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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 15, 2006
J. C. PENNEY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-15274 26-0037077
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation ) Identification No.)
6501 Legacy Drive
Plano, Texas 75024-3698
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (972) 431-1000
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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 1.01 Entry into a Material Definitive Agreement
The Company's Corporate Governance Committee and Board of Directors,
working with an outside executive compensation consultant retained by the
Committee, are currently reviewing the compensation structure for non-employee
directors. In light of this review, on May 19, 2006, the Board, after
considering the recommendations of its Corporate Governance Committee, approved
the following compensation for non-employee directors covering the period from
June 1, 2006 through August 31, 2006:
o Lump sum payment of $15,000 for each non-employee director,
representing the prorated portion of the current annual retainer of
$60,000.
o Lump sum payment of $2,500 for the Chair of the Audit Committee,
representing the prorated portion of the current annual retainer for
the Audit Committee Chair of $10,000.
o Lump sum payment of $1,875 for the respective Chairs of each of the
Corporate Governance, Human Resources and Compensation, and Finance
Committees, representing the prorated portion of the current annual
retainer for each of those Committee Chairs of $7,500.
Directors are not paid a fee for meeting attendance, but are reimbursed for
expenses incurred in connection with any meeting which they attend in their
official capacities as directors. Non-employee directors are also paid $1,000
for each full day of service to the Company in addition to those services which
they perform in connection with Board and committee responsibilities, and are
reimbursed for expenses in connection with their performance of such services.
The Board also approved the annual equity grant for each non-employee
director consisting of restricted stock units having a market value on the date
of grant of $100,000. Pursuant to the provisions of the Company's 2005 Equity
Compensation Plan, the date of grant is the third full trading day following the
date of the Company's annual meeting of stockholders.
Directors may elect to receive all or a portion of their cash retainers and
fees in Company Common Stock. A director may also elect to defer payment of all
or part of any of their cash retainers and fees under the terms of the Company's
Deferred Compensation Plan for Directors. To comply with the requirements of
Section 409A of the Internal Revenue Code, the Company has amended certain of
its non-employee director election forms. Copies of the amended forms are filed
herewith as Exhibits 10.1, 10.2, 10.3, and 10.4 hereto.
Item 5.02 Departure of Directors or Principal Officers; Election of
Directors; Appointment of Principal Officers
On May 15, 2006, the Company's Board of Directors announced that it had
elected Ann Marie Tallman as a member of the Board of Directors, effective May
19, 2006. Ms. Tallman has been elected for the class of directors whose term
expires in May 2007. There are no arrangements or understandings between Ms.
Tallman and any other person pursuant to which she was elected as a director.
Ms. Tallman was also appointed to the Corporate Governance Committee of the
Board of Directors, effective May 19, 2006. A copy of the press release
announcing Ms. Tallman's election to the Board is furnished herewith as Exhibit
99.1.
Item 8.01 Other Events
(a) On May 19, 2006, the Company held its Annual Meeting of Stockholders
at its Home Office in Plano, Texas. At the Annual Meeting,
stockholders (1) re-elected Directors Vernon Jordan, Jr., Burl
Osborne, Mary Beth Stone West, and R. Gerald Turner for a three-year
term expiring at the 2009 Annual Meeting, (2) ratified the appointment
of KPMG LLP as the Company's independent auditor for the fiscal year
ending February 3, 2007, (3) approved amendments to the Company's
Restated Certificate of Incorporation and Bylaws to declassify the
Board of Directors, and (4) rejected a stockholder proposal relating
to executive compensation. A copy of the press release covering
actions taken at the Annual Meeting is furnished herewith as Exhibit
99.2.
(b) The Company has revised its Corporate Governance Guidelines. The
revised Guidelines provide for the annual appointment of a presiding
director for executive sessions of the Board. The presiding director
will be elected by the independent directors to serve a one-year term
beginning with the May 19, 2006 meeting of the Board. The revised
Guidelines also provide that a Committee of the Whole, composed of the
Company's outside directors, shall meet at least annually to evaluate
the Chief Executive Officer's performance based on previously set
goals and objectives (such goals and objectives shall also be set by
the Committee of the Whole). The results of this evaluation will be
shared with the CEO and used by the Committee of the Whole in
establishing the CEO's compensation. The revised Guidelines can be
accessed on the Company's website at www.jcpenney.net by clicking on
"Investor Relations," then "Corporate Governance." A copy of the
revised Guidelines is also furnished herewith as Exhibit 99.3.
Item 9.01 Financial Statements and Exhibits.
10.1 Form of Election to Receive Stock in Lieu of Cash Retainer(s)
10.2 Form of Notice of Election to Defer under the J. C. Penney
Company, Inc. Deferred Compensation Plan for Directors
10.3 Form of Notice of Change in the Amount of Fees deferred under
the J. C. Penney Company, Inc. Deferred Compensation Plan for
Directors
10.4 Form of Notice of Termination of Election to Defer under the
J. C. Penney Company, Inc. Deferred Compensation Plan for
Directors
99.1 J. C. Penney Company, Inc. News Release issued May 15, 2006
regarding election of Ann Marie Tallman to Board of Directors
99.2 J. C. Penney Company, Inc. News Release issued May 19, 2006
regarding results of Annual Meeting of Stockholders
99.3 J. C. Penney Company, Inc. Corporate Governance Guidelines
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
J. C. PENNEY COMPANY, INC.
By: /s/ Joanne L. Bober
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Joanne L. Bober
Executive Vice President,
General Counsel and Secretary
Date: May 19, 2006
EXHIBIT INDEX
Exhibit Number Description
10.1 Form of Election to Receive Stock in Lieu of Cash Retainer(s)
10.2 Form of Notice of Election to Defer under the J. C. Penney
Company, Inc. Deferred Compensation Plan for Directors
10.3 Form of Notice of Change in the Amount of Fees deferred under
the J. C. Penney Company, Inc. Deferred Compensation Plan for
Directors
10.4 Form of Notice of Termination of Election to Defer under the
J. C. Penney Company, Inc. Deferred Compensation Plan for Directors
99.1 J. C. Penney Company, Inc. News Release issued May 15, 2006
regarding election of Ann Marie Tallman to Board of Directors
99.2 J. C. Penney Company, Inc. News Release issued May 19, 2006
regarding results of Annual Meeting of Stockholders
99.3 J. C. Penney Company, Inc. Corporate Governance Guidelines
Exhibit 10.1
To: Vice President, Director of Rewards
and Associate Recognition
J. C. Penney Company, Inc.
P. O. Box 10001 Dallas, TX 75301-8211
Re: Directors' Compensation
ELECTION TO RECEIVE STOCK IN LIEU OF CASH RETAINER(S)
Pursuant to the terms of the 2005 J. C. Penney Company, Inc. Equity Compensation
Plan, I hereby elect as a Director of J. C. Penney Company, Inc. ("Company") to
receive in shares of J. C. Penney Company, Inc. Common Stock ("Common Stock")
_______% of my annual retainer and, if applicable, _______% of my annual
Committee Chairperson Retainer and _______% of my annual Representative under
Indemnification Trust Retainer.
I understand the terms of this election will be as follows:
o The standard annual election date is June 1.
o The payment in stock will be made at the time of payment of the
Directors' compensation.
o The election will automatically renew unless, prior to the end of the
twelve-month period, I notify the Company in writing that the election
is being terminated.
o The shares issued will be based on the fair market value of Common
Stock on the date of issuance. The fair market value will be the
opening price of the Common Stock on such date as reported in the
composite transaction table covering transactions of New York Stock
Exchange listed securities, or if such Exchange is closed, or if the
Common Stock does not trade on such date, the closing price of the
Common Stock reported in the composite transaction table on the last
trading date immediately preceding such date.
o All Common Stock issued in payment of Directors' compensation will be
automatically vested (non-forfeitable) on the date of issue.
o A check will be issued for fractional shares.
I also understand that the retainer is subject to Federal Income Tax and Social
Security Self-Employment Tax as described in the Compensation section of the
Directors' Compensation and Benefits book. Further, I understand that the fair
market value of these shares, as determined above, will be reported to the
Internal Revenue Service on a Form 1099, as if this compensation had been
received in cash.
The issuance of stock made pursuant to this election must be reported to the
Securities and Exchange Commission on a Form 4 which must be filed by the end of
the second business day following the transaction. Any subsequent sale by you of
stock received pursuant to this election should be pre-cleared with the Legal
Department (Joanne Bober, 972/431-1916; Jeff Vawrinek, 972/431-1287; Ralph
Richardson, 972/431-1288; Salil Virkar, 972/431-1211); depending on the number
of shares to be sold, it may be necessary to file a Form 144 notice of sale with
the SEC prior to the sale. The sale must also be reported on Form 4, which is
due by the end of the second business day following the transaction. All stock
received in lieu of cash will be beneficially owned by you, and will be
reflected in the stock ownership table in the Company's Proxy Statement.
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Signature Date
Exhibit 10.2
To: Vice President, Director of United Parcel Service: Vice President, Director of
Rewards and Associate Recognition Rewards and Associate Recognition
J. C. Penney Co., Inc. J. C. Penney Co., Inc.
P. O. Box 10001 6501 Legacy Drive
Dallas, TX 75301-8211 Plano, TX 75024-3698
RE: Notice of Election to Defer under the J. C. Penney Company, Inc. Deferred
Compensation Plan for Directors ("Plan")
Intention to Defer
Pursuant to the terms of the Plan, a copy of which I have received, I hereby
elect as a director of J. C. Penney Company, Inc. to defer receipt of _______%*
of my annual retainer, _____%* of my meeting fees, and _______%* of any other
fees or cash compensation payable to me for services to be rendered to the
Company ("Fees"). I understand that such an election to defer shall take effect
on January 1st and shall continue in effect until December 31st of any year
unless you shall have received from me by December 31st in the prior year
written notice of (1) my termination of such election to defer, or (2) my change
in the amount of my Fees to be deferred.
Factor for Deferral Account
In accordance with the provisions of Section 4 of the Plan, I hereby elect that
the balance in my plan Account shall be determined by reference to the following
Factor (select one):
/___/ The Moody's Single A Corporate Bond Yield
/___/ The rate payable for one-year Treasury Notes.
/___/ The rate under the Interest Income Account of the J. C. Penney
Corporation, Inc. Savings, Profit-Sharing and Stock Ownership Plan.
/___/ Units measured by the value of a share of Company Stock.
NOTE: If you elect this last Factor, you should be aware that under
the most recent rules adopted by the Securities and Exchange
Commission, contributions to your account in this manner will be
considered an exempt "purchase" under Section 16 of the Securities
Exchange Act of 1934. This purchase will be reportable on a Form 5,
but it will not be "matched" against other nonexempt sales you might
wish to make. Your switches into or out of this Factor will be exempt,
so long as any "opposite way" switches (i.e., transfers in followed by
transfers out, or vice versa) are at least six months apart.
This election of a Factor for valuing the balance in my Plan Account shall
continue in effect until the last day of the calendar quarter during which you
shall have received written notice from me of my election of a different Factor.
Payment of Deferred Compensation
I understand that all deferred Fees shall be paid to me in 10 annual
installments, unless otherwise provided for by the Plan. I hereby elect that the
first installment, shall be paid on the first business day of _______**
("Deferred Payment Date") and that subsequent installments shall be paid on the
first business day of each succeeding calendar year until paid in full. I also
understand that my election of a Deferred Payment Date is irrevocable, except as
provided in Section 6 of the Plan (Death or Hardship).
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(Signature) Date
*Specify percentage.
**Specify a year. The year specified shall not be later than the fifth calendar
year following the year in which you reach age 70.
Exhibit 10.3
To: Vice President, Director of United Parcel Service: Vice President, Director of
Rewards and Associate Recognition Rewards and Associate Recognition
J. C. Penney Co., Inc. J. C. Penney Co., Inc.
P. O. Box 10001 6501 Legacy Drive
Dallas, TX 75301-8211 Dallas, TX 75024-3698
RE: Notice of Change in the Amount of Fees deferred under the J. C. Penney
Company, Inc. Deferred Compensation Plan for Directors ("Plan")
Pursuant to the terms of the Plan, I hereby elect to make a change in my
election of the amount of fees deferred.
I hereby elect to defer receipt of _____%* of my annual retainer, _____%* of my
meeting fees, and _____%* of any other fees or compensation payable to me for
services to be rendered to the Company ("Fees").
I understand that such changes in my election of the amount of Fees deferred
shall take effect on January 1st and shall continue in effect until December
31st of any year unless you shall have received from me by December 31st of the
prior year written notice of (1) my termination of such election to defer, or
(2) my change in the amount of my Fees to be deferred.
I further understand that in all other respects my election to defer remains
unchanged.
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(Signature) Date
* Specify percentage.
Exhibit 10.4
To: Vice President, Director of United Parcel Service: Vice President, Director of
Rewards and Associate Recognition Rewards and Associate Recognition
J. C. Penney Co., Inc. J. C. Penney Co., Inc.
P. O. Box 10001 6501 Legacy Drive
Dallas, TX 75301-0004 Plano, TX 75024-3698
RE: Notice of Termination of Election to Defer under the J. C. Penney Company,
Inc. Deferred Compensation Plan for Directors ("Plan")
Pursuant to the terms of the Plan, I hereby terminate my election to defer Fees
under the Plan.
I understand that this termination of election to defer Fees shall take effect
on January 1st of any year following your receipt of this notice by December
31st of the year prior to effective year of termination.
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(Signature) Date
Exhibit 99.1
Ann Marie Tallman Joins JCPenney Board of Directors
Former MALDEF Executive Brings Substantive Leadership to JCPenney Board
May 15, 2006 - J. C. Penney Company, Inc. announced that Ann Marie Tallman, a
highly accomplished leader in the public, private and non-profit sectors, will
join the Company's Board of Directors, effective May 19. Ms. Tallman, an
attorney, most recently served as president and general counsel of the Mexican
American Legal Defense and Educational Fund (MALDEF).
Myron E. (Mike) Ullman, III, chairman and chief executive officer, said, "Ms.
Tallman is an innovative leader and a compelling advocate of equal rights for
all people. Her broad-based business expertise in finance, governance, and
marketing, coupled with a deep understanding of the Latino market will be a
significant value to our Board. We look forward to Ms. Tallman's contributions
as we continue to make JCPenney a great place to work and a top retailer in
terms of performance and execution."
Ms. Tallman added, "I am delighted to be involved in the next phase of
JCPenney's growth and success as the company continues to execute its long range
plan to become the preferred shopping choice of Middle America."
Ms. Tallman, 42, has been actively involved with the Latino community and MALDEF
for more than 18 years. Also a financial services expert, Ms. Tallman held the
position of senior vice president with mortgage lending giant, Fannie Mae. In
this position, Ms. Tallman led Fannie Mae's Single Family Mortgage Business for
the Western United States, which covered 25 states west of the Mississippi
River. Prior to that, Ms. Tallman held various executive positions at the Fannie
Mae Corporation and was president and chief executive officer for the Fannie Mae
Foundation, a non-profit organization in Washington, D.C., where she directed
five offices and a $400 million endowment.
Before joining Fannie Mae in 1994, Tallman was deputy director of office
planning and community development for the City and County of Denver. Ms.
Tallman began her professional career in 1990 as an attorney with Kutak Rock in
Denver. While a practicing attorney, Tallman was a founding board member of
Hispanic PAC USA, a federal political action committee dedicated to supporting
local and national Hispanic candidates for political office.
Ms. Tallman received a B.S. in psychology and political science from the
University of Iowa, and a J.D. from the University of California Berkeley -
Boalt Hall School of Law. She has completed executive programs at the JFK School
of Government at Harvard University, the Wharton School at University of
Pennsylvania and The Aspen Institute.
Exhibit 99.2
JCPENNEY REVIEWS PROGRESS ON ITS STRATEGIC LONG RANGE PLAN
AT COMPANY'S ANNUAL MEETING OF STOCKHOLDERS
PLANO, Texas (May 19, 2006) - At J. C. Penney Company, Inc.'s (NYSE:JCP) Annual
Meeting of Stockholders held here today, Chairman and Chief Executive Officer
Myron E. (Mike) Ullman, III, reviewed the Company's strategic growth initiatives
and financial performance expectations, all reflecting the ongoing execution of
JCPenney's five-year, Long-Range Plan.
"Our Long Range Plan is designed to make JCPenney a leader in the retail
industry, and our excellent performance in the first year of this Plan
underscores that we are well on our way. Looking ahead, we see great opportunity
for JCPenney as we focus on the growth of our customer base, store base and
financial performance. Our highly talented team of associates is focused on
executing our plans to meet the needs of our customers and be the preferred
shopping choice for Middle America," stated Mr. Ullman.
Stockholder Voting Results
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During the meeting, Company stockholders re-elected four directors for a
three-year term and ratified the appointment of KPMG LLP as independent auditor
for the fiscal year ending Feb. 3, 2007. In other Company business, stockholders
approved management's proposal to amend the Company's Restated Certificate of
Incorporation and Bylaws to declassify the Board of Directors. Current
directors, including those re-elected to three-year terms at today's Meeting,
will continue to serve the remainder of their elected terms; and starting with
the 2007 Annual Meeting of Stockholders, directors will be elected annually so
that by the 2009 Annual Meeting of Stockholders, all directors will be elected
annually.
Additionally, stockholders rejected a stockholder's proposal requesting that the
Board of Directors' Executive Compensation Committee establish a
pay-for-performance standard in the Company's executive compensation plan for
senior executives.
Dividend Declaration
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JCPenney's Board of Directors declared a quarterly dividend of $0.18 per share
on the Company's common stock. The dividend is payable Aug. 1, 2006, to the
Company's stockholders of record at the close of business on July 10, 2006.
For further information, contact:
Media Relations
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Darcie Brossart; (972) 431-3400; dbrossar@jcpenney.com
Quinton Crenshaw; (972) 431-3400; qcrensha@jcpenney.com
Investor Relations
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Bob Johnson; (972) 431-2217; rvjohnso@jcpenney.com
Ed Merritt; (972) 431-8167; emerritt@jcpenney.com
About JCPenney
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J. C. Penney Corporation, Inc., the wholly owned operating subsidiary of J. C.
Penney Company, Inc., is one of America's largest department store, catalog, and
e-commerce retailers, employing approximately 150,000 associates. As of April
29, 2006, J. C. Penney Corporation, Inc. operated 1,021 JCPenney department
stores throughout the United States and Puerto Rico. JCPenney is the nation's
largest catalog merchant of general merchandise, and jcp.com is one of the
largest apparel and home furnishings sites on the Internet. JCPenney refers to
the Internet/catalog business as Direct.
This release may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements, which reflect the company's current views of future events and
financial performance, involve known and unknown risks and uncertainties that
may cause the company's actual results to be materially different from planned
or expected results. Those risks and uncertainties include, but are not limited
to, competition, consumer demand, seasonality, economic conditions, including
the price and availability of oil and natural gas, impact of changes in consumer
credit payment terms, changes in management, retail industry consolidations,
acts of terrorism or war, and government activity. Please refer to the company's
most recent Form 10-K and subsequent filings for a further discussion of risks
and uncertainties. Investors should take such risks into account when making
investment decisions. We do not undertake to update these forward-looking
statements as of any future date.
# # #
Exhibit 99.3
J. C. PENNEY COMPANY, INC.
Corporate Governance Guidelines
(revised April 21, 2006)
J. C. Penney Company, Inc. is committed to assuring that the Company is managed
in a way that is fair to its stockholders and that allows its stockholders to
maximize their investment by participating in the present and future growth of
the Company. The Board of Directors has adopted these Corporate Governance
Guidelines and policies and, with ongoing input from the Corporate Governance
Committee, continue to assess the appropriateness of these guidelines and
policies and implement such changes and adopt such additions as may be necessary
or desirable to promote the effective governance of the Company.
I. Board of Directors' Responsibilities.
A. Board. The business affairs of the Company are managed under the
direction of the Board, which represents and is accountable to
the stockholders of the Company. The Board's responsibilities
include the responsibility to oversee and regularly evaluate: (i)
the strategic direction of the Company; (ii) management policies;
(iii) the effectiveness with which management implements its
policies; (iv) the selection, evaluation and setting of
appropriate compensation for the Company's chief executive
officer; (v) succession planning; and (vi) the recommendations
for and election and compensation of the Company's principal
officers.
B. Directors. The directors are to act in good faith and with due
care so as to exercise their business judgment on an informed
basis in what they reasonably and honestly believe to be in the
best interests of the Company and its stockholders. The directors
are expected to attend all duly called meetings and inform
themselves in advance of all relevant information reasonably
available to them.
II. Board Composition and Qualifications.
A. Size. As required by the Company's Bylaws, the total number of
directors is determined by the Board from time to time, except
the total number of directors may not be less than three. The
Board believes that a board ranging in size from 10 to 15 members
is most appropriate.
B. Classes and Terms. The Board has three classes of directors of as
nearly equal size as possible. The term of each class of
directors is normally three years, and the term of one class
expires each year in rotation.
C. Qualifications. The Corporate Governance Committee is responsible
for developing and periodically reviewing the appropriate skills
and characteristics required of Board members in the context of
the then current make-up of the Board. The Corporate Governance
Committee develops and reviews Board membership criteria, which,
among other things, currently include: (i) character and
integrity; (ii) business and management experience; (iii)
demonstrated
competence in dealing with complex problems; (iv) familiarity
with the business of the Company; (v) diverse talents,
backgrounds and perspective; (vi) freedom from conflicts of
interest; (vii) regulatory and stock exchange membership
requirements for the Board; (viii) sufficient time to devote to
the affairs of the Company; and (ix) reputation in the business
community. Under the Company's Bylaws, directors are also
required to be stockholders of the Company.
D. Independence. The Board will at all times be comprised of a
majority of independent directors who meet the criteria for
independence set by the New York Stock Exchange ("NYSE"). The
Board will make a determination as to each director's
independence on an annual basis. Each director is requested to
notify the Chairman of the Board and the chair of the Corporate
Governance Committee, as soon as practicable, of any event,
situation or condition that may affect the Board's evaluation of
his or her independence.
E. Other Board Memberships. Directors are required to advise the
Chairman of the Board and the chair of the Corporate Governance
Committee, as soon as practicable, in advance of accepting an
invitation to serve on another board. Directors are encouraged to
limit the number of other boards (excluding non-profits) on which
they serve, taking into account potential board attendance,
participation and effectiveness on these boards.
F. Retirement Age/Change of Status of Director's Principal
Employment. The Company's bylaws provide for director retirement
upon reaching age 70. Directors are also required to submit their
resignation to the Board for its consideration upon a change in
status of their principal employment or occupation.
G. Selection of Director Nominee Candidates. The Corporate
Governance Committee is responsible for recommending to the Board
the selection of qualified director nominee candidates for
consideration, based on the qualifications set forth in II.C.
above.
III. Board Organization.
A. Chairman of the Board. The Board shall select its Chair in the
manner it considers in the best interests of the Company and the
Company's stockholders. The Chair establishes the board meeting
agenda in consultation with the other directors, the executive
officers of the Company, and the corporate secretary. The Chair
may also serve as the Company's chief executive officer ("CEO").
B. Committees of the Board. The Board has standing committees to
consider designated matters. Currently, the standing committees
of the Board are Audit, Corporate Governance, Finance, and Human
Resources and Compensation. Chair positions rotate every three
years for all committees with the exception of the Audit
Committee, whose chair shall remain in that position for five
years, unless otherwise changed by the Board. Except for the
Finance Committee, all standing committee members shall be
independent directors as determined in accordance
with applicable NYSE rules. Each committee has a written charter
setting forth the duties, authority and responsibilities of the
committee and is responsible to the full Board.
IV. Board Meetings.
A. Regular Meetings. The Board will meet in person at least six
times per year, unless it determines that more or fewer meetings
are required.
B. Special Meetings. The Chair will call additional meetings, as
necessary. Any director may request that the Chair call a special
meeting. Special meetings may be held in person or by telephone
or other form of interactive electronic communication.
C. Executive Sessions and Role of Presiding Director. The
independent directors will meet in executive session at some
point during each regularly held meeting of the directors. The
presiding director of these executive sessions shall rotate on an
annual basis, beginning with the May 19, 2006 meeting of the
Board of Directors, at which time the Chair of the Corporate
Governance Committee shall serve as presiding director.
Thereafter, the independent directors shall select the director
to serve as presiding director for each subsequent one year term.
At a minimum, the independent directors will use these executive
sessions to review, as timely or appropriate: (i) strategic
issues; (ii) future Board agenda and the flow of information to
directors; (iii) CEO succession; (iv) performance and
compensation; (v) management progression and succession; and (vi)
the Company's Corporate Governance Guidelines. The presiding
director will advise the Chair of decisions reached and
suggestions made at these sessions.
V. Access to Management, Independent Advisors and Non-Management Directors.
A. Management. The Board shall have unfettered access at all times
to all members of management and all employees of the Company and
to the Company's inside and outside counsel and auditors.
B. Independent Advisors. The Board and each of its committees,
consistent with the provisions of their respective charters, have
the right at any time to retain independent advisors for legal,
financial, compensation or other services to assist them in
performing their duties and responsibilities.
C. Non-Management Directors. Interested stockholders wishing to
communicate with the Company's non-management directors may
contact the office of the Company's General Counsel. The Company
publishes on its Web site (www.jcpenney.net) a telephone number,
mailing address and email address for this purpose.
VI. Director Orientation and Education. All new directors receive orientation
materials upon joining the Board in order to become familiar with the
Company's vision, strategic direction, core values and ethics, financial
matters, corporate governance practices and other key policies and
practices, and participate in such further meetings and sessions as are
necessary to maximize their understanding of the Company, its operations
and their roles as directors. All directors also receive internal
continuing education on matters relevant to Company operations, governance
matters, business ethics, legal compliance and diversity. Directors are
also encouraged to participate in external continuing education forums for
directors, as they or the Board determine is desirable or appropriate from
time to time.
VII. Compensation.
A. Retainer and Expenses. The Corporate Governance Committee has the
responsibility for recommending to the Board the appropriate
compensation for non-associate directors. It conducts periodic
reviews to assure that the directors are being fairly and
reasonably compensated in relation to comparable U. S. companies.
Directors are also reimbursed for travel and other expenses
incurred in connection with their duties as directors.
Compensation should not be set at a level that would call into
question the Board's objectivity.
B. Loans to Directors and Executive Officers. The Company does not
make personal loans to its directors or executive officers.
C. Director Stock Ownership Guidelines. The Board has not adopted
formal stock ownership guidelines for directors or executive
officers. Under the Company's Equity Compensation Plan, however,
shares of JCPenney common stock underlying non-associate director
annual equity grants are restricted until the director's service
on the Board ends.
VIII. Succession Planning. The CEO reports periodically to an executive session
of the Board on succession planning. Such meetings shall cover the entire
subject of management development, including policies and principles for
CEO selection and performance review and policies regarding succession in
the event of an emergency or the resignation, incapacity or retirement of
the CEO.
IX. Annual Performance Review.
A. Chief Executive Officer.
1. Annually, or more frequently as appropriate, the outside
directors will meet as a Committee of the Whole to evaluate the
CEO's performance based on previously set goals and objectives
(such annual CEO goals and objectives shall also be set by the
Committee of the Whole). The results of this evaluation are
shared with the CEO and are used by the Committee of the Whole in
establishing the CEO's compensation.
2. The evaluation should be based on objective criteria including
performance of the business, accomplishment of long-term
strategic objectives, development of management, etc. The
Committee of the Whole in the course of its deliberations will
use the evaluation when considering the compensation of the CEO.
B. Board of Directors. Annually, or more frequently as appropriate,
the Board conducts a self-evaluation as to its overall
effectiveness and performance. Each of the Audit, Corporate
Governance, and Human Resources and Compensation Committees also
conducts a self-evaluation annually. The purpose of these
evaluations is to improve the effectiveness of the Board and its
committees.