<PAGE>
                                                               EXHIBIT 10(ii)(y)

                         J. C. PENNEY CORPORATION, INC.

                            BENEFIT RESTORATION PLAN

                        ADOPTED EFFECTIVE AUGUST 1, 1995

                       AS AMENDED THROUGH JANUARY 27, 2002

--------------------------------------------------------------------------------

                                DOCUMENT HISTORY

          This document is the Plan adopted by the Benefit Plans Review
          Committee on July 11, 1995 with an effective date of August 1,
          1995, as amended on the following dates:

            April 10, 1996                Board of Directors
            April 10, 1996                Benefit Plan Review Committee
           *June 28, 1996                 Personnel Committee

            July 9, 1997                  Benefit Plan Review Committee
            December 30, 1997             Director of Personnel

            December 11, 1998             Human Resources Committee

            January 13, 1999              Board of Directors
            May 21, 1999                  Benefit Plans Review Committee
            July 14, 1999                 Board of Directors

            March 23, 2001                Human Resources and
                                          Compensation Committee

          **January 27, 2002              Chief Human Resources and
                                          Administration Officer
           *resolutions only
          **Pursuant to authority
            granted by the Board
            of Directors on
            December 5, 2001

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<PAGE>

                         J. C. PENNEY CORPORATION, INC.
                            BENEFIT RESTORATION PLAN

                        Adopted Effective August 1, 1995
                       As Amended Through January 27, 2002

                                TABLE OF CONTENTS

Article                                                                   Page
-------                                                                   ----

ARTICLE I.  INTRODUCTION.....................................................1

ARTICLE II.  DEFINITIONS.....................................................2

ARTICLE III.   PARTICIPATION.................................................5
        (1)  Pension Plan Benefit............................................5

ARTICLE IV.  BENEFITS........................................................6
        (1)      Pension Plan Participant Benefit............................6
        (2)      Death Benefit...............................................6
        (3)      Vesting.....................................................6
        (4)      Effect of Certain Payments Made in December 1992............6

ARTICLE V.  FORM AND COMMENCEMENT OF BENEFIT PAYMENTS........................8
        (1)      Optional Forms and Commencement of Benefit Payments.........8
        (2)      Small Annuities.............................................8

ARTICLE VI.  ADMINISTRATION..................................................9

ARTICLE VII.  TYPE OF PLAN..................................................10

ARTICLE VIII.  MISCELLANEOUS................................................11
        (1)  Amendment and Termination......................................11
        (2)  Rights of Associates...........................................11
        (3)  Mistaken Information...........................................11
        (4)  Liability......................................................12
        (5)  Reemployed Participants........................................12
        (6)  Construction...................................................12
        (7)  Non-assignability of Benefits..................................12
        (8)  Governing Law..................................................12
        (9)  Change of Control..............................................12

ARTICLE IX.  CLAIMS PROCEDURES..............................................16

APPENDIX I.  Participating Employers........................................18

<PAGE>

                         J. C. PENNEY CORPORATION, INC.
                            BENEFIT RESTORATION PLAN

                        Adopted Effective August 1, 1995
                       As Amended Through January 27, 2002

                             ARTICLE I. INTRODUCTION

     The J. C. Penney Corporation, Inc. Benefit Restoration Plan is a plan
maintained by the Company primarily for the purpose of providing benefits for
eligible Associates in excess of the limit on benefits and contributions imposed
by Internal Revenue Code Section 415 and the compensation limit under section
401(a)(17) of the Internal Revenue Code.

     This document amends and completely restates the portion of the
Supplemental Retirement Program for Management Profit-Sharing Associates of J.
C. Penney Corporation, Inc. that provided benefits that would have been payable
under the J. C. Penney Corporation, Inc. Pension Plan and the J. C. Penney
Corporation, Inc. Savings, Profit-Sharing and Stock Ownership Plan but for the
limits on benefits, contributions, and compensation imposed on retirement plans
qualified under the Internal Revenue Code. With respect to Associates who
terminated employment prior to August 1, 1995, benefits payable to such
Associates are determined pursuant to the terms and conditions of the
Supplemental Retirement Program for Management Profit-Sharing Associates of J.
C. Penney Corporation, Inc. in effect as of July 31, 1995.

     Effective January 1, 1999, amounts credited to the Annual Benefit Limit
Make-Up Account as of December 31, 1998 of each Participant were transferred
into the J. C. Penney Corporation, Inc. Mirror Savings Plan II and therefore
were no longer payable under the J. C. Penney Corporation, Inc. Benefit
Restoration Plan after December 31, 1998.

     Effective January 1, 1999, the Thrift Drug, Inc. Benefit Restoration Plan
was merged into the J. C. Penney Corporation, Inc. Benefit Restoration Plan.

                                       1

<PAGE>

                             ARTICLE II. DEFINITIONS

     For the purpose of this Plan the following terms shall have the following
meanings:

     Associate: Any person who is employed by a Controlled Group Member if the
     ---------
relationship between a Controlled Group Member and such person would constitute
the legal relationship of employer and employee, including an officer who may or
may not be a director, but excluding a director serving only in that capacity,
and excluding any employee of a Controlled Group Member substantially all the
operations of which are outside the United States unless United States Social
Security contributions are made on behalf of such employee.

     Human Resources and Compensation Committee: The Human Resources and
     ------------------------------------------
Compensation Committee of the Board of Directors of the Company.

     Benefits Administration Committee: The committee appointed by the Human
     ---------------------------------
Resources Committee and authorized by Article VI to administer the Plan.

                                      2

<PAGE>

     Board of Directors: Board of Directors of the Company.
     ------------------

     Code: The Internal Revenue Code of 1986, as amended from time to time.
     ----
References to "regulations" are to regulations published by the Secretary of the
Treasury under applicable provisions of the Code, unless otherwise expressly
indicated.

     Company: J. C. Penney Corporation, Inc., a Delaware corporation. The term
     -------
"Company" will also include any successor employer, if the successor employer
expressly agrees in writing as of the effective date of succession to continue
the Plan.

     Controlled Group: The Company and all other corporations, trades, and
     ----------------
businesses, the employees of which, together with employees of the Company, are
required by the first sentence of subsection (b), by subsection (c), by
subsection (m), or by subsection (o) of Code section 414 to be treated as if
they were employed by a single employer.

     Controlled Group Member: Each corporation or unincorporated trade or
     -----------------------
business that is or was a member of a Controlled Group, but only during such
period as it is or was such a member.

     Effective Date: August 1, 1995.
     --------------

     ERISA: Employee Retirement Income Security Act of 1974, as amended from
     -----
time to time.

     Human Resources Committee: The Human Resources Committee of the Management
     -------------------------
Committee of the Company.

     Parent Company: J. C. Penney Company, Inc., a Delaware corporation, and any
     --------------
successor corporation.

     Participant: An eligible Associate of a Participating Employer who has
     -----------
satisfied the conditions for participating in the Plan as set forth in Article
III and who has not received a complete distribution of benefits.

     Participating Employer: The Company and any other Controlled Group Member
     ----------------------
or organizational unit of the Company or of a Controlled Group Member which is
designated as a Participating Employer under the Plan by the Human Resources
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.

     Pension Benefit: The monthly benefit that is payable to a Participant
     ---------------
pursuant to the provisions of the Pension Plan in the form of a single-life,
no-death-benefit annuity, assuming the Participant's benefit commencement date
under the Pension Plan is the first day of the month immediately following the
date of the Participant's Separation from Service.

     Pension Plan: J. C. Penney Corporation, Inc. Pension Plan, as amended from
     ------------
time to time.

     Pension Plan Participant: An Associate or former Associate who is treated
     ------------------------
as a participant under the Pension Plan.

     Plan: J. C. Penney Corporation, Inc. Benefit Restoration Plan, as amended
     ----
from time to time.

     Plan Year: The twelve-month period beginning on January 1 and ending on
     ---------
December 31 of each calendar year.

     Prior Plan: The Supplemental Retirement Program for Management
     ----------
Profit-Sharing Associates of J. C. Penney Corporation, Inc. as in effect on July
31, 1995.

     Separation from Service or Separates from Service: Termination of service
     -------------------------------------------------
by reason of disability, discharge, retirement (including resignation), or
death. Termination of service due to a disability is deemed to occur upon the
later of termination of sick pay or the end of any leave of absence granted the
Participant.

     Spouse: The individual to whom an Associate is legally married under the
     ------
laws of the State (within the meaning of section 3(10) of ERISA) in which the
Associate is domiciled, or if domiciled outside the United States, under the
laws of the State of Texas.

     Supplemental Retirement Program: The Supplemental Retirement Program for
     -------------------------------
Management Profit-Sharing Associates of J. C. Penney Corporation, Inc., as
amended and restated August 1, 1995, and as further amended from time to time.

     Unrestricted Benefit: The monthly benefit that would be payable to a
     --------------------
Participant pursuant to the provisions of the Pension Plan in the form of a
single-life, no-death-benefit annuity, assuming the Participant's benefit
commencement date under the Pension Plan is the first day of the month
immediately following the date of the Participant's Separation from Service, if
the Participant's benefit under the Pension Plan were determined without
applying the provisions of the Pension Plan relating to the limitation on
compensation under Section 401(a)(17) of the Code or the limitation on benefits
under Section 415 of the Code.

                                        4

<PAGE>

                           ARTICLE III. PARTICIPATION

     (1) Pension Plan Benefit: For purposes of Paragraph (1) of Article IV, any
         --------------------

Associate of a Participating Employer who is a Pension Plan Participant on or
after the Effective Date and whose retirement pension benefit payable pursuant
to the terms of the Pension Plan is limited by operation of the annual benefit
limits under Section 415 of the Code or the compensation limits under Section
401(a)(17) of the Code shall be a Participant in the Plan. In addition, an
active or former Associate for whom a benefit was accrued under Paragraph (2) of
Article III of the Prior Plan and whose benefit under Paragraph (2) of Article
III under the Prior Plan had not been completely distributed to such Associate
at July 31, 1995, will also be a Participant in the Plan.

                                        5

<PAGE>

                              ARTICLE IV. BENEFITS

     (1) Pension Plan Participant Benefit: A Participant shall be entitled to a
         --------------------------------
monthly benefit equal in amount to his Unrestricted Benefit less his Pension
Benefit.

     Additionally, a benefit shall be accrued for each Participant for whom a
benefit was accrued under Paragraph (2) of Article III of the Prior Plan at July
31, 1995, and whose accrued benefit had not been completely distributed from the
Prior Plan. The value of the Participant's Prior Plan benefit under Paragraph
(2) of Article III determined as of July 31, 1995, will become an accrued
benefit under this Plan and will be distributed to the Participant pursuant to
the terms of this Plan. The distribution to a Participant from this Plan of such
Prior Plan accrued benefit will completely discharge the Company and each other
Participating Employer from any further liability for such benefit.

     (2) Death Benefit: For purposes of the benefit provided by Paragraph (1) of
         -------------
this Article IV, if a Participant is married at the time such Participant
Separates from Service by reason of death, or if a Participant who has Separated
from Service and who is married at the time of his death, dies before payment
has begun under the Plan, the Participant's Spouse will receive the benefit, at
the time the Participant would have attained age 55, that would have been
payable if the Participant had a Separation from Service immediately prior to
such Participant's death (if he was an active Participant on the date of death),
had survived to age 55, and had begun to receive benefits immediately prior to
his death in the form of a 50% joint and survivor annuity without payment
certain with the Spouse as the beneficiary.

     Notwithstanding the preceding sentence, if the Participant at the time of
his death (a) was 55 years of age or more, (b) had 15 years or more of service,
as defined by the Pension Plan, and (c) Separates from Service by reason of
death, the joint and survivor annuity payable to the Spouse will be in the form
of a 100% (75% if death occurs prior to January 1, 1996) joint and survivor
annuity without payment certain.

     (3) Vesting: For purposes of the benefit provided by Paragraph (1) of this
         -------
Article IV, a Participant will have the same degree of vested and nonforfeitable
interest in his benefit under this Plan as the Participant has in his Pension
Benefit under the Pension Plan.

     (4) Effect of Certain Payments Made in December 1992: In the event the
         ------------------------------------------------
Company made payments to a current or former Participant on or before December
31, 1992 under the Company's Profit Incentive Compensation program and under the
Performance Unit Plan and such payments were attributable to the Company's
fiscal year ending on January 30, 1993, this Paragraph shall apply. The effect
of such payments on the benefits payable to such individual under the Savings,
Profit-Sharing and Stock

                                       6

<PAGE>

Ownership Plan and under the Pension Plan shall be determined with respect to
whether an increase or decrease in benefits resulted. Benefits payable under
this Plan to such current or former Participants shall be adjusted (a) to offset
any such increase in benefits and/or (b) to restore any such decrease in
benefits so that no advantage or detriment, as the case may be, shall be
experienced by any such current or former Participant with respect to total
retirement benefits under the Pension Plan and Savings, Profit-Sharing and Stock
Ownership Plan and this Plan.

                                        7

<PAGE>

              ARTICLE V. FORM AND COMMENCEMENT OF BENEFIT PAYMENTS

     (1) Optional Forms and Commencement of Benefit Payments: Except as
         ---------------------------------------------------
otherwise provided in this Plan and subject to such rules and regulations as the
Benefits Administration Committee may establish from time to time with respect
to time and manner of payment, benefits provided by this Plan shall be payable
as follows. For purposes of the benefit provided by Paragraph (1) of Article IV,
the Participant shall receive the annual benefit payable under Paragraph (1) of
Article IV in such a form and at such time and actuarially adjusted in such a
manner as the benefit payable under the Pension Plan. Payment of such benefit
may be deferred to a date no later than the Participant's attainment of age 65
only if the Participant has elected to defer receipt of benefits under the
Pension Plan.

     (2) Small Annuities: If the total benefit payable with respect to a
         ---------------
Participant under Paragraph (1) of Article IV plus the benefits payable from the
Pension Plan would not provide monthly payments exceeding $100, the benefit
shall be converted into an actuarially equivalent lump sum payment (applying the
actuarial factors utilized in the Pension Plan).

                                        8

<PAGE>

                           ARTICLE VI. ADMINISTRATION

     The Benefits Administration Committee will administer the Plan and will
have the full authority and discretion to accomplish that purpose, including
without limitation, the authority and discretion to

(i)  interpret the Plan and correct any defect, supply any omission or reconcile
     any inconsistency or ambiguity in the Plan in the manner and to the extent
     that the Benefits Administration Committee deems desirable to carry on the
     purpose of the Plan,

(ii) resolve all questions relating to the eligibility of Associates to become
     or continue as Participants,

(iii) determine the amount of benefits payable to Participants and authorize and
     direct the Company with respect to the payment of benefits under the Plan,

(iv) make all other determinations and resolve all questions of fact necessary
     or advisable for the administration of the Plan, and

(v)  make, amend, and rescind such rules as it deems necessary for the proper
     administration of the Plan.

     The Benefits Administration Committee will keep a written record of its
actions and proceedings regarding the Plan and all dates, records, and documents
relating to its administration of the Plan.

     Any action taken or determination made by the Benefits Administration
Committee will be conclusive on all parties. No member of the Benefits
Administration Committee will vote on any matter relating specifically to such
member. In the event that a majority of the members of the Benefits
Administration Committee will be specifically affected by any action proposed to
be taken (as opposed to being affected in the same manner as each other
Participant in the Plan), such action will be taken by the Human Resources
Committee.

                                       9

<PAGE>

                           ARTICLE VII. TYPE OF PLAN

     The Plan is a plan which is unfunded. Benefits under the Plan are paid from
the general assets of the Company.

     The portion of this Plan in Paragraph (1) of Article IV which comprises the
benefit determined due to the limit on annual benefits under the Pension Plan
imposed by Code Section 415 constitutes a separable part of this Plan which is
maintained by the Company solely for the purpose of providing benefits for
certain Associates in excess of the limitations on benefits imposed by Section
415 of the Code. This separable portion of the Plan shall be construed according
to the provisions of ERISA applicable to such Plans.

     The remaining portion of the Plan is maintained by the Company primarily
for the purpose of providing deferred compensation for a select group of
management or highly compensated employees. The Plan shall be construed
according to the provisions of ERISA applicable to such plans.

     In the event that it should subsequently be determined by statute or by
regulation or ruling that the Plan is not "a plan which is unfunded and is
maintained primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees" within the meaning
of sections 201(2), 301(a)(3), 401(a)(1), and 4021(b)(6) of ERISA, participation
in the Plan shall be restricted by the Benefits Administration Committee to the
extent necessary to assure that it will be such a plan within the meaning of
such sections.

                                       10

<PAGE>

                          ARTICLE VIII. MISCELLANEOUS

     (1) Amendment and Termination: The Human Resources and Compensation
         -------------------------
Committee may amend or modify the Plan at any time, without prior notice;
provided, however, that any such amendment or modification which would
substantially increase the cost of the Plan to the Company shall require
approval of the Board of Directors of the Company. The Board of Directors of the
Company may suspend, discontinue, or terminate the Plan at any time without
prior notice or approval.

     In no event will any amendment, modification, suspension, discontinuance,
or termination adversely affect the Plan benefit payable pursuant to Paragraph
(1) of Article IV for any Participant for whom benefit payments have already
begun in accordance with the Plan as in effect prior to the effective date of
the amendment, modification, suspension, discontinuance, or termination unless
otherwise required to comply with applicable law.

     Each amendment to the Plan by the Human Resources and Compensation
Committee or the Board of Directors will be made only pursuant to unanimous
written consent or by majority vote at a meeting. Upon such action by the Human
Resources and Compensation Committee or the Board of Directors, the Plan will be
deemed amended as of the date specified as the effective date by such action or
in the instrument of amendment. The effective date of any amendment may be
before, on, or after the date of such action of the Human Resources and
Compensation Committee or the Board of Directors.

     (2) Rights of Associates: Neither the establishment of the Plan nor any
         --------------------
action thereafter taken by the Company or any Controlled Group Member or by the
Benefits Administration Committee shall be construed as giving to any Associate
any vested right to a benefit from the Plan or a right to be retained in
employment or any specific position or level of employment with the Company or
any Controlled Group Member. Moreover, no Associate shall have any right or
claim to any benefits under this Plan if the Associate is summarily discharged,
as defined by the Company (including resignation in lieu thereof) unless the
Benefits Administration Committee, in its discretion, determines that such
Associate shall be eligible for such benefits notwithstanding such summary
discharge.

     (3) Mistaken Information: If any information upon which a Participant's
         --------------------
benefit under the Plan is calculated has been misstated by the Participant or is
otherwise mistaken, such benefit shall not be invalidated (unless upon the basis
of the correct information the Participant would not have been entitled to a
benefit), but the amount of the benefit shall be adjusted to the proper amount
determined on the basis of the correct information and any overpayments shall be
charged against future payments to the Participant or his beneficiary.

                                       11

<PAGE>

     (4) Liability: Neither the Board of Directors (including any committees
         ---------
thereof) of the Company or of any Participating Employer nor any member of the
Benefits Administration Committee or the Human Resources Committee nor any
person to whom any of them may delegate any duty or power in connection with
administering the Plan shall be personally liable for any action or failure to
act with respect to the Plan.

     (5) Reemployed Participants: If a retired Participant again becomes an
         -----------------------
Associate of a Participating Employer, the payment of benefits hereunder shall
continue. Upon such Associate's Separation from Service he shall be entitled to
receive applicable benefits, if any, under Article IV pursuant to uniform rules
approved by the Benefits Administration Committee.

     (6) Construction: In determining the meaning of any provision of the Plan,
         ------------
words imparting the masculine gender shall include the feminine and the singular
shall include the plural, unless the context requires otherwise. Headings of
paragraphs and Articles in the Plan are for convenience only and are not
intended to modify or affect the meaning of the substantive provisions of the
Plan.

     (7) Non-assignability of Benefits: The benefits payable hereunder or the
         -----------------------------
right to receive future benefits under the Plan may not be anticipated,
alienated, pledged, encumbered, or subjected to any charge or legal process, and
if any attempt is made to do so, or a person eligible for any benefits becomes
bankrupt, the interest under the Plan of the person affected may be terminated
by the Benefits Administration Committee which, in its sole discretion, may
cause the same to be held or applied for the benefit of one or more of the
dependents of such person or make any other disposition of such benefits that it
deems appropriate.

     (8) Governing Law: Except to the extent that the Plan may be subject to the
         -------------
provisions of ERISA, the Plan will be construed and enforced according to the
laws of the State of Texas, without giving effect to the conflict of laws
principles thereof. Except as otherwise required by ERISA, every right of action
by a Participant, former Participant, or Beneficiary with respect to the Plan
shall be barred after the expiration of three years from the date of Separation
from Service of the Participant or the date of receipt of the notice of denial
of a claim for benefits, if earlier. In the event ERISA's limitations on legal
actions do not apply, the laws of the State of Texas with respect to limitations
of legal actions shall apply and the cause of action must be brought no later
than four years after the date the action accrues.

     (9) Change of Control: Upon a Change of Control (as hereinafter defined),
         -----------------
assets of the Parent Company in an amount sufficient to pay benefits that have
accrued under the Plan up to that date shall immediately be transferred

                                       12

<PAGE>

to a grantor trust to be established by the Parent Company for the purpose of
paying benefits hereunder, and the Participant's vested benefits shall
thereafter be paid to the Participant from such trust in accordance with the
terms of the Plan; provided that at the time of such Change of Control, the
Participant may make an irrevocable election to have his Plan benefits paid in a
single-sum immediately upon the later of (i) the date of the Change of Control,
or (ii) the Participant's retirement date, in which event his benefits shall be
reduced by 10% as a penalty for early payment. On each anniversary date of the
date of a Change of Control, the Parent Company shall transfer to the grantor
trust an amount necessary to pay all benefits accrued under the Plan during the
preceding twelve months.

     For purposes of this paragraph (9), a Change of Control shall be deemed to
have occurred if the event set forth in any one of the following subparagraphs
shall have occurred:

          (a) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Parent Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Parent Company or its Affiliates) representing 50% or more of the combined
voting power of the Parent Company's then outstanding securities; or

          (b) during any period of two consecutive calendar years, the following
individuals cease for any reason to constitute a majority of the number of
directors then serving as directors of the Parent Company: individuals, who on
July 14, 1999 constitute the Board of Directors of the Company and any new
director (other than a director whose initial assumption of office is in
connection with the settlement of an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the election of
directors of the Parent Company) whose appointment or election by the Board of
Directors of the Parent Company or nomination for election by the Parent
Company's stockholders was approved or recommended by a vote of at least
two-thirds of the directors then still in office who either were directors on
July 14, 1999 or whose appointment, election or nomination for election was
previously so approved or recommended; or

          (c) there is consummated a merger or consolidation of the Parent
Company or any direct or indirect subsidiary of the Parent Company with any
other corporation or entity, other than (i) a merger or consolidation which
would result in the voting securities of the Parent Company outstanding
immediately prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity or any Parent thereof), in combination with the ownership
of any trustee or other fiduciary holding securities under an employee benefit
plan of the Parent Company or any subsidiary of the Parent Company, at least 50%
of the combined voting power of the securities of the Parent

                                      13

<PAGE>

Company, such surviving entity or any Parent thereof outstanding immediately
after such merger or consolidation, or (ii) a merger or consolidation effected
solely to implement a recapitalization of the Parent Company (or similar
transaction) in which no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Parent Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Parent Company or its Affiliates) representing 50% or more of the combined
voting power of the Parent Company's then outstanding securities; or

          (d) the stockholders of the Parent Company approve a plan of complete
liquidation or dissolution of the Parent Company, or there is consummated a sale
or disposition by the Parent Company or any of its subsidiaries of any assets
which individually or as part of a series of related transactions constitute all
or substantially all of the Parent Company's consolidated assets, other than any
such sale or disposition to an entity at least 50% of the combined voting power
of the voting securities of which are owned by stockholders of the Parent
Company in substantially the same proportions as their ownership of the voting
securities of the Parent Company immediately prior to such sale or disposition;
or

          (e) the execution of a binding agreement that if consummated would
result in a Change of Control of a type specified in subparagraphs (a) or (c)
above (an "Acquisition Agreement") or of a binding agreement for the sale or
disposition of assets that, if consummated, would result in a Change of Control
of a type specified in subparagraph (d) above (an "Asset Sale Agreement") or the
adoption by the Board of Directors of the Parent Company of a plan of complete
liquidation or dissolution of the Parent Company that, if consummated, would
result in a Change of Control of a type specified in subparagraph (d) above (a
"Plan of Liquidation"), provided, however, that a Change of Control of the type
specified in this subparagraph (e) shall not be deemed to exist or have occurred
as a result of the execution of such Acquisition Agreement or Asset Sale
Agreement, or the adoption of such a Plan of Liquidation, from and after the
Abandonment Date. As used in this subparagraph (e), the term "Abandonment Date"
shall mean the date on which (i) an Acquisition Agreement, Asset Sale Agreement
or Plan of Liquidation is terminated (pursuant to its terms or otherwise)
without having been consummated, (ii) the parties to an Acquisition Agreement or
Asset Sale Agreement abandon the transactions contemplated thereby, (iii) the
Parent Company abandons a Plan of Liquidation, or (iv) a court or regulatory
body having competent jurisdiction enjoins or issues a cease and desist or stop
order with respect to or otherwise prevents the consummation of, or a regulatory
body notifies the Parent Company that it will not approve an Acquisition
Agreement, Asset Sale Agreement or Plan of Liquidation or the transactions
contemplated thereby and such injunction, order or notice has become final and
not subject to appeal; or

                                       14

<PAGE>

          (f) the Board of Directors of the Parent Company adopts a resolution
to the effect that, for purposes of this Plan, a Change of Control has occurred.

     Notwithstanding the foregoing, a Change of Control shall not be deemed to
have occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Parent Company immediately prior to such transaction or
series of transactions continue to have substantially the same proportionate
ownership in an entity (i) which owns all or substantially all of the assets of
the Parent Company immediately following such transaction or series of
transactions, (ii) which is intended to reflect or track the value or
performance of a particular division, business segment or subsidiary of the
Parent Company, or (iii) which is an affiliated company, subsidiary, or spin-off
entity owned by the stockholders of the Parent Company in substantially the same
proportions as their ownership of stock of the Parent Company on the date of
such spin-off.

     As used in connection with the foregoing definition of Change of Control,
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under
Section 12 of the Exchange Act; "Beneficial Owner" shall have the meaning set
forth in Rule 13d-3 under the Exchange Act; "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended from time to time; "Parent" shall
mean any entity that becomes the Beneficial Owner of at least 50% of the voting
power of the outstanding voting securities of the Parent Company or of an entity
that survives any merger or consolidation of the Parent Company or any direct or
indirect subsidiary of the Parent Company; and "Person" shall have the meaning
given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (i) the Parent
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Parent Company or any of its
Affiliates, (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation or entity owned, directly or
indirectly, by the stockholders of the Parent Company in substantially the same
proportions as their ownership of stock of the Parent Company.

                                       15

<PAGE>

                          ARTICLE IX. CLAIMS PROCEDURES

     If an Associate does not receive the benefits which he believes he is
entitled to receive under the Plan, he may file a claim for benefits with the
Benefits Administration Committee or its delegate. All claims will be made in
writing and will be signed by the claimant. If the claimant does not furnish
sufficient information to determine the validity of the claim, the Benefits
Administration Committee or its delegate will indicate to the claimant any
additional information which is required.

     Each claim will be approved or disapproved by the Benefits Administration
Committee or its delegate within 90 days following the receipt of the
information necessary to process the claim. In the event the Benefits
Administration Committee or its delegate denies a claim for benefits in whole or
in part, the Benefits Administration Committee or its delegate will notify the
claimant in writing of the denial of the claim. Such notice by the Benefits
Administration Committee or its delegate will also set forth, in a manner
calculated to be understood by the claimant, the specific reasons for such
denial, the specific Plan provisions on which the denial is based, a description
of any additional material or information necessary to perfect the claim with an
explanation of the Plan's claim review procedure as set forth below. If no
action is taken by the Benefits Administration Committee or its delegate on a
claim within 90 days, the claim will be deemed to be denied for purposes of the
review procedure.

     A claimant may appeal a denial of his claim by requesting a review of the
decision by the Benefits Administration Committee or a person designated by the
Committee, which person will be a named fiduciary under Section 402(a)(2) of
ERISA for purposes of this Article IX. An appeal must be submitted in writing
within 60 days after the denial and must (i) request a review of the claim for
benefits under the Plan, (ii) set forth all of the grounds upon which claimant's
request for review is based and any facts in support thereof, and (iii) set
forth any issues or comments which the claimant deems pertinent to the appeal.
The Benefits Administration Committee or the named fiduciary designated by the
Benefits Administration Committee will make a full and fair review of each
appeal and any written materials submitted in connection with the appeal. The
Benefits Administration Committee or the named fiduciary designated by the
Benefits Administration Committee will act upon each appeal within 60 days after
receipt thereof unless special circumstances require an extension of the time
for processing, in which case a decision will be rendered as soon as possible
but not later than 120 days after the appeal is received. The claimant will be
given the opportunity to review pertinent documents or materials upon submission
of a written request to the Benefits Administration Committee or named
fiduciary, provided the Benefits Administration Committee or named fiduciary
finds the requested documents or materials are pertinent to the appeal.

                                       16

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     On the basis of its review, the Benefits Administration Committee or named
fiduciary will make an independent determination of the claimant's eligibility
for benefits under the Plan. The decision of the Benefits Administration
Committee or named fiduciary on any claim for benefits will be final and
conclusive upon all parties thereto. In the event the Benefits Administration
Committee or named fiduciary denies an appeal in whole or in part, it will give
written notice of the decision to the claimant, which notice will set forth in a
manner calculated to be understood by the claimant the specific reasons for such
denial and which will make specific reference to the pertinent Plan provisions
on which the decision was based.

                                       17

<PAGE>

                                   APPENDIX I

                             Participating Employers
                             -----------------------

                         J. C. Penney Corporation, Inc.

                        JCPenney Business Services, Inc.
                            (until January 24, 1996)

                     J. C. Penney Casualty Insurance Company
                              (until June 18, 2001)

                        J. C. Penney Funding Corporation

                       J. C. Penney Life Insurance Company
                              (until June 18, 2001)

                           J. C. Penney National Bank
                            (until December 17, 1997)

                      J. C. Penney Overseas Services, Inc.
                          (from and after July 1, 1996)

                        J. C. Penney Private Brands, Inc.
                        (from and after January 1, 2000)

                         J. C. Penney Receivables, Inc.

                    JCPenney Card Bank, National Association
                     (from and after December 17, 1997, and
                            until September 30, 2000)

                           JCPenney Puerto Rico, Inc.

                               JCP ECommerce L.P.
                       (from and after December 24, 2000)

                      JCP Internet Commerce Solutions, Inc.
                        (from and after February 1, 1999)

                               JCP Logistics L.P.
                        (from and after February 1, 1999)

                                 JCP Media L.P.
                        (from and after February 1, 1999)

                              JCP Procurement L.P.
                        (from and after February 1, 1999)

                             JCP Publications Corp.
                        (formerly JCP Media Corporation)
                         (from and after April 3, 1996)

                                       18

<PAGE>

                               Eckerd Corporation
                        (from and after January 1, 1999)

                              EDC Drug Stores, Inc.
                        (formerly Kerr Drug Stores, Inc.)
                        (from and after January 1, 1999)

                               Fay's Incorporated
                        (from and after January 1, 1999)

                           Genovese Drug Stores, Inc.
                        (from and after January 1, 2000)

                           Insurance Consultants, Inc.
                         (from and after April 1, 1999,
                            and until June 18, 2001)

                         Quest Membership Services, Inc.
                        (from and after January 1, 1999,
                            and until June 18, 2001)

                                StepInside, Inc.
                        (from and after January 1, 2000)

                         TDI Managed Care Services, Inc.
                        (from and after January 1, 1999)

                                Thrift Drug, Inc.
                        (from and after January 1, 1999)

                           Thrift Drug Services, Inc.
                        (from and after January 1, 1999)

                                       19