NORDSTROM DIRECTORS DEFERRED COMPENSATION PLAN

 

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                                                                   EXHIBIT 10.55

 

                                    NORDSTROM

 

                      DIRECTORS DEFERRED COMPENSATION PLAN

 

                               (2002 RESTATEMENT)

 

             CONSOLIDATES ALL PLAN PROVISIONS APPROVED BY THE COMPANY

                            INCLUDING THE FOLLOWING:

 

                        JANUARY 1, 2000 RESTATEMENT; AND

                                AMENDMENT 2001-1

 

                         LANE POWELL SPEARS LUBERSKY LLP

                       601 S.W. SECOND AVENUE, SUITE 2100

                             PORTLAND, OREGON 97204

                            TELEPHONE: (503) 778-2100

                            FACSIMILE: (503) 778-2200

 

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                                     ARTICLE I

 

                        TITLE, PURPOSE AND EFFECTIVE DATE

 

                  1.01      Title. This plan shall be known as the Nordstrom

Directors Deferred Compensation Plan, and any reference in this instrument to

the "Plan" shall include the plan as described herein and as amended from time

to time.

 

                  1.02      Purpose. The Plan is intended to constitute an

unfunded plan maintained primarily for the purpose of providing deferred

compensation for members of the Board of Nordstrom, Inc., a Washington

corporation, and its affiliates ("Company"), within the meaning of Sections

201(2), 301(a)(3) and 401(a)(4) of the Employee Retirement Income Security Act

of 1974 ("ERISA").

 

                  1.03      Effective Date. The Plan was originally effective as

of January 1, 1994. In order to provide for Company contributions and to

otherwise clarify certain Plan provisions, the Company adopts this Restatement

of the Plan, effective January 1, 2003.

 

                                    ARTICLE II

 

                                   ELIGIBILITY

 

                  2.01      Participation. A Board member becomes a "Participant"

in the Plan when he or she elects to defer a portion of his or her director's

fees pursuant to the terms of the Plan and Article III or when the Company

awards Units to the Board member pursuant to the terms of the Plan and Article

IV. A Board member remains a Participant as long as he or she has a Bookkeeping

Account balance that has not yet been entirely distributed.

 

                  2.02      Time of Eligibility. A Board member shall be eligible

to participate in the Plan upon the earlier of: (i) January 1 of the year

following the year in which he or she became a Board member; or (ii) the first

day of the second month following the date he or she became a Board member. A

Board Member shall be eligible to receive an award of Units following adoption

of a resolution by the Committee awarding the Units and execution of a

Participation Agreement by the Board member and the Company. Subject to the

provisions of the Plan, all Board members will be eligible to defer compensation

and receive benefits at the time and in the manner provided hereunder.

 

                                   ARTICLE III

 

                             DEFERRAL OF COMPENSATION

 

                  3.01      Deferral Elections. Upon becoming eligible to be a

Participant under Section 2.01, and for any Plan Year thereafter, a Board member

must complete, sign and return a Deferral Agreement to the Company's Corporate

Employee Benefits & Compensation

 

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Department ("Corporate Employee Benefits & Compensation") on or before the

applicable Election Date.

 

                  a.        Deferral Agreement. As used in this instrument, the

          term "Deferral Agreement" means the written form prescribed by the

         Committee, and developed in conjunction with Corporate Employee

         Benefits & Compensation, and which indicates the portion of

         Participant's director's fees he or she elects to defer for any Plan

         Year, and applies only with respect to fees to be earned in periods

         after the date of such election. In the case of an initial Deferral

         Agreement only, such agreement shall also indicate directions with

         respect to distribution options and in-service withdrawals. No Deferral

         Agreement shall be effective until approved by the Company.

 

                  b.        Election Date. The "Election Date" is the date by

         which a Participant must submit a valid Deferral Agreement to the

         Company, determined as follows:

 

                           i.Plan Year Open Enrollment. Except as provided in

                  Section 3.01.b.ii, the applicable Election Date for any given

                  Plan Year is the date preceding the Board Member's performing

                  any services relating to Board Membership for such year as the

                  Company may determine, provided that the Election Date for any

                   given Plan Year must be a date prior to the first meeting of

                  the Company's Board of Directors within the Plan Year.

 

                           ii.Election Date for Gains from Options, Stock

                  Appreciation Rights and Stock Units. The applicable Election

                  Date for gains from Options, Stock Appreciation Rights or

                  Stock Units granted under the Nordstrom Inc. 2002 Nonemployee

                  Director Stock Incentive Plan ("Incentive Plan") exercised in

                  any given Plan Year is June 30 of the preceding Plan Year.

 

                           iii.New Participants. The applicable Election Date

                  for any person who becomes a Board member during the Plan Year

                   is thirty (30) days after first becoming a Board member.

 

                                                      c.Eligible Compensation.

         For purposes of this Plan, the following items of a Participant's

         remuneration shall be considered "Eligible Compensation":

 

                                                      i.Cash Fees. The

 

                  Participant's cash director's fees;

 

 

                                                      ii.Options. The

                  Participant's gain (in the form of cash or stock units) from

                  the exercise of Incentive Plan Options;

 

                                                      iii.Stock Appreciation

                  Rights. The Participant's Stock Appreciation Rights ("SAR")

                  granted under the Incentive Plan;

 

 

                                                      iv.Restricted Shares. The

                  Participant's Restricted Shares granted under the Incentive

                  Plan; and

 

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                                                      v.Stock Units. The

                  Participant's Stock Units granted under the Incentive Plan.

 

 

                  3.02      Amount of Deferral. A Participant may, for any Plan

Year, irrevocably elect to have the following amounts of Eligible Compensation

deferred and credited to the Participant's Bookkeeping Account in accordance

with the terms and conditions of the Plan:

 

                  a.        Cash Fees. All or a portion of the Participant's cash

         director's fees for such Plan Year;

 

                  b.        Options. All or a portion of the Participant's gain

         from the exercise in such Plan Year of Incentive Plan Options;

 

                  c.        Stock Appreciation Rights. All or a portion of the

         Participant's proceeds from the exercise in such Plan Year of Incentive

         Plan SAR;

 

                  d.        Restricted Stock. All or a portion of the

         Participant's Restricted Stock granted under the Incentive Plan for

         such Plan Year; and

 

                  e.        Stock Units. All or a portion of the Participant's

         settlement in such Plan Year of Incentive Plan Stock Units.

 

         3.03      Minimum Deferral. Each Participant must agree to defer a

         minimum of five thousand dollars ($5,000) per Plan Year; provided,

         however, that this minimum need not be met if director's fees actually

         paid is insufficient to yield such minimum deferral in accordance with

         the Participant's Deferral Election.

 

                  3.04      Requirement for Deferral Agreement. A Participant who

has not timely submitted a valid Deferral Agreement may not defer any Eligible

Compensation for the applicable Plan Year under the Plan.

 

                  3.05      Applicability of Deferral Agreement. A Deferral

Agreement remains in effect for the Plan Year to which it applies. A Participant

must file a new Deferral Agreement for each Plan Year. The terms of any Deferral

Agreement may, but need not be, similar to the terms of any prior Agreement.

 

                                   ARTICLE IV

 

                     APPRECIATION UNIT AWARDS AND VALUATION

 

                  4.01      Participation. The Committee shall designate members

of the Board who, in the judgment of the Committee, perform services of special

importance on behalf of the Board or of the Company and should be entitled to an

award of Appreciation Units under this Plan.

 

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Each Board member so designated must execute a Participation Agreement in the

form and manner prescribed by the Committee as a condition to receiving an award

of Appreciation Units.

 

                  4.02      Award of Units. After execution of a Participation

Agreement, the Company shall award Appreciation Units to designated Participants

on such terms and conditions as the Committee deems appropriate. Such Units

shall be immediately fully vested.

 

                  4.03      Nature of Units. Each Appreciation Unit represents

the Company's agreement to pay to the Participant as deferred compensation an

amount based on changes in the value of one share of common stock of the

Company, determined under section 4.05. Appreciation Units represent a

contractual right to receive deferred compensation, and the Participant holding

such right shall be a general, unsecured creditor of the Company. Appreciation

Units are intended to reflect changes in the value of actual shares of common

stock of the Company, but they are not common stock of the Company, are not

transferable or assignable, shall not give the Participant any right to purchase

actual shares of Company stock, and shall not confer on the Participant any of

the ownership rights associated with shares of common stock of the Company.

 

                   4.04      Conversion. Upon the occurrence of a distribution

event under Article VII, or at any time upon the election of a Participant, some

or all of the Appreciation Units shall be converted into a dollar amount, which

represents the difference in value of shares of Company common stock from the

date the Appreciation Units are awarded to the date the Units are converted. The

value of the converted Units shall be determined under section 4.05, shall be

credited to the Participant's Bookkeeping Account, and shall be deemed invested

in accordance with the Participant's deemed investments under section 5.03.

Unless a distribution event has occurred under Article VII, the fact that a

Participant elects to convert one or more Appreciation Units to a cash value

does not create the right to receive a distribution or payment of any kind from

this Plan.

 

                  4.05      Valuation. Upon the Participant's election to convert

some or all of the Appreciation Units or upon occurrence of a distribution event

described in Article VII, the value of the Units shall be determined as follows:

 

                  a. First, the base value of the Units shall be determined by

multiplying the number of Units awarded by the closing price of Company common

stock on the New York Stock Exchange on the date that the Units are awarded.

 

                  b. Second, the adjusted value of the Units shall be determined

by multiplying the number of converted Units by the closing price of Company

common stock on the New York Stock Exchange on the date that the Units are

converted.

 

                  c. Third, the dollar amount under a. shall be subtracted from

the dollar amount in b., and the difference shall be credited to the

Participant's Bookkeeping Account. In the event that the difference results in a

number less than zero, the converted Units shall be cancelled without any

liability or obligation to pay on the part of the Company or the Participant.

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                  4.05      Participation Agreement. As used in this Plan, the

term "Participation Agreement" means the written form prescribed by the

Committee that specifies the number of Appreciation Units awarded to a member of

the Board. The Participation Agreement may include such terms and conditions

applicable to the award and conversion of the Appreciation Units as the

Committee may deem reasonable and necessary to achieve the objectives of this

Plan. In addition, the Participation Agreement with respect to each separate

award of Appreciation Units shall specify the Participant's elections for

distributions of the value of the Units, and the elections can be modified only

as provided in Article VII. The Participation Agreement must be executed prior

to an actual award of Appreciation Units, and shall not be effective until

approved and accepted by the Company.

 

                                    ARTICLE V

 

                        BOOKKEEPING ACCOUNT AND CREDITING

 

5.01      Bookkeeping Account. A "Bookkeeping Account" is the account established

on the books of the Company as a record of each Participant's Plan balance. A

Bookkeeping Account may, at the discretion of the Committee, include one or more

sub-accounts to reflect amounts credited to a Participant under the various

terms of the Plan. As of the effective date of this Restatement, the Committee

has established the following three sub-accounts:

 

                  a.        Deemed Investment Sub-Account: A Deemed Investment

         sub-account, expressed as a dollar amount, reflecting the Participant's

         account balance resulting from the following:

 

                           i.        Deferred cash director's fees;

 

                           ii.       Cash paid as the result of the exercise or

                  settlement of Options, SAR, or Stock Units under the Incentive

                  Plan deferred pursuant to Article III; Appreciation Units

                  pursuant to Article IV; or dividends issued in the form of

                  cash under the Incentive Plan and

 

                           iii.      The Participant's deemed investment of such

                  amounts under Section 5.03.

 

                  b.        Company Shares Sub-Account. A Company Shares

         sub-account, expressed in Units (denominated in units of shares of the

         Company's Common Stock) reflecting the number of Common Shares in the

         Company in which the Participant is vested resulting from Company

         Common Shares paid following the exercise or settlement of Options,

         SAR, or Stock Units under the Incentive Plan deferred pursuant to

         Article III; Incentive Plan Restricted Shares deferred pursuant to

         Article III or dividends issued in the form of stock units under the

         Incentive Plan.

 

                  c.        Appreciation Units Sub-Account. An Appreciation Units

         sub-account reflecting the number of Appreciation Units in the Company.

         The balance in such sub-

 

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         account shall be expressed in Units (denominated in units of shares of

         the Company's Common Stock).

 

                  5.02      Time of Crediting Accounts. Amounts deferred by a

Participant under the Plan shall be credited to the Participant's Bookkeeping

Account as soon as administratively practicable after the date deferred amounts

would otherwise have been received (or beneficially received in the case of

Company contributions) by the Participant. Subject to 5.04(c)(ii) regarding the

underwriting of the Plan's investment vehicles, Earnings shall be credited to a

Participant's Bookkeeping Account on the date determined by the Company, but no

later than the month following the month in which deferrals and Company

contributions were credited to the Bookkeeping Account in accordance with the

preceding sentence. Earnings are based on the performance of the investment

options selected by Participants in accordance with Section 5.03.

 

                  5.03      Participant Deemed Investments. Subject to Section

5.03(b), each Participant may, from time to time, select from the various

indices provided by the Committee (under Section 5.04(b)) in which his or her

Bookkeeping Account will be deemed invested; provided, however, that the

Committee is under no obligation to acquire or provide any of the investments

designated by the Participant.

 

                  a.        Deemed Investment Sub-Account Valuation. A

         Participant's Deemed Investment Sub-Account shall be credited or

         debited on a monthly basis with additional amounts equal to the

         appreciation (or loss) such accounts would have experienced had they

         actually been invested in the specified fund indices as the relevant

         times. This crediting and debiting will take into account the date that

         a Participant's Bookkeeping Account transactions (such as deferrals,

         contributions, distributions and transfers among funds) are actually

         reflected by the Plan's record-keeping system.

 

                  b.        Company Shares and Appreciation Units Sub-Account

         Valuation. The number of Units in a Participant's Company Shares and

         Appreciation Units Sub-Accounts shall be appropriately adjusted

         periodically to reflect any dividend (if applicable), split, split-up

         or any combination or exchange, however accomplished, with respect to

         the shares of the Company's Common Stock represented by such Units.

 

                  5.04      Investments by the Company. In order to provide funds

to satisfy its obligations under the Plan, the Company may, but shall not be

required to, keep cash or invest and reinvest in mutual funds, stocks, bonds

securities or any other assets as may be reasonably selected by the Committee in

its discretion. Such investments may, but need not, follow the investment

indices chosen by the Participants.

 

                  a.        Investment Advice. In the exercise of the foregoing

         investment powers, the Committee may engage investment counsel and, if

         the Committee so desires, may delegate to such counsel full or limited

         authority to select the assets in which the funds are to be invested.

         Such investment counsel may be an Officer and Employee of the Company.

 

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                  b.        Choice of Investment Indices. The Committee, or its

         investment counsel, may specify one or more investment funds to serve

         as indices for the investment performance of amounts credited under the

         Bookkeeping Accounts. The Committee has the authority to expand or

         limit the type or number of fund indices and to prescribe, in

         conjunction with the Company, the frequency with which Participants may

         change their deemed investment elections.

 

                  c.        Insurance. In the event that, in its discretion, the

         Company purchases an insurance policy or policies insuring the life of

         the Participant to allow the Company to recover the cost of providing

         the benefits hereunder, neither the Participant, Participant's

         Beneficiary, nor any other person shall have or acquire any rights

         whatsoever in such policy or policies or in the proceeds therefrom. If

         the Company elects to purchase a life insurance or annuity policy on

         the life of the participant:

 

                  i.        The Participant shall, as a condition to continued

         participation, sign any papers and undergo any medical examinations or

         tests that may be necessary or required for such purpose; and

 

                            ii.       Notwithstanding the Participant's election

                  or direction or any provision in the Plan to the contrary, the

                  Participant's Bookkeeping Account will be deemed invested in a

                  money market fund or instrument or other liquid asset selected

                  by the Committee or its delegate, pending the underwriting and

                  delivery of such policy or annuity.

 

                  5.05      Limited Effect of Allocation. The fact that any

allocation shall be made and credited to a Bookkeeping Account shall not vest in

a Participant any right, title or interest in or to any assets of the Company,

or in any right to payment, except at the time(s) and upon the conditions

elsewhere set forth in the Plan.

 

                  5.06      Report of Account. A Participant shall be provided

information regarding Participant's Bookkeeping Account balance within a

reasonable time after requesting such information from Corporate Employee

Benefits & Compensation. The Company shall furnish each Participant statements

on a periodic basis, no less frequently than annually, as soon as

administratively practicable after the allocations for the end of the Plan Year

have been completed. The Company may, in its discretion, provide Participants

with account balance statements more frequently than provided in the preceding

sentence.

 

                                   ARTICLE VI

 

                          RIGHTS OF PARTICIPANT IN PLAN

 

                  6.01      Ownership Rights in Bookkeeping Account. Subject to

the restrictions provided in this Article, each Participant shall at all times

have a vested right to the value of the Participant's Bookkeeping Account.

 

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                  6.02      Rights in Plan are Unfunded and Unsecured. The

Company's obligation under the Plan shall in every