Exhibit 10(b)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), made in the City of Plano
and the State of Texas, dated as of September 25, 2000, between X. X. Xxxxxx
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Company Inc., a Delaware corporation (hereinafter called the "Employer"), and J.
Xxxxx Xxxxxx (hereinafter called the "Employee").
1. Employment, Position and Duties.
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1.1 The Employer agrees to employ Employee and the Employee hereby agrees
to undertake employment upon the terms and conditions herein set
forth.
1.2 During the Term (as hereafter defined), the Employee will serve as
Chairman and Chief Executive Officer of Eckerd Corporation, or such
other position as may be assigned by the Employer's Chairman and Chief
Executive Officer, and shall perform such duties consistent with such
position as are determined and directed by the Employer's Chairman and
Chief Executive Officer. The Employee shall devote his full working
time, attention and ability to the business of the Employer,
including, if applicable, its subsidiaries and/or affiliates to which
the Employee may have been assigned responsibilities; provided,
however, that it shall not be a violation of this Agreement for the
Employee to (i) devote reasonable periods of time to charitable and
community activities and, with the approval of the Employer, industry
or professional activities, and (ii) manage personal business
interests and investments, so long as such activities do not
materially interfere with the performance of the Employee's
responsibilities under this Agreement.
1.3 Unless otherwise agreed by the Employee and the Employer, throughout
the term of this Agreement, the Employee's principal offices shall be
located in Largo, Florida.
2. Term of Employment. Employee's term of employment under this Agreement
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("Term") will commence on October 1, 2000 (the "Start Date") and, subject
to the provisions of this Agreement, will terminate on the earlier of (i)
the fourth anniversary of the Start Date or (ii) termination of Employee's
employment pursuant to Section 7 of this Agreement (the "Termination
Date"). Notwithstanding the Termination Date provided in the previous
sentence, the term of this Agreement may be extended by mutual agreement of
the parties.
3. Compensation.
3.1 Salary. In consideration of his services during the Term, the Employer
shall pay the Employee cash compensation at an annual rate of $700,000
("Base Salary") (less applicable withholding for federal taxes) in
accordance with the Employer's usual payroll policies. Employee's Base
Salary shall be subject to such adjustments as may be approved by the
appropriate committee of the Employer's Board of Directors or its
delegate (the "Committee").
3.2 Annual Incentive Compensation. Employee shall be eligible to
participate in an annual incentive plan (the "Bonus Plan"), as set out
in ANNEX I hereto.
3.3 Grand Total Earnings. The Employee's "Grand Total Earnings" shall mean
an amount equal to his Base Salary plus target annual incentive under
the Bonus Plan at $1.00 per unit.
3.4 Supplemental Cash Payment. Employee shall be entitled to receive a
supplemental cash payment of $600,000. This supplemental cash payment
shall be payable in four installments as specified below, provided
that Employee remains employed on each date of payment subject to
Section 7. The supplemental cash payment shall be payable as follows:
$150,000 on the Start Date, and $150,000 on the first, second, and
third anniversaries of the Start Date.
4. Expenses. During the Term the Employee shall be allowed reimbursement of
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reasonable expenses necessary for the performance of his duties in
accordance with the policies of the Employer.
5. Stock Options.
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5.1 The Employer will grant to Employee, on the Start Date, an option to
purchase 75,000 shares of Employer's Common Stock ("Common Stock") of
50 cents par value. The option will have a ten-year term and an
exercise price equal to the fair market value on the Start Date as
defined in the Employer's 1997 Equity Compensation Plan or other
equity compensation plan of the Employer then in force or effect (mean
of the high and low sales prices on Start Date). The option will
become exercisable and otherwise be on such terms as are set forth in
Exhibit A attached hereto.
5.2 The grants of Options will be made pursuant to and subject to the
terms, conditions, and restrictions in the Employer's 1997 Equity
Compensation Plan or other equity compensation plan of the Employer
then in force or effect.
6. Employee Benefits.
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6.1 During the Term, Employee shall be entitled to the benefits generally
provided or made available to employees of the Employer, including
group medical insurance benefits (subject in each case, however, to
(i) eligibility and (ii) modification or elimination in accordance
with the Employer's standard policies as in effect from
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time to time). The Employee is entitled to five weeks of vacation each
calendar year.
6.2 For the period from the Start Date until the Employee becomes eligible
for the Employer's Medical Plan, the Employer will reimburse the
Employee for the full cost of the COBRA premium charged by his former
employer.
6.3 The Employer will grant to Employee 10 years of service under the
Employer's 1999 Separation Allowance Program for Profit-Sharing
Management Associates.
6.4 The Employer will grant to the Employee 10 years of credited service
under the Employer's Defined Benefit Pension Plan.
6.5 The Employer will provide a car allowance to the Employee consistent
with the policy for Eckerd executives.
7. Termination of Employment.
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The termination of the Employee's employment will be governed by the
following provisions:
7.1 Death. In the event of the Employee's death during the Term, the
Employer will pay to the Employee's beneficiaries or estate, as
appropriate, as soon as practicable after the Employee's death,
(i) unpaid Base Salary to which the Employee is entitled and any
unpaid vacation, (the "Compensation Payments"), (ii) the target bonus
(at $1.00 per unit) for the Bonus Plan for the fiscal year, prorated
for the actual period of service for that fiscal year, (the "Prorated
Bonus"), (iii) any other death benefits payable under any employee
benefit or compensation plan that is maintained by the Employer for
the Employee's benefit, and (iv) any unpaid portion of the
Supplemental Cash Payment.
7.2 Permanent Disability. If the Employee becomes totally and permanently
disabled (as defined in the Employer's Long-Term Disability Plan)
during the Term, the Employer or Employee may terminate the Employee's
employment on written notice thereof in accordance with Section 12.5,
and the Employer will provide to the Employee as soon as practicable:
(i) amounts payable pursuant to the terms of any applicable disability
plan or program, (ii) the Prorated Bonus, (iii) the Compensation
Payments, (iv) such payments under applicable plans and programs, to
which the Employee is entitled pursuant to the terms of such plans or
programs, and (v) any unpaid portion of the Supplemental Cash Payment.
7.3 Voluntary Termination by Employee; Discharge for Cause.
(i) In the event that during the Term the Employee's employment is
terminated by the Employer for Cause (as defined below) or by the
Employee unless for Good Reason (as defined in Section 7.4) or
unless as a result of the Employee's death or disability, the
Company will pay the
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Compensation Payments as soon as practicable to the Employee and
the Employee will be entitled to no other compensation, except as
otherwise due him under applicable law or the terms of any
applicable plan or program. Employee will not be entitled to the
payment of any bonus in respect of all or any portion of the
fiscal year in which such termination occurs.
(ii) For purposes of this Agreement, the Employer will have "Cause" to
terminate the Employee's employment upon a finding that (a) the
Employee has been convicted by a court of competent jurisdiction
of the commission of a felony, (b) the Employee has committed a
serious breach of the Employer's Statement of Business Ethics,
(c) the Employee materially breached any of the express covenants
set forth in Section 9.1 or 9.3, or (d) the Employee has
materially breached his duties and obligations under this
Agreement; provided, however, that termination for Cause based on
this subparagraph (d) shall not be effective unless the Employee
shall have received written notice from the Chairman and Chief
Executive Officer or such officer(s) or successor in title or
responsibility (which notice shall include a description of the
reasons and circumstances giving rise to such notice) fifteen
(15) days prior to his termination and the Employee has failed
after receipt of such notice to satisfactorily discharge his
duties.
7.4 Involuntary Termination
(i) In any case of involuntary termination under this section,
Employee will be entitled to payment as described in Section 7.5.
(ii) During the Term, the Employee's employment may be terminated by
the Employer for any reason other than for Cause by delivery to
the Employee of a notice of termination in accordance with
Section 11.5. The Employee will be treated for the purposes of
this Agreement as having been involuntarily terminated other than
for Cause if, during the Term the Employee terminates his
employment with the Employer prior to termination for Cause for
any of the following reasons (each, a "Good Reason"): without the
Employee's written consent, (a) the Employer has breached any
material provision of this Agreement and within 30 days after
notice thereof from the Employee, the Employer fails to cure such
breach; or (b) a successor or assign (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Employer
fails to assume liability under the Agreement.
7.5 Termination Payments and Benefits
(i) Form and Amount. Upon the Employee's involuntary termination
other than for Cause, the Employer will pay the Compensation
Payments to the
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Employee, and will provide such payments under applicable plans
or programs to which the Employee is entitled pursuant to the
terms of such plans and programs. In addition, conditioned upon
receipt of Employee's written release of claims in such form as
may be required by the Employer, the Employer will pay or
provide to the Employee as soon as practicable (a) the Prorated
Bonus, (b) a payment equal to two times Grand Total Earnings,
(c) outplacement services by a firm selected by the Employee at
the expense of the Employer, in an amount up to $30,000 and (d)
for 24 months (the "Continuation Period") the continuation of
group medical insurance benefits except as offset by benefits
paid or provided by other sources as set forth in Section 8, or
as prohibited by law. For purposes of determining the period of
continuation coverage to which the Employee or any of his
dependents is entitled under section 4980B of the Internal
Revenue Code of 1986, as amended, (or any successor provision
thereto), the Employee will be deemed to have remained employed
until the end of the Continuation Period.
(ii) Maintenance of Benefits. During the Continuation Period, the
Employer will use its best efforts to maintain its group
medical insurance benefits in full force and effect for the
continued benefit of the Employee or will arrange to make
available to the Employee group medical benefits substantially
similar to those that the Employee would otherwise have been
entitled to receive if his employment had not been terminated.
Such benefits will be provided on the same terms and conditions
(including employee contributions toward the premium payments)
under which the Employee was entitled to participate
immediately prior to his termination.
(iii) Forfeiture. Notwithstanding the foregoing provisions of Section
7.5, any right of the Employee to receive termination payments
and benefits under Section 7.5 will be forfeited to the extent
of any amounts payable or benefits to be provided after a
material breach of any covenant set forth in Section 9.1, 9.2,
or 9.3.
7.6 Nonduplication of Benefits. To the extent, and only to the extent, a
payment or benefit that is paid or provided under this Section 7 would
also be paid or provided under the terms of any applicable plan,
program, or arrangement, including, without limitation, any severance
program, such applicable plan, program, agreement or arrangement will
be deemed to have been satisfied by the payment made or benefit
provided under this Agreement.
7.7 Employer's Right of Offset. Should Employee at any time be indebted to
the Employer, or otherwise obligated to pay money to the Employer for
any reason, the Employer, at its election, may offset amounts
otherwise payable to Employee under this Agreement, including, but
without limitation, salary payments, against any such indebtedness or
amounts due from Employee to the Employer.
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8. Mitigation. The Employee is under no obligation to mitigate damages or the
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amount of any payment or benefit provided for hereunder by seeking other
employment or otherwise. No amounts earned by the Employee after his
termination date, whether from self-employment, as a common law employee,
or otherwise, will reduce the amount of any payment or benefit under any
provision of this Agreement; provided however, the Employee's coverage
under the Employer's group medical insurance as provided in Section 7.5(i)
will terminate as soon as the Employee becomes covered under any group
medical plan made available by another employer. The Employee will report
to the Employer any such coverage actually received by him.
9. Covenants and Representations of Employee.
9.1 Confidentiality. During the Term, the Employer agrees that it will
disclose to Employee its confidential or proprietary information to
the extent necessary for Employee to carry out his obligations under
this Agreement. The Employee hereby covenants and agrees that he will
not, without the prior written consent of the Employer, during the
Term or thereafter disclose to any person not employed by the
Employer, or use in connection with engaging in competition with the
Employer, any confidential or proprietary information of the Employer.
9.2 Nonsolicitation. The Employee hereby covenants and agrees that during
the Term and for two years thereafter, he will not, without the prior
written consent of the Employer, on his own behalf or on the behalf of
any person, firm or company, directly or indirectly, attempt to
influence, persuade or induce, or assist any other person in so
persuading or inducing, any employee of Employer or its affiliates to
give up, or to not commence, employment or a business relationship
with the Employer.
9.3 Noncompetition. It is recognized by the Employee and Employer that the
Employee's duties hereunder will entail the receipt of trade secrets
and confidential information, which include not only information
concerning the Employer's current operations, procedures, suppliers,
and other contacts, but also its short-range and long-range plans, and
that such trade secrets and confidential information have been
developed by the Employer and its affiliates at substantial cost and
constitute valuable and unique property of the Employer. Accordingly,
the Employee acknowledges that the foregoing makes it reasonably
necessary for the protection of the Employer's business interests that
the Employee not compete with the Employer or any of its affiliates
during the Term and for a reasonable and limited period thereafter.
Therefore, during the Term and for a period of one year thereafter,
the Employee shall not acquire a direct investment of $100,000 or more
in a Competing Business (as hereinafter defined) and shall not render
personal services to any such Competing Business in any manner,
including, without limitation, as owner, partner, director, trustee,
officer, employee, consultant, or advisor thereof.
If the Employee shall breach the covenants contained in this Section
9, the Employer shall have no further obligation to make any payment
to the Employee
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pursuant to this Agreement and may recover from the Employee all such
damages as it may be entitled to at law or in equity. In addition, the
Employee acknowledges that any such breach is likely to result in
immediate and irreparable harm to the Employer for which money damages
are likely to be inadequate. Accordingly, the Employee consents to
injunctive and other appropriate equitable relief upon the institution
of proceedings therefor by the Employer in order to protect Employer's
rights hereunder.
As used in this Agreement, the term "Competing Business" shall mean
any business that, at the time of the determination -
(i) operates (a) any retail department store, specialty store,
general merchandise store, or drug store; (b) any retail
catalog, telemarketing, or direct mail business; (c) any
Internet-based or other electronic retailing business; (d) any
other retail business that sells goods, merchandise, or
services of the types sold by Employer, including its
divisions, affiliates, and licensees; or (e) any business that
provides buying office or sourcing services to any business of
the types referred to in this subparagraph;
(ii) conducts any business of the types referred to in subparagraph
(i) in the United States or another country in which Employer,
including its divisions, affiliates, and licensees, conducts a
similar business; and
(iii) from any business(es) of the types referred to in subparagraph
(i), had aggregate net sales or revenues of $500,000,000 in the
fiscal year preceding the determination or is reasonably
expected to have aggregate net sales or revenues of
$500,000,000 in either the current fiscal year or the next
following fiscal year.
9.4 Representations of Employee. The Employee represents and warrants to
the Employer that:
(i) There are no restrictions, agreements or understandings
whatsoever to which the Employee is a party that would prevent or
make unlawful the Employee's execution of this Agreement or the
Employee's employment under this Agreement, or which is or would
be inconsistent, or in conflict with this Agreement or the
Employee's employment under this Agreement, or would prevent,
limit or impair in any way the performance by the Employee of the
obligations under this Agreement; and
(ii) The Employee has disclosed to Employer all restraints,
confidentiality commitments or other employment restrictions that
Employee has with any other employer, person or entity.
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(iii) Upon and after the Employee's termination or cessation of
employment with Employer and until such time as no obligations
of the Employee to Employer hereunder exist, the Employee: (a)
shall provide a complete copy of this Agreement to any
prospective employer or other person, entity or association in
a Competing Business with whom or which the Employee proposes
to be employed, affiliated, engaged, associated or to establish
any business or remunerative relationship prior to the
commencement thereof; and (b) shall notify Employer of the name
and address of any such person, entity or association prior to
the Employee's employment, affiliation, engagement, association
or the establishment of any business or remunerative
relationship.
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10. Survival. The expiration or termination of the Term will not impair the
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rights or obligations of any party hereto that accrue hereunder prior to
such expiration or termination, except to the extent specifically stated
herein. In addition to the foregoing, the Employee's covenants contained in
Section 9 and 11.1 and the Employer's obligations under Section 7 and 11.1
will survive the expiration or termination of Employee's employment.
11. Miscellaneous Provisions.
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Dispute Resolution. Any dispute between the parties under this Agreement
will be resolved (except as provided below) through informal arbitration by
an arbitrator selected under the rules of the American Arbitration
Association for arbitration of employment disputes (located in the city in
which the Employer's principal executive offices are based) and the
arbitration will be conducted in that location under the rules of said
Association. Each party will be entitled to present evidence and argument
to the arbitrator. The arbitrator will have the right only to interpret and
apply the provisions of this Agreement and may not change any of its
provisions. The arbitrator will permit reasonable pre-hearing discovery of
facts, to the extent necessary to establish a claim or a defense to a
claim, subject to supervision by the arbitrator. The determination of the
arbitrator will be conclusive and binding upon the parties and judgment
upon the same may be entered in any court having jurisdiction thereof. The
arbitrator will give written notice to the parties stating his or their
determination, and will furnish to each party a signed copy of such
determination. The expenses of arbitration will be borne equally by the
Employer and Employee or as the arbitrator otherwise equitably determines.
Any arbitration or action pursuant to this Section 11.1 will be governed by
and construed in accordance with the substantive laws of the State of
Texas, without giving effect to the principles of conflict of laws of such
State. The mandatory arbitration provisions of this Section 11.1 shall
supersede in their entirety the X. X. Xxxxxx Alternative, a dispute
resolution program generally applicable to employment terminations.
Notwithstanding the foregoing, the Employer will not be required to seek or
participate in arbitration regarding any breach of the Employee's covenants
in Section 9, but may pursue its remedies for such breach in a court of
competent jurisdiction in the city in which the Employer's principal
executive offices are based.
11.1 Binding on Successors; Assignment. This Agreement will be binding upon
and inure to the benefit of the Employer, Employee and each of their
respective successors, assigns, personal and legal representatives,
executors, administrators, heirs, distributees, devisees, and
legatees, as applicable; provided however, that neither this Agreement
nor any rights or obligations hereunder will be assignable or
otherwise subject to hypothecation by Employee (except by will or by
operation of the laws of intestate succession) or by the Employer,
except that the Employer may assign this Agreement to any successor
(whether by merger, purchase or otherwise) to all or substantially all
of the stock, assets or businesses of the Employer, if such successor
expressly agrees to assume the obligations of the Employer hereunder.
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11.2 Governing Law. This Agreement will be governed, construed,
interpreted, and enforced in accordance with the substantive law of
the State of Texas, without regard to conflicts of law principles.
11.3 Severability. Any provision of this Agreement that is deemed invalid,
illegal or unenforceable in any jurisdiction will, as to that
jurisdiction, be ineffective, to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or
any other provisions of this Agreement invalid, illegal or
unenforceable in any other jurisdiction. If any covenant should be
deemed invalid, illegal or unenforceable because its scope is
considered excessive, such covenant will be modified so that the
scope of the covenant is reduced only to the minimum extent necessary
to render the modified covenant valid, legal and enforceable.
11.4 Notices. For all purposes of this Agreement, all communications
required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof
confirmed), or five business days after having been mailed by United
States registered or certified mail, return receipt requested,
postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service, addressed to the
Employer at its principal executive office and to the Employee at his
principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except
that notices of change of address will be effective only upon
receipt.
11.5 Entire Agreement. The terms of this Agreement are intended by the
parties to be the final expression of their Agreement with respect to
the Employee's employment and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend
that this Agreement will constitute the complete and exclusive
statement of its terms and that no extrinsic evidence whatsoever may
be introduced in any judicial, administrative, or other legal
proceedings to vary the terms of this Agreement.
11.6 Amendments; Waivers. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, approved by the
Employer and signed by the Employee and the Employer. Failure on the
part of either party to complain of any action or omission, breach or
default on the part of the other party, no matter how long the same
may continue, will never be deemed to be a waiver of any rights or
remedies hereunder, at law or in equity. The Employee or Employer may
waive compliance by the other party with any provision of this
Agreement that such other party was or is obligated to comply with or
perform only through an executed writing; provided however, that such
waiver will not operate as a waiver of, or estoppel with respect to,
any other or subsequent failure.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
X. X. Penney Company, Inc.
By: /s/ XXXXX X. XXXXXXXX
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Name: Xxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
/s/ J. XXXXX XXXXXX
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J. Xxxxx Xxxxxx
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ANNEX I
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Bonus Plan
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Employee's annual target incentive units shall be 88.25% of Base Salary unless
changed by the Personnel and Compensation Committee; provided however, that
Employee's annual incentive award for the 12 months commencing with the Start
Date shall not be less than 88.25% of Base Salary, which amount for 2000 shall
be prorated to reflect Employee's actual period of service during 2000 after the
Start Date.
The performance measures for the Bonus Plan shall be as follows:
Sales 40% weighting
Profit (EBIT) 40% weighting
Gross Margin Return on Investment 20% weighting
Performance against plan for these measures produces a unit value that is
multiplied by the target incentive units to produce an annual award. The minimum
unit value under this Plan shall be 0% and the maximum shall be 300%.
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EXHIBIT A
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Special Stock Option Grant
The Employer will grant a special stock option grant for the purchase of 75,000
shares of Common Stock to Employee. The stock option grant will be effective on
the Start Date, pending approval of the Committee, with an exercise price per
share of the fair market value (mean of the high and the low sales prices as
reported in the composite transaction table covering transactions of NYSE listed
securities) of JCPenney stock on the effective date of the grant.
Form of Grant
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Non-qualified Stock Options (NSOs).
Term of the Special Stock Option Grant:
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The option term is 10 years with the normal expiration date of the option on
October 1, 2010.
Vesting Provisions
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The stock option grant will vest 25% per year beginning on October 1, 2001. The
grant will be 100% vested on October 1, 2004.
Termination of Employment Provisions:
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If Employee terminates employment due to disability or retirement, any unvested
portion of the option will become immediately exercisable and the option will
expire five years from the date of termination or the normal expiration date of
the option, whichever is earlier. If Employee terminates employment due to
death, any unvested portion of the option will become immediately exercisable
and the option will expire two years from the date of death or the normal
expiration date of the option, whichever is earlier. If Employee terminates
employment before the normal expiration date of the option for any reason other
than death, disability or retirement, all outstanding vested and unvested
portions of the option will expire on the date of termination.
Change of Control:
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The stock option grant becomes immediately exercisable (vested) without regard
to the vesting dates listed above upon a Change of Control of the JCPenney
Company (as defined in the Employer's 1997 Equity Compensation Plan), or if, as
a result of a sale, merger or other disposition, JCPenney Company, Inc. owns
less than 51% of the outstanding common stock of Eckerd Corporation, or if
JCPenney Company, Inc. sells all or substantially all of the assets of Eckerd
Corporation to a person or entity not affiliated with the Employer.
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