<PAGE>
 
                                                              EXHIBIT 10(ii)(aa)

                          J. C. PENNEY COMPANY, INC.

                     SUPPLEMENTAL TERM LIFE INSURANCE PLAN

                   FOR MANAGEMENT PROFIT-SHARING ASSOCIATES

                       ADOPTED EFFECTIVE JANUARY 1, 1995
<PAGE>
 
                          J. C. PENNEY COMPANY, INC.
                     SUPPLEMENTAL TERM LIFE INSURANCE PLAN
                   FOR MANAGEMENT PROFIT-SHARING ASSOCIATES
 
                               TABLE OF CONTENTS
                               -----------------

                                                              PAGE
                                                              ----
Article 1  Introduction                                          1

Article 2  Definitions                                           2

Article 3  Participation                                         4

Article 4  Life Insurance Benefits                               5

Article 5  Funding of Benefits                                   6

Article 6  Administration of the Plan                            7

Article 7  Adoption By Participating  
           Employers                                            12

Article 8  Amendment and Termination                            13

Article 9  Conversion Rights                                    15

Article 10 Miscellaneous Provisions                             16

                                      (i)
<PAGE>
 
                                   ARTICLE 1

                                 INTRODUCTION
                                 ------------


     J. C. Penney Company, Inc., a Delaware corporation, hereby adopts the J. C.
Penney Company, Inc. Supplemental Term Life Insurance Plan For Management 
Profit-Sharing Associates (the "Plan"), effective January 1, 1995. The Plan is 
an "employee welfare benefit plan" pursuant to ERISA which permits eligible
retired management Associates of J. C. Penney Company, Inc. and JCPenney
Financial Services to purchase group term life insurance benefits directly from
the Insurer (as hereinafter defined). This document, together with the Policies
(as hereinafter defined) will be construed as a single group term life insurance
plan. Capitalized terms used throughout the Plan have the meanings set forth in
Article 2.
<PAGE>
 
                                   ARTICLE 2

                                  DEFINITIONS
                                  -----------

     2.1  "Administrator" means the Benefits Administration Committee of the
           -------------
Company or such other person or committee as may be appointed from time to time
by the Personnel Committee of the Management Committee of the Company (the
"Personnel Committee").

     2.2  "Annual Earnings for Benefits" means the greater of (i) the
           ----------------------------
Participant's "Annual Earnings for Benefits" for purposes of the Company-Paid
Plan on the Participant's retirement date or (ii) for a retired Participant who
is reemployed by a Participating Employer and who becomes eligible for the
Company-Paid Plan and later loses eligibility under the Company-Paid Plan, such
retired Participant's Annual Earnings for Benefits at such time as the
Participant lost eligibility under the Company-Paid Plan.

     2.3  "Associate" means each individual employed by a Participating
           ---------
Employer, other than an individual who is classified as an independent
contractor by the Participating Employer for purposes of federal income tax
reporting and withholding. The term "Associate" does not include any individual
who performs services for a Participating Employer as a "leased employee" within
the meaning of Code section 414(n), or who otherwise performs services through
an agreement with a leasing organization.

     2.4  "Associate-Paid Plan" means the J. C. Penney Company, Inc. Voluntary
           -------------------
Employees' Beneficiary Association Group Term Life Insurance Plan, as amended
from time to time, and/or the J. C. Penney Company, Inc. Associate-Paid Insured
Group Term Life Insurance Plan, as amended from time to time.

     2.5  "Code" means the Internal Revenue Code of 1986, as amended.
           ----

     2.6  "Company" means J. C. Penney Company, Inc., a Delaware corporation, or
           -------
any successor corporation.

     2.7  "Company-Paid Plan" means the J. C. Penney Company, Inc. Group Term
           -----------------
Life Insurance Plan, as amended from time to time.

     2.8  "Date of Disability", "Disabled", and "Disability" have the meanings
           ------------------    --------        ----------
set forth in the Company-Paid Plan.

                                      -2-
<PAGE>
 
     2.9  "ERISA" means the Employee Retirement Income Security Act of 1974, as
           -----                                                               
amended.

     2.10 "Insurer" means the insurance company or companies issuing the Policy
           -------
or Policies.

     2.11 "MSRP Retiree" means a former Associate who retired from a
           ------------
Participating Employer on or after age 60 and who is eligible to receive 
Company-paid life insurance coverage under the terms of the Supplemental 
Retirement Program for Management Profit-Sharing Associates of J. C. Penney 
Company, Inc., as amended from time to time or the Supplemental Retirement 
Program for Eligible Management Associates of JCPenney Financial Services, as 
amended from time to time. The term "MSRP Retiree" also includes any additional 
former Associate so designated from time to time in the discretion of the Board 
of Directors of the Participating Employer or the Benefits Administration 
Committee or the Benefit Plans Review Committee of the Company in accordance 
with the provisions of each such Supplemental Retirement Program.

     2.12 "Participant" means an MSRP Retiree who has satisfied the eligibility
           -----------
reguirements of Article 3, has purchased life insurance coverage under the terms
of the Plan, and whose coverage under the Plan has not terminated.

     2.13 "Participating Employer" means the Company and any subsidiary or
           ----------------------
affiliate of the Company which is designated as a Participating Employer under
the Plan by the Personnel Committee, excluding, however, any division of the
Company or of a subsidiary or affiliate that is designated by the Personnel
Committee as ineligible to participate in the Plan. Appendix I contains a list
of the Participating Employers currently participating in the Plan.

     2.14 "Plan" means the J. C. Penney Company, Inc. Supplemental Term Life
           ----
Insurance Plan For Management Profit Sharing Associates, as amended from time to
time.

     2.15 "Policy" or "Policies" means the life insurance policies through which
           ------      --------
Plan benefits are provided, which are incorporated by reference into the Plan.

                                      -3-
<PAGE>
 
                                   ARTICLE 3

                                 PARTICIPATION
                                 -------------

     3.1  Eligibility For Coverage. An Associate who qualifies as an MSRP
          ------------------------
Retiree will be eligible to purchase coverage under the Plan, effective upon
retirement, provided the MSRP Retiree was a participant in the Associate-Paid
Plan immediately prior to retirement, but only if the MSRP Retiree properly
completes and submits all required enrollment forms within 31 days after
retirement. If the MSRP Retiree has assigned his term life insurance provided by
the Associate-Paid Plan, the assignee may elect the coverage provided by this
Section 3.1. No late enrollment procedures are available for MSRP Retirees.
Notwithstanding the foregoing, an MSRP Retiree who was receiving coverage under
the Associate-Paid or the Company-Paid Plan on account of Disability on the MSRP
Retiree's retirement date will not become eligible to purchase coverage under
this Plan.

     3.2  Termination of Coverage. A Participant's coverage under the Plan will
          -----------------------
terminate automatically on the earliest to occur of the following: (i) the last
day of the month in which the Participant attains age 65; (ii) subject to
Article 8, the last day of the month in which the Plan is terminated, or amended
to terminate coverage with respect to any group or class of MSRP Retirees that
includes the Participant; (iii) the last day of the month in which the Policy
under which the Participant's benefits are provided is cancelled or terminated
and not replaced; iv) the last day of the month in which the Participant fails
to make any required premium payment; (v) the last day of the month in which the
Participant becomes eligible for coverage under the Company-Paid Plan as an
active Associate; or (vi) the date of the Participant's death. A Participant
whose coverage is terminated pursuant to subsection (v) above, shall again
become eligible to participate in the Plan on the first day of the month on or
after the date he or she ceases to be an active Associate eligible for coverage
under the Company-Paid Plan.

     3.3  Enrollment Procedures. The Administrator may from time to time
          ---------------------
prescribe enrollment procedures and forms that are consistent with the terms of
the Plan.

     3.4  Coverage Not Extended by Payment. The duration of a Participant's
          --------------------------------
coverage is determined solely by the terms of the Plan, and coverage which has
otherwise terminated will not be extended even if premium payments for the
terminated coverage continue to be made and/or processed on behalf of the
Participant.

                                      -4-
<PAGE>
 
                                   ARTICLE 4

                            LIFE INSURANCE BENEFITS
                            -----------------------

     4.1  Amount of Life Insurance. An MSRP Retiree may purchase life insurance
          ------------------------
coverage under the Policies in an amount equal to 100% of the MSRP Retiree's
Annual Earnings for Benefits. Coverage will be rounded to the next higher $1,000
if it is not already an even multiple of $1,000.

     4.2  Evidence of Good Health. To the extent required by the applicable
          -----------------------
Policies and/or the Insurer, Participants will be required to provide evidence
of good health as a condition to coverage.

     4.3  Payment of Benefits. Benefits payable under the Plan will be paid by
          -------------------
the Insurer to the beneficiary or beneficiaries as soon as practicable after
receipt by the Insurer of properly submitted claims. Benefits will be paid in a
single lump sum payment unless the Participant (or the beneficiary, if
applicable) elects a different method of payment offered by the Insurer.

     4.4  Designation of Beneficiary. A Participant may designate one or more
          --------------------------
beneficiaries to receive the life insurance benefits under the Plan, or may
change a prior beneficiary designation, by completing and delivering a written
beneficiary designation form in accordance with procedures specified by the
Administrator from time to time. If a Participant fails to designate a
beneficiary (or no beneficiary is alive on the date of the Participant's death),
benefits will be paid to the estate of the Participant.

     4.5  Benefit Limitation. Benefits under the Plan are subject to the terms
          ------------------
of the Policies and to applicable state law.

     4.6  Recovery of Overpayment. Any amounts paid to any person in excess of
          -----------------------
the amount to which he is entitled under the Plan will be repaid by that person
to the Insurer promptly following receipt by the person of a notice of such
excess payments. In the event such repayment is not made, such repayment may be
made, at the discretion of the Insurer, by reducing or suspending any future
payments due under the Plan to the person and by taking such other or additional
action as may be permitted by applicable law.


                                      -5-
<PAGE>
 
                                   ARTICLE 5

                              FUNDING OF BENEFITS
                              -------------------

     5.1  Associate-Paid Premiums. The Participants will pay all or a portion of
          -----------------------
the cost of premiums with respect to benefits under the Policies as determined
by the Administrator in its discretion from time to time. The Administrator will
have full and exclusive power to determine the cost of coverage to be paid by
each Participant, and to adjust the required cost from time to time. In
establishing the amount of required Participant cost, the Administrator may rely
on tables, appraisals, valuations, projections, opinions, and reports furnished
by agents employed or engaged by the Administrator or the Company, and may take
into account the projected or anticipated costs and expenses relating to the
Plan, including without limitation administrative costs and insurance premiums.
Premiums required of Participants will be treated as fixed premium payments, and
neither the Participants nor any beneficiary will be entitled to any refund or
rebate on account of actual claims experience, investment performance, or
similar factors.

     5.2  Participating Employer Obligations. The Participating Employers will
          ----------------------------------
pay the portion, if any, of the cost of premiums with respect to benefits under
the Policies as determined by the Administrator in its discretion from time to
time. The Participating Employers' obligations under the Plan are limited to the
payment of such portion of applicable premiums due under any Policies in force,
and no Participant or beneficiary will have any claim or cause of action against
any Participating Employer on account of the failure of an Insurer to pay
benefits due under the Policies.

     5.3  Source of Benefits. Benefits under the Plan will be paid solely from
          ------------------
the Policies and only to the extent provided under such Policies. Any payment
for the benefit of a Participant that is made in accordance with the terms of
the Policies will, to the extent of the payment, be in full satisfaction of all
claims under the Plan against the Participating Employers, the Administrator,
and the Insurer, any of whom may require such payee, as a condition precedent to
such payment, to execute a release acknowledging receipt of such payment.


                                      -6-
<PAGE>
 
                                   ARTICLE 6

                          ADMINISTRATION OF THE PLAN
                          --------------------------

     6.1  General Powers and Duties of the Administrator. The Administrator will
          ----------------------------------------------
have the full power, responsibility, and discretion to administer the Plan and
to construe and apply Plan provisions, and will be the named fiduciary with
respect to the operation and administration of the Plan, except with respect to
the specific responsibilities performed by the Insurer pursuant to the Policies
or delegated to the Insurer or another fiduciary pursuant to Section 6.3 or 6.4.
The Administrator, and all other persons with discretionary control respecting
the operation, administration, control, and/or management of the Plan will
perform their duties under the Plan solely in the interests of Participants and
their beneficiaries.

     6.2  Specific Powers and Duties of the Administrator. The Administrator
          -----------------------------------------------
will administer the Plan and have the full authority and discretion necessary to
accomplish that purpose, including without limitation the authority and
discretion to: (i) resolve all questions relating to the eligibility of
Associates to become or continue as Participants, (ii) engage any
administrative, legal, medical, accounting, clerical, or other services it deems
appropriate in administering the Plan, (iii) construe and interpret the Plan,
supply omissions from, correct deficiencies in and resolve inconsistencies or
ambiguities in the language of the Plan, resolve inconsistencies or ambiguities
between the provisions of this Plan and the provisions of any Policy, and adopt
rules for the administration of the Plan which are not inconsistent with the
terms of the Plan document, (iv) compile and maintain all records it determines
to be necessary, appropriate, or convenient in connection with the
administration of the Plan, and (v) resolve all questions of fact relating to
any matter for which it has administrative responsibility.

     6.3  Authority of Insurer. The Insurer will be responsible for the initial
          --------------------
review, payment, and/or denial of claims for benefits under the Policies. In
carrying out its responsibilities under the Policies, the Insurer will have the
authority and discretion to (i) determine the amount of benefits, if any,
payable to Participants and beneficiaries under the Policies and determine the
time and manner in which such benefits are to be paid, (ii) construe and
interpret the Policies, and (iii) compile and maintain all records it determines
to be necessary, appropriate, or convenient in connection with the Policies.


                                      -7-
<PAGE>
 
     6.4  Allocation of Fiduciary Responsibility.  The Administrator from time
          --------------------------------------
to time may delegate to any other persons or organizations any of its rights,
powers, duties, and responsibilities with respect to the operation and
administration of the Plan that are permitted to be delegated under ERISA.  Any
such allocation or delegation will be reviewed periodically by the
Administrator, and will be terminable upon such notice as the Administrator in
its discretion deems reasonable and proper under the circumstances.  Whenever
the Administrator delegates discretionary authority respecting the
administration of the Plan to another person or organization, the
Administrator's responsibility with respect to such delegation is limited to the
selection of the person to whom authority is delegated and the periodic review
of such person's performance and compliance with applicable law and regulations.
Any breach of fiduciary responsibility by the person to whom authority has been
delegated which is not proximately caused by the Administrator's failure to
properly select or supervise, and in which breach the Administrator does not
otherwise participate, will not be considered a breach by the Administrator.

     6.5  Information to be Submitted to the Administrator. To enable the
          ------------------------------------------------
Administrator to perform its functions, each Participating Employer will supply
full and timely information to the Administrator on all matters relating to
Associates as the Administrator may require and will maintain such other records
required by the Administrator to determine the benefits due under the Plan.

     6.6  Expenses and Compensation. The expenses of administering the Plan,
          ------------------------
including without limitation the expenses of the Administrator properly incurred
in the performance of its duties under the Plan, will be paid by the Company.
The Administrator will not be compensated by the Plan for services as
Administrator.

     6.7  Reporting and Disclosure. The Company will be the "administrator" of
          ------------------------
the Plan as defined in ERISA section 3(16) (A) for purposes of the reporting and
disclosure requirements imposed by ERISA and the Code. The Administrator will
assist the Company, as requested, in complying with such reporting and
disclosure requirements.

     6.8  Claims Procedure. Participants and beneficiaries must apply for Plan
          ----------------
benefits in writing on a form provided by the Administrator and must supply any
supplemental information required by the Administrator or the Insurer. Following
completion of the claim form, the form may be returned to the Administrator for
submission to the Insurer, or may be submitted directly to the Insurer if so
specified by the Administrator.


                                      -8-
<PAGE>
 
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 Administrator will indicate to the claimant any additional
information which is required.  Each claim will be approved or disapproved by
the Insurer within 90 days following the receipt of the information necessary to
process the claim.  In the event the Insurer denies a claim for benefits in
whole or in part, the Insurer will notify the claimant in writing of the denial
of the claim.  Such notice by the Insurer will also set forth, in a manner
calculated to be understood by the claimant, the specific reason 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 why such material or information is necessary, and an explanation
of the Plan's claim review procedure as set forth below.  If no action is taken
by the Insurer on a claim within 90 days, the claim will be deemed to be denied
for purposes of the review procedure.

     6.9  Appeals Procedure. A claimant may appeal a denial of his claim with
          -----------------
respect to "Procedural Issues" (as hereinafter defined) by requesting a review
of the decision by the Administrator or a person designated by the
Administrator, which person will be a named fiduciary under ERISA section
402(a)(2) for purposes of this Section. A claimant may appeal a denial of his
claim with respect to "Coverage Issues" (as hereinafter defined) by requesting a
review of the decision by the Insurer, which will be a named fiduciary under
ERISA section 402(a)(2) for purposes of this Section. An appeal must be
submitted in writing within one year after the notice of denial is received (or
within 60 days if the notice of denial is received after December 31, 1995) and
must (i) request a review of the claim for benefits under the Plan, (ii) set
forth all of the grounds upon which the 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 Administrator, Insurer, or
other applicable named fiduciary will make a full and fair review of each appeal
and any written materials submitted in connection with the appeal. The
Administrator, Insurer, or other applicable named fiduciary 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
Administrator, Insurer, or other named fiduciary, provided the Administrator,
Insurer, or other named fiduciary finds the requested documents or materials are
pertinent to the appeal. On the basis of its


                                      -9-
<PAGE>
 
review, the Administrator, Insurer, or other named fiduciary will make an
independent determination of the claimant's eligibility for benefits under the
Plan.  The decision of the Administrator, Insurer, or other named fiduciary on
any claim for benefits will be final and conclusive upon all parties thereto.
In the event the Administrator, Insurer, or other 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.

     For purposes of this Section, the term "Procedural Issues" means issues
concerning (i) an Associate's eligibility to become or continue as a
Participant, (ii) an Associate's employment status at the time of the claim or
when the claim arose, (iii) a determination of a Participant's Annual Earnings
for Benefits, and (iv) other procedural issues that do not require
interpretation of the Policies.

     For purposes of this Section, the term "Coverage Issues" means issues
concerning (i) whether death is covered under the Policy, (ii) the documentation
required by the Insurer, (iii) conversion rights under Article 9, (iv) the
validity of beneficiary designations, (v) determinations regarding Disability,
and (vi) other questions concerning the extent of Plan coverage under the terms
of the Policies.

     6.10 Uniform Application of Rules and Policies. The Administrator in
          -----------------------------------------
exercising its discretion granted under any of the provisions of the Plan will
do so only in accordance with rules and policies that it establishes, which
rules and policies will be uniformly applicable to all Associates, MSRP Retirees
and their beneficiaries.

     6.11 Reliance Upon Information. The Administrator is entitled to rely upon
          -------------------------
all tables, valuations, certificates, and reports furnished by any duly
appointed actuary, upon all certificates and reports made by any duly appointed
independent qualified public accountant and upon all opinions given by legal
counsel. The Administrator will be fully protected in respect of any action
taken or suffered by the Administrator in good faith reliance upon all such
tables, valuations, certificates, reports, opinions, or other advice. The
Administrator is also entitled to rely upon any data or information furnished by
a Participating Employer or by an Associate, MSRP Retiree, or beneficiary as to
the age or Annual Earnings for Benefits of any person, or as to any other
information pertinent to any calculation or determination to be made under the
provisions of the Plan, and, as a condition to payment of any benefit under the
Plan, may


                                     -10-
<PAGE>
 
request an Associate, MSRP Retiree, or beneficiary to furnish such information
as the Administrator deems necessary or desirable in administering the Plan.  If
an Associate, MSRP Retiree, or beneficiary does not provide accurate information
in connection with enrollment or coverage under the Plan, the Administrator may,
in its discretion, delay or deny the affected coverage.  If any relevant facts
regarding an Associate, MSRP Retiree, or beneficiary are inaccurate or
misstated, the Administrator may make an equitable adjustment of contributions,
and the true facts will be used by the Administrator to determine whether, and
in what amount, coverage is in effect.


                                     -11-
<PAGE>
 
                                   ARTICLE 7

                      ADOPTION BY PARTICIPATING EMPLOYERS
                      -----------------------------------

     7.1  Adoption Procedure. Any subsidiary or affiliate of the Company may
          ------------------
become a Participating Employer under the Plan provided that (i) the Personnel
Committee approves the adoption of the Plan by the subsidiary or affiliate and
designates the subsidiary or affiliate as a Participating Employer in the Plan,
and (ii) by appropriate resolutions of the board of directors or other governing
body of the subsidiary or affiliate, the subsidiary or affiliate agrees to
become a Participating Employer under the Plan and also agrees to be bound by
any other terms and conditions which may be required by the Personnel Committee
or the Administrator, provided that such terms and conditions are not
inconsistent with the purposes of the Plan. A Participating Employer may
withdraw from participation in the Plan by providing written notice to the
Administrator that withdrawal has been approved by the board of directors or
other governing body of the Participating Employer. The Personnel Committee may
at any time remove a Participating Employer from participation in the Plan by
providing written notice to the Participating Employer that removal has been
approved by the Personnel Committee. The Personnel Committee will act in
accordance with this Article pursuant to unanimous written consent or by
majority vote at a meeting.


                                     -12-
<PAGE>
 
                                   ARTICLE 8

                           AMENDMENT AND TERMINATION
                           -------------------------

     8.1  Right to Suspend Premium Payments. It is the expectation of the
          ---------------------------------
Participating Employers that they will continue to pay any employer portion of
premium payments as determined under Article 5, but they do not assume an
individual or collective contractual obligation to do so, and the right is
reserved by the Personnel Committee at any time to reduce, suspend, or
discontinue any such premium payments.

     8.2  Right to Amend. The right to amend the Plan at any time in any respect
          --------------
is reserved to the Company as provided herein, without prior notice to or
approval by Participants or beneficiaries, provided that no amendment will
adversely affect individuals who are Participants on the effective date of the
amendment unless otherwise required to comply with applicable law. The Personnel
Committee may amend the Plan at any time and from time to time to the extent it
may deem advisable or appropriate. In addition, the Administrator may amend the
Plan at any time and from time to time to the extent the Administrator deems it
advisable or appropriate, provided that such amendment would not significantly
increase the cost of the Plan to the Participating Employers.

     8.3  Amendment Procedure. Each amendment to the Plan by the Personnel
          -------------------
Committee or the Administrator will be made only pursuant to unanimous written
consent or by majority vote at a meeting, and a copy of any amendment adopted by
the Personnel Committee will be delivered to the Administrator. Upon such action
by the Personnel Committee or the Administrator, 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 Personnel Committee or the
Administrator.

     8.4  Termination of the Plan. The Participating Employers expect to
          -----------------------
continue the Plan indefinitely, but they do not assume an individual or
collective contractual obligation to do so, and the right is reserved to the
Company, acting through the Personnel Committee, to terminate the Plan or to
completely discontinue premium payments with respect to any Policy at any time,
without prior notice to or approval by Participants or beneficiaries.
Notwithstanding the foregoing, in no event will termination of the Plan
adversely affect individuals who are Participants on the effective date of the
amendment unless otherwise required to comply with applicable law. The authority


                                     -13-
<PAGE>
 
of the Personnel Committee will be exercised by unanimous written consent or by
majority vote at a meeting.


                                     -14-
<PAGE>
 
                                   ARTICLE 9

                               CONVERSION RIGHTS
                               -----------------

     9.1  Conversion to Individual Policy. A Participant whose coverage under
          -------------------------------
the Plan terminates under Section 3.2 will have the right to convert his or her
group term life insurance coverage to an individual policy to the extent, and
only to the extent, permitted under the group Policy applicable to the
Participant. Any election to convert to individual coverage must be made within
31 days after the Participant's coverage under the Plan terminates, and must be
made in accordance with all requirements specified in such Policy.

     9.2  Death During Conversion Period. If a Participant dies within 31 days
          ------------------------------
after coverage has terminated under the Plan and while the Participant is
entitled to convert his or her group coverage to an individual policy under the
terms of the applicable Policy, the Participant's beneficiary will be entitled
to a death benefit from the Policy in an amount equal to the amount of term life
insurance the Participant was entitled to convert immediately prior to death.
Any benefit payable during the conversion period will be paid solely from the
Policy and will not constitute a benefit under the Plan.


                                     -15-
<PAGE>
 
                                  ARTICLE 10

                           MISCELLANEOUS PROVISIONS
                           ------------------------

     10.1 Plan Year. The period with respect to which the records of the Plan
          ---------
are maintained will be the 12-month period beginning on January 1 and ending on
December 31.

     10.2 Alienation and Assignment. The interests of the Participants and their
          -------------------------
beneficiaries under the Plan are not in any way subject to their debts or other
obligations, and may be transferred or assigned only to the extent permitted by
the applicable Policy.

     10.3 No Right of Employment. Participation in the Plan will not give any
          ----------------------
Associate or Participant the right to be retained in the employment of the
Company.

     10.4 Gender and Number. Whenever used in this Plan, unless the the context
          -----------------
indicates otherwise, words in the masculine gender will include the feminine
gender, and words in the plural will include the singular, and the singular will
include the plural.

     10.5 Notices. Any notice or document required to be given to a Participant
          -------
or beneficiary will be properly given if mailed, postage prepaid, to the
Participant or beneficiary at his last known address as set forth in the
Participating Employer's records. All notices required to be given or any
document required to be filed with the Administrator will be properly given or
filed if mailed postage prepaid, certified mail, to the Administrator at the
addresses as set forth in the Summary Plan Descriptions of the Plan furnished to
Associates or MSRP Retirees from time to time.

     10.6 Section Headings. The section headings or head notes are inserted only
          ----------------
as a matter of convenience and for reference and in no way define, limit, or
describe the scope or intent of the Plan.

     10.7 Officers. Any reference to a particular officer of the Company will
          --------
also refer to the functional equivalent of such officer in the event the title
or responsibilities of that office change.

                                     -16-
<PAGE>
 
     10.8 Consent to Terms of Plan. By enrolling for coverage under the Plan, a
          ------------------------
Participant agrees that the terms and conditions of the Plan will be binding on
the Participant and the Participant's beneficiaries.

     10.9 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.


                                     -17-
<PAGE>
 
                                   APPENDIX I

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

                           J.C. Penney Company, Inc.

                       JCPenney Business Services, Inc.

                    J.C. Penney Casualty Insurance Company

                      J.C. Penney Life Insurance Company 

                            JCPenney National Bank

                          JCPenney Puerto Rico, Inc. 

                             JCP Receivables, Inc.

                           JCPenney Portfolio, Inc.