UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
_________
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date
of
Report (Date of earliest event reported): March 7, 2008
J
.
C. PENNEY COMPANY, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
(State
or other jurisdiction
of
incorporation )
|
1-15274
(Commission
File No.)
|
26-0037077
(I.R.S.
Employer Identification No.)
|
|
6501
Legacy Drive
Plano,
Texas
(Address
of principal executive offices)
|
75024-3698
(Zip
code)
|
Registrant's
telephone number, including area code:
(972)
431-1000
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
] Written communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
[
] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[
] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item
5.02
Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers
(b)
Joanne
L. Bober, J. C. Penney Company, Inc.’s (“Company”) Executive Vice President,
General Counsel and Secretary, has decided to retire effective March 31, 2008
from that position in order to serve on outside boards and pursue community
service, teaching and other areas of interest. At the Company’s request, she
will continue as an employee in an Of Counsel role, serving at the pleasure
of
the Company’s Chairman and Chief Executive Officer (“CEO”), to provide legal
advice to senior officers of the Company on specific projects. In that role,
she
will continue to receive her base salary.
(e)
(1)
2007 Incentive Compensation Awards, 2008 Base Salaries, 2008 Target Incentive
Opportunity Percentages, and 2008 Equity Awards.
Pursuant to the J. C.
Penney Corporation, Inc. Management Incentive Compensation Program (“Incentive
Program”), annual cash incentive compensation is awarded to eligible associates
based upon the achievement of pre-set performance goals. For the Company’s
“named executive officers” identified in the Summary Compensation Table of the
Company’s Proxy Statement, incentive compensation payouts for 2007 were based
(i) 50% on total Company sales and operating profit from continuing operations,
and (ii) 50% on the named executive officer’s individual performance. To receive
any award under the Incentive Program, however, the Company had to achieve
a
minimum level of operating profit performance. Based on the Company’s fiscal
2007 operating profit result, the Incentive Program payment amount for fiscal
2007 was zero.
On
March 7, 2008, the Human Resources
and Compensation Committee of the Board of Directors determined the 2008 base
salaries, the 2008 target incentive opportunity percentages under the Incentive
Program, and the 2008 equity award values for the Company’s named executive
officers other than the CEO, which are set forth in the table below. For 2008,
the Committee determined that the named executive officers’ equity values should
be delivered half in the form of stock options, one-quarter as performance-based
restricted stock units, and one-quarter as time-based restricted stock units.
In
accordance with the Committee’s equity award grant policies, the annual grant of
equity awards will be effective on March 12, 2008.
As
previously reported in the Company’s
Current Report on Form 8-K dated February 26, 2008, the 2008 compensation
arrangements for the CEO were determined by the independent members of the
Board
of Directors on February 27, 2008.
|
Named
Executive Officer
(excluding
CEO)
|
2008
Base
Salary
|
2008
Target
Incentive
Award Opportunity
(%
of base salary)
|
2008
Equity
Awards
|
|
Stock
Options
($)
|
Performance
Units
($)
|
Time-Based
Restricted Stock Units
($)
|
|
Robert
B. Cavanaugh
Executive
Vice President,
Chief
Financial Officer
|
$700,000
|
75%
|
$725,000
|
$362,500
|
$362,500
|
|
Ken
C. Hicks
President
and
Chief
Merchandising Officer
|
$900,000
|
100%
|
$1,657,500
|
$828,750
|
$828,750
|
|
Michael
T. Theilmann
Executive
Vice President,
Chief
Human Resources and
Administration
Officer
|
$600,000
|
75%
|
$632,500
|
$316,250
|
$316,250
|
|
Joanne
L. Bober
Executive
Vice President,
General
Counsel
and
Secretary
|
$500,000
|
N/A
|
N/A
|
N/A
|
N/A
|
For
2008, the independent members of
the Board have modified the structure of the Incentive Program to provide that
each component of the award (sales, operating profit, and individual
performance) will have a separate payout. The sales and operating profit payouts
will be determined in accordance with the respective matrices for such
components. The individual component will be funded at the discretion of the
CEO
for participants who are not executive officers. The Human Resources and
Compensation Committee of the Board has discretion over the funding of the
individual component for executive officers and the independent members of
the
Board have discretion over the funding of the individual component for the
CEO.
These
determinations will be discussed
in the Compensation Discussion and Analysis section of the Company’s 2008 Proxy
Statement, which will be filed with the Securities and Exchange Commission
and
posted on the Company’s website.
(2)
Forms of Grant Notice.
The Company has updated its Forms of Notice of
Grant to be used in connection with grants of stock options and
performance-based restricted stock units under the Company’s 2005 Equity
Compensation Plan, and has adopted a new Form of Notice of Grant to be used
in
connection with grants of time-based restricted stock units under such plan.
Copies of the respective Forms of Notice of Grant are filed herewith as Exhibits
10.1, 10.2 and 10.3 and are incorporated herein by reference.
Item
9.01(d)
Financial
Statements and
Exhibits
|
Exhibit
10.1
|
Form
of Notice of Grant of Stock Options under the J. C. Penney Company,
Inc.
2005 Equity Compensation Plan
|
|
Exhibit
10.2
|
Form
of Notice of Restricted Stock Unit Grant under the J. C. Penney Company,
Inc. 2005 Equity Compensation Plan
|
|
Exhibit
10.3
|
Form
of Notice of 2008 Performance Unit Grant under the J. C. Penney Company,
Inc. 2005 Equity Compensation Plan
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
J.
C.
PENNEY COMPANY, INC.
By:
/s/ Michael T.
Theilmann
Michael
T. Theilmann
Executive
Vice President,
Chief
Human Resources and
Administration
Officer
Date:
March 7, 2008
EXHIBIT
INDEX
|
Exhibit
Number
|
|
Description
|
Exhibit
10.1
Form
of Notice of
Grant of Stock Options under the J. C. Penney Company,
Inc.
2005 Equity Compensation
Plan
Exhibit
10.2
Form
of Notice of
Restricted Stock Unit Grant under the J. C. Penney
Company,
Inc. 2005 Equity Compensation Plan
Exhibit
10.3
Form
of Notice of 2008
Performance Unit Grant under the J. C. Penney
Company,
Inc. 2005 Equity Compensation Plan
Exhibit
10.1
JCPenney
Notice
of 2008
Stock Option Grant
J.
C. Penney Company, Inc.
|
Name
[Associate
Name]
|
Employee
ID
[EEID]
|
|
Date
of
Grant
[Grant
Date]
|
Option
Grant Price Per Share
[Grant
Price]
|
Number
of NSO Shares Granted
[Grant
Amount]
|
2005
Equity
Compensation
Plan
This
Notice of
Non-Qualified (also known as "Non-Statutory") Stock Option ("NSO") gives you
the
right to purchase the total number of shares of Common Stock of 50¢ par value
("Common Stock") of J. C. Penney Company, Inc. ("Company") at the option grant
price per share as shown above. This option is subject to all the terms, rules,
and conditions of the J. C. Penney Company, Inc. 2005 Equity Compensation Plan
(“Plan”) and the implementing resolutions (“Resolutions”) approved by the Human
Resources and Compensation Committee of the Board of Directors. Capitalized
terms not otherwise defined herein shall have the respective meanings assigned
to them in the Plan and the Resolutions. In the event of a change in the
capitalization of the Company or other similar event, the option grant price
and
number of shares shall be adjusted as provided in the Plan.
Terms
of Exercise
Effective
Exercise Date
When
an option
exercise instruction is given in conjunction with a sell order for the
underlying stock that is an Exercise-and-Sell to Cover , an Exercise-and-Sell
Order, a Limit Order or a Good ‘til Cancelled Order, the effective exercise date
shall be the date on which such sale order is executed. For a Cash Payment
(Exercise and Hold) transaction, the effective exercise date shall be the date
the requisite funds are received by the Company at its home office in Plano,
Texas, or such other location as the Company may designate, or by a third party
duly designated by the Company at the offices of such third party. For a Stock
Payment transaction, the effective exercise date shall be the date the properly
completed option exercise form/instructions and any necessary accompanying
documents and payment are received by the Company at its home office in Plano,
Texas, or such other location as the Company may designate, or by a third party
duly designated by the Company at the offices of such third party. Exercise
instructions received after the close of the New York Stock Exchange for the
day
shall be deemed received as of the opening of the next Business Day (a “Business
Day” being any day on which the New York Stock Exchange is open and operating).
An effective exercise date shall never mean a non-Business Day. If any
"effective exercise date," as defined above, falls on a day Common Stock is
not
traded, all transactions shall be postponed until the next trading day, and
the
effective exercise date shall be deemed to be the next trading date, unless
such
day is after the
Normal Expiration Date
(as defined
below),
in which case the option shall expire.
Transferability
This
option may be
assigned or transferred by will or the laws of descent and distribution. No
Stock Option shall be exercisable except by you or (a) upon your incapacity,
by
your guardian or legal representative, or (b) upon your death, by the
beneficiary you have designated on the J. C. Penney Company Equity Plan
Beneficiary Designation Form or in the absence of such beneficiary, your legal
representative (collectively, "Legal Transferees").
Date
Option
Becomes Exercisable
This
option shall
become exercisable (“vest”) over a three-year period in accordance with the
following schedule:
|
Normal
Vesting Dates
|
Percent
of this Option Grant Vesting
|
|
March
12,
2009
|
33-1/3%
|
|
March
12,
2010
|
33-1/3%
|
|
March
12,
2011
|
33-1/3%
|
This
option shall
be 100% vested on the third anniversary of the Date of Grant.
However,
100% of
this option becomes immediately exercisable, without regard to these dates,
upon
a "Change of Control" (as defined in Attachment A) of the Company or an
Involuntary Separation from Service without Cause under, and as defined in,
the
Executive Termination Pay Agreement, and a portion of this option becomes
immediately exercisable, without regard to these dates, in the event of your
employment termination due to Retirement, Disability, death, or job
restructuring/reduction in force/unit closing as described below.
Additional
Exercise Terms Of This Option Are
:
While
you are
Employed
While
you are
employed by the Company, subsidiary, or other entity affiliated with the
Company, you may exercise vested options any time
on
or
after
the
Normal Vesting
Dates
until the
Expiration Date
which is the 10
th
anniversary of the Date of Grant (
"Normal
Expiration Date"
).
This
option can be
exercised by:
·
Cash
Payment Method
(Exercise-and-Hold)
·
Stock
Payment
Method
·
Exercise-and-Sell
Method
·
Exercise-and-Sell
To Cover Method
After
your
Employment Termination
In
all
cases, the option exercise period following termination of employment cannot
extend beyond the applicable date described below or the Normal Expiration
Date,
whichever comes first.
|
1)
|
Retirement,
Death, or Disability:
If your employment terminates due to
your:
|
·
Retirement
at age 60 or more,
·
Retirement
between ages 55 and 59 with at least 15 years of service,
·
Death,
or
·
Disability,
before
the final
Normal Vesting Date
, you shall be entitled to a prorated number
of stock options. The proration shall be based on the ratio of (a) the number
of
calendar days from the date of grant to the effective date of termination to
(b)
the total number of calendar days in the vesting period. The number of options
that have already vested shall be subtracted from the prorated amount and the
remaining prorated options shall become immediately exercisable. Any options
which have not already vested or for which exercisability is not accelerated
shall expire on such employment termination.
If
your employment
terminates due to any of the four circumstances listed above, all vested stock
options may be exercised for a period of five years after employment termination
or until the option’s
Normal Expiration Date
, whichever comes
first.
2)
Job
Restructuring, Reduction in Force or Unit Closing:
If your employment
terminates due to a job restructuring, reduction in force or unit closing before
the final
Normal Vesting Date
, you shall be entitled to a
prorated number of stock options. The proration shall be based on the ratio
of
(a) the number of calendar days from the date of grant to the effective date
of
termination to (b) the total number of calendar days in the vesting period.
The
number of options that have already vested shall be subtracted from the prorated
amount and the remaining prorated options shall become immediately exercisable.
Any options which have not already vested or for which exercisability is not
accelerated shall expire on such employment termination.
If
your employment
terminates due to a job restructuring, reduction in force or unit closing,
all
vested options may be exercised for a period of two years after employment
termination or until the option’s
Normal Expiration Date
,
whichever comes first.
3)
Resignation,
Summary Dismissal or Resignation in Lieu of Summary Dismissal, Discretionary
Dismissal or Resignation in Lieu of Discretionary Dismissal (excluding Reduction
In Force or Unit Closing):
If your employment terminates due to your
resignation, summary dismissal or resignation in lieu of summary dismissal,
discretionary dismissal or resignation in lieu of a discretionary dismissal,
then this option shall expire as of the date of your employment
termination.
4)
Involuntary
Separation
from Service without Cause under the Executive Termination Pay
Agreement:
If your employment terminates due to an Involuntary
Separation from Service without Cause under, and as defined, in the Executive
Termination Pay Agreement, any outstanding options will vest and become
immediately exercisable subject to (a) the execution and delivery of a release
in such form as may be required by the Company and (b) the expiration of
the
applicable revocation period for such release.
If
your employment
terminates due to an Involuntary Separation from Service without Cause under,
and as defined in, the Executive Termination Pay Agreement, all vested stock
options may be exercised for a period of 120 days after the effective date
of
employment termination or until the option’s
Normal Expiration
Date
, whichever comes first.
This
stock
option grant does not constitute an employment contract. It does not guarantee
employment for the length of the vesting period or for any portion
thereof.
Attachment
A
A
Change of Control Event shall have occurred if there is a change of ownership,
a
change of effective control, or a change in ownership of a substantial portion
of the assets of the Company (as “Company” is defined in the J. C. Penney
Company, Inc. 2005 Equity Compensation Plan).
|
1.
|
Change
of
ownership occurs on the date that a person or persons acting as a
group
acquires ownership of stock of the Company that together with stock
held
by such person or group constitutes more than 50 percent of the total
fair
market value or total voting power of the stock of the
Company.
|
|
2.
|
Notwithstanding
whether the Company has undergone a change of ownership, a change
of
effective control occurs (a) when a person or persons acting as a
group
acquires within a 12-month period 30 percent of the total voting
power of
the stock of the Company or (b) a majority of the Board of Directors
is
replaced within 12 months if not previously approved by a majority
of the
members. A change in effective control also may occur in any transaction
in which either of the two corporations involved in the transaction
has a
Change in Control Event, i.e. multiple change in control
events.
|
|
3.
|
Change
in
ownership of a substantial portion of the Company’s assets occurs when a
person or persons acting as a group acquires assets that have a total
gross fair market value equal to or more than 40 percent of the total
gross fair market value of all assets of the Company immediately
prior to
the acquisition. A transfer of assets by the Company is not treated
as a
change in the ownership of such assets if the assets are transferred
to -
|
(i)
A shareholder
of the Company (immediately before the asset transfer) in exchange for or with
respect to its stock;
(ii)
An entity, 50
percent or more of the total value or voting power of which is owned, directly
or indirectly, by the Company;
(iii)
A person, or
more than one person acting as a group, that owns, directly or indirectly,
50
percent or more of the total value or voting power of all the outstanding stock
of the Company; or
(iv)
An entity, at
least 50 percent of the total value or voting power of which is owned, directly
or indirectly, by a person described in paragraph (iii).
Persons
will not be
considered to be acting as a group solely because they purchase assets of the
Company at the same time, or as a result of the same public offering. However
persons will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or acquisition
of
assets, or similar business transaction with the Company.
Exhibit
10.2
JCPenney
Notice
of 2008
Restricted Stock Unit Grant
J.
C. Penney Company, Inc.
|
Name
[Associate
Name]
|
Employee
ID
[EEID]
|
|
Date
of Grant
3/12/2008
|
Number
of Restricted Stock Units Granted
[Grant
Amount]
|
2005
Equity
Compensation
Plan
Restricted
Stock Unit Grant
You
have been
granted the number of restricted stock units listed above in recognition of
your
expected future contributions to the success of JCPenney. Each restricted stock
unit shall at all times be deemed to have a value equal to the then-current
fair
market value of one share of J. C. Penney Company, Inc. Common Stock of 50¢ par
value (“Common Stock”). This grant is subject to all the terms, rules, and
conditions of the J. C. Penney Company, Inc. 2005 Equity Compensation Plan
(“Plan”) and the implementing resolutions (“Resolutions”) approved by the Human
Resources and Compensation Committee of the JCPenney Board of Directors.
Capitalized terms not otherwise defined herein shall have the respective
meanings assigned to them in the Plan and the Resolutions. In the event of
a
change in capitalization of the Company or other similar event, the number
of
units shall be adjusted as provided in the Plan.
Vesting
of Your Restricted Stock Units
The
restricted
stock units shall vest, and the restrictions on your restricted stock units
shall lapse, according to the following Vesting Schedule
,
PROVIDED YOU REMAIN CONTINUOUSLY EMPLOYED BY THE COMPANY
THROUGH EACH
OF THE RESPECTIVE VESTING DATES (unless your employment terminates due to your
Retirement, Disability, death, job restructuring/reduction in force/unit closing
or an Involuntary Separation from Service without Cause under, and as defined
in, the Executive Termination Pay Agreement).
Your vested
restricted stock units shall be paid out in shares of Common Stock as soon
as
practicable but in no event later than 2 ½ months following each Vesting Date.
You shall not be allowed to defer the payment of your shares of Common Stock
to
a later date.
|
Vesting
Dates
|
Percent
Vesting
|
|
March
12,
2009
|
33-1/3%
|
|
March
12,
2010
|
33-1/3%
|
|
March
12,
2011
|
33-1/3%
|
Dividend
Equivalents
You
shall not have
any rights as a stockholder until your restricted stock units vest and you
are
issued shares of Common Stock in cancellation of the vested restricted stock
units. However, you will accrue dividend equivalents on the unvested restricted
stock units in the amount of any quarterly dividend declared on the Common
Stock. Dividend equivalents shall continue to accrue until your restricted
stock
units vest and you receive actual shares of Common Stock in cancellation of
the
vested restricted stock units. The dividend equivalents shall be credited as
additional restricted stock units in your account to be paid out in shares
of
Common Stock on each applicable Vesting Date along with the restricted stock
units to which they relate. The number of additional restricted stock units
to
be credited to your account shall be determined by dividing the aggregate
dividend payable with respect to the number of restricted stock units in your
account by the closing price of the Common Stock on the New York Stock Exchange
on the dividend payment date. The additional restricted stock units credited
to
your account are subject to all of the terms and conditions of this restricted
stock unit award and the Plan and you shall forfeit your additional restricted
stock units in the event that you forfeit the restricted stock units to which
they relate.
Employment
Termination
If
your employment
terminates due to Retirement, Disability, death or job restructuring/reduction
in force/unit closing prior to the vesting date, you shall be entitled to a
prorated number of restricted stock units. The proration shall be based on
the
ratio of (a) the number of calendar days from the date of grant to the effective
date of termination to (b) the total number of calendar days in the vesting
period. The number of restricted stock units that have already vested shall
be
subtracted from the prorated amount and the remaining prorated restricted stock
units shall immediately vest. Any restricted stock units which have not already
vested or for which vesting is not accelerated shall be cancelled on such
employment termination. The beneficiary listed on your J. C. Penney Company
Equity Plan Beneficiary Designation Form shall receive the vested shares covered
by the restricted stock unit award in the case of termination of employment
due
to death.
If
your employment
terminates due to an Involuntary Separation from Service without Cause
under, and as defined in, the Executive Termination Pay Agreement, any
outstanding restricted stock units shall immediately vest and be payable in
shares of JCPenney Common Stock, subject to (a) the execution and delivery
of a
release in such form as may be required by the Company and (b) the expiration
of
the applicable revocation period for such release.
If
your employment
terminates for any reason other than those specified above, any unvested
restricted stock units shall be cancelled on the effective date of termination.
Change
of Control
The
restricted
stock unit award vests immediately without regard to the vesting dates listed
above upon a Change of Control of the Company (as defined in Attachment
A).
Taxes
and Withholding
At
the time your
restricted stock units vest and you are issued shares of Common Stock or cash
in
lieu of fractional shares, the fair market value of the shares of Common Stock
issued to you shall be included in your W-2 form and the Company shall be
required to withhold applicable taxes on such amount. Your withholding rate
with
respect to this award may not be higher than the minimum statutory rate. The
Company shall retain and cancel the number of issued shares equal to the value
of the required minimum tax withholding in payment of the required minimum
tax
withholding due. For purposes of this grant notice, “fair market value” means
the closing price of the Common Stock on the New York Stock Exchange, or if
the
Exchange is closed on the applicable date, or if the Common Stock does not
trade
on such date, the closing price of the Common Stock on the New York Stock
Exchange on the last trading day immediately preceding such date.
Transferability
of Your Restricted Stock Units
The
restricted
stock unit granted hereunder is non-transferable.
Effect
on Other Benefits
The
value of the
shares covered by the restricted stock unit award shall not be included as
compensation or earnings for purposes of any other compensation, retirement,
or
benefit plan offered to Company associates.
Administration
The
Committee has
full authority and discretion, subject only to the terms of the Plan, to decide
all matters relating to the administration and interpretation of the Plan and
this restricted stock unit award. The Committee’s determinations shall be final,
conclusive, and binding on you and your heirs, legatees and
designees.
This
restricted stock unit grant does not constitute an employment contract. It
does
not guarantee employment for the length of the vesting period or for any portion
thereof.
Attachment
A
A
Change of Control Event shall have occurred if there is a change of ownership,
a
change of effective control, or a change in ownership of a substantial portion
of the assets of the Company (as “Company” is defined in the J. C. Penney
Company, Inc. 2005 Equity Compensation Plan).
|
1.
|
Change
of
ownership occurs on the date that a person or persons acting as a
group
acquires ownership of stock of the Company that together with stock
held
by such person or group constitutes more than 50 percent of the total
fair
market value or total voting power of the stock of the
Company.
|
|
2.
|
Notwithstanding
whether the Company has undergone a change of ownership, a change
of
effective control occurs (a) when a person or persons acting as a
group
acquires within a 12-month period 30 percent of the total voting
power of
the stock of the Company or (b) a majority of the Board of Directors
is
replaced within 12 months if not previously approved by a majority
of the
members. A change in effective control also may occur in any transaction
in which either of the two corporations involved in the transaction
has a
Change in Control Event, i.e. multiple change in control
events.
|
|
3.
|
Change
in
ownership of a substantial portion of the Company’s assets occurs when a
person or persons acting as a group acquires assets that have a total
gross fair market value equal to or more than 40 percent of the total
gross fair market value of all assets of the Company immediately
prior to
the acquisition. A transfer of assets by the Company is not treated
as a
change in the ownership of such assets if the assets are transferred
to -
|
(i)
A shareholder
of the Company (immediately before the asset transfer) in exchange for or with
respect to its stock;
(ii)
An entity, 50
percent or more of the total value or voting power of which is owned, directly
or indirectly, by the Company;
(iii)
A person, or
more than one person acting as a group, that owns, directly or indirectly,
50
percent or more of the total value or voting power of all the outstanding stock
of the Company; or
(iv)
An entity, at
least 50 percent of the total value or voting power of which is owned, directly
or indirectly, by a person described in paragraph (iii).
Persons
will not be
considered to be acting as a group solely because they purchase assets of the
Company at the same time, or as a result of the same public offering. However
persons will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or acquisition
of
assets, or similar business transaction with the Company.
Exhibit
10.3
JCPenney
Notice
of
2008 Performance Unit Grant
J.
C. Penney Company, Inc.
|
Name
[Associate
Name]
|
Employee
ID
[EEID]
|
|
Date
of
Grant
3/12/2008
|
Number
of Performance Units Granted
[Grant
Amount]
|
Performance
Cycle
Begins:
2/3/2008
Ends:
1/31/2009
|
2005
Equity
Compensation
Plan
You
have been
granted the number of Performance Units listed above in recognition of your
expected future contributions to the success of JCPenney. This Performance
Unit
grant is a “target” award, which may increase or decrease based on the Company’s
actual results for the Performance Cycle as set forth in the Payout Matrix
established by the independent members of the JCPenney Board of Directors.
This
grant is subject to all the terms, rules, and conditions of the J. C. Penney
Company, Inc. 2005 Equity Compensation Plan (“Plan”) and the implementing
resolutions (“Resolutions”) approved by the Human Resources and Compensation
Committee (“Committee”) of the Board. Capitalized terms not otherwise defined
herein shall have the respective meanings assigned to them in the Plan and
the
Resolutions. In the event of a change in capitalization of the Company or other
similar event, the number of units shall be adjusted as provided in the
Plan.
Definitions
Disability
- Disability means totally and permanently disabled within the meaning of the
Social Security Act, provided you either (a) qualified for disability insurance
benefits under such Act, or (b) in the opinion of the organization that
administers the Company’s disability plans, you have a disability which entitles
you to such disability insurance benefits except for the fact that you do not
have sufficient quarters of coverage or have not satisfied any age requirements
under such law.
Payout
Matrix
- The payout matrix is established by the independent members of the
Board at the beginning of the Performance Cycle and describes the percentage
of
units you shall earn based on the Company’s actual EPS for the Performance
Cycle.
Performance
Units
- The performance units granted under this program are restricted
stock units with both performance-based and time-based vesting features. Each
performance unit shall at all times be deemed to have a value equal to the
then-current fair market value of one share of J. C. Penney Company, Inc. Common
Stock of 50¢ par value (“Common Stock”). You can earn from 0% to 200% of the
units granted based on the Company’s actual results for the Performance
Cycle.
Performance
Cycle
- The performance cycle is a one-year period beginning on the first
day of the Company’s fiscal year and ending on the last day of the fiscal
year.
Performance
Measurement
-The Performance Measurement is the Company’s Diluted Earnings
Per Share from continuing operations (“EPS”) over the Performance Cycle.
The Committee, based on objective criteria selected by the Committee may, in
its
sole discretion and in compliance with Internal Revenue Service regulations,
adjust EPS. Such adjustments may include, but are not limited to,
extraordinary items as defined under APB No. 30 (as amended), or other items
that are not reflective of normal ongoing operations, such as: asset impairments
and write-downs; the effects of losses, or gains as a result of natural,
or man made disasters; litigation and claims judgments; legal or tax
settlements; the effects of tax law changes; changes in accounting or the
application of new accounting standards; the effects of restructuring or
reorganization programs, including refinancing, debt or common stock
repurchases, or other capital restructurings; gains or losses,
realized or unrealized on real estate investments, or assets held for
sale.
Retirement
—Retirement
means your separation from service either (1) at or after age 60 or (2) at
or
after age 55 with at least 15 years of service with JCPenney or any of its
subsidiaries.
How
Your
Actual Performance Units are Determined
The
Company’s EPS
for fiscal 2008 shall determine the actual number of Performance Units, if
any,
that are credited to your account. The Payout Matrix shown below indicates
the
percentage of Performance Units that shall be credited for the respective EPS
amounts.
The
actual number
of Performance Units that you earn shall be credited to your account as soon
as
practicable but in no event later than 2 ½ months after the end of the
Performance Cycle.
Vesting
of Your Credited Performance Units
The
actual
Performance Units credited to your account shall vest, and the restrictions
on
your Performance Units shall lapse, according to the following Vesting
Schedule
,
PROVIDED YOU REMAIN CONTINUOUSLY EMPLOYED BY THE
COMPANY THROUGH EACH OF THE RESPECTIVE VESTING DATES (unless your employment
terminates due to your Retirement, Disability, death, job
restructuring/reduction in force/unit closing or an Involuntary Separation
from
Service without Cause under, and as defined in, the Executive Termination Pay
Agreement).
Your vested Performance Units shall be paid
out in shares of Common Stock as soon as practicable but in no event later
than
2 ½ months following each Vesting Date. You shall not be allowed to defer the
payment of your shares of Common Stock to a later date.
|
Vesting
Dates
|
Percent
Vesting
|
|
March
12,
2009
|
33-1/3%
|
|
March
12,
2010
|
33-1/3%
|
|
March
12,
2011
|
33-1/3%
|
Dividend
Equivalents
You
shall not have
any rights as a stockholder until your Performance Units vest and you are issued
shares of Common Stock in cancellation of the vested Performance Units. However,
after your earned Performance Units have been credited to your account, you
shall begin to accrue dividend equivalents on such Performance Units in the
amount of any quarterly dividend declared on the Common Stock. Dividend
equivalents shall continue to accrue until your Performance Units vest and
you
receive actual shares of Common Stock in cancellation of the vested Performance
Units. The dividend equivalents shall be credited as additional Performance
Units in your account to be paid out in shares of Common Stock on each
applicable Vesting Date along with the Performance Units to which they relate.
The number of additional Performance Units to be credited to your account shall
be determined by dividing the aggregate dividend payable with respect to the
number of Performance Units in your account by the closing price of the Common
Stock on the New York Stock Exchange on the dividend payment date. The
additional Performance Units credited to your account are subject to all of
the
terms and conditions of this Performance Unit award and the Plan and you shall
forfeit your additional Performance Units in the event that you forfeit the
Performance Units to which they relate.
Employment
Termination
If
your employment
terminates during the Performance Cycle because of Retirement, Disability,
death
or job restructuring/reduction in force/unit closing, then you shall be entitled
to a prorated number of the Performance Units earned in accordance with the
Payout Matrix, determined as of the end of the Performance Cycle. The proration
shall be based on the ratio of (a) the number of calendar days from the date
of
grant to the effective date of termination to (b) the total number of calendar
days in the vesting period. Any Performance Units earned under this termination
provision, shall be immediately vested and delivered in shares of JCPenney
Common Stock within 2 ½ months following the end of the Performance
Cycle.
If
your employment
terminates following the end of the Performance Cycle because of Retirement,
Disability, death or job restructuring/reduction in force/unit closing, you
shall be entitled to a prorated number of the Performance Units earned under
the
Payout Matrix. The proration shall be based on the ratio of (a) the number
of
calendar days from the date of grant to the effective date of termination to
(b)
the total number of calendar days in the vesting period. Any Performance Units
that have already vested shall be subtracted from the prorated amount and the
remaining prorated Performance Units shall vest immediately and be delivered
as
shares of JCPenney Common Stock as soon as practicable but in no event later
than 2 ½ months following your termination date. Any Performance Units which
have not already vested or for which vesting is not accelerated shall expire
on
such employment termination. The beneficiary listed on your J. C. Penney Company
Equity Plan Beneficiary Designation Form shall receive the vested shares covered
by the Performance Unit award in the case of termination of employment due
to
death.
If
your employment
terminates due to an Involuntary Separation from Service without Cause under,
and as defined in, the Executive Termination Pay Agreement, any outstanding
Performance Units shall immediately vest and be payable in shares of JCPenney
Common Stock, in an amount equal to (1) if termination occurs prior to the
end
of the Performance Cycle, the target number of Performance Units for such
Performance Cycle, and (2) if the termination occurs after the end of the
Performance Cycle, the number of Performance Units earned for such Performance
Cycle, subject to (a) the execution and delivery of a release in such form
as
may be required by the Company and (b) the expiration of the applicable
revocation period for such release.
If
your employment
terminates for any reason other than Retirement, Disability, death, job
restructuring/reduction in force/unit closing, or Involuntary Separation from
Service without Cause under, and as defined in, the Executive Termination Pay
Agreement you shall forfeit any unearned and/or unvested Performance Units
at
the time of such employment termination.
Change
of Control
If
a Change of
Control (as defined in Attachment A to this Notice of Grant) occurs during
the
Performance Cycle, any outstanding Performance Units shall immediately vest
and
be payable in shares of JCPenney Common Stock, in an amount equal to (1) if
a
Change of Control occurs prior to the end of the Performance Cycle, the target
number of Performance Units for such Performance Cycle, and (2) if the Change
of
Control occurs after the end of the Performance Cycle, the number of Performance
Units earned for such Performance Cycle.
Taxes
and Withholding
At
the time your
Performance Units vest and you are issued shares of Common Stock or cash in
lieu
of fractional shares, the fair market value of the shares of Common Stock issued
to you shall be included in your W-2 form and the Company shall be required
to
withhold applicable taxes on such amount. Your withholding rate with respect
to
this award may not be higher than the minimum statutory rate. The Company shall
retain and cancel the number of issued shares equal to the value of the required
minimum tax withholding in payment of the required minimum tax withholding
due.
For purposes of this grant notice, “fair market value” means the closing price
of the Common Stock on the New York Stock Exchange, or if the Exchange is closed
on the applicable date, or if the Common Stock does not trade on such date,
the
closing price of the Common Stock on the New York Stock Exchange on the last
trading day immediately preceding such date.
Transferability
of Your Performance Units
The
Performance
Units awarded hereunder are non-transferable.
Effect
on Other Benefits
The
value of the
shares covered by the Performance Unit award shall not be included as
compensation or earnings for purposes of any other compensation, retirement,
or
benefit plan offered to Company associates.
Administration
The
Committee has
full authority and discretion, subject only to the terms of the Plan, to decide
all matters relating to the administration and interpretation of the Plan and
this Performance Unit award. The Committee’s determinations shall be final,
conclusive, and binding on you and your heirs, legatees and
designees.
This
performance unit grant does not constitute an employment contract. It does
not
guarantee employment for the length of the vesting period or for any portion
thereof.
|
2008
Performance Unit Award Payout
Matrix
|
|
|
2008
EPS
|
Plan
Payout
%
|
|
Maximum
|
$4.50
|
200%
|
|
|
$4.40
|
180%
|
|
|
$4.30
|
160%
|
|
|
$4.20
|
140%
|
|
|
$4.10
|
120%
|
|
Target
|
$4.00
|
100%
|
|
|
$3.90
|
80%
|
|
|
$3.80
|
60%
|
|
|
$3.70
|
40%
|
|
|
$3.60
|
20%
|
|
Threshold
|
$3.50
|
0%
|
For
EPS results
that fall in between the intervals shown above, the payout percent increases
approximately 2% for each $0.01 above target and decreases approximately 2%
for
each $0.01 of EPS below target.
Attachment
A
A
Change of Control Event shall have occurred if there is a change of ownership,
a
change of effective control, or a change in ownership of a substantial portion
of the assets of the Company (as “Company” is defined in the J. C. Penney
Company, Inc. 2005 Equity Compensation Plan).
|
1.
|
Change
of
ownership occurs on the date that a person or persons acting as a
group
acquires ownership of stock of the Company that together with stock
held
by such person or group constitutes more than 50 percent of the total
fair
market value or total voting power of the stock of the
Company.
|
|
2.
|
Notwithstanding
whether the Company has undergone a change of ownership, a change
of
effective control occurs (a) when a person or persons acting as a
group
acquires within a 12-month period 30 percent of the total voting
power of
the stock of the Company or (b) a majority of the Board of Directors
is
replaced within 12 months if not previously approved by a majority
of the
members. A change in effective control also may occur in any transaction
in which either of the two corporations involved in the transaction
has a
Change in Control Event, i.e. multiple change in control
events.
|
|
3.
|
Change
in
ownership of a substantial portion of the Company’s assets occurs when a
person or persons acting as a group acquires assets that have a total
gross fair market value equal to or more than 40 percent of the total
gross fair market value of all assets of the Company immediately
prior to
the acquisition. A transfer of assets by the Company is not treated
as a
change in the ownership of such assets if the assets are transferred
to -
|
(i)
A shareholder
of the Company (immediately before the asset transfer) in exchange for or with
respect to its stock;
(ii)
An entity, 50
percent or more of the total value or voting power of which is owned, directly
or indirectly, by the Company;
(iii)
A person, or
more than one person acting as a group, that owns, directly or indirectly,
50
percent or more of the total value or voting power of all the outstanding stock
of the Company; or
(iv)
An entity, at
least 50 percent of the total value or voting power of which is owned, directly
or indirectly, by a person described in paragraph (iii).
Persons
will not be
considered to be acting as a group solely because they purchase assets of the
Company at the same time, or as a result of the same public offering. However
persons will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or acquisition
of
assets, or similar business transaction with the Company.