Exhibit 10(ii)(aw)
INCENTIVE COMPENSATION AGREEMENT
--------------------------------
INCENTIVE COMPENSATION AGREEMENT (this "Agreement") dated as of January 2,
2001 by and between Xxxx X. Xxxxx (the "Executive") and X.X. Penney Company,
Inc. (the "Company").
WHEREAS, the Executive and the Company entered into a Succession Severance
Agreement, dated as of the date set forth on Appendix A hereto (as amended, the
"Succession Agreement"); and
WHEREAS, the Executive, desiring to continue in the employment of the
Company, has agreed to cancel the Succession Agreement in exchange for the
incentive compensation and other benefits set forth herein, and
WHEREAS, the Company also desires that the Executive continue in the employ
of the Company;
NOW THEREFORE, in consideration of the representations, covenants and
mutual promises set forth in this Agreement (the sufficiency of which is hereby
acknowledged) and intending legally to be bound, it is hereby agreed as follows:
1) Termination of Succession Agreement. Effective as of the date hereof, the
-----------------------------------
Succession Agreement is terminated and cancelled and shall be of no further
force and effect and the Company and the Executive shall have no further
rights or obligations under such agreement.
2) Incentive Compensation Payments. In consideration of the termination of the
-------------------------------
Succession Agreement and the execution of this Agreement, the Executive
shall be entitled to the compensation and benefits set forth in this Section
2.
a) Restricted Stock Unit Grant. As of the date hereof, the Executive is
---------------------------
hereby granted the number of restricted stock units (the "Restricted
Stock Units") set forth on Appendix A hereto (the "Restricted Stock Unit
Grant"), pursuant to the Company's 1997 Equity Compensation Plan (the
"Plan"). Subject to the provisions hereof, the Restricted Stock Units
shall become fully vested on December 31, 2003. Notwithstanding the
foregoing, the Restricted Stock Units shall become fully vested on the
date on which there occurs an "Acceleration Event" (as hereinafter
defined). An Acceleration Event shall occur on such date, prior to
December 31, 2003, as the Executive's employment with the Company
terminates by reason of death or "Disability"
(as hereinafter defined), termination by the Company without Cause (as
hereinafter defined), the Executive's retirement on or following the
date set forth on Appendix A hereto, a termination of employment by the
Executive for Good Reason (as hereinafter defined) or upon a change of
control of the Company, as defined in the 1997 Equity Compensation Plan.
Upon any other termination of the Executive's employment prior to
December 31, 2003, the Restricted Stock Units shall be forfeited.
Except as set forth herein, the terms and conditions applicable to the
Restricted Stock Units shall be governed by the terms of the Plan and
the standard agreement evidencing the grant of Restricted Stock Units
pursuant to the Plan. As soon as practicable following the date upon
which the Restricted Stock Units become fully vested (the "Vesting
Date"), the Company shall issue to the Executive, in cancellation of the
Restricted Stock Units, a number of shares of Company common stock equal
to the number of Restricted Stock Units. Notwithstanding the foregoing,
the Executive may elect to defer the receipt of such common stock until
a date after December 31, 2003, provided that such election is made at
least six months prior to the Vesting Date. Any such deferral shall be
evidenced by a deferral agreement entered into by the Executive and the
Company.
b) Stock Option Grant. As of the date hereof, the Executive is hereby
------------------
granted a non-qualified stock option to purchase 50,000 shares of
Company common stock (the "Option") pursuant to the Plan. The Option
shall have a maximum term of ten years from the date hereof and shall
have the per share exercise price set forth on Appendix A hereto.
Subject to the provisions hereof, the Option shall vest and become
exercisable on December 31, 2003. Notwithstanding the foregoing, the
Option shall become fully vested and exercisable if, prior to December
31, 2003, there occurs an Acceleration Event with respect to the
Executive. Upon any termination of the Executive's employment prior to
December 31, 2003, other than pursuant to an Acceleration Event, the
Option shall be forfeited and in the event of a termination of the
Executive's employment for Cause at any time prior to the expiration of
the Option term, the unexercised portion of the Option shall be
immediately forfeited. Following any termination of the Executive's
employment after December 31, 2003, other than a termination for Cause,
the Option shall remain exercisable for one year (but not beyond the
expiration of the Option's term). The terms and conditions applicable to
the Option shall otherwise be governed by the terms of the Plan and the
standard agreement evidencing the grant of an Option pursuant to the
Plan.
2
c) Bonus Payment. With respect to the Company's 2000 fiscal year, unless
-------------
the Executive is terminated for Cause prior to the payment date, the
Executive shall receive a minimum cash bonus pursuant to the Company's
EVAPP and 1989 Management Incentive Compensation Plan plans equal to 50%
of the Executive's target award level for such year.
d) Make-Whole Payment. Except as otherwise provided herein, during the
------------------
20-day period ending upon the earlier of(i) December 31, 2003 or (ii)
the date upon which the Option becomes fully vested and exercisable
(such earlier date being referred to hereinafter as the "Election
Date"), the Executive shall be entitled to elect irrevocably to receive
the Make-Whole Payment (as hereinafter defined). For purposes of this
Section 2(d), the Make-Whole Payment shall equal the amount (if any) by
which the Minimum Payout (as set forth on Appendix A hereto) exceeds the
aggregate fair market value (as defined in the Plan) of the shares of
Company common stock represented by the Restricted Stock Unit Grant,
measured as of the Election Date. The Executive shall not be entitled to
elect to receive the Make-Whole Payment if, prior to the Election Date,
the Executive's employment with the Company is terminated other than
pursuant to an Acceleration Event or the Executive has exercised any
portion of the Option. An election by the Executive to receive the Make-
Whole Payment shall result in the immediate cancellation of the Option
and the Executive agrees that he will have no further rights with
respect to the Option following such election.
e) Pension Guarantee. Following (i) any termination of Executive's
-----------------
employment by the Company other than a termination for Cause, (ii) a
termination of employment by the Executive for Good Reason or (iii) a
termination of employment by the Executive for any reason after the
retirement date noted on Appendix A, the Company agrees to pay the
Executive an additional monthly pension supplement if, and to the extent
that, the aggregate monthly pension payments (expressed as a life
annuity commencing at age 60) for which the Executive is eligible
pursuant to the Company's qualified and non-qualified pension plans (the
JCPenney Pension Plan, Supplemental Retirement Plan, and Benefits
Restoration Plan) following such termination are less than the monthly
pension payment set forth on Appendix A hereto. The payment to the
Executive of the pension supplement described in the preceding sentence
shall commence immediately upon termination of the Executive's
employment in a manner which qualifies the Executive for the pension
supplement.
3
3) Certain Definitions. For purposes of this Agreement only (i) "Cause" means
-------------------
that the Executive (A) has been convicted of a felony involving theft or
moral turpitude, or (B) has engaged in conduct that constitutes willful
gross neglect or willful gross misconduct with respect to his employment
duties, which, in either case, results in, or can reasonably be expected to
result in, material economic harm to the Company, (ii) "Disability" means
that the Executive is disabled within the meaning of the Company's long-term
disability policy and (iii) the Executive shall be entitled to terminate his
employment for "Good Reason" within thirty days following (a) any reduction
in the Executive's current base salary or (b) any reduction in the aggregate
annual bonus opportunity available to the Executive under the Company's
incentive bonus plans and arrangements (except for across-the-board
reductions in annual bonus opportunity similarly affecting all senior
executives of the Company).
4) Tax Withholding. The Company may withhold from amounts or benefits due or
---------------
shares issuable hereunder to the Executive such amounts as are required to
satisfy applicable withholding obligations.
5) Successors. This Agreement is personal to the Executive and, without the
----------
prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives. This Agreement shall inure to the benefit
of and be binding upon the Company and its successors and assigns. The
Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would have been required to perform it if no such succession had
taken place. As used in this Agreement, the "Company" shall mean both the
Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
6) Miscellaneous.
-------------
a) The Executive and the Company agree that nothing contained in this
Agreement shall confer any rights to continued employment upon the
Executive or alter the Executive's status as an "at-will" employee of
the Company.
4
b) This Agreement may not be altered, amended, or modified except by
written instrument executed by the Company and the Executive. A waiver
of any term, covenant, agreement or condition contained in this
Agreement shall not be deemed a waiver of any other term, covenant,
agreement or condition and any waiver of any default in any such term,
covenant, agreement or condition shall not be deemed a waiver of any
later default thereof or of any other term, covenant, agreement or
condition.
c) This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, but all of which together will
constitute one and the same instrument.
d) This Agreement (including Appendix A hereto) forms the entire agreement
between the parties hereto with respect to with respect to the subject
matter contained in the Agreement. This Agreement shall supersede all
prior agreements, promises, and representations regarding severance or
other payments contingent upon termination of employment, whether in
writing or otherwise, including, without limitation, the Succession
Agreement. The Executive agrees that, in the event that the Executive's
employment with the Company terminates pursuant to an Acceleration
Event, the Executive shall not be entitled to severance payments under
any severance plan, program or arrangement maintained by the Company,
notwithstanding anything to the contrary in any such plan, program or
arrangement.
e) All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) If to the Executive:
(b) To the address set forth on Appendix A hereto
(c) If to the Company:
(d) X. X. Xxxxxx Company, Inc.
(e) 0000 Xxxxxx Xxxxx
(x) Xxxxx, Xxxxx 00000-0000
(g) Attention: Director of Human Resources and Administration
5
ii) or to such other address as either party furnishes to the other in
writing in accordance with this paragraph (e) of Section 6. Notices
and communications shall be effective when actually received by the
addressee.
f) Notwithstanding anything to the contrary contained herein, in connection
with any termination of the Executive's employment or in connection with
the payment of benefits under Section 2(d) hereof, the Executive and the
Company agree to execute a customary mutual release from liability and
it is understood that the payment of benefits pursuant to Section 2(d)
or 2(e) hereof, as applicable, are conditioned upon the execution of
such release.
g) All disputes arising under, related to, or in connection with this
Agreement shall be settled by expedited arbitration conducted before a
panel of three arbitrators sitting in Dallas, Texas, in accordance with
the rules of the American Arbitration Association then in effect. The
decision of the arbitrators in that proceeding shall be binding on the
Company and the Executive. Judgment may be entered on the award of the
arbitrators in any court having jurisdiction. All expenses of such
arbitration, including legal fees, shall be borne by the non-prevailing
party in such arbitration.
h) The captions of this Agreement are not part of the provisions hereof and
shall not have any force or effect.
i) The provisions of this Agreement shall be interpreted and construed in
accordance with the laws of the State of Texas, without regard to its
choice of law principles.
6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
dates specified below.
X.X. PENNEY COMPANY, INC.
/s/ Xxxxx Xxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer
/s/ Xxxx X. Xxxxx
---------------------------------
Xxxx X. Xxxxx
7
Appendix A
Date of Succession Agreement May 18, 2000
Restricted Stock Units 96,406
Approved Retirement Date June 30, 2002
Option Exercise Price $10.85 per share
Minimum Payout $2,092,008
Succession Agreement Pension $30,746.97
Executive's Address: [intentionally omitted]
8
INCENTIVE COMPENSATION AGREEMENT
--------------------------------
INCENTIVE COMPENSATION AGREEMENT (this "Agreement") dated as of January 2,
2001 by and between Xxxxxxx X. Xxxxxx (the "Executive") and X.X. Penney Company,
Inc. (the "Company").
WHEREAS, the Executive and the Company entered into a Succession Severance
Agreement, dated as of the date set forth on Appendix A hereto (as amended, the
"Succession Agreement"); and
WHEREAS, the Executive, desiring to continue in the employment of the
Company, has agreed to cancel the Succession Agreement in exchange for the
incentive compensation and other benefits set forth herein, and
WHEREAS, the Company also desires that the Executive continue in the employ
of the Company;
NOW THEREFORE, in consideration of the representations, covenants and
mutual promises set forth in this Agreement (the sufficiency of which is hereby
acknowledged) and intending legally to be bound, it is hereby agreed as follows:
1) Termination of Succession Agreement. Effective as of the date hereof, the
-----------------------------------
Succession Agreement is terminated and cancelled and shall be of no further
force and effect and the Company and the Executive shall have no further
rights or obligations under such agreement.
2) Incentive Compensation Payments. In consideration of the termination of the
-------------------------------
Succession Agreement and the execution of this Agreement, the Executive
shall be entitled to the compensation and benefits set forth in this Section
2.
a) Restricted Stock Unit Grant. As of the date hereof, the Executive is
---------------------------
hereby granted the number of restricted stock units (the "Restricted
Stock Units") set forth on Appendix A hereto (the "Restricted Stock Unit
Grant"), pursuant to the Company's 1997 Equity Compensation Plan (the
"Plan"). Subject to the provisions hereof, the Restricted Stock Units
shall become fully vested on December 31, 2003. Notwithstanding the
foregoing, the Restricted Stock Units shall become fully vested on the
date on which there occurs an "Acceleration Event" (as hereinafter
defined). An Acceleration Event shall
occur on such date, prior to December 31, 2003, as the Executive's
employment with the Company terminates by reason of death or
"Disability" (as hereinafter defined), termination by the Company
without Cause (as hereinafter defined), the Executive's retirement on or
following the date set forth on Appendix A hereto, a termination of
employment by the Executive for Good Reason (as hereinafter defined) or
upon a change of control of the Company, as defined in the 1997 Equity
Compensation Plan. Upon any other termination of the Executive's
employment prior to December 31, 2003, the Restricted Stock Units shall
be forfeited. Except as set forth herein, the terms and conditions
applicable to the Restricted Stock Units shall be governed by the terms
of the Plan and the standard agreement evidencing the grant of
Restricted Stock Units pursuant to the Plan. As soon as practicable
following the date upon which the Restricted Stock Units become fully
vested (the "Vesting Date"), the Company shall issue to the Executive,
in cancellation of the Restricted Stock Units, a number of shares of
Company common stock equal to the number of Restricted Stock Units.
Notwithstanding the foregoing, the Executive may elect to defer the
receipt of such common stock until a date after December 31, 2003,
provided that such election is made at least six months prior to the
Vesting Date. Any such deferral shall be evidenced by a deferral
agreement entered into by the Executive and the Company.
b) Stock Option Grant. As of the date hereof, the Executive is hereby
------------------
granted a non-qualified stock option to purchase 50,000 shares of
Company common stock (the "Option") pursuant to the Plan. The Option
shall have a maximum term of ten years from the date hereof and shall
have the per share exercise price set forth on Appendix A hereto.
Subject to the provisions hereof, the Option shall vest and become
exercisable on December 31, 2003. Notwithstanding the foregoing, the
Option shall become fully vested and exercisable if, prior to December
31, 2003, there occurs an Acceleration Event with respect to the
Executive. Upon any termination of the Executive's employment prior to
December 31, 2003, other than pursuant to an Acceleration Event, the
Option shall be forfeited and in the event of a termination of the
Executive's employment for Cause at any time prior to the expiration of
the Option term, the unexercised portion of the Option shall be
immediately forfeited. Following any termination of the Executive's
employment after December 31, 2003, other than a termination for Cause,
the Option shall remain exercisable for one year (but not beyond the
expiration of the Option's term). The terms and conditions applicable to
the Option shall
2
otherwise be governed by the terms of the Plan and the standard
agreement evidencing the grant of an Option pursuant to the Plan.
c) Bonus Payment. With respect to the Company's 2000 fiscal year, unless
-------------
the Executive is terminated for Cause prior to the payment date, the
Executive shall receive a minimum cash bonus pursuant to the Company's
EVAPP and 1989 Management Incentive Compensation Plan plans equal to 50%
of the Executive's target award level for such year.
d) Make-Whole Payment. Except as otherwise provided herein, during the
------------------
20-day period ending upon the earlier of (i) December 31, 2003 or (ii)
the date upon which the Option becomes fully vested and exercisable
(such earlier date being referred to hereinafter as the "Election
Date"), the Executive shall be entitled to elect irrevocably to receive
the Make-Whole Payment (as hereinafter defined). For purposes of this
Section 2(d), the Make-Whole Payment shall equal the amount (if any) by
which the Minimum Payout (as set forth on Appendix A hereto) exceeds the
aggregate fair market value (as defined in the Plan) of the shares of
Company common stock represented by the Restricted Stock Unit Grant,
measured as of the Election Date. The Executive shall not be entitled to
elect to receive the Make-Whole Payment if, prior to the Election Date,
the Executive's employment with the Company is terminated other than
pursuant to an Acceleration Event or the Executive has exercised any
portion of the Option. An election by the Executive to receive the Make-
Whole Payment shall result in the immediate cancellation of the Option
and the Executive agrees that he will have no further rights with
respect to the Option following such election.
e) Pension Guarantee. Following (i) any termination of Executive's
-----------------
employment by the Company other than a termination for Cause, (ii) a
termination of employment by the Executive for Good Reason or (iii) a
termination of employment by the Executive for any reason after the
retirement date noted on Appendix A, the Company agrees to pay the
Executive an additional monthly pension supplement if, and to the extent
that, the aggregate monthly pension payments (expressed as a life
annuity commencing at age 60) for which the Executive is eligible
pursuant to the Company's qualified and non-qualified pension plans (the
JCPenney Pension Plan, Supplemental Retirement Plan, and Benefits
Restoration Plan) following such termination are less than the monthly
pension payment set forth on Appendix A hereto. The payment to the
Executive of the pension supplement described in the
3
preceding sentence shall commence immediately upon termination of the
Executive's employment in a manner which qualifies the Executive for the
pension supplement.
3) Certain Definitions. For purposes of this Agreement only (i) "Cause" means
-------------------
that the Executive (A) has been convicted of a felony involving theft or
moral turpitude, or (B) has engaged in conduct that constitutes willful
gross neglect or willful gross misconduct with respect to his employment
duties, which, in either case, results in, or can reasonably be expected to
result in, material economic harm to the Company, (ii) "Disability" means
that the Executive is disabled within the meaning of the Company's long-term
disability policy and (iii) the Executive shall be entitled to terminate his
employment for "Good Reason" within thirty days following (a) any reduction
in the Executive's current base salary or (b) any reduction in the aggregate
annual bonus opportunity available to the Executive under the Company's
incentive bonus plans and arrangements (except for across-the-board
reductions in annual bonus opportunity similarly affecting all senior
executives of the Company).
4) Tax Withholding. The Company may withhold from amounts or benefits due or
---------------
shares issuable hereunder to the Executive such amounts as are required to
satisfy applicable withholding obligations.
5) Successors. This Agreement is personal to the Executive and, without the
----------
prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives. This Agreement shall inure to the benefit
of and be binding upon the Company and its successors and assigns. The
Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would have been required to perform it if no such succession had
taken place. As used in this Agreement, the "Company" shall mean both the
Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
4
6) Miscellaneous.
-------------
a) The Executive and the Company agree that nothing contained in this
Agreement shall confer any rights to continued employment upon the
Executive or alter the Executive's status as an "at-will" employee of
the Company.
b) This Agreement may not be altered, amended, or modified except by
written instrument executed by the Company and the Executive. A waiver
of any term, covenant, agreement or condition contained in this
Agreement shall not be deemed a waiver of any other term, covenant,
agreement or condition and any waiver of any default in any such term,
covenant, agreement or condition shall not be deemed a waiver of any
later default thereof or of any other term, covenant, agreement or
condition.
c) This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, but all of which together will
constitute one and the same instrument.
d) This Agreement (including Appendix A hereto) forms the entire agreement
between the parties hereto with respect to with respect to the subject
matter contained in the Agreement. This Agreement shall supersede all
prior agreements, promises, and representations regarding severance or
other payments contingent upon termination of employment, whether in
writing or otherwise, including, without limitation, the Succession
Agreement. The Executive agrees that, in the event that the Executive's
employment with the Company terminates pursuant to an Acceleration
Event, the Executive shall not be entitled to severance payments under
any severance plan, program or arrangement maintained by the Company,
notwithstanding anything to the contrary in any such plan, program or
arrangement.
e) All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) If to the Executive:
(b) To the address set forth on Appendix A hereto
5
(c) If to the Company:
(d) X. X. Xxxxxx Company, Inc.
(e) 0000 Xxxxxx Xxxxx
(x) Xxxxx, Xxxxx 00000-0000
(g) Attention: Director of Human Resources and Administration
ii) or to such other address as either party furnishes to the other in
writing in accordance with this paragraph (e) of Section 6. Notices
and communications shall be effective when actually received by the
addressee.
f) Notwithstanding anything to the contrary contained herein, in connection
with any termination of the Executive's employment or in connection with
the payment of benefits under Section 2(d) hereof, the Executive and the
Company agree to execute a customary mutual release from liability and
it is understood that the payment of benefits pursuant to Section 2(d)
or 2(e) hereof, as applicable, are conditioned upon the execution of
such release.
g) All disputes arising under, related to, or in connection with this
Agreement shall be settled by expedited arbitration conducted before a
panel of three arbitrators sitting in Dallas, Texas, in accordance with
the rules of the American Arbitration Association then in effect. The
decision of the arbitrators in that proceeding shall be binding on the
Company and the Executive. Judgment may be entered on the award of the
arbitrators in any court having jurisdiction. All expenses of such
arbitration, including legal fees, shall be borne by the non-prevailing
party in such arbitration.
h) The captions of this Agreement are not part of the provisions hereof and
shall not have any force or effect.
i) The provisions of this Agreement shall be interpreted and construed in
accordance with the laws of the State of Texas, without regard to its
choice of law principles.
6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
dates specified below.
X.X. PENNEY COMPANY, INC.
/s/ Xxxxx Xxxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer
/s/ Xxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxx X. Xxxxxx
7
Appendix A
Date of Succession Agreement May 18, 2000
Restricted Stock Units 125,050
Approved Retirement Date June 30, 2002
Option Exercise Price $10.85 per share
Minimum Payout $2,713,566
Succession Agreement Pension $27,193.86
Executive's Address: [intentionally omitted]
8
INCENTIVE COMPENSATION AGREEMENT
--------------------------------
INCENTIVE COMPENSATION AGREEMENT (this "Agreement") dated as of January 2,
2001 by and between Xxxxxxx X. Xxxxxx (the "Executive") and X.X. Xxxxxx Company,
Inc. (the "Company").
WHEREAS, the Executive and the Company entered into a Succession Severance
Agreement, dated as of the date set forth on Appendix A hereto (as amended, the
"Succession Agreement"); and
WHEREAS, the Executive, desiring to continue in the employment of the
Company, has agreed to cancel the Succession Agreement in exchange for the
incentive compensation and other benefits set forth herein, and
WHEREAS, the Company also desires that the Executive continue in the
employ of the Company;
NOW THEREFORE, in consideration of the representations, covenants and
mutual promises set forth in this Agreement (the sufficiency of which is hereby
acknowledged) and intending legally to be bound, it is hereby agreed as follows:
1) Termination of Succession Agreement. Effective as of the date hereof, the
-----------------------------------
Succession Agreement is terminated and cancelled and shall be of no further
force and effect and the Company and the Executive shall have no further
rights or obligations under such agreement.
2) Incentive Compensation Payments. In consideration of the termination of the
-------------------------------
Succession Agreement and the execution of this Agreement, the Executive
shall be entitled to the compensation and benefits set forth in this Section
2.
a) Restricted Stock Unit Grant. As of the date hereof, the Executive is
---------------------------
hereby granted the number of restricted stock units (the "Restricted
Stock Units") set forth on Appendix A hereto (the "Restricted Stock Unit
Grant"), pursuant to the Company's 1997 Equity Compensation Plan (the
"Plan"). Subject to the provisions hereof, the Restricted Stock Units
shall become fully vested on December 31, 2003. Notwithstanding the
foregoing, the Restricted Stock Units shall become fully vested on the
date on which there occurs an "Acceleration Event" (as hereinafter
defined). An Acceleration Event shall occur on such date, prior to
December 31, 2003, as the Executive's employment with the Company
terminates by reason of death or "Disability"
(as hereinafter defined), termination by the Company without Cause (as
hereinafter defined), the Executive's retirement on or following the
date set forth on Appendix A hereto, a termination of employment by the
Executive for Good Reason (as hereinafter defined) or upon a change of
control of the Company, as defined in the 1997 Equity Compensation Plan.
Upon any other termination of the Executive's employment prior to
December 31, 2003, the Restricted Stock Units shall be forfeited.
Except as set forth herein, the terms and conditions applicable to the
Restricted Stock Units shall be governed by the terms of the Plan and
the standard agreement evidencing the grant of Restricted Stock Units
pursuant to the Plan. As soon as practicable following the date upon
which the Restricted Stock Units become fully vested (the "Vesting
Date"), the Company shall issue to the Executive, in cancellation of the
Restricted Stock Units, a number of shares of Company common stock equal
to the number of Restricted Stock Units. Notwithstanding the foregoing,
the Executive may elect to defer the receipt of such common stock until
a date after December 31, 2003, provided that such election is made at
least six months prior to the Vesting Date. Any such deferral shall be
evidenced by a deferral agreement entered into by the Executive and the
Company.
b) Stock Option Grant. As of the date hereof, the Executive is hereby
------------------
granted a non-qualified stock option to purchase 50,000 shares of
Company common stock (the "Option") pursuant to the Plan. The Option
shall have a maximum term of ten years from the date hereof and shall
have the per share exercise price set forth on Appendix A hereto.
Subject to the provisions hereof, the Option shall vest and become
exercisable on December 31, 2003. Notwithstanding the foregoing, the
Option shall become fully vested and exercisable if, prior to December
31, 2003, there occurs an Acceleration Event with respect to the
Executive. Upon any termination of the Executive's employment prior to
December 31, 2003, other than pursuant to an Acceleration Event, the
Option shall be forfeited and in the event of a termination of the
Executive's employment for Cause at any time prior to the expiration of
the Option term, the unexercised portion of the Option shall be
immediately forfeited. Following any termination of the Executive's
employment after December 31, 2003, other than a termination for Cause,
the Option shall remain exercisable for one year (but not beyond the
expiration of the Option's term). The terms and conditions applicable to
the Option shall otherwise be governed by the terms of the Plan and the
standard agreement evidencing the grant of an Option pursuant to the
Plan.
2
c) Bonus Payment. With respect to the Company's 2000 fiscal year, unless
-------------
the Executive is terminated for Cause prior to the payment date, the
Executive shall receive a minimum cash bonus pursuant to the Company's
EVAPP and 1989 Management Incentive Compensation Plan plans equal to 50%
of the Executive's target award level for such year.
d) Make-Whole Payment. Except as otherwise provided herein, during the
------------------
20-day period ending upon the earlier of (i) December 31, 2003 or (ii)
the date upon which the Option becomes fully vested and exercisable
(such earlier date being referred to hereinafter as the "Election
Date"), the Executive shall be entitled to elect irrevocably to receive
the Make-Whole Payment (as hereinafter defined). For purposes of this
Section 2(d), the Make-Whole Payment shall equal the amount (if any) by
which the Minimum Payout (as set forth on Appendix A hereto) exceeds the
aggregate fair market value (as defined in the Plan) of the shares of
Company common stock represented by the Restricted Stock Unit Grant,
measured as of the Election Date. The Executive shall not be entitled to
elect to receive the Make-Whole Payment if, prior to the Election Date,
the Executive's employment with the Company is terminated other than
pursuant to an Acceleration Event or the Executive has exercised any
portion of the Option. An election by the Executive to receive the Make-
Whole Payment shall result in the immediate cancellation of the Option
and the Executive agrees that he will have no further rights with
respect to the Option following such election.
e) Pension Guarantee. Following (i) any termination of
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Executive's employment by the Company other than a termination
for Cause, (ii) a termination of employment by the Executive
for Good Reason or (iii) a termination of employment by the
Executive for any reason after December 31, 2003, the
Company agrees to pay the Executive an additional monthly
pension supplement if, and to the extent that, the aggregate
monthly pension payments (expressed as a life annuity
commencing at age 60) for which the Executive is eligible
pursuant to the Company's qualified and non-qualified pension
plans (the JCPenney Pension Plan, Supplemental Retirement
Plan, and Benefits Restoration Plan) following such
termination are less than the monthly pension payment set
forth on Appendix A hereto. The payment to the Executive of
the pension supplement described in the preceding sentence
shall commence immediately upon termination of the Executive's
employment in a manner which qualifies the Executive for the
pension supplement.
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3) Certain Definitions. For purposes of this Agreement only (i) "Cause" means
-------------------
that the Executive (A) has been convicted of a felony involving theft or
moral turpitude, or (B) has engaged in conduct that constitutes willful
gross neglect or willful gross misconduct with respect to his employment
duties, which, in either case, results in, or can reasonably be expected to
result in, material economic harm to the Company, (ii) "Disability" means
that the Executive is disabled within the meaning of the Company's long-term
disability policy and (iii) the Executive shall be entitled to terminate his
employment for "Good Reason" within thirty days following (a) any reduction
in the Executive's current base salary or (b) any reduction in the aggregate
annual bonus opportunity available to the Executive under the Company's
incentive bonus plans and arrangements (except for across-the-board
reductions in annual bonus opportunity similarly affecting all senior
executives of the Company).
4) Tax Withholding. The Company may withhold from amounts or benefits due or
---------------
shares issuable hereunder to the Executive such amounts as are required to
satisfy applicable withholding obligations.
5) Successors. This Agreement is personal to the Executive and, without the
----------
prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives. This Agreement shall inure to the benefit
of and be binding upon the Company and its successors and assigns. The
Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would have been required to perform it if no such succession had
taken place. As used in this Agreement, the "Company" shall mean both the
Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
6) Miscellaneous.
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a) The Executive and the Company agree that nothing contained in this
Agreement shall confer any rights to continued employment upon the
Executive or alter the Executive's status as an "at-will" employee of
the Company.
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b) This Agreement may not be altered, amended, or modified except by
written instrument executed by the Company and the Executive. A waiver
of any term, covenant, agreement or condition contained in this
Agreement shall not be deemed a waiver of any other term, covenant,
agreement or condition and any waiver of any default in any such term,
covenant, agreement or condition shall not be deemed a waiver of any
later default thereof or of any other term, covenant, agreement or
condition.
c) This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, but all of which together will
constitute one and the same instrument.
d) This Agreement (including Appendix A hereto) forms the entire agreement
between the parties hereto with respect to with respect to the subject
matter contained in the Agreement. This Agreement shall supersede all
prior agreements, promises, and representations regarding severance or
other payments contingent upon termination of employment, whether in
writing or otherwise, including, without limitation, the Succession
Agreement. The Executive agrees that, in the event that the Executive's
employment with the Company terminates pursuant to an Acceleration
Event, the Executive shall not be entitled to severance payments under
any severance plan, program or arrangement maintained by the Company,
notwithstanding anything to the contrary in any such plan, program or
arrangement.
e) All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) If to the Executive:
(b) To the address set forth on Appendix A hereto
(c) If to the Company:
(d) X. X. Xxxxxx Company, Inc.
(e) 0000 Xxxxxx Xxxxx
(x) Xxxxx, Xxxxx 00000-0000
(g) Attention: Director of Human Resources and Administration
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ii) or to such other address as either party furnishes to the other in
writing in accordance with this paragraph (e) of Section 6. Notices
and communications shall be effective when actually received by the
addressee.
f) Notwithstanding anything to the contrary contained herein, in connection
with any termination of the Executive's employment or in connection with
the payment of benefits under Section 2(d) hereof, the Executive and the
Company agree to execute a customary mutual release from liability and
it is understood that the payment of benefits pursuant to Section 2(d)
or 2(e) hereof, as applicable, are conditioned upon the execution of
such release.
g) All disputes arising under, related to, or in connection with this
Agreement shall be settled by expedited arbitration conducted before a
panel of three arbitrators sitting in Dallas, Texas, in accordance with
the rules of the American Arbitration Association then in effect. The
decision of the arbitrators in that proceeding shall be binding on the
Company and the Executive. Judgment may be entered on the award of the
arbitrators in any court having jurisdiction. All expenses of such
arbitration, including legal fees, shall be borne by the non-prevailing
party in such arbitration.
h) The captions of this Agreement are not part of the provisions hereof and
shall not have any force or effect.
i) The provisions of this Agreement shall be interpreted and construed in
accordance with the laws of the State of Texas, without regard to its
choice of law principles.
6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
dates specified below.
X.X. PENNEY COMPANY, INC.
/s/ Xxxxx Xxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer
/s/ Xxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxx X. Xxxxxx 1/8/01
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Appendix A
Date of Succession Agreement May 18, 2000
Restricted Stock Units 96,775
Approved Retirement Date June 30, 2011
Option Exercise Price $10.85 per share
Minimum Payout $2,100,003
Succession Agreement Pension $10,112.74
Executive's Address: [intentionally omitted]
8
