J C PENNEY CO INC (Form: 8-K, Received: 03/24/2014 06:01:08)

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 17, 2014

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 (IRS 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

Not Applicable

(Former name or former address, if changed since last report)

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.

(e) (1) 2014 Base Salaries, 2014 Target Incentive Opportunity Percentages, and 2014 Equity Awards.

The 2014 base salaries, target incentive opportunity percentages under the J. C. Penney Corporation, Inc. Management Incentive Compensation Program, and equity award values for the named executive officers of J. C. Penney Company, Inc. (the “Company”) are set forth below. For 2014, the equity value for Mr. Ullman was delivered 50% in the form of performance-contingent stock options and 50% in the form of performance-based restricted stock units, each as further described below. The equity values for the other named executive officers of the Company were or will be, as the case may be, delivered 50% in the form of performance-contingent stock options, as described below, and 50% in the form of time-based restricted stock units.



Executive Officer	2014 Base Salary	2014 Target Incentive Award Opportunity (% of base salary)	2014 Equity Awards
Myron E. Ullman, III Chief Executive Officer	$1,500,000	200%	$5,500,000
Edward J. Record ¹ Executive Vice President and Chief Financial Officer	$750,000	75%	$1,500,000
Janet L. Dhillon Executive Vice President, General Counsel and Secretary	$700,000	75%	$2,000,000
Brynn L. Evanson Executive Vice President, Human Resources	$475,000	75%	$700,000
D. Scott Laverty Executive Vice President, Chief Information Officer	$450,000	75%	$700,000

¹ Edward J. Record will succeed Kenneth H. Hannah as Executive Vice President and Chief Financial Officer effective March 24, 2014. The grant date for Mr. Record’s annual equity award will be the third trading day following commencement of his employment.

(2) Forms of Grant Notice. The performance-contingent stock options require that the price of the Company’s common stock of 50¢ par value (the “Common Stock”) appreciate by at least 50% over the option exercise price for a period of 20 consecutive trading days (the “price

hurdle” ). Mr. Ullman’s performance-contingent stock options vest on the first anniversary of the grant date provided he remains continuously employed with the Company during that time

and will become immediately exercisable in full if the price hurdle is met at any time within four years of the grant date. For the other named executive officers, the performance-contingent stock options are subject to time-based vesting requirements over four years and will vest in full only if the price hurdle is met at any time within four years of the grant date. The performance-contingent stock options have a ten-year term, provided, however, if the price hurdle is not met prior to the fourth anniversary of the grant date, the options will be cancelled.

The number of performance-based restricted stock units granted to Mr. Ullman is a target award which may increase or decrease based on the extent to which the Company achieves the performance measurements established by the Committee of the Whole at the beginning of the performance cycle, which is the Company’s fiscal year. The payout matrix established by the Committee of the Whole sets forth a range of payout percentages (from 50% to 200%) relative to the Company’s actual results for the fiscal year. The performance measures are free cash flow (50%) and EBITDA (50%). For purposes of the award, free cash flow is defined as cash flow from operating activities less capital expenditures and dividends paid, plus proceeds from the sale of operating assets, and EBITDA is defined as earnings before interest, taxes, depreciation and pension expense, excluding certain non-recurring items. Following the conclusion of the performance cycle, the number of performance units earned in accordance with the payout matrix, subject to reduction at the discretion of the Committee of the Whole, will vest and will be paid out in shares of Common Stock in equal installments on each of the second and third anniversaries of the grant date.

Copies of the Forms of Notice of 2014 Performance-Contingent Stock Option Grant for Mr. Ullman and for the other named executive officers are filed herewith as Exhibits 10.1 and 10.2, respectively, and are incorporated herein by reference. A copy of the Form of Notice of 2014 Performance-Based Restricted Stock Unit Grant for Mr. Ullman is filed herewith as Exhibit 10.3 and is incorporated herein by reference. The Form of Notice of Time-Based Restricted Stock Unit Grant to be used in connection with the grants of time-based restricted stock units to the named executive officers other than Mr. Ullman has been previously filed with the Securities and Exchange Commission.

Item 9.01 Financial Statements and Exhibits.


(d)	Exhibit 10.1 Form of Notice of 2014 Performance-Contingent Stock Option

Grant under the J. C. Penney Company, Inc. 2012 Long-Term Incentive Plan for Myron E. Ullman, III

Exhibit 10.2 Form of Notice of 2014 Performance-Contingent Stock Option

Grant under the J. C. Penney Company, Inc. 2012 Long-Term Incentive Plan

Exhibit 10.3 Form of Notice of 2014 Performance-Based Restricted Stock Unit

Grant under the J. C. Penney Company, Inc. 2012 Long-Term Incentive Plan

SIGNATURE

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/ Janet Dhillon

Janet Dhillon

Executive Vice President,

General Counsel and Secretary

Date: March 21, 2014

EXHIBIT INDEX

Exhibit Number Description

10.1 Form of Notice of 2014 Performance-Contingent Stock Option Grant

under the J. C. Penney Company, Inc. 2012 Long-Term Incentive Plan for Myron E. Ullman, III

10.2 Form of Notice of 2014 Performance-Contingent Stock Option Grant

under the J. C. Penney Company, Inc. 2012 Long-Term Incentive Plan

10.3 Form of Notice of 2014 Performance-Based Restricted Stock Unit Grant

under the J. C. Penney Company, Inc. 2012 Long-Term Incentive Plan

Notice of Performance-Contingent Stock Option Grant



^Name [Participant Name]		^{Employee ID}
^{Date of Grant} [Grant Date]	^{Option Grant Price Per Share} [Grant Price]	^{Number of NSO Shares Granted} [Shares Granted]

This Notice of Non-Qualified Performance-Contingent 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. Unless otherwise noted, this grant is subject to all the terms, rules, and conditions of the J. C. Penney Company, Inc. 2012 Long-Term Incentive Plan (“Plan”) and the implementing resolutions (“Resolutions”) approved by the Human Resources and Compensation Committee (“Committee”) of the Company’s Board of Directors (“Board”). Capitalized terms not otherwise defined herein shall have the respective meanings assigned to them in the Plan and the Resolutions.

Definitions

Performance Period – The Performance Period is the four (4) year period beginning on the Date of Grant (“Grant Date”) listed above and ending with the fourth anniversary of the Grant Date.

Stock Price Appreciation Metric – The closing stock price of the Company’s Common Stock must be at least 50% higher than the Grant Price for a period of 20 consecutive trading days. For purposes of this Grant Notice, “trading day” shall mean any day on which the Company’s Common Stock trades on the New York Stock Exchange.

Vesting Terms

This NSO will vest on the first anniversary of the Grant Date (the “Vest date”) and will become fully exercisable if the Stock Price Appreciation Metric is satisfied during the Performance Period.

If the Stock Price Appreciation Metric is not achieved by the fourth anniversary of the Grant Date, 100% of the award will be forfeited.

You must remain continuously employed by the Company through the Vest date (unless your Employment terminates due to your Retirement, Disability, death, job restructuring, reduction in force, or unit closing) to Vest in your NSO; otherwise the NSOs granted will be forfeited.

Employment Termination

If your Employment terminates prior to the Vest date due to Retirement, Disability, death, job restructuring, reduction in force, or unit closing , your NSOs will vest on a pro-rata basis. The pro-rata portion of your NSOs that will vest will be determined by multiplying the “Number of NSO Shares Granted” above by a fraction, the numerator of which is the number of months from the Grant Date to the effective date of your termination of Employment, inclusive, and the denominator of which is 12.

If the Stock Price Appreciation Metric has not been met at the time of your termination, any pro-rata vested NSOs will remain outstanding but not exercisable unless the Stock Price Appreciation Metric is satisfied by the end of the Performance Period. If the Stock Price Appreciation Metric has not been met by the end of the Performance Period all pro-rata vested NSOs will be forfeited. Any NSOs for which vesting is not accelerated will expire on such Employment termination.

Notwithstanding the foregoing, if you are party to a termination agreement, and your Employment is terminated due to an involuntary termination of Employment without Cause under, and as defined in that termination agreement, then the number of NSOs that will become exercisable will be determined according to the terms of the underlying termination agreement 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 you voluntarily terminate your Employment or your Employment is terminated for Cause prior to your Vest date then all unvested and unexercised NSO will expire as of the date of your Employment termination.

Notwithstanding anything in the Plan to the contrary, if you experience an Employment Termination following a Change in Control before your Vest date, your NSOs will vest on a pro-rata basis. The pro-rata portion of your NSOs that will vest will be determined by multiplying the “Number of NSO Shares Granted” above by a fraction, the numerator of which is the number of months from the Grant Date to the effective date of your Employment Termination, inclusive, and the denominator of which is 12. If the Stock Price Appreciation Metric has not been met at the time of your Employment

(Rev. 03/2014) – SOPC2014MEU

Termination, any pro-rata vested NSOs will remain outstanding but not exercisable unless the Stock Price Appreciation Metric is satisfied by the end of the Performance Period. If the Stock Price Appreciation Metric has not been met by the end of the Performance Period all pro-rata vested NSOs will be forfeited. Any NSOs for which vesting is not accelerated will expire on such Employment Termination.

If the Stock Price Appreciation Metric is met and the NSOs become exercisable, the NSOs will remain exercisable until the original expiration date of the NSO, which will be 10 years from the date of grant.

Recoupment

As provided in Section 12.19 of the Plan this Award is subject to any compensation recoupment policy adopted by the Board or the Committee prior to or after the effective date of the Plan, and as such policy may be amended from time to time after its adoption.

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.

(Rev. 03/2014) – SOPC2014MEU

Notice of Performance-Contingent Stock Option Grant



^Name [Participant Name]		^{Employee ID}
^{Date of Grant} [Grant Date]	^{Option Grant Price Per Share} [Grant Price]	^{Number of NSO Shares Granted} [Shares Granted]

This Notice of Non-Qualified Performance-Contingent 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 grant is subject to all the terms, rules, and conditions of the J. C. Penney Company, Inc. 2012 Long-Term Incentive Plan (“Plan”) and the implementing resolutions (“Resolutions”) approved by the Human Resources and Compensation Committee (“Committee”) of the Company’s Board of Directors (“Board”). Capitalized terms not otherwise defined herein shall have the respective meanings assigned to them in the Plan and the Resolutions.

Definitions

Performance Period – The Performance Period is the four (4) year period beginning on the Date of Grant (“Grant Date”) listed above and ending with the fourth anniversary of the Grant Date.

Vesting Terms

This NSO will generally become exercisable (“Vest”) in three (3) equal installments over a three (3) year period on the first, second, and third anniversaries of the Grant Date provided the Stock Price Appreciation Metric is satisfied by the first anniversary of the Grant Date.

If the Stock Price Appreciation Metric is achieved after the first anniversary of the Grant Date but by the second anniversary of the Grant Date, two-thirds of the award will Vest on the second anniversary of the Grant Date and one-third will Vest on the third anniversary of the Grant Date.

If the Stock Price Appreciation Metric is achieved after the second anniversary of the Grant Date but by the third anniversary of the Grant Date, the full award will Vest on the third anniversary of the Grant Date.

If the Stock Price Appreciation Metric is achieved after the third anniversary of the Grant Date, but by the fourth anniversary of the Grant Date, 100% of the award will immediately Vest.

If the Stock Price Appreciation Metric is not achieved by the fourth anniversary of the Grant Date, 100% of the award will be forfeited.

You must remain continuously employed by the Company through the date the Stock Price Appreciation Metric is achieved and through each respective Vest date (unless your Employment terminates due to your Retirement, Disability, death, job restructuring, reduction in force, or unit closing) to Vest in your NSO; otherwise the options granted will be forfeited.

Employment Termination

If your Employment terminates due to Retirement, Disability, death, job restructuring, reduction in force, or unit closing before any applicable Vest date of your NSO, your NSO will vest on a pro-rata basis. The pro-rata portion of your NSO that will vest will be determined by multiplying the “Number of NSO Shares Granted” from above by a fraction, the numerator of which is the number of months from the Grant Date to the effective date of your termination of Employment, inclusive, and the denominator of which is 36. The number of NSOs that have already vested according to the terms herein, if any, will be subtracted from the prorated amount and the remaining prorated NSOs will become immediately exercisable if the Stock Price Appreciation Metric has been met at the time of termination.

If the Stock Price Appreciation Metric has not been met at the time of your termination, any pro-rata vested NSOs will remain outstanding but not exercisable unless the Stock Price Appreciation Metric is satisfied by the end of the Performance Period. If the Stock Price Appreciation Metric has not been met by the end of the Performance Period all vested NSOs will be forfeited. Any NSOs which have not already vested or for which vesting is not accelerated will expire on such employment termination.

(Rev. 03/2014) – SOPC2013EB

If you voluntarily terminate your Employment or your Employment is terminated for Cause then all unvested and unexercised NSOs will expire as of the date of your Employment termination.

Please see the Plan for all terms, rules, and conditions, including the post-termination of Employment exercise period applicable to this NSO. For any vested NSOs, if the Stock Price Appreciation Metric is met after your termination and before the end of the Performance Period, the post-termination Employment exercise period will be measured from the date the Stock Price Appreciation Metric is met.

Recoupment

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.

(Rev. 03/2014) – SOPC2013EB

Notice of Performance-Contingent Stock Option Grant



^Name [Participant Name]		^{Employee ID}
^{Date of Grant} [Grant Date]	^{Option Grant Price Per Share} [Grant Price]	^{Number of NSO Shares Granted} [Shares Granted]

Performance Unit Grant

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 means that the number of Performance Units you will actually receive under this grant may increase or decrease based on the Company’s actual results for the Performance Period as set forth in the Payout Matrix established by the independent members of the Human Resources and Compensation Committee (Committee) of the Board of Directors and set out below. Unless otherwise noted, This grant is subject to all the terms, rules, and conditions of the J. C. Penney Company, Inc. 2012 Long-Term Incentive Plan (“Plan”) and the implementing resolutions (“Resolutions”) approved by the Committee. Capitalized terms not otherwise defined herein shall have the respective meanings assigned to them in the Plan and the Resolutions, as applicable.

Definitions

Payout Matrix – The Payout Matrix is established by the independent members of the Board at the beginning of the Performance Period and describe the percentage of units you shall earn based on attainment of the applicable Performance Measure, as described in the Matrix, for the Performance Period.

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 50% to 200% of the units granted based on the Company’s actual results for the Performance Period.

Performance Period – The Performance Period is the one-year period beginning with the first day of the Company’s 2014 fiscal year and ending with the last day of that fiscal year.

Performance Measure – There are two Performance Measures. 50% of the PBRSU Award will be tied to the Company Free Cash Flow Performance Measure and 50% of the PBRSU Award will be tied to the EBITDA Performance Measure. Each metric will fund independently of the other. Free Cash Flow will be defined as cash flow from operating activities less capital expenditures & dividends paid, plus proceeds from the sale of operating assets. EBITDA will be defined as earnings before interest, taxes, depreciation and pension expense under the J. C. Penney Corporation, Inc. Pension Plan, and will exclude any gain on the sale of the Firestone tire and battery locations and any non-recurring impairment on the Company’s assets.

How Your Actual Performance Units are Determined

The actual number of Performance Units, if any that are credited to your account will be based on the Company’s Free Cash Flow and EBITDA for fiscal 2014. The Payout Matrix shown below indicates the percentage of Performance Units that you can actually earn for the respective Free Cash Flow and EBITDA results. Within 2½ months after the end of the Performance Period the independent members of the Board of Directors will certify the number of Performance Units, if any, that you could receive for the Performance Period based on the Payout Matrix, and subject to the Committee’s discretion to reduce the number of Performance Units you earn will determine the total number of Performance Units awarded to you for the Performance Period.

Payout Matrix



Performance Level	Payout %	Free Cash Flow (in millions)	EBITDA (in millions)
Maximum	200%	[Max Free Cash Flow]	[Max EBITDA]
Target	100%	[Target Free Cash Flow]	[Target EBITDA]
Threshold	50%	[Threshold Free Cash Flow]	[Threshold EBITDA]

The payout percentage between threshold and maximum will be evenly interpolated .

Vesting of Your Credited Performance Units

(Rev. 03/13)

The actual Performance Units awarded to you by the Committee will be fully vested, and the restrictions on your Performance Units will lapse on the first anniversary of the Date of Grant (the “Vest Date”) , provided you remain continuously employed by the Company through the Vest Date (unless your Employment terminates due to your Retirement, Disability, death, job restructuring, reduction in force, or unit closing).

50% of your vested Performance Units will be distributed to you in shares of Common Stock on the second anniversary of the Date of Grant and 50% of your vested Performance Units will be distributed to you in shares of Common Stock on the third anniversary of the Date of Grant.

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. If the Company declares a dividend, you will accrue dividend equivalents on earned Performance Units that have been credited to your account 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 in shares of Common Stock on the Vest 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 Units 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 due to Retirement, Disability, or death or job restructuring, reduction in force, or unit closing prior to the Vest Date, you shall be entitled to a prorated number of Performance Units earned under the Payout Matrix, determined as of the end of the Performance Period. The pro-rata vesting of the Performance Units will be determined by multiplying the number of Performance Units earned in the Performance Period under the Payout Matrix by a fraction, the numerator of which is the number of months from the first month of the Performance Period to the effective date of the termination, inclusive, and the denominator of which is 12. Any Performance Units earned under this termination provision will be immediately vested. 50% of your vested Performance Units will be distributed to you in shares of Common Stock on the second anniversary of the Date of Grant and 50% of your vested Performance Units will be distributed to you in shares of Common Stock on the third anniversary of the Date of Grant.

Notwithstanding the foregoing, if you are party to a termination agreement, and your Employment is terminated due to an involuntary termination of Employment without cause (or summary dismissal) under, and as defined in that termination agreement, then the number of Performance Units that will vest will be determined according to the terms of the underlying termination agreement 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. Any shares that vest under a termination agreement will be distributed as provided in the Vesting of Your Credited Performance Units section of this Notice.

Notwithstanding anything in the Plan to the contrary, if you experience an Employment Termination following a Change in Control before your Vest date, your Performance Units will vest on a pro-rata basis based on the attainment of the Performance Measures as of the effective date of the Change in Control. The pro-rata portion of the Performance Units you are awarded by the independent members of the Board of Directors as described in How Your Actual Performance Units above will be determined by multiplying the number of Performance Units awarded you by the independent members of the Board of Directors by a fraction, the numerator of which is the number of months from the Grant Date to the effective date of your Employment Termination, inclusive, and the denominator of which is 12. 50% of your vested Performance Units will be distributed to you in shares of Common Stock on the second anniversary of the Date of Grant and 50% of your vested Performance Units will be distributed to you in shares of Common Stock on the third anniversary of the Date of Grant.

If your employment terminates for any reason other than those specified above, any unvested Performance Units shall be cancelled on the effective date of termination.

Recoupment

This Performance Units grant does not constitute an employment contract. It does not guarantee employment for the length of the vesting period or for any portion thereof.

(Rev. 03/13)