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                                                                    Exhibit 4(b)

                      ISSUING AND PAYING AGENCY AGREEMENT

     This Agreement, dated as of February 3 1997, is by and between J.C. Penney
Funding Corporation (the "ISSUER") and The Chase Manhattan Bank ("CHASE").

1.   APPOINTMENT AND ACCEPTANCE

     The Issuer hereby appoints Chase as its issuing and paying agent in
connection with the issuance and payment of certain short-term promissory notes
of the Issuer (the "Notes"), as further described herein, and Chase agrees to
act as such agent upon the terms and conditions contained in this Agreement.

2.   COMMERCIAL PAPER PROGRAMS

     The Issuer may establish one or more commercial paper programs under this
Agreement by delivering to Chase a completed program schedule (the "PROGRAM
SCHEDULE"), with respect to each such program. Chase has given the Issuer a copy
                            ----
of the current form of Program Schedule and the Issuer shall complete and return
its first Program Schedule to Chase prior to or simultaneously with the
execution of this Agreement. In the event that any of the information provided
in, or attached to, a Program Schedule shall change, the Issuer shall promptly
inform Chase of such change in writing.

3.   NOTES

     All Notes issued by the Issuer under this Agreement shall be short-term
promissory notes, exempt from the registration requirements of the Securities
Act of 1933, as amended, as indicated on the Program Schedules, and from
applicable state securities laws. The Notes may be placed by dealers (the
"DEALERS") pursuant to Section 4 hereof. Notes shall be issued in either
certificated or book-entry form.

4.   AUTHORIZED REPRESENTATIVES

     The Issuer shall deliver to Chase a duly adopted corporate resolution from
the Issuer's Board of Directors (or other governing body) authorizing the
issuance of Notes under each program established pursuant to this Agreement and
a certificate of incumbency, with specimen signatures attached, of those
officers, employees and agents of the Issuer authorized to take certain actions
with respect to the Notes as provided in this Agreement (each such person is
hereinafter referred to as an "AUTHORIZED REPRESENTATIVE"). Until Chase receives
any subsequent incumbency certificates of the Issuer, Chase shall be entitled to
rely on the last incumbency certificate delivered to it for the purpose of
determining the Authorized Representatives. The Issuer represents and warrants
that each Authorized Representative may appoint other officers, employees and
agents of the Issuer (the "DELEGATES"), including without limitation any
Dealers, to issue instructions to Chase under this Agreement, and take other
actions on the Issuer's behalf hereunder, provided that notice of the
appointment of each Delegate is delivered to Chase in writing. Each such
appointment shall remain in effect unless and until revoked by the Issuer in a
written notice to Chase.

5.   CERTIFICATED NOTES

     If and when the Issuer intends to issue certificated notes ("CERTIFICATED
NOTES"), the Issuer and Chase shall agree upon the form of such Notes.
Thereafter, the Issuer shall from time to time deliver to Chase adequate
supplies of Certificated Notes which will be in bearer



December 4, 1996
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form, serially numbered, and shall be executed by the manual or facsimile
signature of an Authorized Representative. Chase will acknowledge receipt of any
supply of Certificated Notes received from the Issuer, noting any exceptions to
the shipping manifest or transmittal letter (if any), and will hold the
Certificated Notes in safekeeping for the Issuer in accordance with Chase's
customary practices.  Chase shall not have any liability to the Issuer to
determine by whom or by what means a facsimile signature may have been affixed
on Certificated Notes, or to determine whether any facsimile or manual signature
is genuine, if such facsimile or manual signature resembles the specimen
signature attached to the Issuer's certificate of incumbency with respect to
such Authorized Representative.  Any Certificated Note bearing the manual or
facsimile signature of a person who is an Authorized Representative on the date
such signature was affixed shall bind the Issuer after completion thereof by
Chase, notwithstanding that such person shall have ceased to hold his or her
office on the date such Note is countersigned or delivered by Chase.

6.   BOOK-ENTRY NOTES

     The Issuer's book-entry notes ("BOOK-ENTRY NOTES") shall not be issued in
physical form, but their aggregate face amount shall be represented by a master
note (the "MASTER NOTE") in the form of Exhibit A executed by the Issuer
pursuant to the book-entry commercial paper program of The Depository Trust
Company ("DTC"). Chase shall maintain the Master Note in safekeeping, in
accordance with its customary practices, on behalf of Cede & Co., the registered
owner thereof and nominee of DTC. As long as Cede & Co. is the registered owner
of the Master Note, the beneficial ownership interest therein shall be shown on,
and the transfer of ownership thereof shall be effected through, entries on the
books maintained by DTC and the books of its direct and indirect participants.
The Master Note and the Book-Entry Notes shall be subject to DTC's rules and
procedures, as amended from time to time. Chase shall not be liable or
responsible for sending transaction statements of any kind to DTC's participants
or the beneficial owners of the Book-Entry Notes, or for maintaining,
supervising or reviewing the records of DTC or its participants with respect to
such Notes. In connection with DTC's program, the Issuer understands that as one
of the conditions of its participation therein, it shall be necessary for the
Issuer and Chase to enter into a Letter of Representations, in the form of
Exhibit B hereto, and for DTC to receive and accept such Letter of
Representations. In accordance with DTC's program, Chase shall obtain from the
CUSIP Service Bureau a written list of CUSIP numbers for Issuer's Book-Entry
Notes, and Chase shall deliver such list to DTC. The CUSIP Service Bureau shall
bill the Issuer directly for the fee or fees payable for the list of CUSIP
numbers for the Issuer's Book-Entry Notes.

7.   ISSUANCE INSTRUCTIONS TO CHASE; PURCHASE PAYMENTS

     The Issuer understands that all instructions under this Agreement are to be
directed to Chase's Commercial Paper Operations Department. Chase shall provide
the Issuer, or, if applicable, the Issuer's Dealers, with access to Chase's
Money Market Issuance System or other electronic means (collectively, the
"SYSTEM") in order that Chase may receive electronic instructions for the
issuance of Notes. Electronic instructions will be subject to a separate license
agreement issued by Chase in the event that the Issuer elects to use Chase's
communications software to access the System. Electronic instructions must be
transmitted in accordance with the procedures furnished by Chase to the Issuer
or its Dealers in connection with the System. These transmissions shall be the
equivalent to the giving of a duly authorized written and signed instruction
which Chase may act upon without liability. In the event that the System is
inoperable at any time, an Authorized Representative or a Delegate may deliver
written, telephone or facsimile instructions to Chase, which instructions shall
be verified in accordance with any security procedures

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agreed upon by the parties.  Chase shall incur no liability to the Issuer in
acting upon instructions believed by Chase in good faith to have been given by
an Authorized Representative or a Delegate. In the event that a discrepancy
exists between a telephonic instruction and a written confirmation, the
telephonic instruction will be deemed the controlling and proper instruction.
Chase may electronically record any conversations made pursuant to this
Agreement, and the Issuer hereby consents to such recordings.  All issuance
instructions regarding the Notes must be received by 1:00 P.M. New York time in
order for the Notes to be issued or delivered on the same day.

     (a) ISSUANCE AND PURCHASE OF BOOK-ENTRY NOTES.        Upon  receipt of
         -----------------------------------------                         
     issuance instructions from the Issuer or its Dealers with respect to Book-
     Entry Notes, Chase shall transmit such instructions to DTC and direct DTC
     to cause appropriate entries of the Book-Entry Notes to be made in
     accordance with DTC's applicable rules, regulations and procedures for
     book-entry commercial paper programs. Chase shall assign CUSIP numbers to
     the Issuer's Book-Entry Notes to identify the Issuer's aggregate principal
     amount of outstanding Book-Entry Notes in DTC's system, together with the
     aggregate unpaid interest (if any) on such Notes. Promptly following DTC's
     established settlement time on each issuance date, Chase shall access DTC's
     system to verify whether settlement has occurred with respect to the
     Issuer's Book-Entry Notes. Prior to the close of business on such business
     day, Chase shall deposit immediately available funds in the amount of the
     proceeds due the Issuer (if any) to the Issuer's account at Chase and
     designated in the applicable Program Schedule (the "ACCOUNT"), provided
                                                                    --------
     that Chase has received DTC's confirmation that the Book-Entry Notes have
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     settled in accordance with DTC's applicable rules, regulations and
     procedures.  Chase shall have no liability to the Issuer whatsoever if any
     DTC participant purchasing a Book-Entry Note fails to settle or delays in
     settling its balance with DTC or if DTC fails to perform in any respect.

     (b) ISSUANCE AND PURCHASE OF CERTIFICATED NOTES. Upon   receipt   of
         -------------------------------------------                     
     issuance instructions with respect to Certificated Notes, Chase shall: (a)
     complete each Certificated Note as to principal amount, date of issue,
     maturity date, place of payment, and rate or amount of interest (if such
     Note is interest bearing) in accordance with such instructions; (b)
     countersign each Certificated Note; and (c) deliver each Certificated Note
     in accordance with the Issuer's instructions, except as otherwise set forth
     below.  Whenever Chase is instructed to deliver any Certificated Note by
     mail, Chase shall strike from the Certificated Note the word "Bearer,"
     insert as payee the name of the person so designated by the Issuer and
     effect delivery by mail to such payee or to such other person as is
     specified in such instructions to receive the Certificated Note. The Issuer
     understands that, in accordance with the custom prevailing in the
     commercial paper market, delivery of Certificated Notes shall be made
     before the actual receipt of payment for such Notes in immediately
     available funds, even if the Issuer instructs Chase to deliver a
     Certificated Note against payment. Therefore, once Chase has delivered a
     Certificated Note to the designated recipient, the Issuer shall bear the
     risk that such recipient may fail to remit payment of such Note or return
     such Note to Chase. Delivery of Certificated Notes shall be subject to the
     rules of the New York Clearing House in effect at the time of such
     delivery. Funds received in payment of Certificated Notes shall be credited
     to the Account.

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8.   USE OF SALES PROCEEDS IN ADVANCE OF PAYMENT

     Chase shall not be obligated to credit the Issuer's Account unless and
until payment of the purchase price of each Note is received by Chase. From time
to time, Chase, in its sole discretion, may permit the Issuer to have use of
funds payable with respect to a Note prior to Chase's receipt of the sales
proceeds of such Note. If Chase makes a deposit, payment or transfer of funds on
behalf of the Issuer before Chase receives payment for any Note, such deposit,
payment or transfer of funds shall represent an advance by Chase to the Issuer
to be repaid promptly, and in any event on the same day as it is made, from the
proceeds of the sale of such Note, or by the Issuer if such proceeds are not
received by Chase.

9.   PAYMENT OF MATURED NOTES

     On any day when a Note matures or is prepaid, the Issuer shall transmit, or
cause to be transmitted, to the Account, prior to 2:30 P.M. New York time on the
same day, an amount of immediately available funds sufficient to pay the
aggregate principal amount of such Note and any applicable interest due. Chase
shall pay the interest (if any) and principal on a Book-Entry Note to DTC in
immediately available funds, which payment shall be by net settlement of Chase's
account at DTC. Chase shall pay Certificated Notes upon presentment. Chase shall
have no obligation under the Agreement to make any payment for which there is
not sufficient, available and collected funds in the Account, and Chase may,
without liability to the Issuer, refuse to pay any Note that would result in an
overdraft to the Account.

10.  OVERDRAFTS

     (a) Intraday overdrafts with respect to each Account shall be subject to
     Chase's policies as in effect from time to time.

     (b) An overdraft will exist in an Account if Chase, in its sole discretion,
     (i) permits an advance to be made pursuant to Section 8 and,
     notwithstanding the provisions of Section 8, such advance is not repaid in
     full on the same day as it is made, or (ii) pays a Note pursuant to Section
     9 in excess of the available collected balance in such Account.  Overdrafts
     shall be subject to Chase's established banking practices, including,
     without limitation, the imposition of interest, funds usage charges and
     administrative fees. The Issuer shall repay any such overdraft, fees and
     charges no later than the next business day, together with interest on the
     overdraft at the rate established by Chase for the Account, computed from
     and including the date of the overdraft to the date of repayment.

11.  NO PRIOR COURSE OF DEALING

     No prior action or course of dealing on the part of Chase with respect to
advances of the purchase price or payments of matured Notes shall give rise to
any claim or cause of action by the Issuer against Chase in the event that Chase
refuses to pay or settle any Notes for which the Issuer has not timely provided
funds as required by this Agreement.

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12.  RETURN OF CERTIFICATED NOTES

     Chase will in due course cancel any Certificated Note presented for payment
and return such Note to the Issuer. Chase shall also cancel and return to the
Issuer any spoiled or voided Certificated Notes. Promptly upon written request
of the Issuer or at the termination of this Agreement, Chase shall destroy all
blank, unissued Certificated Notes in its possession and furnish a certificate
to the Issuer certifying such actions.

13.  INFORMATION FURNISHED BY CHASE

     Upon the reasonable request of the Issuer, Chase shall promptly provide the
Issuer with information with respect to any Note issued and paid hereunder,
provided, that the Issuer delivers such request in writing and, to the extent
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applicable, includes the serial number or note number, principal amount, payee,
date of issue, maturity date, amount of interest (if any) and place of payment
of such Note.

14.  REPRESENTATIONS AND WARRANTIES

     The Issuer represents and warrants that: (i) it has the right, capacity and
authority to enter into this Agreement; and (ii) it will comply with all of its
obligations and duties under this Agreement. The Issuer further represents and
agrees that each Note issued and distributed upon its instruction pursuant to
this Agreement shall constitute the Issuer's representation and warranty to
Chase that such Note is a legal, valid and binding obligation of the Issuer, and
that such Note is being issued in a transaction which is exempt from
registration under the Securities Act of 1933, as amended, and any applicable
state securities law.

15.  DISCLAIMERS

     Neither Chase nor its directors, officers, employees or agents shall be
liable for any act or omission under this Agreement except in the case of
negligence or willful misconduct. IN NO EVENT SHALL CHASE BE LIABLE FOR SPECIAL,
INDIRECT OR CONSEQUENTIAL LOSS OR DAMAGE OF ANY KIND WHATSOEVER (INCLUDING BUT
NOT LIMITED TO LOST PROFITS), EVEN IF CHASE HAS BEEN ADVISED OF THE LIKELIHOOD
OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION. In no event shall
Chase be considered negligent in consequence of complying with DTC's rules,
regulations and procedures. The duties and obligations of Chase, its directors,
officers, employees or agents shall be determined by the express provisions of
this Agreement and they shall not be liable except for the performance of such
duties and obligations as are specifically set forth herein and no implied
covenants shall be read into this Agreement against them. Neither Chase nor its
directors, officers, employees or agents shall be required to ascertain whether
any issuance or sale of any Notes (or any amendment or termination of this
Agreement) has been duly authorized or is in compliance with any other agreement
to which the Issuer is a party (whether or not Chase is also a party to such
agreement).

16.  INDEMNIFICATION

     The Issuer agrees to indemnify and hold harmless Chase, its directors,
officers, employees and agents from and against any and all liabilities, claims,
losses, damages, penalties, costs and expenses (including attorneys' fees and
disbursements) suffered or incurred by or asserted or assessed against Chase or
any of them arising out of Chase or any of them acting as the Issuer's agent
under this Agreement, except for such liability,

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claim, loss, damage, penalty, cost or expense resulting from the negligence or
willful misconduct of Chase, its directors, officers, employees or agents.  This
indemnity will survive the termination of this Agreement with respect to events
or circumstances arising or occurring prior to such termination.

17.  OPINION OF COUNSEL

     The Issuer shall deliver to Chase all documents it may reasonably request
relating to the existence of the Issuer and authority of the Issuer for this
Agreement, including, without limitation, an opinion of counsel, substantially
in the form of Exhibit C hereto.

18.  NOTICES

     All notices, confirmations and other communications hereunder shall (except
to the extent otherwise expressly provided) be in writing and shall be sent by
first-class mail, postage prepaid, by telecopier or by hand, addressed as
follows, or to such other address as the party receiving such notice shall have
previously specified to the party sending such notice:

If to the Issuer:        Treasurer's Department - Banking
                         P.O. Box 10001
                         Dallas TX 75301-1304
                         Attention:    Commercial Paper Manager
                         Telephone:    (972) 431-2063
                         Facsimile:    (972) 431-2044
 
If to Chase concerning the daily issuance and redemption of Notes:
 
                         Attention:  Commercial Paper Operations
                         55 Water Street, 2nd Floor
                         New York NY 10041
                         Telephone:    (212) 638-0536
                         Facsimile:    (212) 638-7375
 
All other:               Attention: Commercial Paper Service Delivery Unit
                         450 W. 33rd Street, 15th Floor
                         New York NY 10001-2697
                         Telephone:    (212) 946-3108
                         Facsimile:    (212) 946-8181

19.  COMPENSATION

     The Issuer shall pay compensation for services pursuant to this Agreement
in accordance with the pricing schedules furnished by Chase to the Issuer from
time to time and upon such payment terms as the parties shall determine. The
Issuer shall also reimburse Chase for any fees and charges imposed by DTC with
respect to services provided in connection with the Book-Entry Notes.

20.  BENEFIT OF AGREEMENT

     This Agreement is solely for the benefit of the parties hereto and no other
person shall acquire or have any right under or by virtue hereof.

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21.  TERMINATION

     This Agreement may be terminated at any time by either party by written
notice to the other, but such termination shall not affect the respective
liabilities of the parties hereunder arising prior to such termination.

22.  FORCE MAJEURE

     In no event shall Chase be liable for any failure or delay in the
performance of its obligations hereunder because of circumstances beyond Chase's
control, including, but not limited to, acts of God, flood, war (whether
declared or undeclared), terrorism, fire, riot, strikes or work stoppages for
any reason, embargo, government action, including any laws, ordinances,
regulations or the like which restrict or prohibit the providing of the services
contemplated by this Agreement, inability to obtain material, equipment, or
communications or computer facilities, or the failure of equipment or
interruption of communications or computer facilities, and other causes beyond
Chase's control whether or not of the same class or kind as specifically named
above.

23.  ENTIRE AGREEMENT

     This Agreement, together with the exhibits attached hereto, constitutes the
entire agreement between Chase and the Issuer with respect to the subject matter
hereof and supersedes in all respects all prior proposals, negotiations,
communications, discussions and agreements between the parties concerning the
subject matter of this Agreement.

24.  WAIVERS AND AMENDMENTS

     No failure or delay on the part of any party in exercising any power or
right under this Agreement shall operate as a waiver, nor does any single or
partial exercise of any power or right preclude any other or further exercise,
or the exercise of any other power or right. Any such waiver shall be effective
only in the specific instance and for the purpose for which it is given. No
amendment, modification or waiver of any provision of this Agreement shall be
effective unless the same shall be in writing and signed by the Issuer and
Chase.

25.  BUSINESS DAY

     Whenever any payment to be made hereunder shall be due on a day which is
not a business day for Chase, then such payment shall be made on Chase's next
succeeding business day.

26.  COUNTERPARTS

     This Agreement may be executed in counterparts, each of which shall be
deemed an original and such counterparts together shall constitute but one
instrument.

27.  HEADINGS

     The headings in this Agreement are for purposes of reference only and shall
not in any way limit or otherwise affect the meaning or interpretation of any of
the terms of this Agreement.

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28.  GOVERNING LAW

     This Agreement and the Notes shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
the conflict of laws provisions thereof.

29.  JURISDICTION AND VENUE

     Each party hereby irrevocably and unconditionally submits to the
jurisdiction of the United States District Court for the Southern District of
New York and any New York State court located in the Borough of Manhattan in New
York City and of any appellate court from any thereof for the purposes of any
legal suit, action or proceeding arising out of or relating to this Agreement (a
"PROCEEDING"). Each party hereby irrevocably agrees that all claims in respect
of any Proceeding may be heard and determined in such Federal or New York State
court and irrevocably waives, to the fullest extent it may effectively do so,
any objection it may now or hereafter have to the laying of venue of any
Proceeding in any of the aforementioned courts and the defense of an
inconvenient forum to the maintenance of any Proceeding.

30.  ACCOUNT CONDITIONS

     Each Account shall be subject to Chase's account conditions, as in effect
from time to time.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by duly authorized officers as of the day and year
first-above written.

THE CHASE MANHATTAN BANK                        J.C. PENNEY FUNDING
                                                        CORPORATION

By: /s/ LLOYD A. BAGGS                          By:  /s/ ROBERT B. CAVANAUGH
   ---------------------------                     -----------------------------
Name:  Lloyd A. Baggs                           Name:  Robert B. Cavanaugh
     -------------------------                       ---------------------------
Title: Vice President                           Title: Chairman of The Board
      ------------------------                        --------------------------
Date:       02/07/97                            Date:          2/6/97
     -------------------------                       ---------------------------

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