................................................................	24 
	
                (8)

              	 	Delta
                Benefit..............................................................................................	24 
	 	 	 	 
	
                ARTICLE
                  VI.

              	 	ADMINISTRATION....................................................................................	26
	 	 	 	 
	
                ARTICLE
                  VII.

              	 	TYPE
                OF
                PLAN........................................................................................	27
	 	 	 	 
	
                ARTICLE
                  VIII.

              	
              	MISCELLANEOUS...................................................................................	28
	 	 	 	 
	
                (1)

              	 	Additional
                Credited Service and Other
                Adjustments............................	28
	
              	 	
                 

                 

                2

                 

                 

              	 
	
                (2)

              	 	Amendment and
                Termination...................................................................	29
	
                (3)

              	 	Rights of
                Associates.................................................................................	30 
	
                (4)

              	 	Mistaken
                Information.................................................................................	31 
	
                (5)

              	 	Liability........................................................................................................	31 
	
                (6)

              	 	Benefits for Reemployed
                Eligible Management Associates................	31 
	
                (7)

              	 	Construction...............................................................................................	31 
	
                 (8) 

              	 	Non-assignability
                of
                Benefits....................................................................	31 
	
                (9)

              	 	Governing
                Law...........................................................................................	31 
	
                (10)

              	 	Transferred
                Eligible Management
                Associates.......................................	32
	
                (11)

              	 	Change in Control
                Plan.............................................................................	32
	 	 	 	 
	ARTICLE IX.	 	CLAIMS
                PROCEDURES.........................................................................	34 
	 	 	 	 
	APPENDIX I 	 	.....................................................................................................................	36 
	 	 	 	 
	APPENDIX II 	 	.....................................................................................................................	37
	 	 	 	 
	APPENDIX III	 	.....................................................................................................................	38
	 	 	 	 
	APPENDIX IV	 	.....................................................................................................................	40
	 	 	 	 

      

    

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        3

      

      
        
        

        
        

      

      
        
        

      

    

     

    
 

    SUPPLEMENTAL
      RETIREMENT PROGRAM FOR

    MANAGEMENT
      PROFIT-SHARING ASSOCIATES OF

    J.
      C. PENNEY CORPORATION, INC.

    

    Adopted
      Effective January 1, 1978

    

    Amended
      and Restated Effective December 31, 2007, at 11:59:59 p.m.

    

    

    ARTICLE
      I.    INTRODUCTION

    

    The
      Supplemental Retirement Program for Management Profit--Sharing Associates of
      J.
      C. Penney Corporation, Inc. is a plan maintained primarily for the purpose
      of
      providing deferred compensation for a select group of management or highly
      compensated associates. This document amends and restates the Plan, originally
      adopted effective January 1, 1978. 

    

    With
      respect to any Eligible Management Associate who terminated employment prior
      to
      August 1, 1995, benefits payable to such Eligible Management Associates are
      determined pursuant to the terms and conditions of the Supplemental Retirement
      Program for Management Profit-Sharing Associates of J. C. Penney Company, Inc.
      in effect as of July 31, 1995.

    

    The
      provisions of the Plan as amended and restated herein will apply to the entire
      benefit of each Eligible Management Associate who is an Eligible Management
      Associate on or after the Effective Date and each Eligible Management Associate
      who had a Separation from Service prior to the Effective Date and had not
      commenced receiving benefit payments under the Plan as of the Effective Date.
      For all other Eligible Management Associates who have commenced receiving
      benefits under the Plan as of the Effective Date, the provisions of the Plan
      as
      in effect at the time each such Eligible Management Associates commenced
      receiving benefits will continue to be applicable. Set forth in Appendix IV
      for
      reference only is a copy of the Plan as in effect on October 3, 2004, and
      amendments to that Plan adopted after that date. Unless otherwise indicated,
      no
      provision of the Plan as amended and restated shall amend any provision of
      the
      Plan in Appendix IV.

    
      
        4

      

      
        
        

        
        

      

      
        
        

      

    

    

    ARTICLE
      II.    DEFINITIONS

    

    For
      the
      purpose of this Plan the following terms shall have the following
      meanings:

    

    Actuarial
      Equivalent or Actuarially Equivalent: A form
      of
      benefit payment under which the aggregate payments expected to be received
      are
      equal in value to the aggregate payments expected to be received under a
      different form of benefit payment using the interest rate and other factors
      set
      forth in this Section.

    

    (a) This
      paragraph applies to determine the present value of a Plan Benefit payable
      to an
      Eligible Management Associate or a Spouse in the form of five annual
      installments or an immediate lump sum payment. “Actuarial Equivalent” or
“Actuarially Equivalent” means an amount equal to the present value of the
      monthly Plan Benefit payable on the applicable Payment Commencement Date to
      the
      Eligible Management Associate in the form of a Single Life Annuity, or to the
      Spouse in the form of a “qualified preretirement survivor annuity” as that term
      is defined in Paragraph 4 of Article IV, calculated by using the Applicable
      Interest Rate and the Applicable Mortality Table.

    

    (b) This
      paragraph applies to determine the present value of a Plan Benefit payable
      to an
      alternate payee pursuant to a domestic relations order. "Actuarial Equivalent"
      or "Actuarially Equivalent" means an amount calculated applying the methodology
      in Subparagraph (a) above using the alternate payee’s applicable commencement
      date calculated by using the Applicable Interest Rate and the Applicable
      Mortality Table.

     

    Applicable
      Interest Rate:
      If an
      Eligible Management Associate has a Separation from Service prior to the
      Effective Date, or
      for
      a Beneficiary or Spouse of an Eligible Management Associate who dies prior
      to
      the Effective Date,
      the
      Applicable Interest Rate is the annual rate of interest on 30-year Treasury
      securities for the month of August, 2006, plus one percent. If an Eligible
      Management Associate has a Separation from Service after the Effective date,
      the
      adjusted first, second, and third segment rates under Code section 417(e)(3)(C)
      and (D), determined with regard to the 2008 through 2011 phase-in provision
      of
      Code section 417(e)(3)(D)(iii), for the month of August preceding a Payment
      Commencement Date occurring during the next following January 1 through June
      30
      period and for the month of February preceding a Payment Commencement Date
      occurring during the next following July 1 through December 31 period.
      Notwithstanding the foregoing, for purposes of calculating the phase-in of
      the
      Applicable Interest Rate, 1% will be added to the annual rate of interest on
      30-year Treasury securities for the above-determined month.

    

    Applicable
      Mortality Table:
      If an
      Eligible Management Associate has a Separation from Service prior to the
      Effective Date, or for a Beneficiary or Spouse of an Eligible Management
      Associate who dies prior to the Effective Date, the Applicable Mortality Table
      is the mortality table as prescribed by the Secretary of the Treasury under
      Code
      section 417(e)(3) as in effect for August, 2006. If an Eligible Management
      Associate has a Separation from Service after the Effective Date, the Applicable
      Mortality Table is the mortality table as prescribed by the Secretary of the
      Treasury under Code section 417(e)(3) for the Plan Year containing the Payment
      Commencement Date.

    

    
      
        5

      

      
        
        

        
        

      

      
        
        

      

    

    Associate:
      Any
      person who is employed by a Controlled Group Member if the relationship between
      a Controlled Group Member and such person would constitute the legal
      relationship of employer and employee, including an officer who may or may
      not
      be a director, but excluding a director serving only in that capacity, and
      excluding any employee of a Controlled Group Member substantially all the
      operations of which are outside the United States unless United States Social
      Security contributions are made on behalf of such employee.

    

    Average
      Final Compensation:
      The
      average annual Compensation of an Eligible Management Associate in respect
      of
      the three calendar years of his highest Compensation determined by taking into
      account (a) the Compensation attributable to the Eligible Management Associate's
      Credited Service in the calendar year in which occurs such Early Retirement
      Date, Traditional Retirement Date, or Late Retirement Date, as the case may
      be,
      and (b) the Compensation during either of the following, whichever is
      appropriate:

    
       

      (i) 
        the 9 full calendar years of Final Service immediately preceding the calendar
        year in which occurs the Eligible Management Associate's Early Retirement
        Date,
        Traditional Retirement Date, or Late Retirement Date, as the case may be;
        or

       

      (ii) 
        if such Eligible Management Associate has less than 9 full calendar years
        of
        Final Service, the entire number of full calendar years of such Final Service
        immediately preceding the calendar year in which occurs the Eligible Management
        Associate's Early Retirement Date, Traditional Retirement Date, or Late
        Retirement Date, as the case may be.  

    

     

    If
      such
      Eligible Management Associate has less than three full calendar years of Final
      Service prior to the calendar year in which occurs his Early Retirement Date,
      Traditional Retirement Date, or Late Retirement Date, Average Final Compensation
      shall mean the aggregate Compensation earned with respect to the Eligible
      Management Associate's Final Service immediately preceding the calendar year
      in
      which occurs his Early Retirement Date, Traditional Retirement Date or Late
      Retirement Date, divided by the total number of full months of such Final
      Service, multiplied by 12.

    

    Benefit
      Commencement Date:
      The
      date upon which payment of a Pension Plan Participant's retirement benefit
      is
      scheduled to begin pursuant to the terms of the Pension Plan.

    

    Benefit
      Restoration Plan:
      The
      J.
      C. Penney Corporation, Inc. Benefit Restoration Plan, as amended from time
      to
      time.

    

    Benefits
      Administration Committee:
      The
      committee appointed by the Human Resources Committee and authorized by Article
      VI to administer the Plan.

    

    Board
      of Directors:
      Board
      of Directors of the Parent Company.

    

    
      
        6

      

      
        
        

        
        

      

      
        
        

      

    

    Code:
      The
      Internal Revenue Code of 1986, as amended from time to time. References to
      "regulations" are to regulations published by the Secretary of the Treasury
      under applicable provisions of the Code, unless otherwise expressly
      indicated.

    

    Company:
      Prior
      to January 27, 2002, J. C. Penney Company, Inc., a Delaware corporation, and
      on
      and after January 27, 2002, J. C. Penney Corporation, Inc., a Delaware
      corporation. The term "Company" will also include any successor employer, if
      the
      successor employer expressly agrees in writing as of the effective date of
      succession to continue the Plan.

    

    Company
      Account(s):
      The
      account(s) of that name and any successor account(s) and/or fund(s) established
      and maintained pursuant to the Savings and Profit-Sharing Retirement Plan prior
      to January 1, 1999, the Savings, Profit-Sharing and Stock Ownership Plan, and
      the Mirror Savings Plans in which are reflected all Company contributions
      allocated to an Eligible Management Associate together with all assets
      attributable thereto.

    

    Compensation:
      The
      total cash remuneration (including Profit Incentive Compensation) paid to an
      Associate by the Company or a Participating Employer, or, for the purpose of
      determining Average Final Compensation only, by a Controlled Group Member,
      that
      qualifies as wages as defined in Code Section 3401(a), determined without regard
      to any reduction for workers’ compensation and state disability insurance
      reimbursements, and all other compensation payments for which the Company or
      a
      Participating Employer or other Controlled Group Member is required to furnish
      the Associate a written statement under Code Sections 6041(d), 6051(a)(3) and
      6052, reduced by the following items:

    

    (a)  all
      expatriate and foreign service allowances, including without limitation

        cost-of-living
      adjustments;

    

    (b)  tax
      gross-up payments;

    

    (c)  noncash
      prizes;

    

    (d)  income
      attributable to employer-provided group term life insurance;

    

    (e)  income
      recognized with respect to stock options and stock awards;

    

    (f)  tax
      equalizations payments;

    

    (g)  taxable
      and nontaxable relocation payments;

    

    (h)  payments
      of deferred amounts under any nonqualified plan of deferred compensation;

    

    (i)  special
      payments made to an Associate under the Performance Unit Plan in the
      year

       of
      retirement or
      disability;

    

    (j)  severance
      pay, outplacement pay, and/or critical pay;

    

    
      
        7

      

      
        
        

        
        

      

      
        
        

      

    

    (k)  third-party
      disability payments;

    

    (l)  home
      sale bonus payments;

    

    (m)  mortgage
      interest assistance payments;

    

    (n)  senior
      management perquisites, tax preparation fees, and allowances for travel from
      Alaska

    and
      Hawaii;

    

    (o)  legal
      settlements constituting back pay or other wage payments;

    

    (p)  non-associate
      travel reimbursements;

    

    (q)  clothing
      allowance payments; and

    

    (r)  payments
      made pursuant to a non-compete agreement.

    

    In
      addition, Compensation includes any contributions made by a Participating
      Employer or other Controlled Group Member on behalf of an Associate pursuant
      to
      a deferral election under any employee benefit plan containing a cash or
      deferred arrangement under Code Section 401(k), and any amounts that would
      have
      been received as cash but for an election to receive benefits under a cafeteria
      plan meeting the requirements of Code Section 125, and amounts deferred by
      an
      Associate under the Mirror Savings Plans.

    

    Each
      annual payment to an Associate from the Profit Incentive Compensation shall
      be
      deemed to have been made in the calendar year immediately preceding the year
      in
      which payment was actually made. For purposes of calculating a Plan Benefit
      at
      the time of Payment Commencement Date, the Profit Incentive Compensation earned
      during the year of Separation from Service shall be calculated as zero at the
      time of Separation from Service. For purposes of calculating a Delta Benefit
      as
      provided in Paragraph 8 of Article V, the amount of the Profit Incentive
      Compensation shall be the amount actually paid.

    

    For
      all
      purposes under the Plan, the Benefits Administration Committee, in its
      discretion, may exclude additional items from “Compensation” under the
      Plan.

    

    An
      Associate who is in the service of the Armed Forces of the United States during
      any period in which his reemployment rights are guaranteed by law will be
      considered to have received the same rate of Compensation during his absence
      he
      was receiving immediately prior to his absence, provided he returns to
      employment with a Controlled Group Member within the time such rights are
      guaranteed.

    

    Controlled
      Group:
      The
      Company and all other corporations, trades and businesses, the employees of
      which, together with employees of the Company, are required by the first
      sentence of subsection (b) , by subsection (c) , by subsection (m), or by
      subsection (o) of Code section 414 to be treated as if they were employed by
      a
      single employer. For
      purposes of determining if a Separation from Service has occurred,

     

    
      
        8

      

      
        
        

        
        

      

      
        
        

      

    

     

    the
      Controlled Group will be determined under Code sections 414(b) and 414(c) and
      Treasury Regulation section 1.414(c)-2 by using the language “at least 50
      percent” instead of “at least 80 percent” each place it appears in Code section
      1563(a)(1),(2), and (3).

    

    Controlled
      Group Member:
      Each
      corporation or unincorporated trade or business that is or was a member of
      a
      Controlled Group, but only during such period as it is or was such a
      member.

    

    Credited
      Service:
      The
      years of credited service, up to a total maximum of 40 years, credited to an
      Eligible Management Associate (a) under the terms of the Pension Plan,
      determined without regard to any yearly limitation imposed by the terms of
      the
      Pension Plan (excluding any periods of Disability Service), and (b) under
      Paragraph (1) of Article VIII.

    

    Disability
      Service:
      The
      years of disability service credited to an Eligible Management Associate under
      the terms of the Pension Plan.

    

    Early
      Retirement Age:
      The
      first date on which an Eligible Management Associate has attained age 55 and
      has
      completed at least 15 years of Service.

    

    Early
      Retirement Date:
      The
      first day of the month immediately following the date on which an Eligible
      Management Associate Separates from Service after having attained Early
      Retirement Age but before attainment of such Eligible Management Associate's
      Traditional Retirement Age.

    

    Effective
      Date:
      December 31, 2007 at 11:59 p.m.

    

    Eligible
      Management Associate:
      An
      Associate (excluding an Associate who retired from (i) a Participating Employer
      before January 1, 1978, or (ii) J. C. Penney Life Insurance Company or J. C.
      Penney Casualty Insurance Company on or after January 1, 1990) classified under
      the Company's personnel policy as a management associate who has reached Early
      Retirement Age, or Traditional Retirement Age, and who is participating in
      a
      Profit Incentive Compensation program or other profit sharing compensation
      program (other than the Savings and Profit-Sharing Retirement Plan or the
      Savings, Profit-Sharing and Stock Ownership Plan) of a Participating Employer
      on
      his Traditional Retirement Date or Early Retirement Date or Late Retirement
      Date. Notwithstanding the preceding sentence, the Benefits Administration
      Committee reserves the right to waive, in its discretion, one or more of the
      requirements of this paragraph on a case by case basis for any Associate age
      55
      who was participating in a Profit Incentive Compensation program on December
      31,
      1995.

    

    ERISA:
      Employee
      Retirement Income Security Act of 1974, as amended from time to
      time.

    

    Estimated
      Social Security Benefit:
      (1)
      For
      purposes of the benefit provided in Paragraph (3) of Article IV the monthly
      benefit the Eligible Management Associate would receive under the Social
      Security Act at age 62 based on the following assumptions:

     

    
      
        9

      

      
        
        

        
        

      

      
        
        

      

    

    (i)
      All
      compensation earned (a) prior to the later of 1951 or the year the Eligible
      Management Associate attains age 22 or (b) in the year in which the Eligible
      Management Associate Separates from Service if such separation occurs prior
      to
      the last day of the calendar year will be disregarded;

    
       

      (ii)
        Earnings for the years prior to the Eligible Management Associate’s employment
        with the Participating Employer are in the same proportion to the Taxable
        Wage
        Base in effect for the prior years as that which the first full year of earnings
        bore to the Taxable Wage Base in existence at that time;

       

      (iii)
        Earnings are averaged over a number of full calendar years as determined
        

            
        by the following:

    
      	
              Year
                of
                Birth

            	 	
               Number
                of
                Full

               Calendar
                Years

            
	
               1925

            	 	
               31

            
	
               1926

            	 	
               32

            
	
               1927

            	 	
               33

            
	
               1928

            	 	
               34

            
	
               After
                1928

            	 	
               35

            

    

     

     

    
      If
        the
        Eligible Management Associate's total calendar years of earnings determined
        under clauses (i) and (ii) above exceed the number of full years of earnings
        that are to be averaged based on the year of such Eligible Management
        Associate's birth, one or more of the Eligible Management Associate's lowest
        years of earnings will be disregarded until his total years of earnings equals
        the number of full years of earnings that are to be averaged based on the
        year
        of such Eligible Management Associate's birth.

    

     

    
      (iv)  
        Social Security indexing factors used are those actually used by the Social
        Security Administration in determining the Eligible Management Associate's
        Social Security benefit, and if those factors are not available, the latest
        published factors will be used.

       

      (2)       For
        Eligible Management Associates who reach Traditional Retirement Age on or
        prior
        to August 1, 2000, for purposes of clause (iii) of Subparagraph (b) of Paragraph
        (1) of Article IV the lesser of the benefit determined under (A) or (B)
        below: 

    

    

    (A) The
      product of (a) multiplied by (b) with (a) being the monthly benefit the Eligible
      Management Associate would receive under the Social Security Act at age 62,
      or
      if retirement is later than age 62, the benefit payable at actual retirement,
      based on the following assumptions:

    
       

      (i)
        The
        benefit is based solely on the compensation earned during the Eligible
        Management Associate’s calendar years of service and disregarding the

    

     

    
      
        10

      

      
        
        

        
        

      

      
        
        

      

    

     

    Eligible
      Management Associate’s
      last calendar year of service if less than a full year and disregarding
      completely all other years;

     

     (ii)   
      Earnings
      are averaged over the number of years of actual credited service,
      as

            
      defined in the Pension
      Plan; 

     

    
      (iii)  
        Social Security indexing factors used are those actually used by the Social
        Security Administration in determining the Eligible Management Associate’s
        social security benefit, and if those factors are not available, the latest
        published factors will be used;

    

     

    and (b)
      being a fraction, not exceeding one, the numerator of which is the Eligible
      Management Associate’s years of credited service, as defined by the Pension Plan
      and the denominator of which is 30.

    

    (B) The
      monthly benefit the Eligible Management Associate would receive under the Social
      Security Act at age 62, or if retirement is later than age 62, the benefit
      payable at actual retirement, based on the following assumptions:

     

    
      (i)    
        All compensation earned (a) prior to the later of 1951 or the year the Eligible
        Management Associate attains age 22 or (b) in the year in which the Eligible
        Management Associate Separates from Service if such separation occurs prior
        to
        the last day of the calendar year will be disregarded; 

    

    

    (ii)   
      The
      Eligible Management Associate earned no compensation for calendar years before
      the Eligible Management Associate was employed by the Participating Employer,
      which years will be included in the calculation as years of zero
      earnings;

     

    (iii)  
      Earnings are averaged over a number of full calendar years as 

    determined
      by the following:

     

    
      	
              Year
                of
                Birth

            	 	
               Number
                of
                Full

               Calendar
                Years

            
	
               1925

            	 	
               31

            
	
               1926

            	 	
               32

            
	
               1927

            	 	
               33

            
	
               1928

            	 	
               34

            
	
               After
                1928

            	 	
               35

            

    

    
       

      
        If
          the
          Eligible Management Associate's total calendar years of earnings determined
          under clauses (i) and (ii) above exceed the number of full years of earnings
          that are to be averaged based on year of such Eligible Management Associate's
          birth, one or more of the Eligible Management Associate's lowest years
          of
          earnings will be disregarded until his total years of earnings equals the
          number
          of full years of earnings that are to be averaged based on the year of
          such
          Eligible Management Associate's birth.

      

    

     

    
      
        11

      

      
        
        

        
        

      

      
        
        

      

    

     

    
      (iv)  
        Social Security indexing factors used are those actually used by the Social
        Security Administration in determining the Eligible Management Associate's
        Social Security benefit, and, if those factors are not available, the latest
        published factors will be used.

    For
      Eligible Management Associates who reach Traditional Retirement Age after August
      1, 2000, for purposes of clause (iii) of Subparagraph (b) of Paragraph (1)
      of
      Article IV, Estimated Social Security Benefit shall be determined under (B)
      above.

    

    Final
      Service:
      An
      Eligible Management Associate's years of Credited Service plus, if he becomes
      an
      Associate of a Controlled Group member that is not a Participating Employer,
      the
      years of Service with such Controlled Group Member that are credited to the
      Associate after he ceases earning Credited Service. Calendar years that include
      a period of Disability Service will not be included in the determination of
      Final Service. Calendar years of Service or of Credited Service that are
      interrupted by a Separation from Service or by one or more years in which the
      Eligible Management Associate did not receive Compensation for the entire year
      will be considered to be consecutive for purposes of determining consecutive
      years of Final Service.

    

    Human
      Resources and Compensation Committee:
      The
      Human Resources and Compensation Committee of the Board of
      Directors.

    

    Human
      Resources Committee:
      The
      Human Resources Committee of the Company.

    

    Interest
      Income Account(s):
      The
      account(s) of that name and any successor account(s) and/or fund(s) established
      and maintained pursuant to the Savings and Profit-Sharing Retirement Plan and/or
      the Savings, Profit-Sharing and Stock Ownership Plan.

    

    Late
      Retirement Date:
      The
      first day of the month immediately following the date on which an Eligible
      Management Associate Separates from Service after having attained Traditional
      Retirement Age.

     

    Matched
      Deposits:
      An
      Eligible Management Associate’s deposits, not in excess of 6% of his
      compensation (as defined in the Savings and Profit-Sharing Retirement Plan,
      the
      Savings, Profit-Sharing and Stock Ownership Plan and the Mirror Savings Plans),
      made pursuant to the Savings and Profit-Sharing Retirement Plan, the Savings,
      Profit-Sharing and Stock Ownership Plan, and the Mirror Savings
      Plans.

    

    Mirror
      Savings Plans:
      The
      J.C. Penney Corporation Mirror Savings Plan, as amended from time to
      time.

    

    Parent
      Company:
      J. C.
      Penney Company, Inc., a Delaware corporation, and any successor
      corporation.

    

    Participating
      Employer:
      The
      Company and any other Controlled Group Member or organizational unit of the
      Company or of a Controlled Group Member which is designated as a Participating
      Employer under the Plan by the Human Resources

     

    
      
        12

      

      
        
        

        
        

      

      
        
        

      

    

    
Committee;
      provided, however, that if such designation would substantially increase the
      cost of the Plan to the Company, such designation shall be subject to the sole
      discretion of the Board of Directors.

    

    Payment
      Commencement Date:
      The
      date upon which payment of an Eligible Management Associate’s Plan Benefit is
      scheduled to begin as determined under Article V, Paragraph 3.

    

    Payment
      Events: The
      event set forth in Paragraph 2 of Article V upon which an amount of deferred
      compensation 

    under
      this Plan may be paid.

    

    Penney
      Stock (Company) Account:
      The
      account(s) of that name and any successor account(s) and/or fund(s) established
      and maintained pursuant to the Savings and Profit-Sharing Retirement Plan and/or
      the Savings, Profit-Sharing and Stock Ownership Plan.

    

    Pension
      Plan:
      The
      J.
      C. Penney Corporation, Inc. Pension Plan, as amended from time to
      time.

    

    Pension
      Plan Participant:
      An
      Associate or former Associate who is treated as a participant under the Pension
      Plan.

    

    Performance
      Unit Plan:
      J.
      C.
      Penney Company, Inc. 1984 Performance Unit Plan, as amended from time to time,
      as in existence prior to February 1, 1998 when terminated effective January
      31,
      1998.

    

    Plan:
      Prior
      to January 27, 2002, the Supplemental Retirement Program for Management
      Profit-Sharing Associates of J. C. Penney Company, Inc., as amended from time
      to
      time, and on and after January 27, 2002, the Supplemental Retirement Program
      for
      Management Profit-Sharing Associates of J. C. Penney Corporation, Inc. as
      amended from time to time.

    

    Plan
      Benefit:
      The
      benefit payable to an Eligible Management Associate on his Early Retirement
      Date, Traditional Retirement Date or Late Retirement date, determined in
      accordance with the provisions of Article IV of this Plan, or, where applicable,
      the qualified preretirement survivor annuity, as defined in Article IV, payable
      to a Spouse.

    

    Profit
      Incentive Compensation:
      The
      share of store profits to which an Associate is entitled as a store manager
      or
      as a member of a store's management staff; the management incentive compensation
      to which a management Associate is entitled; the regional or district incentive
      compensation to which a regional or district office Associate is entitled;
      and,
      if so determined by the Human Resources Committee, any other compensation based
      on profits (excluding any Company contributions to and benefits under the
      Savings and Profit-Sharing Retirement Plan and Savings, Profit--Sharing and
      Stock Ownership Plan) to which an Associate of a Participating Employer, or,
      for
      the purpose of determining Average Final Compensation only, a Controlled Group
      Member who is not a Participating Employer, is entitled.

    

    
      
        13

      

      
        
        

        
        

      

      
        
        

      

    

    Retirement
      Date:
      The
      first day of the month immediately following the date on which an Eligible
      Management Associate Separates from Service after having attained Early
      Retirement Age or Traditional Retirement Age.

    

    Savings,
      Profit-Sharing and Stock Ownership Plan:
      The
      J.
      C. Penney Corporation, Inc. Savings, Profit-Sharing and Stock Ownership Plan,
      as
      amended from time to time.

    

    Separation
      from Service or Separates
      from Service:
      means
      the date an Eligible Management Associate dies, retires, or otherwise has a
      termination of employment from the Controlled Group, within the meaning of
      Code
      section 409A and Treasury Regulation section 1.409A-1(h), or its successor,
      taking into account the definition of Controlled Group for such purpose in
      this
      Article II, after having attained age
      55
      and 15 years of Credited Service or age 60. 

    

    Service:
      The
      period of time credited to an Eligible Management Associate as service under
      the
      terms of the Pension Plan.

    

    Single
      Life Annuity:
      An
      annuity with no ancillary benefits, consisting of equal monthly payments
      beginning as of a designated
      commencement date and ending with the monthly payment due immediately prior
      to
      his death. 

    

    Specified
      Employee:
      An
      Eligible Management Associate who is a “specified
      employee” within the meaning of Code section 409A, as determined in accordance
      with the rules specified by the Board of Directors in resolutions dated December
      12, 2007.

    

    Spouse:
      The
      individual to whom an Eligible Management Associate is legally married under
      the
      laws of the State (within the meaning of section 3(10) of ERISA) in which the
      Eligible Management Associate is domiciled, or if domiciled outside the United
      States, under the laws of the State of Texas subject to federal legal
      requirements.

    

    Traditional
      Retirement Age:
      The
      date on which an Eligible Management Associate attains age 60.

    

    Traditional
      Retirement Date:
      The
      first day of the month immediately following the date an Eligible Management
      Associate attains Traditional Retirement Age if such Eligible Management
      Associate Separates from Service on such date.

    

    Valuation
      Date:
      With
      respect to the Company Accounts, excluding the Penney Stock (Company) Account,
      each day of the calendar year. With respect to the Penney Stock (Company)
      Account(s), each day of a calendar year on which the New York Stock Exchange
      is
      open. If the New York Stock Exchange is closed, the Penney Stock (Company)
      Account(s) will have the same value as of the last immediately preceding day
      the
      Exchange was open.

    
      
        14

      

      
        
        

        
        

      

      
        
        

      

    

    

    ARTICLE
      III.    PARTICIPATION

    

    Each
      Eligible Management Associate shall participate in the Plan as of such Eligible
      Management Associate's Early Retirement Date, Traditional Retirement Date,
      or
      Late Retirement Date, as the case may be; provided, however, that such Eligible
      Management Associate who has a Separation from Service in the month of December
      shall commence participation in the Plan as of the last day of that December.
      Notwithstanding the preceding sentence, and except as otherwise provided in
      Paragraph (8) of Article IV, effective on and after January 1, 1996, any
      Associate who, on December 31, 1995, was not classified as management or who
      was
      not in a Profit Incentive Compensation program shall not be considered an
      Eligible Management Associate and shall not participate in the Plan. In
      addition, effective as of the Closing (as such term is defined in Paragraph
      (8)
      of Article IV), the Eligible Management Associates whose names are set forth
      on
      Appendix II to the Plan shall cease to participate in the Plan and shall not
      be
      entitled to a benefit under any provision of the Plan. In the event an Eligible
      Management Associate whose name is set forth on Appendix II is employed after
      the Closing by the Company or any Controlled Group Member, such person will
      not
      thereafter be an Eligible Management Associate and will not participate in
      the
      Plan on or after the date of such employment.

    
      
        15

      

      
        
        

        
        

      

      
        
        

      

    

    

    ARTICLE
      IV.   BENEFITS

    

    An
      Eligible Management Associate shall be entitled to a Plan Benefit equal to
      an
      amount determined as follows:

    

    (1) 
      At
      Early, Traditional, or Late Retirement Date:
      The
      annual amount of benefit payable from the Plan to an Eligible Management
      Associate commencing on such Eligible Management Associate's Early Retirement
      Date, Traditional Retirement Date, or Late Retirement Date, as the case may
      be,
      shall be:

    

    (a) the
      sum
      of

    
       

      (i) 
        3% of the Eligible Management Associate's Average Final Compensation multiplied
        by such Eligible Management
        Associate's Credited Service not in excess of 10 years; 

    

    plus

    
      (ii) 
        1% of the Eligible Management Associate's Average Final Compensation multiplied
        by such Eligible Management
        Associate's Credited Service in excess of 10 years but not in excess of 30
        years;

      plus 

    

    
      (iii) 
        1/2 of 1% of the Eligible Management Associate's Average Final Compensation
        multiplied by such Eligible Management
        Associate's Credited Service in excess of 30 years but not in excess of 40
        years;

    

     less

    
      (iv)  
        1/3 of 1% for each month by which the Eligible Management Associate's Early
        Retirement Date shall precede such
        Eligible Management Associate's Traditional Retirement Date multiplied by
        the
        Eligible Management Associate's
        Average Final Compensation;

    

     less

    

    (b) the
      sum
      of

    

    (i)    
      the
      single-life, no-death-benefit annuity equivalent of (a) the annual amount of
      pension payable pursuant to the Pension Plan (disregarding Disability Service)
      assuming that the Eligible Management Associate's Benefit Commencement Date
      is
      the first day of the month immediately following the date of such Eligible
      Management Associate's Separation from Service, (b) the amount payable pursuant
      to the terms of a domestic relations order qualified under Code
      Section 414(p),
      (A) from the Pension Plan and (B) from benefits accrued pursuant to Section
      4.1
      of the Benefit Restoration Plan and (c) the accrued benefit payable pursuant
      to
      Section 4.1 of the Benefit Restoration Plan; 

    plus

      
      (ii)     the single-life, no-death-benefit annuity
      equivalent, as of the Valuation Date which is the next trading date of the
      New
      York Stock Exchange following the Eligible Management Associate’s Separation
      from Service, of

     

     

    
      
        16

      

      
        
        

        
        

      

      
        
        

      

    

    
      	 	
               
                (a)

            	
              the
                value of all assets allocated to the Eligible Management Associate
                in the
                Company Account(s) under the Savings, Profit-Sharing and Stock Ownership
                Plan, including such assets allocated to him under the Savings and
                Profit-Sharing Retirement Plan prior to January 1, 1999;
                and

            

    

    

    
      	(b)  	
              the
                value of any additional assets which would have been allocated to
                the
                Eligible Management Associate’s Company Account(s) under the Savings and
                Profit-Sharing Retirement Plan, the Savings, Profit-Sharing and Stock
                Ownership Plan, and the Mirror Savings Plans, had such Eligible Management
                Associate made all further permissible Matched Deposits up to 6%
                of his
                compensation (as such term is defined in each said plan) under each
                said
                plan and had he not made any withdrawals of taxed Matched Deposits
                from
                the plans prior to January 1, 1989;
                and

            

    

    

    
      	(c)  	
              the
                value of dividends attributable to units in his Company Account (within
                the meaning of the Savings, Profit-Sharing and Stock Ownership Plan)
                and
                distributed to the Eligible Management Associate pursuant to Section
                9.04
                of the Savings, Profit-Sharing and Stock Ownership Plan;
                and

            

    

    

    
      	(d)  	
              the
                value of any amounts payable pursuant to the terms of a domestic
                relations
                order qualified under Code Section 414(p) out of such Eligible Management
                Associate’s Company Account(s) from the Savings, Profit-Sharing and Stock
                Ownership Plan and/or the Mirror Savings Plan;
                and

            

    

    

    
      	(e)  	
              the
                value of benefits payable to the Eligible Management Associate (or
                another
                person on behalf of the Eligible Management Associate from (A) his
                annual
                benefit limit make-up account pursuant to paragraph (2) of Article
                IV of
                the Benefit Restoration Plan prior to January 1, 1999, and (B) his
                Company
                Accounts under the Mirror Savings
                Plan;

            

    

    plus

    

    
      	 	 	
              (iii)

            	
              50%
                (less 1/4 of 1% for each month by which the Eligible Management
                Associate's Early Retirement Date shall precede such Eligible Management
                Associate's Traditional Retirement Date) of the Eligible Management
                Associate's Estimated Social Security
                Benefit;

            

    

    plus

    

    
      	 	 	
              (iv)

            	
              to
                the extent permitted by Code section 409A, in the case of an Eligible
                Management Associate whose Credited Service is increased pursuant
                to
                Paragraph (1) of Article VIII, the amount of annual retirement benefit
                (or
                any commutations thereof or substitutions therefrom) payable to an
                Eligible Management Associate from any other employer, but only to
                the
                extent determined by the Benefits Administration Committee, expressed
                in
                the form of a single-life, no-death-benefit annuity equivalent (as
                determined by 

            

    

     

    
      
        17

      

      
        
        

        
        

      

      
        
        

      

    

    the
      Benefits Administration
      Committee), commencing on such Eligible Management Associate's Separation from
      Service.

    
 

    In
      determining the amount referred to in clause (ii) of subparagraph (b) of this
      Paragraph (1) of this Article IV, it shall be deemed that:

     

    
      (i)    
        an Eligible Management Associate who has not, at all times when he was eligible
        to participate in the Savings, Profit-Sharing and Stock Ownership Plan and
        the
        Mirror Savings Plan, contributed an amount sufficient to share, to the maximum
        extent, in the Company contribution to such Plan or such predecessor plan
        has so
        contributed and that an Eligible Management Associate who did not share,
        to the
        maximum extent, in Company contributions for which he was eligible under
        the
        Savings and Profit-Sharing Retirement Plan due to any withdrawal of taxed
        Matched Deposits, be deemed not to have any such withdrawal;

       

      (ii)   
        the share of any such Company contribution deemed to have been credited to
        an
        Eligible Management Associate pursuant to this Paragraph for plan years ending
        before January 1, 1989 shall be deemed to have experienced the same rate
        of
        dividends, earnings, and change in value as the actual rate of dividends,
        earnings, and change in value experienced by the Penney Stock (Company) Account
        under the Savings and Profit-Sharing Retirement Plan from the time such share
        of
        a Company contribution is deemed to have been credited for said plan years
        and
        that the value of this said amount as of December 31, 1988 under the Savings
        and
        Profit-Sharing Retirement Plan, plus the share of any such Company contribution
        deemed to have been credited to an Eligible Management Associate pursuant
        to
        this Paragraph for plan years beginning after December 31, 1988 shall be
        deemed
        to have experienced the same rate of earnings and change in value experienced
        by
        the Interest Income Account under the Savings, Profit-Sharing and Stock
        Ownership Plan from the time such share of a Company contribution is deemed
        to
        have been credited for said plan years; 

    

    

    (iii)  
      the
      value of the amount of the Company Account(s) and annual limit make-up account
      paid out pursuant to a domestic relations order qualified under Section 414(p)
      of the Code deemed to have been credited to an Eligible Management Associate
      pursuant to this Paragraph shall be deemed to have experienced the same rate
      of
      earnings and change in value experienced by the Interest Income Account under
      the Savings, Profit-Sharing and Stock Ownership Plan from the time such amount
      is deemed to have been credited; and 

     

    
      (iv)  
        the rates used to determine the single-life, no-death-benefit annuity equivalent
        shall be the rates that the Benefits Administration Committee, in its
        discretion, shall determine. 

       

    

    (2)   
      Minimum
      Benefit:
      In
      no
      event will the amount payable to an Eligible Management Associate under
      Paragraph (1) of this Article IV at such Eligible 

     

    
      
        18

      

      
        
        

        
        

      

      
        
        

      

    

     

    Management
      Associate's Traditional Retirement Date or Late Retirement Date, as the case
      may
      be, be less than the difference between:

     

    
      (A)  
        the amount of pension payable pursuant to the early retirement pension benefit
        provision of the Pension Plan (determined without regard to any compensation
        or
        benefit limits imposed by the Code) that would be applicable if the Eligible
        Management Associate elected to receive benefits pursuant to that provision
        prior to such Eligible Management Associate's normal retirement date, as
        defined
        in the Pension Plan (disregarding Disability Service, if any, and including
        as
        Credited Service any increase granted under Article VIII hereof) assuming
        the
        Eligible Management Associate's Benefit Commencement Date is the first day
        of
        the month immediately following the day of such Eligible Management Associate's
        Separation from Service under this Plan, and 

     

    
      (B)    
        the amount of pension payable pursuant to the early retirement pension benefit
        provision of the Pension Plan (determined without regard to any compensation
        or
        benefit limits imposed by the Code) that would be applicable if the Eligible
        Management Associate did not elect to receive benefits pursuant to that
        provision prior to the Eligible Management Associate's normal retirement
        date,
        as defined in the Pension Plan (disregarding Disability Service, if any,
        and
        including as Credited Service any increase granted under Article VIII
        hereof). 

    

    

    In
      no
      event will the amount payable under Paragraph (1) of this Article IV be made
      to
      an Eligible Management Associate who: 

    

    (a)   
      Separates from Service on his Early Retirement Date within one year prior to
      his
      Traditional Retirement Date and who is granted additional Credited Service
      pursuant to Paragraph (1) of Article VIII at his Early Retirement Date, or
      

    

    (b)   
      Separates from Service because of a reduction in force and is designated as
      an
      individual termination by the Chief Human Resources and Administration Officer
      of the Company, or his delegate or successor, in accordance with Paragraph
      (1)
      of Article VIII and who is granted deemed additional months
      of Credited Service thereunder be less than the difference between 

    

    (A)    
      the
      amount of pension that would be payable (determined without regard to any
      compensation or benefit limits imposed by the Code) at such Eligible Management
      Associate's normal retirement date, as defined by the Pension Plan (disregarding
      Disability Service, if any, and including as Credited Service, as defined by
      the
      Pension Plan, any increase granted under Article VIII hereof), and 

     

    (B)  the
      amount of pension payable pursuant to the early retirement pension benefit
      provision of the Pension Plan (determined without regard to any compensation
      or
      benefit limits imposed by the Code) that would be 

     

     

    
      
        19

      

      
        
        

        
        

      

      
        
        

      

    

     

    applicable
      if the Eligible Management Associate elected to receive benefits pursuant to
      that provision prior to such Eligible Management Associate's normal retirement
      date, as defined by the Pension Plan (disregarding Disability Service, if any,
      and excluding as Credited Service any increase granted under Article VIII
      hereof) assuming the Eligible Management Associate's Benefit Commencement Date
      is the first day of the month following such associate's Separation from
      Service, but in no event prior to the date such associate reaches age
      59.

    

    (3)   
      Social
      Security Make-up:
      In
      addition to any other benefit payable under this Plan, a benefit equal to the
      Estimated Social Security Benefit shall be payable in to an Eligible Management
      Associate commencing on such Eligible Management Associate's Traditional
      Retirement Date or Late Retirement Date up to age 62, as the case may be, (or,
      for an Eligible Management Associate who Separates from Service within one
      year
      prior to his Traditional Retirement Date and who is granted any adjustment
      pursuant to either clause (i) or (ii) of Paragraph (1) of Article VIII, on
      his
      Early Retirement Date). 

    

    An
      Eligible Management Associate, who, on his Separation from Service, is entitled
      to disability benefits under the United States Social Security laws, shall
      not
      be eligible for any Social Security make-up benefits provided for in this
      paragraph.

     

    (4)   
      Death
      Benefit:
      For
      purposes of the benefit provided by Paragraphs 1 and 2 of Article IV,
      if
      an
      Eligible Management Associate who has a vested interest in his benefit is
      married at the time such Eligible Management Associate has a Separation from
      Service by reason of death, the Eligible Management Associate’s Spouse will
      receive a benefit in the form of five equal annual installments commencing
      as of
      the first day of the month after the Eligible Management Associate’s death. The
      amount of such death benefit will be calculated to be Actuarially Equivalent
      by
      reference to the Single Life Annuity that would be payable to the Spouse as
      a
“qualified preretirement survivor annuity” based on the Eligible Management
      Associate’s Plan Benefit in Paragraphs 1 and 2 of Article IV and such amount
      will be adjusted to reflect payment over five years in the manner described
      in
      Paragraph 1 of Article V. For these purposes, a “qualified preretirement
      survivor annuity” means a monthly annuity for the life of the Spouse of a
      deceased Eligible Management Associate equal to the monthly annuity that the
      Spouse would have received under a qualified joint and survivor annuity, with
      the survivor annuity being equal to 100% of the amount of the monthly annuity
      payable during the joint lives of the Eligible Management Associate and his
      Spouse if the Eligible Management Associate dies on or after the day he attains
      Early Retirement Age or Traditional Retirement Age. The calculation of the
      qualified joint and survivor annuity shall be determined by reference to the
      factors used under Exhibit E to Appendix I to the Pension Plan, or its
      successor. No benefit under this Plan will be payable to a single Eligible
      Management Associate who has a Separation from Service due to
      death.

    

    If
      a
      Eligible Management Associate who has a Separation from Service (other than
      by
      death) and who is either married or single at the time of his subsequent death
      dies before payment of his vested benefit has begun under the Plan, the Eligible
      Management Associate’s Beneficiary will receive the benefit in the form of five
      equal annual installments equal to the amount that would have been payable
      under
      Paragraph 1 of Article V and at 

     

    
      
        20

      

      
        
        

        
        

      

      
        
        

      

    

     

    the
      same time. If no Beneficiary has been designated by such a Eligible Management
      Associate, the Beneficiary will be deemed to be the Spouse for a married
      Eligible Management Associate and the estate for a single Eligible Management
      Associate. 

    

    In
      the
      event of the death of a Eligible Management Associate after his benefit has
      commenced and before all installments have been paid, the remaining unpaid
      installments shall be paid to his Beneficiary in accordance with the payment
      schedule of the Eligible Management Associate. 

    

    (5) 
      Life
      Insurance Coverage:
      Commencing
      on an Eligible Management Associate's Traditional Retirement Date or Late
      Retirement Date, as the case may be, and ending on such Eligible Management
      Associate's attainment of age 70, the Company will continue to provide an
      Eligible Management Associate who has at least 10 years of uninterrupted
      employment with a Participating Employer with term life insurance coverage
      at
      Company expense on a decreasing coverage basis. 

    

    The
      amount of coverage to be provided into retirement shall be equal, at such
      Eligible Management Associate's Traditional Retirement Date, to 100% of the
      amount of coverage being provided to him at Company expense immediately prior
      to
      the attainment of his Traditional Retirement Age reduced to 90%, 80%, 70%,
      60%,
      50%, 40%, 30%, 20%, and 10% of such amount of coverage on the first day of
      the
      month following his attainment of age 61, 62, 63, 64, 65, 66, 67, 68, and 69,
      respectively. 

    

    The
      amount of coverage to be provided at a Late Retirement Date shall be the
      applicable percentage based upon the Eligible Management Associate's age on
      such
      Late Retirement Date multiplied by the amount of coverage being provided to
      him
      at Company expense immediately prior to his Late Retirement Date and decreasing
      thereafter as provided in the preceding sentence. 

    

    If,
      on
      the Eligible Management Associate's Traditional Retirement Date or Late
      Retirement Date, as the case may be, such Eligible Management Associate is
      already covered by term life insurance under the Company's term life insurance
      plan on account of the Eligible Management Associate's total disability, such
      Eligible Management Associate shall not be eligible for any term life insurance
      coverage provided for in this paragraph. Benefits payable under this Plan will
      be paid to the beneficiary designated by the Eligible Management Associate
      as
      soon as practicable after receipt of a properly submitted claim.

    

    An
      Eligible
      Management Associate whose
      group term life insurance coverage under the Plan terminates because of his
      attainment of age 70 will have the right to convert his group term life
      insurance coverage to an individual policy to the extent, and only to the
      extent, permitted under the group policy applicable to the Eligible
      Management Associate.
      Any
      election to convert to individual coverage must be made within 31 days after
      the
Eligible
      Management Associate’s coverage
      under the Plan terminates and must be made in accordance with all requirements
      specified in such policy. The amount of coverage that may be converted shall
      be
      the amount in effect immediately before the Eligible
      Management Associate attained
      age 70.

     

    
      
        21

      

      
        
        

        
        

      

      
        
        

      

    

    (6) 
      Nonduplication
      of Benefits: The
      benefits payable to or on behalf of an Eligible Management Associate under
      the
      Plan shall not duplicate benefits payable from the Pension Plan, the Benefit
      Restoration Plan, or the Mirror Savings Plans, of the Company or a Participating
      Employer or a Controlled Group Member. To the extent that any benefits otherwise
      payable under the Plan are paid from one or more of the plans or programs
      described in the prior sentence, such benefits under the Plan shall be
      cancelled.

     

    (7) 
      Change
      in Control Plan.
      If the
      Board of Directors exercises its discretion under Paragraph 11 of Article VIII,
      to terminate the Plan because of a Change in Control (as defined in Paragraph
      11(c)) and an Eligible Management Associate is a participant in the J.C. Penney
      Corporation, Inc. Change in Control Plan (“Change in Control Plan”), that
      Eligible Management Associate’s interest in his Plan Benefit will become 100%
      vested and nonforfeitable without regard to his years of service or age. If
      a
      Eligible Management Associate who is also a participant in the Change in Control
      Plan has an “employment termination” following a “change in control” as those
      terms are defined in the Change in Control Plan, his interest in his Plan
      Benefit will become 100% vested and nonforfeitable without regard to his years
      of Final Service or age.

    

    (8)
      Benefits
      for Certain Former Financial Services Plan Participants:
      The
      provisions of this Paragraph (8) will become effective on the close of the
      transactions (“Closing”) contemplated by that certain Stock Purchase Agreement
      among Commonwealth General Corporation, J. C. Penney Company, Inc. and J. C.
      Penney Direct Marketing Services, Inc. dated as of March 7, 2001, provided
      that
      the Closing occurs on or before September 30, 2001.

    

    The
      Plan hereby assumes the accrued retirement income benefit obligation under
      the
      Supplemental Retirement Program for Eligible Management Associates of JCPenney
      Financial Services (the “Financial Services Plan”) for each former Associate who
      (i) retired or separated from service prior to the Closing with a right to
      a
      retirement income benefit under the Financial Services Plan and who had not
      begun to receive retirement income benefits from the Financial Services Plan
      as
      of the Closing and (ii) whose name is not set forth on Appendix I to the
      Financial Services Plan, which Appendix is reproduced and attached as Appendix
      III to the Plan. Each such former Associate will be entitled to a retirement
      income benefit under this Plan in the amount of such former Associate’s
      Financial Services Plan accrued retirement income benefit and payable in the
      same form and at the same time as such Financial Services Plan accrued
      retirement income benefit would have been paid to the extent allowed under
      Code
      section 409A. Otherwise these benefits will be paid in accordance with Paragraph
      3 of Article V. In addition, the Plan hereby assumes the obligation of the
      Financial Services Plan to make continued monthly retirement income benefit
      payments to each former Associate who retired prior to the Closing and had
      begun
      to receive retirement income benefits from the Financial Services Plan as of
      the
      Closing in the same amount, the same form and at the same time as such former
      Associate’s Financial Services Plan retirement income benefit was being
      paid.

    
      
        22

      

      
        
        

        
        

      

      
        
        

      

    

     

    

    ARTICLE
      V.   FORM AND COMMENCEMENT OF BENEFIT PAYMENTS

    

    (1)
       Form
      of Benefit Payments.
      Except as otherwise provided in this Plan, benefits will be paid in the form
      of
      five equal annual installments. The present value of such installments will
      be
      equal to the Actuarially Equivalent amount determined under Article II. For
      an
      Eligible Management Associate who has a Separation from Service after the
      Effective Date, the amount of such annual installments will be calculated by
      using only the adjusted first segment rate of the Applicable Interest Rate,
      determined with regard to the 2008 through 2011 phase-in provisions of Code
      section 417(e)(3)(D)(iii). For an Eligible Management Associate who has a
      Separation from Service prior to the Effective Date, the amount of such annual
      installments will be calculated by using the Applicable Interest Rate that
      applies to such Eligible Management Associate. The lookback and stability
      periods set forth in the definition of Applicable Interest Rate will apply
      in
      determining the adjustment.

    

    (2)
       Payment
      Events.
      The
      Payment Event for an Eligible Management Associate will be the later of (i)
      Separation from Service or (ii) January 1, 2008; provided, however, that if
      a
      Specified Employee’s Separation from Service (other than by reason of death)
      occurs prior to January 1, 2008, and the date of such Separation from Service
      plus six months is after January 1, 2008, Separation from Service will be the
      deemed Payment Event for such a Specified Employee.

    

    (3)
       Payment
      Commencement Date.
      The
      Payment Commencement Date for a Eligible Management Associate (including a
      Specified Employee) whose Payment Event under Paragraph 2 of this Article V
      is
      Separation from Service will be the first day of the month following the date
      of
      his Separation from Service; provided, however, that the actual time of the
      first payment to a Specified Employee will be determined in accordance with
      the
      provisions of Paragraph 4 of Article V. For all other Eligible Management
      Associates, the Payment Commencement Date for benefits under Paragraph 1 of
      Article IV will be January 1, 2008, or as soon as practicable thereafter, but
      no
      later than the time required for payment under Treasury Regulation section
      1.409A-3(d), or its successor. Subsequent installments for all Eligible
      Management Associates, including Specified Employees, will be paid on the first
      through fourth anniversaries of the Payment Commencement Date. 

    

    The
      Payment Commencement Date in the case of a death benefit will be determined
      under Paragraph 4 of Article IV. For an alternate payee, the Payment
      Commencement Date will be the applicable commencement date as provided in a
      domestic relations order that conforms with the requirements of Code section
      409A and Treasury regulation section 1.409A-3(j)(4)(ii), or its
      successor.

    

    (4) Delay
      for Specified Employees.
      If an
      Eligible Management Associate is a Specified Employee as of the date of his
      Separation from Service and his Payment Event is Separation from Service (other
      than by reason of death), payment will not be made before the date that is
      six
      months after the date of Separation from Service. The first payment to such
      a
      Specified Employee will be paid on the first day of the seventh month following
      the date of Separation from Service. The initial installment payment to a
      Specified Employee whose Separation from Service occurs after December 31,
      2007,
      will 

     

    
      
        23

      

      
        
        

        
        

      

      
        
        

      

    

    include
      an interest adjustment. Such adjustment will be calculated by using only the
      adjusted first segment rate of the Applicable Interest Rate, determined with
      regard to the 2008 through 2011 phase-in provisions of Code section
      417(e)(3)(D)(iii). The lookback and stability periods set forth in the
      definition of “Applicable Interest Rate” will apply in determining the
      adjustment. Notwithstanding the foregoing, no interest will be paid to a
      Specified Employee whose Separation from Service occurs before January 1, 2008.
      If a Specified Employee dies after a Separation from Service but prior to the
      expiration of the six-month delay, benefit payments under Article IV will
      commence to the Beneficiary in accordance with the provisions of Paragraph
      4 of
      Article IV. 

    

    (5) Subsequent
      Changes in Time and Form of Payment.
      No
      Eligible Management Associate can make a subsequent election to delay a payment
      or change the form of payment. 

     

    (6) Prohibition
      on Acceleration of Payment.
      Except
      as provided in Code section 409A, Treasury regulation section 1.409A-3(j)(4)
      or
      its successor, this Paragraph 6 and Paragraph 7 of this Article, and Paragraph
      11 of Article VIII, neither the Eligible Management Associate nor the Company
      can accelerate the time or schedule of any payment or amount scheduled to be
      paid pursuant to the terms of the Plan. The Benefits Administration Committee
      will have the discretion to accelerate payments in accordance with the
      provisions of Code section 409A and Treasury Regulation section 1.409A-3(j)(4),
      or its successor (provided that only the Board of Directors of the Parent
      Company will have the discretion to accelerate payments in accordance with
      the
      provisions of Treasury Regulation section 1.409A-3(j)(4)(ix) or its successor).
      

    

    (7) Limited
      Cashouts.
      If the
      present value, as determined herein, of an Eligible Management Associate’s or
      Beneficiary's benefit under Article IV when combined with the present value
      of
      an Eligible Management Associate’s or Beneficiary's interest in any other
      agreements, methods, programs, or other arrangements with respect to which
      deferrals of compensation are treated as having been deferred under a single
      nonqualified deferred compensation plan under Code section 409A and Treasury
      Regulation section 1.409A-1(c)(2), or its successor, is equal to or less than
      the applicable dollar amount under Code section 402(g)(1)(B), in effect for
      the
      year of distribution, the Benefits Administration Committee of the Company
      will
      distribute the benefit in the form of an immediate lump sum payment that is
      the
      Actuarial Equivalent of such vested Plan Benefit on the Payment Commencement
      Date (or, if applicable, the date specified in Paragraph 4 of this Article),
      provided that the Eligible Management Associate is not also a participant in
      the
      Mirror Savings Plan, or its successor, and the
      payment results in the termination and liquidation of the entirety of the
      Eligible Management Associate’s interest under this Plan and all other
      agreements, methods, programs, or other arrangements aggregated with this Plan
      and is in accordance with Treasury regulation section 1.409A-3(j)(4)(v), or
      its
      successor. In the case of a Specified Employee, the benefit will be paid at
      the
      time specified in Paragraph 4 of this Article V, with the comparable adjustment
      for interest as described in Paragraph 4 of this Article.

    

    (8) Delta
      Benefit.
      In
      the
      event an Eligible Management Associate receives a cash incentive award under
      the
      Management Incentive Compensation Plan after payment of his benefit has begun,
      such Eligible Management Associate shall receive a “delta benefit” equal to the
      present value of any incremental increase in the Eligible Management

     

    
      
        
          24

        

        
          
          

        

         

      

    

    

    Associate’s
      Plan Benefit
      attributable to such cash incentive award. Such determination
      will be made as of the original payment commencement date.
      Such
      delta benefit shall be payable as a lump sum no later than two and 1⁄2 months
      following the Plan Year in which the Eligible Management Associate’s right to
      such cash incentive award is no longer subject to a substantial risk of
      forfeiture under Treasury Regulation section 1.409A-1.

     

    
      
        25

      

      
        
        

        
        

      

      
        
        

      

    

     

    ARTICLE
      VI.   ADMINISTRATION

    

    The
      Benefits Administration Committee will administer the Plan and will have the
      full authority and discretion to accomplish that purpose, including without
      limitation, the authority and discretion to:

     

    
      (i)
            interpret the Plan in accordance with Code section 409A and
        correct any defect, supply any omission or reconcile any inconsistency or
        ambiguity in the Plan in the manner and to the extent that the Benefits
        Administration Committee deems desirable to carry on the purpose of the Plan;
        

       

      (ii)    
        resolve
        all questions relating to the eligibility of Associates to become Eligible
        Management Associates and the eligibility of Eligible Management Associates
        to
        participate in the Plan;

       

      (iii)  
        determine the amount of benefits payable to Eligible Management Associates
        and
        authorize and direct the Company with respect to
        the
        payment of benefits under the Plan;

       

      (iv)  
        make all other determinations and resolve all questions of fact necessary
        or
        advisable for the administration of the Plan; and

       

      (v)    
        make, amend, and rescind such rules as it deems necessary for the proper
        administration of the Plan. 

    

     

    The
      Benefits Administration Committee will keep a written record of its action
      and
      proceedings regarding the Plan and all dates, records, and documents relating
      to
      its administration of the Plan.

    

    Any
      action taken or determination made by the Benefits Administration Committee
      will
      be conclusive on all parties. No member of the Benefits Administration Committee
      will vote on any matter relating specifically to such member. In the event
      that
      a majority of the members of the Benefits Administration Committee will be
      specifically affected by any action proposed to be taken (as opposed to being
      affected in the same manner as each other Eligible Management Associate in
      the
      Plan), such action will be taken by the Human Resources
      Committee.

    
      
        26

      

      
        
        

        
        

      

      
        
        

      

    

    

    ARTICLE
      VII.   TYPE OF PLAN

    

    The
      Plan is a plan which is unfunded. The Plan is maintained by the Company
      primarily for the purpose of providing deferred compensation for a select group
      of management or highly compensated employees. The Plan shall be construed
      according to the provisions of ERISA applicable to such plans. Benefits under
      the Plan (other than the life insurance benefits referred to in Paragraph (5)
      of
      Article IV which may be insured) are paid from the general assets of the
      Company. 

    

    In
      the
      event that it should subsequently be determined by statute or by regulation
      or
      ruling that the Plan is not “a plan which is unfunded and is maintained
      primarily for the purpose of providing deferred compensation for a select group
      of management or highly compensated employees" within the meaning of sections
      201(2), 301(a)(3), 401(a)(1), and 4021(b)(6) of ERISA and section 2520.104-24
      of
      Chapter 29 of the Code of Federal Regulations, participation in the Plan shall
      be restricted by the Benefits Administration Committee to the extent necessary
      to assure that it will be such a plan within the meaning of such
      sections.

    
      
        27

      

      
        
        

        
        

      

      
        
        

      

    

    

    ARTICLE
      VIII.   MISCELLANEOUS

    

    (1)
      Additional
      Credited Service and Other Adjustments:
      For
      all
      purposes of the Plan, the Credited Service of an Eligible Management Associate
      may be increased, and with respect to an Eligible Management Associate whose
      Early Retirement Date is within one year prior to his Traditional Retirement
      Date, (i) the percentage reduction on account of early retirement referred
      to in
      clause (iv) of Subparagraph (a) of Paragraph (1) of Article IV may be decreased
      or waived, and (ii) the entitlement to and the amount of benefits or coverage
      referred to in Paragraphs (2), (3), and (5) of Article IV may be adjusted or
      increased, as the case may be, in the discretion of:

    

    (a)  
      in
      the
      case of an Eligible Management Associate other than members of the Company’s
      executive or senior management committee (or a successor committee then in
      place) described in Subparagraphs (b) and (c) of this Paragraph (1), the
      Chairman of the Board or the Chief Human Resources Officer;

    

    (b)  
      in
      the
      case of an Eligible Management Associate who is a member of the Company’s
      executive or senior management committee but who is not a director of the
      Company, the Human Resources and Compensation Committee; and

    

    (c)  
      in
      the
      case of the Chairman of the Board and an Eligible Management Associate who
      is a
      member of the Company’s executive or senior management committee and who is also
      a director of the Company, the Board of Directors.

    

    For
      all
      purposes of the Plan, the Benefits Administration Committee
      in its discretion, may make adjustments in Compensation and Credited Service
      with respect to payments of severance pay, including, but not limited to,
      outplacement pay and critical pay; provided that such adjustments comply with
      the requirements of Code section 409A.

    

    For
      purposes of a unit closing, job restructuring or reduction in force, the Chief
      Human Resources and Administration Officer of the Company, or his delegate
      or
      successor, may in his discretion, make adjustments in Credited Service, Service
      and/or Age, but in no event shall this discretion allow for an amount of the
      benefit to be less than the Eligible Management Association would have otherwise
      received under Article IV. A unit closing, job restructuring or reduction in
      force shall be determined by the Company entitling the Eligible Management
      Associate to severance pay under the Company’s then existing Separation Pay
      Plan.

    

    For
      the
      purpose of determining life insurance coverage under paragraph (5) of Article
      IV, an Eligible Management Associate deemed to have attained Traditional
      Retirement Age shall be entitled to coverage effective on the first day of
      the
      month following his Separation from Service. The
      amount of such coverage shall be equal to 100% of the amount being provided
      to
      him at Company expense immediately prior to his Separation from Service. Said
      amount shall be reduced in accordance with paragraph (5) of Article IV starting
      with the first day of the month following his attainment of age 61.

    

    
      
        28

      

      
        
        

        
        

      

      
        
        

      

    

    Notwithstanding
      any other provision of the Plan, an Eligible Management Associate (excluding
      Officers of the Company) who is entitled to a benefit pursuant to the formula
      described in paragraph (1) of Article IV as of the Associate’s Early Retirement
      Date, Traditional Retirement Date or Late Retirement Date, as the case may
      be
      (“formula benefit”), (i) who received from the Company as part of the Company’s
      offer in 1997 to participate in the Voluntary Early Retirement Program, a
      personalized statement showing the aggregate benefits earned as of January
      1,
      1998, from the Plan, the Pension Plan and, if applicable, the Benefit
      Restoration Plan, (“earned benefit”) and (ii) who retires from the Company prior
      to January 1, 1999, shall receive the greater of: (a) the formula benefit,
      or
      (b) an amount derived by subtracting the aggregate benefit payable to the
      Associate from the Pension Plan and, if applicable, the Benefit Restoration
      Plan
      from the earned benefit.

    

    (2) 
      Amendment
      and Termination:
      

    

    (a)
      The
      Human Resources and Compensation Committee may amend or modify the Plan at
      any
      time, without prior notice; provided, however, that any such amendment or
      modification which would substantially increase the cost of the Plan to the
      Company shall require approval of the Board of Directors. The Board of Directors
      may suspend, discontinue, or terminate and liquidate the Plan at any time
      without prior notice or approval. Any
      termination and liquidation of the Plan, including any termination and
      liquidation of the Plan upon a Change in Control (as defined in Paragraph 11(c)
      of Article VIII), must comply with the provisions of Code section 409A and
      Treasury Regulation section 1.409A-3(j)(4)(ix), or its successor.
      Subject
      to the foregoing, in
      no
      event will any amendment, modification, suspension, discontinuance, or
      termination adversely affect existing life insurance coverage for retirees
      or
      the Plan benefit for any Eligible Management Associate for whom benefit payments
      have already begun in accordance with the Plan as in effect prior to the
      effective date of the amendment, modification, suspension, discontinuance,
      or
      termination unless otherwise required to comply with applicable
      law.

    

    (b)
      For
      the purpose of termination of the Plan under this paragraph only, the Eligible
      Management Associate will be deemed to have had a Separation from Service in
      order to calculate the Plan Benefit, and the amount of the distribution shall
      be
      the Actuarial Equivalent of the Plan Benefit. In calculating the Plan Benefit,
      the date of the deemed Separation from Service will be the actual date of the
      Plan termination. 

    

    (i) If
      the
      Plan is terminated, any Eligible Management Associate who, as of the effective
      date of Plan termination, has reached Traditional Retirement Age but who has
      not
      reached age 65 shall be entitled to receive, at his deemed Separation from
      Service as
      defined in Paragraph 2(b) of this Article VIII the benefits, if any, to which
      he
      would have been entitled under Paragraph (1) or (2) or (3) of Article IV, had
      he
      Separated from Service on the day before the effective date of Plan termination.
      

    

    (ii)
      If
      the Plan is terminated, any Eligible Management Associate who, as of the
      effective date of Plan termination, has reached his Early Retirement Date
      (assuming a Separation from Service on such date) shall be entitled to receive,
      at his deemed Separation from Service as defined in Paragraph 2(b) of this
      Article VIII, the benefits, if any, to which he would have been entitled under
      Paragraph (1) or (2) or (3) of Article IV 

     

     

    
      
        29

      

      
        
        

        
        

      

      
        
        

      

    

     

     

    calculated
      as if he
      had reached his Traditional Retirement Age and Separated from Service on the
      day
      before the effective date of Plan termination and disregarding the percentage
      reduction on account of early retirement referred to in clause (iv) of
      Subparagraph (a) of Paragraph (1) of Article IV.

     

    
      (iii)
        If the Plan is terminated, any Associate who, as of the effective date of
        Plan
        termination (a) has reached age 50, (b) has 10 or more years of credited
        service, as defined by the Pension Plan, and (c) would have been an Eligible
        Management Associate but for his age or service, and (d) is not otherwise
        eligible for benefits under this Paragraph (2) of this Article VIII, shall
        be
        entitled to receive, at his deemed Separation from Service as
        defined in Paragraph 2(b) of this Article VIII, a benefit equal to the
        difference between the amount of pension which would be payable pursuant
        to the
        early retirement pension benefit provision of the Pension Plan that would
        be
        applicable if the Eligible Management Associate elected to receive benefits
        pursuant to that provision prior to his normal retirement date, as defined
        in
        the Pension Plan (disregarding Disability Service, if any) and the amount
        of
        pension payable pursuant to the early retirement pension benefit provision
        of
        the Pension Plan that would be applicable if the Eligible Management Associate
        did not elect to receive benefits pursuant to that provision prior to his
        normal
        retirement date, as defined in the Pension Plan (disregarding Disability
        Service, if any) reduced by the percentage derived by dividing the number
        of
        months of Credited Service, if any, after Traditional Retirement Date (assuming
        a separation from Service) by 60.

       
 (c)
      In
      no event will any future amendment or modification of the Plan adversely affect
      the right to Plan benefits which vest on Plan termination as set forth in this
      Paragraph (2) without the consent of at least 75 percent of the affected
      Eligible Management Associates unless such amendment or modification is
      specifically required to comply with applicable law.

    

    (d)
      Each amendment to the Plan by the Human Resources and Compensation Committee
      or
      the Board of Directors will be made only pursuant to unanimous written consent
      or by majority vote at a meeting. Upon such action by the Human Resources and
      Compensation Committee or the Board of Directors,
      the Plan will be deemed amended as of the date specified as the effective date
      by such action or in the instrument of amendment. The effective date of any
      amendment may be before, on, or after the date of such action of the Human
      Resources and Compensation Committee or the Board of Directors.

    

    (3)
      Rights
      of Associates:
      Except
      for the Associate's non-forfeitable interest as set forth in Paragraph (2)
      of
      this Article VIII, neither the establishment of the Plan nor any action
      thereafter taken by the Company or any Controlled Group Member or by the
      Benefits Administration Committee shall be construed as giving to any Associate
      any vested right to a benefit from the Plan or a right to be retained in
      employment or any specific position or level of employment with the Company,
      or
      any Controlled Group Member. Moreover, no Associate shall have any right or
      claim to any benefits under this Plan if the Associate is summarily dismissed
      as
      defined by the Company’s policies and procedures (including resignation in lieu
      thereof), unless the Benefits Administration Committee in its discretion
      determines that such Associate shall be eligible for such benefits
      notwithstanding such summary dismissal.

     

    
      
        30

      

      
        
        

        
        

      

      
        
        

      

    

     

    (4)
      Mistaken
      Information:
      If
      any
      information upon which an Eligible Management Associate's benefit under the
      Plan
      is calculated has been misstated by the Eligible Management Associate or is
      otherwise mistaken, such benefit shall not be invalidated (unless upon the
      basis
      of the correct information the Eligible Management Associate would not have
      been
      entitled to a benefit), but the amount of the benefit shall be adjusted to
      the
      proper amount determined on the basis of the correct information and, to the
      extent permitted by Section 409A any overpayments shall be charged against
      future payments to the Eligible Management Associate or his beneficiary or
      otherwise required to be repaid by the recipient.

    

    (5)
      Liability:
      Neither
      the Board of Directors (including any committees thereof) or Board of Directors
      of the Company or of any Participating Employer nor any member of the Benefits
      Administration Committee or the Human Resources Committee nor any person to
      whom
      any of them may delegate any duty or power in connection with administering
      the
      Plan shall be personally liable for any action or failure to act with respect
      to
      the Plan.

    

    (6)
      Benefits
      for Reemployed Eligible Management Associates:
      If
      a
      retired Eligible Management Associate subsequently is reemployed by a
      Participating Employer, the payment of benefits hereunder shall continue. Any
      life insurance coverage in effect pursuant to Paragraph (5) of Article IV shall
      cease effective on the date a rehired (whether or not participating in a Profit
      Incentive Compensation program) Associate becomes eligible for coverage under
      the Company's term life insurance plan. Upon such Associate's subsequent
      Separation from Service he shall be entitled to receive applicable benefits,
      if
      any, under Article IV offset by prior payments from this Plan adjusted with
      interest pursuant to uniform rules approved by the Benefits Administration
      Committee.

    

    (7)
      Construction:
      In
      determining the meaning of any provision 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 paragraphs and
      Articles in the Plan are for convenience only and are not intended to modify
      or
      affect the meaning of the substantive provisions of the Plan.

    

    (8)
      Non-assignability
      of Benefits:
      The
      benefits payable hereunder or the right to receive future benefits under the
      Plan may not be anticipated, alienated, pledged, encumbered, or subjected to
      any
      charge or legal process, and if any attempt is made to do so, or a person
      eligible for any benefits becomes bankrupt, the interest under the Plan of
      the
      person affected may be terminated by the Benefits Administration Committee
      which, in its sole discretion, may cause the same to be held or applied for
      the
      benefit of one or more of the dependents of such person or make any other
      disposition of such benefits that it deems appropriate, in all events subject
      to
      the requirements of Code section 409A.

    

    (9)
      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, former
      

     

    
      
        31

      

      
        
        

        
        

      

      
        
        

      

    

     

    Associate,
      or beneficiary with respect to the Plan shall be barred after the expiration
      of
      three years from the date of Separation of Service of the Eligible Management
      Associate or the date of receipt of the notice of denial of a claim for
      benefits, if earlier. In the event ERISA's limitations on legal actions do
      not
      apply, the laws of the State of Texas with respect to 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.

    

    (10)
      Transferred
      Eligible Management Associates:
      In
      the
      event of the transfer of an Eligible Management Associate after December 31,
      1995 from a Participating Employer to a "non-participating employer" as defined
      below, said Eligible Management Associate shall continue to be eligible to
      participate in this Plan in accordance with Article III. 

    

    In
      the
      event of the transfer of an Eligible Management Associate on or after March
      8,
      1995 but on or before December 31, 1995 to a non-participating employer, said
      Eligible Management Associate will continue to be eligible to participate in
      this Plan in accordance with Article III provided that on December 31, 1995
      the
      Eligible Management Associate (a) is in the employ of the non-participating
      employer and (b) is not eligible to participate in the Supplemental Retirement
      Program for Eligible Management Associates of JCPenney Financial Services.
      

    

    The
      Service and Compensation of the Eligible Management Associate with the
      non-participating employer shall be recognized as attributable to a
      Participating Employer to the extent permitted by the Plan in determining
      benefits under the Plan. A non-participating employer shall mean a participating
      employer in the Supplemental Retirement Program for Eligible Management
      Associates of JCPenney Financial Services.

    

    Notwithstanding
      the foregoing provisions of this Paragraph (10), an entity that ceases to be
      a
      member of the Controlled Group immediately after the Closing (as such term
      is
      defined in Paragraph (8) of Article IV) will not be a “non-participating
      employer” for any purpose of this Plan.

    

    (11)
      Change
      in Control:
      

    

    (a)    
      Authority
      of the Board of Directors.
      Upon
      a Change in Control as defined in Paragraph 11(c) of this Article VIII, the
      Board of Directors of the Parent Company will have the discretion and the
      authority to (i) terminate and liquidate the Plan pursuant to its irrevocable
      action taken within the 30 days preceding or the 12 months following a Change
      in
      Control and in accordance with Code section 409A, and Treasury Regulation
      section 1.409A-3(j)(4)(ix)(B), or its successor (in which event the benefit
      of
      each Eligible
      Management Associate who
      is
      also a participant in the Change In Control Plan will automatically vest as
      provided in Article IV, Paragraph 7); (ii) fund a grantor trust in accordance
      with the provisions of Paragraph 11(b) of this Article VIII; or (iii) provide
      that each Eligible
      Management Associate’s benefit
      in the Plan will become 100% vested and nonforfeitable as of the date of the
      Change in Control.

    

    (b)    
      Grantor
      Trust.
      To
      the extent permitted by Code section 409A and the regulations thereunder, the
      Board of Directors will have the discretion and the authority

     

    
      
        32

      

      
        
        

        
        

      

      
        
        

      

    

     

    to
      transfer assets of the Parent Company, in an amount sufficient to pay benefits
      that have accrued under the Plan up to the date of the Change in Control Event,
      to a grantor trust to be established by the Parent Company for the purpose
      of
      paying benefits hereunder; and the Eligible
      Management Associate’s vested
      benefits shall thereafter be paid to the Eligible
      Management Associate
      from
      such trust in accordance with the terms of the Plan. On each anniversary date
      the Change of Control, the Company shall transfer, to the extent permitted
      by
      Code section 409A and the regulations thereunder, to the grantor trust an amount
      necessary to pay all benefits accrued under the Plan during the preceding twelve
      months.

    

    (c)   
      Change
      in Control Event.
      For
      the purpose of determining whether a Change in Control has occurred with respect
      to a Eligible
      Management Associate,
      a
      Change in Control means a change in control within the meaning of Code section
      409A and Treasury Regulation section 1.409A-3(i)(5), or its successor, including
      a change in the ownership of the corporation , a change in the effective control
      of the corporation, or a change in the ownership of a substantial portion of
      the
      assets of the corporation. For this purpose, “corporation” has the meaning given
      in Treasury Regulation section 1.409A-3(i)(5)(ii), or its
      successor.

    
      
        33

      

      
        
        

        
        

      

      
        
        

      

    

    

    ARTICLE
      IX.   CLAIMS PROCEDURES

    

    If
      an
      Associate does not receive the benefits which he believes he is entitled to
      receive under the Plan, he may file a claim for benefits with the claims
      administrator as so designated by the Plan Administrator. All claims will be
      made in writing no later than the time prescribed by Treasury Regulation section
      1.409A-3(g), or its successor, and will be signed by the claimant. If the
      claimant does not furnish sufficient information to determine the validity
      of
      the claim, the claims administrator will indicate to the claimant any additional
      information which is required.

    

    Each
      claim will be approved or disapproved by the claims administrator within 90
      days
      following the receipt of the information necessary to process the claim. In
      the
      event the claim administrator denies a claim for benefits in whole or in part,
      the claims administrator will notify the claimant in writing of the denial
      of
      the claim. Such notice by the claims administrator will also set forth, in
      a
      manner calculated to be understood by the claimant, the specific reasons for
      such denial, the specific Plan provisions on which the denial is based, a
      description of any additional material or information necessary to perfect
      the
      claim with an explanation of the Plan's claim review procedure as set forth
      below. 

    

    A
      claimant may appeal a denial of his claim by requesting a review of the decision
      by the Benefits Administration Committee or a person designated by the
      Committee, which person will be a named fiduciary under Section 402(a) (2)
      of
      ERISA for purposes of this Article IX. An appeal must be submitted in writing
      within 60 days after the denial and must (i) request a review of the claim
      for
      benefits under the Plan; (ii) set forth all of the grounds upon which claimant's
      request for review is based and any facts in support thereof; and (iii) set
      forth any issues or comments which the claimant deems pertinent to the appeal.
      

    

    The
      Benefits Administration Committee or the named fiduciary designated by the
      Benefits Administration Committee will make a full and fair review of each
      appeal and any written materials submitted in connection with the appeal. The
      Benefits Administration Committee or the named fiduciary designated by the
      Benefits Administration Committee will act upon each appeal within 60 days
      after
      receipt thereof unless special circumstances require an extension of the time
      for processing, in which case a decision will be rendered as soon as possible
      but not later than 120 days after the appeal is received. The claimant will
      be
      given the opportunity to review pertinent documents or materials upon submission
      of a written request to the Benefits Administration Committee or named
      fiduciary, provided the Benefits Administration Committee or named fiduciary
      finds the requested documents or materials are pertinent to the appeal. On
      the
      basis of its review, the Benefits Administration Committee or named fiduciary
      will make an independent determination of the claimant's eligibility for
      benefits under the Plan. 

    

    The
      decision of the Benefits Administration Committee or named fiduciary on any
      claim for benefits will be final and conclusive upon all parties thereto. In
      the
      event the Benefits Administration Committee or named fiduciary denies an appeal
      in whole or in part, it will give written notice of the decision to the
      claimant, which notice will set forth in

     

    
      
        34

      

      
        
        

        
        

      

      
        
        

      

    

     

    a
      manner calculated to be understood by the claimant the specific reasons for
      such
      denial and which will make specific reference to the pertinent Plan provisions
      on which the decision was based.

    

    If
      the
      claimant’s claim or appeal is approved, any resulting payment of benefits will
      be made no later than the time prescribed for payment of benefits by Treasury
      Regulation section 1.409A-3(g), or its successor. 

    
      
        35

      

      
        
        

        
        

      

      
        
        

      

    

    

    APPENDIX
      I

    Participating
      Employers

    

    J.
      C.
      Penney Corporation, Inc.

    

    

    

    JCP
      Logistics L. P.

    (from
      and after February 1, 1999)

    

    JCP
      Media L. P.

    (from
      and after February 1, 1999)

    

    JCP
      Overseas Services, Inc.

    (from
      and after July 1, 1996)

    

    

    J.
      C.
      Penney Private Brands, Inc.

    (from
      and after January 1, 2000)

    

    JCP
      Procurement L. P.

    (from
      and after February 1, 1999)

    

    JCP
      Publications Corp.

    (formerly
      JCP Media Corporation)

    (from
      and after April 3, 1996)

    

    JCPenney
      Puerto Rico, Inc.

    

    JCP
      Receivables, Inc.

    

    

    The
      Original Arizona Jean Company 

    

    

    
      
        36

      

      
        
        

        
        

      

      
        
        

      

    

    APPENDIX
      II

    FORMER
      ELIGIBLE MANAGEMENT ASSOCIATES

    WHOSE
      BENEFITS HAVE BEEN ASSUMED BY

    THE
      SUPPLEMENTAL RETIREMENT PROGRAM FOR

    ELIGIBLE
      MANAGEMENT ASSOCIATES OF

    JCPENNEY
      FINANCIAL SERVICES

    

    

    John
      Camillo

    Yumin
      Chen

    Donald
      S. Creveling

    Stephen
      Duran

    David
      Foster

    Jerry
      R. Geyer

    Paul
      A.
      Heleski

    Robert
      Iorio

    Judy
      Johnston

    Deborah
      Litwak

    Karen
      A. Nelson

    Larry
      J. Tracey

    Robert
      Valliere

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        37

      

      
        
        

        
        

      

      
        
        

      

    

    APPENDIX
      III

    ELIGIBLE
      MANAGEMENT ASSOCIATES

    WHOSE
      NAMES ARE SET FORTH ON

    APPENDIX
      I TO THE

    SUPPLEMENTAL
      RETIREMENT PROGRAM FOR

    ELIGIBLE
      MANAGEMENT ASSOCIATES OF 

    JCPENNEY
      FINANCIAL SERVICES

    

    

    John
      Camillo

    Yumin
      Chen

    Donald
      S. Creveling

    John
      DiJoseph

    Stephen
      Duran

    David
      Foster

    Walter
      Gatewood

    Jerry
      R. Geyer

    Paul
      A.
      Heleski

    Robert
      Iorio

    Judy
      Johnston

    Deborah
      Litwak

    Thomas
      McGahey

    Deborah
      Megee

    Lynn
      Morris

    Karen
      A. Nelson

    Karen
      Newton

    Leslie
      Pierce

    Alvin
      Prudhomme

    Regina
      V. Rohner

     

     

    
      
        38

      

      
        
        

        
        

      

      
        
        

      

    

     

    Joseph
      Sartoris

    Sue
      E.
      Stewart

    George
      Suiter

    Mark
      Thornton

    Larry
      J. Tracey

    Robert
      Valliere

    R.
      Michael Williams

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        39

      

      
        
        

        
        

      

      
        
        

      

    

    APPENDIX
      IV

    THE
      SUPPLEMENTAL RETIREMENT PROGRAM FOR

    ELIGIBLE
      MANAGEMENT ASSOCIATES OFJ.C. PENNEY CORPORATION, INC.

    Effective
      as of October 3, 2004

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    

      

      

      
        
          40

        

        
          
          

          
          

        

        
          
          

        

      

      

      

      

      SUPPLEMENTAL
        RETIREMENT PROGRAM FOR

      

      MANAGEMENT
        PROFIT-SHARING ASSOCIATES OF

      

      J.
        C. PENNEY CORPORATION, INC.

      

      

      ADOPTED
        EFFECTIVE JANUARY 1, 1978

      

      AMENDED
        AND RESTATED EFFECTIVE AUGUST 1, 1995

      

      AS
        AMENDED THROUGH FEBRUARY 16, 2004

       

      
         

         

      

      
        	This
                document
                is the amended and restated Plan adopted by the Benefit Plans Review
                Committee (BPRC) on July 11, 1995 with an effective date of August
                1,
                1995, as amended on the following dates:
	 

                April
                  1, 1996
                  by Director of Personnel;

              	 
	
                April
                  10,
                  1996 by Board of Directors;

              	 
	
                April
                  10,
                  1996 by Benefit Plans Review Committee;

              	 
	
                June
                  28, 1996
                  by Personnel Committee;

              	 
	
                 

                July
                  9, 1997
                  by Benefit Plans Review Committee; 

              	 
	December
                30,
                1997 by Director of Personnel; 	 
	
                 

                March
                  18,
                  1998 by Director of Personnel;

              	 
	
                 

                January
                  13,
                  1999 by Board of Directors;

              	 
	July
                14, 1999
                by Board of Directors;	 
	
                 

                March
                  7, 2000
                  by Benefit Plans Review Committee;

              	 
	
                 

                February
                  6,
                  2001 by Human Resources Committee;

              	 
	March
                22,
                2001 by Human Resources and Compensation Committee; 	 
	June
                18, 2001
                by Director of Business Planning and Support;	 
	
                 

                January
                  27,
                  2002 by Chief Human Resources and Administrative Officer;
                  and

              	 
	June
                1, 2002
                by Director of Human Resources.	 
	
                 

                December
                  10,
                  2003 by Board of Directors

              	 
	
                 

                February
                  16,
                  2004 by Human Resources Committee

              	 

      

       

       

       

      
        
          1

        

        
          
          

          
          

        

        
          
          

        

      

       

      SUPPLEMENTAL
        RETIREMENT PROGRAM FOR

      MANAGEMENT
        PROFIT-SHARING ASSOCIATES OF

      J.
        C. PENNEY CORPORATION, INC.

      

      Adopted
        Effective January 1, 1978

      

      Amended
        and Restated Effective August 1, 1995

      

      As
        Amended Through December 10, 2003

      

      TABLE
        OF CONTENTS

       

      
        	Article	 	 	 Page
	 	 	 	 
	 ARTICLE I.	 	INTRODUCTION........................................................................................	4 
	 	 	 	 
	
                ARTICLE II.

              	 	DEFINITIONS............................................................................................	5
	 	 	 	 
	
                ARTICLE
                  III.

              	
              	PARTICIPATION.......................................................................................	15
	 	 	 	 
	ARTICLE
                IV.	 	BENEFITS..................................................................................................	16
	 	 	 	 
	
                (1)

              	 	At
                Early,
                Traditional, or Delayed Retirement
                Date................................	16
	
                (2)

              	 	
                Minimum
                  Benefit.......................................................................................

              	18
	
                (3)

              	 	Social
                Securitiy
                Make-up..........................................................................	20
	
                (4)

              	 	Death
                Benefit.............................................................................................	20
	
                (5)

              	 	Life
                Insurance
                Coverage...........................................................................	20
	
                (6)

              	 	Effect
                of
                Certain Payments made in December 1992..........................	21
	
                (7)

              	 	Special
                Rules
                for VERP Plan
                Participants.............................................	21
	
                (8)

              	 	Nonduplication of
                Benefits........................................................................	24
	
                
                  (9)

                

              	 	Benefits for Certain
                Former Financial Services Plan Participants......	24 
	 	 	 	 
	
                ARTICLE
                  V.

              	 	FORM
                AND
                COMMENCEMENT OF BENEFIT PAYMENTS..............	26 
	
                 

              	 	 	 
	
                (1)

              	 	Delayed
                Commencement of
                Benefits.....................................................	26
	
                (2)

              	
              	Optional
                Forms of Benefit
                Payment........................................................	26
	
                (3)

              	 	Small
                Annuities..........................................................................................	26
	 	 	 	 
	
                ARTICLE
                  VI.

              	 	ADMINISTRATION....................................................................................	28
	 	 	 	 
	
                ARTICLE
                  VII.

              	 	TYPE
                OF
                PLAN........................................................................................	29
	 	 	 	 
	
                ARTICLE
                  VIII.

              	
              	MISCELLANEOUS...................................................................................	30
	 	 	 	 
	
                (1)

              	 	Additional
                Credited Service and Other
                Adjustments............................	30
	
                (2)

              	 	Amendment and
                Termination...................................................................	31
	
                (3)

              	 	Rights of
                Associates.................................................................................	33
	
                (4)

              	 	Mistaken
                Information.................................................................................	33
	 	 	
                 

                 

                2

                 

              	 
	
                (5)

              	 	Liability........................................................................................................	33 
	
                (6)

              	 	Benefits for Reemployed
                Eligible Management Associates................	33 
	
                (7)

              	 	Construction...............................................................................................	34 
	
                 (8) 

              	 	Non-assignability
                of
                Benefits....................................................................	34 
	
                (9)

              	 	Governing
                Law...........................................................................................	34 
	
                (10)

              	 	Transferred
                Eligible Management
                Associates.......................................	34
	
                (11)

              	 	Change in Control
                Plan.............................................................................	35
	
                (12)

              	 	Separation Allowance
                Program...............................................................	37
	 	 	 	 
	ARTICLE IX.	 	CLAIMS
                PROCEDURES.........................................................................	39 
	 	 	 	 
	APPENDIX I 	 	.....................................................................................................................	41 
	 	 	 	 
	APPENDIX II 	 	.....................................................................................................................	42
	 	 	 	 
	APPENDIX III	 	.....................................................................................................................	43

      

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      

      
        
          3

        

        
          
          

          
          

        

        
          
          

        

      

      

      SUPPLEMENTAL
        RETIREMENT PROGRAM FOR

      MANAGEMENT
        PROFIT-SHARING ASSOCIATES OF

      J.
        C. PENNEY CORPORATION, INC.

      

      Adopted
        Effective January 1, 1978

      

      Amended
        and Restated Effective August 1, 1995

      

      As
        Amended Through December 10, 2003

      

      ARTICLE
        I.   INTRODUCTION

      

      The
        Supplemental Retirement Program for Management Profit--Sharing Associates
        of J.
        C. Penney Corporation, Inc. is a plan maintained primarily for the purpose
        of
        providing deferred compensation for a select group of management or highly
        compensated associates. This document amends and restates the Plan, originally
        adopted effective January 1, 1978, effective August 1, 1995. 

      

      With
        respect to any Eligible Management Associate who terminated employment prior
        to
        August 1, 1995, benefits payable to such Eligible Management Associates are
        determined pursuant to the terms and conditions of the Supplemental Retirement
        Program for Management Profit-Sharing Associates of J. C. Penney Company,
        Inc.
        in effect as of July 31, 1995.

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      
        
          4

        

        
          
          

          
          

        

        
          
          

        

      

      ARTICLE
        II.   DEFINITIONS

      

      For
        the
        purpose of this Plan the following terms shall have the following
        meanings:

      

      Associate:
        Any
        person who is employed by a Controlled Group Member if the relationship between
        a Controlled Group Member and such person would constitute the legal
        relationship of employer and employee, including an officer who may or may
        not
        be a director, but excluding a director serving only in that capacity, and
        excluding any employee of a Controlled Group Member substantially all the
        operations of which are outside the United States unless United States Social
        Security contributions are made on behalf of such employee.

      

      Average
        Final Compensation:
        The
        average annual Compensation of an Eligible Management Associate in respect
        of
        the three calendar years of his highest Compensation determined by taking
        into
        account (a) the Compensation attributable to the Eligible Management Associate's
        Credited Service in the calendar year in which occurs such Early Retirement
        Date, Traditional Retirement Date, or Delayed Retirement Date, as the case
        may
        be, and (b) the Compensation during either of the following, whichever is
        appropriate:

       

      

        (i) 
          the 9 full calendar years of Final Service immediately preceding the calendar
          year in which occurs the Eligible Management Associate's Early Retirement
          Date,
          Traditional Retirement Date, or Delayed Retirement Date, as the case may
          be;
          or

         

        
          (ii) 
            if such Eligible Management Associate has less than 9 full calendar years
            of
            Final Service, the entire number of full calendar years of such Final
            Service
            immediately preceding the calendar year in which occurs the Eligible
            Management
            Associate's Early Retirement Date, Traditional Retirement Date, or Delayed
            Retirement Date, as the case may be.

           

              If
            such
            Eligible Management Associate has less than three full calendar years
            of Final
            Service prior to the calendar year in which occurs his Early Retirement
            Date,
            Traditional Retirement Date, or Delayed Retirement Date, Average Final
            Compensation shall mean the aggregate Compensation earned with respect
            to the
            Eligible Management Associate's Final Service immediately preceding the
            calendar
            year in which occurs his Early Retirement Date, Traditional Retirement
            Date or
            Delayed Retirement Date, divided by the total number of full months of
            such
            Final Service, multiplied by 12.

        

      

      

      Benefit
        Commencement Date:
        The
        date upon which payment of a Pension Plan Participant's retirement benefit
        is
        scheduled to begin pursuant to the terms of the Pension Plan.

      

      Benefit
        Restoration Plan:
        Prior
        to January 27, 2002, the J. C. Penney Company, Inc. Benefit Restoration Plan,
        as
        amended from time to time, and on and 

       

      
        
          5

        

        
          
          

        

         

      

      after
        January 27, 2002, The J. C. Penney Corporation, Inc. Benefit Restoration
        Plan,
        as amended from time to time.

      

      Benefits
        Administration Committee:
        The
        committee appointed by the Human Resources Committee and authorized by Article
        VI to administer the Plan.

      

      Board
        of Directors:
        Board
        of Directors of the Parent Company.

      

      Code:
        The
        Internal Revenue Code of 1986, as amended from time to time. References to
        "regulations" are to regulations published by the Secretary of the Treasury
        under applicable provisions of the Code, unless otherwise expressly
        indicated.

      

      Company:
        Prior
        to January 27, 2002, J. C. Penney Company, Inc., a Delaware corporation,
        and on
        and after January 27, 2002, J. C. Penney Corporation, Inc., a Delaware
        corporation. The term "Company" will also include any successor employer,
        if the
        successor employer expressly agrees in writing as of the effective date of
        succession to continue the Plan.

      

      Company
        Account(s):
        The
        account(s) of that name and any successor account(s) and/or fund(s) established
        and maintained pursuant to the Savings and Profit-Sharing Retirement Plan
        prior
        to January 1, 1999, the Savings, Profit-Sharing and Stock Ownership Plan,
        and
        the Mirror Savings Plans in which are reflected all Company contributions
        allocated to an Eligible Management Associate together with all assets
        attributable thereto.

      

      Compensation:
        The
        total cash remuneration (including Profit Incentive Compensation, and whether
        received or deferred (i) Performance Unit Plan payments and (ii) EVA Performance
        Plan payments) paid to an Associate by the Company or a Participating Employer,
        or, for the purpose of determining Average Final Compensation only, by a
        Controlled Group Member, that qualifies as wages as defined in Code Section
        3401(a), determined without regard to any reduction for workers’ compensation
        and state disability insurance reimbursements, and all other compensation
        payments for which the Company or a Participating Employer or other Controlled
        Group Member is required to furnish the Associate a written statement under
        Code
        Sections 6041(d), 6051(a)(3) and 6052, reduced by the following
        items:

      

      (a)  all
        expatriate and foreign service allowances, including without limitation

      cost-of-living
        adjustments;

      

      (b)  tax
        gross-up payments;

      

      (c)  noncash
        prizes;

      

      (d)  income
        attributable to employer-provided group term life insurance;

      

      (e)  income
        recognized with respect to stock options and stock awards;

      

      (f)  tax
        equalizations payments;

      6

       

      (g)    
        Taxable and nontaxable relocation payments; 

       

      (h)  payments
        of deferred amounts under the EVA Performance Plan or any other nonqualified
        plan of deferred compensation; 

      

      (i)  special
        payments made to an Associate under the Performance Unit Plan or the EVA
        Performance Plan in the year of retirement or disability;

      

      (j)  severance
        pay, outplacement pay, and/or critical pay;

      

      (k)  third-party
        disability payments (State of New York);

      

      (l)  home
        sale bonus payments;

      

      (m)  mortgage
        interest assistance payments;

      

      (n)  senior
        management perquisites, tax preparation fees, and allowances for
        travel

               
        from Alaska and Hawaii;

      

      (o)  legal
        settlements constituting back pay or other wage payments;

      

      (p)  non-associate
        travel reimbursements;

      

      (q)  clothing
        allowance payments; and

      

      (r)     
        payments made pursuant to a non-compete agreement.

      

      In
        addition, Compensation includes any contributions made by a Participating
        Employer or other Controlled Group Member on behalf of an Associate pursuant
        to
        a deferral election under any employee benefit plan containing a cash or
        deferred arrangement under Code Section 401(k), and any amounts that would
        have
        been received as cash but for an election to receive benefits under a cafeteria
        plan meeting the requirements of Code Section 125, and amounts deferred by
        an
        Associate under the Deferred Compensation Plan and the Mirror Savings
        Plans.

      

      Each
        annual payment to an Associate (i) from the Performance Unit Plan, (ii) from
        the
        EVA Performance Plan, and (iii) of Profit Incentive Compensation shall be
        deemed
        to have been made in the calendar year immediately preceding the year in
        which
        payment was actually made.

      

      For
        all
        purposes under the Plan, the Benefits Administration Committee, in its
        discretion, may exclude additional items from “Compensation” under the
        Plan.

      

      An
        Associate who is in the service of the Armed Forces of the United States
        during
        any period in which his reemployment rights are guaranteed by law will be
        considered to have received the same rate of Compensation during his absence
        he
        was receiving immediately prior to his absence, provided he returns to
        employment with a Controlled Group Member within the time such rights are
        guaranteed.

       

      
        
          7

        

        
          
          

        

         

      

           Controlled
        Group:
        The
        Company and all other corporations, trades and businesses, the employees
        of
        which, together with employees of the Company, are required by the first
        sentence of subsection (b) , by subsection (c) , by subsection (m) , or by
        subsection (o) of Code section 414 to be treated as if they were employed
        by a
        single employer.

      

      Controlled
        Group Member:
        Each
        corporation or unincorporated trade or business that is or was a member of
        a
        Controlled Group, but only during such period as it is or was such a
        member.

      

      Credited
        Service:
        The
        years of credited service, up to a total maximum of 40 years, credited to
        an
        Eligible Management Associate (a) under the terms of the Pension Plan,
        determined without regard to any yearly limitation imposed by the terms of
        the
        Pension Plan (excluding any periods of Disability Service), and (b) under
        Paragraph (1) of Article VIII.

      

      Deferred
        Compensation Plan:
        J.
        C.
        Penney Company, Inc. 1995 Deferred Compensation Plan, as amended from time
        to
        time, as in existence prior to January 1, 1999 before being merged into the
        J.
        C. Penney Company, Inc. Mirror Savings Plan II effective January 1,
        1999.

      

      Deferred
        Performance Unit Plan:
        J.
        C.
        Penney Company, Inc. Deferred Compensation Plan originally effective February
        1,
        1985 and amended to prohibit further deferrals effective January 26,
        1991.

      

      Delayed
        Retirement Date:
        The
        first day of the month immediately following the date on which an Eligible
        Management Associate Separates from Service after having attained Traditional
        Retirement Age.

      

      Disability
        Service:
        The
        years of disability service credited to an Eligible Management Associate
        under
        the terms of the Pension Plan.

      

      Early
        Retirement Age:
        The
        first date on which an Eligible Management Associate has attained age 55
        and has
        completed at least 15 years of Service.

      

      Early
        Retirement Date:
        The
        first day of the month immediately following the date on which an Eligible
        Management Associate Separates from Service after having attained Early
        Retirement Age but before attainment of such Eligible Management Associate's
        Traditional Retirement Age.

      

      Eligible
        Management Associate:
        An
        Associate (excluding an Associate who retired from (i) a Participating Employer
        before January 1, 1978, (ii) J. C. Penney Life Insurance Company or J. C.
        Penney
        Casualty Insurance Company on or after January 1, 1990, or (iii) Thrift Drug,
        Inc. on or after April 1, 1991) classified under the Company's personnel
        policy
        as a management associate and who is participating in a Profit Incentive
        Compensation program or other profit sharing compensation program (other
        than
        the Savings and Profit-Sharing Retirement Plan or the Savings, Profit-Sharing
        and Stock Ownership Plan) of a Participating Employer on his Traditional
        Retirement Date or Early Retirement Date. Notwithstanding the preceding
        sentence, the Benefits 

       

      
        
          8

        

        
          
          

        

      

      Administration
        Committee reserves the right to waive, in its discretion, one or more of
        the
        requirements of this paragraph on a case by case basis for any Associate
        age 55
        who was participating in a Profit Incentive Compensation program on December
        31,
        1995.

      

      ERISA:
        Employee
        Retirement Income Security Act of 1974, as amended from time to
        time.

      

      Estimated
        Social Security Benefit:
        (1)
        For
        purposes of the benefit provided in Paragraph (3) of Article IV the monthly
        benefit the Eligible Management Associate would receive under the Social
        Security Act at age 62 based on the following assumptions:

      
         

        (i)    
          All compensation earned (a) prior to the later of 1951 or the year the
          Eligible
          Management Associate attains age 22 or (b) in the year in which the Eligible
          Management Associate Separates from Service if such separation occurs prior
          to
          the last day of the calendar year will be disregarded;

         

        (ii)  
          Earnings for the years prior to the Eligible Management Associate’s employment
          with the Participating Employer are in the same proportion to the Taxable
          Wage
          Base in effect for the prior years as that which the first full year of
          earnings
          bore to the Taxable Wage Base in existence at that time;

         

        (iii)  
          Earnings are averaged over a number of full calendar years as determined
          by the
          following:

      

       

       

      
        	
                 Year
                  of
                  Birth

              	 	
                Number
                  of Full

                Calendar
                  Years

              
	
                 1925

              	 	
                31

              
	
                 1926

              	 	
                32

              
	
                 1927

              	 	
                33

              
	
                 1928

              	 	
                34

              
	
                 After
                  1928

              	 	
                35

              

      

       

      
        
          If
            the
            Eligible Management Associate's total calendar years of earnings determined
            under clauses (i) and (ii) above exceed the number of full years of earnings
            that are to be averaged based on the year of such Eligible Management
            Associate's birth, one or more of the Eligible Management Associate's
            lowest
            years of earnings will be disregarded until his total years of earnings
            equals
            the number of full years of earnings that are to be averaged based on
            the year
            of such Eligible Management Associate's birth.

           

        

      

      
        (iv)        
          Social Security indexing factors used are those actually used by the Social
          Security Administration in determining the Eligible Management Associate's
          Social Security benefit, and if those factors are not available, the latest
          published factors will be used.

         

        
          
            9

          

          
            
            

          

           

        

      

      
        (2)         
          For Eligible Management Associates who reach Traditional Retirement Age
          on or
          prior to August 1, 2000, for purposes of clause (iii) of Subparagraph (b)
          of
          Paragraph (1) of Article IV the lesser of the benefit determined under
          (A) or
          (B) below:

      

       

      (A) The
        product of (a) multiplied by (b) with (a) being the monthly benefit the Eligible
        Management Associate would receive under the Social Security Act at age 62,
        or
        if retirement is later than age 62, the benefit payable at actual retirement,
        based on the following assumptions:

       

      
        (i) 
          The benefit is based solely on the compensation earned during the Eligible
          Management Associate’s calendar years of service and disregarding the Eligible
          Management Associate’s last calendar year of service if less than a full year
          and disregarding completely all other years;

         

        (ii)  
          Earnings are averaged over the number of years of actual credited service,
          as
          defined in the Pension Plan;

         

        (iii) 
          Social Security indexing factors used are those actually used by the Social
          Security Administration in determining the Eligible Management Associate’s
          social security benefit, and if those factors are not available, the latest
          published factors will be used;

      

       

      and 
(b)
        being a fraction, not exceeding one, the numerator of which is the Eligible
        Management Associate’s years of credited service, as defined by the Pension Plan
        and the denominator of which is 30.

       

      (B) The
        monthly benefit the Eligible Management Associate would receive under the
        Social
        Security Act at age 62, or if retirement is later than age 62, the benefit
        payable at actual retirement, based on the following assumptions:

       

      
        (i)    
          All compensation earned (a) prior to the later of 1951 or the year the
          Eligible
          Management Associate attains age 22 or (b) in the year in which the Eligible
          Management Associate Separates from Service if such separation occurs prior
          to
          the last day of the calendar year will be disregarded;

         

        (ii) 
          The
          Eligible Management Associate earned no compensation for calendar years
          before
          the Eligible Management Associate was employed by the Participating Employer,
          which years will be included in the calculation as years of zero
          earnings;

         

        (iii)  
          Earnings
          are averaged over a number of full calendar years as determined by the
          following:

      

       

      
        	
                 Year
                  of
                  Birth

              	 	 

                Number
                  of Full 

                Calendar
                  Years

              
	
                1925

              	 	
                31

              
	
                1926

              	 	
                32

              

      

    

    

    
      
        10

      

      
        
        

        
        

      

       

    

    
      	
              1927

            	 	
              33

            
	
              1928

            	 	
              34

            
	
              After
                1928

            	 	
              35

            

    

     

    If
      the
      Eligible Management Associate's total calendar years of earnings determined
      under clauses (i) and (ii) above exceed the number of full years of earnings
      that are to be averaged based on year of such Eligible Management Associate's
      birth, one or more of the Eligible Management Associate's lowest years of
      earnings will be disregarded until his total years of earnings equals the number
      of full years of earnings that are to be averaged based on the year of such
      Eligible Management Associate's birth.

     

    
      (iv)   
        Social Security indexing factors used are those actually used by the Social
        Security Administration in determining the Eligible Management Associate's
        Social Security benefit, and, if those factors are not available, the latest
        published factors will be used.

    

     

    For
      Eligible Management Associates who reach Traditional Retirement Age after August
      1, 2000, for purposes of clause (iii) of Subparagraph (b) of Paragraph (1)
      of
      Article IV, Estimated Social Security Benefit shall be determined under (B)
      above.

    

    EVA
      Performance Plan:
      The
      J.
      C. Penney Company, Inc. 1998 EVA Performance Plan, as amended from time to
      time.

    

    Final
      Service:
      An
      Eligible Management Associate's years of Credited Service plus, if he becomes
      an
      Associate of a Controlled Group member that is not a Participating Employer,
      the
      years of Service with such Controlled Group Member that are credited to the
      Associate after he ceases earning Credited Service. Calendar years that include
      a period of Disability Service will not be included in the determination of
      Final Service. Calendar years of Service or of Credited Service that are
      interrupted by a Separation from Service or by one or more years in which the
      Eligible Management Associate did not receive Compensation for the entire year
      will be considered to be consecutive for purposes of determining consecutive
      years of Final Service.

    

    Human
      Resources and Compensation Committee:
      The
      Human Resources and Compensation Committee of the Board of Directors of the
      Parent Company.

    

    Human
      Resources Committee:
      The
      Human Resources Committee of the Management Committee of the
      Company.

    

    Interest
      Income Account(s):
      The
      account(s) of that name and any successor account(s) and/or fund(s) established
      and maintained pursuant to the Savings and Profit-Sharing Retirement Plan and/or
      the Savings, Profit-Sharing and Stock Ownership Plan.

    

    Matched
      Deposits:
      An
      Eligible Management Associate’s deposits, not in excess of 6% of his
      compensation (as defined in the Savings and Profit-Sharing Retirement Plan,
      the
      Savings, Profit-Sharing and Stock Ownership Plan and the Mirror

     

     

     

     

     

     

     

    
      
        11

      

    

     

    Savings
      Plans), made pursuant to the Savings and Profit-Sharing Retirement Plan, the
      Savings, Profit-Sharing and Stock Ownership Plan, and the Mirror Savings
      Plans.

    

    Mirror
      Savings Plans:
      Prior
      to January 27, 2002, the J. C. Penney Company, Inc. Mirror Savings Plan I,
      the
      J. C. Penney Company, Inc. Mirror Savings Plan II, and the J. C. Penney Company,
      Inc. Mirror Savings Plan III, all as amended from time to time, and on and
      after
      January 27, 2002, the J. C. Penney Corporation, Inc. Mirror Savings Plan I,
      the
      J. C. Penney Corporation, Inc. Mirror Savings Plan II, and the J. C. Penney
      Corporation, Inc. Mirror Savings Plan III, all as amended from time to
      time.

    

    Parent
      Company:
      J. C.
      Penney Company, Inc., a Delaware corporation, and any successor
      corporation.

    

    Participating
      Employer:
      The
      Company and any other Controlled Group Member or organizational unit of the
      Company or of a Controlled Group Member which is designated as a Participating
      Employer under the Plan by the Human Resources Committee; provided, however,
      that if such designation would substantially increase the cost of the Plan
      to
      the Company, such designation shall be subject to the sole discretion of the
      Board of Directors.

    

    Penney
      Stock (Company) Account:
      The
      account(s) of that name and any successor account(s) and/or fund(s) established
      and maintained pursuant to the Savings and Profit-Sharing Retirement Plan and/or
      the Savings, Profit-Sharing and Stock Ownership Plan.

    

    Pension
      Plan:
      Prior
      to January 27, 2002, the J. C. Penney Company, Inc. Pension Plan, as amended
      from time to time, and on and after January 27, 2002, the J. C. Penney
      Corporation, Inc. Pension Plan, as amended from time to time.

    

    Pension
      Plan Participant:
      An
      Associate or former Associate who is treated as a participant under the Pension
      Plan.

    

    Performance
      Unit Plan:
      J.
      C.
      Penney Company, Inc. 1984 Performance Unit Plan, as amended from time to time,
      as in existence prior to February 1, 1998 when terminated effective January
      31,
      1998.

    

    Plan:
      Prior
      to January 27, 2002, the Supplemental Retirement Program for Management
      Profit-Sharing Associates of J. C. Penney Company, Inc., as amended from time
      to
      time, and on and after January 27, 2002, the Supplemental Retirement Program
      for
      Management Profit-Sharing Associates of J. C. Penney Corporation, Inc. as
      amended from time to time.

    

    Profit
      Incentive Compensation:
      The
      share of store profits to which an Associate is entitled as a store manager
      or
      as a member of a store's management staff; the management incentive compensation
      to which a management Associate is entitled; the regional or district incentive
      compensation to which a regional or district office Associate is entitled;
      and,
      if so determined by the Human Resources Committee, any other compensation based
      on profits (excluding any Company contributions to and benefits under the
      Savings and Profit-Sharing Retirement Plan and Savings, Profit-

     

     

     

     

    
      
        12

      

    

     

    Sharing
      and Stock Ownership Plan) to which an Associate of a Participating Employer,
      or,
      for the purpose of determining Average Final Compensation only, a Controlled
      Group Member who is not a Participating Employer, is entitled.

    

    Savings
      and Profit-Sharing Retirement Plan:
      J.
      C.
      Penney Company, Inc. Savings and Profit-Sharing Retirement Plan, as amended
      from
      time to time, as in existence prior to January 1, 1999 before being merged
      into
      the Savings, Profit-Sharing and Stock Ownership Plan effective January 1,
      1999.

    

    Savings,
      Profit-Sharing and Stock Ownership Plan:
      Prior
      to January 27, 2002, the J. C. Penney Company, Inc. Savings, Profit-Sharing
      and
      Stock Ownership Plan, as amended from time to time, and on and after January
      27,
      2002, the J. C. Penney Corporation, Inc. Savings, Profit-Sharing and Stock
      Ownership Plan, as amended from time to time.

    

    Separation
      from Service or Separates
      from Service:
      Termination
      of Service after having attained age 55 by reason of disability, discharge,
      retirement (including resignation), or death. Termination of Service due to
      a
      disability is deemed to occur upon the later of termination of the Eligible
      Management Associate's sick pay or at the end of any leave of absence granted
      the Eligible Management Associate.

    

    Service:
      The
      period of time credited to an Eligible Management Associate as service under
      the
      terms of the Pension Plan.

    

    Spouse:
      The
      individual to whom an Eligible Management Associate is legally married under
      the
      laws of the State (within the meaning of section 3(10) of ERISA) in which the
      Eligible Management Associate is domiciled, or if domiciled outside the United
      States, under the laws of the State of Texas.

    

    Tax
      Deferred Deposits:
      Deposits
      made under the Savings and Profit-Sharing Retirement Plan and/or the Savings,
      Profit-Sharing and Stock Ownership Plan which were subject to a cash or deferred
      election under Section 401(k) of the Code and designated as Tax Deferred
      Deposits pursuant to the terms of the Savings and Profit--Sharing Retirement
      Plan and/or the Savings, Profit-Sharing and Stock Ownership Plan.

    

    Taxed
      Deposits:
      An
      Eligible Management Associate's after-tax deposits made under the Savings and
      Profit-Sharing Retirement Plan and/or the Savings, Profit-Sharing and Stock
      Ownership Plan and designated as Taxed Deposits pursuant to the terms of the
      Savings and Profit-Sharing Retirement Plan and/or the Savings, Profit--Sharing
      and Stock Ownership Plan.

    

    Traditional
      Retirement Age:
      The
      date on which an Eligible Management Associate attains age 60.

    

    Traditional
      Retirement Date:
      The
      first day of the month immediately following the date an Eligible Management
      Associate attains Traditional Retirement Age if such Eligible Management
      Associate Separates from Service on such date.

    
      
        13

      

      
        
        

      

       

    

    Valuation
      Date:
      With
      respect to the Company Accounts, excluding the Penney Stock (Company) Account,
      each day of the calendar year. With respect to the Penney Stock (Company)
      Account(s), each day of a calendar year on which the New York Stock Exchange
      is
      open. If the New York Stock Exchange is closed, the Penney Stock (Company)
      Account(s) will have the same value as of the last immediately preceding day
      the
      Exchange was open.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    

    
      
        
          14

        

        
          
          

          
          

        

        
          
          

        

      

    

    

    ARTICLE
      III.   PARTICIPATION

    

    Each
      Eligible Management Associate shall participate in the Plan as of such Eligible
      Management Associate's Early Retirement Date, Traditional Retirement Date,
      or
      Delayed Retirement Date, as the case may be; provided, however, that such
      Eligible Management Associate who has a Separation from Service in the month
      of
      December shall commence participation in the Plan as of the last day of that
      December. Notwithstanding the preceding sentence, and except as otherwise
      provided in Paragraph (9) of Article IV, effective on and after January 1,
      1996,
      any Associate who, on December 31, 1995, was not classified as management or
      who
      was not in a Profit Incentive Compensation program shall not be considered
      an
      Eligible Management Associate and shall not participate in the Plan. In
      addition, effective as of the Closing (as such term is defined in Paragraph
      (9)
      of Article IV), the Eligible Management Associates whose names are set forth
      on
      Appendix II to the Plan shall cease to participate in the Plan and shall not
      be
      entitled to a benefit under any provision of the Plan. In the event an Eligible
      Management Associate whose name is set forth on Appendix II is employed after
      the Closing by the Company or any Controlled Group Member, such person will
      not
      thereafter be an Eligible Management Associate and will not participate in
      the
      Plan on or after the date of such employment.

     

     

     

     

     

     

     

    
 

     

     

     

     

     

     

    

    
      
        
          15

        

         

      

    

    ARTICLE
      IV.   BENEFITS

    

    (1) 
      At
      Early, Traditional, or Delayed Retirement Date:
      The
      annual amount of benefit payable from the Plan in monthly installments to an
      Eligible Management Associate commencing on such Eligible Management Associate's
      Early Retirement Date, Traditional Retirement Date, or Delayed Retirement Date,
      as the case may be, and terminating with the installment payable on the first
      day of the month in which such Eligible Management Associate dies, shall
      be:

    

    (a) the
      sum
      of

    
      (i)   
        3% of the Eligible Management Associate's Average Final Compensation multiplied
        by such Eligible Management Associate's Credited Service not in excess of
        10
        years;

    

    plus
      
      (ii)  
        1% of the Eligible Management Associate's Average Final Compensation multiplied
        by such Eligible Management Associate's Credited Service in excess of 10
        years
        but not in excess of 30 years;

    

    plus
      
      (iii) 
        1/2 of 1% of the Eligible Management Associate's Average Final Compensation
        multiplied by such Eligible Management Associate's Credited Service in excess
        of
        30 years but not in excess of 40 years;

    

    less
      
      (iv)  
        1/3 of 1% for each month by which the Eligible Management Associate's Early
        Retirement Date shall precede such Eligible Management Associate's Traditional
        Retirement Date multiplied by the Eligible Management Associate's Average
        Final
        Compensation;

    

    less

    

    (b) the
      sum
      of

    

    (i)    
      the
      single-life, no-death-benefit annuity equivalent of (a) the annual amount of
      pension payable pursuant to the Pension Plan (disregarding Disability Service)
      assuming that the Eligible Management Associate's Benefit Commencement Date
      is
      the first day of the month immediately following the date of such Eligible
      Management Associate's Separation from Service, (b) the annual amount payable
      pursuant to the terms of a domestic relations order qualified under Code
      Section 414(p),
      (A) from the Pension Plan and (B) from benefits accrued pursuant to Paragraph
      (1) of Article IV of the Benefit Restoration Plan and (c) the accrued benefit
      payable pursuant to Paragraph (1) of Article IV of the Benefit Restoration
      Plan;

    plus

    (ii)     
       the single-life, no-death-benefit annuity equivalent, as of the Valuation
      Date which is the next trading date of the New York Stock Exchange following
      the
      Eligible Management Associate’s Separation from Service, of

     

    
      (a)   
        the value of all assets allocated to the Eligible Management Associate in
        the
        Company Account(s) under the Savings, Profit-Sharing and Stock Ownership
        Plan,
        including such assets allocated to him under

      16

       

       

       

       

       

       

          the
        Savings
        and Profit-Sharing Retirement Plan prior to January 1, 1999; and

       

      (b)   
        the value of any additional assets which would have been allocated to the
        Eligible Management Associate’s Company Account(s) under the Savings and
        Profit-Sharing Retirement Plan, the Savings, Profit-Sharing and Stock Ownership
        Plan, and the Mirror Savings Plans, had such Eligible Management Associate
        made
        all further permissible Matched Deposits up to 6% of his compensation (as
        such
        term is defined in each said plan) under each said plan and had he not made
        any
        withdrawals of taxed Matched Deposits from the plans prior to January 1,
        1989;
        and

       

      (c)   
        the value of dividends attributable to units in his Company Account (within
        the
        meaning of the Savings, Profit-Sharing and Stock Ownership Plan) and distributed
        to the Eligible Management Associate pursuant to Section 9.04 of the Savings,
        Profit-Sharing and Stock Ownership Plan; and

    

    
       

      (d)      
        the value of any amounts payable pursuant to the terms of a domestic relations
        order qualified under Code Section 414(p) out of such Eligible Management
        Associate’s Company Account(s) from the Savings and Profit-Sharing Retirement
        Plan and the Savings, Profit-Sharing and Stock Ownership Plan; and

       

      (e)      
        the value of benefits payable to the Eligible Management Associate (or another
        person on behalf of the Eligible Management Associate from (A) his annual
        benefit limit make-up account pursuant to paragraph (2) of Article IV of
        the
        Benefit Restoration Plan prior to January 1, 1999, and (B) his Company Accounts
        under the Mirror Savings Plans;

      plus

    

    
      (iii)  
        50% (less 1/4 of 1% for each month by which the Eligible Management Associate's
        Early Retirement Date shall precede such Eligible Management Associate's
        Traditional Retirement Date) of the Eligible Management Associate's Estimated
        Social Security Benefit;

    

    plus

    
      (iv)  
        in the case of an Eligible Management Associate whose Credited Service is
        increased pursuant to Paragraph (1) of Article VIII, the amount of annual
        retirement benefit (or any commutations thereof or substitutions therefor)
        payable to an Eligible Management Associate from any other employer, but
        only to
        the extent determined by the Benefits Administration Committee, expressed
        in the
        form of a single-life, no-death-benefit annuity equivalent (as determined
        by the
        Benefits Administration Committee), commencing on such Eligible Management
        Associate's Separation from Service.

    

     

    In
      determining the amount referred to in clause (ii) of subparagraph (b) of this
      Paragraph (1) of this Article IV, it shall be deemed that:

    
      
        17

      

      
        
        

        
        

      

      
        
        

      

    

    
      (i)    
        an Eligible Management Associate who has not, at all times when he was eligible
        to participate in the Savings and Profit-Sharing Retirement Plan and the
        Savings, Profit-Sharing and Stock Ownership Plan and the Mirror Savings Plans,
        contributed an amount sufficient to share, to the maximum extent, in the
        Company
        contribution to such Plan or such predecessor plan has so contributed and
        that
        an Eligible Management Associate who did not share, to the maximum extent,
        in
        Company contributions for which he was eligible under the Savings and
        Profit-Sharing Retirement Plan due to any withdrawal of taxed Matched Deposits,
        be deemed not to have any such withdrawal;

       

      (ii)   
        the share of any such Company contribution deemed to have been credited to
        an
        Eligible Management Associate pursuant to this Paragraph for plan years ending
        before January 1, 1989 shall be deemed to have experienced the same rate
        of
        dividends, earnings, and change in value as the actual rate of dividends,
        earnings, and change in value experienced by the Penney Stock (Company) Account
        under the Savings and Profit-Sharing Retirement Plan from the time such share
        of
        a Company contribution is deemed to have been credited for said plan years
        and
        that the value of this said amount as of December 31, 1988 under the Savings
        and
        Profit-Sharing Retirement Plan, plus the share of any such Company contribution
        deemed to have been credited to an Eligible Management Associate pursuant
        to
        this Paragraph for plan years beginning after December 31, 1988 shall be
        deemed
        to have experienced the same rate of earnings and change in value experienced
        by
        the Interest Income Account under the Savings, Profit-Sharing and Stock
        Ownership Plan from the time such share of a Company contribution is deemed
        to
        have been credited for said plan years;

       

      (iii)  
        the
        value of the amount of the Company Account(s) and annual limit make-up account
        paid out pursuant to a domestic relations order qualified under Section 414(p)
        of the Code deemed to have been credited to an Eligible Management Associate
        pursuant to this Paragraph shall be deemed to have experienced the same rate
        of
        earnings and change in value experienced by the Interest Income Account under
        the Savings, Profit-Sharing and Stock Ownership Plan from the time such amount
        is deemed to have been credited; and

       

      (iv)  
        the rates used to determine the single-life, no-death-benefit annuity equivalent
        shall be the rates that the Benefits Administration Committee, in its
        discretion, shall determine.

    

     

    (2)
      Minimum
      Benefit:
      In
      no
      event will the amount payable to an Eligible Management Associate under
      Paragraph (1) of this Article IV at such Eligible Management Associate's
      Traditional Retirement Date or Delayed Retirement Date, as the case may be,
      be
      less than the difference between:

    
       

      (A)  
        the amount of pension payable pursuant to the early retirement pension benefit
        provision of the Pension Plan (determined without regard to any 

       

       

       

       

       

       

       

      18

       

       

       

    

    compensation
      or benefit limits
      imposed by the Code) that would be applicable if the Eligible Management
      Associate elected to receive benefits pursuant to that provision prior to such
      Eligible Management Associate's normal retirement date, as defined in the
      Pension Plan (disregarding Disability Service, if any, and including as Credited
      Service any increase granted under Article VIII hereof) assuming the Eligible
      Management Associate's Benefit Commencement Date is the first day of the month
      immediately following the day of such Eligible Management Associate's Separation
      from Service under this Plan, and 

     

    (B)  
      the amount of pension payable pursuant to the early retirement pension benefit
      provision of the Pension Plan (determined without regard to any compensation
      or
      benefit limits imposed by the Code) that would be applicable if the Eligible
      Management Associate did not elect to receive benefits pursuant to that
      provision prior to the Eligible Management Associate's normal retirement date,
      as defined in the Pension Plan (disregarding Disability Service, if any, and
      including as Credited Service any increase granted under Article VIII
      hereof).

     

    In
      no
      event will the amount payable under Paragraph (1) of this Article IV to an
      Eligible Management Associate who: 

     

    (a)      
      Separates from Service on his Early Retirement Date within one year prior to
      his
      Traditional Retirement Date and who is granted additional Credited Service
      pursuant to Paragraph (1) of Article VIII at his Early Retirement Date,
      or

     

    (b)     
      Separates from Service because of a reduction in force and is designated as
      an
      individual termination by the Director of Personnel in accordance with Paragraph
      (1) of Article VIII and who is granted deemed additional months
      of Credited Service thereunder be less than the difference between

     

    (A) the
      amount of pension that would be payable (determined without regard to any
      compensation or benefit limits imposed by the Code) at such Eligible Management
      Associate's normal retirement date, as defined by the Pension Plan (disregarding
      Disability Service, if any, and including as Credited Service, as defined by
      the
      Pension Plan, any increase granted under Article VIII hereof), and 

    

    (B)  the
      amount of pension payable pursuant to the early retirement pension benefit
      provision of the Pension Plan (determined without regard to any compensation
      or
      benefit limits imposed by the Code) that would be applicable if the Eligible
      Management Associate elected to receive benefits pursuant to that provision
      prior to such Eligible Management Associate's normal retirement date, as defined
      by the Pension Plan (disregarding Disability Service, if any, and excluding
      as
      Credited Service any increase granted under Article VIII hereof) assuming the
      Eligible Management Associate's Benefit Commencement Date is the first day
      of
      the month 

     

     

     

     

     

     

     

     

     

     

    19

     

     

     

     

     

     

    following
      such associate's
      Separation from Service, but in no event prior to the date such associate
      reaches age 59.

     

    
      (3)
        Social
        Security Make-up:In
        addition to any other benefit payable under this Plan, an annual benefit
        equal
        to the Estimated Social Security Benefit shall be payable in monthly
        installments to an Eligible Management Associate commencing on such Eligible
        Management Associate's Traditional Retirement Date or Delayed Retirement
        Date up
        to age 62, as the case may be, (or, for an Eligible Management Associate
        who
        Separates from Service within one year prior to his Traditional Retirement
        Date
        and who is granted any adjustment pursuant to either clause (i) or (ii) of
        Paragraph (1) of Article VIII, on his Early Retirement Date) and terminating
        with the installment payable on the first day of the month in which such
        Eligible Management Associate dies or with the installment payable on the
        first
        day of the month prior to the month in which the Eligible Management Associate
        first becomes eligible for the primary old age benefit payable under the
        United
        States Social Security laws by reason of disability or attainment of age
        62,
        whichever comes first. 

    

    

    An
      Eligible Management Associate, who, on his Separation from Service, is entitled
      to disability benefits under the United States Social Security laws, shall
      not
      be eligible for any Social Security make-up benefits provided for in this
      paragraph.

    

    (4)
      Death
      Benefit:
      If
      an
      Eligible Management Associate has elected a form of payment with a guaranteed
      number of payments and the Eligible Management Associate dies before receiving
      all benefits payable under that option, remaining payments will be made to
      the
      person designated by the Eligible Management Associate as his beneficiary at
      the
      time the form of payment was selected. 

    

    If
      an
      Eligible Management Associate is married at the time such Eligible Management
      Associate Separates from Service by reason of death after attaining Early
      Retirement Age, or if an Eligible Management Associate who has Separated from
      Service after attaining Early Retirement Age and who is married at the time
      of
      his death, dies before payment has begun under the Plan, such Eligible
      Management Associate's Spouse will receive the benefit that would have been
      payable if the Eligible Management Associate had a Separation from Service
      immediately prior to such Eligible Management Associate's death (if he was
      an
      active Associate on the date of his death), and had begun to receive benefits
      immediately prior to his death in the form of a 100% (75% if death occurs prior
      to January 1, 1996) joint and survivor annuity without payment certain with
      the
      Spouse as the beneficiary.

    

    (5)
      Life
      Insurance Coverage:
      Commencing
      on an Eligible Management Associate's Traditional Retirement Date or Delayed
      Retirement Date, as the case may be, and ending on such Eligible Management
      Associate's attainment of age 70, the Company will continue to provide an
      Eligible Management Associate who has at least 10 years of uninterrupted
      employment with a Participating Employer with term life insurance coverage
      at
      Company expense on a decreasing coverage basis. 

    

    The
      amount of coverage to be provided into retirement shall be equal, at such
      Eligible Management Associate's Traditional Retirement Date, to 100% of the
      amount of coverage being provided to him at Company expense immediately prior
      to

     

     

     

     

     

     

    20

     

    the
      attainment of his Traditional Retirement Age reduced to 90%, 80%, 70%, 60%,
      50%,
      40%, 30%, 20%, and 10% of such amount of coverage on the first day of the month
      following his attainment of age 61, 62, 63, 64, 65, 66, 67, 68, and 69,
      respectively. 

    

    The
      amount of coverage to be provided at a Delayed Retirement Date shall be the
      applicable percentage based upon the Eligible Management Associate's age on
      such
      Delayed Retirement Date multiplied by the amount of coverage being provided
      to
      him at Company expense immediately prior to his Delayed Retirement Date and
      decreasing thereafter as provided in the preceding sentence. 

    

    If,
      on
      the Eligible Management Associate's Traditional Retirement Date or Delayed
      Retirement Date, as the case may be, such Eligible Management Associate is
      already covered by term life insurance under the Company's term life insurance
      plan on account of the Eligible Management Associate's total disability, such
      Eligible Management Associate shall not be eligible for any term life insurance
      coverage provided for in this paragraph. Benefits payable under this Plan will
      be paid to the beneficiary designated by the Eligible Management Associate
      as
      soon as practicable after receipt of a properly submitted claim.

    

    A
      Participant whose group term life insurance coverage under the Plan terminates
      because of his attainment of age 70 will have the right to convert his group
      term life insurance coverage to an individual policy to the extent, and only
      to
      the extent, permitted under the group policy applicable to the Participant.
      Any
      election to convert to individual coverage must be made within 31 days after
      the
      Participant's coverage under the Plan terminates and must be made in accordance
      with all requirements specified in such policy. The amount of coverage that
      may
      be converted shall be the amount in effect immediately before the Participant
      attained age 70.

    

    (6)
      Effect
      of Certain Payments made in December 1992:
      In
      the
      event the Company, in its discretion, made payments to a current or former
      Eligible Management Associate on or before December 31, 1992 under the Company's
      Profit Incentive Compensation program and under the Performance Unit Plan and
      such payments were attributable to the Company's fiscal year ending on January
      30, 1993, this Paragraph shall apply. The effect of such payments on the
      benefits payable to such individual under the Pension Plan and under the
      Savings, Profit-Sharing and Stock Ownership Plan shall be determined with
      respect to whether an increase or decrease in benefits resulted. Benefits
      payable under this Plan to such current or former Eligible Management Associate
      shall be adjusted (a) to offset any such increase in benefits and/or (b) to
      restore any such decrease in benefits so that no advantage or detriment, as
      the
      case may be, shall be experienced by any such current or former Eligible
      Management Associate with respect to total retirement benefits under the
      above-referenced Plans and this Plan.

    

    (7)
      Special
      Rules for VERP Plan Participants:
      The
      following special rules shall apply as applicable to an Eligible Management
      Associate who is a participant in the J. C. Penney Company, Inc. Voluntary
      Early
      Retirement Plan ("VERP Plan") or who is eligible for benefits under Section
      4.17(a) of the Pension Plan. Effective January 27, 2002, the name of the VERP
      Plan was changed to the J. C. Penney Corporation, Inc. Voluntary Early
      Retirement Plan.

     

     

     

     

    

    
      
        21

      

    

     

     

    (a)
      If
      the Eligible Management Associate has attained at least age 55 but not age
      60 as
      of April 30, 1998 and has compensation as determined under Section 4.17(d)
      the
      Pension Plan for the 1997 calendar year in excess of $80,000 but not more than
      $87,000, he shall be entitled to receive a benefit in lieu of the Minimum
      Benefit described in Paragraph (2) of Article IV equal to (i) minus (ii)
      below:

     

    (i)   
      The annual enhanced normal retirement benefit that
      would have been payable to the Eligible Management Associate from the Pension
      Plan pursuant to Section 4.17(b) of the Pension Plan but for the restrictions
      and limitations of said Section 4.17(b), calculated as
      follows:

     

    (A) For
      purposes of determining the Eligible Management Associate's normal retirement
      benefit and supplemental retirement benefit that would have been payable under
      the Pension Plan pursuant to Sections 4.1(b) and 4.1(e), 4.2(b) and 4.2(e),
      4.3(b) and 4.3(e), or Section 4.3A(b) and 4.3A(e), three additional years of
      Credited Service, up to a maximum of 35 such years, will be added to his
      Credited Service determined as if he had Separated from Service on December
      31,
      1997; and such retirement benefit will be unreduced for early commencement
      of
      benefits. In no event will more than 10 years of Credited Service be taken
      into
      account for purposes of determining his enhanced supplemental retirement
      benefit.

    

    (B) The
      Eligible Management Associate's minimum and protected retirement benefits
      determined under the Pension Plan pursuant to Sections 4.1(c), 4.2(c), 4.3(c),
      4.3A(c), and 4.4; his supplemental retirement benefit calculated under Sections
      4.1(e), 4.2(e), 4.3(e) or 4.3A(e), which is to be added to his minimum benefit;
      and his Recalculated Pension Benefit (as defined in the Pension Plan) under
      Section 4.15 will be calculated without regard to the provisions of this
      subparagraph (i), and the applicable early retirement factors set forth in
      Section 4.5 of the Pension Plan will be applied.

    

    (C)
      The
      Participant's enhanced retirement benefit will be the greater of the benefit
      calculated under clause (A) or the benefit under clause (B).

     

    (ii)   
      The annual enhanced normal retirement benefit actually payable to the Eligible
      Management Associate pursuant to Section 4.17(c) of the Pension Plan subject
      to
      the applicable early retirement factors set forth in Section 4.5 of the Pension
      Plan, calculated as follows:

     

    (A) For
      purposes of determining the Eligible Management Associate's normal retirement
      benefit and supplemental retirement benefit under the Pension Plan pursuant
      to
      Sections 4.1(b) and 4.1(e), 4.2(b) and 4.2(e), 4.3(b) and 4.3(e), or Section
      4.3A(b) and 4.3A(e), three additional years of Credited Service, up to a maximum
      of 35 such years, will be added to his Credited Service determined as if the
      Participant had Separated from Service on December 31, 1997; five years will
      be
      added to his age as of April 30, 1998; and the applicable early retirement
      factors set forth in 

     

     

     

     

     

     

    
      
        22

      

    

     

    Section
      4.5 of the Pension Plan will be applied based on his enhanced age. In no event
      will more than 10 years of Credited Service be taken into account for purposes
      of determining his enhanced supplemental retirement benefit.

    

    (B)
       The
      Eligible Management Associate's minimum and protected retirement benefits
      determined under the Pension Plan pursuant to Sections 4.1(c), 4.2(c), 4.3(c),
      4.3A(c), and 4.4; his supplemental retirement benefit calculated under Sections
      4.1(e), 4.2(e), 4.3(e) or 4.3A(e), which is to be added to his minimum benefit;
      and his Recalculated Pension Benefit (as defined in the Pension Plan) under
      Section 4.15 will be calculated without regard to the provisions of this
      subparagraph (ii), and the applicable early retirement factors set forth in
      Section 4.5 of the Pension Plan will be applied.

    

    (C) The
      Participant's enhanced retirement benefit will be the greater of the benefit
      calculated under clause (A) or the benefit under clause (B).

    

    (b) If
      the
      Eligible Management Associate has attained at least age 60 but not age 65 as
      of
      April 30, 1998 and has compensation as determined under the Pension Plan for
      the
      1997 calendar year of $87,000 or less, to avoid duplication of benefits
      otherwise payable from the Plan and the Pension Plan,

     

    (i)
       the
      Minimum Benefit described in Paragraph (2) of Article IV shall be offset by
      the
      enhanced retirement benefit paid to such Eligible Management Associate pursuant
      to Section 4.17(b) of the Pension Plan calculated as described in paragraph
      (7)(a)(i)(A), (B) and (C) above, and 

     

    (ii)
      if
      the
      monthly Social Security Make-up benefit described in Paragraph (3) of Article
      IV
      is payable to such Eligible Management Associate, the benefit shall be paid
      by
      the Plan only in the amount that exceeds the $1,000 per month social security
      supplement paid to such Eligible Management Associate pursuant to Section
      4.17(f) of the Pension Plan.

     

    (c)
      An
      Eligible Management Associate who as of his Separation from Service has attained
      at least age 60 but has not attained age 62 shall not receive the Social
      Security Make-up benefit described in paragraph (3) of Article IV of the Plan
      if
      he elected to receive the lump sum payment described in subparagraph (b) of
      Section 3.02 of the VERP Plan.

    

    (d)
      Benefits payable from the Plan pursuant to this paragraph (7) shall be subject
      to the provisions of paragraph (2) of Article V regarding optional forms of
      benefit payments based on the ages of the Eligible Management Associate and
      his
      Spouse on December 1, 1997.

    

    (e)
      An
      Eligible Management Associate shall be entitled to life insurance coverage
      under
      paragraph (5) of Article IV effective on the first day of the month following
      his Separation from Service by reason of retirement. The amount of such coverage
      shall be equal to 100% of the amount being provided to him at Company expense
      immediately

     

     

     

     

     

     

     

     

    
      
        23

      

    

     

    prior
      to his Separation from Service by reason of retirement. Said amount shall be
      reduced in accordance with paragraph (5) of Article IV starting with the first
      day of the month following his attainment of age 61.

    

    (f)
      In
      the event an Eligible Management Associate is reemployed
      by the Company or a Participating Employer and again participates in the Plan,
      benefits payable under the formula described in Paragraph (1) of Article IV,
      if
      any, shall be reduced by the benefits to which the Eligible Management Associate
      is entitled under the VERP Plan. Benefits payable under the Minimum Benefit
      described in Paragraph (2) of Article IV or the benefit described in
      subparagraph (a) above, whichever is applicable, if any, based on the Credited
      Service attributable to his  reemployment,
      shall be based on his actual age as of his retirement date subsequent to his
      reemployment date.

    

    (g)
      [Deleted] 

    

    (h)
      Notwithstanding any other provision of the Plan, an Eligible Management
      Associate (excluding Officers of the Company) who is entitled to receive a
      benefit under the Plan pursuant to the formula described in Paragraph (1) of
      Article IV and who retires as part of the Voluntary Early Retirement Program
      announced in 1997 shall receive the greater of:

    

    (i) 
The
      amount payable under the Plan pursuant to Paragraph (1) of Article IV as of
      his
      Early Retirement Date, Traditional Retirement Date, or Delayed Retirement Date,
      as the case may be (the “Plan Benefit”), or 

     

    (ii)  
The
      amount derived by subtracting the aggregate benefit payable to the Associate
      from the Pension Plan and, if applicable, the Benefit Restoration Plan from
      the
      benefit communicated to the Associate in the personalized VERP communication
      materials as the aggregate benefit earned as of January 1, 1998, from the Plan,
      the Pension Plan and, if applicable, the Benefit Restoration
      Plan.

     

    (8)
      Nonduplication
      of Benefits: The
      benefits payable to or on behalf of an Eligible Management Associate under
      the
      Plan shall not duplicate benefits payable from the Pension Plan, the VERP Plan,
      the Benefit Restoration Plan, the Mirror Savings Plans, or any separation pay
      program of the Company or a Participating Employer or a Controlled Group Member.
      To the extent that any benefits otherwise payable under the Plan are paid from
      one or more of the plans or programs described in the prior sentence, such
      benefits under the Plan shall be cancelled.

    

    (9)
      Benefits
      for Certain Former Financial Services Plan Participants:
      The
      provisions of this Paragraph (9) will become effective on the close of the
      transactions (“Closing”) contemplated by that certain Stock Purchase Agreement
      among Commonwealth General Corporation, J. C. Penney Company, Inc. and J. C.
      Penney Direct Marketing Services, Inc. dated as of March 7, 2001, provided
      that
      the Closing occurs on or before September 30, 2001.

    

    The
      Plan hereby assumes the accrued retirement income benefit obligation under
      the
      Supplemental Retirement Program for Eligible Management Associates of

     

     

     

    
      24

       

       

       

       

       

       

       

    

    JCPenney
      Financial Services (the “Financial Services Plan”) for each former Associate who
      (i) retired or separated from service prior to the Closing with a right to
      a
      retirement income benefit under the Financial Services Plan and who had not
      begun to receive retirement income benefits from the Financial Services Plan
      as
      of the Closing and (ii) whose name is not set forth on Appendix I to the
      Financial Services Plan, which Appendix is reproduced and attached as Appendix
      III to the Plan. Each such former Associate will be entitled to a retirement
      income benefit under this Plan in the amount of such former Associate’s
      Financial Services Plan accrued retirement income benefit and payable in the
      same form and at the same time as such Financial Services Plan accrued
      retirement income benefit would have been paid. In addition, the Plan hereby
      assumes the obligation of the Financial Services Plan to make continued monthly
      retirement income benefit payments to each former Associate who retired prior
      to
      the Closing and had begun to receive retirement income benefits from the
      Financial Services Plan as of the Closing in the same amount, the same form
      and
      at the same time as such former Associate’s Financial Services Plan retirement
      income benefit was being paid.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    

    
      
        
          25

        

        
          
          

          
          

        

         

      

    

     

    ARTICLE
      V.   FORM AND COMMENCEMENT OF BENEFIT PAYMENTS

    

    (1)
      Delayed
      Commencement of Benefits:
      An
      Eligible Management Associate may elect that the commencement of his annual
      benefit payable under Paragraph (1) or (2) of Article IV be delayed to the
      first
      day of any month following his Early Retirement Date, Traditional Retirement
      Date, or Delayed Retirement Date, as the case may be (but not beyond the first
      day of the month in which he attains age 70). In such a case, the amount of
      annual benefit payable under Paragraph (1) or (2) of Article IV shall be
      increased by 1/2 of 1% for each month that the commencement of such benefits
      is
      delayed.

    

    (2)
      Optional
      Forms of Benefit Payment:
      Except
      as otherwise provided in this Plan and subject to such rules and regulations
      as
      the Benefits Administration Committee may establish from time to time with
      respect to time and manner of election, an Eligible Management Associate may
      elect, prior to the commencement of his annual benefit payable under Paragraph
      (1) or (2) of Article IV, to receive a benefit of equivalent actuarial value
      (applying factors utilized in the Pension Plan) to such benefit, which may
      be
      one of the forms of benefit options described in the Pension Plan. The Benefits
      Administration Committee has full authority to revise the forms of benefit
      options available under this Plan.

    

    (3)
      Small
      Annuities:
      If
      the
      total benefit payable to an Eligible Management Associate under Paragraph (1)
      or
      (2) of Article IV would not provide monthly payments exceeding $100, the benefit
      shall be converted into an actuarially equivalent lump sum payment (applying
      the
      actuarial factors utilized in the Pension Plan). If an Eligible Management
      Associate who has begun to receive payments under the Plan and who has elected
      a
      form of payment with a guaranteed number of payments dies, and if the monthly
      benefit that becomes payable to the beneficiaries of the Eligible Management
      Associate does not exceed $100 per beneficiary, the monthly benefit shall be
      converted into an actuarially equivalent lump sum payment (applying the
      actuarial factors utilized in the Pension Plan).

    

    (4) Installments:
      Notwithstanding
      any other provisions of the Plan to the contrary, a retired Participant who
      on a
      date to be determined by the Benefits Administration Committee is receiving
      benefits from the Plan, or is eligible to receive benefits from the Plan, may
      make a one-time irrevocable election that his remaining unpaid benefits from
      the
      Plan be paid as 5 equal annual installments. The election must be made during
      an
      election period and in a manner authorized by the Benefits Administration
      Committee or its delegate. The total of such payments shall be actuarially
      equivalent to his remaining unpaid benefits determined by applying the actuarial
      factors utilized in the Pension Plan for lump sum payments except that the
      interest rate shall be determined by the Human Resources and Compensation
      Committee. Payment dates shall be determined by the Benefits Administration
      Committee or its delegate. 

    

    Notwithstanding
      any other provisions of the Plan to the contrary (except for small annuities
      payable under Paragraph (3) of Article V), an Eligible Management
      Associate

     

    
      
        26

      

      
        
        

      

    

      
      who on a date to be determined by the Benefits Administration Committee has
      not
      had a Separation from Service may make an irrevocable election that his benefits
      from the Plan be paid as 5 equal annual installments. The election, which shall
      be made in a manner authorized by the Benefits Administration
      Committee or its delegate, must be made prior to his Separation from Service.
      If
      an Eligible Management Associate makes an installment election, the first annual
      installment will be made as of the first day of the month immediately following
      the latest to occur of (i) the Eligible Management Associate’s Separation from
      Service, (ii) six full months following the date of the Eligible Management
      Associate’s election, if the election is made in a calendar year prior to the
      calendar year of his Separation from Service, or (iii) 12 full months following
      the date of his election, if the election is made in the calendar year of his
      Separation from Service. The total of such payments shall be actuarially
      equivalent to his benefits under Paragraph (1) or (2) and Paragraphs (3) and
      (9)
      of Article IV, whichever is applicable, determined by applying the actuarial
      factors utilized in the Pension Plan for lump sum payments except that the
      interest rate shall be determined by the Human Resources and Compensation
      Committee. Payment dates shall be determined by the Benefits Administration
      Committee or its delegate. Paragraph (1) of this Article V shall not apply
      to an
      election to receive 5 annual installments.

     

    In
      the
      event of the death of the retired or active Eligible Management Associate after
      his election is made and before all installments have been paid, the remaining
      unpaid installments shall be paid to his beneficiary in accordance with the
      payment schedule of the Eligible Management Associate except that the first
      remaining installment shall be paid as soon as administratively feasible after
      satisfactory proof of death is received by the Benefits Administration Committee
      or its delegate, if later.

    

    

    
      
        
          27

        

        
          
          

          
          

        

        
          
          

        

      

    

    

    

    

    ARTICLE
      VI.   ADMINISTRATION

    

    The
      Benefits Administration Committee will administer the Plan and will have the
      full authority and discretion to accomplish that purpose, including without
      limitation, the authority and discretion to: 

     

    (i)    
      interpret
      the Plan and correct any defect, supply any omission or reconcile any
      inconsistency or ambiguity in the Plan in the manner and to the extent that
      the
      Benefits Administration Committee deems desirable to carry on the purpose of
      the
      Plan; 

     

    (ii)   
       resolve
      all questions relating to the eligibility of Associates to become Eligible
      Management Associates and the eligibility of Eligible Management Associates
      to
      participate in the Plan;

     

    (iii)  
      determine
      the amount of benefits payable to Eligible Management Associates and authorize
      and direct the Company with respect to the payment of benefits under the Plan;
      

     

    (iv)  
      make
      all other determinations and resolve all questions of fact necessary or
      advisable for the administration of the Plan; and

     

    (v)    
      make,
      amend, and rescind such rules as it deems necessary for the proper
      administration of the Plan. 

     

    The
      Benefits Administration Committee will keep a written record of its action
      and
      proceedings regarding the Plan and all dates, records, and documents relating
      to
      its administration of the Plan.

    

    Any
      action taken or determination made by the Benefits Administration Committee
      will
      be conclusive on all parties. No member of the Benefits Administration Committee
      will vote on any matter relating specifically to such member. In the event
      that
      a majority of the members of the Benefits Administration Committee will be
      specifically affected by any action proposed to be taken (as opposed to being
      affected in the same manner as each other Eligible Management Associate in
      the
      Plan), such action will be taken by the Human Resources Committee.

    

    
      
        
          28

        

        
          
          

          
          

        

        
          
          

        

      

    

    

    ARTICLE
      VII.   TYPE OF PLAN

    

    The
      Plan is a plan which is unfunded. The Plan is maintained by the Company
      primarily for the purpose of providing deferred compensation for a select group
      of management or highly compensated employees. The Plan shall be construed
      according to the provisions of ERISA applicable to such plans. Benefits under
      the Plan (other than the life insurance benefits referred to in Paragraph (5)
      of
      Article IV which may be insured) are paid from the general assets of the
      Company. 

    

    In
      the
      event that it should subsequently be determined by statute or by regulation
      or
      ruling that the Plan is not “a plan which is unfunded and is maintained
      primarily for the purpose of providing deferred compensation for a select group
      of management or highly compensated employees" within the meaning of sections
      201(2), 301(a)(3), 401(a)(1), and 4021(b)(6) of ERISA and section 2520.104-24
      of
      Chapter 29 of the Code of Federal Regulations, participation in the Plan shall
      be restricted by the Benefits Administration Committee to the extent necessary
      to assure that it will be such a plan within the meaning of such
      sections.

    

    
      
        
          29

        

        
          
          

          
          

        

        
          
          

        

      

    

    

    ARTICLE
      VIII.  MISCELLANEOUS

    

    (1)
      Additional
      Credited Service and Other Adiustments:
      For
      all
      purposes of the Plan, the Credited Service of an Eligible Management Associate
      may be increased, and with respect to an Eligible Management Associate whose
      Early Retirement Date is within one year prior to his Traditional Retirement
      Date, (i) the percentage reduction on account of early retirement referred
      to in
      clause (iv) of Subparagraph (a) of Paragraph (1) of Article IV may be decreased
      or waived, and (ii) the entitlement to and the amount of benefits or coverage
      referred to in Paragraphs (2), (3), and (5) of Article IV may be accelerated
      or
      increased, as the case may be, in the discretion of:

    

    (a) in
      the
      case of an Eligible Management Associate other than members of the Company’s
      executive or senior management committee (or a successor committee then in
      place) described in Subparagraphs (b) and (c) of this Paragraph (1), the
      Chairman of the Board or the Chief Human Resources Officer;

    

    (b) in
      the
      case of an Eligible Management Associate who is a member of the Company’s
      executive or senior management committee but who is not a director of the
      Company, the Human Resources and Compensation Committee; and

    

    (c) in
      the
      case of the Chairman of the Board and an Eligible Management Associate who
      is a
      member of the Company’s executive or senior management committee and who is also
      a director of the Company, the Board of Directors.

    

    For
      all
      purposes of the Plan, the Benefits Administration Committee
      in its discretion, may make adjustments in Compensation and Credited Service
      with respect to payments of severance pay, including, but not limited to,
      outplacement pay and critical pay.

    

    An
      Eligible Management Associate who terminates employment due to a reduction
      in
      force, as defined below, and who does not satisfy the requirements for
      Traditional Retirement Age on the date of termination shall receive deemed
      additional months of age and/or Service, based on the following:

    

    
      	
               Years
                of
                Service

            	 	
               Deemed
                Additional
                Months of Age and/or Service

            
	
              0-9

            	 	
              0 

            
	
              10-14

            	 	
              12

            
	
              15-19

            	 	
              18

            
	
              20
                or more

            	 	
              24

            

    

     

    A
      reduction in force shall mean the termination of employment of an Eligible
      Management Associate because of:

    

    (a)
       A
      partial unit closing or complete unit closing ("unit closing") as determined
      by
      the Director of Personnel of the Company in his sole discretion, or

    

    (b)
       Other
      business reasons of the Company ("individual termination") as determined by
      the
      Director of Personnel of the Company in his sole discretion. With the approval
      of the Benefits Administration Committee of the Company, the Director of

    
      
        30

      

      
        
        

      

    

     

    Human
      Resources may increase such award by up to 24 deemed additional months of age
      and/or Service for an individual termination.

    

    For
      the
      purposes of determining the benefit payable under Paragraph (1) of Article
      IV,
      such Eligible Management Associate is deemed to have attained Traditional
      Retirement Age. The deemed additional months of age and/or Service shall be
      added, but only to the extent necessary, to the Eligible Management Associate's
      age and/or Service, in such amounts necessary to satisfy the minimum
      requirements for Traditional Retirement Age or, with the approval of the
      Benefits Administration Committee, an Early Retirement Age on or after age
      59.

    

    The
      deemed additional months of Service shall count as Credited Service for the
      purpose of entitlement to benefits under this Plan only in the event of an
      individual termination as described in (b) of the preceding subparagraph, and
      shall not count as Credited Service in the event of a unit closing described
      in
      (a) of the preceding subparagraph. 

    

    For
      the
      purpose of determining life insurance coverage under paragraph (5) of Article
      IV, an Eligible Management Associate deemed to have attained Traditional
      Retirement Age in the event of a unit closing described in (a) of the preceding
      subparagraph shall be entitled to coverage effective on the first day of the
      month following his Separation from Service. The
      amount of such coverage shall be equal to 100% of the amount being provided
      to
      him at Company expense immediately prior to his Separation from Service. Said
      amount shall be reduced in accordance with paragraph (5) of Article IV starting
      with the first day of the month following his attainment of age 61.

    

    Notwithstanding
      any other provision of the Plan, an Eligible Management Associate (excluding
      Officers of the Company) who is entitled to a benefit pursuant to the formula
      described in paragraph (1) of Article IV as of the Associate’s Early Retirement
      Date, Traditional Retirement Date or Delayed Retirement Date, as the case may
      be
      (“formula benefit”), (i) who received from the Company as part of the Company’s
      offer in 1997 to participate in the Voluntary Early Retirement Program, a
      personalized statement showing the aggregate benefits earned as of January
      1,
      1998, from the Plan, the Pension Plan and, if applicable, the Benefit
      Restoration Plan, (“earned benefit”) and (ii) who retires from the Company prior
      to January 1, 1999, shall receive the greater of: (a) the formula benefit,
      or
      (b) an amount derived by subtracting the aggregate benefit payable to the
      Associate from the Pension Plan and, if applicable, the Benefit Restoration
      Plan
      from the earned benefit.

    

    (2)
      Amendment
      and Termination:
      The
      Human Resources and Compensation Committee may amend or modify the Plan at
      any
      time, without prior notice; provided, however, that any such amendment or
      modification which would substantially increase the cost of the Plan to the
      Company shall require approval of the Board of Directors of the Company. The
      Board of Directors of the Company may suspend, discontinue, or terminate the
      Plan at any time without prior notice or approval. In no event will any
      amendment, modification, suspension, discontinuance, or termination adversely
      affect existing life insurance coverage for retirees or the Plan benefit for
      any
      Eligible Management Associate for whom benefit payments have already begun
      in
      accordance 

     

    
      
        31

      

      
        
        

        
        

      

    

     

    with
      the Plan as in effect prior to the effective date of the amendment,
      modification, suspension, discontinuance, or termination unless otherwise
      required to comply with applicable law.

    

    If
      the
      Plan is terminated, any Eligible Management Associate who, as of the effective
      date of Plan termination, has reached Traditional Retirement Age but who has
      not
      reached age 65 shall be entitled to receive, at his actual Separation from
      Service, the benefits, if any, to which he would have been entitled under
      Paragraph (1) or (2) of Article IV had he Separated from Service on the day
      before the effective date of Plan termination, reduced by the percentage derived
      by dividing the number of months of Credited Service, if any, from the Plan
      termination effective date to the date of actual Separation from Service by
      the
      number of months of Credited Service from the Plan termination effective date
      to
      the date the Eligible Management Associate will have reached age 65. Any such
      Eligible Management Associate shall also be entitled to receive at his actual
      Separation from Service (other than by reason of death) a benefit, if any,
      to
      which he would have been entitled under Paragraph (3) of Article IV had the
      Plan
      not been terminated. If, after Plan termination, such Eligible Management
      Associate Separates from Service by reason of death, Paragraph (4) of Article
      IV
      shall apply, if appropriate.

    

    If
      the
      Plan is terminated, any Eligible Management Associate who, as of the effective
      date of Plan termination, has reached his Early Retirement Date (assuming a
      Separation from Service on such date) shall be entitled to receive, at his
      actual Separation from Service, the benefits, if any, to which he would have
      been entitled under Paragraph (1) or (2) of Article IV calculated as if he
      had
      reached his Traditional Retirement Age and Separated from Service on the day
      before the effective date of Plan termination and disregarding the percentage
      reduction on account of early retirement referred to in clause (iv) of
      Subparagraph (a) of Paragraph (1) of Article IV, reduced by the percentage
      derived by dividing the number of months of Credited Service, if any, after
      his
      Traditional Retirement Date by 60. Any such Eligible Management Associate shall
      also be entitled to receive at his actual Separation from Service (other than
      by
      reason of death) a benefit, if any, to which he would have been entitled under
      Paragraph (3) of Article IV had the Plan not been terminated. If after Plan
      termination, such Eligible Management Associate Separates from Service by reason
      of death, Paragraph (4) of Article IV shall apply, if appropriate.

    

    If
      the
      Plan is terminated, any Eligible management Associate who, as of the effective
      date of Plan termination (a) has reached age 50, (b) has 10 or more years of
      credited service, as defined by the Pension Plan, as an Eligible Management
      Associate, and (c) is not otherwise eligible for benefits under this Paragraph
      (2) of this Article VIII, shall be entitled to receive, at his actual Separation
      from Service but no earlier than his Traditional Retirement Date, a benefit
      equal to the difference between the amount of pension which would be payable
      pursuant to the early retirement pension benefit provision of the Pension Plan
      that would be applicable if the Eligible Management Associate elected to receive
      benefits pursuant to that provision prior to his normal retirement date, as
      defined in the Pension Plan (disregarding Disability Service, if any) and the
      amount of pension payable pursuant to the early retirement pension benefit
      provision of the Pension Plan that would be applicable if the Eligible
      Management Associate did not elect to receive benefits pursuant to that
      provision prior to his normal

     

    
      
        32

      

      
        
        

        
        

      

    

     

    retirement
      date, as defined in the Pension Plan (disregarding Disability Service, if any)
      reduced by the percentage derived by dividing the number of months of Credited
      Service, if any, after Traditional Retirement Date (assuming a separation from
      Service) by 60.

    

    In
      no
      event will any future amendment or modification of the Plan adversely affect
      the
      right to Plan benefits which vest on Plan termination as set forth in this
      Paragraph (2) without the consent of at least 75 percent of the affected
      Eligible Management Associates unless such amendment or modification is
      specifically required to comply with applicable law.

    

    Each
      amendment to the Plan by the Human Resources and Compensation Committee or
      the
      Board of Directors will be made only pursuant to unanimous written consent
      or by
      majority vote at a meeting. Upon such action by the Human Resources and
      Compensation Committee or the Board of Directors,
      the Plan will be deemed amended as of the date specified as the effective date
      by such action or in the instrument of amendment. The effective date of any
      amendment may be before, on, or after the date of such action of the Human
      Resources and Compensation Committee or the Board of Directors.

    

    (3)
      Rights
      of Associates:
      Except
      for the Associate's non-forfeitable interest as set forth in Paragraph (2)
      of
      this Article VIII, neither the establishment of the Plan nor any action
      thereafter taken by the Company or any Controlled Group Member or by the
      Benefits Administration Committee shall be construed as giving to any Associate
      any vested right to a benefit from the Plan or a right to be retained in
      employment or any specific position or level of employment with the Company,
      or
      any Controlled Group Member. Moreover, no Associate shall have any right or
      claim to any benefits under this Plan if the Associate is summarily discharged
      (including resignation in lieu thereof) unless the Benefits Administration
      Committee, in its discretion, determines that such Associate shall be eligible
      for such benefits notwithstanding such summary discharge.

    

    (4)
      Mistaken
      Information:
      If
      any
      information upon which an Eligible Management Associate's benefit under the
      Plan
      is calculated has been misstated by the Eligible Management Associate or is
      otherwise mistaken, such benefit shall not be invalidated (unless upon the
      basis
      of the correct information the Eligible Management Associate would not have
      been
      entitled to a benefit), but the amount of the benefit shall be adjusted to
      the
      proper amount determined on the basis of the correct information and any
      overpayments shall be charged against future payments to the Eligible Management
      Associate or his beneficiary.

    

    (5)
      Liability:
      Neither
      the Board of Directors (including any committees thereof) of the Company or
      of
      any Participating Employer nor any member of the Benefits Administration
      Committee or the Human Resources Committee nor any person to whom any of them
      may delegate any duty or power in connection with administering the Plan shall
      be personally liable for any action or failure to act with respect to the
      Plan.

    

    (6)
      Benefits
      for Reemployed Eligible Management Associates:
      If
      a
      retired Eligible Management Associate subsequently is reemployed by a
      Participating Employer, the payment of benefits hereunder shall continue. Any
      life insurance 

    
      
        33

      

      
        
        

        
        

      

       

    

    coverage
      in effect pursuant to Paragraph (5) of Article IV shall cease effective on
      the
      date a rehired (whether or not participating in a Profit Incentive Compensation
      program) Associate becomes eligible for coverage under the Company's term life
      insurance plan. Upon such Associate's Separation from Service he shall be
      entitled to receive applicable benefits, if any, under Article IV pursuant
      to
      uniform rules approved by the Benefits Administration Committee.

    

    (7)
      Construction:
      In
      determining the meaning of any provision 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 paragraphs and
      Articles in the Plan are for convenience only and are not intended to modify
      or
      affect the meaning of the substantive provisions of the Plan.

    

    (8)
      Non-assignability
      of Benefits:
      The
      benefits payable hereunder or the right to receive future benefits under the
      Plan may not be anticipated, alienated, pledged, encumbered, or subjected to
      any
      charge or legal process, and if any attempt is made to do so, or a person
      eligible for any benefits becomes bankrupt, the interest under the Plan of
      the
      person affected may be terminated by the Benefits Administration Committee
      which, in its sole discretion, may cause the same to be held or applied for
      the
      benefit of one or more of the dependents of such person or make any other
      disposition of such benefits that it deems appropriate.

    

    (9)
      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, former
      Associate, or beneficiary with respect to the Plan shall be barred after the
      expiration of three years from the date of Separation of Service of the Eligible
      Management Associate or the date of receipt of the notice of denial of a claim
      for benefits, if earlier. In the event ERISA's limitations on legal actions
      do
      not apply, the laws of the State of Texas with respect to 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.

    

    (10)
      Transferred
      Eligible Management Associates:
      In
      the
      event of the transfer of an Eligible Management Associate after December 31,
      1995 from a Participating Employer to a "non- participating employer" as defined
      below, said Eligible Management Associate shall continue to be eligible to
      participate in this Plan in accordance with Article III. 

    

    In
      the
      event of the transfer of an Eligible Management Associate on or after March
      8,
      1995 but on or before December 31, 1995 to a non-participating employer, said
      Eligible Management Associate will continue to be eligible to participate in
      this Plan in accordance with Article III provided that on December 31, 1995
      the
      Eligible Management Associate (a) is in the employ of the non- participating
      employer and (b) is not eligible to participate in the Supplemental Retirement
      Program for Eligible Management Associates of JCPenney Financial Services,
      or
      Supplemental Retirement Program for Management Profit-Sharing Associates of
      Thrift Drug, Inc. 

    

    
      
        34

      

      
        
        

        
        

      

       

    

    The
      Service and Compensation of the Eligible Management Associate with the
      non-participating employer shall be recognized as attributable to a
      Participating Employer to the extent permitted by the Plan in determining
      benefits under the Plan. A non-participating employer shall mean a participating
      employer in the (a) Supplemental Retirement Program for Eligible Management
      Associates of JCPenney Financial Services, or (b) Supplemental Retirement
      Program for Management Profit--Sharing Associates of Thrift Drug,
      Inc.

    

    Notwithstanding
      the foregoing provisions of this Paragraph (10), an entity that ceases to be
      a
      member of the Controlled Group immediately after the Closing (as such term
      is
      defined in Paragraph (9) of Article IV) will not be a “non-participating
      employer” for any purpose of this Plan.

    

    (11)
      Change
      of Control:
      Solely
      for the purposes of this Paragraph (11), the term Eligible Management Associate
      shall include all active associates who upon their retirement would qualify
      as
      an Eligible Management Associate as of the date of a “Change of Control” (as
      hereinafter defined).

    

    Upon
      a
      Change of Control, assets of the Parent Company in an amount sufficient to
      pay
      benefits that have accrued under the Plan up to that date shall immediately
      be
      transferred to a grantor trust to be established by the Parent Company for
      the
      purpose of paying benefits hereunder. Each Eligible Management Associate’s
      vested benefits shall thereafter be paid to him from such trust in accordance
      with the terms of the Plan; provided that at the time of such Change of Control,
      the Eligible Management Associate may make an irrevocable election to have
      his
      Plan benefits paid in a single-sum immediately upon the later of (i) the date
      of
      the Change of Control, or (ii) the Eligible Management Associate’s retirement
      date; in which event his benefits shall be reduced by 10% as a penalty for
      early
      payment. The amount transferred to the grantor trust shall include the amount
      necessary to pay benefits for Eligible Management Associates who have not yet
      retired, determined as if they retired on the date of the Change of Control.
      On
      each anniversary date of the date of a Change of Control, the Parent Company
      shall transfer to the grantor trust an amount necessary to pay all benefits
      that
      have accrued under the plan during the preceding twelve months.

    

    For
      purposes of this paragraph (11), a Change of Control shall be deemed to have
      occurred if the event set forth in any one of the following subparagraphs shall
      have occurred:

    

    (a) any
      Person is or becomes the Beneficial Owner, directly or indirectly, of securities
      of the Parent Company (not including in the securities beneficially owned by
      such Person any securities acquired directly from the Parent Company or its
      Affiliates) representing 50% or more of the combined voting power of the Parent
      Company’s then outstanding securities; or

    

    (b) during
      any period of two consecutive calendar years, the following individuals cease
      for any reason to constitute a majority of the number of directors then serving
      as directors of the Parent Company: individuals, who on July 14, 1999 constitute
      the Board of Directors of the Parent Company and any new director (other than
      a
      director whose initial assumption of office is in connection with the settlement
      of 

     

    
      
        35

      

      
        
        

        
        

      

       

    

    an
      actual or threatened election contest, including but not limited to a consent
      solicitation, relating to the election of directors of the Parent Company)
      whose
      appointment or election by the Board of Directors of the Parent Company or
      nomination for election by the Parent Company’s stockholders was approved or
      recommended by a vote of at least two-thirds of the directors then still in
      office who either were directors on July 14, 1999 or whose appointment, election
      or nomination for election was previously so approved or recommended;
      or

    

    (c) there
      is consummated a merger or consolidation of the Parent Company or any direct
      or
      indirect subsidiary of the Parent Company with any other corporation or entity,
      other than (i) a merger or consolidation which would result in the voting
      securities of the Parent Company outstanding immediately prior to such merger
      or
      consolidation continuing to represent (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 Parent Company or
      any
      subsidiary of the Parent Company, at least 50% of the combined voting power
      of
      the securities of the Parent Company, such surviving entity or any Parent
      thereof outstanding immediately after such merger or consolidation, or (ii)
      a
      merger or consolidation effected solely to implement a recapitalization of
      the
      Parent Company (or similar transaction) in which no Person is or becomes the
      Beneficial Owner, directly or indirectly, of securities of the Parent Company
      (not including in the securities beneficially owned by such Person any
      securities acquired directly from the Parent Company or its Affiliates)
      representing 50% or more of the combined voting power of the Parent Company’s
      then outstanding securities; or

    

    (d) the
      stockholders of the Parent Company approve a plan of complete liquidation or
      dissolution of the Parent Company, or there is consummated a sale or disposition
      by the Parent Company or any of its subsidiaries of any assets which
      individually or as part of a series of related transactions constitute all
      or
      substantially all of the Parent Company’s consolidated assets, other than any
      such sale or disposition to an entity at least 50% of the combined voting power
      of the voting securities of which are owned by stockholders of the Parent
      Company in substantially the same proportions as their ownership of the voting
      securities of the Parent Company immediately prior to such sale or disposition;
      or

    

    (e) the
      execution of a binding agreement that if consummated would result in a Change
      of
      Control of a type specified in subparagraphs (a) or (c) above (an “Acquisition
      Agreement”) or of a binding agreement for the sale or disposition of assets
      that, if consummated, would result in a Change of Control of a type specified
      in
      subparagraph (d) above (an “Asset Sale Agreement”) or the adoption by the Board
      of Directors of the Parent Company of a plan of complete liquidation or
      dissolution of the Parent Company that, if consummated, would result in a Change
      of Control of a type specified in subparagraph (d) above (a “Plan of
      Liquidation”), provided, however, that a Change of Control of the type specified
      in this subparagraph (e) shall not be deemed to exist or have occurred as a
      result of the execution of such Acquisition Agreement or Asset Sale Agreement,
      or the adoption of such a Plan of Liquidation, from and after the Abandonment
      Date. As used in this subparagraph (e), the term “Abandonment Date” shall mean
      the date on which (i) an Acquisition Agreement, Asset Sale Agreement or Plan
      of
      Liquidation is terminated (pursuant to its terms or otherwise) without
      having

     

    
      
        36

      

      
        
        

        
        

      

    

     

    been
      consummated, (ii) the parties to an Acquisition Agreement or Asset Sale
      Agreement abandon the transactions contemplated thereby, (iii) the Parent
      Company abandons a Plan of Liquidation, or (iv) a court or regulatory body
      having competent jurisdiction enjoins or issues a cease and desist or stop
      order
      with respect to or otherwise prevents the consummation of, or a regulatory
      body
      notifies the Parent Company that it will not approve an Acquisition Agreement,
      Asset Sale Agreement or Plan of Liquidation or the transactions contemplated
      thereby and such injunction, order or notice has become final and not subject
      to
      appeal; or

    

    (f) the
      Board adopts a resolution to the effect that, for purposes of this Plan, a
      Change of Control has occurred.

    

    Notwithstanding
      the foregoing, a Change of Control shall not be deemed to have occurred by
      virtue of the consummation of any transaction or series of integrated
      transactions immediately following which the record holders of the common stock
      of the Parent Company immediately prior to such transaction or series of
      transactions continue to have substantially the same proportionate ownership
      in
      an entity (i) which owns all or substantially all of the assets of the Parent
      Company immediately following such transaction or series of transactions, (ii)
      which is intended to reflect or track the value or performance of a particular
      division, business segment or subsidiary of the Parent Company, or (iii) which
      is an affiliated company, subsidiary, or spin-off entity owned by the
      stockholders of the Parent Company in substantially the same proportions as
      their ownership of stock of the Parent Company on the date of such spin
      off.

    

    As
      used
      in connection with the foregoing definition of Change of Control, “Affiliate”
shall have the meaning set forth in Rule 12b-2 promulgated under Section 12
      of
      the Exchange Act; “Beneficial Owner” shall have the meaning set forth in Rule
      13d-3 under the Exchange Act; “Exchange Act” shall mean the Securities Exchange
      Act of 1934, as amended from time to time; “Parent” shall mean any entity that
      becomes the Beneficial Owner of at least 50% of the voting power of the
      outstanding voting securities of the Parent Company or of an entity that
      survives any merger or consolidation of the Parent Company or any direct or
      indirect subsidiary of the Parent Company; and “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 Parent
      Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
      securities under an employee benefit plan of the Parent Company or any of it
      Affiliates, (iii) an underwriter temporarily holding securities pursuant to
      an
      offering of such securities, or (iv) a corporation or entity owned, directly
      or
      indirectly, by the stockholders of the Parent Company in substantially the
      same
      proportions as their ownership of stock of the Parent Company.

    

    (12)
      Separation
      Allowance Program:
      If
      an
      Eligible Management Associate becomes entitled to Severance Pay under the J.
      C.
      Penney Corporation Inc. 1999 Separation Allowance Program for Profit-Sharing
      Management Associates ("SAP") or if this Plan is terminated within five years
      after a Change of Control (as defined in Paragraph (11) above) and, at that
      time, in either case, is age 45 or older with at least five years of Credited
      Service, he also shall become entitled to the same Plan benefits (as adjusted
      by
      this Paragraph (12) ) he would have become vested in under Article VIII,
      Paragraph (2) of this Plan as if this Plan had been terminated on the day before
      his 

     

    
      
        37

      

      
        
        

        
        

      

       

    

    Employment
      Termination (within the meaning of the SAP). In calculating such Plan benefit,
      an Eligible Management Associate

    

    (a) shall
      receive credit for an additional five years of Credited Service (provided that
      total Credited Service under the Plan does not exceed 40 years) and

    

    (b) shall,
      if age 55 or less, be deemed to be five years older than his actual age, or
      if
      age 56 to 59 be deemed to be age 60, and

    

    (c) shall
      have his Severance Pay counted as Compensation under this Plan as if paid in
      monthly installments commencing with his Employment Termination (within the
      meaning of the SAP), 

    

    provided
      that, for purposes of clause (ii) of Subparagraph (b) of Paragraph (1) of
      Article IV of this Plan, the single life, no-death-benefit annuity equivalent
      shall not exceed the equivalent determined by ascribing to the Common Stock
      of
      the Company, as of the Valuation Date, a value equal to the average of the
      mean
      of the high and low sales prices (as reported in the composite transaction
      table
      covering transactions of New York Stock Exchange-listed securities) for each
      trading day in the two calendar quarters immediately preceding the calendar
      quarter in which a Change of Control (as defined in Paragraph (11) above)
      occurs, and the amount payable under this Plan at age 60 assuming such Eligible
      Management Associate remained in employment up to such age at a Compensation
      level equal to that of the calendar year immediately preceding his Employment
      Termination (within the meaning of the SAP).

     

     

     

     

     

     

     

    

    
      
        
          38

        

        
          
          

          
          

        

        
          
          

        

      

    

    

    ARTICLE
      IX.   CLAIMS PROCEDURES

    

    If
      an
      Associate does not receive the benefits which he believes he is entitled to
      receive under the Plan, he may file a claim for benefits with the Benefits
      Director. All claims will be made in writing and will be signed by the claimant.
      If the claimant does not furnish sufficient information to determine the
      validity of the claim, the Benefits Director will indicate to the claimant
      any
      additional information which is required.

    

    Each
      claim will be approved or disapproved by the Benefits Director within 90 days
      following the receipt of the information necessary to process the claim. In
      the
      event the Benefits Director denies a claim for benefits in whole or in part,
      the
      Benefits Director will notify the claimant in writing of the denial of the
      claim. Such notice by the Benefits Director will also set forth, in a manner
      calculated to be understood by the claimant, the specific reasons for such
      denial, the specific Plan provisions on which the denial is based, a description
      of any additional material or information necessary to perfect the claim with
      an
      explanation of the Plan's claim review procedure as set forth below. If no
      action is taken by the Benefits Director on a claim within 90 days, the claim
      will be deemed to be denied for purposes of the review procedure.

    

    A
      claimant may appeal a denial of his claim by requesting a review of the decision
      by the Benefits Administration Committee or a person designated by the
      Committee, which person will be a named fiduciary under Section 402(a) (2)
      of
      ERISA for purposes of this Article IX. An appeal must be submitted in writing
      within 60 days after the denial and must (i) request a review of the claim
      for
      benefits under the Plan; (ii) set forth all of the grounds upon which claimant's
      request for review is based and any facts in support thereof; and (iii) set
      forth any issues or comments which the claimant deems pertinent to the appeal.
      

    

    The
      Benefits Administration Committee or the named fiduciary designated by the
      Benefits Administration Committee will make a full and fair review of each
      appeal and any written materials submitted in connection with the appeal. The
      Benefits Administration Committee or the named fiduciary designated by the
      Benefits Administration Committee will act upon each appeal within 60 days
      after
      receipt thereof unless special circumstances require an extension of the time
      for processing, in which case a decision will be rendered as soon as possible
      but not later than 120 days after the appeal is received. The claimant will
      be
      given the opportunity to review pertinent documents or materials upon submission
      of a written request to the Benefits Administration Committee or named
      fiduciary, provided the Benefits Administration Committee or named fiduciary
      finds the requested documents or materials are pertinent to the appeal. On
      the
      basis of its review, the Benefits Administration Committee or named fiduciary
      will make an independent determination of the claimant's eligibility for
      benefits under the Plan. 

    

    The
      decision of the Benefits Administration Committee or named fiduciary on any
      claim for benefits will be final and conclusive upon all parties thereto. In
      the
      event the Benefits Administration Committee or named fiduciary denies an appeal
      in whole or in part, it will give written notice of the decision to the
      claimant, which notice will set forth in a manner calculated to be understood
      by
      the claimant the specific reasons for such 

    

    
      
        
          39

        

        
          
          

          
          

        

         

      

    

    
 

    denial
      and which will make
      specific reference to the pertinent Plan provisions on which the decision was
      based.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        40

      

      
        
        

        
        

      

      
        
        

      

    

    

    APPENDIX
      I

    Participating
      Employers

    

    J.
      C.
      Penney Corporation, Inc.

    

    JCPenney
      National Bank

    (from
      and after August 1, 1994 until December 17, 1997)

    

    JCP
      Internet Commerce Solutions, Inc.

    (from
      and after February 1, 1999)

    

    JCP
      Logistics L. P.

    (from
      and after February 1, 1999)

    

    JCP
      Media L. P.

    (from
      and after February 1, 1999)

    

    JCP
      Overseas Services, Inc.

    (from
      and after July 1, 1996)

    

    JCP
      Portfolio, Inc.

    (dissolved
      July 18, 1995)

    

    J.
      C.
      Penney Private Brands, Inc.

    (from
      and after January 1, 2000)

    

    JCP
      Procurement L. P.

    (from
      and after February 1, 1999)

    

    JCP
      Publications Corp.

    (formerly
      JCP Media Corporation)

    (from
      and after April 3, 1996)

    

    JCPenney
      Puerto Rico, Inc.

    

    JCP
      Receivables, Inc.

    

    StepInside,
      Inc.

    (from
      and after January 1, 2000)

    

    

    
      
        
          41

        

        
          
          

          
          

        

        
          
          

        

      

    

    

    APPENDIX
      II

    FORMER
      ELIGIBLE MANAGEMENT ASSOCIATES

    WHOSE
      BENEFITS HAVE BEEN ASSUMED BY

    THE
      SUPPLEMENTAL RETIREMENT PROGRAM FOR

    ELIGIBLE
      MANAGEMENT ASSOCIATES OF

    JCPENNEY
      FINANCIAL SERVICES

    

    

    John
      Camillo

    Yumin
      Chen

    Donald
      S. Creveling

    Stephen
      Duran

    David
      Foster

    Jerry
      R. Geyer

    Paul
      A.
      Heleski

    Robert
      Iorio

    Judy
      Johnston

    Deborah
      Litwak

    Karen
      A. Nelson

    Larry
      J. Tracey

    Robert
      Valliere

    

    
      
        
          42

        

        
          
          

          
          

        

        
          
          

        

      

    

    

    APPENDIX
      III

    ELIGIBLE
      MANAGEMENT ASSOCIATES

    WHOSE
      NAMES ARE SET FORTH ON

    APPENDIX
      I TO THE

    SUPPLEMENTAL
      RETIREMENT PROGRAM FOR

    ELIGIBLE
      MANAGEMENT ASSOCIATES OF 

    JCPENNEY
      FINANCIAL SERVICES

    

    

    John
      Camillo

    Yumin
      Chen

    Donald
      S. Creveling

    John
      DiJoseph

    Stephen
      Duran

    David
      Foster

    Walter
      Gatewood

    Jerry
      R. Geyer

    Paul
      A.
      Heleski

    Robert
      Iorio

    Judy
      Johnston

    Deborah
      Litwak

    Thomas
      McGahey

    Deborah
      Megee

    Lynn
      Morris

    Karen
      A. Nelson

    Karen
      Newton

    Leslie
      Pierce

    Alvin
      Prudhomme

    Regina
      V. Rohner

     

    
      
        43

      

      
        
        

        
        

      

      
        
        

      

    

     

    Joseph
      Sartoris

    Sue
      E.
      Stewart

    George
      Suiter

    Mark
      Thornton

    Larry
      J. Tracey

    Robert
      Valliere

    R.
      Michael Williams

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        44

      

      
        
        

        
        

      

      
        
        

      

    

    

    

    SRP
      RIF RESOLUTIONS

    OF

    THE
      HUMAN RESOURCES AND COMPENSATION COMMITTEE 

    OF
      THE 

    BOARD
      OF DIRECTORS OF 

    J.
      C. PENNEY COMPANY, INC. 

    

    

    

    WHEREAS
      the Committee deems it in the best interest of the Company and of J. C. Penney
      Corporation, Inc., that the Supplemental Retirement Program for Management
      Associates of J. C. Penney Corporation, Inc. ("SRP") be amended to grant certain
      discretionary authority to the Chief Human Resources and Administration Officer
      relating to reduction in force situations;

    

    RESOLVED
      that Article VIII of the SRP be, and it hereby is, amended to (i) delete the
      third, fourth, and fifth paragraphs of Paragraph (1) (Additional Credited
      Service and Other Adjustments); (ii) to delete from the sixth paragraph of
      Paragraph (1) the phrase “in the event of a unit closing described in (a) of the
      preceding subparagraph”; and to add the following paragraph prior to the sixth
      paragraph of Paragraph (1) (as such sixth paragraph was in effect immediately
      prior to this amendment), effective as of August 1, 2005:

    

    For
      purposes of a reduction in force, the Chief Human Resources and Administration
      Officer, or his or her delegate, may in his/her discretion, make adjustments
      in
      Credited Service, Service and/or Age as he/she deems advisable, but in no event
      shall this discretion allow for an amount of the benefit to be less than the
      Eligible Management Associate would have otherwise received under Article
      IV.

    

    and;

    

    RESOLVED
      that the officers of the Company and its counsel be, and each of them hereby
      is,
      authorized to take all such further action, and to execute and deliver all
      such
      further instruments and documents, in the name and on behalf of the Company,
      and
      under its corporate seal or otherwise, and to pay all such expenses as shall
      in
      their judgment be necessary, proper, or advisable in order fully to carry out
      the intent and effectuate the purposes of the foregoing resolutions and each
      of
      them.

    

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

     

    SECTION
      409A RESOLUTIONS

    OF

    THE
      HUMAN RESOURCES AND COMPENSATION COMMITTEE 

    OF
      THE 

    BOARD
      OF DIRECTORS OF 

    J.
      C. PENNEY COMPANY, INC. 

    

    WHEREAS,
      the American Jobs Creation Act of 2004 (the “Act”) amended the Internal Revenue
      Code of 1986 to add section 409A governing the inclusion in gross income of
      deferred compensation under nonqualified deferred compensation plans, effective
      with respect to amounts deferred in taxable years beginning after December
      31,
      2004, and in taxable years beginning before January 1, 2005, if the plan under
      which the deferral is made is materially modified after October 3,
      2004;

    

    WHEREAS,
      section 409A is a significant departure from existing laws governing the timing
      of inclusion in gross income of amounts deferred under nonqualified deferred
      compensation plans and sets out broad requirements that nonqualified deferred
      compensation plans must meet in order to avoid the current inclusion in gross
      income of amounts deferred under such plans;

    

    WHEREAS,
      the Act provides that the Secretary of the Treasury (the “Secretary”) will have
      the authority to prescribe such regulations as are necessary to carry out the
      purposes of section 409A and to provide exceptions to certain requirements
      of
      section 409A during the transition period for plans to come into compliance
      with
      section 409A;

    

    WHEREAS,
      the Secretary to date has issued guidance related to certain requirements of
      section 409A and will be issuing further guidance in the form of final
      regulations;

    

    WHEREAS,
      section 409A and the guidance define a nonqualified deferred compensation plan
      as a plan that provides for the deferral of compensation and provide that,
      with
      certain exceptions, a deferral of compensation occurs if the service provider
      has a legally binding right during a taxable year to compensation that has
      not
      been actually or constructively received and included in gross income and that,
      pursuant to the terms of the plan, is payable to the service provider in a
      later
      year;

    

    WHEREAS,
      section 409A applies to a number of the Company’s arrangements, including the
      Supplemental Retirement Program for Management Profit - Sharing Associates
      of J.
      C. Penney Corporation, Inc.; the J. C. Penney Corporation, Inc. Benefit
      Restoration Plan; and the J. C. Penney Corporation, Inc. Mirror Savings Plans
      I,
      II, and III (collectively, the “Plans”);

    

    WHEREAS,
      compensation under the Plans that is subject to section 409A may not be
      distributed earlier than (1) separation from service, (2) disability, (3) death,
      (4) a specified time or pursuant to a fixed schedule, (5) a change in control
      event, or (6) the occurrence of an unforeseeable emergency;

    

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    WHEREAS,
      section 409A provides that distributions to officers having annual compensation
      greater than $130,000 (adjusted for inflation and limited to 50 employees)
      may
      not be made before the date which is six months after the date of separation
      from service (or, if earlier, the date of death of the employee);

    

    WHEREAS,
      section 409A provides that the Plans may not permit the acceleration of the
      time
      or schedule of any payment under the Plans, except as provided in regulations
      by
      the Secretary;

    

    WHEREAS,
      section 409A and the guidance require that compensation for services performed
      during a taxable year may be deferred at the participant’s election only if the
      election to defer is made no later than the close of the preceding taxable
      year,
      or at such other time as provided in Treasury regulations, or that the Plan
      may
      specify the time and form of payment no later than the time the service provider
      first has a legally binding right to the compensation;

    

    WHEREAS,
      the requirements of section 409A related to subsequent changes in the time
      and
      form of payment provide that the Plans may allow a subsequent election to delay
      the timing or form of distributions only if (1) the plan requires that such
      election cannot be effective for at least 12 months after the date on which
      the
      election is made; (2) except in the case of elections relating to distributions
      on account of death, disability, or unforeseeable emergency, the plan requires
      that the payment with respect to which such election is made be deferred for
      a
      period of not less than 5 years from the date such payment would otherwise
      have
      been paid; and (3) the plan requires that an election related to a distribution
      to be made upon a specified time may not be made less than 12 months prior
      to
      the date of the first scheduled payment;

    

    WHEREAS,
      the guidance issued by the Secretary provides that the Plans must be operated
      through December 31, 2006, in good faith compliance with the provisions of
      section 409A and the guidance and that the Plans must be amended to comply
      with
      the provisions and the regulations thereunder by December 31, 2006;
      and

    

    WHEREAS,
      the Secretary has provided for certain relief measures the Plans can adopt
      during the transition period for coming into compliance with section 409A;
      and
      the Committee has determined that the Plans need to be amended to provide for
      the transition relief set forth in Questions and Answers 19(c) and 20 of
      Internal Revenue Service Notice 2005-1, as clarified and extended in the
      preamble to the proposed regulations issued on October 4, 2005 (the "Proposed
      Regulations").

    

    NOW,
      THEREFORE, BE IT RESOLVED that the Supplemental Retirement Program for
      Management Profit-Sharing Associates of J. C. Penney Corporation, Inc. be,
      and
      it hereby is, amended to add a new Article X at the end thereof to read as
      follows, effective as of January 1, 2005;

    

    Article
      X. Section 409A Transition Relief

    

    (1)  Priority
      over Other Provisions:
      The provisions set forth in this Article will supersede any conflicting
      provisions of the Plan.

    

    
      
        2

      

      
        
        

        
        

      

       

    

    (2)  Termination
      of Participation:
      Any amount subject to Code section 409A paid to an Eligible Management Associate
      during 2005 that would otherwise violate the requirements of Code section
      409A(a)(2), (3), or (4) will be treated as a distribution in termination of
      the
      Eligible Management Associate's participation in the Plan within the meaning
      of
      IRS Notice 2005-1, Q&A-20. The amounts subject to termination will be
      includible in the Eligible Management Associate's income in calendar year 2005.
      This paragraph applies to (i) payments in 2005 to a specified employee, as
      that
      term is defined in Code section 409A(a)(2)(B)(i), within six months after the
      date of the Eligible Management Associate's separation from service, as that
      term is defined by the Secretary; (ii) payments in 2005 pursuant to an election
      under Paragraph (1) of Article V to delay the commencement of annual benefits;
      (iii) payments in 2005 pursuant to the election of the installment option under
      paragraph (4) of Article V; and (iv) any other payments in 2005 otherwise in
      violation of Code section 409A(a)(2), (3) or (4). 

    

    (3)  Change
      in Payment Elections or Conditions on or Before December 31,
      2006:
      With respect to amounts subject to Code section 409A, an Eligible Management
      Associate may make a new payment election on or before December 31, 2006, as
      permitted by the preamble to the Proposed Regulations; and the election will
      not
      be treated as a change in the timing and form of payment under Code section
      409A(a)(4) or an acceleration of a payment under Code section 409A(a)(3);
      provided, however, that an Eligible Management Associate cannot in 2006 change
      a
      payment election with respect to payments that the Eligible Management Associate
      would otherwise receive in 2006, or cause payments to be made in 2006. Any
      election made by an Eligible Management Associate on or before December 31,
      2006
      (including an election made before January 1, 2005) that applies to an amount
      accrued under the Plan subject to Code section 409A will be treated as a new
      election under this paragraph unless an election in 2006 would apply to amounts
      that otherwise would be payable in 2006. 

    

    RESOLVED
      that the J. C. Penney Corporation, Inc. Benefit Restoration Plan be, and it
      hereby is, amended to add a new Article X at the end thereof to read as follows,
      effective as of January 1, 2005:

    

    Article
      X. Section 409A Transition Relief

    

    (1)  Priority
      over Other Provisions:
      The provisions set forth in this Article will supersede any conflicting
      provisions of the Plan.

    

    (2)  Termination
      of Participation:
      Any amount subject to Code section 409A paid to a Participant during 2005 that
      would otherwise violate the requirements of Code section 409A(a)(2), (3), or
      (4)
      will be treated as a distribution in termination of the Participant’s
      participation in the Plan within the meaning of IRS Notice 2005-1, Q&A-20.
      The amounts subject to termination will be includible in the Participant’s
      income in calendar year 2005. This paragraph applies to (i) payments in

     

    
      
        3

      

      
        
        

        
        

      

    

     

    2005
      to a specified employee, as that term is defined in Code section
      409A(a)(2)(B)(i), within six months after the date of the Participant’s
      separation from service, as that term is defined by the Secretary; (ii) payments
      in 2005 pursuant to the election of the installment option under paragraph
      (3)
      of Article V; and (iii) any other payments in 2005 otherwise in violation of
      Code section 409A(a)(2), (3), or (4). 

    

    (3)  Change
      in Payment Elections or Conditions on or Before December 31,
      2006:
      With respect to amounts subject to Code section 409A, a Participant may make
      a
      new payment election on or before December 31, 2006, as permitted by the
      preamble to the Proposed Regulations; and the election will not be treated
      as a
      change in the timing and form of payment under Code section 409A(a)(4) or an
      acceleration of a payment under Code section 409A(a)(3); provided, however,
      that
      a participant cannot in 2006 change payment elections with respect to payments
      that the Participant would otherwise receive in 2006, or cause payments to
      be
      made in 2006. Any election made by a Participant on or before December 31,
      2006
      (including an election made before January 1, 2005) that applies to an amount
      accrued under the Plan subject to Code section 409A will be treated as a new
      election under this paragraph unless an election in 2006 would apply to amounts
      that otherwise would be payable in 2006.

    

    RESOLVED
      that, the J. C. Penney Corporation, Inc. Mirror Savings Plans I, II, and III
      be,
      and they hereby are, amended to add a new Article Ten to read as follows,
      effective as of January 1, 2005:

    

    ARTICLE
      TEN

    

    SECTION
      409A TRANSITION RELIEF

    

    
      	10.01  	
               Priority
                over Other Provisions 

            

    

    

    The
      provisions set forth in this Article will supersede any conflicting provisions
      of the Plan.

    

    10.02 Cancellation
      of Deferrals and Termination of Participation 

    

    Any
      amount subject to Code section 409A paid to a Participant during 2005 that
      would
      otherwise violate the requirements of Code section 409A(a)(2), (3), or (4)
      will
      be treated as a distribution in termination of the Participant’s participation
      in the Plan or a cancellation of the Participant's deferral election. The
      amounts subject to termination or cancellation will be includible in the
      Participant’s income in the calendar year 2005. This paragraph applies to (i)
      payments in 2005 to a specified employee, as that term is defined in Code
      section 409A(a)(2)(B)(i), within six months after the date of the Participant’s
      separation from service, as that term is defined by the Secretary; (ii) payments
      in 2005 pursuant to the election of an alternate form of payment under Section
      7.04; and

     

    
      
        4

      

      
        
        

        
        

      

       

    

     (iii)
      any other payments in 2005 otherwise in violation of Code section 409A(a)(2),
      (3), or (4).

    

    
      	 	
              10.03

            	
              Change
                in Payment Elections or Conditions on or Before December 31,
                2006 

            

    

    

    With
      respect to amounts subject to Code section 409A, a Participant may make a new
      payment election on or before December 31, 2006, as permitted by the preamble
      to
      the Proposed Regulations; and the election will not be treated as a change
      in
      the timing and form of payment under Code section 409A(a)(4) or an acceleration
      of a payment under Code section 409A(a)(3); provided, however, that a
      participant cannot in 2006 change payment elections with respect to payments
      that the Participant would otherwise receive in 2006, or to cause payments
      to be
      made in 2006. Any election made by a Participant on or before December 31,
      2006
      (including an election made before January 1, 2005) that applies to an amount
      accrued under the Plan subject to Code section 409A will be treated as a new
      election under this paragraph unless an election in 2006 would apply to amounts
      that otherwise would be payable in 2006.

    

    and;

    

    RESOLVED
      that the officers of the Company and its counsel be, and each of them hereby
      is,
      authorized to take all such further action, and to execute and deliver all
      such
      further instruments and documents, in the name and on behalf of the Company,
      and
      under its corporate seal or otherwise, and to pay all such expenses as shall
      in
      their judgment be necessary, proper, or advisable in order fully to carry out
      the intent and effectuate the purposes of the foregoing resolutions and each
      of
      them.

     

    
      
        5

      

      
        
        

        
        

      

       

    

    
      Item
        3

      

      

      WHEREAS,
        the American Jobs Creation Act of 2004 (the “Act”) amended the Internal Revenue
        Code of 1986 to add section 409A governing the inclusion in gross income
        of
        deferred compensation under nonqualified deferred compensation plans, effective
        with respect to amounts deferred in taxable years beginning after December
        31,
        2004, and in taxable years beginning before January 1, 2005, if the plan
        under
        which the deferral is made is materially modified after October 3,
        2004;

      

      WHEREAS,
        the Act provides that the Secretary of the Treasury (the “Secretary”) will have
        the authority to prescribe such regulations as are necessary to carry out
        the
        purposes of section 409A and to provide exceptions to certain requirements
        of
        section 409A during the transition period for plans to come into compliance
        with
        section 409A;

      

      WHEREAS,
        the Secretary to date has issued guidance related to certain requirements
        of
        section 409A and will be issuing further guidance in the form of final
        regulations;

      

      WHEREAS,
        section 409A applies to a number of the Company’s arrangements, including the
        Supplemental Retirement Program for Management Profit - Sharing Associates
        of J.
        C. Penney Corporation, Inc.("SRP"); the J. C. Penney Corporation, Inc. Benefit
        Restoration Plan ("BRP"); the J. C. Penney Corporation, Inc. Mirror Savings
        Plan; and the J.C. Penney Corporation, Inc. Mirror Savings Plans I and III
        (collectively, the “Plans”);

      

      WHEREAS,
        the guidance issued by the Secretary provides that the Plans must be operated
        through December 31, 2007, in good faith compliance with the provisions of
        section 409A and the guidance and that the Plans must be amended to comply
        with
        the provisions and the regulations thereunder by December 31, 2007;

      

      WHEREAS,
        the Secretary in 2005 provided for certain relief measures the Plans could
        adopt
        during the transition period for coming into compliance with section 409A;
        and
        the Committee amended the Plans to provide for the transition relief set
        forth
        in Questions and Answers 19(c) and 20 of Internal Revenue Service Notice
        2005-1,
        as clarified and extended in the preamble to the proposed regulations issued
        on
        October 4, 2005; 

      

      WHEREAS,
        on October 4, 2006, the Secretary issued a notice further extending through
        2007
        certain of the transition relief for nonqualified deferred compensation plans
        to
        comply with the requirements of section 409A; and the Committee has determined
        that the Plans need to be amended to provide for this additional transition
        relief; and

      

      WHEREAS,
        certain amendments to the BRP and the SRP are needed to preserve the ability
        to
        treat amounts deferred in taxable years beginning before January 1, 2005,
        as not
        being subject to section 409A.

       

      
        
          
          

        

        
          
          

          
          

        

        
          
          

        

      

      NOW,
        THEREFORE, BE IT RESOLVED that Paragraph (3) of Article X of the Supplemental
        Retirement Program for Management Profit-Sharing Associates of J. C. Penney
        Corporation, Inc. be, and it hereby is, amended to read as follows, effective
        as
        of December 31, 2006:

      

      (3) 
Change
        in Payment Elections or Conditions on or Before December 31,
        2007:
        With respect to amounts subject to Code section 409A, an Eligible Management
        Associate may make a new payment election on or before December 31, 2007,
        as
        permitted by IRS Notice 2006-79; and the election will not be treated as
        a
        change in the timing and form of payment under Code section 409A(a)(4) or
        an
        acceleration of a payment under Code section 409A(a)(3); provided, however,
        that
        an Eligible Management Associate cannot in 2006 or 2007 change a payment
        election with respect to payments that the Eligible Management Associate
        would
        otherwise receive in 2006 or 2007, respectively, or cause payments to be
        made in
        2006 or 2007, respectively. Any election made by an Eligible Management
        Associate on or before December 31, 2007 (including an election made before
        January 1, 2005) that applies to an amount accrued under the Plan subject
        to
        Code section 409A will be treated as a new election under this paragraph
        unless
        an election in 2006 or 2007 would apply to amounts that otherwise would be
        payable in 2006 or 2007, respectively. 

      

      RESOLVED
        that paragraph (3) of Article X of the J. C. Penney Corporation, Inc. Benefit
        Restoration Plan be, and it hereby is, amended to read as follows, effective
        as
        of December 31, 2006: 

      

      (3) 
Change
        in Payment Elections or Conditions on or Before December 31,
        2007:
        With respect to amounts subject to Code section 409A, a Participant may make
        a
        new payment election on or before December 31, 2007, as permitted by IRS
        Notice
        2006-79; and the election will not be treated as a change in the timing and
        form
        of payment under Code section 409A(a)(4) or an acceleration of a payment
        under
        Code section 409A(a)(3); provided, however, that a participant cannot in
        2006 or
        2007 change payment elections with respect to payments that the Participant
        would otherwise receive in 2006 or 2007, respectively, or cause payments
        to be
        made in 2006 or 2007, respectively. Any election made by a Participant on
        or
        before December 31, 2007 (including an election made before January 1, 2005)
        that applies to an amount accrued under the Plan subject to Code section
        409A
        will be treated as a new election under this paragraph unless an election
        in
        2006 or 2007 would apply to amounts that otherwise would be payable in 2006
        or
        2007, respectively.

      

      RESOLVED
        that, Section 10.03 of the J. C. Penney Corporation, Inc. Mirror Savings
        Plan
        and Mirror Savings Plans I and III be, and it hereby is, amended to read
        as
        follows, effective as of December 31, 2006:

      

      
        
          2

        

        
          
          

          
          

        

        
          
          

        

      

      
        	 	
                10.03

              	
                Change
                  in Payment Elections or Conditions on or Before December 31,
                  2007 

              

      

      

      With
        respect to amounts subject to Code section 409A, a Participant may make a
        new
        payment election on or before December 31, 2007, as permitted by IRS Notice
        2006-79; and the election will not be treated as a change in the timing and
        form
        of payment under Code section 409A(a)(4) or an acceleration of a payment
        under
        Code section 409A(a)(3); provided, however, that a participant cannot in
        2006 or
        2007 change payment elections with respect to payments that the Participant
        would otherwise receive in 2006 or 2007, respectively, or to cause payments
        to
        be made in 2006 or 2007, respectively. Any election made by a Participant
        on or
        before December 31, 2007 (including an election made before January 1, 2005)
        that applies to an amount accrued under the Plan subject to Code section
        409A
        will be treated as a new election under this paragraph unless an election
        in
        2006 or 2007 would apply to amounts that otherwise would be payable in 2006
        or
        2007, respectively.

      

      RESOLVED
        that the definitions of the terms "Pension Benefit" and "Unrestricted Benefit"
        in Article I (Definitions) of the BRP be, and they hereby are, amended effective
        for distributions commencing after December 31, 2006, to read as
        follows:

      

      Pension
        Benefit:
        The monthly benefit that is payable to a Participant  pursuant
        to the provisions of the Pension Plan in the form of a single-life,  no-death-benefit
        annuity, assuming the Participant's benefit commencement  date
        under the Pension Plan is the first day of the month immediately  following
        the date of the Participant's Separation from Service; provided,  however,
        that the applicable terms of the Pension Plan as in effect on  October
        3, 2004, are to be applied in calculating the monthly benefit  earned
        and vested under the Pension Plan as of December 31, 2004, and to  which
        the Participant had a legally binding right.

      

      Unrestricted
        Benefit:
        The monthly benefit that would be payable to a Participant pursuant to the
        provisions of the Pension Plan in the form of a single-life, no-death-benefit
        annuity, assuming the Participant's benefit commencement date under the Pension
        Plan is the first day of the month immediately following the date of the
        Participant's Separation from Service, if the Participant's benefit under
        the
        Pension Plan were determined without applying the provisions of the Pension
        Plan
        relating to the limitation on compensation under Section 401(a) (17) of the
        Code
        or the limitation on benefits under Section 415 of the Code; provided, however,
        that the applicable terms of the Pension Plan as in effect on October 3,
        2004,
        are to be applied in calculating the monthly benefit earned and vested under
        the
        Pension Plan as of December 31, 2004, and to which the Participant had a
        legally
        binding right.

      

      
        
          3

        

        
          
          

          
          

        

        
          
          

        

      

      RESOLVED
        that the last paragraph of subparagraph (b) of Paragraph (1) of Article IV
        of
        the SRP be, and it hereby is, amended to add the following sentence at the
        beginning of the paragraph effective for distributions commencing after December
        31, 2006:

      

      In
        determining the amount referred to in clause (i) of subparagraph (b) of this
        Paragraph (1) of this Article IV, the applicable terms of the Pension Plan
        as in
        effect on October 3, 2004, are to be applied in calculating the monthly benefit
        earned and vested under the Pension Plan as of December 31, 2004, and to
        which
        the Participant had a legally binding right.

      and;

      

      RESOLVED
        that the officers of the Company and its counsel be, and each of them hereby
        is,
        authorized to take all such further action, and to execute and deliver all
        such
        further instruments and documents, in the name and on behalf of the Company,
        and
        under its corporate seal or otherwise, and to pay all such expenses as shall
        in
        their judgment be necessary, proper, or advisable in order fully to carry
        out
        the intent and effectuate the purposes of the foregoing resolutions and each
        of
        them.

    

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
4J. C. Penney Company, Inc. 2005 Equity Compensation Plan

    Exhibit
      10.3

    

    

    

    

    

    

    

    

    

    J.
      C. Penney Company, Inc. 

    2005
      Equity Compensation Plan 

    

    

    

    

    As
      Amended to December 31, 2007

     

     

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    J.
      C. PENNEY COMPANY, INC. 

    2005
      EQUITY COMPENSATION PLAN 

    

    INTRODUCTION 

    

    1.     Purposes
      of Plan.
      The
      general purposes of this 2005 Equity Compensation Plan (“Plan”) are to provide
      associates and non-associate directors of J. C. Penney Company, Inc., its
      subsidiaries and affiliates, or any unit thereof (together referred to herein
      as
“Company”), an opportunity to increase their proprietary interests as
      stockholders in order to motivate them to continue and increase their efforts
      on
      the Company’s behalf to sustain its progress, growth, and profitability, and to
      assist the Company in continuing to attract and retain associates and
      non-associate directors capable of assuring the Company’s future success. Terms
      and conditions of awards shall be governed by the terms of this Plan along
      with
      the Plan Determinations (“Determinations”) as approved by the Human Resource and
      Compensation Committee of the Company, and the Notice of Grant of the particular
      award. This Plan permits the grant of stock options, stock appreciation rights,
      restricted stock and stock units, stock, and cash incentive awards, each as
      will
      be subject to such conditions based upon continued employment, passage of time
      or satisfaction of performance criteria as shall be specified pursuant to the
      Plan or set by the Committee (as defined in Section 5 below). 

    

    2.     Shares
      Subject to Plan. 

         
        

    (a) Reserved
      Shares.
      The
      maximum number of shares of J. C. Penney Company, Inc. Common Stock of 50¢ par
      value (“Common Stock”) upon which options to purchase shares of Common Stock
      (“Stock Options”), stock appreciation rights (“SARs”), or awards of Common Stock
      or share units (“Stock Awards”), (“Stock Options,” “SARs,” and “Stock Awards”
herein collectively called “Equity Awards”), may be issued under the Plan is
      14,400,000 shares, plus up to 2,800,000 shares which on May 31,
      2005 are reserved but not then subject to awards under the Company’s 2001 Equity
      Compensation Plan (referred to herein as the “Prior Plan”). In no event may more
      than: (i) 30% of the shares reserved for issuance under the Plan be issued
      as Stock Awards over the term of the Plan; (ii) 5,000,000 shares of
      Common Stock be issued pursuant to incentive stock options (“ISOs”) within the
      meaning of Section 422 of the Internal Revenue Code of 1986, and any
      regulations promulgated thereunder, or any similar successor statute or
      regulation, as in effect from time to time (“Code”) over the term of the Plan;
      or (iii) 1,000,000 shares of Common Stock be issued as Stock Awards
      that are intended to qualify as performance-based compensation for purposes
      of
      Section 162(m) of the Code in any one year for any one Associate
      Participant. Notwithstanding anything contained herein to the contrary, the
      number of Equity Awards, singly (as defined in Section 4 below) or in
      combination, granted to any associate or non-associate director in any two
      consecutive fiscal years shall not in the aggregate exceed 3,000,000.

         
        

    (b) Share
      Accounting.
      Common
      Stock issuable under the Plan may be, in whole or in part, as determined by
      the
      J. C. Penney Company, Inc. Board of Directors (“Board of Directors” or “Board”),
      authorized but unissued shares, reacquired or treasury shares, or shares
      available from prior plans. If any Stock Option or SAR granted under the Plan
      (or any prior Plan) expires or terminates for any reason without having been
      exercised in full, or if any Stock Award is not earned in full, the unpurchased
      or unearned shares will again be available for use under the Plan. Also, the
      pool of shares available under the Plan will not be reduced if any Equity Award
      is paid in cash rather than shares of Common Stock. “Common Stock” includes any
      security issued in substitution, exchange, or in lieu thereof. Also, any option
      to purchase securities assumed in an acquisition of another company will not
      be
      included in the pool of shares available under the Plan. 

    

    3.  Cash
      Incentive Awards.
      The
      Committee may grant cash incentive awards (“Cash Incentive Awards”) to Associate
      Participants on such terms and conditions as the Committee may determine, but
      in
      all instances in compliance with Section 409A of the Code or any exemptions
      thereto. Cash Incentive Awards are performance-based (see Section 9 below),
      annual or long-term awards that are expressed in U.S. currency. Cash
      Incentive Awards to any individual associate may not exceed the product
      of $1,500,000 and the number of years in the Performance Cycle (as defined
      in
      Section 9 below). (Equity Awards and Cash Incentive Awards are herein
      collectively referred to as “Awards”.) 

    

    4.     Eligibility
      and Bases of Participation.
      Under
      the Plan: (i) Awards may be made to such associates, including officers and
      associate directors of the Company, as the Committee (as hereinafter defined)
      may determine (“Associate Participants”); and (ii) Equity Awards will be
      made pursuant to Section 13 below, to individuals who serve as
      non-associate directors of the Company (“Non-Associate Director Participants”
and,

    
      
        A-1

      

      
        
        

        
        

      

      
        
        

      

    

    together
      with Associate Participants, “Participants”). In determining the Associate
      Participants who are to receive Awards and the number of shares covered by
      any
      Award, the Committee may take into account the nature of the services rendered
      by the Associate Participants, their contributions to the Company’s success,
      their position levels and salaries, and such other factors as the Committee,
      in
      its discretion, may deem relevant in light of the purposes of the Plan.

    

    5.     Administration
      of Plan.
      The
      Plan will be administered by, or under the direction of, a committee
      (“Committee”) of the Board of Directors constituted in such a manner as to
      comply at all times with Rule 16b-3 or any successor rule
      (“Rule 16b-3”) promulgated by the Securities and Exchange Commission
      (“SEC”) under the Securities Exchange Act of 1934, as in effect from time to
      time (“Exchange Act”) and Section 162(m) of the Code. The Committee shall
      administer the Plan so as to comply at all times with the Exchange Act and
      the
      Code, and shall otherwise have plenary authority to interpret the Plan and
      to
      make all determinations specified in or permitted by the Plan or deemed
      necessary or desirable for its administration or for the conduct of the
      Committee’s business. All interpretations and determinations of the Committee
      may be made on an individual or group basis, and shall be final, conclusive,
      and
      binding on all interested parties. The Committee may delegate, to the fullest
      extent permitted by law, its responsibilities under the Plan to persons other
      than its members, subject to such terms and conditions as it may determine,
      other than: (i) the making of grants and awards under the Plan to
      individuals subject to Section 16 of the Exchange Act; and
      (ii) regarding performance-based Awards intended to be qualified under
      Section 162(m) of the Code. With respect to Participants subject to
      Section 16 of the Exchange Act, transactions under the Plan are intended to
      comply with all applicable conditions of Rule 16b-3. To the extent any
      provision of the Plan or any action by the Committee or its delagatee fails
      to
      so comply, such provision or action will, without further action by any person,
      be deemed to be automatically amended to the extent necessary to effect
      compliance with Rule 16b-3, provided that if such provision or action
      cannot be amended to effect such compliance, such provision or action will
      be
      deemed null and void, to the extent permitted by law and deemed advisable by
      the
      relevant authority. Each Award to a Participant subject to Section 16 of
      the Exchange Act under this Plan will be deemed issued subject to the foregoing
      qualification. Further,
      except as otherwise specifically provided in the Notice of Grant, Awards under
      this Plan are intended to be exempt from Section 409A of the Code and the Plan
      shall be interpreted accordingly. 

    

    ASSOCIATE
      PARTICIPANT AWARDS 

    

    
      	6.  	
              Stock
                Options. 

            

    

    

         
       (a) Grants.
      The
      Committee may grant Stock Options to Associate Participants on such terms and
      conditions as the Committee may determine. These Stock Options may be ISOs
      within the meaning of Section 422 or any successor provision of the Code,
      or non-qualified stock options within the meaning of the Code (“NSOs”), or a
      combination of both; provided, however, that an Associate Participant must
      be an
      associate of the Company or its subsidiaries in order to receive an ISO grant.
      In no event, however, may an Associate Participant be given an ISO grant which
      first becomes exercisable in any calendar year which, when added to all other
      ISO grants held by such Associate Participant that first become exercisable
      in
      that calendar year, causes the aggregate dollar amount of such ISO grants to
      exceed $100,000. The date of grant of each Stock Option will be the date
      specified by the Committee; provided, however, that such date of grant may
      not
      be prior to the date of such action by the Committee. 

    

          
      (b) Payment
      Methods.
      The
      option price (and, as provided in Section 15 of the Plan, any applicable
      taxes thereon) of the shares as to which a Stock Option is exercised will be
      paid in such manner as the Committee may determine in accordance with the Plan’s
      purposes, including: (i) in cash; (ii) in
      shares of Common Stock that have been held for a period of at least six months
      and a day; or (iii) in any combination of (i) or (ii) above. Each
      Stock Option will have such terms and conditions for its exercise, including
      the
      manner and effective date of such exercise, as the Committee may determine,
      except as otherwise specifically provided herein. However, a Stock Option grant
      or its equivalent may not vest in whole in less than three years from the date
      of grant (although individual options may vest in equal annual installments
      over
      a period of not less than three years) except in certain limited situations
      such
      as for new hires, retirement and similar situations warranting a shorter or
      no
      vesting period, as may be determined by the Committee, and, if the grant is
      performance-based, the restriction must be for at least one year. 

    

          
      (c)     Option
      Price/Repricing.
      The
      option price per share of Common Stock purchasable under a Stock Option will
      be
      determined by the Committee (or, for Associate Participants not subject to
      Section 16 of the

    
      
        A-2

      

      
        
        

        
        

      

      
        
        

      

    

    Exchange
      Act, its delagatee, pursuant to Section 5 above) at the time of grant;
      provided, however, no such price may be less than 100% of the “fair market
      value” of the shares of Common Stock covered by the grant on such date. Also, in
      no event may any Stock Option exercise price be reset from its original grant
      price. 

    

          "Fair
      market value” of the Common Stock on any date will be the closing price on such
      date as reported in the composite transaction table covering transactions of
      New
      York Stock Exchange listed securities, or if such Exchange is closed, or if
      the
      Common Stock does not trade on such date, the closing price reported in the
      composite transaction table on the last trading date immediately preceding
      such
      date, or such other amount as the Committee may ascertain reasonably to
      represent such fair market value; provided however, that such determination
      shall be in accordance with the requirements of Treasury Regulation section
      1.409A-1(b)(5)(iv), or its successor.

    

          
      (d) Exercise
      of Stock Options.
      Each
      Stock Option will become exercisable upon such date as the Committee may
      determine, or as provided in Sections 10 or 11 of the Plan, and may be
      exercised thereafter at any time during its term, as to any or all full shares
      which have become purchasable under the provisions of the Stock Option. The
      term
      of each Stock Option may not exceed: (i) 10 years in the case of an
      ISO or such other term as may be required for the Stock Option to constitute
      an
      ISO under the Code; and (ii) in the case of a NSO, 10 years or such
      shorter period of time as determined by the Committee on the date of grant
      (“exercise period”), in each case measured from the date of its grant. Except as
      provided in Section 11 or 14 of the Plan, a Stock Option may be exercised
      only by the Associate Participant, and only if the Associate Participant is
      then
      an associate of the Company, or of a subsidiary or affiliate of the Company.
      

    

    7.     Stock
      Awards.
      The
      Committee may grant a Stock Award (including any associated dividend equivalent
      right or share unit equal in value to such Stock Award) to Associate
      Participants on such terms and conditions as the Committee may determine. The
      Committee may determine the types of Stock Awards made, the number of shares,
      share units, or dividend equivalent rights covered by such awards, and any
      other
      terms and conditions relating to the Stock Awards as it deems appropriate,
      including any vesting conditions necessary to comply with the laws of the State
      of Delaware. However, a Stock Award or its equivalent that is restricted may
      not
      vest in whole in less than three years from the date of grant (although
      individual Stock Award shares may vest in equal annual installments over a
      period of not less than three years) except in certain limited situations such
      as for new hires, retirement and similar situations warranting a shorter or
      no
      vesting period, as may be determined by the Committee. 

      

        
      Any dividend equivalent paid as part of a restricted stock unit award will
      be
      reinvested in additional restricted stock units that will accumulate over the
      vesting period of the underlying restricted stock units and vest, if ever,
      concurrently with the underlying restricted stock units. Subject to Section
      22,
      payment of a restricted stock unit award and any dividend equivalents thereto
      will be made no later than 2 1⁄2 months following the end of the Company’s fiscal
      year in which the restricted stock unit award vests. 

    

    8.     Stock
      Appreciation Rights.
      The
      Committee may grant SARs covering shares of Common Stock to Associate
      Participants on such terms and conditions as the Committee may determine. The
      Committee may cancel or place limits on the term of or amount payable by the
      Company upon exercise of any SAR at any time prior to exercise. SARs may be
      granted independently or in tandem with any other
      Award under the Plan. Tandem SARs may be granted concurrently with or subsequent
      to the grant of the related Award. An SAR will entitle an Associate Participant
      to receive an amount no greater than the excess of the fair market value of
      a
      share of Common Stock on the date of exercise over the SAR exercise price,
      multiplied by the number of shares of Common Stock with respect to which the
      SAR
      will have been exercised. Such payment may be made by the Company only in shares
      of Common Stock. The SAR exercise price will be determined by the Committee
      at
      the time of grant; provided, however, that no such price may be less than 100%
      of the fair market value of the shares of Common Stock covered by the grant
      on
      such date. Upon exercise of a tandem SAR, in whole or in part, the related
      Award
      will be canceled or forfeited automatically to the extent of the number of
      shares covered by such exercise and, conversely, if a tandem Award is exercised,
      forfeited, or terminated, as the case may be, for any reason, in whole or in
      part, the related SAR will be canceled automatically to the extent of the number
      of shares covered by such exercise, forfeiture, or termination. 

    

    9.     Performance-Based
      Awards.
      Any
      Award granted pursuant to the Plan may be in the form of a performance-based
      award made through the application of Performance Goals and Performance Cycles,
      which are defined as follows: 

    
      
        A-3

      

      
        
        

        
        

      

      
        
        

      

    

        (a) “Performance
      Cycle”
      means
      the period selected by the Committee during which the performance of the Company
      or any Associate Participant is measured for the purpose of determining the
      extent to which an Award subject to Performance Goals has been earned. A
      Performance Cycle may not be less than one year. 

    

         
       (b) “Performance
      Goals”
      means
      the objectives for the Company or any Associate Participant that may be
      established by the Committee for a Performance Cycle with respect to any
      Performance-Based Award contingently awarded under the Plan. The Performance
      Goals for Awards that are intended to constitute “performance-based”
compensation within the meaning of Section 162(m) of the Code shall be
      based on one or more of the following criteria: earnings per share, total
      stockholder return, operating income, net income, cash flow, gross profit,
      gross
      profit return on investment, return on equity, return on capital, sales,
      revenue, gross margin, and gross margin return on investment. 

    

         
        (c) Vesting.
      A
      Performance-Based Award, other than a restricted Equity Award, may not vest,
      or
      be deemed to be earned, in whole in less than three years from the date of
      grant
      (though portions of an individual award may vest or be deemed to be earned
      in
      equal annual installments over a period of not less than three years). A
      Performance-Based Award to be paid out as a restricted Equity Award may not
      have
      a vesting period of less than one year. Subject to Section 22, payment of any
      portion of a Cash Incentive Award and all earnings will be made no later than
      2
1⁄2 months following the end of the Company’s fiscal year.

    

    10.     Change
      in Control.
      For
      purposes of this Section 10, all references to “Company” are to
      J. C. Penney Company, Inc. Upon a Change in Control of the Company,
      each Associate Participant will have the right to exercise any and all Stock
      Options and SARs held by the Associate Participant, and all Stock Awards will
      immediately vest, be deemed to have been earned and any Performance Goal for
      the
      then applicable Performance Cycle met, on such terms and conditions as may
      be
      determined by the Committee at the time of the grant or award provided, further,
      that any vested Stock Awards that are restricted stock units or vested Cash
      Incentive Awards, shall be distributed no later than the deadline for
      distribution specified in Sections 7 and 9 above. The Committee may exercise
      discretion to terminate the Plan upon a Change in Control event and distribute
      amounts within 12 months of the Change of Control event. 

         

    For
      purposes of the Plan, a “Change in Control” is defined by Section 409A of
      the Code, and any regulations and guidance promulgated under this Section as
      set
      forth in the Committee’s determinations for the applicable grants under the
      Plan. 

    

    11.     Changes
      in Employment Status, Death.
      In the
      event of an Associate Participant’s termination of employment, layoff,
      incapacity or death (regardless of whether the deceased was employed at death),
      the Committee may determine the terms and conditions applicable to any Award
      previously granted to the Associate Participant and not then exercised or earned
      in full, as the case may be, including, without limitation: (i) the
      duration of any exercise period following such event (which may not exceed
      the original exercise period for a Stock Option or SAR, or if shorter, the
      tenth
      anniversary of the original date of grant); (ii) any necessary or
      appropriate authorization to the Associate Participant’s legatee, distributee,
      guardian, legal representative, or other third party, as the Committee may
      determine; or (iii) the circumstances under which all or part of such Stock
      Options and SARs may be terminated and any unearned Stock Awards forfeited
      or
      Cash Incentive Awards paid. All determinations by the Committee with respect
      to
      the foregoing shall be final, conclusive, and binding on all interested parties.
      

    

    12.     Right
      to Continued Employment.
      Nothing in the Plan shall confer on an Associate Participant any right to
      continue in the employ of the Company or any of its subsidiaries or affiliates
      or affect in any way the right of the Company or any of its subsidiaries or
      affiliates to terminate such Associate Participant’s employment without prior
      notice at any time for any reason or for no reason. 

    

    NON-ASSOCIATE
      DIRECTOR PARTICIPANT AWARDS 

    

    13.     Annual
      Awards 

          

    (a) General
      Provisions.
      Subject to the terms and conditions of this section, each person who is serving
      as a non-associate director of the Company on the date of grant of an Equity
      Award (including any former Associate Participant) (“Non-Associate Director
      Participant”) will automatically be awarded an Annual Equity Award in an amount
      which the Board of Directors determines, based upon the advice of outside
      consultants, to be competitive by industry standards, and pursuant to such
      terms, conditions, and restrictions as determined by the Board
      of

    
      
        A-4

      

      
        
        

        
        

      

      
        
        

      

    

    Directors
      (the “Annual Equity Award”). These Annual Equity Awards will begin in 2006
      (except for any pro
      rata award
      for a newly elected director which may occur at any time on or after the
      effective date of the Plan) and continue through May 31, 2010, unless
      earlier terminated by the Board of Directors. The date of each Annual Equity
      Award will be the third full trading date following the later of: (i) the
      date on which the Annual Meeting of the Company’s stockholders, or any
      adjournment thereof, is held (“Annual Meeting”); or (ii) the date on which
      the Company’s earnings for the fiscal quarter immediately preceding such Annual
      Meeting date are released to the public. Also, Equity Awards in a pro
      rata amount
      of the Annual Equity Award for that year, based on the date of election, will
      automatically be granted to each individual (other than a former Company
      Associate Participant) who is first elected a Non-Associate Director after
      May 31, 2005, on the third full trading date following the effective date
      of such election. 

    

       (b) Right
      to Tender, Exchange.
      A
      Non-Associate Director Participant (including for purposes of this paragraph
      a
      Non-Associate Director Participant’s guardian or legal representative) will
      have, with respect to any shares covered by an Annual Equity Award and any
      shares already received pursuant to an Annual Equity Award under this Plan,
      the
      right to: (i) tender or exchange any such shares in the event of any tender
      offer or exchange within the meaning of Section 14(d) of the Exchange Act
      or any plan of merger approved by the Board; and (ii) sell or exercise any
      option, right, warrant, or similar property derived from or attributable to
      such
      shares after such option, right, warrant, or similar property becomes
      transferable or exercisable. If any shares covered by an Annual Equity Award
      are
      tendered or exchanged or any option, right, warrant, or similar property
      attributable thereto is sold, exercised, or redeemed for value, the cash and/or
      property received will be delivered to the Company (or its successor) and held
      subject to the restrictions of the Plan as if it were the stock itself.

         
       

    (c) Non-Transferability.
      A
      Non-Associate Director Participant may not transfer, sell, assign, pledge,
      or
      otherwise encumber or dispose of any shares of Common Stock received in
      connection with an Annual Equity Award prior to the time his or her service
      as a
      director expires or is terminated, other than
      by
      will or the laws of descent and distribution or by such other means as the
      Committee, in its discretion, may approve from time to time and any attempt
      to
      do so will be void. 

         
      

    (d) Non-Associate
      Director Participant’s Termination.
      If a
      Non-Associate Director Participant’s service as a director of the Company
      terminates on account of any act of: (i) fraud or intentional
      misrepresentation; or (ii) embezzlement, misappropriation, or conversion of
      assets or opportunities of the Company or any subsidiary of the Company, such
      termination will be considered a “Non-Qualifying Termination.” All other
      terminations, including termination by reason of death, will be considered
      “Qualifying Terminations”. In the event of a Non-Qualifying Termination, all
      outstanding restricted Awards made pursuant to this Section will be forfeited
      or
      canceled, as the case may be. 

         
      

    (e) Stock
      In Lieu of Cash.
      A
      Non-Associate Director Participant may also elect to receive Common Stock in
      lieu of the cash compensation payable for services rendered as a director,
      so
      long as such election is made in accordance with Section 16 of the Exchange
      Act and on such other terms and conditions as may be determined from time to
      time by the Board of Directors. Any such Common Stock issued to a Non-Associate
      Director Participant in lieu of cash compensation will automatically vest
      (become non-forfeitable and freely transferable) in the Non-Associate Director
      Participant on the date of issuance. 

    

    GENERAL 

    

    14.     Transferability.
      No
      unearned Award, or any portion thereof, granted under the Plan may be assigned
      or transferred other than by will or the laws of descent and distribution or
      by
      such other means as the Committee, in its discretion, may approve from time
      to
      time and any attempt to do so will be void. No Stock Option or SAR will be
      exercisable during the Associate Participant’s lifetime except by the Associate
      Participant or the Associate Participant’s guardian or legal representative, or
      other third party, as the Committee may determine. 

    

    15.     Taxes.
      The
      Company has the right to deduct from any cash payment made under the Plan,
      or
      otherwise, to any Associate Participant, including an Associate Participant
      subject to Section 16 of the Exchange Act, any federal, state, or local
      taxes of any kind required by law to be withheld by it (“Withholding
      Obligation”) with respect to such payment. The Withholding Obligation will be
      limited to the minimum statutory rate. The Company’s obligation to deliver
      shares of Common Stock pursuant to any Award under the Plan is conditioned
      on
      the payment by the Associate Participant to the Company of any Withholding
      Obligation arising therefrom. The Company may withhold, in satisfaction of
      all
      or a portion of such Withholding Obligation referred to in the preceding
      sentence, that

    
      
        A-5

      

      
        
        

        
        

      

      
        
        

      

    

    number
      of shares of Common Stock having an aggregate fair market value sufficient
      to
      satisfy the amount of such obligation. 

    

    16.    
      Changes
      in Capitalization and Similar Changes.
      In the
      event of any change in the number of shares of Common Stock outstanding, or
      the
      assumption and conversion of outstanding Awards, by reason of a stock dividend,
      stock split, acquisition, recapitalization, reclassification, merger,
      consolidation, combination or exchange of shares, spin-off, distribution to
      holders of Common Stock (other than normal cash dividends), an equitable and
      proportionate adjustment shall be made to: (1) the option price under each
      unexercised Stock Option; (2) the exercise price under each unexercised SAR;
      and
      (3) the number and class of shares which may be issued on exercise of Stock
      Options and SARs granted and for Stock Awards, including restricted stock units,
      and any remaining shares reserved under the Plan. Any such adjustment with
      respect to each Stock Option or SAR shall be consistent with the requirements
      applicable to exempt stock rights under Treasury Regulations section
      1.409A-1(b)(5) or its successor. Any adjustment with respect to ISOs shall
      also
      conform to the requirements of Section 422 of the Code. 

    

    17.     Stockholder
      Rights.
      A
      Participant (including for purposes of this Section, a Participant’s legatee,
      distributee, guardian, legal representative, or other third party, as the
      Committee may determine) will have no stockholder rights with respect to any
      shares subject to an Award until such shares are issued to such Participant.
      Shares will be deemed issued on the date on which they are registered
      in the Participant’s (as this term is defined in the preceding sentence) name on
      the Company stock records. 

    

    18.     Effective
      Date.
      The
      Plan will become effective on June 1, 2005, subject to approval by the
      affirmative vote of the holders of a majority of the outstanding stock of the
      Company having general voting power at the Company’s 2005 Annual Meeting of
      Stockholders. 

    

    19.     Termination
      and Amendment.
      No
      Award may be made under the Plan after May 31, 2010. The Board of Directors
      may terminate the Plan or make such amendments as it deems advisable, including,
      but not limited to, any amendments to conform to or reflect any change in any
      law, regulation, or ruling applicable to an Award or the Plan, provided,
      however, that the Board of Directors may not, without approval by affirmative
      vote of the holders of a majority of the outstanding stock of the Company having
      general voting power: (i) take any action which will increase the aggregate
      number of shares of Common Stock which may be issued under the Plan (except
      for
      adjustments pursuant to Sections 2 and 16 of the Plan); (ii) decrease
      the grant or exercise price of any Award to less than fair market value of
      its
      underlying Common Stock on the date of grant; (iii) change the individual
      award limits found in Sections 2 and 3 or any other maximum limit included
      in the Plan to comply with requirements for performance-based compensation
      under
      Section 162(m) of the Code; (iv) change the separate limit for ISOs
      set forth in Section 2; (v) change the class of Associate Participants
      eligible for Awards under Section 4; or (vi) change the performance
      criteria applicable to Performance-Based Awards under Section 9. Except as
      otherwise provided in or permitted by the Plan or by the terms, if any, of
      an
      Award under the Plan, no termination or amendment of the Plan or change in
      the
      terms of an outstanding Award may adversely affect the rights of the holder
      of
      any Award without the consent of the holder. 

    

    20.     Severability
      of Provisions.
      If any
      provision of this Plan becomes or is deemed invalid, illegal, or unenforceable
      in any jurisdiction, or if any such provision would, in the sole determination
      of the Committee, disqualify the Plan or any Award under any law deemed
      applicable by the Committee, such provision will be construed or deemed amended
      to conform to applicable law or if, in the sole determination of the Committee,
      such provision cannot be so construed or so deemed amended without materially
      altering the intent of the Plan, such provision will be stricken and the
      remainder of the Plan will remain in full force and effect. 

    

    21.     Governing
      Law.
      This
      Plan will be governed by the internal laws of the State of Delaware, regardless
      of the dictates of Delaware conflict of laws provisions. 

    

    22. Deferred
      Payments.
      Unless
      specifically provided for in the Notice of Grant, no Equity Award shall provide
      any feature for the deferral of compensation as defined by Treasury Regulation
      section 1.409A-1(b). ). Any
      deferral will be for such period and in accordance with the terms and conditions
      as the Committee may determine and must be in compliance with Code
      Section 409A. The terms and conditions applicable to such deferral and the
      terms and conditions evidencing compliance with Code Section 409A shall be
      set
      forth in the Notice of Grant. The method of payment for, and type and character
      of, any Award may not be altered by any deferral permitted under this Section
      unless specifically permitted under Code Section 409A and the Treasury
      Regulations thereunder. 

    A-6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}]]