<PAGE>
 
                                                                    EXHIBIT 4(F)


                 AMENDED AND RESTATED 364-DAY REVOLVING CREDIT
                                   AGREEMENT



     AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AGREEMENT dated as of
November 21, 1997 among J. C. PENNEY COMPANY, INC. and J. C. PENNEY FUNDING
CORPORATION (the "BORROWERS"), the LENDERS listed on the signature pages hereof
(the "LENDERS"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"AGENT"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (successor
to Bank of America Illinois), BANKERS TRUST COMPANY, THE CHASE MANHATTAN BANK,
CITIBANK, N.A., CREDIT SUISSE FIRST BOSTON and NATIONSBANK OF TEXAS, N.A., as
Managing Agents (the "MANAGING AGENTS").



                             W I T N E S S E T H:



     WHEREAS, certain of the parties hereto have heretofore entered into a
364-Day Revolving Credit Agreement dated as of December 16, 1993, as amended and
restated as of December 7, 1994, as amended as of December 6, 1995, and as
amended and restated as of December 3, 1996 (the "AGREEMENT"); and

     WHEREAS, the parties hereto desire to amend such Agreement as set forth
herein and to restate the Agreement in its entirety to read as set forth in the
Agreement with the amendments specified below;

     NOW, THEREFORE, the parties hereto agree as follows:

     Section 1.  Definitions; References.  Unless otherwise specifically defined
herein, each term used herein which is defined in the Agreement shall have the
meaning assigned to such term in the Agreement.  Each reference to "HEREOF",
"HEREUNDER", "HEREIN" and "HEREBY" and each other similar reference and each
<PAGE>
 
reference to "THIS AGREEMENT" and each other similar reference contained in the
Agreement shall from and after the date hereof refer to the Agreement as amended
and restated hereby.

     Section 2.  Managing Agents; Co-Agents.  (a) Each reference to "Co-Agent"
and "Co-Agents" in the Agreement as heretofore in effect is changed to "Managing
Agent" and "Managing Agents" respectively.

     (b) The following new definition is added to Section 1.01 of the Agreement
immediately after "Closing Date":

     "Co-Agents" shall mean the Lenders who are indicated as being Co-Agents on
      ---------                                                                
the signature pages hereof.

     (c) The last sentence of Article VIII is amended to read in its entirety as
follows:

     No Managing Agent or Co-Agent shall have any duties or responsibilities
hereunder in its capacity as such.

     Section 3.  Extension of Maturity Date.   (a) The definition of "MATURITY
DATE" in Section 1.01 of the Agreement is amended to read in its entirety as
follows:

     "MATURITY DATE" shall mean November 20, 1998.

     (b)  The date "December 2, 1997" in Section 2.11(d) of the Agreement is
changed to "November 20, 1998".

     Section 4.  Financial Statements.  (a) Each reference to "January 27, 1996"
in Sections 3.05 and 3.06 of the Agreement is changed to "January 25, 1997".

     (b)  The date "July 27, 1996" in Section 3.05 of the Agreement is changed
to "July 26, 1997".

     Section 5.  Confirmation of Guaranty.  J. C. Penney Company, Inc. confirms
that its subordinated Guaranty of the obligations of J. C. Penney Funding
Corporation dated as of December 3, 1996, shall apply to the obligations of J.
C. Penney Funding Corporation under the Agreement as amended and restated
hereby.

                                       2
<PAGE>
 
     Section 6.  Changes in Commitments.  With effect from and including the
date this Amendment and Restatement becomes effective in accordance with Section
9 hereof, (i)  each Person listed on the signature pages hereof which is not a
party to the Agreement shall become a Lender party to the Agreement, (ii  the
Commitment of each Lender shall be the amount set forth opposite the name of
such Lender on the Commitment Schedule annexed hereto and (iii) Schedule 2.01 to
the Agreement shall be amended to read as set forth in Part I of said Commitment
Schedule.  Any Lender whose Commitment is changed to zero shall upon such
effectiveness cease to be a Lender party to the Agreement, and all accrued fees
and other amounts payable under the Agreement for the account of such Lender
shall be due and payable on such date; provided that, subject to Section 2.20,
the provisions of Sections 2.13, 2.15, 2.19 and 9.05 of the Agreement shall
continue to inure to the benefit of each such Lender.

     Section 7.  Assignments.  (a) The phrase "in substantially the form of
Exhibit E" is added to clause (iv) of the proviso to Section 9.04(b) of the
                                          -------                          
Agreement immediately following the words "an instrument".

     (b)  Exhibit A hereto is added to the Agreement as Exhibit E thereto.

     (c)  The definition of "ELIGIBLE ASSIGNEE" is amended by the addition of
the following clause (d):

          and (d) with the prior written consent of the Borrowers, any other
          financial institution.

     Section 8.  Governing Law.  This Amendment and Restatement shall be
governed by and construed in accordance with the laws of the State of New York.

     Section 9.  Counterparts; Conditions to Effectiveness.  This Amendment and
Restatement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.  This Amendment and Restatement shall become effective
as of the date hereof when the Agent shall have received:

     (a)  duly executed counterparts hereof signed by the Borrowers and all of
the Lenders (or, in the case of any party as to which an executed counterpart
shall not have been received, the Agent shall have received telegraphic, telex
or other written confirmation from such party of execution of a counterpart
hereof by such party);

     (b)  an opinion of Charles R. Lotter, General Counsel for the Borrowers,
dated the date hereof and addressed to the Lenders, to the effect set forth in

                                       3
<PAGE>
 
Exhibit B hereto, and the Borrowers hereby instruct such counsel to deliver such
opinion to the Agent;

     (c)  a certificate from a Responsible Officer of each Borrower, dated the
date hereof, and certifying that the representations and warranties set forth in
Article III of the Agreement shall be true and correct in all material respects
on and as of the date hereof with the same effect as though made on and as of
such date, except to the extent such representations and warranties expressly
relate to an earlier date;

     (d)  a certificate from a Responsible Officer of each Borrower, dated the
date hereof, and certifying that on such date, no Event of Default or Default
shall have occurred and be continuing;

     (e)  for its own account all fees due and payable to it and in such amounts
as have been previously agreed upon in writing between the Borrowers and the
Agent in connection with this Amendment and Restatement; and

     (f)  (i) a certificate of the Secretary or Assistant Secretary of each
Borrower, dated the date hereof and certifying (A) that attached thereto is a
true and complete copy of resolutions duly adopted by the Board of Directors of
such Borrower authorizing the execution, delivery and performance of the
Agreement as hereby amended and restated and the borrowings thereunder, and that
such resolutions have not been modified, rescinded or amended and are in full
force and effect, and (B) as to the incumbency and specimen signature of each
officer executing this Amendment and Restatement or any other document delivered
in connection herewith on behalf of such Borrower and (ii) a certificate of
another officer of each Borrower as to the incumbency and specimen signature of
the Secretary or Assistant Secretary executing the certificate pursuant to (i)
above.

                                       4
<PAGE>
 
          IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Restatement to be duly executed as of the date first above written.


                    J. C. PENNEY COMPANY, INC.


                    By /s/ Robert B. Cavanaugh
                       ----------------------------------------
                       Name:  Robert B. Cavanaugh
                       Title: Vice President and Treasurer

                    J. C. PENNEY FUNDING CORPORATION

 
                    By /s/ Stephen F. Walsh
                       ----------------------------------------
                       Name:  Stephen F. Walsh
                       Title: President


                    MORGAN GUARANTY TRUST COMPANY
                       OF NEW YORK, as Lender and as Agent


                    By /s/ Laura E. Loffredo
                       ----------------------------------------
                       Name:  Laura E. Loffredo
                       Title: Vice President


                    BANK OF AMERICA NATIONAL TRUST AND
                      SAVINGS ASSOCIATION, as Lender and as
                      Managing Agent


                    By /s/ J. Casey Cosgrove
                       ----------------------------------------
                       Name:  J. Casey Cosgrove
                       Title: Assistant Vice President

<PAGE>
 
                    BANKERS TRUST COMPANY, as Lender and
                       as Managing Agent


                    By /s/ Anthony LoGrippo
                       ----------------------------------------
                       Name:  Anthony LoGrippo
                       Title: Vice President


                    THE CHASE MANHATTAN BANK, as Lender
                       and as Managing Agent


                    By /s/ Margaret T. Lane
                       ----------------------------------------
                       Name:  Margaret T. Lane
                       Title: Assistant Vice President


                    CITIBANK, N.A., as Lender and as Managing
                       Agent


                    By /s/ Richard F. Kurth
                       ----------------------------------------
                       Name:  Richard F. Kurth
                       Title: Vice President



                    CREDIT SUISSE FIRST BOSTON, as Lender and
                       as Managing Agent


                    By /s/ Robert N. Finney
                       ----------------------------------------
                       Name:  Robert N. Finney
                       Title: Managing Director


                    By /s/ Thomas G. Muoio
                       ----------------------------------------
                       Name:  Thomas G. Muoio
                       Title: Vice President
<PAGE>
 
                    NATIONSBANK OF TEXAS, N.A., as Lender
                       and as Managing Agent


                    By /s/ Suzanne B. Smith
                       ----------------------------------------
                       Name:  Suzanne B. Smith
                       Title: Vice President


                    THE BANK OF TOKYO-MITSUBISHI,  LTD., as
                       Lender and as Co-Agent


                    By /s/ John M. Mearns
                       ----------------------------------------
                       Name:  John M. Mearns
                       Title: Vice President and Manager


                    CORESTATES BANK, N.A., as Lender and as
                       Co-Agent


                    By /s/ Randal D. Southern 
                       ----------------------------------------
                       Name:  Randal D. Southern
                       Title: Vice President


                    FLEET NATIONAL BANK, as Lender and as
                       Co-Agent


                    By /s/ Thomas J. Bullard
                       ----------------------------------------
                       Name:  Thomas J. Bullard
                       Title: Vice President



                    PNC BANK, NATIONAL ASSOCIATION, as
                       Lender and as Co-Agent


                    By /s/ Philip K. Liebscher
                       ----------------------------------------
                       Name:  Philip K. Liebscher
                       Title: Vice President

<PAGE>
 
                    ROYAL BANK OF CANADA, as Lender and as
                       Co-Agent


                    By /s/ Karen T. Hull
                       ----------------------------------------
                       Name:  Karen T. Hull
                       Title: Retail Group Manager


                    WACHOVIA BANK, N.A., as Lender and as
                       Co-Agent


                    By /s/ Roderick S. Miles
                       ----------------------------------------
                       Name:  Roderick S. Miles
                       Title: Senior Vice President


                    BANKBOSTON, N.A.
 
 
                    By /s/ Judith C. E. Kelly
                       ----------------------------------------
                       Name:  Judith C. E. Kelly
                       Title: Vice President



                    THE FIRST NATIONAL BANK OF CHICAGO


                    By /s/ Catherine A. Muszynski
                       ----------------------------------------
                       Name:  Catherine A. Muszynski
                       Title: Vice President



                    FIRST UNION NATIONAL BANK


                    By /s/ Dennis Harvey
                       ----------------------------------------
                       Name:  Dennis Harvey
                       Title: Senior Vice President
<PAGE>
 
                    MELLON BANK, N.A.


                    By /s/ Marc T. Kennedy
                       ----------------------------------------
                       Name:  Marc T. Kennedy
                       Title: Assistant Vice President


                    NATIONAL AUSTRALIA BANK LIMITED
                       A.C.N.  004044937
 

                    By /s/ Michael G. McHugh
                       ----------------------------------------
                       Name:  Michael g. McHugh
                       Title: Vice President
 


                    SUNTRUST BANK, ATLANTA


                    By /s/ Todd C. Davis
                       ----------------------------------------
                       Name:  Todd C. Davis
                       Title: Assistant Vice President



                    By /s/ John A. Fields, Jr.
                       ----------------------------------------
                       Name:  John A. Fields, Jr.
                       Title: Vice President


                    THE BANK OF NEW YORK


                    By /s/ Charlotte Sohn
                       ----------------------------------------
                       Name:  Charlotte Sohn
                       Title: Vice President

<PAGE>
 
                    WELLS FARGO BANK N.A.

 
 
                    By /s/ Marsha Anderson
                       ----------------------------------------
                       Name:  Marsha Anderson
                       Title: Vice President



                    By /s/ Gene Fuentes
                       ----------------------------------------
                       Name:  Gene Fuentes
                       Title: Vice President



                    CRESTAR BANK


                    By /s/ James P. Duval, Jr.
                       ----------------------------------------
                       Name:  James P. Duval, Jr.
                       Title: Vice President



                    THE NORTHERN TRUST COMPANY


                    By /s/ John E. Burda
                       ----------------------------------------
                       Name:  John E. Burda
                       Title: Second Vice President



                    BANK OF HAWAII

 
                    By /s/ Brenda K. Testerman
                       ----------------------------------------
                       Name:  Brenda K. Testerman
                       Title: Vice President


                    BANK ONE, TEXAS N.A.


                    By /s/ Scott Rhea
                       ----------------------------------------
                       Name:  Scott Rhea
                       Title: Vice President

<PAGE>
 
                    BARCLAYS BANK PLC


                    By /s/ Gary F. Albanese
                       ----------------------------------------
                       Name:  Gary F. Albanese
                       Title: Associate Director



                    CREDIT AGRICOLE INDOSUEZ


                    By /s/ Katherine L. Abbott
                       ----------------------------------------
                       Name:  Katherine L. Abbott
                       Title: First Vice President



                    By /s/ Dean Balice
                       ----------------------------------------
                       Name:  Dean Balice
                       Title: Senior Vice President 
                              Branch Manger



                    FIRST SECURITY BANK OF UTAH, N.A.
 

                    By /s/ Judy Callister
                       ----------------------------------------
                       Name:  Judy Callister
                       Title: Vice President



                    MARINE MIDLAND BANK


                    By /s/ William M. Holland
                       ----------------------------------------
                       Name:  William M. Holland
                       Title: Vice President




<PAGE>
 
                    ISTITUTO BANCARIO SAN PAOLO DI
                       TORINO SPA
 

                    By /s/ Robert Wurster
                       ----------------------------------------
                       Name:  Robert Wurster
                       Title: First Vice President



                    By /s/ Wendell Jones
                       ----------------------------------------
                       Name:  Wendell Jones
                       Title: Vice President


                    NORWEST BANK MINNESOTA, N.A.


                    By /s/ Scott D. Bjelde
                       ----------------------------------------
                       Name:  Scott D. Bjelde
                       Title: Vice President


                    THE SAKURA BANK, LTD.
 

                    By /s/ Yasumasa Kikuchi
                       ----------------------------------------
                       Name:  Yasumasa Kikuchi
                       Title: Senior Vice President


                    STATE STREET BANK & TRUST COMPANY


                    By /s/ Johnny Ip
                       ----------------------------------------
                       Name:  Johnny Ip
                       Title: Vice President
<PAGE>
 
                    THE FUJI BANK, LTD.
                       HOUSTON AGENCY


                    By /s/ Philip C. Lauinger III
                       ----------------------------------------
                       Name:  Philip C. Lauinger III
                       Title: Vice President & Manager



                    U.S. BANK NATIONAL ASSOCIATION


                    By /s/ David A. Draxler
                       ----------------------------------------
                       Name:  David A. Draxler
                       Title: Vice President


                    FIRSTAR BANK MILWAUKEE, N.A.


                    By /s/ James Spredemann
                       ----------------------------------------
                       Name:  James Spredemann
                       Title: Vice President


                    HIBERNIA NATIONAL BANK


                    By /s/ Troy J. Villafarra
                       ----------------------------------------
                       Name:  Troy J. Villafarra
                       Title: Vice President


                    THE YASUDA TRUST AND BANKING CO.,
                       LTD., NEW YORK BRANCH


                    By /s/ Rohn J. Laudenschlager
                       ----------------------------------------
                       Name:  Rohn J. Laudenschlager
                       Title: Senior Vice President

<PAGE>
 
                    UMB BANK, N.A.
 

                    By /s/ David Proffitt
                       ----------------------------------------
                       Name:  David Proffitt
                       Title: Senior Vice President

<PAGE>
 
               DEPARTING LENDERS
               -----------------


                    THE CANADIAN IMPERIAL BANK OF
                       COMMERCE


                    By /s/ Elizabeth Fischer
                       ----------------------------------------
                       Name:  Elizabeth Fischer
                       Title: CIBC Oppenheimer Corp., as Agent


                    UNION BANK OF SWITZERLAND, NEW YORK BRANCH 


                    By /s/ Mary V. Turnbach
                       ----------------------------------------
                       Name:  Mary V. Turnbach
                       Title: Assistant Treasurer


                    By /s/ Paula Mueller
                       ----------------------------------------
                       Name:  Paula Mueller
                       Title: Vice President


                    BANQUE NATIONALE DE PARIS


                    By /s/ David P. Camp
                       ----------------------------------------
                       Name:  David P. Camp
                       Title: Banking Officer


                    DAI-ICHI KANGYO BANK, LTD.


                    By /s/ Seiji Imai
                       ----------------------------------------
                       Name:  Seiji Imai
                       Title: Vice President
<PAGE>
 
                    COMPAGNIE FINANCIERE DE CIC ET DE
                       L'UNION EUROPEENNE


                    By /s/ Martha Skidmore
                       ----------------------------------------
                       Name:  Martha Skidmore
                       Title: Vice President


                    By /s/ Eric Longuet
                       ----------------------------------------
                       Name:  Eric Longuet
                       Title: Vice President


                    THE INDUSTRIAL BANK OF JAPAN, TRUST COMPANY
 
 
                    By /s/ Kazutoshi Kuwahara
                       ----------------------------------------
                       Name:  Kazutoshi Kuwahara
                       Title: Executive Vice President 
                              The Industrial Bank of Japan, Limited
                              Houston Office (Authorized Representative)


                    THE LONG-TERM CREDIT BANK OF JAPAN,
                       LIMITED


                    By /s/ Sadao Muraoka
                       ----------------------------------------
                       Name:  Sadao Muraoka
                       Title: Head of Southwest Region


                    THE SANWA BANK LTD.
 

                    By /s/ Warren G. Parham
                       ----------------------------------------
                       Name:  Warren G. Parham
                       Title: Vice President
 
<PAGE>
 
                    WELLS FARGO BANK (TEXAS), N.A.


                    By /s/ Ken Taylor
                       ----------------------------------------
                       Name:  Ken Taylor
                       Title: Assistant Vice President
<PAGE>
 
                              COMMITMENT SCHEDULE
                              -------------------

                            I.  Continuing Lenders


NAME OF LENDER AND APPLICABLE LENDING OFFICE                COMMITMENT

Morgan Guaranty Trust Company of New York                   $87,500,000

Bank of America National Trust and Savings Association      $72,500,000

Bankers Trust Company                                       $72,500,000

The Chase Manhattan Bank                                    $72,500,000

Citibank, N.A.                                              $72,500,000

Credit Suisse First Boston                                  $72,500,000

NationsBank of Texas, N.A.                                  $72,500,000

The Bank of Tokyo-Mitsubishi, Ltd.                          $55,000,000

CoreStates Bank, N.A.                                       $55,000,000

Fleet National Bank                                         $55,000,000

PNC Bank, National Association                              $55,000,000

Royal Bank of Canada                                        $55,000,000

Wachovia Bank, N.A.                                         $55,000,000

BankBoston                                                  $37,500,000

The First National Bank of Chicago                          $37,500,000

First Union National Bank                                   $37,500,000

Mellon Bank, N.A.                                           $37,500,000

National Australia Bank Limited                             $37,500,000

SunTrust Bank, Atlanta                                      $37,500,000

The Bank of New York                                        $37,500,000

Wells Fargo Bank N.A.                                       $37,500,000

Crestar Bank                                                $25,000,000


                                       2
<PAGE>
 
NAME OF LENDER AND APPLICABLE LENDING OFFICE                COMMITMENT

The Northern Trust Company                                  $25,000,000

Bank of Hawaii                                              $20,000,000

Bank One, Texas N.A.                                        $20,000,000

Barclays Bank PLC                                           $20,000,000

Credit Agricole Indosuez                                    $20,000,000

First Security Bank of Utah, N.A.                           $20,000,000

Marine Midland Bank                                         $20,000,000

Istituto Bancario San Paolo Di Torino S.p.A                 $20,000,000

Norwest Bank Minnesota, N.A.                                $20,000,000

The Sakura Bank, Ltd.                                       $20,000,000

State Street Bank & Trust Company                           $20,000,000

The Fuji Bank, Ltd., Houston Agency                         $20,000,000

U.S. Bank National Association                              $20,000,000

Firstar Bank Milwaukee, N.A.                                $17,500,000

Hibernia National Bank                                      $15,000,000

The Yasuda Trust and Banking Co., Ltd., New York Branch     $15,000,000

UMB Bank, N.A.                                              $10,000,000

                                       2
<PAGE>
 
                             II. Departing Lenders


NAME OF LENDER AND APPLICABLE LENDING OFFICE                   COMMITMENT

Banque Nationale de Paris                                          $ 0
                                                                
The Canadian Imperial Bank of Commerce                             $ 0
                                                                
Compagnie Financiere de CIC et de L'Union Europeenne               $ 0
                                                                
Dai-Ichi Kangyo Bank, Ltd.                                         $ 0
                                                                
The Industrial Bank of Japan Ltd.                                  $ 0
                                                                
The Long Term Credit Bank of Japan, Ltd.                           $ 0
                                                                
The Sanwa Bank Ltd.                                                $ 0
                                                                
Union Bank of Switzerland                                          $ 0
                                                                
Wells Fargo Bank (Texas), N.A.                                     $ 0
 
  Total                                                 $1,500,000,000
                                                        ==============




                                       3
<PAGE>
 
                                                                       EXHIBIT A


                      ASSIGNMENT AND ASSUMPTION AGREEMENT

     ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of _________, _______  between
[NAME OF ASSIGNOR] (the "ASSIGNOR") and [NAME OF ASSIGNEE] (the "ASSIGNEE").

     WHEREAS, this Assignment and Assumption Agreement (the "AGREEMENT") relates
to the Amended and Restated 364-Day Revolving Credit Agreement dated as of
November 21, 1997, among J. C. PENNEY COMPANY, INC. and J. C. PENNEY FUNDING
CORPORATION (the "BORROWERS"), the LENDERS listed on the signature pages thereto
(the "LENDERS"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"AGENT"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, BANKERS
TRUST COMPANY, THE CHASE MANHATTAN BANK, CITIBANK, N.A., CREDIT SUISSE FIRST
BOSTON and NATIONSBANK OF TEXAS, N.A., as Managing Agents (the "MANAGING
AGENTS") (as amended from time to time, the "CREDIT AGREEMENT");

     WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Standby Loans to the Borrower in an aggregate principal
amount at any time outstanding not to exceed $____________;

     WHEREAS, [Standby] Loans made to the Borrower by the Assignor under the
Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and

     WHEREAS, the Assignor proposes to assign to the Assignee all of the rights
of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $__________ (the "ASSIGNED AMOUNT"),
together with a corresponding portion of each of its outstanding [Standby]
Loans, and the Assignee proposes to accept such assignment and assume the
corresponding obligations of the Assignor under the Credit Agreement;

     NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:

     Section 1.  Definitions.  All capitalized terms not otherwise defined
herein have the respective meanings set forth in the Credit Agreement.
<PAGE>
 
     Section 2.  Assignment.  The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount and a corresponding portion of each of its
outstanding [Standby] Loans, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount.  Upon the execution and
delivery hereof by the Assignor and the Assignee [and the execution of the
consent attached hereto by the Borrowers and the Agent] (1)  and the payment
of the amounts specified in Section 3 required to be paid on the date hereof (i)
the Assignee shall, as of the effective date hereof, succeed to the rights and
be obligated to perform the obligations of a Lender under the Credit Agreement
with a Commitment in an amount equal to the Assigned Amount and acquire the
rights of the Assignor with respect to a corresponding portion of each of the
Assignor's outstanding [Standby] Loans and (ii) the Commitment of the Assignor
shall, as of the date hereof, be reduced by the Assigned Amount, and the
Assignor shall be released from its obligations under the Credit Agreement to
the extent such obligations have been assumed by the Assignee.  The assignment
provided for herein shall be without recourse to the Assignor.


     Section 3.  Payments.  As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
effective date hereof in Federal funds the amount heretofore agreed between
them. (2)   Facility fees accrued before the date hereof are for the account
of the Assignor and such fees accruing on and after the date hereof with respect
to the Assigned Amount are for the account of the Assignee.  Each of the
Assignor and the Assignee agrees that if it receives any amount under the Credit
Agreement which is for the account of the other party hereto, it shall receive
the same for the account of such other party to the extent of such other party's
interest therein and promptly pay the same to such other party.


     Section 4.  Effective Date.  This Agreement shall become or be deemed to be
effective on ___________________  ____, _________. (3)


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

     (1) Delete if consent is not required.
     (2) Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
     (3) Effective date of assignment. Must be at least five days after
execution of this instrument.


                                       2
<PAGE>
 
     [Section 5.  Consent of the Borrowers and the Agent.  This Agreement is
conditioned upon the consent of the Borrowers and the Agent pursuant to Section
9.04(b)(i) of the Credit Agreement.] (4)


     Section 6.  Confirmation by Assignee.  The Assignee hereby confirms and
agrees to the matters set forth in Section 9.04(c) of the Credit Agreement.

     Section 7.  Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

     Section 8.  Counterparts.  This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.

                         [NAME OF ASSIGNOR]


                         By:
                            -----------------------------------------
                            Name:
                            Title:




                         [NAME OF ASSIGNEE]



                         By:
                            -----------------------------------------
                            Name:
                            Title:



            [The undersigned consent to the foregoing assignment.]
            
-------------------

 (4) Delete if consent is not required.

                                       3
<PAGE>
 
                         J. C. PENNEY COMPANY, INC.



                         By:
                            -----------------------------------------
                            Name:
                            Title:

                         J. C. PENNEY FUNDING
                            CORPORATION




                         By:
                            -----------------------------------------
                            Name:
                            Title:


                         MORGAN GUARANTY TRUST
                            COMPANY OF NEW YORK, as Agent



                         By:
                            -----------------------------------------
                            Name:
                            Title:




                                       4
<PAGE>
 
                                                                       EXHIBIT B
                                                                       ---------


                                                               November 21, 1997


Each of the lenders referred to below

Re:  Amended and Restated 364-Day Revolving Credit Agreement of
     J. C. Penney Company, Inc.  and
     J. C. Penney Funding Corporation

Dear Ladies and Gentlemen:

     As the General Counsel of J. C. Penney Company, Inc., a Delaware
corporation ("JCPenney"), and of J. C. Penney Funding Corporation, a Delaware
corporation ("Funding" and, together with JCPenney, "Borrowers"), I have been
asked to render an opinion pursuant to Section 9(b) of the Amended and Restated
364-Day Revolving Credit Agreement dated as of November 21, 1997 among the
Borrowers, Morgan Guaranty Trust Company of New York, as Agent (the "Agent"),
the lenders listed on the signature pages thereof (the "Lenders"), and Bank of
America National Trust and Savings Association, Bankers Trust Company, The Chase
Manhattan Bank, Citibank, N.A., Credit Suisse First Boston and NationsBank of
Texas, N.A., as Managing Agents (the "Managing Agents") (the "Amendment and
Restatement") which amends and restates the 364-Day Revolving Credit Agreement
dated as of December 16, 1993, as amended and restated with new Lenders as of
December 7, 1994, as amended with new Lenders as of December 6, 1995 and as
amended and restated as of December 3, 1996 (such Credit Agreement, as amended
and restated by the Amendment and Restatement, the "Credit Agreement").

     In rendering the opinion set forth below, I have examined originals,
photostatic, or certified copies of the Credit Agreement, the respective
corporate records and documents of the Borrowers, copies of public documents,
certificates of the officers or representatives of the Borrowers, and such other
instruments and documents, and have made such inquiries, as I have deemed
necessary as a basis for such opinion.  In making such examinations, I have
assumed the genuineness of all signatures (other than the signatures of the
Borrowers) and the authenticity of all documents submitted to me as originals,
the conformity to original documents of all documents submitted to me as
certified or photostatic copies, and the authenticity of the originals of such
latter documents.  As to questions of fact material to such opinion, to the
extent I deemed necessary, I have relied upon the representations and warranties
of the Borrowers made in the Credit Agreement
<PAGE>
 
and upon certificates of the officers of the Borrowers. Capitalized terms not
otherwise defined in this opinion letter have the meanings specified in the
Credit Agreement.

     Based upon the foregoing, I am of the opinion that:

     1.   Each of the Borrowers has been duly incorporated and is validly
existing and in good standing under the laws of the State of Delaware, and is
duly qualified as a foreign corporation and in good standing under the laws of
each jurisdiction where the failure to so qualify would have a Material Adverse
Effect. Each of the Borrowers has the requisite corporate power and authority to
own, pledge, and operate its properties and assets, to lease the property it
operates under lease, and to conduct its business as now conducted.

     2.   The execution, delivery, and performance by the Borrowers of the
Credit Agreement, the Borrowings by the Borrowers under the Credit Agreement (i)
are within the corporate power of each of the Borrowers; (ii)have been duly
authorized by each of the Borrowers by all necessary corporate action; (iii) are
not in contravention of JCPenney's Restated Certificate of Incorporation,
Funding's Certificate of Incorporation, as amended, or either of the Borrower's
bylaws; (iv) to the best of my knowledge do not violate any material law,
statute, rule, or regulation, or any material order of any Governmental
Authority, applicable to either of the Borrowers; (v) do not conflict with or
result in the breach of, or constitute a default under, the material borrowing
indentures, agreements, or other instruments of either of the Borrowers; (vi) do
not result in the creation or imposition of any Lien upon any of the property or
assets of either of the Borrowers other than any Lien created by the Credit
Agreement; and (vii) do not require the consent or approval of, or any filing
with, any Governmental Authority or any other person party to those agreements
described above other than those that have been obtained or made or where the
failure to obtain such consent or approval would not result in a Material
Adverse Effect.

     3.   The Credit Agreement has been duly executed and delivered by each of
the Borrowers and constitutes a legal, valid, and binding obligation of each
such Borrower, enforceable against such Borrower in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.

     4.   Neither Borrower is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "public-utility company" or a
"holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.


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<PAGE>
 
     5.   To the best of my knowledge, except as set forth in Schedule 3.09 of
the Credit Agreement, no litigation by or before any Governmental Authority is
now pending or threatened against JCPenney or Funding (i) which involves the
Credit Agreement or (ii) as to which there is a reasonable possibility of an
adverse determination and which, if adversely determined, would, individually or
in the aggregate result in a Material Adverse Effect.

     6.   The Support Agreements have been duly executed and delivered by
JCPenney and, where applicable, Funding and, as of the date hereof, are in full
force and effect in accordance with their terms.

     The opinions expressed herein are limited to the laws of the State of
Delaware with respect to the opinions provided in paragraph 1 (except as to due
qualification as a foreign corporation and good standing under the laws of other
jurisdictions) and clauses (i), (ii), and (iii) of paragraph 2.  The other
opinions expressed are limited to the laws of the State of New York and the laws
of the United States.  I do not express any opinion herein concerning any laws
of any other jurisdictions.  This opinion is furnished to you in connection with
the transactions contemplated by the Credit Agreement, and may not be relied
upon by any other person, firm, or corporation for any purpose or by you in any
other context without my prior written consent.

                              Very truly yours,


                              Charles R. Lotter
                              Executive Vice President,
                              Secretary and General Counsel




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