<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
20549
-----------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
-----------------
For the 13 week period Commission file number 1-777
ended April 27, 1996
J. C. PENNEY COMPANY, INC.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-5583779
- -----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6501 Legacy Drive, Plano, Texas 75024 - 3698
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 431-1000
------------------
-----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X . No .
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
224,960,712 shares of Common Stock of $.50 par value, as of April 27, 1996.
</PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements.
The following interim financial information is unaudited but, in the opinion
of the Company, includes all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation. Certain prior year amounts have
been restated to conform with the current year presentation. The financial
information should be read in conjunction with the audited consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the 52 weeks ended January 27, 1996.
<TABLE>
Statements of Income
(Amounts in millions except per share data)
<CAPTION>
13 weeks ended
-------------------------
Apr. 27, Apr. 29,
1996 1995
---------- ----------
<S> <C> <C>
Retail sales $ 4,452 $ 4,367
Revenue of insurance and bank operations 236 197
---------- ----------
Total revenue 4,688 4,564
---------- ----------
Costs and expenses
Cost of goods sold, occupancy, buying,
and warehousing costs 3,097 2,997
Selling, general, and administrative
expenses 1,154 1,148
Costs and expenses of insurance and
bank operations 187 149
Net interest expense and credit
operations 23 17
---------- ----------
Total costs and expenses 4,461 4,311
---------- ----------
Income before income taxes 227 253
Income taxes 85 97
---------- ----------
Net income $ 142 $ 156
---------- ----------
---------- ----------
Net income per common share
Primary $ .58 $ .63
---------- ----------
---------- ----------
Fully diluted $ .57 $ .61
---------- ----------
---------- ----------
Weighted average common shares outstanding
Primary 227.2 231.9
---------- ----------
---------- ----------
Fully diluted 247.2 253.0
---------- ----------
---------- ----------
</TABLE>
</PAGE>
<PAGE>
<TABLE>
Balance Sheets
(Amounts in millions)
<CAPTION>
Apr. 27, Apr. 29, Jan. 27,
1996 1995 1996
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and short term investments
of $103, $135, and $173 $ 145 $ 255 $ 173
Receivables, net 4,756 4,668 5,207
Merchandise inventories 3,992 3,994 3,935
Prepaid expenses 92 81 94
------- ------- -------
Total current assets 8,985 8,998 9,409
Properties, net of accumulated
depreciation of $2,036, $1,927,
and $2,127 4,245 3,957 4,281
Investments, primarily insurance operations 1,637 1,469 1,651
Deferred insurance policy acquisition costs 603 500 582
Other assets 1,312 1,135 1,179
------- ------- -------
$16,782 $16,059 $17,102
------- ------- -------
------- ------- -------
</TABLE>
</PAGE>
<PAGE>
<TABLE>
Balance Sheets
(Amounts in millions)
<CAPTION>
Apr. 27, Apr. 29, Jan. 27,
1996 1995 1996
--------- -------- --------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 2,129 $ 2,086 $ 2,404
Short term debt 1,385 2,160 1,509
Deferred taxes 107 115 107
--------- --------- ---------
Total current liabilities 3,621 4,361 4,020
Long term debt 4,077 3,167 4,080
Deferred taxes 1,236 1,100 1,188
Bank deposits 774 709 767
Insurance policy and claims reserves 711 587 691
Other liabilities 473 466 472
--------- --------- ---------
Total liabilities 10,892 10,390 11,218
Stockholders' equity
Preferred stock, without par value:
Authorized, 25 million shares -
issued, 1 million shares of
Series B ESOP convertible preferred 589 624 603
Guaranteed LESOP obligation (228) (307) (228)
Common stock, par value $.50:
Authorized, 1,250 million shares -
issued, 225, 227, and 224 million
shares 1,140 1,112 1,112
--------- --------- ---------
Total capital stock 1,501 1,429 1,487
--------- --------- ---------
Reinvested earnings at beginning
of year 4,397 4,262 4,262
Net income 142 156 838
Net unrealized change in debt
and equity securities and foreign
currency translation adjustments (33) 19 72
Retirement of common stock -- (87) (301)
Common stock dividends declared (117) (110) (434)
Preferred stock dividends
declared, net of taxes -- -- (40)
--------- --------- ---------
Reinvested earnings at end of
period 4,389 4,240 4,397
--------- --------- ---------
Total stockholders' equity 5,890 5,669 5,884
--------- --------- ---------
$16,782 $16,059 $17,102
--------- --------- ---------
--------- --------- ---------
</TABLE>
</PAGE>
<PAGE>
<TABLE>
Statements of Cash Flows
(Amounts in millions)
<CAPTION>
13 weeks ended
----------------------
Apr. 27, Apr. 29,
1996 1995
-------- --------
<S> <C> <C>
Operating activities
Net income $ 142 $ 156
Depreciation and amortization 82 80
Deferred taxes 48 62
Change in cash from:
Customer receivables 476 533
Inventories, net of trade payables (97) (123)
Other assets and liabilities, net (307) (259)
-------- --------
344 449
-------- --------
Investing activities
Capital expenditures (123) (109)
Purchases of investment securities (165) (191)
Proceeds from sales of investment securities 131 121
Acquisition of Kerr Drug -- (74)
-------- --------
(157) (253)
-------- --------
Financing activities
Increase/(Decrease) in short term debt (124) 68
Payments of long term debt -- (165)
Common stock issued, net 28 84
Common stock purchased and retired -- (88)
Preferred stock retired (14) (6)
Dividends paid, preferred and common (105) (95)
-------- --------
(215) (202)
-------- --------
Net decrease in cash and short term
investments (28) (6)
Cash and short term investments at beginning
of year 173 261
-------- --------
Cash and short term investments at end of
first quarter $ 145 $ 255
-------- --------
-------- --------
</TABLE>
</PAGE>
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition
- -------------------
The Company's financial condition remains strong. Merchandise inventories,
on a FIFO basis, were $4,218 million at the end of the first quarter, a
slight decrease (0.5 per cent) from the prior year. The current cost of
inventories exceeded the LIFO basis amount carried on the balance sheet by
approximately $226 million at April 27, 1996 and January 27, 1996, and $247
million at April 29, 1995.
Total debt, both on and off the balance sheet, was $6.5 billion at April
27, 1996, up $222 million compared with April 29, 1995 levels, and
slightly below levels at the end of fiscal 1995. Debt levels are up from
the prior year principally due to the Company's stock purchase program.
As of April 27, 1996, the Company's debt to capital ratio was 52.5 per
cent, slightly below last year and the Company's target ratio.
As of May 31, 1996, the Company had purchased approximately 7.5 million
shares of its common stock at a cost of $335 million under its 1995 stock
purchase program. No stock was purchased during the first quarter of
1996. Since March 1994, the Company has purchased approximately 17.5
million shares at a cost of $810 million. All shares were retired and
returned to the status of authorized but unissued shares of common stock.
On March 13, 1996, the Board of Directors increased the quarterly
dividend to 52 cents per share, or an indicated annual rate of $2.08, an
increase of 8.3 per cent. The regular quarterly dividend of 52 cents per
share on the Company's outstanding common stock was paid on May 1, 1996,
to stockholders of record on April 10, 1996.
</PAGE>
<PAGE>
<TABLE>
Results of Operations
- ---------------------
<CAPTION>
Ratios useful in analyzing the results of operations are as follows:
13 weeks ended
-------------------
Apr. 27, Apr. 29,
1996 1995
-------------------
<S> <C> <C>
Retail sales, per cent increase 1.9 0.4
JCPenney stores sales, per cent
increase (decrease) 0.6 (0.5)
Gross margin, per cent of retail
sales
FIFO 30.4 31.4
LIFO 30.4 31.4
Selling, general, and adminis-
trative expenses, per cent of
retail sales 25.9 26.3
Effective income tax rate 37.7 38.3
</TABLE>
For the 13 weeks ended April 27, 1996, fully diluted net income per share
declined 6.6 per cent to 57 cents, compared with 61 cents per share in
the comparable period last year. Net income totaled $142 million, a 9.2
per cent decline from $156 million in 1995's first quarter.
First quarter total retail sales increased 1.9 per cent to $4,452 million
from $4,367 million in last year's comparable period. Sales from
JCPenney stores increased 0.6 per cent, while catalog sales increased 1.3
per cent from the comparable 1995 period. Sales from the Thrift Drug
operation during the 1996 first quarter increased 12.5 per cent over the
comparable period in 1995. On a comparable store basis, JCPenney store
sales decreased 0.8 per cent, and Thrift Drug store sales increased 5.3
per cent compared to first quarter 1995.
Gross margin, as a per cent of retail sales, decreased 100 basis points
in the first quarter to 30.4 per cent from 31.4 per cent in the
comparable 1995 period, as stores and catalog competed in a highly
competitive retail environment.
Selling, general, and administrative ("SG&A") expenses continued to be
well managed in the first quarter. On a dollar basis, SG&A expenses were
only slightly above 1995 levels and were leveraged despite weak sales.
As a per cent of retail sales, SG&A expenses for first quarter 1996 were
25.9 per cent compared with 26.3 per cent in 1995's first quarter. This
reflects the Company's continuing efforts to reduce costs across all
operating and support areas.
Net interest expense and credit operations for the first quarter of 1996
was $23 million compared with $17 million in the comparable period last
year. Net interest expense was $75 million, down $2 million from last
year's first quarter. Finance charge revenue of $168 million in the first
quarter was down slightly from 1995 levels, corresponding with total
customer receivables, which, at $4.128 billion, were $16 million lower
than last year's level. Credit operating costs were $116 million in
first quarter 1996 compared with $111 million in first quarter 1995.
</PAGE>
<PAGE>
The Company's life and health insurance business continued its strong
growth in premiums and earnings during the first quarter of 1996. Total
revenue for the first quarter was $196 million, an increase of $37
million or 22.8 per cent over the comparable 1995 period. Pretax income
was $46 million, an increase of $7 million or 17.8 per cent over last year.
The Company's business depends to a great extent on the last quarter of
the year. Historically, sales for that period have averaged approximately
one third of annual sales. Accordingly, the results of operations for
the 13 weeks ended April 27, 1996 are not necessarily indicative of the
results for the entire year.
</PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings.
The Company has no material legal proceedings pending against it.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
The following documents are filed as exhibits to this report:
3(i) Restated Certificate of Incorporation of J. C. Penney
Company, Inc.
10(a) April 1996 Amendments to the J. C. Penney Company, Inc.
Supplemental Retirement Program for Management
Profit-Sharing Associates.
10(b) April 1996 Amendment to the J. C. Penney Company, Inc.
Benefit Restoration Plan.
11 Computation of net income per common share.
12(a) Computation of ratios of available income to combined
fixed charges and preferred stock dividend requirement.
12(b) Computation of ratios of available income to fixed charges.
27 Financial Data Schedule for the three months ended April
27, 1996.
(b) Reports on Form 8-K
-------------------
None.
</PAGE>
<PAGE>
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 thereunto duly authorized.
J. C. PENNEY COMPANY, INC.
By /s/ W. J. Alcorn
---------------------
W. J. Alcorn
Vice President and Controller
(Principal Accounting Officer)
Date: June 6, 1996
</PAGE>
Exhibit 3(i)
RESTATED CERTIFICATE OF INCORPORATION
OF
J. C. PENNEY COMPANY, INC.
The present name of the corporation is J. C. Penney Company, Inc.
(the "Company"). The Company was incorporated under the name of J. C. Penney
Company by the filing of its original Certificate of Incorporation with
the Secretary of State of the State of Delaware on December 15, 1924.
This Restated Certificate of Incorporation of the Company restates and
integrates but does not further amend the provisions of the Company's
Certificate of Incorporation as heretofore amended and supplemented, and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation. This Restated Certificate of
Incorporation was duly adopted by the Board of Directors of the Company in
accordance with the provisions of Section 245 of the General Corporation Law
of the State of Delaware and hereby restates and integrates the provisions
of the Company's Certificate of Incorporation, as heretofore amended and
restated, to read in its entirety as follows:
First: The name of the corporation (which is herein referred to as the
Company) shall be J. C. Penney Company, Inc.
Second: The address of the Company's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle Delaware 19801. The name of the Company's
registered agent at such address is The Corporation Trust Company.
Third: The purpose of the Company is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
Fourth: The total number of shares of all classes of stock which the
Company shall have authority to issue is 1,275,000,000 shares, of which
25,000,000 shares shall be shares of Preferred Stock without par value
(hereinafter called Preferred Stock) and 1,250,000,000 shares shall be
shares of Common Stock of $.50 par value (hereinafter called Common
Stock).
Authority is hereby expressly granted to the Board of Directors
from time to time to issue the Preferred Stock as Preferred Stock of one
or more series and in connection with the creation of any such series
to fix by the resolution or resolutions providing for the issue of shares
thereof the designation, powers, preferences, and relative, participating,
optional, or other special rights of such series, and the qualifications,
limitations, or restrictions thereof. Such authority of the Board of
Directors with respect to each such series shall include, but not be
limited to, the determination of the following:
(a) the distinctive designation of, and the number of
shares comprising, such series, which number may be increased
(except where otherwise provided by the Board of Directors in
creating such series) or decreased (but not below the number of
shares thereof then outstanding) from time to time by like action of
the Board of Directors;
(b) the dividend rate or amount for such series, the
conditions and dates upon which such dividends shall be payable,
the relation which such dividends shall bear to the dividends
payable on any other class or classes or any other series of any
class or classes of stock, and whether such dividends shall be
cumulative, and if so, from which date or dates for such series;
(c) whether or not the shares of such series shall be subject
to redemption by the Company and the times, prices, and other terms
and conditions of such redemption;
(d) whether or not the shares of such series shall be subject
to the operation of a sinking fund or purchase fund to be applied to
the purchase or redemption of such shares and if such a fund be
established, the amount thereof and the terms and provisions relative
to the application thereof;
(e) whether or not the shares of such series shall be
convertible into or exchangeable for shares of any other class or
classes, or of any other series of any class or classes, of stock
of the Company and if provision be made for conversion or exchange,
the times, prices, rates, adjustments, and other terms and conditions
of such conversion or exchange;
(f) whether or not the shares of such series shall have voting
rights, in addition to the voting rights provided by law, and if they
are to have such additional voting rights, the extent thereof;
(g) the rights of the shares of such series in the event of
any liquidation, dissolution, or winding up of the Company or
upon any distribution of its assets; and
(h) any other powers, preferences, and relative, participating,
optional, or other special rights of the shares of such series, and
qualifications, limitations, or restrictions thereof, to the full
extent now or hereafter permitted by law and not inconsistent with
the provisions hereof.
All shares of any one series of Preferred Stock shall be identical in
all respects except as to the dates from which dividends thereon shall be
cumulative. All series of the Preferred Stock shall rank equally and be
identical in all respects except as otherwise provided in the resolution or
resolutions providing for the issue of any series of Preferred Stock.
Whenever dividends upon the Preferred Stock at the time outstanding, to
the extent of the preference to which such stock is entitled, shall have
been paid in full or declared and set apart for payment for all past dividend
periods, and after the provisions for any sinking or purchase fund or funds
for any series of Preferred Stock shall have been complied with, the Board
of Directors may declare and pay dividends on the Common Stock, payable in
cash, stock, or otherwise, and the holders of shares of Preferred Stock
shall not be entitled to share therein, subject to the provisions of the
resolution or resolutions creating any series of Preferred Stock.
In the event of any liquidation, dissolution, or winding up of the Company
or upon the distribution of the assets of the Company, all assets and funds
of the Company remaining, after the payment to the holders of the Preferred
Stock of the full preferential amounts to which they shall be entitled as
provided in the resolution or resolutions creating any series thereof, shall
be divided and distributed among the holders of the Common Stock ratably,
except as may otherwise be provided in any such resolution or resolutions.
Neither the merger or consolidation of the Company with another corporation
nor the sale or lease of all or substantially all the assets of the Company
shall be deemed to be a liquidation, dissolution, or winding up of the
Company or a distribution of its assets.
Except as otherwise required by law or provided by a resolution or
resolutions of the Board of Directors creating any series of Preferred
Stock, the holders of Common Stock shall have the exclusive power to vote
and shall have one vote in respect of each share of such stock held and the
holders of Preferred Stock shall have no voting power whatsoever. Except
as otherwise provided in such a resolution or resolutions, the authorized
shares of any class or classes may be increased or decreased by the
affirmative vote of the holders of a majority of the outstanding shares of
stock of the Company entitled to vote.
Pursuant to the authority conferred by this Article Fourth upon the
Board of Directors of the Company, the Board of Directors created a series of
1,600,000 shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock by filing a Certificate of Designations of the
Company with the Secretary of State of the State of Delaware (the
"Secretary of State") on January 29, 1986, as amended by the Amended
Certificate of Designations of the Company filed with the Secretary of State
on February 15, 1990, and the voting powers, designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the Company's
Series A Junior Participating Preferred Stock are set forth in Appendix A
hereto and are incorporated herein by reference.
Pursuant to the authority conferred by this Article Fourth upon the
Board of Directors of the Company, the Board of Directors created a series
of 1,400,000 shares of Preferred Stock designated as Series B ESOP
Convertible Preferred Stock by filing a Certificate of Designations of the
Company with the Secretary of State on August 30, 1988, and the voting
powers, designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or restrictions
thereof, of the Company's Series B ESOP Convertible Preferred Stock are set
forth in Appendix B hereto and are incorporated herein by reference.
Fifth: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized and empowered:
(a) to make, alter, and repeal the Bylaws of the Company,
subject to the power of the stockholders of the Company to alter or
repeal any Bylaw made by the Board of Directors;
(b) subject to the laws of the State of Delaware, from time to
time to sell, lease, or otherwise dispose of any part or parts of the
properties of the Company and to cease to conduct the business
connected therewith or again to resume the same, as it may deem
best; and
(c) in addition to the powers and authorities hereinbefore and
by the laws of the State of Delaware conferred upon the Board of
Directors, to exercise all such powers and to do all such acts and
things as may be exercised or done by the Company; subject,
nevertheless, to the provisions of said laws, of the Certificate of
Incorporation as from time to time amended of the Company, and of its
Bylaws.
Sixth: (a) Except as otherwise provided for or fixed by or pursuant to
the provisions of Article Fourth of this Certificate of Incorporation relating
to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to
elect additional directors under specified circumstances, the number of
directors of the Company shall be fixed from time to time by or pursuant to
the Bylaws of the Company. The directors, other than those who may be
elected pursuant to the aforesaid provisions of said Article Fourth, shall
be classified, with respect to the time for which they severally hold office,
into three classes, as nearly equal in number as possible, as shall be
provided in the manner specified in the Bylaws of the Company, the first
such class to be originally elected for a term expiring at the annual
meeting of stockholders to be held in 1986, the second such class to be
originally elected for a term expiring at the annual meeting of stockholders
to be held in 1987, and the third such class to be originally elected for a
term expiring at the annual meeting of stockholders to be held in 1988, with
each director in each class to hold office until his or her successor is
elected and qualified. At each annual meeting of stockholders beginning
with the annual meeting of stockholders to be held in 1986, the successors
of the class of directors whose term expires at that meeting shall be
elected to hold office for a term expiring at the annual meeting of
stockholders to be held in the third year following the year of their
election, with each director in each such class to hold office until his or
her successor is elected and qualified.
(b) Advance notice of stockholder nominations for the election of
directors shall be given in the manner provided by the Bylaws of the Company
at the time in effect.
(c) Except as otherwise provided for or fixed by or pursuant to the
provisions of Article Fourth of this Certificate of Incorporation relating to
the rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation to elect additional
directors under specified circumstances, newly-created directorships
resulting from any increase in the number of directors and any vacancies on
the Board of Directors resulting from death, resignation, disqualification,
removal, or other cause shall be filled only by the affirmative vote of a
majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term
of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been elected
and qualified. No decrease in the number of directors constituting the Board
of Directors shall shorten the term of any incumbent director.
(d) Except as otherwise provided for or fixed by or pursuant to
the provisions of Article Fourth of this Certificate of Incorporation
relating to the rights of the holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation to
elect additional directors under specified circumstances, any director may
be removed from office, with or without cause, but only by the affirmative
vote of at least 80% of the combined voting power of the then-outstanding
shares of all classes and series of stock of the Company entitled to vote
generally in the election of directors ("Voting Stock"), voting together as
a single class (it being understood that for the purposes of this Article
Sixth, each share of the Voting Stock shall have the number of votes granted
to it in accordance with Article Fourth of this Certificate of
Incorporation).
(e) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of at least 80% of the
combined voting power of the Voting Stock, voting together as a single class,
shall be required to alter, amend, or repeal, or adopt any provision
inconsistent with, this Article Sixth.
Seventh: Section 1. The vote of stockholders of the Company required
to approve any Business Combination shall be as set forth in this Article
Seventh. The term "Business Combination", as well as other capitalized
terms used in this Article Seventh, shall have the respective meanings
ascribed to them in Section 3 of this Article Seventh.
Irrespective of any affirmative vote required by law or by this
Certificate of Incorporation, and except as otherwise expressly provided in
Section 2 of this Article Seventh:
(i) any merger or consolidation of the Company or any
Subsidiary with (a) any Interested Stockholder or (b) any other Person
(whether or not itself an Interested Stockholder or an Affiliate of an
Interested Stockholder) which is, or after such merger or consolidation
would be, an Interested Stockholder or an Affiliate of an Interested
Stockholder,
(ii) any sale, lease, exchange, mortgage, pledge, transfer, or
other disposition (in one transaction or a series of transactions) to
or with any Interested Stockholder or any Affiliate of any Interested
Stockholder of any assets of the Company or any Subsidiary having an
aggregate Fair Market Value of $100 million or more,
(iii) any sale, lease, exchange, mortgage, pledge, transfer, or
other disposition (in one transaction or a series of transactions) to
the Company or any Subsidiary of any assets of any Interested
Stockholder or any Affiliate of any Interested Stockholder having an
aggregate Fair Market Value of $100 million or more,
(iv) any issuance or transfer by the Company or any Subsidiary
(in one transaction or a series of transactions) of any securities of
the Company or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash,
securities, or other property (or a combination thereof) having an
aggregate Fair Market Value of $100 million or more,
(v) the adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of any Interested
Stockholder or any Affiliate of any Interested Stockholder, or
(vi) any reclassification of securities (including any reverse
stock split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder), which has the effect, directly or indirectly,
of increasing the proportionate share of the outstanding shares of any
class of equity, or securities convertible into any equity, securities
of the Company or any Subsidiary, as the case may be, which is,
directly or indirectly, owned by any Interested Stockholder or any
Affiliate of any Interested Stockholder,
shall require the affirmative vote of at least 80% of the combined voting
power of the then-outstanding shares of all classes and series of stock of
the Company entitled to vote generally in the election of directors ("Voting
Stock"), voting together as a single class (it being understood that for the
purposes of this Article Seventh, each share of Voting Stock shall have the
number of votes granted to it in accordance with Article Fourth of this
Certificate of Incorporation). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage may otherwise be applicable, by law or in any agreement with any
national securities exchange or otherwise.
Section 2. Any Business Combination which meets all the conditions
specified in either paragraph A or paragraph B below shall not be subject to
the provisions of Section 1 of this Article Seventh and shall require only
such affirmative vote as is required by law and any other provision of this
Certificate of Incorporation:
A. the Business Combination shall have been approved by a majority of
the Disinterested Directors;
- or -
B. all the following conditions with respect to such Business
Combination shall have been met:
(i) the aggregate amount of cash and the Fair Market Value as of the
date of the consummation of the Business Combination of consideration other
than cash to be received per share by holders of Common Stock in such
Business Combination, shall be at least equal in value to the higher of the
following:
(a) if applicable, the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealers' fees, and
option costs) paid by the Interested Stockholder (before or after
becoming an Interested Stockholder), or any Affiliate or Associate
thereof, in acquiring Beneficial Ownership of any shares of Common
Stock (1) within the two-year period immediately prior to the first
public announcement of the proposal of the Business Combination
("Announcement Date") or (2) in the transaction in which it became an
Interested Stockholder, whichever is higher; or
(b) the Fair Market Value per share of Common Stock of the
Company (1) on the Announcement Date, or (2) on the date on which the
Interested Stockholder became an Interested Stockholder ("Determination
Date"), whichever is higher;
(ii) the aggregate amount of cash and the Fair Market Value as of
the date of the consummation of the Business Combination of consideration
other than cash to be received per share by holders of shares of any class
or series of outstanding Voting Stock other than Common Stock shall be at
least equal to the highest of the following (it being intended that the
requirements of this paragraph B(ii) of this Section 2 of Article Seventh
shall be required to be met with respect to every class or series, as the
case may be, of outstanding Voting Stock, whether or not the Interested
Stockholder has previously acquired any shares of such class or series of
Voting Stock):
(a) if applicable, the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealers' fees, and
option costs) paid by the Interested Stockholder (before or after
becoming an Interested Stockholder) for any shares of such class or
series of Voting Stock acquired by it (1) within the two-year period
immediately prior to the Announcement Date or (2) in the transaction
in which it became an Interested Stockholder, whichever is higher;
(b) if applicable, the highest preferential amount per share
to which the holders of shares of such class or series, as the case
may be, of Voting Stock are entitled in the event of any voluntary
or involuntary liquidation, dissolution, or winding up of the Company;
or
(c) the Fair Market Value per share of such class or series, as
the case may be, of Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher;
(iii) the price determined in accordance with paragraphs B(i) and B(ii)
of this Section 2 of Article Seventh shall be subject to appropriate
adjustment in the event of any stock dividend, stock split, combination of
shares, or similar event;
(iv) the consideration to be received by the holders of a specified
class or series of outstanding Voting Stock (including Common Stock) shall
be in cash or in the same form as that which the Interested Stockholder
has previously paid for shares of such class or series of Voting Stock; if
the Interested Stockholder had paid for shares of any class or series of
Voting Stock with varying forms of consideration, the form of consideration
for such class or series of Voting Stock shall, at the option of the
Interested Stockholder, be either cash or the form used to acquire the
largest number of shares of such class or series of Voting Stock previously
acquired by it;
(v) after such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (a)
except as approved by a majority of the Disinterested Directors, there shall
have been no failure to declare and pay at the regular date therefor any
full quarterly dividends (whether or not cumulative) on the outstanding
Preferred Stock; (b) there shall have been (i) no reduction in the annual
rate of dividends payable or last paid, as the case may be, on the Common
Stock (except as necessary to reflect any subdivision of such Common Stock)
except as approved by a majority of the Disinterested Directors and (ii) an
increase in the annual rate of dividends last paid on the Common Stock, as
necessary to reflect any reclassification (including any reverse stock
split), recapitalization, reorganization, or any similar transaction which
has the effect of reducing the number of outstanding shares of such Common
Stock, unless the failure so to increase such annual rate shall have been
approved by a majority of the Disinterested Directors; and (c) such
Interested Stockholder shall not have acquired Beneficial Ownership of any
additional shares of Voting Stock, except as part of the transaction which
resulted in such Interested Stockholder becoming an Interested Stockholder;
(vi) after such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a stockholder),
of any loans, advances, guarantees, pledges, or other financial assistance
or any tax credits or other tax advantages provided by, or as a result of
its equity position in, the Company, whether in anticipation of or in
connection with such Business Combination or otherwise; and
(vii) a proxy statement or information statement describing the
proposed Business Combination (and including the views of the Disinterested
Directors, if requested by the Disinterested Directors, and of an
independent investment banker, if any, selected by such Disinterested
Directors with respect to the proposed Business Combination) and complying
with the disclosure and other requirements of the Securities Exchange Act of
1934 and the rules and regulations thereunder (or any subsequent provisions
replacing such requirements of such Act, rules, or regulations) shall be
mailed at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy statement or information
statement is required to be mailed pursuant to such Act or subsequent
provisions) to stockholders of the Company.
Section 3. For purposes of this Article Seventh:
A. An "Affiliate" of, or a Person "Affiliated" with, a specified
Person, shall mean a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified.
B. "Announcement Date" shall have the meaning set forth in
paragraph B(i)(a) of Section 2 of this Article Seventh.
C. The term "Associate" used to indicate a relationship with any
Person shall mean (1) any corporation or organization (other than the
Company or any Subsidiary), of which such Person is an officer or partner
or is, directly or indirectly, the Beneficial Owner of 10% or more of any
class of equity securities, (2) any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as a trustee or in a similar fiduciary capacity, and (3) any relative
or spouse of such Person, or any relative of such spouse, who has the same
home as such Person or who is a director or officer of the Company or any
Subsidiary.
D. A Person shall be a "Beneficial Owner" of any Voting Stock:
(i) which such Person or any of its Affiliates or Associates
owns, directly or indirectly;
(ii) which such Person or any of its Affiliates or Associates
has (a) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement, or understanding or upon the exercise of
conversion rights, exchange rights, warrants, or options, or otherwise,
or (b) the right to vote (whether or not irrevocable) pursuant to any
agreement, arrangement, or understanding; or
(iii) which is Beneficially Owned, directly or indirectly, by
another Person with which such Person or any of its Affiliates or
Associates has any agreement, arrangement, or understanding for the
purpose of acquiring, holding, voting, or disposing of any shares of
Voting Stock,
and any Voting Stock of which a Person shall be the Beneficial Owner shall
be "Beneficially Owned" by, or be under the "Beneficial Ownership" of,
such Person.
E. "Business Combination" shall mean any transaction which is
referred to in any one or more of clauses (i) through (vi) of Section 1 of
this Article Seventh.
F. In the event of any Business Combination in which the Company
survives, the phrase "consideration other than cash to be received"
as used in paragraphs B(i) and (ii) of Section 2 of this Article Seventh
shall include shares of Common Stock and shares of any other class or
series of outstanding Voting Stock retained by the holders of such shares,
or both.
G. "Determination Date" shall have the meaning set forth in
paragraph B(i)(b) of Section 2 of this Article Seventh.
H. "Disinterested Director" shall mean any member of the Board of
Directors who is not an Affiliate, an Associate, or a nominee of the
Interested Stockholder and who was a member of the Board of Directors prior
to the time that the Interested Stockholder became an Interested Stockholder,
and any successor of a Disinterested Director who is not an Affiliate or
Associate of the Interested Stockholder and is recommended to succeed a
Disinterested Director by a majority of Disinterested Directors then on the
Board of Directors.
I. "Fair Market Value" shall mean: (i) in the case of stock, the
highest closing sale price of a share of such stock during the 30 calendar
day period immediately preceding the date in question on the Composite Tape
for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted
on such Composite Tape, on the New York Stock Exchange, or, if such stock
is not listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934 on which
such stock is listed, or, if such stock is not listed on any such exchange,
the highest closing bid quotation with respect to a share of such stock
during the 30 calendar day period immediately preceding the date in
question on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations are
available, the fair market value on the date in question of a share of
such stock as determined by a majority of the Disinterested Directors; and
(ii) in the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by a majority
of the Disinterested Directors.
J. "Interested Stockholder" shall mean any Person (other than the
Company, any Subsidiary, or any employee benefit plan of the Company or any
Subsidiary) who or which:
(i) is the Beneficial Owner, directly or indirectly, of at least
10% of the Voting Stock;
(ii) is an Affiliate of the Company and at any time within the
two-year period immediately prior to the date in question was the
Beneficial Owner, directly or indirectly, of at least 10% of the
Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the two-year
period immediately prior to the date in question Beneficially
Owned by any Interested Stockholder, if such assignment or
succession shall have occurred in the course of a transaction
or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933, as amended.
For purposes of determining whether a person is an Interested Stockholder,
the number of shares of Voting Stock deemed to be outstanding shall include
shares deemed owned through application of paragraph D of this Section 3,
but shall not include any other shares of Voting Stock which may be issuable
pursuant to any agreement, arrangement, or understanding or upon exercise
of conversion rights, warrants, or options, or otherwise.
K. "Person" shall mean any individual, firm, trust, partnership,
association, corporation, or other entity.
L. "Subsidiary" shall mean any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the Company.
M. "Voting Stock" shall have the meaning set forth in Section 1 of
this Article Seventh.
Section 4. A majority of the Disinterested Directors shall have the
power and duty to determine for the purposes of this Article Seventh, on
the basis of information known to them after reasonable inquiry, (A) whether
a person is an Interested Stockholder, (B) the number of shares of Voting
Stock beneficially owned by any person, (C) whether a Person is an Affiliate
or Associate of another, and (D) whether the assets which are the subject of
any Business Combination have, or the consideration to be received for the
issuance or transfer of securities by the Company or any Subsidiary in any
Business Combination has, an aggregate Fair Market Value of $100 million
or more. A majority of the Disinterested Directors shall have the further
power to interpret all the terms and provisions of this Article Seventh.
Section 5. Nothing contained in this Article Seventh shall be construed
to relieve any Interested Stockholder from any fiduciary obligation imposed
by law.
Section 6. Notwithstanding any other provisions of this Certificate
of Incorporation or the Bylaws (and notwithstanding the fact that a
lesser percentage may otherwise be specified by law, this Certificate of
Incorporation, or the Bylaws), the affirmative vote of at least 80% of the
Voting Stock, voting together as a single class (it being understood that for
the purposes of this Article Seventh, each share of the Voting Stock shall
have the number of votes granted to it in accordance with Article Fourth of
this Certificate of Incorporation), shall be required to alter, amend, or
repeal, or adopt any provisions inconsistent with, this Article Seventh.
Eighth: Any action required or permitted to be taken by the holders of
the Voting Stock must be effected at a duly called annual or special meeting
of such holders and may not be effected by any consent in writing by such
holders. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of at least 80% of the
combined voting power of the then-outstanding shares of all classes and
series of stock of the Company entitled to vote generally in the election of
directors ("Voting Stock"), voting together as a single class (it being
understood that for the purposes of this Article Eighth, each share of the
Voting Stock shall have the number of votes granted to it in accordance with
Article Fourth of this Certificate of Incorporation), shall be required to
alter, amend, or repeal, or adopt any provisions inconsistent with, this
Article Eighth.
Ninth: The Board of Directors shall have the power to make, alter,
amend, or repeal, or adopt any provision inconsistent with, the Bylaws
(except insofar as the Bylaws adopted by the stockholders shall otherwise
provide). Any Bylaws made by the directors under the powers conferred
hereby may be altered, amended, or repealed, and any provisions
inconsistent therewith may be adopted, by the directors or by the
stockholders. Notwithstanding the foregoing and anything contained in this
Certificate of Incorporation to the contrary, Section 2 of Article II, and
Sections 3, 12, 13, and 15 of Article III of the Bylaws, all as in effect
simultaneously with the effectiveness of this Article, shall not be altered,
amended, or repealed, and no provision inconsistent therewith shall be
adopted, without the affirmative vote of at least 80% of the combined voting
power of the then-outstanding shares of all classes and series of stock of
the Company entitled to vote generally in the election of directors ("Voting
Stock"), voting together as a single class (it being understood that for the
purposes of this Article Ninth, each share of the Voting Stock shall have the
number of votes granted to it in accordance with Article Fourth of this
Certificate of Incorporation). Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of at least
80% of the Voting Stock, voting together as a single class, shall be required
to alter, amend, or repeal, or adopt any provision inconsistent with, this
Article Ninth.
Tenth: A director of the Company shall not be personally liable to
the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
an improper personal benefit. If the Delaware General Corporation Law is
hereafter amended to permit further limitation on or elimination of the
personal liability of the Company's directors for breach of fiduciary duty,
then a director of the Company shall be exempt from such liability for any
such breach to the full extent permitted by the Delaware General Corporation
Law as so amended from time to time. Any repeal or modification of the
foregoing provisions of this Article Tenth, or the adoption of any provision
inconsistent herewith, shall not adversely affect any right or protection
of a director of the Company hereunder in respect of any act or omission of
such director occurring prior to such repeal, modification, or adoption of an
inconsistent provision.
IN WITNESS WHEREOF, the Company has caused this Restated Certificate
of Incorporation to be signed in its name by its Chairman of the Board
this 22nd day of April, 1996.
J. C. PENNEY COMPANY, INC.
By: /s/ William R. Howell
--------------------------
William R. Howell
Chairman of the Board
EXHIBIT A
---------
AMENDED CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
(Without Par Value)
OF
J. C. PENNEY COMPANY, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
J. C. Penney Company, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Company"), DOES HEREBY CERTIFY:
1. That by resolution of the Board of Directors of the Company dated
January 28, 1986, and by a Certificate of Designations filed in the office
of the Secretary of State of Delaware on January 29, 1986, the Company
authorized the issuance of a series of 1,600,000 shares of Series A Junior
Participating Preferred Stock of the Company (the "Series A Preferred
Stock") and established the voting powers, designations, preferences and
relative, participating and other rights, and the qualifications, limitations
or restrictions thereof.
2. That as of the date hereof no shares of such Series A Preferred
Stock are outstanding and no shares of such Series A Preferred Stock have
been issued.
3. That pursuant to authority conferred on the Board of Directors of
the Company by its Restated Certificate of Incorporation, as amended
("Restated Certificate of Incorporation") and the provisions of Section
151(g) of the General Corporation Law of the State of Delaware, the Board
of Directors on January 30, 1990 adopted the following resolution amending
in their entireties the voting powers, preferences, and relative,
participating, optional or other special rights of the shares of the
Series A Preferred Stock, and the qualifications, limitations or
restrictions thereof effective upon the redemption of the rights (the
"1986 Rights") issued pursuant to the Rights Agreement between the
Company and Morgan Guaranty Trust Company, as Agent, dated January 28, 1986.
RESOLVED, that effective upon the redemption of the 1986 Rights in
accordance with these resolutions and pursuant to the authority conferred
upon the Board of Directors of the Company by its Restated Certificate of
Incorporation and by the provisions of Section 151(g) of the General
Corporation Law of the State of Delaware, the voting powers, preferences
and relative participating, optional or other special rights of the Series A
Junior Preferred Stock of the Company, and the qualifications, limitations
or restrictions thereof, be, and the same hereby are, amended in their
entireties to be as follows:
Section 1. Designation and Amount. The shares of such series shall
----------------------
be designated "Series A Junior Participating Preferred Stock" ("Series A
Preferred Stock") and the number of shares constituting such series shall
be 1,600,000.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the provisions for adjustment hereinafter set forth,
the holders of shares of Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, (i) cash dividends in an amount per
share (rounded to the nearest cent) equal to 200 times the aggregate per
share amount of all cash dividends declared or paid on the Common Stock,
$.50 par value per share, of the Company ("Common Stock") and (ii)
a preferential cash dividend (a "Preferential Dividend"), if any, on the
first day of February, May, August and November of each year (each a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series A Preferred Stock, in an amount equal to $50.00 per share
of Series A Preferred Stock less the per share amount of all cash dividends
declared on the Series A Preferred Stock pursuant to clause (i) of this
sentence since the immediately preceding Quarterly Dividend Payment Date
or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Preferred
Stock. In the event the Company shall, at any time after the issuance of
any share or fraction of a share of Series A Preferred Stock, make any
distribution on the shares of Common Stock, whether by way of a dividend
or a reclassification of stock, a recapitalization, reorganization or
partial liquidation of the Company or otherwise, which is payable in cash
or any debt security, debt instrument, real or personal property or any
other property (other than cash dividends subject to clause (i) of the
immediately preceding sentence and other than a distribution of shares of
Common Stock or other capital stock of the Company and other than a
distribution of rights or warrants to acquire any such share, including
any debt security convertible into or exchangeable for any such share),
at a price less than the Current Market Price of such share, then and in
each such event the Company shall simultaneously pay on each then
outstanding share of Series A Preferred Stock of the Company a distribution,
in like kind, of 200 times (subject to the provisions for adjustment
hereinafter set forth) such distribution paid on a share of Common Stock.
The dividends and distributions on the Series A Preferred Stock to which
holders thereof are entitled pursuant to clause (i) of the first sentence
of this paragraph and the second sentence of this paragraph are hereinafter
referred to as "Participating Dividends," and the multiple of cash and
noncash dividends on the Common Stock applicable to the determination of
the Participating Dividends, which shall be 200 initially but shall be
adjusted from time to time as hereinafter provided, is hereinafter referred
to as the "Dividend Multiple." In the event the Company shall at any time
after February 14, 1990 declare or pay any dividend or make any distribution
on Common Stock payable in shares of Common Stock, or effect a subdivision
or split or a combination, consolidation or reverse split of the outstanding
shares of Common Stock into a greater or lesser number of shares of
Common Stock, then in each such event the Dividend Multiple thereafter
applicable to the determination of the amount of Participating Dividends
which holders of shares of Series A Preferred Stock shall be entitled to
receive shall be the Dividend Multiple applicable immediately prior to such
event multiplied by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided for or fixed by or pursuant to the
provisions of Article Fourth of the Restated Certificate of Incorporation
of the Company relating to the rights of holders of any class or series of
stock having a preference over the Common Stock as to dividends, the Company
shall declare each Participating Dividend at the same time it declares
any cash or noncash dividend or distribution on the Common Stock in respect
of which a Participating Dividend is required to be paid. No cash or
noncash dividend or distribution on the Common Stock in respect of which a
Participating Dividend is required shall be paid or set aside for payment
on the Common Stock unless a Participating Dividend in respect of such
dividend or distribution on the Common Stock shall be simultaneously paid
or set aside for payment on the Series A Preferred Stock.
(C) Preferential Dividends shall begin to accumulate on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issuance of any shares of Series A Preferred
Stock. Accumulated but unpaid Preferential Dividends shall cumulate but
shall not bear interest. Preferential Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends
at the time accumulated and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
Section 3. Voting Rights. The holders of shares of Series A
-------------
Preferred Stock shall have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
200 votes on all matters submitted to a vote of the stockholders of the
Company. The number of votes which a holder of Series A Preferred Stock
is entitled to cast, as the same may be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Vote Multiple."
In the event the Company shall at any time after February 14, 1990 declare
or pay any dividend on Common Stock payable in shares of Common Stock, or
effect a subdivision or split or a combination, consolidation or reverse
split of the outstanding shares of Common Stock into a greater or lesser
number of shares of Common Stock, then in each such case the Vote Multiple
thereafter applicable to the determination of the number of votes per share
to which holders of shares of Series A Preferred Stock shall be entitled
after such event shall be the Vote Multiple immediately prior to such event
multiplied by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in the Restated Certificate
of Incorporation, in any resolution or resolutions of the Board of Directors
of the Company providing for the issue of any other series of Preferred
Stock or by law, the holders of shares of Series A Preferred Stock, the
holders of shares of Common Stock and the holders of shares of any other
class or series of capital stock of the Company entitled to vote generally
for the election of directors shall vote together as one class on all
matters submitted to a vote of stockholders of the Company.
(C) In the event that the Preferential Dividends accrued on the Series A
Preferred Stock for four or more consecutive quarterly dividend periods shall
not have been declared and paid or set apart for payment, the holders of
record of the Series A Preferred Stock, voting together with the holders of
record of any other series of Preferred Stock of the Company which shall
then have the right, expressly granted by the Restated Certificate of
Incorporation of the Company or in any resolution or resolutions of the Board
of Directors of the Company providing for the issue of such shares of
Preferred Stock, to elect directors upon such a default in the payment of
dividends by the Company, shall have the right, at the next meeting of
stockholders called for the election of directors, voting together as a
class, to elect two members to the Board of Directors, which directors
shall be in addition to the number provided for pursuant to the Company's
Bylaws prior to such event, to serve until the next Annual Meeting and until
their successors are elected and qualified or their earlier resignation,
removal or incapacity or until such earlier time as all accrued and unpaid
Preferential Dividends upon the outstanding shares of Series A Preferred
Stock shall have been paid (or set aside for payment) in full. The holders
of shares of Series A Preferred Stock shall continue to have the right to
elect directors as provided by the immediately preceding sentence until all
accrued and unpaid Preferential Dividends upon the outstanding shares of
Series A Preferred Stock shall have been paid (or set aside for payment)
in full. Such directors may be removed and replaced by such stockholders,
and vacancies in such directorships may be filled only by such stockholders
(or by the remaining director elected by such stockholders, if there be one)
in the manner permitted by law. Subject to the foregoing, any directors
elected pursuant to this paragraph 3(C) shall be elected annually and shall
not constitute members of any Class of directors as contemplated by Article
Sixth of the Company's Restated Certificate of Incorporation.
(D) Except as otherwise required by law or set forth herein, holders
of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to
vote as set forth herein) for the taking of any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever Preferential Dividends or Participating Dividends are
in arrears or the Company shall be in default in payment thereof, thereafter
and until all accumulated and unpaid Preferential Dividends and Participating
Dividends, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid or set aside for payment in full, and in
addition to any and all other rights which any holder of shares of Series A
Preferred Stock may have in such circumstances, the Company shall not
(i) declare or pay dividends on, make any other distributions on
or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends or make any other distributions on
any shares of stock ranking on a parity as to dividends with the Series A
Preferred Stock, unless dividends are paid ratably on the Series A Preferred
Stock and all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such shares
are then entitled;
(iii) except as permitted by subparagraph (iv) of this paragraph (A),
redeem or purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, provided that
the Company may at any time redeem, purchase or otherwise acquire shares of
any such parity stock in exchange for shares of any stock of the Company
ranking junior (both as to dividends and upon liquidation, dissolution or
winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with
the Series A Preferred Stock (either as to dividends or upon liquidation,
dissolution or winding up), except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment
among the respective series or classes.
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company ranking junior to the Series A Preferred Stock unless the Company
could, under paragraph (A) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
(C) The Company shall not issue any shares of Series A Preferred
Stock except upon exercise of Rights issued pursuant to that certain Rights
Agreement dated as of February 14, 1990 between the Company and First
Chicago Trust Company of New York (the "Rights Agreement"), a copy of which
is on file with the Secretary of the Company at the principal executive
office of the Company and shall be made available to holders of record of
Common Stock or Series A Preferred Stock without charge upon written request
therefor addressed to the Secretary of the Company. Notwithstanding the
foregoing sentence, nothing contained in the provisions hereof shall
prohibit or restrict the Company from issuing for any purpose any series
of Preferred Stock with rights and privileges similar to, different from,
or greater than those of the Series A Preferred Stock.
Section 5. Reacquired Shares. Any shares of Series A Preferred
-----------------
Stock purchased or otherwise acquired by the Company in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
--------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the
Company, no distribution shall be made (i) to the holders of shares of
stock ranking junior to the Series A Preferred Stock (either as to dividends
or upon liquidation, dissolution or winding up) unless the holders of shares
of Series A Preferred Stock shall have received, subject to adjustment as
hereinafter provided, the greater of (A) $200.00 per share plus an amount
equal to all accumulated and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, and (B) the amount
equal to 200 times the aggregate amount to be distributed per share to
holders of Common Stock, or (ii) to the holders of stock ranking on a
parity upon liquidation, dissolution or winding up with the Series A
Preferred Stock, unless simultaneously therewith distributions are made
ratably on the Series A Preferred Stock and all other shares of such parity
stock in proportion to the total amounts to which the holders of shares of
Series A Preferred Stock are entitled under clause (i) (A) of this sentence
and to which the holders of such parity shares are entitled, in each case
upon such liquidation, dissolution or winding up. The amount to which
holders of Series A Preferred Stock shall be entitled upon liquidation,
dissolution or winding up of the Company pursuant to clause (i) (B) of the
foregoing sentence is hereinafter referred to as the "Participating
Liquidation Amount," and the multiple of the amount to be distributed to
holders of shares of Common Stock upon the liquidation, dissolution or
winding up of the Company applicable pursuant to said clause to the
determination of the Participating Liquidation Amount, which shall be 200
initially but shall be adjusted from time to time as hereinafter provided,
is hereinafter referred to as the "Liquidation Multiple." In the event the
Company shall at any time after February 14, 1990 declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or split or a combination, consolidation or reverse split of
the outstanding shares of Common Stock into a greater or lesser number of
shares of Common Stock, then in each such case the Liquidation Multiple
thereafter applicable to the determination of the Participating Liquidation
Amount to which holders of Series A Preferred Stock shall be entitled after
such event shall be the Liquidation Multiple applicable immediately prior
to such event multiplied by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Certain Reclassification and Other Events.
-----------------------------------------
(A) In the event that holders of shares of Common Stock receive after
February 14, 1990 in respect of their shares of Common Stock any share of
capital stock of the Company (other than any share of Common Stock of the
Company), whether by way of reclassification, recapitalization,
reorganization, dividend or other distribution or otherwise ("Transaction"),
then in each such event the dividend rights and rights upon the liquidation,
dissolution or winding up of the Company of the shares of Series A Preferred
Stock shall be adjusted so that after such event the holders of Series A
Preferred Stock shall be entitled, in respect of each share of Series A
Preferred Stock held, in addition to such rights in respect thereof to
which such holder was entitled immediately prior to such adjustment, to
(i) such additional dividends as equal the Dividend Multiple in effect
immediately prior to such Transaction multiplied by the additional dividends
which the holder of a share of Common Stock shall be entitled to receive by
virtue of the receipt in the Transaction of such capital stock, (ii) such
additional voting rights as equal the Vote Multiple in effect immediately
prior to such Transaction multiplied by the additional voting rights which
the holder of a share of Common Stock shall be entitled to receive by virtue
of the receipt in the Transaction of such capital stock, and (iii) such
additional distributions upon liquidation, dissolution or winding up of the
Company as equal the Liquidation Multiple in effect immediately prior to
such Transaction multiplied by the additional amount which the holder of a
share of Common Stock shall be entitled to receive upon liquidation,
dissolution or winding up of the Company by virtue of the receipt in the
Transaction of such capital stock, as the case may be, all as provided by
the terms of such capital stock.
(B) In the event that holders of shares of Common Stock receive after
February 14, 1990 in respect of their shares of Common Stock any right or
warrant to purchase Common Stock (including as such a right, for all
purposes of this paragraph, any security convertible into or exchangeable
for Common Stock) at a purchase price per share less than the Current Market
Price (as hereinafter defined) of a share of Common Stock on the date of
issuance of such right or warrant, then in each such event the dividend
rights, voting rights and rights upon the liquidation, dissolution or
winding up of the Company of the shares of Series A Preferred Stock shall
each be adjusted so that after such event the Dividend Multiple, the Vote
Multiple and the Liquidation Multiple shall each be the product of the
Dividend Multiple, the Vote Multiple and the Liquidation Multiple, as the
case may be, in effect immediately prior to such event multiplied by a
fraction the numerator of which shall be the number of shares of Common
Stock outstanding immediately before such issuance of rights or warrants
plus the maximum number of shares of Common Stock which could be
acquired upon exercise in full of all such rights or warrants and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately before such issuance of rights or warrants plus the
number of shares of Common Stock which could be purchased, at the
Current Market Price of the Common Stock at the time of such issuance, by
the maximum aggregate consideration payable upon exercise in full of all
such rights or warrants.
(C) In the event that holders of shares of Common Stock receive after
February 14, 1990 in respect of their shares of Common Stock any right or
warrant to purchase capital stock of the Company (other than shares of
Common Stock), including as such a right, for all purposes of this paragraph,
any security convertible into or exchangeable for capital stock of the
Company (other than Common Stock), at a purchase price per share less than
the Current Market Price of such shares of capital stock on the date of
issuance of such right or warrant, then in each such event the dividend
rights, voting rights and rights upon liquidation, dissolution or winding
up of the Company of the shares of Series A Preferred Stock shall each be
adjusted so that after such event each holder of a share of Series A
Preferred Stock held, in addition to such rights in respect thereof to
which such holder was entitled immediately prior to such event, to receive
(i) such additional dividends as equal the Dividend Multiple in effect
immediately prior to such event multiplied, first, by the additional
dividends to which the holder of a share of Common Stock shall be entitled
upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise and multiplied again by the
Discount Fraction (as hereinafter defined), (ii) such additional voting
rights as equal the Vote Multiple in effect immediately prior to the event
multiplied, first, by the additional voting rights to which the holder of a
share of Common Stock shall be entitled upon exercise of such right or
warrant by virtue of the capital stock which could be acquired upon such
exercise and multiplied, again, by the Discount Fraction, and (iii) such
additional distributions upon liquidation, dissolution or winding up of the
Company as equal the Liquidation Multiple in effect immediately prior to
such event multiplied, first, by the additional amount which the holder of
a share of Common Stock shall be entitled to receive upon liquidation,
dissolution or winding up of the Company upon exercise of such right or
warrant by virtue of the capital stock which could be acquired upon such
exercise and multiplied again by the Discount Fraction. For purposes of
this paragraph, the "Discount Fraction" shall be a fraction the numerator
of which shall be the difference between the Current Market Price (as
hereinafter defined) of a share of the capital stock subject to a right or
warrant distributed to holders of shares of Common Stock as contemplated by
this paragraph immediately after the distribution thereof and the purchase
price per share for such share of capital stock pursuant to such right or
warrant and the denominator of which shall be the Current Market Price of
a share of such capital stock immediately after the distribution of such
right or warrant.
(D) For purposes of this Section 7, the "Current Market Price" of a
share of capital stock of the Company (including a share of Common Stock)
on any date shall be deemed to be the average of the daily closing prices
per share thereof over the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date, provided that in the
event that such Current Market Price of any such share of capital stock is
determined during a period which includes any date that is within 30 Trading
Days after the ex-dividend date for (i) a dividend or distribution on stock
payable in shares of such stock or securities convertible into shares of
such stock or (ii) any subdivision, split, combination, consolidation,
reverse stock split or reclassification of such stock, then in each such
event, the Current Market Price shall be appropriately adjusted by the Board
of Directors to reflect the Current Market Price of such stock to take into
account ex-dividend trading. The closing price for any day shall be the
last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the shares are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the shares are listed or
admitted to trading or, if the shares are not listed or admitted to trading
on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-
counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system
then in use, or if on any such date the shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the shares selected by
the Board of Directors. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares are
listed or admitted to trading is open for the transaction of business or,
if the shares are not listed or admitted to trading on any national securities
exchange, on which the New York Stock Exchange or such other national
securities exchange as may be selected by the Board of Directors is open.
If the shares are not publicly held or not so listed or traded on any day
within the period of 30 Trading Days applicable to the determination of
Current Market Price thereof as aforesaid, "Current Market Price" shall mean
the fair market value thereof per share as determined in good faith by the
Board of Directors. In either case referred to in the foregoing sentence,
the determination of Current Market Price shall be described in a statement
filed with the Secretary of the Company.
Section 8. Consolidation, Merger, etc. In the event that the Company
---------------------------
shall enter into any consolidation, merger, combination or other transaction
in which shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such event each
outstanding share of Series A Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and other property (payable in like kind), as the case may
be, for which or into which each share of Common Stock is changed or exchanged
multiplied by the highest of the Dividend Multiple, the Vote Multiple or the
Liquidation Multiple in effect immediately prior to such event.
Section 9. Effective Time of Adjustments.
-----------------------------
(A) Adjustments to the Series A Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event
requiring such adjustments occurs.
(B) The Company shall give prompt written notice to each holder of a
share of Series A Preferred Stock of the effect on any such shares of any
adjustment to the dividend rights, voting rights or rights upon liquidation,
dissolution or winding up of the Company required by the provisions hereof.
Notwithstanding the foregoing sentence, the failure of the Company to give
such notice shall not affect the validity of or the force or effect of or the
requirement for such adjustment.
Section 10. No Redemption. The shares of Series A Preferred Stock
-------------
shall not be redeemable at the option of the Company or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Company may
acquire shares of Series A Preferred Stock in any other manner permitted by
law, the provisions of the Amended Certificate of Designations setting forth
the rights, powers and preferences of the Series A Preferred Stock and the
Restated Certificate of Incorporation of the Company.
Section 11. Ranking. Unless otherwise provided in the Restated
-------
Certificate of Incorporation or a certificate of designations relating to
a subsequent series of Preferred Stock of the Company, the Series A
Preferred Stock shall rank junior to all other series of the Company's
Preferred Stock as to the payment of dividends and the distribution of
assets on liquidation, dissolution or winding up, and senior to the Common
Stock.
Section 12. Amendment. After the Distribution Date (as defined in
---------
the Rights Agreement), the provisions of the Amended Certificate of
Designations setting forth the rights, powers and preferences of the Series A
Preferred Stock and the Restated Certificate of Incorporation shall not be
amended in any manner which would materially affect the rights, privileges
or powers of the Series A Preferred Stock without, in addition to any other
vote of stockholders required by law, the affirmative vote of the holders of
66 2/3% or more of the outstanding shares of Series A Preferred Stock,
voting together as a single class.
EXHIBIT B
---------
CERTIFICATE OF DESIGNATIONS
OF
SERIES B ESOP CONVERTIBLE PREFERRED STOCK
of
J. C. PENNEY COMPANY, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
I, William R. Howell, Chairman of the Board of J. C. Penney Company, Inc.
("Company"), a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions
of Section 151 thereof, DO HEREBY CERTIFY that, pursuant to the authority
conferred upon the Board of Directors by the Restated Certificate of
Incorporation of the Company, the Board of Directors authorized the series
of Preferred Stock hereinafter provided for and established the voting
powers thereof and authorized a committee of the Board of Directors to adopt,
and said committee has adopted, the following resolution creating a series
of 1,400,000 shares of Preferred Stock, without par value, designated as
Series B ESOP Convertible Preferred Stock:
RESOLVED that, pursuant to the authority vested in the Board of
Directors of the Company in accordance with the provisions of its Restated
Certificate of Incorporation, a series of Preferred Stock of the Company be,
and it hereby is, created, and that the designation and amount thereof and
the voting powers, preferences and relative, participating, optional or other
special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount; Special Purpose Restricted Transfer
------- -----------------------------------------------------------
Issue.
- -----
(A) The shares of this series of Preferred Stock shall be designated as
Series B ESOP Convertible Preferred Stock ("Series B Preferred Stock") and
the number of shares constituting such series shall be 1,400,000.
(B) Shares of Series B Preferred Stock shall be issued only to a
trustee acting on behalf of an employee stock ownership plan or other
employee benefit plan of the Company. In the event of any transfer of
shares of Series B Preferred Stock to any person other than any such plan
trustee, the shares of Series B Preferred Stock so transferred, upon such
transfer and without any further action by the Company or the holder, shall
be automatically converted into shares of Common Stock on the terms otherwise
provided for the conversion of shares of Series B Preferred Stock into
shares of Common Stock pursuant to Section 5 hereof and no such transferee
shall have any of the voting powers, preferences and relative, participating,
optional or special rights ascribed to shares of Series B Preferred Stock
hereunder but, rather, only the powers and rights pertaining to the Common
Stock into which such shares of Series B Preferred Stock shall be so
converted. Certificates representing shares of Series B Preferred Stock
shall be legended to reflect such restrictions on transfer. Notwithstanding
the foregoing provisions of this paragraph (B) of Section 1, shares of Series
B Preferred Stock (i) may be converted into shares of Common Stock as
provided by Section 5 hereof and the shares of Common Stock issued upon
such conversion may be transferred by the holder thereof as permitted by
law and (ii) shall be redeemable by the Company upon the terms and conditions
provided by Sections 6, 7 and 8 hereof.
Section 2. Dividends and Distributions.
------- ---------------------------
(A) Subject to the provisions for adjustment hereinafter set forth,
the holders of shares of Series B Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available therefor, cash dividends ("Preferred Dividends") in an
amount per share equal to $47.40 per share per annum, and no more, payable
semi-annually, one-half on the first day of January and one-half on the first
day of July of each year (each a "Dividend Payment Date") commencing on
January 1, 1989, to holders of record at the start of business on such
Dividend Payment Date. Preferred Dividends shall begin to accrue on
outstanding shares of Series B Preferred Stock from the date of issuance of
such shares of Series B Preferred Stock. Preferred Dividends shall accrue on
a daily basis whether or not the Company shall have earnings or surplus at
the time, but Preferred Dividends accrued after January 1, 1989 on the
shares of Series B Preferred Stock for any period less than a full
semi-annual period between Dividend Payment Dates shall be computed on
the basis of a 360-day year of 30-day months. A full semi-annual dividend
payment of $23.70 per share shall accrue for the period from the date of
issuance until January 1, 1989. Accumulated but unpaid Preferred Dividends
shall cumulate as of the Dividend Payment Date on which they first become
payable, but no interest shall accrue on accumulated but unpaid Preferred
Dividends.
(B) So long as any Series B Preferred Stock shall be outstanding, no
dividend shall be declared or paid or set apart for payment on any other
series of stock ranking on a parity with the Series B Preferred Stock as to
dividends, unless there shall also be or have been declared and paid or set
apart for payment on the Series B Preferred Stock, like dividends for all
dividend payment periods of the Series B Preferred Stock ending on or
before the dividend payment date of such parity stock, ratably in proportion
to the respective amounts of dividends accumulated and unpaid through such
dividend payment period on the Series B Preferred Stock and accumulated and
unpaid or payable on such parity stock through the dividend payment period
on such parity stock next preceding such dividend payment date. In the
event that full cumulative dividends on the Series B Preferred Stock have
not been declared and paid or set apart for payment when due, the Company
shall not declare or pay or set apart for payment any dividends or make any
other distributions on, or make any payment on account of the purchase,
redemption or other retirement of any other class of stock or series thereof
of the Company ranking, as to dividends or as to distributions in the event
of a liquidation, dissolution or winding-up of the Company, junior to the
Series B Preferred Stock until full cumulative dividends on the Series B
Preferred Stock shall have been paid or declared and provided for; provided,
however, that the foregoing shall not apply to (i) any dividend payable
solely in any shares of any stock ranking, as to dividends or as to
distributions in the event of a liquidation, dissolution or winding-up of
the Company, junior to the Series B Preferred Stock, or (ii) the acquisition
of shares of any stock ranking, as to dividends or as to distributions in
the event of a liquidation, dissolution or winding up of the Company, junior
to the Series B Preferred Stock either (A) pursuant to any employee or
director incentive or benefit plan or arrangement (including any employment,
severance or consulting agreement) of the Company or any subsidiary of the
Company heretofore or hereafter adopted or (B) in exchange solely for shares
of any other stock ranking junior to the Series B Preferred Stock.
Section 3. Voting Rights. The holders of shares of Series B Preferred
------- -------------
Stock shall have the following voting rights:
(A) The holders of Series B Preferred Stock shall be entitled to vote
on all matters submitted to a vote of the holders of Common Stock of the
Company, voting together with the holders of Common Stock as one class. Each
share of the Series B Preferred Stock shall be entitled to the number of votes
equal to the number of shares of Common Stock into which such share of
Series B Preferred Stock could be converted on the record date for
determining the stockholders entitled to vote, rounded to the nearest
one-tenth of a vote; it being understood that whenever the "Conversion
Price" (as defined in Section 5 hereof) is adjusted as provided in Section 9
hereof, the voting rights of the Series B Preferred Stock shall also be
similarly adjusted.
(B) Except as otherwise required by law or set forth herein, holders
of Series B Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for the taking of
any corporate action; provided, however, that the vote of at least
-------- -------
66-2/3% of the outstanding shares of Series B Preferred Stock, voting
separately as a series, shall be necessary to adopt any alteration,
amendment or repeal of any provision of the Restated Certificate of
Incorporation of the Company, as amended, or this Resolution (including any
such alteration, amendment or repeal effected by any merger or
consolidation in which the Company is the surviving or resulting corporation)
if such amendment, alteration or repeal would alter or change the powers,
preferences or special rights of the shares of Series B Preferred Stock so as
to affect them adversely.
Section 4. Liquidation, Dissolution or Winding Up.
------- --------------------------------------
(A) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of Series B Preferred Stock shall
be entitled to receive out of assets of the Company which remain after
satisfaction in full of all valid claims of creditors of the Company and
which are available for payment to stockholders and subject to the rights of
the holders of any stock of the Company ranking senior to or on a parity with
the Series B Preferred Stock in respect of distributions upon liquidation,
dissolution or winding up of the Company, before any amount shall be paid
or distributed among the holders of Common Stock or any other shares
ranking junior to the Series B Preferred Stock in respect of distributions
upon liquidation, dissolution or winding up of the Company, liquidating
distributions in the amount of $600.00 per share, plus an amount equal to
all accumulated and unpaid dividends thereon to the date fixed for
distribution, and no more. If upon any liquidation, dissolution or winding
up of the Company, the amounts payable with respect to the Series B Preferred
Stock and any other stock ranking as to any such distribution on a parity
with the Series B Preferred Stock are not paid in full, the holders of the
Series B Preferred Stock and such other stock shall share ratably in any
distribution of assets in proportion to the full respective preferential
amounts to which they are entitled. After payment of the full amount to
which they are entitled as provided by the foregoing provisions of this
paragraph 4(A), the holders of shares of Series B Preferred Stock shall
not be entitled to any further right or claim to any of the remaining assets
of the Company.
(B) Neither the merger or consolidation of the Company with or into
any other corporation, nor the merger or consolidation of any other
corporation with or into the Company, nor the sale, transfer or lease of
all or any portion of the assets of the Company, shall be deemed to be a
dissolution, liquidation or winding up of the affairs of the Company for
purposes of this Section 4, but the holders of Series B Preferred Stock
shall nevertheless be entitled in the event of any such merger or
consolidation to the rights provided by Section 8 hereof.
(C) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, stating the payment date or
dates when, and the place or places where, the amounts distributable to
holders of Series B Preferred Stock in such circumstances shall be payable,
shall be given by first-class mail, postage prepaid, mailed not less than
twenty (20) days prior to any payment date stated therein, to the holders
of Series B Preferred Stock, at the address shown on the books of the
Company or any transfer agent for the Series B Preferred Stock.
Section 5. Conversion into Common Stock.
------- ----------------------------
(A) A holder of shares of Series B Preferred Stock shall be entitled,
at any time prior to the close of business on the date fixed for redemption
of such shares pursuant to Section 6, 7 or 8 hereof, to cause any or all of
such shares to be converted into shares of Common Stock, initially at a
conversion rate equal to the ratio of $600.00 to the amount which initially
shall be $60.00 and which shall be adjusted as hereinafter provided (and,
as so adjusted, is hereinafter sometimes referred to as the "Conversion
Price") (that is, a conversion rate initially equivalent to ten shares of
Common Stock for each share of Series B Preferred Stock so converted but
that is subject to adjustment as the Conversion Price is adjusted as
hereinafter provided).
(B) Any holder of shares of Series B Preferred Stock desiring to
convert such shares into shares of Common Stock shall surrender the
certificate or certificates representing the shares of Series B Preferred
Stock being converted, duly assigned or endorsed for transfer to the Company
(or accompanied by duly executed stock powers relating thereto), at the
principal executive office of the Company or the offices of the transfer
agent for the Series B Preferred Stock or such office or offices in the
continental United States of an agent for conversion as may from time to
time be designated by notice to the holders of the Series B Preferred Stock
by the Company or the transfer agent for the Series B Preferred Stock,
accompanied by written notice of conversion. Such notice of conversion
shall specify (i) the number of shares of Series B Preferred Stock to be
converted and the name or names in which such holder wishes the certificate
or certificates for Common Stock and for any shares of Series B Preferred
Stock not to be so converted to be issued, and (ii) the address to which
such holder wishes delivery to be made of such new certificates to be issued
upon such conversion.
(C) Upon surrender of a certificate representing a share or shares of
Series B Preferred Stock for conversion, the Company shall issue and send
by hand delivery (with receipt to be acknowledged) or by first-class mail,
postage prepaid, to the holder thereof or to such holder's designee, at the
address designated by such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled upon
conversion. In the event that there shall have been surrendered a certificate
or certificates representing shares of Series B Preferred Stock, only part of
which are to be converted, the Company shall issue and deliver to such
holder or such holder's designee a new certificate or certificates
representing the number of shares of Series B Preferred Stock which shall
not have been converted.
(D) The issuance by the Company of shares of Common Stock upon a
conversion of shares of Series B Preferred Stock into shares of Common Stock
made at the option of the holder thereof shall be effective as of the
earlier of (i) the delivery to such holder or such holder's designee of the
certificates representing the shares of Common Stock issued upon conversion
thereof or (ii) the commencement of business on the second business day
after the surrender of the certificate or certificates for the shares of
Series B Preferred Stock to be converted, duly assigned or endorsed for
transfer to the Company (or accompanied by duly executed stock powers
relating thereto) as provided by this Resolution. On and after the
effective day of conversion, the person or persons entitled to receive the
Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock, but no
allowance or adjustment shall be made in respect of dividends payable to
holders of Common Stock in respect of any period prior to such effective
date. The Company shall not be obligated to pay any dividends which shall
have been declared and shall be payable to holders of shares of Series B
Preferred Stock on a Dividend Payment Date if such Dividend Payment Date
for such dividend shall coincide with or be on or subsequent to the
effective date of conversion of such shares.
(E) The Company shall not be obligated to deliver to holders of
Series B Preferred Stock any fractional share or shares of Common Stock
issuable upon any conversion of such shares of Series B Preferred Stock,
but in lieu thereof may make a cash payment in respect thereof in any manner
permitted by law.
(F) Whenever the Company shall issue shares of Common Stock upon
conversion of shares of Series B Preferred Stock as contemplated by this
Section 5, the Company shall issue together with each such share of
Common Stock one right to purchase Series A Preferred Stock of the
Company (or other securities in lieu thereof) pursuant to the Rights
Agreement dated as of January 28, 1986 between the Company and
Morgan Guaranty Trust Company as Rights Agent, as such agreement may
from time to time be amended, or any rights issued to holders of Common
Stock of the Company in addition thereto or in replacement therefor, whether
or not such rights shall be exercisable at such time, but only if such rights
are issued and outstanding and held by other holders of Common Stock of
the Company at such time and have not expired.
(G) The Company shall at all times reserve and keep available out
of its authorized and unissued Common Stock, solely for issuance upon the
conversion of shares of Series B Preferred Stock as herein provided, free
from any preemptive rights, such number of shares of Common Stock as shall
from time to time be issuable upon the conversion of all the shares of Series B
Preferred Stock then outstanding. The Company shall prepare and shall use
its best efforts to obtain and keep in force such governmental or regulatory
permits or other authorizations as may be required by law, and shall comply
with all requirements as to registration or qualification of the Common
Stock, in order to enable the Company lawfully to issue and deliver to each
holder of record of Series B Preferred Stock such number of shares of its
Common Stock as shall from time to time be sufficient to effect the
conversion of all shares of Series B Preferred Stock then outstanding and
convertible into shares of Common Stock.
Section 6. Redemption At the Option of the Company.
------- ---------------------------------------
(A) The Series B Preferred Stock shall be redeemable, in whole or in
part, at the option of the Company at any time after July 1, 1991, or on
or before July 1, 1991 if permitted by paragraph (C) or (D) of this
Section 6, at the following redemption prices per share:
During the Twelve-
Month Period Price Per
Beginning July 2, Share
------------------ ---------
1988 . . . . . . . . . . . . . . . . . . $ 647.40
1989 . . . . . . . . . . . . . . . . . . $ 642.66
1990 . . . . . . . . . . . . . . . . . . $ 637.92
1991 . . . . . . . . . . . . . . . . . . $ 633.18
1992 . . . . . . . . . . . . . . . . . . $ 628.44
1993 . . . . . . . . . . . . . . . . . . $ 623.70
1994 . . . . . . . . . . . . . . . . . . $ 618.96
1995 . . . . . . . . . . . . . . . . . . $ 614.22
1996 . . . . . . . . . . . . . . . . . . $ 609.48
1997 . . . . . . . . . . . . . . . . . . $ 604.74
and thereafter at $600.00 per share, plus, in each case, an amount equal to
all accumulated and unpaid dividends thereon to the date fixed for
redemption. Payment of the redemption price shall be made by the Company
in cash or shares of Common Stock, or a combination thereof, as permitted
by paragraph (E) of this Section 6. From and after the date fixed for
redemption, dividends on shares of Series B Preferred Stock called for
redemption will cease to accrue, such shares will no longer be deemed to
be outstanding and all rights in respect of such shares of the Company shall
cease, except the right to receive the redemption price. If less than all
of the outstanding shares of Series B Preferred Stock are to be redeemed,
the Company shall either redeem a portion of the shares of each holder
determined pro rata based on the number of shares held by each holder or
shall select the shares to be redeemed by lot, as may be determined by the
Board of Directors of the Company.
(B) Unless otherwise required by law, notice of redemption will be
sent to the holders of Series B Preferred Stock at the address shown on
the books of the Company or any transfer agent for the Series B Preferred
Stock by first class mail, postage prepaid, mailed not less than twenty (20)
days nor more than sixty (60) days prior to the redemption date. Each such
notice shall state: (i) the redemption date; (ii) the total number of
shares of the Series B Preferred Stock to be redeemed and, if fewer than
all the shares held by such holder are to be redeemed, the number of such
shares to be redeemed from such holder; (iii) the redemption price; (iv)
the place or places where certificates for such shares are to be surrendered
for payment of the redemption price; (v) that dividends on the shares to be
redeemed will cease to accrue on such redemption date; and (vi) the
conversion rights of the shares to be redeemed, the period within which
conversion rights may be exercised, and the Conversion Price and number of
shares of Common Stock issuable upon conversion of a share of Series B
Preferred Stock at the time. Upon surrender of the certificates for any
shares so called for redemption and not previously converted (properly
endorsed or assigned for transfer, if the Board of Directors of the Company
shall so require and the notice shall so state), such shares shall be
redeemed by the Company at the date fixed for redemption and at the
redemption price set forth in this Section 6.
(C) In the event of a change in the federal tax law of the United
States of America which has the effect of precluding the Company from
claiming any of the tax deductions for dividends paid on the Series B
Preferred Stock when such dividends are used as provided under Section
404(k)(2) of the Internal Revenue Code of 1986, as amended and in effect on
the date shares of Series B Preferred Stock are initially issued, the Company
may, in its sole discretion and notwithstanding anything to the contrary in
paragraph (A) of this Section 6, elect to redeem such shares for the amount
payable in respect of the shares upon liquidation of the Company pursuant to
Section 4 hereof.
(D) Notwithstanding anything to the contrary in paragraph (A) of this
Section 6, the Company may elect to redeem any or all of the shares of
Series B Preferred Stock at any time on or prior to July 1, 1991 on the
terms and conditions set forth in paragraphs (A) and (B) of this Section 6, if
the last reported sales price, regular way, of a share of Common Stock, as
reported on the New York Stock Exchange Composite Tape or, if the
Common Stock is not listed or admitted to trading on the New York Stock
Exchange, on the principal national securities exchange on which such stock
is listed or admitted to trading or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, on the National
Market System of the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or, if the Common Stock is not
quoted on such National Market System, the average of the closing bid and
asked prices in over-the-counter market as reported by NASDAQ, for at
least twenty (20) trading days within a period of thirty (30) consecutive
trading days ending within five (5) days of the notice of redemption equals or
exceeds one hundred fifty percent (150%) of the Conversion Price (giving
effect equitably in making such calculation to any adjustments required by
Section 9 hereof).
(E) The Company, at its option, may make payment of the redemption
price required upon redemption of shares of Series B Preferred Stock in
cash or in shares of Common Stock, or in a combination of such shares and
cash, any such shares to be valued for such purpose at their Fair Market
Value (as defined in paragraph (G) of Section 9 hereof, provided, however,
that in calculating their Fair Market Value the Adjustment Period shall be
deemed to be the five (5) consecutive trading days preceding, and including,
the date of redemption).
Section 7. Other Redemption Rights.
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Shares of Series B Preferred Stock shall be redeemed by the Company
for cash or, if the Company so elects, in shares of Common Stock, or a
combination of such shares and cash, any such shares of Common Stock to be
valued for such purpose as provided by paragraph (E) of Section 6, at a
redemption price of $600.00 per share plus accumulated and unpaid dividends
thereon to the date fixed for redemption, at the option of the holder, at
any time and from time to time upon notice to the Company given not less
than five (5) business days prior to the date fixed by the holder in such
notice for such redemption, when and to the extent necessary (i) for such
holder to provide for distributions required to be made under, or to satisfy
an investment election provided to participants in accordance with, the
J. C. Penney Company, Inc. Savings, Profit-Sharing and Stock Ownership Plan,
dated and effective as of August 22, 1988, as the same may be amended, or
any successor plan (the "Plan") to participants in the Plan or (ii) for
such holder to make payment of principal, interest or premium due and
payable (whether as scheduled or upon acceleration) on the 8.17% ESOP Notes
Due July 1, 1998 of the trust under the Plan or any indebtedness incurred
by the holder for the benefit of the Plan.
Section 8. Consolidation, Merger, etc.
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(A) In the event that the Company shall consummate any consolidation
or merger or similar transaction, however named, pursuant to which the
outstanding shares of Common Stock are by operation of law exchanged solely
for or changed, reclassified or converted solely into stock of any successor
or resulting company (including the Company) that constitutes "qualifying
employer securities" with respect to a holder of Series B Preferred Stock
within the meaning of Section 409(e) of the Internal Revenue Code of 1986,
as amended, and Section 407(c)(5) of the Employee Retirement Income Security
Act of 1974, as amended, or any successor provisions of law, and, if
applicable, for a cash payment in lieu of fractional shares, if any, the
shares of Series B Preferred Stock of such holder shall be assumed by and
shall become preferred stock of such successor or resulting company,
having in respect of such company insofar as possible the same powers,
preferences and relative, participating, optional or other special rights
(including the redemption rights provided by Sections 6, 7 and 8 hereof), and
the qualifications, limitations or restrictions thereon, that the Series B
Preferred Stock had immediately prior to such transaction, except that after
such transaction each share of the Series B Preferred Stock shall be
convertible, otherwise on the terms and conditions provided by Section 5
hereof, into the qualifying employer securities so receivable by a holder of
the number of shares of Common Stock into which such shares of Series B
Preferred Stock could have been converted immediately prior to such
transaction if such holder of Common Stock failed to exercise any rights of
election to receive any kind or amount of stock, securities, cash or other
property (other than such qualifying employer securities and a cash
payment, if applicable, in lieu of fractional shares) receivable upon such
transaction (provided that, if the kind or amount of qualifying employer
securities receivable upon such transaction is not the same for each
non-electing share, then the kind and amount of qualifying employer
securities receivable upon such transaction for each non-electing share shall
be the kind and amount so receivable per share by a plurality of the
non-electing shares). The rights of the Series B Preferred Stock as
preferred stock of such successor or resulting company shall successively
be subject to adjustments pursuant to Section 9 hereof after any such
transaction as nearly equivalent to the adjustments provided for by such
section prior to such transaction. The Company shall not consummate any
such merger, consolidation or similar transaction unless all then outstanding
shares of the Series B Preferred Stock shall be assumed and authorized by
the successor or resulting company as aforesaid.
(B) In the event that the Company shall consummate any consolidation
or merger or similar transaction, however named, pursuant to which the
outstanding shares of Common Stock are by operation of law exchanged for or
changed, reclassified or converted into other stock or securities or cash or
any other property, or any combination thereof, other than any such
consideration which is constituted solely of qualifying employer securities
(as referred to in paragraph (A) of this Section 8) and cash payments, if
applicable, in lieu of fractional shares, outstanding shares of Series B
Preferred Stock shall, without any action on the part of the Company or any
holder thereof (but subject to paragraph (C) of this Section 8), be deemed
converted by virtue of such merger, consolidation or similar transaction
immediately prior to such consummation into the number of shares of Common
Stock into which such shares of Series B Preferred Stock could have been
converted at such time and each share of Series B Preferred Stock shall, by
virtue of such transaction and on the same terms as apply to the holders of
Common Stock, be converted into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in like kind) receivable by a
holder of the number of shares of Common Stock into which such shares of
Series B Preferred Stock could have been converted immediately prior to
such transaction if such holder of Common Stock failed to exercise any
rights of election as to the kind or amount of stock, securities, cash or other
property receivable upon such transaction (provided that, if the kind or
amount of stock, securities, cash or other property receivable upon such
transaction is not the same for each non-electing share, then the kind and
amount of stock, securities, cash or other property receivable upon such
transaction for each non-electing share shall be the kind and amount so
receivable per share by a plurality of the non-electing shares).
(C) In the event the Company shall enter into any agreement providing
for any consolidation or merger or similar transaction described in paragraph
(B) of this Section 8, then the Company shall as soon as practicable thereafter
(and in any event at least ten (10) business days before consummation of
such transaction) give notice of such agreement and the material terms
thereof to each holder of Series B Preferred Stock and each such holder
shall have the right to elect, by written notice to the Company, to receive,
upon consummation of such transaction (if and when such transaction is
consummated), from the Company or the successor of the Company, in
redemption and retirement of such Series B Preferred Stock, a cash
payment equal to the amount payable in respect of shares of Series B
Preferred Stock upon liquidation of the Company pursuant to Section 4
hereof. No such notice of redemption shall be effective unless given to the
Company prior to the close of business on the fifth business day prior to
consummation of such transaction, unless the Company or the successor of
the Company shall waive such prior notice, but any notice of redemption so
given prior to such time may be withdrawn by notice of withdrawal given to
the Company prior to the close of business on the fifth business day prior to
consummation of such transaction.
Section 9. Anti-dilution Adjustments.
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(A) In the event the Company shall, at any time or from time to time
while any of the shares of the Series B Preferred Stock are outstanding,
(i) pay a dividend or make a distribution in respect of the Common Stock
in shares of Common Stock, (ii) subdivide the outstanding shares of Common
Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, in each case whether by reclassification of
shares, recapitalization of the Company (including a recapitalization
effected by a merger or consolidation to which Section 8 hereof does not
apply) or otherwise, the Conversion Price in effect immediately prior to
such action shall be adjusted by multiplying such Conversion Price by the
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately before such event and the denominator of which is
the number of shares of Common Stock outstanding immediately after such
event. An adjustment made pursuant to this paragraph 9(A) shall be given
effect, upon payment of such a dividend or distribution, as of the record
date for the determination of shareholders entitled to receive such dividend
or distribution (on a retroactive basis) and in the case of a subdivision or
combination shall become effective immediately as of the effective date
thereof.
(B) In the event that the Company shall, at any time or from time to
time while any of the shares of Series B Preferred Stock are outstanding,
issue to holders of shares of Common Stock as a dividend or distribution,
including by way of a reclassification of shares or a recapitalization of the
Company, any right or warrant to purchase shares of Common Stock (but not
including as such a right or warrant any security convertible into or
exchangeable for shares of Common Stock) at a purchase price per share less
than the Fair Market Value (as hereinafter defined) of a share of Common
Stock on the date of issuance of such right or warrant, then, subject to
the provisions of paragraphs (E) and (F) of this Section 9, the Conversion
Price shall be adjusted by multiplying such Conversion Price by the
fraction the numerator of which shall be the number of shares of Common
Stock outstanding immediately before such issuance of rights or warrants
plus the number of shares of Common Stock which could be purchased at the
Fair Market Value of a share of Common Stock at the time of such issuance
for the maximum aggregate consideration payable upon exercise in full of all
such rights or warrants and the denominator of which shall be the number of
shares of Common Stock outstanding immediately before such issuance of
rights or warrants plus the maximum number of shares of Common Stock that
could be acquired upon exercise in full of all such rights and warrants.
(C) In the event the Company shall, at any time or from time to time
while any of the shares of Series B Preferred Stock are outstanding, issue,
sell or exchange shares of Common Stock (other than pursuant to any right or
warrant to purchase or acquire shares of Common Stock (including as such
a right or warrant any security convertible into or exchangeable for shares of
Common Stock) and other than pursuant to any employee or director incentive
or benefit plan or arrangement, including any employment, severance or
consulting agreement, of the Company or any subsidiary of the Company
heretofore or hereafter adopted) for a consideration having a Fair Market
Value on the date of such issuance, sale or exchange less than the Fair
Market Value of such shares on the date of such issuance, sale or exchange,
then, subject to the provisions of paragraphs (E) and (F) of this
Section 9, the Conversion Price shall be adjusted by multiplying such
Conversion Price by the fraction the numerator of which shall be the sum of
(i) the Fair Market Value of all the shares of Common Stock outstanding on
the day immediately preceding the first public announcement of such issuance,
sale or exchange plus (ii) the Fair Market Value of the consideration
received by the Company in respect of such issuance, sale or exchange of
shares of Common Stock, and the denominator of which shall be the product
of (i) the Fair Market Value of a share of Common Stock on the day
immediately preceding the first public announcement of such issuance, sale
or exchange multiplied by (ii) the sum of the number of shares of Common
Stock outstanding on such day plus the number of shares of Common Stock
so issued, sold or exchanged by the Company. In the event the Company
shall, at any time or from time to time while any shares of Series B
Preferred Stock are outstanding, issue, sell or exchange any right or warrant
to purchase or acquire shares of Common Stock (including as such a right
or warrant any security convertible into or exchangeable for shares of
Common Stock), other than any such issuance to holders of shares of
Common Stock as a dividend or distribution (including by way of a
reclassification of shares or a recapitalization of the Company) and other
than pursuant to any employee or director incentive or benefit plan or
arrangement (including any employment, severance or consulting
agreement) of the Company or any subsidiary of the Company heretofore or
hereafter adopted, for a consideration having a Fair Market Value on the
date of such issuance, sale or exchange less than the Non-Dilutive Amount
(as hereinafter defined), then, subject to the provisions of paragraphs (E)
and (F) of this Section 9, the Conversion Price shall be adjusted by
multiplying such Conversion Price by a fraction the numerator of which shall
be the sum of (i) the Fair Market Value of all the shares of Common Stock
outstanding on the day immediately preceding the first public announcement
of such issuance, sale or exchange plus (ii) the Fair Market Value of the
consideration received by the Company in respect of such issuance, sale or
exchange of such right or warrant plus (iii) the Fair Market Value at the time
of such issuance of the consideration which the Company would receive
upon exercise in full of all such rights or warrants, and the denominator of
which shall be the product of (i) the Fair Market Value of a share of
Common Stock on the day immediately preceding the first public
announcement of such issuance, sale or exchange multiplied by (ii) the sum
of the number of shares of Common Stock outstanding on such day plus the
maximum number of shares of Common Stock which could be acquired
pursuant to such right or warrant at the time of the issuance, sale or
exchange of such right or warrant (assuming shares of Common Stock could
be acquired pursuant to such right or warrant at such time).
(D) In the event the Company shall, at any time or from time to time
while any of the shares of Series B Preferred Stock are outstanding, make an
Extraordinary Distribution (as hereinafter defined) in respect of the Common
Stock, whether by dividend, distribution, reclassification of shares or
recapitalization of the Company (including a recapitalization or
reclassification effected by a merger or consolidation to which Section 8
hereof does not apply) or effect a Pro Rata Repurchase (as hereinafter
defined) of Common Stock, the Conversion Price in effect immediately prior
to such Extraordinary Distribution or Pro Rata Repurchase shall, subject to
paragraphs (E) and (F) of this Section 9, be adjusted by multiplying such
Conversion Price by the fraction the numerator of which is (i) the product of
(x) the number of shares of Common Stock outstanding immediately before
such Extraordinary Distribution or Pro Rata Repurchase multiplied by (y) the
Fair Market Value (as herein defined) of a share of Common Stock on the
record date with respect to an Extraordinary Distribution, or on the applicable
expiration date (including all extensions thereof) of any tender offer which is
a Pro Rata Repurchase, or on the date of purchase with respect to any Pro
Rata Repurchase which is not a tender offer, as the case may be, minus (ii)
the Fair Market Value of the Extraordinary Distribution or the aggregate
purchase price of the Pro Rata Repurchase, as the case may be, and the
denominator of which shall be the product of (A) the number of shares of
Common Stock outstanding immediately before such Extraordinary Dividend
or Pro Rata Repurchase minus, in the case of a Pro Rata Repurchase, the
number of shares of Common Stock repurchased by the Company multiplied
by (B) the Fair Market Value of a share of Common Stock on the record
date with respect to an Extraordinary Distribution or on the applicable
expiration date (including all extensions thereof) of any tender offer which
is a Pro Rata Repurchase or on the date of purchase with respect to any Pro
Rata Repurchase which is not a tender offer, as the case may be. The
Company shall send each holder of Series B Preferred Stock (i) notice of its
intent to make any dividend or distribution and (ii) notice of any offer by the
Company to make a Pro Rata Repurchase, in each case at the same time
as, or as soon as practicable after, such offer is first communicated
(including by announcement of a record date in accordance with the rules of
any stock exchange on which the Common Stock is listed or admitted to
trading) to holders of Common Stock. Such notice shall indicate the
intended record date and the amount and nature of such dividend or
distribution, or the number of shares subject to such offer for a Pro Rata
Repurchase and the purchase price payable by the Company pursuant to
such offer, as well as the Conversion Price and the number of shares of
Common Stock into which a share of Series B Preferred Stock may be
converted at such time.
(E) Notwithstanding any other provisions of this Section 9, the
Company shall not be required to make any adjustment of the Conversion
Price unless such adjustment would require an increase or decrease of at
least one percent (1%) in the Conversion Price. Any lesser adjustment
shall be carried forward and shall be made no later than the time of, and
together with, the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to an increase
or decrease of at least one percent (1%) in the Conversion Price.
(F) If the Company shall make any dividend or distribution on the
Common Stock or issue any Common Stock, other capital stock or other
security of the Company or any rights or warrants to purchase or acquire
any such security, which transaction does not result in an adjustment to
the Conversion Price pursuant to the foregoing provisions of this Section 9,
the Board of Directors of the Company shall consider whether such action
is of such a nature that an adjustment to the Conversion Price should
equitably be made in respect of such transaction. If in such case the
Board of Directors of the Company determines that an adjustment to the
Conversion Price should be made, an adjustment shall be made effective as
of such date, as determined by the Board of Directors of the Company. The
determination of the Board of Directors of the Company as to whether an
adjustment to the Conversion Price should be made pursuant to the foregoing
provisions of this paragraph 9(F), and, if so, as to what adjustment should be
made and when, shall be final and binding on the Company and all
stockholders of the Company. The Company shall be entitled to make such
additional adjustments in the Conversion Price, in addition to those required
by the foregoing provisions of this Section 9, as shall be necessary in order
that any dividend or distribution in shares of capital stock of the Company,
subdivision, reclassification or combination of shares of stock of the
Company or any recapitalization of the Company shall not be taxable to
holders of the Common Stock.
(G) For purposes of this Resolution, the following definitions shall
apply:
"Extraordinary Distribution" shall mean any dividend or other
distribution (effected while any of the shares of Series B Preferred Stock
are outstanding) (i) of cash, where the aggregate amount of such cash
dividend or distribution together with the amount of all cash dividends
and distributions made during the preceding period of 12 months, when
combined with the aggregate amount of all Pro Rata Repurchases (for this
purpose, including only that portion of the aggregate purchase price of
such Pro Rata Repurchase which is in excess of the Fair Market Value of the
Common Stock repurchased as determined on the applicable expiration date
(including all extensions thereof) of any tender offer or exchange offer
which is a Pro Rata Repurchase, or the date of purchase with respect to any
other Pro Rata Repurchase which is not a tender offer or exchange offer made
during such period), exceeds twelve and one-half percent (12-1/2%) of the
aggregate Fair Market Value of all shares of Common Stock outstanding on the
record date for determining the shareholders entitled to receive such
Extraordinary Distribution and (ii) any shares of capital stock of the
Company (other than shares of Common Stock), other securities of the Company
(other than securities of the type referred to in paragraph (B) of this
Section 9), evidences of indebtedness of the Company or any other person
or any other property (including shares of any subsidiary of the Company),
or any combination thereof. The Fair Market Value of an Extraordinary
Distribution for purposes of paragraph (D) of this Section 9 shall be the
sum of the Fair Market Value of such Extraordinary Distribution plus the
amount of any cash dividends which are not Extraordinary Distributions made
during such twelve month period and not previously included in the
calculation of an adjustment pursuant to paragraph (D) of this Section 9.
"Fair Market Value" shall mean, as to shares of Common Stock or any
other class of capital stock or securities of the Company or any other
issuer which are publicly traded, the average of the Current Market Prices
(as hereinafter defined) of such shares or securities for each day of the
Adjustment Period (as hereinafter defined). "Current Market Price" of
publicly traded shares of Common Stock or any other class of capital stock
or other security of the Company or any other issuer for a day shall mean
the last reported sales price, regular way, or, in case no sale takes place
on such day, the average of the reported closing bid and asked prices,
regular way, in either case as reported on the New York Stock Exchange
Composite Tape or, if such security is not listed or admitted to trading
on the New York Stock Exchange, on the principal national securities
exchange on which such security is listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the
NASDAQ National Market System or, if such security is not quoted on such
National Market System, the average of the closing bid and asked prices on
each such day in the over-the-counter market as reported by NASDAQ or, if
bid and asked prices for such security on each such day shall not have been
reported through NASDAQ, the average of the bid and asked prices for such
day as furnished by any New York Stock Exchange member firm regularly
making a market in such security selected for such purpose by the Board of
Directors of the Company or a committee thereof on each trading day during
the Adjustment Period. "Adjustment Period" shall mean the period of five (5)
consecutive trading days, selected by the Board of Directors of the Company
or a committee thereof, during the 20 trading days preceding, and including,
the date as of which the Fair Market Value of a security is to be determined.
The "Fair Market Value" of any security which is not publicly traded or of any
other property shall mean the fair value thereof as determined by an
independent investment banking or appraisal firm experienced in the valuation
of such securities or property selected in good faith by the Board of
Directors of the Company or a committee thereof, or, if no such investment
banking or appraisal firm is in the good faith judgment of the Board of
Directors or such committee available to make such determination, as
determined in good faith by the Board of Directors of the Company or such
committee.
"Non-Dilutive Amount" in respect of an issuance, sale or exchange by
the Company of any right or warrant to purchase or acquire shares of Common
Stock (including any security convertible into or exchangeable for shares
of Common Stock) shall mean the remainder of (i) the product of the Fair
Market Value of a share of Common Stock on the day preceding the first
public announcement of such issuance, sale or exchange multiplied by the
maximum number of shares of Common Stock which could be acquired on such
date upon the exercise in full of such rights and warrants (including upon
the conversion or exchange of all such convertible or exchangeable
securities), whether or not exercisable (or convertible or exchangeable)
at such date, minus (ii) the aggregate amount payable pursuant to such
right or warrant to purchase or acquire such maximum number of shares of
Common Stock; provided, however, that in no event shall the Non-Dilutive
Amount be less than zero. For purposes of the foregoing sentence, in the
case of a security convertible into or exchangeable for shares of Common
Stock, the amount payable pursuant to a right or warrant to purchase or
acquire shares of Common Stock shall be the Fair Market Value of such
security on the date of the issuance, sale or exchange of such security by
the Company.
"Pro Rata Repurchase" shall mean any purchase of shares of Common Stock
by the Company or any subsidiary thereof, whether for cash, shares of capital
stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other person or any other property
(including shares of a subsidiary of the Company), or any combination thereof,
effected while any of the shares of Series B Preferred Stock are outstanding,
pursuant to any tender offer or exchange offer subject to Section 13(e) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision of law, or pursuant to any other offer available to
substantially all holders of Common Stock; provided, however, that no
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purchase of shares by the Company or any subsidiary thereof made in open
market transactions shall be deemed a Pro Rata Repurchase. For purposes
of this paragraph 9(G), shares shall be deemed to have been purchased by
the Company or any subsidiary thereof "in open market transactions" if they
have been purchased substantially in accordance with the requirements of
Rule 10b-18 as in effect under the Exchange Act, on the date shares of
Series B Preferred Stock are initially issued by the Company or on such other
terms and conditions as the Board of Directors of the Company or a committee
thereof shall have determined are reasonably designed to prevent such purchases
from having a material effect on the trading market for the Common Stock.
(H) Whenever an adjustment to the Conversion Price and the related
voting rights of the Series B Preferred Stock is required pursuant to this
Resolution, the Company shall forthwith place on file with the transfer agent
for the Common Stock and the Series B Preferred Stock if there be one, and
with the Secretary of the Company, a statement signed by two officers of the
Company stating the adjusted Conversion Price determined as provided
herein and the resulting conversion ratio, and the voting rights (as
appropriately adjusted), of the Series B Preferred Stock. Such statement
shall set forth in reasonable detail such facts as shall be necessary to show
the reason and the manner of computing such adjustment, including any
determination of Fair Market Value involved in such computation. Promptly
after each adjustment to the Conversion Price and the related voting rights
of the Series B Preferred Stock, the Company shall mail a notice thereof
and of the then prevailing conversion ratio to each holder of shares of the
Series B Preferred Stock.
Section 10. Ranking; Attributable Capital and Adequacy of Surplus;
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Retirement of Shares.
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(A) The Series B Preferred Stock shall rank senior to the Series A
Preferred Stock and the Common Stock as to the payment of dividends and the
distribution of assets on liquidation, dissolution and winding up of the
Company, and, unless otherwise provided in the Restated Certificate of
Incorporation of the Company, as amended, or a Certificate of Designations
relating to a subsequent series of Preferred Stock, without par value, of
the Company, the Series B Preferred Stock shall rank junior to all other
series of the Company's Preferred Stock, without par value, as to the payment
of dividends and the distribution of assets on liquidation, dissolution or
winding up.
(B) The capital of the Company allocable to the Series B Preferred
Stock for purposes of the Delaware General Corporation Law (the "Corporation
Law") shall be $600.00 per share. In addition to any vote of stockholders
required by law, the vote of the holders of a majority of the outstanding
shares of Series B Preferred Stock shall be required to increase the par
value of the Common Stock or otherwise increase the capital of the Company
allocable to the Common Stock for the purpose of the Corporation Law if, as
a result thereof, the surplus of the Company for purposes of the Corporation
Law would be less than the amount of Preferred Dividends that would accrue
on the then outstanding shares of Series B Preferred Stock during the
following three years.
(C) Any shares of Series B Preferred Stock acquired by the Company by
reason of the conversion or redemption of such shares as provided by this
Resolution, or otherwise so acquired, shall be retired as shares of Series B
Preferred Stock and restored to the status of authorized but unissued shares
of preferred stock, without par value, of the Company, undesignated as to
series, and may thereafter be reissued as part of a new series of such
preferred stock as permitted by law.
Section 11. Miscellaneous.
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(A) All notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier of receipt
thereof or three (3) business days after the mailing thereof if sent by
registered mail (unless first-class mail shall be specifically permitted for
such notice under the terms of this Resolution) with postage prepaid,
addressed: (i) if to the Company, to its office at 14841 North Dallas
Parkway, Dallas Texas 75240 (Attention: Secretary) or to the transfer agent
for the Series B Preferred Stock, or other agent of the Company designated
as permitted by this Resolution or (ii) if to any holder of the Series B
Preferred Stock or Common Stock, as the case may be, to such holder at the
address of such holder as listed in the stock record books of the Company
(which may include the records of any transfer agent for the Series B
Preferred Stock or Common Stock, as the case may be) or (iii) to such other
address as the Company or any such holder, as the case may be, shall have
designated by notice similarly given.
(B) The term "Common Stock" as used in this Resolution means the
Company's Common Stock of $.50 par value, as the same exists at the date of
filing of a Certificate of Designations relating to Series B Preferred Stock
or any other class of stock resulting from successive changes or
reclassification of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
In the event that, at any time as a result of an adjustment made pursuant to
Section 9 of this Resolution, the holder of any share of the Series B
Preferred Stock upon thereafter surrendering such shares for conversion
shall become entitled to receive any shares or other securities of the
Company other than shares of Common Stock, the Conversion Price in respect
of such other shares or securities so receivable upon conversion of shares
of Series B Preferred Stock shall thereafter be adjusted, and shall be
subject to further adjustment from time to time, in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to Common
Stock contained in Section 9 hereof, and the provisions of Sections 1 through 8
and 10 and 11 of this Resolution with respect to the Common Stock shall apply
on like or similar terms to any such other shares or securities.
(C) The Company shall pay any and all stock transfer and documentary
stamp taxes that may be payable in respect of any issuance or delivery of
shares of Series B Preferred Stock or shares of Common Stock or other
securities issued on account of Series B Preferred Stock pursuant hereto or
certificates representing such shares or securities. The Company shall not,
however, be required to pay any such tax which may be payable in respect of
any transfer involved in the issuance or delivery of shares of Series B
Preferred Stock or Common Stock or other securities in a name other than that
in which the shares of Series B Preferred Stock with respect to which such
shares or other securities are issued or delivered were registered, or in
respect of any payment to any person with respect to any such shares or
securities other than a payment to the registered holder thereof, and shall
not be required to make any such issuance, delivery or payment unless and
until the person otherwise entitled to such issuance, delivery or payment has
paid to the Company the amount of any such tax or has established, to the
satisfaction of the Company, that such tax has been paid or is not payable.
(D) In the event that a holder of shares of Series B Preferred Stock
shall not by written notice designate the name in which shares of Common
Stock to be issued upon conversion of such shares should be registered or
to whom payment upon redemption of shares of Series B Preferred Stock
should be made or the address to which the certificate or certificates
representing such shares, or such payment, should be sent, the Company
shall be entitled to register such shares, and make such payment, in the
name of the holder of such Series B Preferred Stock as shown on the
records of the Company and to send the certificate or certificates
representing such shares, or such payment, to the address of such holder
shown on the records of the Company.
(E) Unless otherwise provided in the Restated Certificate of
Incorporation, as amended, of the Company, all payments in the form of
dividends, distributions on voluntary or involuntary dissolution,
liquidation or winding-up or otherwise made upon the shares of Series B
Preferred Stock and any other stock ranking on a parity with the Series B
Preferred Stock with respect to such dividend or distribution shall be made
pro rata, so that amounts paid per share on the Series B Preferred Stock and
such other stock shall in all cases bear to each other the same ratio that
the required dividends, distributions or payments, as the case may be, then
payable per share on the shares of the Series B Preferred Stock and such
other stock bear to each other.
(F) The Company may appoint, and from time to time discharge and
change, a transfer agent for the Series B Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Company shall send notice
thereof by first-class mail, postage prepaid, to each holder of record of
Series B Preferred Stock.
Exhibit 10(a)
RESOLVED that pursuant to Paragraph (2) of Article VIII of the
Supplemental Retirement Program for Management Profit-Sharing Associates of
J. C. Penney Company, Inc. ("Program"), the Program be, and it hereby is,
amended as follows:
1. Article III (Participation) is amended, effective January 1, 1996,
in its entirety to read as follows:
Each Eligible Management Associate shall participate in the Plan
as of such Eligible Management Associate's Early Retirement Date,
Traditional Retirement Date, or Delayed Retirement Date, as the
case may be; provided, however, that such Eligible Management
Associate who has a Separation from Service in December shall be
entitled to participate in the Plan as of the last day of that
December. Notwithstanding the preceding sentence, effective on
and after January 1, 1996, any Associate who, on December 31, 1995,
was not classified as management or who was not participating in a
Profit Incentive Compensation program shall not be considered an
Eligible Management Associate and shall not participate in the Plan.
2. Article IV (Benefits) is amended, effective January 1, 1996, to
revise item (iv) of the last subparagraph of Paragraph (1) (At Early,
Traditional, or Delayed Retirement Date) to read as follows:
(iv) The rates used to determine the single-life,
no-death-benefit annuity equivalent shall be the rates that the
Benefits Administration Committee, in its discretion, shall determine.
3. Article IV (Benefits) is amended, effective January 1, 1996, to
restate the last subparagraph of Paragraph (2) (Minimum Benefit)
to read as follows:
In no event will the amount payable under Paragraph (1) of this
Article IV to an Eligible Management Associate who (a) Separates from
Service on his Early Retirement Date within one year prior to his
Traditional Retirement Date and who is granted additional Credited
Service pursuant to Paragraph (1) of Article VIII at his Early
Retirement Date, or (b) Separates from Service because of a
reduction in force and is designated as an individual termination
by the Director of Personnel in accordance with Paragraph (1) of
Article VIII and who is granted deemed additional months
of Credited Service thereunder be less than the difference between
(A) the amount of pension that would be payable (determined without
regard to any compensation or benefit limits imposed by the Code) at
such Eligible Management Associate's normal retirement date, as
defined by the Pension Plan (disregarding Disability Service, if any,
and including as Credited Service, as defined by the Pension Plan,
any increase granted under Article VIII hereof) and (B) the amount
of pension payable pursuant to the early retirement pension benefit
provision of the Pension Plan (determined without regard to any
compensation or benefit limits imposed by the Code) that would be
applicable if the Eligible Management Associate elected to receive
benefits pursuant to that provision prior to such Eligible
Management Associate's normal retirement date, as defined by the
Pension Plan (disregarding Disability Service, if any, and excluding
as Credited Service any increase granted under Article VIII hereof)
assuming the Eligible Management Associate's Benefit Commencement
Date is the later of his Traditional Retirement Date or Delayed
Retirement Date, or, alternatively, his Early Retirement Date (if
within one year of his Traditional Retirement Date), and assuming
the early retirement reduction under the Pension Plan is decreased
or waived.
4. Article VIII (Miscellaneous) is amended, effective January 1, 1996,
to add the following subparagraphs to Paragraph (1) (Additional
Credited Service and other Adjustments):
An Eligible Management Associate who terminates employment due
to a reduction in force, as defined below, and who does not satisfy
the requirements for Traditional Retirement Age on the date of
termination shall receive deemed additional months of age and/or
Service, based on the following:
Years of Service Deemed Additional Months of Age and/or Service
---------------- ----------------------------------------------
0 - 9 0
10 - 14 12
15 - 19 18
20 or more 24
A reduction in force shall mean the termination of employment of an
Eligible Management Associate because of:
(a) A partial unit closing or complete unit closing ("unit
closing") as determined by the Director of Personnel of the Company
in his sole discretion, or
(b) Other business reasons of the Company ("individual
termination") as determined by the Director of Personnel of the
Company in his sole discretion. With the approval of the Benefits
Administration Committee of the Company, the Director of Personnel
may increase such award by up to 24 deemed additional months of age
and/or Service for an individual termination.
For the purposes of determining the benefit payable under Paragraph
(1) of Article IV, such Eligible Management Associate is deemed to
have attained Traditional Retirement Age. The deemed additional
months of age and/or Service shall be added, but only to the extent
necessary, to the Eligible Management Associate's age and/or Service,
in such amounts necessary to satisfy the minimum requirements for
Traditional Retirement Age or, with the approval of the Benefits
Administration Committee, an Early Retirement Age on or after age 59.
The deemed additional months of Service shall count as Credited
Service for the purpose of entitlement to benefits under this Plan
only in the event of an individual termination as described in (b)
of the preceding subparagraph, and shall not count as Credited
Service in the event of a unit closing described in (a) of the
preceding subparagraph.
5. Article VIII (Miscellaneous) is amended, effective March 8, 1995,
to add a new Paragraph (10) to read as follows:
(10) Transferred Eligible Management Associates: In the
------------------------------------------
event of the transfer of an Eligible Management Associate after
December 31, 1995 from a Participating Employer to a
"non-participating employer" as defined below, said Eligible
Management Associate shall continue to be eligible to participate
in this Plan in accordance with Article III. In the event of the
transfer of an Eligible Management Associate on or after March 8,
1995 but on or before December 31, 1995 to a non-participating
employer, said Eligible Management Associate will continue to be
eligible to participate in this Plan in accordance with Article
III provided that on December 31, 1995 the Eligible Management
Associate (a) is in the employ of the non-participating employer
and (b) is not eligible to participate in the Supplemental
Retirement Program for Eligible Management Associates of JCPenney
Financial Services, or Supplemental Retirement Program for
Management Profit-Sharing Associates of Thrift Drug, Inc. The
Service and Compensation of the Eligible Management Associate with
the non-participating employer shall be recognized as attributable to
a Participating Employer to the extent permitted by the Plan in
determining benefits under the Plan. A non-participating employer
shall mean a participating employer in the (a) Supplemental
Retirement Program for Eligible Management Associates of JCPenney
Financial Services, or (b) Supplemental Retirement Program for
Management Profit-Sharing Associates of Thrift Drug, Inc.
RESOLVED that, pursuant to Article VIII, Paragraph 2 of the Supplemental
Retirement Program for Management Profit-Sharing Associates of J. C. Penney
Company, Inc. ("Program"), the definition of "Participating Employer" under the
Program be, and it hereby is, amended in its entirety effective February 1,
1996, to read as follows:
Participating Employer: The Company and any other Controlled
----------------------
Group Member or organizational unit of the Company or a Controlled
Group Member which is designated as a Participating Employer
under the Plan by the Personnel Committee; provided, however, that
if such designation would substantially increase the cost of the
Plan to the Company, such designation shall be subject to the
sole discretion of the Board of Directors.
<PAGE>
Exhibit 10(b)
RESOLVED that, pursuant to Article VIII, Paragraph 1 of the J. C. Penney
Company, Inc. Benefit Restoration Plan, the definition of "Participating
Employer" under the Benefit Restoration Plan be, and it hereby is, amended in
its entirety effective February 1, 1996, to read as follows:
Participating Employer: The Company and any other Controlled
----------------------
Group Member or organizational unit of the Company or a Controlled Group
Member which is designated as a Participating Employer under the Plan by
the Personnel Committee; provided, however, that if any such designation
would substantially increase the cost of the Plan to the Company, such
designation shall be subject to the sole discretion of the Board of
Directors.
</PAGE>
<PAGE>
<TABLE>
Exhibit 11
J. C. PENNEY COMPANY, INC.
and Consolidated Subsidiaries
<CAPTION>
Computation of Net Income Per Common Share
------------------------------------------
(Amounts in millions except per common share data)
13 Weeks Ended
---------------------------------
Apr. 27, 1996 Apr. 29, 1995
--------------- ---------------
Shares Income Shares Income
------ ------ ------ ------
<S> <C> <C> <C> <C>
Primary:
- -------
Net income $ 142 $ 156
Dividend on Series B ESOP convertible
preferred stock (after-tax) (11) (10)
------ ------
Adjusted net income 131 146
Weighted average number of shares
outstanding 224.6 229.5
Common stock equivalents:
Stock options and other dilutive effects 2.6 2.4
----- ----- ----- ------
227.2 $ 131 231.9 $ 146
----- ----- ----- ------
----- ----- ----- ------
Net income per common share $0.58 $0.63
----- ------
----- ------
Fully diluted:
- -------------
Net income $ 142 $ 156
Tax benefit differential on ESOP dividend
assuming stock is fully converted -- (1)
Assumed additional contribution to ESOP
if preferred stock is fully converted (1) (1)
------ ------
Adjusted net income 141 154
Weighted average number of shares
outstanding (primary) 227.2 231.9
Maximum dilution 0.2 0.2
Convertible preferred stock 19.8 20.9
----- ----- ----- ------
247.2 $ 141 253.0 $ 154
----- ----- ----- ------
----- ----- ----- ------
Net income per common share $0.57 $0.61
----- ------
----- ------
</TABLE>
</PAGE>
<PAGE>
<TABLE> Exhibit 12(a)
J. C. Penney Company, Inc.
(the Company and all subsidiaries)
<CAPTION>
Computation of Ratios of Available Income to Combined Fixed Charges
and Preferred Stock Dividend Requirement
52 weeks 52 weeks
ended ended
--------- ---------
Apr. 27, Apr. 29,
1996 1995
--------- ---------
<S> <C> <C>
($ Millions)
Income from continuing operations
(before income taxes,
before capitalized interest,
but after preferred stock dividend) $ 1,256 $ 1,537
--------- ---------
Fixed charges
Interest (including capitalized
interest)
On operating leases 102 95
On short term debt 120 108
On long term debt 268 232
On capital leases 5 7
Other, net 1 (1)
--------- ---------
Total fixed charges 496 441
Preferred stock dividend, before taxes 48 49
--------- ---------
Combined fixed charges and preferred stock
dividend requirement 544 490
--------- ---------
Total available income $ 1,800 $ 2,027
--------- ---------
--------- ---------
Ratio of available income to combined
fixed charges and preferred stock
dividend requirement 3.3 4.1
--------- ---------
--------- ---------
</TABLE>
The interest cost of the LESOP notes guaranteed by the Company is not
included in fixed charges above.
The Company believes that, due to the seasonal nature of its business,
ratios for a period other than a 52 week period are inappropriate.
</PAGE>
<PAGE>
<TABLE>
Exhibit 12(b)
J. C. Penney Company, Inc.
(the Company and all subsidiaries)
<CAPTION>
Computation of Ratios of Available Income to Fixed Charges
52 weeks 52 weeks
ended ended
-------- --------
Apr. 27, Apr. 29,
1996 1995
-------- --------
<S> <C> <C>
($ Millions)
Income from continuing operations
(before income taxes and
before capitalized interest) $ 1,304 $ 1,586
-------- --------
Fixed charges
Interest (including capitalized
interest)
On operating leases 102 95
On short term debt 120 108
On long term debt 268 232
On capital leases 5 7
Other, net 1 (1)
-------- --------
Total fixed charges 496 441
-------- --------
Total available income $ 1,800 $ 2,027
-------- --------
-------- --------
Ratio of available income to fixed charges 3.6 4.6
-------- --------
-------- --------
</TABLE>
The interest cost of the LESOP notes guaranteed by the Company is not
included in fixed charges above.
The Company believes that, due to the seasonal nature of its business,
ratios for a period other than a 52 week period are inappropriate.
</PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND RELATED CONSOLIDATED STATEMENT OF INCOME
OF J. C. PENNEY COMPANY, INC. AND SUBSIDIARIES AS OF APRIL 27, 1996, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-END> APR-27-1996
<CASH> 145
<SECURITIES> 0
<RECEIVABLES> 4,830
<ALLOWANCES> 74
<INVENTORY> 3,992
<CURRENT-ASSETS> 8,985
<PP&E> 6,281
<DEPRECIATION> 2,036
<TOTAL-ASSETS> 16,782
<CURRENT-LIABILITIES> 3,621
<BONDS> 4,077
<COMMON> 1,140
0
589
<OTHER-SE> 4,161
<TOTAL-LIABILITY-AND-EQUITY> 16,782
<SALES> 4,452
<TOTAL-REVENUES> 4,688
<CGS> 3,097
<TOTAL-COSTS> 4,251
<OTHER-EXPENSES> 88
<LOSS-PROVISION> 47
<INTEREST-EXPENSE> 75
<INCOME-PRETAX> 227
<INCOME-TAX> 85
<INCOME-CONTINUING> 142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.57
</TABLE>
