<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
___________
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
___________
For the 13 week and 39 week periods Commission File Number 1-4947-1
ended October 30, 1999
J. C. PENNEY FUNDING CORPORATION
_______________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 51-0101524
_______________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6501 Legacy Drive, Plano, Texas 75024-3698
_______________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 972-431-1000
__________________
___________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
______ ______
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
500,000 shares of Common Stock of $100 par value, as of October 30, 1999.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)
(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
1
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
____________________
The following interim financial information of J. C. Penney Funding
Corporation ("Funding"), a wholly owned subsidiary of J. C. Penney Company,
Inc. ("JCPenney"), is unaudited; however, in the opinion of Funding, it
includes all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation. The financial information should be
read in conjunction with the audited financial statements included in
Funding's Annual Report on Form 10-K for the 52 weeks ended January 30,
1999.
Statements of Income and Reinvested Earnings
(Dollars in millions)
13 weeks ended 39 weeks ended
______________ ____________________
Oct. 30, Oct 31, Oct. 30, Oct 31,
1999 1998 1999 1998
____ ____ ____ ____
Interest earned from
JCPenney and affiliates $ 63 $ 46 $ 156 $ 113
Interest expense 41 30 102 74
____ ____ _____ ____
Income before income taxes 22 16 54 39
Income taxes 7 6 19 14
____ ____ ____ _____
Net income 15 10 35 25
Reinvested earnings at
beginning of period 1,062 1,022 1,042 1,007
______ ______ ______ ______
Reinvested earnings at
end of period $1,077 $1,032 $1,077 $1,032
====== ====== ====== ======
2
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Balance Sheets
(Dollars in millions)
Oct. 30, Oct. 31, Jan.30,
1999 1998 1999
________ _________ ________
ASSETS
Cash $ 1 $ 0 $ 0
Loans to JCPenney and affiliates $ 4,481 $ 3,708 $ 3,129
________ ________ ________
$ 4,482 $ 3,708 $ 3,129
======== ======== ========
LIABILITIES AND EQUITY OF JCPENNEY
Short-term debt $ 3,222 $ 2,518 $ 1,924
Due to JCPenney 38 13 18
______ ______ ______
Total liabilities $ 3,260 $ 2,531 $ 1,942
Equity of JCPenney:
Common stock (including
contributed capital), par
value $100:
Authorized, 750,000 shares
Issued, 500,000 shares $145 $145 $145
Reinvested earnings $ 1,077 $ 1,032 $ 1,042
________ _________ ________
Total equity of JCPenney $ 1,222 $ 1,177 $ 1,187
________ ________ ________
$ 4,482 $ 3,708 $ 3,129
======== ======== ========
3
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Consolidated Statements of Cash Flows
(Dollars in millions)
39 weeks ended
_________________________________
Oct. 30, Oct. 31,
1999 1998
________ ________
Operating Activities
Net Income $ 35 $ 25
(Increase) Decrease in loans to
JCPenney (1,353) (1,117)
(Decrease) Increase in amount due
to JCPenney 20 (10)
_______ _______
(1,298) (1,102)
________ ________
Financing Activities
Increase (Decrease) in short-term
Debt 1,298 1,102
_____ _____
Increase (Decrease) in cash -1- -0-
Cash at beginning of year -0- -0-
______ ______
Cash at end of third quarter $ -1- $ -0-
========= =========
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Under the terms of the loan agreement which provides for unsecured loans to
be made by Funding to JCPenney and the receivables agreement pursuant to
which Funding may purchase an undivided interest in certain JCPenney
customer receivables, Funding derives earnings on loans to JCPenney and
income from charges to JCPenney. The income of Funding is designed to
cover Funding's fixed charges (interest expense) at a coverage ratio
mutually agreed upon by Funding and JCPenney. The earnings to fixed
charges coverage ratio has historically been at least one and one-half
times.
Since 1986, Funding has provided financing to JCPenney in accordance with
the loan agreement and no receivable balances have been purchased.
Funding is not and has not been involved in the administration of
JCPenney's retail credit operation and does not bear any expenses or
receive any finance charge revenue connected therewith.
For the third quarter of 1999, income, expenses, and provision for taxes
increased as compared with the third quarter of 1998, as a result of
higher average borrowing levels. Borrowing levels averaged $2,923 million
during the 1999 third quarter as compared with $2,172 million during the
comparable 1998 period. At the end of the third quarter of 1999, borrowing
levels were $3,222 million as compared with $2,518 million at the end of
the third quarter of 1998. Average interest rates for the third quarter of
1999 increased 7 basis points as compared with the third quarter of 1998.
For the nine month period ended October 30, 1999, income, expenses, and
provision for taxes increased as compared to the 1998 comparable period.
These increases were a result of higher average borrowing levels. Borrowing
levels averaged $2,549 million for the first nine months of 1999 as
compared with $1,781 million in the comparable 1998 period due to an
increase in JCPenney's general capital needs. For the nine month period in
1999, average rates decreased 22 basis points as compared with the same
period in 1998.
JCPenney has initiated actions to address the Year 2000 issue relating to
Funding. Year 2000 readiness work was more than 99 per cent complete as of
October 30, 1999. Since January 1999, JCPenney has been retesting all
systems critical to JCPenney's core businesses. JCPenney has also focused
on the Year 2000 readiness of its suppliers and service providers, both
independently and in conjunction with the National Retail Federation.
Total costs associated with these efforts are not expected to have a
material impact on the financial results of either JCPenney or Funding. In
addition, Funding has communicated with its commercial paper
5
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dealers to determine their Year 2000 readiness. However, there can be no
guarantee that the systems of these commercial paper dealers, on which
Funding relies, will be converted in a timely manner, or that a failure
to convert would not have a material adverse effect on Funding's
operations.
SUBSEQUENT EVENT
On December 6, 1999, JCPenney completed the previously announced sale of
its proprietary credit card business to General Electric Capital
Corporation.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits
The following documents are filed as exhibits to this
report:
4(a) Amended and Restated 364-Day Revolving Credit
Agreement dated as of October 1, 1999, among
J.C.Penney Company, Inc. and J.C.Penney Funding
Corporation, the Lenders party thereto, The Chase
Manhattan Bank, as Administrative Agent, Salomon
Smith Barney Inc., as Syndication Agent, and Bank of
America, N.A. and Credit Suisse First Boston, as
Co-Documentation Agents.
27 Financial Data Schedule for the nine months ended
Oct. 30, 1999.
(b) Reports on Form 8-K
___________________
None
6
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SIGNATURES
__________
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
J. C. PENNEY FUNDING CORPORATION
By: /s/ W. J. Alcorn
__________________________
W. J. Alcorn
Controller
(Principal Accounting Officer)
Date: December 13, 1999
7
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Exhibit 4 (a)
CONFORMED COPY
===========================================================================
J. C. PENNEY COMPANY, INC.
J. C. PENNEY FUNDING CORPORATION
___________________________________________________
AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AGREEMENT
dated as of October 1, 1999
___________________________________________________
THE CHASE MANHATTAN BANK,
as Administrative Agent,
SALOMON SMITH BARNEY INC.,
as Syndication Agent,
BANK OF AMERICA, N.A. and CREDIT SUISSE FIRST BOSTON,
as Co-Documentation Agents
___________________________________________________
CHASE SECURITIES INC. and SALOMON SMITH BARNEY INC.,
as Joint Lead Arrangers and Joint Book Managers
==========================================================================
<PAGE>
AMENDED AND RESTATED 364-DAY REVOLVING CREDIT AGREEMENT
(this "Amendment and Restatement") dated as of October 1,
1999, among J. C. PENNEY COMPANY, INC. and J. C. PENNEY
FUNDING CORPORATION (the "Borrowers"), the LENDERS listed on
the signature pages hereof (the "Lenders"), THE CHASE
MANHATTAN BANK, as Administrative Agent (the "Agent"),
SALOMON SMITH BARNEY INC., as Syndication Agent (the
"Syndication Agent"), and BANK OF AMERICA, N.A. and CREDIT
SUISSE FIRST BOSTON, as Co-Documentation Agents (the "Co-
Documentation 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, as amended and restated as of December 3, 1996, as amended and
restated as of November 21, 1997, and as amended and restated as of
November 20, 1998 (the "Agreement");
WHEREAS, at the date hereof, there are no Loans outstanding under
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 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. Extension of Maturity Date. (a) Section 1.01 of the
__________________________
Agreement is hereby amended by deleting the definition of the defined term
"Maturity Date" in its entirety and substituting in lieu thereof the
following:
"Maturity Date" shall mean the first anniversary of the
_____________
Termination Date.
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(b) Section 1.01 of the Agreement is hereby amended by adding
the following defined term in proper alphabetical order:
"Termination Date" shall mean September 29, 2000.
________________
(c) The first sentence of the first paragraph, the definition of
the defined term "Commitment" and Sections 2.01 and 2.11(a) of the
Agreement are hereby amended by deleting the defined term "Maturity Date"
in each place it appears and substituting in lieu thereof the defined term
"Termination Date".
(d) Section 2.06(a) of the Agreement is hereby amended by
deleting such subsection in its entirety and substituting in lieu thereof
the following:
(a) The Borrowers agree, jointly and severally, to pay to the
Agent for the account of the Lenders ratably in proportion to their
Commitments on each March 31, June 30, September 30 and December 31
and on the date on which the Commitments of the Lenders shall be
terminated as provided herein, a facility fee (a "Facility Fee") at a
rate per annum equal to the Facility Fee Percentage on the Total
Commitment, whether used or unused; provided that, if any such Lender
________
continues to have any Loans outstanding after its Commitment
terminates, then such Facility Fee shall continue to accrue on the
daily amount of such Lender's Loans from and including the date on
which its Commitment terminates to but excluding the date on which
such Lender ceases to have any Loans outstanding. All Facility Fees
shall be computed in arrears on the basis of the actual number of days
elapsed in a year of 360 days. The Facility Fee due to each Lender
shall commence to accrue on the Closing Date (or, if later, the date
on which such Lender became a Lender) and shall cease to accrue on the
later of (A) the termination of the Commitment of such Lender as
provided herein or (B) if such Lender continues to have any Loans
outstanding after its Commitment terminates, the date on which such
Lender ceases to have any Loans outstanding.
(e) Section 2.07 of the Agreement is hereby amended by deleting
the defined term "Commitment Termination Date" and substituting in lieu
thereof the defined term "Maturity Date".
(f) Section 2.11(d) of the Agreement is hereby amended by
deleting such subsection in its entirety and substituting in lieu thereof
the following:
(d) [INTENTIONALLY OMITTED].
SECTION 3. Financial Statements. (a) Sections 3.05 and 3.06 of
____________________
the Agreement are hereby amended by deleting each reference to the date
"January 31, 1998" and substituting in lieu thereof the date "January 30,
1999".
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3
(b) Section 3.05 of the Agreement is hereby amended by deleting
the date "August 1, 1998" and substituting in lieu thereof the date
"July 31, 1999".
SECTION 4. Changes in the Available Commitment. (a)
___________________________________
Section 1.01 of the Agreement is hereby amended by deleting the definitions
of each of the defined terms "Available Commitment" and "Seasonal
Availability Period" in their entirety.
(b) The term "Available Commitment" is hereby deleted in each
place in which it appears in the Agreement and the term "Total Commitment"
is hereby substituted in lieu thereof.
(c) Section 2.21 of the Agreement is hereby amended by deleting
such Section in its entirety and substituting in lieu thereof the
following:
SECTION 2.21. [INTENTIONALLY OMITTED].
SECTION 5. Year 2000 Issues. Article III of the Agreement is
________________
amended by adding at the end thereof a new Section 3.18 to read as follows:
SECTION 3.18. Year 2000 Issues. The Borrowers have established
________________
a program to address the inability of certain computer programs and
infrastructure systems to process dates in and following the
year 2000. As of the date hereof, all modifications and upgrades of
each Borrower's critical systems (including a contingency plan) are
reasonably expected to be completed by October 31, 1999. As of the
date hereof, the cost to the Borrowers of such modifications and
upgrades, as the case may be, and testing to the Borrowers will not
result in a Default or, in the good faith belief of the Borrowers,
have a reasonable possibility of affecting materially and adversely
the Borrowers' abilities to perform their obligations under this
Agreement.
SECTION 6. The Agent and its Counsel. (a) Article VIII of the
__________________________
Agreement is hereby amended by deleting the defined term "Managing Agent"
in each place it appears in the fourth paragraph thereof and substituting
in lieu thereof the defined term "Co-Documentation Agent".
(b) The last sentence of Article VIII of the Agreement is hereby
amended by deleting such sentence in its entirety and substituting in lieu
thereof the following:
No Syndication Agent or Co-Documentation Agent shall have any
duties or responsibilities hereunder in its capacity as such.
<PAGE>
4
(c) Section 9.01(c) of the Agreement is hereby amended by
deleting such subsection in its entirety and substituting in lieu thereof
the following:
(c) if to the Agent, to it at The Chase Manhattan Bank, 270 Park
Avenue, New York, NY 10017, Attention of Barry Bergman,
Telephone: (212) 270-0203, Telecopy: (212) 270-5646.
(d) Section 9.05(a) of the Agreement is hereby amended by
deleting the firm "Davis Polk & Wardwell" and substituting in lieu thereof
the firm "Cravath, Swaine & Moore".
(e) Section 9.05(b) of the Agreement is hereby amended by
deleting the name "J.P. Morgan Securities Inc.," in its entirety.
SECTION 7. 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.
SECTION 8. Changes in Commitments. With effect from and
_______________________
including the date this Amendment and Restatement becomes effective in
accordance with Section 11,
(a) each Person listed on the signature pages hereof which is
not a party to the Agreement shall become a Lender party to the
Agreement;
(b) the Commitment of each Lender shall be the amount set forth
opposite the name of such Lender on the Commitment Schedule annexed
hereto as Schedule I; and
(c) 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.
<PAGE>
5
SECTION 9. Pricing Schedule. Exhibit D to the Agreement is
_________________
amended by deleting the last paragraph thereof in its entirety and
substituting in lieu thereof the following:
In the case of split ratings from S&P and Moody's at any time
when the Total Commitment is greater than $1,125,000,000 or the Total
Commitment (as defined in the Tranche A Credit Agreement) is greater
than $1,125,000,000, the rating to be used to determine Categories is
the lower of the two (e.g., A+/A2 results in Category II); provided
that in the event the split is more than one full ratings "notch", the
average rating (or the lower of the two intermediate ratings) shall be
used (e.g. A+/A3 results in Category II and A+/Baa1 results in
Category III). In the case of split ratings from S&P and Moody's at
any time when the Total Commitment is equal to or less than
$1,125,000,000 and the Total Commitment (as defined in the Tranche A
Credit Agreement) is equal to or less than $1,125,000,000, the rating
to be used to determine Categories is the higher of the two (e.g.,
A+/A2 results in Category I); provided that in the event the split is
more than one full ratings "notch", the average rating (or the higher
of the two intermediate ratings) shall be used (e.g. A+/A3 results in
Category II, as does A+/Baa1). Notwithstanding the foregoing, if at
any date the Index Debt is rated BB+ or lower by S&P or Ba1 or lower
by Moody's, the Facility Fee Percentage and the Euro-Dollar Margin
shall be determined by reference to Category VI.
SECTION 10. Governing Law. This Amendment and Restatement shall
______________
be governed by and construed in accordance with the laws of the State of
New York.
SECTION 11. 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 Exhibit A hereto, and the Borrowers hereby
instruct such counsel to deliver such opinion to the Agent;
<PAGE>
6
(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 all expenses of the Agent (including legal fees and
expenses) which have been submitted by the Agent to the Borrowers for
payment; 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.
<PAGE>
7
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/ Michael P. Dastugue
___________________________________________
Name: Michael P. Dastugue
Title: Assistant Treasurer
J. C. PENNEY FUNDING CORPORATION,
by
/s/ Frank N. Napoli
___________________________________________
Name: Frank N. Napoli
Title: Vice President and Treasurer
THE CHASE MANHATTAN BANK, as Lender and as
Agent,
by
/s/ Barry Bergman
___________________________________________
Name: Barry Bergman
Title: Vice President
SALOMON SMITH BARNEY INC., as Syndication
Agent,
by
/s/ Laura A. Siracuse
___________________________________________
Name: Laura A. Siracuse
Title: Attorney-in-Fact
<PAGE>
8
BANK OF AMERICA, N.A., as Lender and as Co-
Documentation Agent,
by
/s/ Kim Whitney
___________________________________________
Name: Kim Whitney
Title: Principal
CREDIT SUISSE FIRST BOSTON, as Lender and Co-
Documentation Agent,
by
/s/ Douglas Maher
_______________________________________________
Name: Douglas Maher
Title: Vice President
by
/s/ James Moran
_______________________________________________
Name: James Moran
Title: Director
BANK BOSTON,
by
/s/ Stephen J. Garvin
_______________________________________________
Name: Stephen J. Garvin
Title: Director
BANK OF HAWAII,
by
/s/ Brenda K. Testerman
_______________________________________________
Name: Brenda K. Testerman
Title: Vice President
THE BANK OF NEW YORK,
<PAGE>
by
/s/ Charlotte Sohn
_______________________________________________
Name: Charlotte Sohn
Title: Vice President
BANK ONE, NA (Formerly known as The First
National Bank of Chicago),
by
/s/ Catherine A. Muszynski
_______________________________________________
Name: Catherine A. Muszynski
Title: Vice President
THE BANK OF TOKYO-MITSUBISHI, LTD.,
by
/s/ John M. Mearns
_______________________________________________
Name: John M. Mearns
Title: Vice President and Manager
BANKERS TRUST COMPANY,
by
/s/ Mary Kay Coyle
_______________________________________________
Name: Mary Kay Coyle
Title: Managing Director
BARCLAYS BANK PLC,
by
/s/ Marlene Wechselblaet
_______________________________________________
Name: Marlene Wechselblaet
Title: Vice President
CITIBANK, N.A.,
by
<PAGE>
/s/ Laura A. Siracuse
_______________________________________________
Name: Laura A. Siracuse
Title: Attorney-in-Fact
FIRST AMERICAN NATIONAL BANK,
by
/s/ Seth Butler
_______________________________________________
Name: Seth Butler
Title: Corporate Bank Officer
FIRST SECURITY BANK, N.A.,
by
/s/ Judy Callister
_______________________________________________
Name: Judy Callister
Title: Vice President
FIRSTAR BANK MILWAUKEE, N.A.,
by
/s/ John Franceschi
_______________________________________________
Name: John Franceschi
Title: Commercial Loan Officer
FLEET NATIONAL BANK,
by
/s/ Thomas J. Bullard
_______________________________________________
Name: Thomas J. Bullard
Title: Vice President
FIRST UNION NATIONAL BANK,
by
/s/ Richard A. Clarke
_______________________________________________
Name: Richard A Clarke
<PAGE>
Title: Senior Vice President
HIBERNIA NATIONAL BANK,
by
/s/ Angela Bentley
_______________________________________________
Name: Angela Bentley
Title: Portfolio Manager
HSBC BANK USA,
by
/s/ Robert Corder
_______________________________________________
Name: Robert Corder, #9428
Title: Relationship Manager
KEYBANK NATIONAL ASSOCIATION,
by
/s/ Frank J. Jancar
_______________________________________________
Name: Frank J. Jancar
Title: Vice President
MELLON BANK, N.A.,
by
/s/ Richard J. Scharch
_______________________________________________
Name: Richard J. Scharch
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
by
/s/ Dennis Wilczek
_______________________________________________
Name: Dennis Wilczek
Title: Associate
<PAGE>
NATIONAL CITY BANK,
by
/s/ Jeffrey L. Hawthorne
_______________________________________________
Name: Jeffrey L. Hawthorne
Title: Senior Vice President
THE NORTHERN TRUST COMPANY,
by
/s/ Jaron Grimm
_______________________________________________
Name: Jaron Grimm
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
by
/s/ Philip K. Liebscher
_______________________________________________
Name: Philip K. Liebscher
Title: Vice President
ROYAL BANK OF CANADA,
by
/s/ Lynne M. Litterini
_______________________________________________
Name: Lynne M. Litterini
Title: Manager
STATE STREET BANK AND TRUST COMPANY,
by
/s/ Jacqueline Kuss
_______________________________________________
Name: Jacqueline Kuss
Title: Vice President
<PAGE>
SUNTRUST BANK, ATLANTA,
by
/s/ Todd C. Danis
_______________________________________________
Name: Todd C. Danis
Title: Vice President
UMB BANK, N.A.,
by
/s/ David A. Proffitt
_______________________________________________
Name: David A. Proffitt
Title: Senior Vice President
U.S. BANK NATIONAL ASSOCIATION,
by
/s/ David A. Draxler
_______________________________________________
Name: David A. Draxler
Title: Vice President
WACHOVIA BANK, N.A.,
by
/s/ Paige Mesaros
_______________________________________________
Name: Paige Mesaros
Title: Vice President
WELLS FARGO BANK, N.A.,
by
/s/ Timothy A. McDevitt
_______________________________________________
Name: Timothy A. McDevitt
Title: Vice President
<PAGE>
SCHEDULE I
COMMITMENT SCHEDULE
I. Continuing Lenders
NAME OF LENDER AND APPLICABLE LENDING OFFICE COMMITMENT
____________________________________________ __________
The Chase Manhattan Bank $100,000,000
Citibank, N.A. $100,000,000
Bank of America, N.A. $95,000,000
Credit Suisse First Boston $95,000,000
Bank One, N.A. $70,000,000
First Union National Bank $70,000,000
Morgan Guaranty Trust Company $70,000,000
Wells Fargo Bank, N.A. $70,000,000
Bankers Trust Company $60,000,000
HSBC Bank USA $60,000,000
Mellon Bank, N.A. $60,000,000
PNC Bank National Association $60,000,000
Wachovia Bank, N.A. $60,000,000
The Bank of Tokyo-Mitsubishi, Ltd. $50,000,000
The Bank of New York $45,000,000
BankBoston $35,000,000
Fleet National Bank $35,000,000
Barclays Bank PLC $30,000,000
First American National Bank $30,000,000
Firstar Bank Milwaukee, N.A. $30,000,000
KeyBank National Association $30,000,000
<PAGE>
NAME OF LENDER AND APPLICABLE LENDING OFFICE COMMITMENT
____________________________________________ __________
National City Bank $30,000,000
Royal Bank of Canada $30,000,000
State Street Bank and Trust Company $30,000,000
SunTrust Bank, Atlanta $30,000,000
The Northern Trust Company $30,000,000
UMB Bank, N.A. $30,000,000
Bank of Hawaii $20,000,000
Hibernia National Bank $20,000,000
First Security Bank, N.A. $15,000,000
US Bank, N.A. $10,000,000
TOTAL $1,500,000,000
<PAGE>
EXHIBIT A
October [ ], 1999
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
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 11(b) of the
Amended and Restated 364-Day Revolving Credit Agreement dated as of
October [ ], 1999, among the Borrowers, The Chase Manhattan Bank, as
Administrative Agent (the "Agent"), the lenders listed on the signature
pages thereof (the "Lenders"), Salomon Smith Barney Inc., as Syndication
Agent (the "Syndication Agent"), and Bank of America and Credit Suisse
First Boston, as Co-Documentation Agents (the "Co-Documentation 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, as amended and restated as of December 3,
1996, as amended and restated as of November 21, 1997, and as amended and
restated with new Lenders as of November 20, 1998 (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 and upon certificates of the
officers of the Borrowers. Capitalized
<PAGE>
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 and 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, as amended, 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.
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
<PAGE>
3
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,
/s/ Charles R. Lotter
Charles R. Lotter
Executive Vice President,
Secretary and General Counsel
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND RELATED CONSOLIDATED STATEMENT OF INCOME
OF J. C. PENNEY FUNDING CORPORATION AS OF OCTOBER 30, 1999, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> OCT-30-1999
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 4,481
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,482
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,482
<CURRENT-LIABILITIES> 3,260
<BONDS> 0
0
0
<COMMON> 145
<OTHER-SE> 1,077
<TOTAL-LIABILITY-AND-EQUITY> 4,482
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (54)
<INCOME-PRETAX> 54
<INCOME-TAX> 19
<INCOME-CONTINUING> 35
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
