Exhibit 10.1
J. C. PENNEY CORPORATION, INC.
CHANGE IN CONTROL PLAN
AS AMENDED AND RESTATED
Effective March 27, 2008
J. C. PENNEY CORPORATION, INC.
CHANGE IN CONTROL PLAN
TABLE OF CONTENTS
Article
Page
ARTICLE ONE
INTRODUCTION...............................................................................
1
ARTICLE TWO
DEFINITIONS....................................................................................
3
ARTICLE THREE
ELIGIBILITY AND PARTICIPATION ............................................
11
ARTICLE FOUR
BENEFITS...........................................................................................
12
ARTICLE FIVE
AMENDMENT AND TERMINATION.............................................
24
ARTICLE SIX
MISCELLANEOUS............................................................................
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APPENDIX I
PARTICIPATING EMPLOYERS....................................................
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J. C. PENNEY CORPORATION, INC.
CHANGE IN CONTROL PLAN
ARTICLE ONE
INTRODUCTION
1.01
Purpose Of Plan
The J.C. Penney Corporation, Inc. Change in Control Plan (the "Plan") consists primarily of (i) severance benefits, (ii) additional cash benefits after termination of employment to be paid outside of the
Corporation's non-qualified retirement plans and (iii) a cash amount payable at Employment Termination equal to the Corporation' s cost of health and welfare benefits the associate participated
in immediately prior to the Change in Control. The purpose and intent of the Plan is to attract and retain key associates and to improve associate productivity by reducing distractions resulting from a potential Change in Control situation, all of
which are in the best interest of the Corporation, and J.C. Penney Company, Inc. and its stockholders.
Capitalized terms used throughout the Plan have the meanings set forth in Article Two except as otherwise defined in the Plan, or the context clearly requires otherwise.
1.02
Plan Status
The Plan is intended to be a plan providing Severance Pay and certain other benefits following a Change in Control. The Plan is intended to be a top hat plan for a select group of management or highly compensated executives,
subject only to the administration and enforcement provisions of ERISA. To the extent applicable, it is intended that portions of this Plan either comply with or be exempt from the provisions of Code Section 409A. This Plan shall be administered
in a manner consistent with this intent and any provision that would cause this Plan to fail to either comply with or be exempt from Code Section 409A, as the case may be, shall have no force and effect.
1.03
Entire Plan
This document, including any Appendix hereto, and any documents incorporated by reference set forth the provisions of the Plan effective as of the Effective Date, except as otherwise provided herein.
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1.04
Administration
The Human Resources and Compensation Committee of the Board ("Committee") shall administer the Plan, provided, however, that none of the members of the Committee will be a Participant. The powers and duties
of the Committee in administering the Plan are set forth in Article Six.
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ARTICLE TWO
DEFINITIONS
2.01
For purposes of this Plan the following terms shall have the following meanings:
Accounting Firm means a nationally recognized accounting firm, or actuarial, benefits or compensation consulting firm, (with experience in performing the calculations
regarding the applicability of Section 280G of the Code and of the tax imposed by Section 4999 of the Code) selected by the Corporation prior to a change in control (as defined in Section 4.09(h) of this Plan) or Change in Control.
Board means the Board of Directors of J.C. Penney Company, Inc.
Change in Control means the occurrence of any of the following events:
(i)
any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of the combined voting power of the then-outstanding Voting Stock of the Company or Corporation; provided , however
, that:
(1)
for purposes of this Section (i)(1), the following acquisitions shall not constitute a Change in Control: (A) any acquisition of Voting Stock of the Company or Corporation directly from the Company or Corporation
that is approved by a majority of the Incumbent Directors, (B) any acquisition of Voting Stock of the Company or Corporation by the Company or any Subsidiary, (C) any acquisition of Voting Stock of the Company or Corporation by the trustee or other
fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, and (D) any acquisition of Voting Stock of the Company or Corporation by any Person pursuant to a Business Transaction
that complies with clauses (A), (B) and (C) of Section (iii) below;
(2)
if any Person becomes the beneficial owner of 20% or more of combined voting power of the then-outstanding Voting Stock of the Company or Corporation as a result of a transaction described in clause (A) of Section (i)(1)
above and such Person thereafter becomes the beneficial owner of any additional shares of Voting Stock of the Company or Corporation representing 1% or more of the then-
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outstanding Voting Stock of the Company or Corporation, other than in an acquisition directly from the Company or Corporation that is approved by a majority of the Incumbent Directors or other than as a result
of a stock dividend, stock split or similar transaction effected by the Company or Corporation in which all holders of Voting Stock are treated equally, such subsequent acquisition shall be treated as a Change in Control;
(3)
a Change in Control will not be deemed to have occurred if a Person becomes the beneficial owner of 20% or more of the Voting Stock of the Company or Corporation as a result of a reduction in the number of shares
of Voting Stock of the Company or Corporation outstanding pursuant to a transaction or series of transactions that is approved by a majority of the Incumbent Directors unless and until such Person thereafter becomes the beneficial owner of any additional
shares of Voting Stock of the Company or Corporation representing 1% or more of the then-outstanding Voting Stock of the Company or Corporation, other than as a result of a stock dividend, stock split or similar transaction effected by the Company or
Corporation in which all holders of Voting Stock are treated equally; and
(4)
if at least a majority of the Incumbent Directors determine in good faith that a Person has acquired beneficial ownership of 20% or more of the Voting Stock of the Company or Corporation inadvertently, and such
Person divests as promptly as practicable but no later than the date, if any, set by the Incumbent Directors a sufficient number of shares so that such Person beneficially owns less than 20% of the Voting Stock of the Company or Corporation, then no Change
in Control shall have occurred as a result of such Person's acquisition; or
(ii)
a majority of the board of the Company or of the Corporation ceases to be comprised of Incumbent Directors; or
(iii)
the consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company or the Corporation, or the acquisition of the stock or assets
of another corporation, or other transaction (each, a "Business Transaction"), unless, in each case, immediately following such Business Transaction (A) the Voting Stock of the Company outstanding immediately prior to such Business Transaction
continues to represent (either by remaining
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outstanding or by being converted into Voting Stock of the surviving entity or any parent thereof), more than 50% of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting
from such Business Transaction (including, without limitation, an entity which as a result of such transaction owns the Company, Corporation or all or substantially all of the Company's or Corporation's assets either directly or through
one or more subsidiaries), (B) no Person (other than the Company, such entity resulting from such Business Transaction, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary or such entity resulting
from such Business Transaction) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such Business Transaction, and (C) at least a majority of
the members of the Board of Directors of the entity resulting from such Business Transaction were Incumbent Directors at the time of the execution of the initial agreement or of the action of the Board providing for such Business Transaction; or
(iv)
approval by the stockholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Transaction that complies with clauses (A), (B) and (C) of Section (iii).
Code shall mean the Internal Revenue Code of 1986, as amended and the proposed, temporary and final regulations promulgated thereunder. Reference to any section
or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection.
Company shall mean J. C. Penney Company, Inc., a
Delaware corporation, or any successor company.
Compensation shall mean the annual base salary rate of a Participant, plus the Participant' s target annual incentive compensation (at $1.00 per unit), under
the Corporation's Management Incentive Compensation Plan (or any successor plans thereto) for the fiscal year, all at the greater of the amount in effect on the date of the Change in Control or as of his/her Employment Termination
date. As applied to a Participant employed by an affiliate or Subsidiary of the Corporation, Compensation shall include the same elements of pay to the extent the affiliate or Subsidiary maintains similar or comparable pay
arrangements.
Corporation shall mean J. C. Penney Corporation, Inc., a Delaware corporation, or any successor company.
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Effective Date shall mean March 27, 2008. The Plan was first adopted effective March 21, 2006.
Employment Termination shall be deemed to have occurred when a Participant has a Separation from Service within two years after a Change in Control (or prior to
a Change in Control if the Participant has reasonably demonstrated that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control, or (ii) otherwise arose in connection
with or in anticipation of a Change in Control) because of either a Separation from Service for Good Reason or an Involuntary Separation from Service other than as a result of a Summary Dismissal. An Employment Termination shall not include a termination
by reason of the Participant's death, disability, voluntary quit other than a Separation from Service for Good Reason, or Normal Retirement.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder. Reference to any section or subsection
of ERISA includes reference to any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder. Reference to any section or subsection of the Exchange
Act includes reference to any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection.
Excise Tax shall mean, collectively, (i) the tax imposed by Section 4999 of the Code by reason of being "contingent on a change in ownership or control
? of the Company, within the meaning of Section 280G of the Code, or (ii) any similar tax imposed by state or local law, or (iii) any interest or penalties with respect to any excise tax described in clause (i) or (ii).
Good Reason within the meaning of Code section 409A and Treasury Regulation section 1.409A-1(n)(2)(i) or any successor thereto, shall mean a condition resulting
from any of the actions listed below taken by a Service Recipient, without the consent of the Participant, directed at a Participant:
(a) a material decrease in salary or incentive compensation opportunity (the amount paid at target as a percentage of salary under the Corporation's Management Incentive Compensation Program) as in effect immediately
prior to the Change in Control, or
(b) failure by the Service Recipient to pay the Participant a material portion of his/her current base salary, or incentive compensation within seven days of its due date, or
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(c) a material adverse change in reporting responsibilities, duties, or authority as compared with pre-Change in Control responsibilities, duties, or authority, or
(d) a material diminution in the authority, duties, or responsibilities of the supervisor to whom the Participant is required to report, including a requirement that a Participant report to a corporate officer or employee
instead of reporting directly to the Board of the Corporation, or
(e) a material diminution in the budget over which the Participant retains authority as compared to the pre-Change in Control budget, or
(f) the Service Recipient requires the Participant to have the Participant's principal location of work changed to a location more than 50 miles from the location thereof immediately prior to the Change in Control,
or
(g) discontinuance of any material paid time off policy, fringe benefit, welfare benefit, incentive compensation, equity compensation, or retirement plan (without substantially equivalent compensating remuneration or
a plan or policy providing substantially similar benefits) in which the Participant participates or any action that materially reduces such Participant's benefits or payments under such plans, as in effect immediately before the Change in Control.
Provided, however, that the Participant must provide notice to the Corporation of the existence of the condition described above within 90 days of the initial existence of the condition, upon the notice of which the Corporation
will have 30 days during which it or a Service Recipient may remedy the condition and not be required to pay any amount owed under this Plan. Any Separation from Service as a result of a Good Reason condition must occur within two years of the initial
existence of the condition in order for benefits to be due under this Plan. A Separation from Service for Good Reason will be treated as an Involuntary Separation from Service for purposes of this Plan.
Gross-Up Payment within the meaning of Code section 409A and Treasury Regulation section 1.409A-3(i)(1)(v) or any successor thereto, means a payment to reimburse
the Participant in an amount equal to all or a designated portion of the Federal, state, local, or foreign taxes imposed upon the Participant as a result of compensation paid or made available to the Participant by the Service Recipient, including the
amount of additional taxes imposed upon the Participant due to the Service Recipient's payment of the initial taxes on such compensation.
Incumbent Directors means the individuals who, as of the Effective Date hereof, are Directors of the Company or the Corporation, as the context requires, and any
individual becoming a Director subsequent to the date
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hereof whose election, nomination for election by the Company's or Corporation' s stockholders, or appointment, was approved by a vote of at least two-thirds of the
then Incumbent Directors (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination); provided
, however , that an individual shall not be an Incumbent Director if such individual's election or appointment to the Board occurs as a result of an actual or threatened election contest (as
described in Rule 14a-12(c) of the Exchange Act) with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.
Involuntary Separation from Service shall mean Separation from Service due to the independent exercise of the unilateral authority of the Service Recipient to terminate
the Participant's services, other than due to the Participant's implicit or explicit request, where the Participant was willing and able to continue performing services, within the meaning of Code section 409A and Treasury Regulation section 1.409A-1(n)(1)
or any successor thereto.
Normal Retirement shall mean retirement at or after a Participant's normal retirement date as determined in accordance with the J. C. Penney Corporation, Inc.
Pension Plan as in effect immediately prior to a Change in Control.
Participant shall mean each person appointed by the Board to the Executive Board allowing them to participate in the Plan as provided in Article Three and who continues
to be an Executive Board member immediately prior to a Change in Control.
Participating Employer shall mean the Corporation and any Subsidiary or affiliate of the Corporation which is designated as a Participating Employer under the Plan
by the Board, excluding, however, any division of the Corporation or of a Subsidiary or affiliate that is designated by the Board as ineligible to participate in the Plan. Appendix I contains a list of the Participating Employers currently participating
in the Plan that have adopted the Plan pursuant to Article Six.
Separation from Service within the meaning of Code section 409A and Treasury Regulation section 1.409A-1(h) or any successor thereto, shall mean the date a Participant
retires, dies or otherwise has a termination of employment with the Service Recipient. In accordance with Treasury Regulation section 1.409A-1(h) or any successor thereto, if a Participant is on a period of leave that exceeds six months and the Participant
does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period, and also, a Participant is presumed to have a Separation
from Service where the level of bona fide services performed
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(whether as an employee or an independent contractor) decreases to a level equal to 20 percent or less of the average level of services performed (whether as an employee or an independent contractor) by the Participant during the
immediately preceding 36-month period (or the full period of service to the Service Recipient if the employee has been providing services for less than the 36-month period).
Service Recipient shall mean the Corporation or any successor thereto, for whom the services are performed and with respect to whom the legally binding right to
compensation arises, and all persons with whom the Corporation would be considered a single employer under Code section 414(b) (employees of controlled group of corporations), and all persons with whom the Corporation would be considered a single employer
under Code section 414(c) (employees of partnerships, proprietorships, etc., under common control), using the "at least 50 percent" ownership standard, within the meaning of Code section 409A and Treasury Regulation section 1.409A-1(h)(3)
or any successor thereto.
Severance Pay shall mean the cash severance payments payable to a Participant pursuant to Section 4.01 of the Plan.
Severance Benefits shall mean Severance Pay and the other benefits described in Article Four of the Plan payable to a Participant.
Subsidiary shall mean any entity in which the Company, directly or indirectly, beneficially owns 50% or more of the Voting Stock.
Summary Dismissal shall mean a termination due to:
(a) any willful or negligent material violation of any applicable securities laws (including the Sarbanes-Oxley Act of 2002);
(b) any intentional act of fraud or embezzlement from the Corporation or Company;
(c) a conviction of or entering into a plea of nolo contendere to a felony that occurs during or in the course of the Participant's employment with the Corporation;
(d) any breach of a written covenant or agreement with the Corporation, which is material and which is not cured within 30 days after written notice thereof from the Corporation; and
(e) willful and continued failure of the Participant to substantially perform his/her duties for the Corporation (other than as a result of incapacity due to physical or mental illness) or to materially
comply with Corporation or
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Company policy after written notice, in either case, from the Corporation and a 30-day opportunity to cure.
For purposes hereof, an act, or failure to act, shall not be deemed to be " willful" or "intentional" unless it is done, or omitted to be done,
by the Participant in bad faith or without a reasonable belief that the action or omission was in the best interests of the Corporation.
Voting Stock means securities entitled to vote generally in the election of directors.
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ARTICLE THREE
ELIGIBILITY AND PARTICIPATION
3.01 Eligibility on the Effective Date
Each person who has been appointed to the Executive Board of the Corporation (" Executive Board") by the Board as of the Effective Date will be a Participant
in the Plan.
3.02 Future Eligibility
Each person who is appointed to the Executive Board by the Board after the Effective Date and prior to the occurrence of a Change in Control will be a Participant in the Plan.
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ARTICLE FOUR
BENEFITS
4.01 Severance Pay
Upon an Employment Termination, a Participant shall become entitled to Severance Pay in accordance with the following schedule.
Title
Severance Pay Period
Chief Executive Officer and direct reports
3 years
Other Executive Vice Presidents
2.5 years
Senior Vice Presidents
2 years
Severance Pay will be computed by multiplying the Participant's Compensation times the number of years (including any fraction of a year) in the Participant'
s Severance Pay Period, plus a cash amount equal to the aggregate Corporation's premium cost for active associate medical, dental and life insurance coverage, if any, provided to the Participant on the date of the Change in Control, or if higher,
the amount in effect at Employment Termination, times the number of years (including any fraction of a year) in the Severance Pay Period. Such lump sum Corporation contribution toward medical, dental and life insurance coverage for the Severance Pay
Period will be grossed-up for federal income taxes using the applicable federal income tax rate that applied to the Participant for his/her prior year's Compensation. To the extent applicable, Severance Pay will be reduced as provided in Sections 4.09(g)
or 4.09(k) hereof.
Severance Pay shall be paid in a lump sum within 30 days after Employment Termination.
In the event a Participant is entitled to any cash severance payments that are payable in the event of termination of employment pursuant to a written contract ("contract payments") between the Participant and the Corporation
or an affiliate or Subsidiary, Severance Pay otherwise payable to the Participant under this Section 4.01 shall be reduced by the amount of such contract payments. Notwithstanding the foregoing, if the Participant receives payments and benefits pursuant
to this Section 4.01, the Participant shall not be entitled to any severance pay or benefits under any severance plan, program or policy of the Company or an affiliate or Subsidiary, unless otherwise specifically provided therein in a specific reference
to this Plan.
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4.02 Prorated Incentive Compensation
A Participant who is covered under the Corporation's Management Incentive Compensation Program (or any successor plan thereto) and who becomes entitled to Severance Pay under this Plan shall be paid a lump sum
equal to the Participant's pro-rated target annual incentive compensation (at $1.00 per unit), under the Corporation's Management Incentive Compensation Program for the fiscal year; provided, however, if the Employment Termination occurs on
the last day of the Corporation's fiscal year the Participant shall be paid the higher of (a) target annual incentive compensation (at $1.00 per unit) or (b) the actual annual incentive compensation earned under the Corporation's Management
Incentive Compensation Program. Notwithstanding the foregoing, if the Participant has elected to defer under the Corporation's Mirror Savings Plan (or any successor plan thereto) a portion of the annual incentive to be paid under the Corporation
?s Management Incentive Compensation Program for the fiscal year, then that portion of the prorated incentive compensation will be deferred and paid in accordance with the terms of the Corporation's Mirror Savings Plan, and the remaini ...