Employment Agreement dated October 29, 2018 between J. C. Penney Company, Inc., J. C. Penney Corporation, Inc. and Michael Fung

This Employment Agreement (the “Agreement”) is dated as of October 29, 2018 and effective as of October 30, 2018 (the “Effective Date”), by and among Michael Fung (“Employee”), J. C. Penney Company, Inc. a Delaware corporation (“Company”), and J. C. Penney Corporation, Inc., a Delaware corporation (“Corporation”).

WHEREAS, based upon the reputation and successful experience of Employee, the Company and the Corporation desire to hire Employee as Interim Executive Vice President, Chief Financial Officer to provide the Services described herein for the duration of this Agreement.

THEREFORE, the Company, Corporation, and Employee agree as follows:

 

2.1 Definitions. The following definitions will apply:

information, and all other intellectual property and intellectual property rights that are conceived, reduced to practice, developed or made by Employee either alone or with others in the course of employment with Company, Corporation, and its controlled Affiliates (including employment prior to the date of this Agreement).

3.1 Term. The Company and Corporation on the one hand, and Employee on the other, shall have the right to terminate the Engagement for any reason or for no reason prior to the Expiration Date, in accordance with Section 3.2 or 3.3, as applicable.

3.2 Termination by the Company or Corporation.

(i) in the event of the death or Disability of Employee;

(ii) in the event of any action by Employee constituting Cause; or

(b) In the event of termination of the Engagement by the Company or Corporation pursuant to Section 3.2(a)(iii) above or 3.3(b) below, in either case prior to the Expiration Date, (i) Employee shall be entitled to payment of the Monthly Salary from the Corporation through the Expiration Date, (ii) reimbursement of expenses incurred prior to the Termination Date in accordance with Section 1.5 above; (iii) payment of the Bonus as set forth in Section 1.3; and (iv) payment of the additional stipend as set forth in Section 1.4.

(a) 30 days prior written notice to the Company and Corporation; or

3.4 Expiration. Unless earlier terminated as described above, the Engagement shall terminate automatically on the Expiration Date, in which case Employee shall receive from the Corporation the Monthly Salary through the Expiration Date, reimbursement of expenses incurred prior to the Expiration Date in accordance with Section 1.5 above, payment of the Bonus as set forth in Section 1.3, and payment of the additional stipend as set forth in Section 1.4.

3.5 Except as described in Section 3.2, 3.3 or this Section 3.5, Employee shall not be entitled to receive any other fees, remuneration or other amounts from the Company or Corporation after the Termination Date other than earned and unpaid Monthly Consulting Fees through the Termination Date,

reimbursement of expenses incurred prior to the Termination Date in accordance with Section 1.5 above, payment of the Bonus as set forth in Section 1.3, and payment of the additional stipend as set forth in Section 1.4.

4.1 Confidential Information. Employee acknowledges and agrees that (a) the Company and Corporation are each engaged in a highly competitive business; (b) the Company and Corporation have each expended considerable time and resources to develop goodwill with its customers, vendors, and others, and to create, protect, and exploit Confidential Information; (c) the Company and Corporation each must continue to prevent the dilution of its goodwill and unauthorized use or disclosure of its Confidential Information to avoid irreparable harm to its legitimate business interests; (d) in the retail business, the Consultant’s participation in or direction of the Company’s and Corporation’s day-to-day operations and strategic planning are an integral part of the Company’s and Corporation’s continued success and goodwill; (e) given the Employee’s position and responsibilities, he necessarily will be creating Confidential Information that belongs to the Company and Corporation and enhances the Company’s and Corporation’s goodwill, and in carrying out his responsibilities he in turn will be relying on the Company’s and Corporation’s goodwill and the disclosure by the Company and Corporation to him of Confidential Information; (f) he will have access to Confidential Information that could be used by any competitor of the Company and Corporation in a manner that would irreparably harm the Company’s and Corporation’s competitive position in the marketplace and dilute its goodwill; and (g) he necessarily would use or disclose Confidential Information if he were to engage in competition with the Company and Corporation. The Company and Corporation acknowledge and agree that Employee must have and continue to have throughout the Engagement the benefits and use of its goodwill and Confidential Information to properly carry out his responsibilities. The Company and Corporation accordingly promise to provide Employee with access to new and additional Confidential Information and authorize him to engage in activities that will create new and additional Confidential Information. The Company and Employee thus acknowledge and agree that during the Engagement with the Company, the Employee (i) will receive new and additional Confidential Information that is unique, proprietary, and valuable to the Company, (ii) will create new and additional Confidential Information that is unique, proprietary, and valuable to the Company, and (iii) will benefit, including without limitation by way of increased earnings and earning capacity, from the goodwill the Company and Corporation have generated and from the Confidential Information. Accordingly, Employee acknowledges and agrees that at all times during the Engagement and thereafter:

(a) all Confidential Information shall remain and be the sole and exclusive property of the Companyor Corporation, respectively;

(b) Employee will protect and safeguard all Confidential Information, including upon and after termination of this Agreement;

(c) Employee will hold all Confidential Information in strictest confidence and not, directly or indirectly, disclose or divulge any Confidential Information to any person other than an officer, director, or employee of the Company or Corporation to the extent necessary for the proper performance of his or her responsibilities unless authorized to do so by the Company or Corporation or compelled to do so by law or valid legal process; provided that nothing in this Agreement shall be construed to prohibit him from reporting possible violations of law or regulation to any governmental agency or regulatory body or making other disclosures that are protected under any law or regulation, or from filing a charge with or participating in any investigation or proceeding conducted by any governmental agency or regulatory body, and that he does not need the prior authorization of the Company or Corporation to make any such reports or disclosures and he is not required to notify the Company or Corporation that he has made such reports or disclosures;

(d) if Employee believes he is compelled by law or valid legal process to disclose or divulge any Confidential Information, subject to the proviso in Section 4.1(c) above, he will notify the Company or Corporation in writing sufficiently in advance of any such disclosure to allow the Company the opportunity to defend, limit, or otherwise protect its interests against such disclosure;

(e) at the end of his Services with the Company or Corporation for any reason or at the request of the Company or Corporation at any time, Employee will immediately return to the Company or Corporation all Confidential Information and all copies thereof, in whatever tangible form or medium including electronic, in the form and manner reasonably requested by the Company or Corporation;

4.2 Restricted Activities. In consideration of the new and additional Confidential Information which Employee will obtain in connection with his Services with the Company and Corporation, the goodwill of the Company and Corporation that will be created by Employee’s Services, and to permit the Company and Corporation to protect such Confidential Information and goodwill, as well as the other promises and undertakings of the Company and Corporation in this Agreement, Employee agrees that, while he is providing services of any kind for the Company and Corporation (including the Services) and following the end of those services for any reason, Employee will not directly or indirectly make or publish any disparaging or derogatory statements or otherwise disparage the Company, the Corporation or any of their respective Affiliates, any products, services, or operations of the Company, the Corporation, or any of their respective Affiliates, or any of the former, current, or future officers, directors, or employees of the Company, the Corporation, or any of their Affiliates.

4.5 Tolling. If Employee violates the restrictive covenants set forth in Article IV of this Agreement and the Company or Corporation brings legal action for injunctive or other relief and obtains such relief, the terms of such restrictions, as applicable, shall be extended by computing the applicable period of

time from the date relief is granted for the Company or Corporation and then reducing such period by the amount of time, after Employee’s termination of services with the Company, during which Employee complied with such restrictions.

(B) where the Employee performs services, whether paid or unpaid, in any capacity, including as an officer, director, owner, consultant, employee, agent, or representative, where such services involve the performance of (x) substantially similar duties or oversight responsibilities as those performed by the Employee at any time during the Term of this Agreement, or (y) greater duties or responsibilities that include such substantially similar duties or oversight responsibilities as those referred to in (x); or

5.1 Governing Law. This Agreement, the terms of the Engagement, and any contest, dispute, controversy or claim arising therefrom or relating thereto, shall be governed by the laws of the State of Texas, without regard to its conflict of laws principles.

5.2 Dispute Resolution. Any dispute between the parties under this Agreement shall be resolved (except as provided below) through informal binding mandatory arbitration by an arbitrator selected under the rules of the American Arbitration Association (located in the city in which the Corporation’s principal executive offices are based) and the arbitration shall be conducted in that location under the rules of said Association. Each party shall be entitled to present evidence and argument to the arbitrator. The arbitrator shall have the right only to interpret and apply the provisions of this Agreement and may not change any of its provisions, except as otherwise expressly provided herein and only in the event the Company or Corporation has not brought an action in a court of competent jurisdiction to enforce the covenants set forth herein. The arbitrator shall 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 shall be conclusive and binding upon the parties and judgment upon the same may be entered in any court having jurisdiction thereof. The arbitrator shall give written notice to the parties stating the arbitrator’s determination, and shall furnish to each party a signed copy of such determination. The expenses of arbitration shall be borne equally by the Corporation and the Employee or as the arbitrator equitably determines consistent with the application of state or federal law; provided, however, that the Employee’s share of such expenses shall not exceed the maximum permitted by law. To the extent applicable, in accordance with Code section 409A and Treasury Regulation section 1.409A-3(i)(1)(iv)(A) or any successor thereto, any payments or reimbursement of arbitration expenses which the Corporation is required to make under the foregoing provision shall meet the requirements below. The Corporation shall reimburse the Employee for any such expenses, promptly upon delivery of reasonable documentation, provided, however, all invoices for reimbursement of expenses must be submitted to the Corporation and paid in a lump sum payment by the end of the calendar year following the calendar year in which the expense was incurred. All expenses must be incurred within a two-year period following the termination of this Agreement. The amount of expenses paid or eligible for reimbursement in one year under this Section 5.2 shall not affect the expenses paid or eligible for reimbursement in any other taxable year. The right to payment or reimbursement under this Section 5.2 shall not be subject to liquidation or exchange for another benefit.

Notwithstanding the foregoing, the Company and Corporation shall not be required to seek or participate in arbitration regarding any actual or threatened breach of the Employee’s covenants as set forth herein, but may pursue its remedies, including temporary or permanent injunctive relief, for such breach in a court of competent jurisdiction in the city in which the Corporation’s principal

executive offices are based, or in the sole discretion of the Corporation, in a court of competent jurisdiction where the Employee has committed or is threatening to commit a breach of the Employee’s covenants, and no arbitrator may make any ruling inconsistent with the findings or rulings of such court.

5.5 Severability. If any provision of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written, construed and enforced as so limited.

If to Employee, at Employee’s then-current home address on file with the Company or Corporation.

5.7 Code Section 409A Compliance. The intent of the parties is that payments and benefits under this Agreement comply with, or be exempt from, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith; provided, that the Corporation does not guarantee to Employee any particular tax treatment with respect to this Agreement and any payments hereunder. In no event whatsoever shall the Corporation be liable for any additional tax, interest, or penalties that may be imposed on Employee by Code Section 409A or any damages for failing to comply with Code Section 409A.

For purposes of Code Section 409A, Employee’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number

of days (e.g., “payment shall be made within ten calendar days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Corporation. In no event may Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement that is considered nonqualified deferred compensation.

With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; provided, that this clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) such payments shall be made on or before the last day of Employee’s taxable year following the taxable year in which the expense was incurred.

Former Senior Vice-President and Chief Financial Officer of Wal-Mart U.S., with respect to any interviews regarding governmental investigations

“Cause” shall be determined in the sole discretion of J. C. Penney Corporation, Inc. and J. C. Penney Company, Inc., provided that any indictment or negative publicity with respect to the current or past investigation of Walmart Inc. by the Securities and Exchange Commission and the Department of Justice with respect to the Foreign Corrupt Practices Act, shall not be grounds for the Company or the Corporation to terminate the Engagement for “Cause”.