-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I8UrNCuR8CGl3Ddh+B7mzuAs6qx8cMmExBnJ+kP04iij6irLM7UiZyQ2LUgYb9Tj v0KRAw32zU7Q2/OI9ULFQQ== 0000950131-97-003322.txt : 19970514 0000950131-97-003322.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950131-97-003322 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONTGOMERY WARD HOLDING CORP CENTRAL INDEX KEY: 0000836974 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 363571585 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17540 FILM NUMBER: 97601818 BUSINESS ADDRESS: STREET 1: ONE MONTGOMERY WARD PLZ CITY: CHICAGO STATE: IL ZIP: 60671 BUSINESS PHONE: 3124672000 10-Q 1 FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 ____________ FORM 10-Q (MARK ONE) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF --- THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 29, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF --- THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-17540 MONTGOMERY WARD HOLDING CORP. (Exact Name Of Registrant As Specified In Its charter) Delaware 36-3571585 (State Of Incorporation) (I.R.S. Employer Identification No.) Montgomery Ward Plaza, Chicago, Illinois 60671 (Address Of Principal Executive Offices) (Zip Code) Registrant's Telephone Number Including Area Code: 312/467-2000 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 ------ ------ As of April 30, 1997 the Registrant had 18,324,522 shares of Class A Common Stock and 25,000,000 shares of Class B Common Stock of the Registrant outstanding. ================================================================================ PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements INDEX Page Montgomery Ward Holding Corp. Consolidated Statement of Income................................... 2 Consolidated Balance Sheet......................................... 3 Consolidated Statement of Cash Flows............................... 4 Notes to Consolidated Financial Statements......................... 6 1 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
March 29, March 30, 1997 1996 --------- --------- (Millions, except per share amounts) Revenues Net sales, including leased and licensed department sales........................... $1,119 $1,253 Direct response marketing revenues, including insurance................................. 210 182 ------ ------ Total Revenues.................................... 1,329 1,435 ------ ------ Costs and Expenses Cost of goods sold, including net occupancy and buying expense........................ 997 1,038 Operating, selling, general and administrative expenses, including benefits and losses of direct response operations (Note 4)........................ 525 452 Interest expense....................................... 33 22 ------ ------ Total Costs and Expenses........................... 1,555 1,512 ------ ------ Loss Before Income Taxes............................... (226) (77) Income Tax Benefit..................................... (85) (29) ------ ------ Net Loss............................................... (141) (48) Preferred Stock Dividend Requirements (Note 5)......... 3 3 ------ ------ Net Loss Applicable to Common Shareholders................................... $ (144) $ (51) ====== ====== Net Loss per Common Share (Note 2) Class A............................................... $(3.71) $(1.27) Class B............................................... $(3.05) $(1.07) Cash dividends per Common Share........................ $ - $ -
See notes to consolidated financial statements. 2 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED BALANCE SHEET (UNAUDITED)
March 29, December 28, 1997 1996 --------- ----------- ASSETS (Millions) Cash and cash equivalents........................... $ 96 $ 32 Short-term investments.............................. 4 3 Investments of insurance operations................. 276 317 ------ ------ Total Cash and Investments..................... 376 352 Trade and other accounts receivable................. 174 213 Accounts and notes receivable from affiliates....... 11 13 ------ ------ Total Receivables.............................. 185 226 Merchandise inventories............................. 1,402 1,545 Prepaid pension cost................................ 355 351 Properties, plant and equipment, net of accumulated depreciation and amortization.......... 1,297 1,308 Direct response and insurance acquisition costs..... 599 603 Other assets........................................ 510 494 Prepaid deferred income taxes....................... 44 - ------ ------ Total Assets................................... $4,768 $4,879 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY Short-term debt..................................... $1,437 $1,028 Trade accounts payable.............................. 1,340 1,585 Federal income taxes payable........................ 4 4 Accrued liabilities and other obligations........... 1,148 1,228 Insurance policy claim reserves..................... 230 227 Long-term debt...................................... 85 87 Obligations under capital leases.................... 58 60 Deferred income taxes............................... - 52 ------ ------ Total Liabilities.............................. 4,302 4,271 Commitments and Contingent Liabilities (Note 6) Redeemable Preferred Stock (Note 5)................. 175 175 Shareholders' Equity Common stock....................................... 1 1 Capital in excess of par value..................... 53 53 Retained earnings.................................. 364 509 Unrealized gain on marketable securities.......... 12 9 Less: Treasury stock, at cost.................... (139) (139) ------ ------ Total Shareholders' Equity................... 291 433 ------ ------ Total Liabilities and Shareholders' Equity.......... $4,768 $4,879 ====== ======
See notes to consolidated financial statements. 3 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
For the 13-Week Period Ended March 29, March 30, (Millions) 1997 1996 ---------- ---------- Cash flows from operating activities: Net loss................................................. $ (141) $ (48) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization.......................... 31 31 Amortization of Goodwill............................... 2 6 Amortization of Direct response and insurance acquisition costs........................... 61 42 Deferred income taxes.................................. (96) - ------- ------ Net (loss) income adjusted for non-cash expenses..... (143) 31 ------- ------ Changes in operating assets and liabilities: (Increase) decrease in: Trade and other accounts receivable................... 39 12 Accounts and notes receivable from affiliates......... 2 10 Merchandise inventories............................... 143 201 Prepaid pension cost.................................. (4) (4) Federal income taxes receivable, net.................. - (31) Direct response insurance acquisition costs........... (57) (64) Other assets.......................................... (16) (10) Increase (decrease) in: Trade accounts payable................................ (245) (494) Accrued liabilities and other obligations............. (77) (57) Insurance policy claim reserves....................... 3 6 ------- ------ Net cash used for operations........................ (355) (400) ------- ------ Cash flows from (used for) investing activities: Investment in Merchant Partners.......................... - (2) Acquisition of Amoco Enterprises......................... - (102) Purchase of short-term investments....................... (43) (9) Purchase of investments of insurance operations.......... (101) (104) Sale of short-term investments........................... 42 9 Sale of investments of insurance operations.............. 142 117 Capital expenditures..................................... (20) (11) Disposition of properties, plant and equipment, net......................................... - 1 ------- ------ Net cash from (used for) investing activities....... $ 20 $ (101) ------- ------
See notes to consolidated financial statements. 4 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
For the 13-Week Period Ended March 29, March 30, (Millions) 1997 1996 --------- --------- Cash flows from financing activities: Proceeds from short-term borrowings, net......... $ 409 $ 541 Payments of long-term debt....................... (2) (1) Payments of obligations under capital leases..... (2) (1) Proceeds from issuance of common stock........... - 1 Cash dividends paid.............................. (6) (3) Purchase of treasury stock, at cost.............. - (10) --------- --------- Net cash provided by financing activities...... 399 527 --------- --------- Increase in cash and cash equivalents............. 64 26 Cash and cash equivalents at beginning of period.. 32 37 --------- --------- Cash and cash equivalents at end of period........ $ 96 $ 63 ========= ========= Supplemental disclosure of cash flow information: Cash paid during the period for: Income taxes.................................... $ - $ 1 Interest........................................ $ 19 $ 23 Non-cash investing activity: Change in unrealized gain on marketable equity securities............................... $ 3 $ - Non-cash financing activity: Notes issued for purchase of treasury stock...... $ - $ 5
See notes to consolidated financial statements. 5 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) 1. Accounting Policies Basis of Presentation The Consolidated Balance Sheet as of March 29, 1997 and the Statements of Income and Cash Flows for the three months ended March 29, 1997 and March 30, 1996 are unaudited. The interim financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The interim financial statements should be read in the context of the financial statements and notes thereto filed with the Securities and Exchange Commission in the 1996 Annual Report on Form 10-K of Montgomery Ward Holding Corp. (the "Company"). Capitalized terms not otherwise defined herein have the meaning ascribed to such terms in the 1996 Annual Report on Form 10-K. Certain prior period amounts have been reclassified to be comparable with the current period presentation. 2. Net (Loss) Per Common Share Net (Loss) per common share is computed as follows: For the 13-Week Period Ended March 29, 1997 Class A Class B Net (Loss) applicable to Common $(68) $(76) Shareholders...................... Weighted average number of common shares outstanding........................ 18,326,019 25,000,000 Net (Loss) per share................ $(3.71) $3.05) For the 13-Week Period Ended March 30, 1996 Class A Class B Net Loss applicable to Common $(24) $(27) Shareholders...................... Weighted average number of common shares outstanding....................... 19,155,678 25,000,000 Net (Loss) per share................ $(1.27) $(1.07) In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings per Share." The statement is effective for financial statements for periods ending after December 15, 1997, and changes the method in which earnings per share will be determined and presented in the financial statements. Adoption of this statement by the Company will not have a material impact on earnings per share. 6 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) 3. Liquidity The Company had a net loss of $141 for the 13-week period ending March 29, 1997 and its short term debt increased by $409 from December 28, 1996. An amendment to the Company's bank agreements was required at year end 1996 and was obtained. Due to the Company's worsening financial condition, waivers were required and obtained for the first quarter of 1997. It will likely be necessary for the Company to obtain amendments or waivers with respect to the second quarter of fiscal 1997. The Company intends to improve its financial condition and reduce its dependence on borrowing by slowing expansion, controlling expenses, closing certain unprofitable stores and continuing to implement its inventory reduction program. Management is in the process of reevaluating the Company's merchandising, marketing, store operations and real estate strategies. The Company is also considering the sale of certain operating units as a means of generating cash. The Company is actively involved in negotiations with respect to the sale of certain of these units, including The Signature Group. Future cash is also expected to continue to be provided by ongoing operations, sales of receivables under the Agreements with Monogram Credit Card Bank of Georgia ("Monogram") and Montgomery Ward Credit Corporation ("MWCC"), borrowings under revolving loan facilities and vendor financing programs. The Company is currently in discussions with financing sources with a view toward a longer term solution to its liquidity problems and obtaining refinancing for all or a substantial portion of its outstanding indebtedness, including a total of $1,437 which will mature on or about August 29, 1997. This would include repayment of the current bank borrowings and amounts outstanding under the Note Purchase Agreements. The Company's management is highly confident that the indebtedness can be refinanced. The Company's largest shareholder, GE Capital, also expects the Company to be able to refinance such indebtedness. However, there can be no assurance that such refinancing can be obtained or, if obtained, will be on terms favorable to the Company or that amendments or waivers required to maintain compliance with the existing agreements can be obtained. 4. Insurance, Benefits and Losses Operating, selling, general and administrative expenses include benefits and losses related to direct response marketing operations of $34 and $39 for the 13-week periods ended March 29, 1997 and March 30, 1996, respectively. 7 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) 5. Preferred Stock On January 31, 1996, GE Capital exercised an exchange option which allowed it to exchange the MW Senior Preferred Stock for senior preferred stock of the Company with substantially the same terms. On March 28, 1996, the Company's Certificate of Incorporation was amended to authorize the issuance of a new series of senior preferred stock (New Senior Preferred Stock). On March 29, 1996, the Company issued all of the 1,750 shares of New Senior Preferred Stock to General Electric Capital Corporation ("GE Capital") in exchange for the 1,750 shares of MW Senior Preferred Stock held by GE Capital. Dividends on the New Senior Preferred Stock are payable quarterly at an annual rate of $7,010 per share. The Company is required to redeem the New Senior Preferred Stock on June 30, 2002, with the option of redeeming all or any portion prior to June 30, 2002. 6. Commitments and Contingent Liabilities MW Holding, Montgomery Ward and its subsidiaries are engaged in various litigation and have a number of unresolved claims. While the amounts claimed are substantial and the ultimate liability with respect to such litigation and claims cannot be determined at this time, management is of the opinion that such liability, to the extent not provided for through insurance or otherwise, is not likely to have a material impact on the financial condition and the results of operations of the Company. On April 29, 1997 the Company, Montgomery Ward and Lechmere, were served with a complaint, purporting to represent a nationwide class, filed by certain bankrupt credit card holders of Montgomery Ward and Lechmere credit cards. The complaint alleged that the Company, Montgomery Ward and Lechmere benefited from the actions taken by Hurley State Bank ("Hurley"), Lechmere's previous credit card provider, MWCC and Monogram (both of which are affiliates of GE Capital), and Montgomery Ward's and Lechmere's current credit card providers in that the recoveries received from the bankrupt credit card holders, allegedly in violation of the bankruptcy laws dealing with reaffirmations ultimately reduced Montgomery Ward's and Lechmere's loss sharing obligations. Hurley, MWCC and Monogram took all actions related to such bankruptcy reaffirmations and neither the Company nor any of its subsidiaries took any such actions. Management believes that the indemnification obligations contained in its various agreements with Hurley and with MWCC and Monogram will relieve Lechmere, Montgomery Ward and the Company of any financial obligations related to the acts alleged in the complaint. 8 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) 7. Customer Credit Agreement Montgomery Ward entered into a Bank Credit Card Program Agreement (Card Agreement) effective April 1, 1996 with Monogram and an Account-Related Agreement (Account Related Agreement) effective April 1, 1996 with MWCC (collectively referred to as the Agreements) pursuant to which Monogram and MWCC (collectively referred to as the "Montgomery Ward Credit Companies"), both of which are affiliates of GE Capital, make payments to Montgomery Ward as to the receivables generated by sales to customers of Montgomery Ward, its affiliates and licensees who utilize the Montgomery Ward private label credit card, and pursuant to which Agreements the Montgomery Ward Credit Companies provide services to Montgomery Ward. Under the Agreements, Monogram has the exclusive right to operate the Montgomery Ward private label credit card system and the obligation to pay to Montgomery Ward the face amount of Monogram's receivables generated by the Montgomery Ward private label credit card system, up to $7,000 outstanding at any time. If Montgomery Ward desires to receive payment for receivables generated by the Montgomery Ward private label credit card system at any time when Montgomery Ward Credit Companies own $7,000 or more of such receivables and do not desire to finance additional receivables, alternative arrangements, such as the sale of receivables to banks or other financial institutions, would be required unless Monogram agrees to fund the excess. Montgomery Ward's subsidiary, Lechmere entered into an Interim Consumer Credit Card Program Agreement (Lechmere Agreement) effective March 13, 1996 with Monogram pursuant to which Monogram makes payments to Lechmere in the face amount of Monogram's receivables generated by sales to customers of Lechmere who utilize the Lechmere private label credit card system that is provided by Monogram pursuant to the Lechmere Agreement. (The Lechmere Agreement provides that it will terminate upon the earlier of May 31, 1997 or the execution of a long-term agreement between the parties.) A term sheet was executed on March 7, 1997, outlining the major provisions that the parties intend to incorporate in the long-term agreement. The term sheet contemplates a long-term agreement for a fifteen year term which would continue thereafter from year to year unless either party gives ten years prior notice of its election to terminate. The term sheet further provides that Montgomery Ward will (i) be responsible for 50% of credit losses that are between 4.25% and 8.0% of average outstanding receivables, (ii) receive a one time payment of $3 million in consideration of entering into the agreement, (iii) be responsible for a payment to Monogram of approximately $2.5 million representing 50% of the reserve established when Monogram purchased the Lechmere portfolio from the previous provider of the Lechmere private label credit card, and (iv) receive 50% of the net income generated from the portfolio in excess of a 17.5% return. The performance of the respective obligations of MWCC and Monogram under the Agreements and the Lechmere Agreement have been guaranteed by GE Capital. 8. Inventory The Company changed its method of valuing inventory in 1996 from the retail inventory Last In-First Out (LIFO) method to the retail inventory First In-First Out (FIFO) method. The impact of this change had no impact on the first quarter of 1996 results of operations as previously reported. 9 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of results of operations for the Company compares the first quarter of 1997 to the first quarter of 1996. All dollar amounts referred to in this discussion are in millions, and all income and expense items are shown before income taxes, unless specifically stated otherwise. The Company's business is seasonal, with approximately one third of the sales traditionally occurring in the fourth quarter. Accordingly, the results of operations for the first three months are not necessarily indicative of the results for the entire year. Forward-Looking Statements Information included in this Report on Form 10-Q may constitute forward- looking statements that involve a number of risks and uncertainties. From time to time, information provided by the Company or statements made by its employees may contain other forward-looking statements. Factors that could cause actual results to differ materially from the forward-looking statements include but are not limited to: general economic conditions including inflation, consumer debt levels, trade restrictions and interest rate fluctuations; competitive factors including pricing pressures, technological developments and products offered by competitors; inventory risks due to changes in market demand or the Company's business strategies; and changes in effective tax rates. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Results of Operations First Quarter 1997 Compared with First Quarter 1996 The Company's performance reflected difficult competitive conditions with the consolidated net loss of $141, increasing $93 from the first quarter 1996 net loss of $48. In the first quarter of 1996, the Company accelerated efforts to reduce and redeploy inventory to allow for a shift in focus to items the Company believes will provide higher turnover and improved merchandise assortments in the future. Aggressive markdowns and promotional advertising to liquidate inventory were continued in the first quarter of 1997. 10 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Results of Operations (continued) First Quarter 1997 Compared with First Quarter 1996 While these actions have had an adverse earnings impact, they are generating positive cash flows. The Company aggressively identified and began to liquidate discontinued and problem merchandise in the fourth quarter of 1996. The total amount of the inventory identified at the beginning of the fourth quarter of 1996 was more than $300. As of March 29, 1997, $87 of this inventory remained, for which there was a reserve of $51 available. The Company believes that the liquidation of this inventory should position it with balanced inventory assortments to execute its strategic plan in future periods. However, the Company anticipates that the trends resulting from competitive pressures underlying declining revenues and margin rates will continue in fiscal 1997. The consolidated net loss applicable to common shareholders was $144 versus $51 in the first quarter of 1996. Consolidated total revenues (net sales and direct response marketing revenues, including insurance) were $1,329 compared with $1,435 in the first quarter of 1996, decreasing by $106 or 7%. The $106 total revenue decrease consisted of a $134 decrease in net sales and a $28 increase in direct marketing revenues. The change in total net sales represented an 11% decline. Specifically, in the Montgomery Ward retail stores, Apparel sales declined 5%, Jewelry sales declined 5%, Home and Furniture sales declined 10%, Electronics sales declined 24%, Appliances sales declined 4% and Automotive sales declined 14%. The Company believes that the decline in net sales in the first quarter of 1997 reflected a decline in market share compared to competitors. The increase in direct response marketing revenues was primarily due to increased clubs' membership. Gross margin (net sales less cost of goods sold) dollars were $122, a decrease of $93, or 43%, from the first quarter of 1996. This decrease was due to the gross margin impact of the decreased sales of $29, a decrease in the margin rate on sales of $62, and increased buying and other expenses of $2. Operating, selling, general and administrative expenses increased $73, or 16%, from the first quarter of 1996. The increase is primarily due to increased payroll and other administrative expenses of Signature of $37; decreased income from the sale of product service contracts of $10; increased advertising and promotional costs of $8; and increased operating and other administrative expenses of Montgomery Ward and Lechmere of $18. 11 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Results of Operations (continued) First Quarter 1997 Compared with First Quarter 1996 (continued) Net interest expense increased $11, or 50%, from the prior year. The increase is due to higher interest rates and increased borrowings resulting from a combination of higher average working capital levels and reduced cash flow resulting from slower than anticipated sales. Income tax benefit was $85 for 1997, as compared to an income tax benefit of $29 for the first quarter 1996. Discussion of Financial Condition Montgomery Ward is the only subsidiary of the Company and, therefore, Montgomery Ward and its subsidiaries are the Company's sole source of funds. Net cash used in the Company's operating activities totaled $355 compared to $400 in the first quarter of 1996. The lower cash usage reflects a larger operating loss offset by a significantly lower cash payments related to accounts payable. As a result of the inventory reduction program and better management of receipts of inventory, inventory decreased by $143 from December 29, 1996. This was offset by a decrease in trade accounts payable of $245 and an expenditure for direct response and insurance acquisition costs of $57. Net cash generated in the Company's investing activities totaled $20 in the first quarter 1997, compared to net cash used of $101 in the first quarter of 1996. 1996 net cash used included Signature's acquisition of the Amoco Motor Club. Net cash provided by financing activities totaled $399 for the first quarter of 1997, compared to $527 for the first quarter of 1996. Montgomery Ward has obtained waivers under the Long Term Credit Agreement (Long Term Agreement) and the Short Term Credit Agreement (Short Term Agreement) with respect to compliance for the fiscal quarter ending March 29, 1997 with covenants requiring maintenance of minimum consolidated shareholders' equity, a minimum ratio of debt to capitalization and minimum earnings before interest, taxes, depreciation, amortization and rent (EBITDAR). These waivers and amendments also reduce the maximum of amount of debt permitted to be incurred by Signature and the maturity 12 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Discussion of Financial Condition (continued) of the Long Term Agreement was changed from February 15, 1998 to August 29, 1997. Similar amendments to corresponding covenants in the Company's two Purchase and Master Lease Agreements were made. The Long Term Credit Agreement and the Short Term Credit Agreement were amended on December 23, 1996, to substitute the EBITDAR test for an earnings to fixed charges test for the three quarters ended June 28, 1997, to add a limitation on capital expenditures, to require prepayments if proceeds of certain asset dispositions are received and to amend the minimum debt to equity ratio required to permit payment of preferred stock dividends. In connection with these amendments the Company paid fees, the rates of interest under both agreements were increased in three stages, at the date of the agreement and effective at the end of the first and second quarters of 1997, the commitment fee was increased by 0.375% of the unused commitment and the maturity of the Long Term Agreement was changed to February 15, 1998 from September 6, 2000. These amendments also limited the amount of debt which can be incurred by Signature. Similar amendments to the corresponding covenants in the Company's two Purchase and Master Lease Agreements were made (including shortening the lease expiration dates to August 29, 1997) and the rents thereunder were increased. The Company entered into an amendment and waiver agreement with holders of the notes issued under the 1993 and 1995 Note Purchase Agreements, which included a waiver through June 27, 1997 of compliance with the minimum shareholders' equity test, added restrictions on the disposition of assets and the incurrence of debt and funded debt, required a mandatory prorata prepayment in the event of any prepayment of any loans or termination of bank commitments under the Long Term and Short Term Agreements and shortened the maturity dates of all Notes to August 29, 1997. In connection therewith the noteholders received fees and interest rates on the Notes were increased in two stages. Montgomery Ward also entered into a Credit Agreement (Seasonal Credit Agreement) dated as of October 4, 1996 with various lenders, including GE Capital. The Seasonal Credit Agreement expires August 29, 1997 and provides a revolving loan facility in the principal amount of $165. A waiver corresponding to those most recently obtained with respect to the Long Term and Short Term Agreements has been obtained by the Company. The 13 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Discussion of Financial Condition (continued) purpose of this facility is to provide back-up liquidity. Unless the lenders otherwise agree, loans may be made under this facility only after the commitments under the Short Term Agreement and the Long Term Agreement are fully used. It will likely be necessary for the Company to obtain amendments or waivers with respect to the second quarter of fiscal 1997. The Company intends to improve its financial condition and reduce its dependence on borrowing by slowing expansion, controlling expenses, closing certain unprofitable stores and continuing to implement its inventory reduction program. Management is in the process of reevaluating the Company's merchandising, marketing, store operations and real estate strategies. The Company is also considering the sale of certain operating units as a means of generating cash. The Company is actively involved in negotiations with respect to the sale of certain of these units, including The Signature Group. Future cash is also expected continue to be provided by ongoing operations, receipt of payment for credit sales under the Agreements with Montgomery Ward Credit Companies, borrowings under revolving loan facilities and vendor financing programs. The Company is currently in discussions with financing sources with a view toward a longer term solution to its liquidity problems and obtaining refinancing for all or a substantial portion of its outstanding indebtedness, including a total of $1,437 which will mature on or about August 29, 1997. This would include repayment of the current bank borrowings and amounts outstanding under the Note Purchase Agreements. The Company's management is highly confident that the indebtedness can be refinanced. The Company's largest shareholder, GE Capital, also expects the Company to be able to refinance such indebtedness. However, there can be no assurance that such refinancing can be obtained or that amendments or waivers required to maintain compliance with the existing agreements can be obtained. The Long Term Agreement provides a revolving facility in the principal amount of $603. As of March 29, 1997, $603 was outstanding under the Long Term Agreement. 14 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Discussion of Financial Condition (continued) The Short Term Agreement provides a revolving facility in the principal amount of $456. As of March 29, 1997, $456 was outstanding under the Short Term Agreement. The Seasonal Credit Agreement provides a revolving facility in the principal amount of $165. As of March 29, 1997, Montgomery Ward had no amounts outstanding under the Seasonal Credit Agreement. In 1997, Montgomery Ward has facilities under vendor financing programs (which are reflected in Trade Accounts Payable) which total $500. As of May 13, 1997 this facility had been increased to an aggregate amount of $600. At March 29, 1997, these facilities were principally drawn. There was an increase in the facility of $150 in the first quarter of 1997. On March 29, 1997, Montgomery Ward had no amounts outstanding under the short term uncommitted lines of credit. 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings. On April 29, 1997 the Company, Montgomery Ward and Lechmere, were served with a complaint, purporting to represent a nationwide class, filed by certain bankrupt credit card holders of Montgomery Ward and Lechmere credit cards. The complaint alleged that the Company, Montgomery Ward and Lechmere, benefited from the actions taken by Hurley, Lechmere's previous credit card provider, and MWCC and Monogram, (both of which are affiliates of GE Capital) Montgomery Ward's and Lechmere's current credit card providers, in that the recoveries received from the bankrupt credit card holders, allegedly were in violation of the bankruptcy laws dealing with reaffirmations ultimately reduced Montgomery Ward's and Lechmere's loss sharing obligations. Hurley, MWCC and Monogram took all actions related to such bankruptcy reaffirmations and neither the Company nor any of its subsidiaries took any such actions. Management believes that the indemnification obligations contained in its various agreements with Hurley, MWCC and Monogram will relieve Lechmere, Montgomery Ward and the Company of any financial obligations related to the acts alleged in the complaint. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 10.(i)(A)(3) Amendment No. 17 to Stockholders' Agreement, dated as of March 31, 1997. 16 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (continued) (a) Exhibits (continued): 10.(i)(F)(2) Limited Waiver and First Amendment to Note Purchase Agreements dated as of March 29, 1997 among Montgomery Ward & Co., Incorporated and various lenders. 10.(i)(H)(5) Waiver and Fourth Amendment to Long Term Credit Agreement dated as of March 29, 1997 among Montgomery Ward & Co., Incorporated and various banks. 10.(i)(I)(6) Waiver and Fourth Amendment to Short Term Credit Agreement dated as of March 29, 1997 among Montgomery Ward & Co., Incorporated and various banks. 10.(i)(L)(2) Waiver Letter dated as of March 27, 1997 addressed to Signature Financial/Marketing, Inc. from The Bank of New York and The Bank of Nova Scotia. 10.(i)(L)(3) Correction Letter Agreement dated as of March 27, 1997 among Signature Financial/Marketing, Inc., The Bank of New York and The Bank of Nova Scotia. 10.(i)(M)(3) Waiver and Third Amendment to Credit Agreement dated as of March 29, 1997 among Montgomery Ward & Co., Incorporated and various lenders. 10.(iii)(C) Waiver Letter of General Electric Capital Corporation dated March 27, 1997. 10.(iv)(D)(3) Third Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan. 10.(xiv) Employment Agreement dated April 11, 1997 between Montgomery Ward & Co., Incorporated and Spencer H. Heine. 27. Financial Data Schedule. (b) Reports on Form 8-K. On January 21, 1997, the Company filed a Form 8-K with respect to the appointment of Roger V. Goddu as Chief Executive Officer of the Company, the related resignations of three of the Company's directors and other matters. 17 SIGNATURE 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. REGISTRANT MONTGOMERY WARD HOLDING CORP. BY JOHN L. WORKMAN NAME AND TITLE John L. Workman, Executive Vice President and Chief Financial Officer DATE: May 13, 1997 18 EX-10.(I)(A)(3) 2 STOCKHOLDERS' AGREEMENT AMENDMENT EXHIBIT 10.(i)(A)(3) AMENDMENT NO. 17 TO ------------------- STOCKHOLDERS' AGREEMENT ----------------------- This Amendment No. 17 to Stockholders' Agreement ("Amendment No. 17") is consented to and made as of the 31st day of March, 1997 by and among MONTGOMERY WARD HOLDING CORP., a Delaware corporation (the "Company"), Bernard F. Brennan, individually and as attorney-in-fact for certain other parties to that certain Stockholders' Agreement dated as of June 17, 1988, as heretofore amended (the "Stockholders' Agreement"), General Electric Capital Corporation, a New York corporation, and Myron Lieberman, as Trustee of the Brennan 1988 MW Trust. WHEREAS, it is advisable to amend the Stockholders' Agreement to make certain changes set forth herein; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 7.1 of the Stockholders' Agreement is hereby amended as follows: 1. Paragraph (a) of Section 7.1 is hereby designated as paragraph (a)(i) of Section 7.1 and amended by inserting at the beginning of such paragraph the words "with respect to Management Shareholders whose employment with the Ward Group is terminated prior to February 1, 1997,". 2. A new paragraph (a)(ii) is added to Section 7.1 to read as follows: " (ii) with respect to all other Management Shareholders, during the time that he is employed by a member of the Ward Group and for a period of one year following the termination of his employment by the Ward Group for any reason whatsoever other than discharge without Cause, he shall not, directly or indirectly, own, manage, operate, join, control, be employed by, or participate in the ownership, management, operation or control of or be connected in any manner, including but not limited to holding the positions of officer, director, shareholder, consultant, independent contractor, employee, partner or investor, with any of K-mart Corporation, Wal-Mart Stores, Inc., Sears, Roebuck and Co., Dayton Hudson Corp., J.C. Penney or any affiliate of the foregoing; provided that such Management Shareholder may invest in stocks, bonds or securities of any entity (but without participating in the business thereof) if such stocks, bonds or other securities are listed for trading on a national securities exchange or on NASDAQ and such Management Shareholders' investment does not exceed 1% of the issued and outstanding shares of capital stock, or in the case of bonds or other securities, 1% of the aggregate principal amount thereof issued and outstanding;" IN WITNESS WHEREOF, the undersigned hereby consent to and execute this Amendment No. 17 as of the day and year first above written. MONTGOMERY WARD HOLDING CORP. GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ John Workman By: /s/ Edward D. Stewart ----------------------------- ------------------------------- Its: Exec VP and CFO Its: Exec VP ----------------------------- ------------------------------- /s/ Bernard F. Brennan /s/ Myron Lieberman - ---------------------------------- ------------------------------------ Bernard F. Brennan, individually Myron Lieberman, as Trustee of the and as attorney-in-fact for the Brennan 1988 MW Trust. beneficial owners of all Shares (as defined in the Stockholders' Agreement) held by him as Voting Trustee under those certain Voting Trust Agreements dated as of June 21, 1988 and October 21, 1994, respectively. 2 EX-10.(I)(F)(2) 3 LIMITED WAIVER TO NOTE PURCHASE AGREEMENTS EXHIBIT 10.(i)(F)(2) LIMITED WAIVER AND FIRST AMENDMENT TO NOTE PURCHASE AGREEMENTS This Limited Waiver and First Amendment to Note Purchase Agreements (this "Waiver and Amendment") is made as of March 29, 1997 by and among Montgomery Ward & Co., Incorporated, an Illinois corporation (the "Company"), and the holders of Senior Notes of the Company identified on Annex 1 hereto (individually, a "Noteholder" and, collectively, the "Noteholders.") RECITALS A. Certain of the Noteholders (the "1993 Noteholders") are parties to a Note Purchase Agreement, dated as of March 1, 1993, as amended June 30, 1995 (immediately prior to giving effect to this Waiver and Amendment, the "Existing 1993 Agreement" and, after giving effect thereto, the "1993 Agreement"), pursuant to which the Company issued the series of its Senior Notes identified below (collectively, immediately prior to giving effect to this Waiver and Amendment, the "Existing 1993 Notes" and, after giving effect thereto, the "1993 Notes"): (i) 7.07% Series A Senior Notes due 1998 (the "Series A Notes"); (ii) 7.56% Series B Senior Notes due 2003 (the "Series B Notes"); (iii) 7.61% Series C Senior Notes due 2003 (the "Series C Notes"); (iv) 7.92% Series D Senior Notes due 2001 (the "Series D Notes"); (v) 8.13% Series E Senior Notes due 2003 (the "Series E Notes"); (vi) 8.18% Series F Senior Notes due 2003 (the "Series F Notes"); and (vii) 8.18% Series G Senior Notes due 2005 (the "Series G Notes"). B. Certain of the Noteholders (the "1995 Noteholders" and, together with the 1993 Noteholders, the "Noteholders") are parties to a Note Purchase Agreement, dated as of July 11, 1995 (immediately prior to giving effect to this Waiver and Amendment, the "Existing 1995 Agreement" and, after giving effect thereto, the "1995 Agreement"), pursuant to which the Company issued the series of its Senior Notes identified below (collectively, immediately prior to giving effect to this Waiver and Amendment, the "Existing 1995 Notes" and, after giving effect thereto, the "1995 Notes") (the Existing 1993 Agreement and the Existing 1995 Agreement are referred to herein, collectively, as the "Existing Note Agreements;" the 1993 Agreement and the 1995 Agreement are referred to herein, collectively, as the "Note Agreements"; the Existing 1993 Notes and the Existing 1995 Notes are referred to herein, collectively, as the "Existing Notes;" and the 1993 Notes and the 1995 Notes are referred to herein, collectively, as the "Notes"): (i) 6.52% Series H Senior Notes due 2000 (the "Series H Notes"); (ii) 6.74% Series I Senior Notes due 2002 (the "Series I Notes"); and (iii) 6.98% Series J Senior Notes due 2005 (the "Series J Notes"). C. The Company and certain banks (the "Long Term Banks") are parties to a Long Term Credit Agreement (as amended by the letter agreements and amendments referred to below in this Recital C, but without giving effect to any amendments, waivers or modifications that may be made with respect thereto after the Effective Date (as defined below), the "Long Term Bank Agreement"), dated as of September 15, 1994, as amended by a letter agreement, dated March 19, 1996, by a letter agreement which became effective September 6, 1996, and by a Third Amendment to Long Term Credit Agreement, dated as of December 23, 1996 (the "Third Bank Long Term Amendment"). The Long Term Banks and the Company will be entering into a Waiver and Fourth Amendment to Long Term Credit Agreement, dated as of March 29, 1997 (the "Fourth Bank Long Term Amendment"). D. The Company and certain banks (the "Short Term Banks" and, together with the Long Term Banks, the "Banks") are parties to a Short Term Credit Agreement (as amended by 2 the letter agreements and amendments referred to below in this Recital D, but without giving effect to any amendments, waivers or modifications that may be made with respect thereto after the Effective Date, the "Short Term Bank Agreement"), dated as of September 15, 1994, as amended by letter agreements, dated March 19, 1996 and September 6, 1996, and a Third Amendment to Short Term Credit Agreement, dated as of December 23, 1996 (the "Third Bank Short Term Amendment"). The Short Term Banks and the Company will be entering into a Waiver and Fourth Amendment to Short Term Credit Agreement, dated as of March 29, 1997 (the "Fourth Bank Short Term Amendment"). The Long Term Bank Agreement and the Short Term Bank Agreement are referred to herein, collectively, as the "Bank Agreements." E. The Company has requested that the Noteholders enter into this Waiver and Amendment to waive compliance with Section 6.2 of the Existing Note Agreements on the terms and conditions set forth herein (including, without limitation, the amendments effected hereby) and any Event of Default (as defined below) resulting from such non-compliance, and the Noteholders are willing to enter into this Waiver and Amendment subject, among other things, to the Long Term Banks and the Short Term Banks entering into the Fourth Bank Long Term Amendment and the Fourth Bank Short Term Amendment, respectively. F. Terms used and not defined herein have the respective meanings ascribed thereto in the Existing Note Agreements. AGREEMENT 1. Waiver. For all periods prior to and including June 27, 1997, the Noteholders waive compliance by the Company with Section 6.2 of each of the Existing Note Agreements, waive any right the Noteholders would have as a result of any Event of Default arising from non-compliance with Section 6.2 of the Existing Note Agreements prior to and including June 27, 1997, and also waive any rights the Noteholders would have pursuant to Section 4(a) of this Waiver and Amendment as the result of an Event of Default arising from a failure by the Company to comply with the provisions of Sections 11.3, 11.4 and 11.20 of each of the Bank Agreements; provided, however, that, solely for purposes of Section 5 of the Note 3 Agreements (providing, inter alia, for the payment of certain expenses and the exercise of certain inspection rights), any Event of Default that would have been continuing but for the waiver set forth in this Section 1 shall be deemed to be continuing. 2. Financial Provisions. The financial provisions set forth in this Section 2 shall apply notwithstanding anything to the contrary set forth in the Existing Note Agreements or the Bank Agreements. (a) Interest Prior to Second Quarter. Interest on the Notes accruing prior to March 29, 1997 shall accrue at the non-default rates set forth in the 1993 Agreement or the 1995 Agreement, as applicable. (b) Second Quarter Interest. The following interest rates shall apply from and including March 29, 1997 to and including June 28, 1997 for each of the series of Notes identified below: Series A Notes - 8.695% per annum Series B Notes - 9.185% per annum Series C Notes - 9.235% per annum Series D Notes - 9.545% per annum Series E Notes - 9.755% per annum Series F Notes - 9.805% per annum Series G Notes - 9.805% per annum Series H Notes - 8.145% per annum Series I Notes - 8.365% per annum Series J Notes - 8.605% per annum (c) Interest after Second Quarter. The following interest rates shall apply on and after June 29, 1997 for each of the series of Notes identified below: Series A Notes - 9.195% per annum 4 Series B Notes - 9.685% per annum Series C Notes - 9.735% per annum Series D Notes - 10.045% per annum Series E Notes - 10.255% per annum Series F Notes - 10.305% per annum Series G Notes - 10.305% per annum Series H Notes - 8.645% per annum Series I Notes - 8.865% per annum Series J Notes - 9.105% per annum (d) Interest Rate for Late Payments. For the avoidance of doubt, it is understood and agreed that, with respect to each series of Notes, the non-default rate of interest referred to in the phrase "the interest rate borne by such series of Notes" in the definition of "Default Rate" in the Note Agreements shall mean the interest rates specified above, for the periods specified above, in this Section 2. (e) Payment Dates for Interest. Interest on the 1993 Notes shall be payable on March 15, June 15, September 15 and December 15 in each year, commencing on June 15, 1997. Interest on the 1995 Notes shall be payable on January 15, April 15, July 15 and October 15 in each year, commencing on April 15, 1997. (f) Makewhole Amount. Any prepayment of the Notes before, after or upon the occurrence of a Default or an Event of Default with cash from any source, whether from internal cash, external investment, proceeds of the sale of any asset or business, a refinancing or otherwise, shall be made together with all interest accrued to the date of prepayment and a Makewhole Amount on the principal amount so prepaid determined as of the date of such prepayment; provided that, notwithstanding the change in interest rates and maturities in respect of the Notes as provided herein, any calculation of the Makewhole Amount shall be made on 5 the basis of the interest rates, interest payment dates, principal prepayment dates and amounts, maturity dates and amounts payable at maturity in effect under the Existing Note Agreements (which term, as stated in the Recitals, means such documents as in effect immediately prior to giving effect to this Waiver and Amendment). The Makewhole Amount due under any provision of this Waiver and Amendment (including, without limitation, paragraphs (h), (i) and (j) of this Section 2) or the Note Agreements shall be in the amount so calculated. (g) Waiver Fee. In consideration for the execution by the Noteholders of this Waiver and Consent, the Company shall pay to each Noteholder, on the Effective Date, by wire transfer in immediately available funds, a waiver fee in the amount set forth opposite its name on Annex 1 hereto. (h) Mandatory Prepayment on Paydown of Bank Debt. If the Company, or any of its Subsidiaries or Affiliates, shall prepay any principal of any Loan (as defined in the Bank Agreements) at any time, or if the Aggregate Bank Commitment (as defined below) shall be permanently reduced at any time, the Company shall, or shall cause one or more of its Subsidiaries or Affiliates to, simultaneously prepay a portion of principal of the 1993 Notes and the 1995 Notes in an amount in each case (without double counting) equal to the outstanding principal amount of such Notes multiplied by a fraction, of which (i) the numerator shall be the greater of the aggregate principal amount of Loans so prepaid or the amount of the reduction in the Aggregate Bank Commitment (whether under the Long Term Bank Agreement, the Short Term Bank Agreement or both) and (ii) the denominator shall be, in the case of any such prepayment, the aggregate principal amount of Loans under both Bank Agreements outstanding immediately prior to such prepayment or, in the case of any such reduction, the Aggregate Bank Commitment in effect immediately prior to such reduction. 6 Each such prepayment shall be made together with all interest accrued to the date of prepayment and the Makewhole Amount on the principal amount so prepaid determined as of the date of such prepayment. The "Aggregate Bank Commitment" means the sum of the Commitments (as such term is defined in the Bank Agreements) under both Bank Agreements. (i) Mandatory Prepayment on Change of Control. If a Change of Control (as defined in the Bank Agreements) shall occur, then, upon 30 days written demand made by holders of at least two-thirds of the outstanding principal amount of the 1993 Notes or the 1995 Notes, as the case may be, to the Company within 180 days after the occurrence of such Change in Control (or, if later, within 180 days after such holders' obtaining actual knowledge of such Change in Control), the Company shall prepay all of the 1993 Notes, if such demand was made in respect of such Notes and/or all of the 1995 Notes, if such demand was made in respect of such Notes. Such principal amount shall be paid on the next Business Day after its receipt of such demand, together with all interest accrued to the date of prepayment and the Makewhole Amount on the principal amount so prepaid determined as of the date of such prepayment. (j) Maturity Date. The entire principal amount of the Notes shall be due and payable on August 29, 1997, together with all interest accrued to such date and the Makewhole Amount on the principal amount so paid determined as of the date of such payment. 3. Covenants. The covenants set forth in this Section 3 shall apply notwithstanding anything to the contrary set forth in the Existing Note Agreements or the Bank Agreements. (a) Asset Dispositions. The Company shall not, and shall not permit any of its Subsidiaries to, effect any Disposition (as defined below) if, after giving effect thereto, the aggregate amount of Net Proceeds (as defined below) received and to be received from such Disposition and from all other Dispositions consummated on or after December 23, 1996 would exceed $20,000,000. "Disposition" and "Net Proceeds" shall have the respective meanings ascribed thereto in the 7 Third Bank Long Term Amendment and the Third Bank Short Term Amendment. (b) Debt Incurrence. The Company shall not, and shall not permit any of its Subsidiaries to, at any time incur any Funded Debt or any Debt (as "Debt" is defined in the Bank Agreements); provided, however, that the Company may incur Funded Debt or Debt pursuant to the Liquidity Facility, the Deutsche Agreement, the GECC Inventory Program and the GECC Receivables Program (as each such term is defined below). For the period commencing on the Effective Date and ending on and including June 27, 1997, the Noteholders shall waive and defer the effect of any non-compliance by the Company with Section 6.3 of the Note Agreements in connection with the Company's incurrence of Funded Debt or Debt under the facilities listed in the proviso to the immediately preceding sentence; provided, however, that on and after June 28, 1997, the effect of any such non-compliance shall be determined without giving effect to such deferral or waiver. As used in this Waiver and Amendment, the following terms have the following meanings: "Deutsche Agreement" means the Program Agreement dated as of October 7, 1996, among Deutsche Financial Services Corporation, Montgomery Ward & Co., Incorporated and Lechmere, Inc., as amended by agreement dated as of October 30, 1996. "GECC Inventory Program" means the Program Agreement dated October 12, 1989, between Montgomery Ward & Co., Incorporated and General Electric Capital Corporation, as amended by letter agreement dated October 12, 1989, and by Program Agreement Amendment dated as of March 4, 1997, and by letter agreement dated February 14, 1997. The GECC Inventory Program is governed in the manner described in (S)(S) 2-6 of Draft GTM031497 of the Amended and Restated Program Agreement dated March 4, 1997, but unsigned, in the form submitted to counsel to the Noteholders on March 25, 1997. "GECC Receivables Program" means the Account Purchase Agreement dated as of June 24, 1988, as amended, restated and renamed the Account- 8 Related Agreement dated as of April 1, 1996, between Montgomery Ward Credit Corporation and Montgomery Ward & Co., Incorporated, and the Interim Consumer Credit Card Program dated as of April 1, 1996, as amended, restated and renamed the Bank Credit Card Program Agreement dated as of April 1, 1996, between Monogram Credit Card Bank of Georgia and Montgomery Ward & Co., Incorporated. "Liquidity Facility" means the Credit Agreement dated as of October 4, 1996 among Montgomery Ward & Co., Incorporated, The Bank of Nova Scotia as Administrative Agent and as a Lender, The Bank of New York as Documentation Agent and as a Lender, and General Electric Capital Corporation as a Lender, as amended by agreement dated as of December 23, 1996. (c) Liens. The Company shall not, and shall not permit any of its Subsidiaries to, incur any Liens pursuant to clauses (i) (related to financing or refinancing of real estate or tangible fixed assets), (xii) (relating to Liens in favor of the Banks), or (xix) (relating to a basket permission for Liens securing Debt up to 1% of the Company's total assets) of Section 11.2 of each of the Bank Agreements or pursuant to clause (t) (relating to a basket permission for Liens) of Section 6.4 of the Note Agreements. (d) Restricted Payments. The Company shall not make any Restricted Payment other than amounts payable to the Parent to permit the Parent to pay its corporate and business expenses in an aggregate amount for all such expenses not to exceed $1,333,333 for the period from the commencement of its current Fiscal Year to August 29, 1997 (with no carry-over for amounts not so used in any prior Fiscal Year). Notwithstanding anything to the contrary set forth in this Waiver and Amendment or in the Note Agreements, no Event of Default shall result from the payment by the Company of a dividend on March 31, 1997 in the amount of $3,066,875 on the Company's Debt-Like Preferred Stock. (e) Mergers. The Company shall not, and shall not permit any of its Subsidiaries to, voluntarily liquidate or 9 dissolve, or consolidate or merge with or into any other Person, or participate in a share exchange with, or sell, lease, transfer, contribute or otherwise dispose of all or substantially all of its assets to, any other Person; provided, however, that any of the Company's Subsidiaries may be consolidated or merged with or into the Company or any other Subsidiary of the Company. (f) Repayment of Subordinated Debt and Debt-Like Preferred Stock. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, distribute, make or set apart any sum or property for the prepayment of principal of or prepayment charge or premium on, or any redemption, retirement, purchase or other acquisition, directly or indirectly, of, any Subordinated Debt or any Debt- Like Preferred Stock. (g) Deposits with Banks. The Company shall not, nor shall it permit any of its Subsidiaries to, maintain amounts on deposit with any Bank to be in an aggregate amount in excess of an amount consistent with the past practices of the Company and its Subsidiaries. (h) No Amendment to Financing Documents. The Company shall not enter into any amendment, waiver or modification of the Bank Agreements. The Company shall not enter into any amendment, waiver or modification of the GECC Inventory Program, the GECC Receivables Program, the Deutsche Agreement or the Liquidity Facility, except for any amendment to any of such documents which solely increases the amounts that may be borrowed by the Company or its Subsidiaries thereunder and except that the Company may (i) enter into an amendment of the GECC Receivables Program if such amendment shall not secure the Seller Notes (as defined GECC Receivables Program), provide for any of such Seller Notes to be payable on a date earlier than the date on which such Seller Notes are payable as of the Effective Date, or otherwise materially adversely affect the Noteholders, or (ii) enter into any other amendment of the GECC Receivables Program so long as such amendment would not constitute an Event of Default (as defined 10 in the Bank Agreements) under clauses (ii), (iii), or (iv) of Section 13.1(j) of the Bank Agreements. (i) Information. In addition to furnishing the information required pursuant to Sections 4 and 5 of the Existing Note Agreements, the Company shall provide to each Noteholder the same reports and other information as are provided to the Banks pursuant to either of the Bank Agreements (including, without limitation, the monthly financial information required to be provided to the Banks pursuant to the amendments to the Long Term Bank Agreement and the Short Term Bank Agreement effected by Section 1.8 of the Third Bank Long Term Amendment and the Third Bank Short Term Amendment), and such other information as may be reasonably requested by the Noteholders or provided to the Banks pursuant to any amendment or other modification to the Long Term Bank Agreement or the Short Term Bank Agreement entered into after the Effective Date. All such reports and other information provided to the Banks shall be provided to the Noteholders substantially contemporaneously with the provision thereof to the Banks. All such information provided to the Noteholders pursuant to this paragraph (i) shall be subject to Section 5(b) of the Note Agreements. (j) Diligence. In addition to furnishing the information required pursuant to Sections 4(p) and 5 of the Existing Note Agreements, the Company shall, upon request of any Noteholder, provide such Noteholder with all information such Noteholder may reasonably request regarding progress formulating a restructuring plan for consideration by the Noteholders, and regarding financial support, investments and contractual and other relationships that may exist between the Company or any of its Subsidiaries or Affiliates, on the one hand, and General Electric Capital Corporation or any of its Subsidiaries or Affiliates, on the other hand. All information provided to the Noteholders pursuant to this paragraph (j) shall be subject to Section 5(b) of the Note Agreements. 4. Defaults. (a) Cross-Default. An Event of Default shall exist under the Note Agreements upon the occurrence of an Event of Default under (and as defined in) either of the 11 Bank Agreements (such Event of Default under either Bank Agreement being referred to as a "Bank Default"). No waiver, amendment or other action by the Banks with respect to any Bank Default shall be effective to terminate the Event of Default under the Note Agreements arising from such Bank Default. (b) Default under Sections 3 and 6 of this Waiver and Amendment. An Event of Default shall exist under the Note Agreements if the Company shall default in the due performance and observance of any covenant, provision, agreement or condition set forth in Section 3 of this Waiver and Amendment or if any representation or warranty of the Company set forth in Section 6 of this Waiver and Amendment shall be false or incorrect or breached in any material respect. 5. Lechmere Guaranty. The Company shall cause Lechmere, Inc. to guaranty (the "Lechmere Guaranty") all amounts owing in respect of the Notes pursuant to a Guaranty substantially in the form of Exhibit A hereto. 6. Representations and Warranties. The Company represents and warrants as of the Effective Date as follows: (a) Organization and Authority. The Company is a corporation duly organized and in good standing under the laws of Illinois and has all requisite power and authority to execute and deliver this Waiver and Amendment. (b) Authorization, Execution and Enforceability. The execution and delivery by the Company of this Waiver and Amendment has been duly authorized by all necessary action on the part of the Company, has been duly executed and delivered, and constitutes the legal, valid and binding obligation of the Company enforceable in accordance with its terms, except as such enforceability may be: (i) limited by bankruptcy, insolvency or other similar laws affecting the enforceability of creditors' rights generally; and (ii) subject to the availability of equitable remedies. 12 (c) No Conflicts. Neither the execution and delivery by the Company of this Waiver and Amendment, nor the performance by the Company of its obligations hereunder, conflicts with, results in any breach of any of the provisions of, constitutes a default under, or violates or results in the creation of any Lien upon or other security interest in any property of the Company under, the provisions of: (i) the certificate of incorporation or by-laws of the Company; (ii) any agreement, instrument or conveyance to which the Company, any of its Subsidiaries or any of their respective properties may be bound or affected except as disclosed by letter, dated March 27, 1997, by the Company to counsel to the Noteholders; or (iii) any statute, rule or regulation or any order, judgment or award of any court, tribunal or arbitrator by which the Company, any of its Subsidiaries or any of their respective properties may be bound or affected. (d) Litigation. There are no proceedings pending or, to the knowledge of the Company, threatened against the Company, any of its Subsidiaries or any of their respective properties in any court or before any Governmental Body or arbitration board or tribunal which, either individually or in the aggregate, would conflict or interfere with the ability of the Company to execute, deliver and perform its obligations under this Waiver and Amendment, the Note Agreements or the Notes. (e) Disclosure. None of the documents delivered to certain Noteholders at a meeting at the Company's offices in Chicago, Illinois on March 20, 1997 contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. There is no fact which the Company did not disclose to the Noteholders on March 20, 1997 which materially affects adversely or, so far as the Company can now foresee, will materially affect adversely the properties, business, prospects, 13 profits or condition (financial or otherwise) of the Company and its Subsidiaries, taken as whole, or the ability of the Company to perform its obligations under this Waiver and Amendment, the Note Agreements or the Notes. (f) Bank Agreements. All of the documents comprising the Long Term Bank Agreement and the Short Term Bank Agreement are identified in the Recitals of this Waiver and Amendment. (g) Existence of Events of Default. There are no Events of Default or material Defaults in existence under the Note Agreements on the Effective Date, after giving effect to the waiver set forth in Section 1 hereof and there are no Events of Default (as defined in the Bank Agreements), and no material events which, with the passage of time or the giving of notice, or both, would become any such Event of Default, in existence on the Effective Date, after giving effect to the Fourth Bank Long Term Amendment and the Fourth Bank Short Term Amendment. (h) Outstanding Obligations Under Other Agreements. The amounts of specific obligations outstanding as of specific dates under each of the following agreements are shown below:
Approx. Amount Outstanding Facility ($ in millions) Item Date -------- --------------- ---- ----- Long Term Credit Agreement $ 603.0 Principal 3/25/97 Short Term Credit Agreement $ 455.7 Principal 3/25/97 Liquidity Facility $ 0.0 Principal 3/25/97 Deutsche Agreement $ 73.0 Outstanding 3/25/97 advances and pending commitments
14
GECC Inventory Program $ 469.0 Outstanding 3/25/97 advances and pending commitments GECC Receivables Program $4,969.0 Customer account 3/01/97 balance GECC Receivables Program $ 262.0 Loss Sharing Note 3/01/97
7. Conditions to Effectiveness. This Waiver and Amendment shall be effective only if the following conditions shall have been satisfied on or prior to March 28, 1997 (the "Effective Date"): (a) Lechmere Guaranty. Lechmere, Inc. shall have duly executed and delivered the Lechmere Guaranty. (b) Bank Waiver. The Banks and the Company shall have executed a Waiver and Fourth Amendment to Long Term Credit Agreement and a Waiver and Fourth Amendment to Short Term Credit Agreement in substantially the forms attached hereto as Exhibits B and C, respectively. (c) Execution by All Noteholders. Each of the Noteholders and the Company shall have executed this Waiver and Amendment. (d) Waiver Fee. The Company shall have paid the waiver fee provided for in Section 2(g) of this Waiver and Amendment. (e) Fees and Expenses. The Company shall have paid the fees and expenses referred to in Section 8(c) of this Waiver and Amendment. (f) Secretary's Certificate. The Company shall have delivered to the Noteholders a certificate of its Secretary in the form of Exhibit D-1 hereto, and shall have caused Lechmere, Inc. to deliver to the Noteholders a certificate of its Secretary in the form of Exhibit D-2 hereto, or, in either case, in form and substance satisfactory to the Noteholders. 15 (g) Opinion of Counsel. The Company shall have delivered to the Noteholders an opinion of Altheimer & Gray in the form of Exhibit E hereto. (h) Proceedings Satisfactory. All proceedings taken in connection with this Waiver and Amendment and all documents and papers relating thereto shall be satisfactory to the Noteholders and their special counsel. The Noteholders and their special counsel shall have received copies of such documents and papers as they may reasonably request in connection therewith, in form and substance satisfactory to them. 8. Miscellaneous. (a) Limitation of Waiver and Amendment. The terms of this Waiver and Amendment shall not, except as set forth in Section 1 hereof, operate as or constitute a waiver by the Noteholders of, or otherwise prejudice, the Noteholders' rights, remedies or powers under the Existing Notes, the Existing Note Agreements or under applicable law. Except as otherwise expressly provided herein, (i) no other terms and provisions of the Existing Note Agreement or the Existing Notes are modified or changed by this Waiver and Amendment, and (ii) the terms and provisions of the Existing Note Agreements and the Existing Notes shall continue in full force and effect. The Company hereby acknowledges, confirms, and ratifies all of its obligations and duties under the Notes and the Note Agreements. Except as set forth in Section 1 hereof, this Waiver and Amendment is not a limitation on the ability of any Noteholder to exercise any of its rights and remedies due to any Default or Event of Default. This Waiver and Amendment may not be contradicted by evidence of any actual or alleged prior, contemporaneous or subsequent understandings or agreements of the parties, written or oral, express or implied, other than a writing which expressly amends or supersedes this Waiver and Amendment, and there are no unwritten oral understandings or agreements between 16 the parties concerning the subject matter of this Waiver and Amendment. This Waiver and Amendment may not be amended, modified or waived except by a written instrument signed by all of the parties hereto except that any amendment to or waiver of any provision of the Existing Note Agreements effected hereby may be superseded by an amendment to or waiver of such provision signed by the holders of the requisite percentage of outstanding Notes, as specified in the Note Agreements. (b) Effect of Execution by Noteholders. Each of the Noteholders, in executing this Waiver and Amendment, is executing it only with respect to the Notes which it holds and the Note Agreement to which it is a party. (c) Expenses. Without limitation on the Company's obligations to pay expenses of the Noteholders, as set forth in the Note Agreements or in any other document to which any Noteholder and the Company may be a party, the Company shall pay the reasonable out-of-pocket costs incurred by the Noteholders (including, without limitation, travel costs) in connection with consideration of this Waiver and Amendment or any future waiver or amendment that may be proposed by any Noteholder or the Company, or any of its Subsidiaries or Affiliates (regardless of whether it shall become effective), the presentation, review or analysis of the Company's existing financial arrangements or any financial plan proposed by the Company, or any of its Subsidiaries or Affiliates, or any analysis of the rights and remedies of the Noteholders under the Note Agreements or in any other document to which any Noteholder and the Company may be a party, and the Company shall also pay all reasonable fees and disbursements of special counsel to the Noteholders, and the reasonable allocated cost of in-house counsel for any Noteholder, related to any of the foregoing. (d) Duplicate Originals; Execution in Counterpart. Two or more duplicate originals of this Waiver and Amendment may be signed by the parties hereto, each of which shall be an original but all of which together shall constitute one and the same instrument. This Waiver and Amendment may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party 17 hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original. (e) Headings. All headings and captions preceding the text of the several Section of this Waiver and Amendment are intended solely for convenience of reference and shall not constitute a part of this Waiver and Amendment nor shall they affect its meaning, construction or effect. (f) Successors and Assigns. This Waiver and Amendment shall be binding upon each of the parties hereto and their respective successor and assigns. (g) Notices. Any notices sent in respect of this Waiver and Amendment shall be sent in the manner and to the addresses specified in the Note Agreements. (h) Governing Law. THIS WAIVER AND AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Waiver and Amendment to be duly executed by one or more of their authorized officers. [Remainder of Page Intentionally Blank; Next Pages are Signature Pages] 18 MONTGOMERY WARD & CO., INCORPORATED By /s/ C. J. Harms ------------------------------------ Name: C. J. Harms Title: Senior Vice President - Finance NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION By New York Life Insurance Company By /s/ William Y. Cheng ------------------------------------ Name: William Y. Cheng Title: Vice President NEW YORK LIFE INSURANCE COMPANY By /s/ Lydia S. Sangree ------------------------------------ Name: Lydia S. Sangree Title: Investment Vice President TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By /s/ Sharon Manewitz ------------------------------------ Name: Sharon Manewitz Title: Director - Special Loans NATIONWIDE LIFE INSURANCE COMPANY By /s/ Michael D. Groseclose -------------------------------------- Name: Michael D. Groseclose Title: Associate Vice President Corporate Fixed-Income Securities EMPLOYERS LIFE INSURANCE COMPANY OF WAUSAU By /s/ John G. Powles -------------------------------------- Name: John G. Powles Title: Vice President Subsidiary & Affiliate Investments NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY (formerly Financial Horizons Life Insurance Company) By /s/ Michael D. Groseclose -------------------------------------- Name: Michael D. Groseclose Title: Associate Vice President Corporate Fixed-Income Securities WISCONSIN HEALTH CARE LIABILITY INSURANCE PLAN By /s/ John G. Powles -------------------------------------- Name: John G. Powles, Vice President Title: Assistant Treasurer Employers Insurance Company of Wausau Acting Agent Wisconsin Health Care Liability Insurance Plan WEST COAST LIFE INSURANCE COMPANY By /s/ Michael D. Groseclose -------------------------------------- Name: Michael D. Groseclose Title: Attorney-in-Fact SUN LIFE ASSURANCE COMPANY OF CANADA By /s/ John N. Whelihan -------------------------------------- Name: John N. Whelihan Title: Vice President, U.S. Private Placements for President By /s/ Jeffrey J. Skerry -------------------------------------- Name: Jeffrey J. Skerry Title: Senior Associate Counsel - for Secretary SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) By /s/ L. Brock Thomson -------------------------------------- Name: L. Brock Thomson Title: Treasurer CONNECTICUT GENERAL LIFE INSURANCE COMPANY By CIGNA INVESTMENTS, INC. By /s/ James F. Coggins, Jr. -------------------------------------- Name: James F. Coggins, Jr. Title: Managing Director AID ASSOCIATION FOR LUTHERANS By /s/ James Abitz -------------------------------------- Name: James Abitz Title: Vice President - Securities By /s/ Alan D. Onstad -------------------------------------- Name: Alan D. Onstad Title: Assistant Vice President - Securities JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By /s/ Marlene J. DeLeon -------------------------------------- Name: Marlene J. DeLeon Title: Investment Officer THE TRAVELERS INSURANCE COMPANY By /s/ Teresa M. Torrey -------------------------------------- Name: Teresa M. Torrey Title: Second Vice President MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By /s/ Mary Ann McCarthy -------------------------------------- Name: Mary Ann McCarthy Title: Managing Director CM LIFE INSURANCE COMPANY By /s/ Mary Ann McCarthy -------------------------------------- Name: Mary Ann McCarthy Title: Investment Officer THE VARIABLE ANNUITY LIFE INSURANCE COMPANY By /s/ Julia S. Tucker -------------------------------------- Name: Julia S. Tucker Title: Investment Officer THE FRANKLIN LIFE INSURANCE COMPANY By /s/ Julia S. Tucker -------------------------------------- Name: Julia S. Tucker Title: Investment Officer Cummings & Co. As Nominee For: THE CANADA LIFE ASSURANCE COMPANY By /s/ Wilfredo Cuevas -------------------------------------- Name: Wilfredo Cuevas Title: Assistant Vice President Cummings & Co. As Nominee For: CANADA LIFE INSURANCE COMPANY OF AMERICA By /s/ Wilfredo Cuevas -------------------------------------- Name: Wilfredo Cuevas Title: Assistant Vice President LUTHERAN BROTHERHOOD By /s/ Randall L. Boushek -------------------------------------- Name: Randall L. Boushek Title: Vice President AMERICAN FAMILY LIFE INSURANCE COMPANY By /s/ Phillip Hannifan -------------------------------------- Name: Phillip Hannifan Title: Investment Director KANSAS CITY LIFE INSURANCE COMPANY By /s/ Richard L. Finn -------------------------------- Name: Richard L. Finn Title: Senior Vice President THE SAFECO LIFE INSURANCE COMPANY By /s/ Michael C. Knebel -------------------------------- Name: Michael C. Knebel Title: Vice President and Treasurer WOODMEN ACCIDENT AND LIFE COMPANY By /s/ A. M. McCray -------------------------------- Name: A. M. McCray Title: Vice President and Assistant Treasurer PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA By /s/ S. C. Lange -------------------------------- Name: S. C. Lange Title: Vice President PROVIDENT MUTUAL LIFE INSURANCE COMPANY By /s/ S. C. Lange -------------------------------- Name: S. C. Lange Title: Vice President GREAT WESTERN INSURANCE COMPANY By MIMLIC ASSET MANAGEMENT COMPANY By /s/ Joseph R. Betlej ------------------------------------- Name: Joseph R. Betlej Title: Vice President GUARANTEE RESERVE LIFE INSURANCE COMPANY By MIMLIC ASSET MANAGEMENT COMPANY By /s/ Guy M. de Lambert ------------------------------------- Name: Guy M. de Lambert Title: Vice President NATIONAL TRAVELERS LIFE COMPANY By MIMLIC ASSET MANAGEMENT COMPANY By /s/ Guy M. de Lambert ------------------------------------- Name: Guy M. de Lambert Title: Vice President NORTHWEST LIFE ASSURANCE COMPANY OF CANADA By MIMLIC ASSET MANAGEMENT COMPANY By /s/ Joseph R. Betlej ------------------------------------- Name: Joseph R. Betlej Title: Vice President BERKSHIRE LIFE INSURANCE COMPANY By /s/ Ellen I. Whittaker ----------------------------- Name: Ellen I. Whittaker Title: Investment Officer SECURITY MUTUAL LIFE INSURANCE COMPANY By /s/ William R. Schmeeckle ----------------------------- Name: William R. Schmeeckle Title: Second Vice President Annex 1 to March 29, 1997 Limited Waiver and First Amendment
Noteholders Series Original 1993 1993 Notes 1995 Notes Waiver Fee Notes Principal Principal 0.3906250% - ---------------------------------------------------------------------------------------------------------------------------------- New York Life Insurance and Annuity Corp. H $ 30,000,000.00 $ 117,187.50 - ---------------------------------------------------------------------------------------------------------------------------------- New York Life Insurance Company H $ 10,000,000.00 $ 39,062.50 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Teachers Insurance and Annuity Association of America G $ 35,000,000.00 $35,000,000.00 $ 136,718.75 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Nationwide Life Insurance Company I $ 12,500,000.00 $ 48,828.13 - ---------------------------------------------------------------------------------------------------------------------------------- Nationwide Life Insurance Company C $ 5,000,000.00 $ 4,285,681.82 $ 19,531.25 - ---------------------------------------------------------------------------------------------------------------------------------- Nationwide Life Insurance Company F $ 10,000,000.00 $10,000,000.00 $ 39,062.50 - ---------------------------------------------------------------------------------------------------------------------------------- Employers Life Insurance Company of Wausau C $ 3,000,000.00 $ 2,571,409.09 $ 11,718.75 - ---------------------------------------------------------------------------------------------------------------------------------- Financial Horizons Life Insurance Company C $ 2,000,000.00 $ 1,714,272.73 $ 7,812.50 - ---------------------------------------------------------------------------------------------------------------------------------- Wisconsin Health Care Liability Insurance Plan I $ 500,000.00 $ 1,953.13 - ---------------------------------------------------------------------------------------------------------------------------------- West Coast Life Insurance Company I $ 2,000,000.00 $ 7,812.50 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Sun Life Assurance Company of Canada D $ 2,000,000.00 $ 2,000,000.00 $ 7,812.50 - ---------------------------------------------------------------------------------------------------------------------------------- Sun Life Assurance Company of Canada (U.S.) D $ 9,000,000.00 $ 9,000,000.00 $ 35,156.25 - ---------------------------------------------------------------------------------------------------------------------------------- Sun Life Assurance Company of Canada (U.S.) I $ 10,000,000.00 $ 39,062.50 - ---------------------------------------------------------------------------------------------------------------------------------- Sun Life Assurance Company of Canada I $ 2,500,000.00 $ 9,765.63 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Connecticut General Life Insurance Company H $ 12,000,000.00 $ 46,875.00 - ---------------------------------------------------------------------------------------------------------------------------------- Connecticut General Life Insurance Company I $ 10,000,000.00 $ 39,062.50 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Aid Association for Lutherans I $ 10,000,000.00 $ 39,062.50 - ---------------------------------------------------------------------------------------------------------------------------------- Aid Association for Lutherans C $ 10,000,000.00 $ 8,571,363.63 $ 39,062.50 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- John Hancock Mutual Life Insurance Company H $ 20,000,000.00 $ 78,125.00 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- The Travelers Insurance Company I $ 10,000,000.00 $ 39,062.50 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Connecticut Mutual Life Insurance Company (Mass I $ 11,000,000.00 $ 42,968.75 Mutual) - ---------------------------------------------------------------------------------------------------------------------------------- CM Life Insurance Co. (Mass Mutual) I $ 4,000,000.00 $ 15,625.00 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- The Variable Annuity Life Insurance Company J $ 10,000,000.00 $ 39,062.50 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- The Franklin Life Insurance Company C $ 2,000,000.00 $ 1,714,272.73 $ 7,812.50 - ---------------------------------------------------------------------------------------------------------------------------------- The Franklin Life Insurance Company G $ 3,000,000.00 $ 3,000,000.00 $ 11,718.75 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- The Canada Life Assurance Company A $ 5,000,000.00 $ 5,000,000.00 $ 19,531.25 - ---------------------------------------------------------------------------------------------------------------------------------- Canada Life Insurance Company of America A $ 2,500,000.00 $ 2,500,000.00 $ 9,765.63 - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- Lutheran Brotherhood I $ 7,000,000.00 $ 27,343.75 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- American Family Life Insurance Company H $ 5,000,000.00 $ 19,531.25 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Kansas City Life Insurance Co. I $ 5,000,000.00 $ 19,531.25 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Safeco Life Insurance Company E $ 5,000,000.00 $ 5,000,000.00 $ 19,531.25 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Woodmen Accident and Life Company F $ 2,500,000.00 $ 2,500,000.00 $ 9,765.63 - ---------------------------------------------------------------------------------------------------------------------------------- Woodmen Accident and Life Company J $ 2,000,000.00 $ 7,812.50 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Provident Mutual Life Insurance Company of Philadelphia A $ 2,000,000.00 $ 2,000,000.00 $ 7,812.50 - ---------------------------------------------------------------------------------------------------------------------------------- Provident Mutual Life Insurance Company I $ 1,500,000.00 $ 5,859.38 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Great Western Insurance Company* J $ 500,000.00 $ 1,953.13 - ---------------------------------------------------------------------------------------------------------------------------------- Guarantee Reserve Life Insurance Company J $ 500,000.00 $ 1,953.13 - ---------------------------------------------------------------------------------------------------------------------------------- National Travelers Life Company J $ 1,000,000.00 $ 3,906.25 - ---------------------------------------------------------------------------------------------------------------------------------- North West Life Assurance Company of Canada H $ 1,000,000.00 $ 3,906.25 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Berkshire Life Insurance Company B $ 2,000,000.00 $ 1,714,000.00 $ 7,812.50 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Security Mutual Life Insurance Company H $ 2,000,000.00 $ 7,812.50 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- $100,000,000.00 $96,571,000.00 $180,000,000.00 $1,093,750.00 - ----------------------------------------------------------------------------------------------------------------------------------
EX-10.(I)(H)(5) 4 WAIVER TO LONG TERM CREDIT AGREEMENT EXHIBIT 10.(i)(H)(5) WAIVER AND FOURTH AMENDMENT TO LONG TERM CREDIT AGREEMENT THIS WAIVER AND AMENDMENT (this "Waiver and Amendment") dated as of March 29, 1997 (the "Effective Date"), is made and entered into among MONTGOMERY WARD & CO., INCORPORATED (the "Company") and the banks listed on the signature pages hereof (herein, together with their respective successors and assigns, collectively called the "Banks" and individually called a "Bank"). WHEREAS the Banks are parties to that certain Long Term Credit Agreement dated as of September 15, 1994, as amended (the "Long Term Credit Agreement"), among Montgomery Ward & Co., Incorporated, various banks named therein, The First National Bank of Chicago, as Documentary Agent, The Bank of Nova Scotia, as Administrative Agent, The Bank of New York, as Negotiated Loan Agent, and Bank of America National Trust and Savings Association, as Advisory Agent; and WHEREAS the Company desires that the Banks waive compliance by the Company with certain financial covenants contained in the Long Term Credit Agreement; NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I WAIVERS 1.1 Waiver. (a) For the Fiscal Quarter ending March 29, 1997 (the "Waiver Period"), the Banks hereby waive any noncompliance by the Company with the provisions of Sections 11.3, 11.4, and 11.20, of the Long Term Credit Agreement. (b) The Banks hereby further waive compliance by the Company under Section 11.18 of the Long Term Credit Agreement with the ratio of Debt of the Company and its Restricted Subsidiaries to Total Capitalization, such waiver being for the sole purpose to permit the Company on March 31, 1997 to make a dividend of (but not in excess of) $3,066,875 on its Debt-Like Preferred Stock. (c) The Banks hereby further waive any Event of Default under Section 13.1(c) of the Long Term Credit Agreement arising by reason of any payment or other concession pursuant to the Finance Agreement Modifications referred to in Section 3.2(a) hereof. 1.2 Modification of Finance Agreements. After the Effective Date, without the written consent of the Required Banks, the Company will not, and will not permit any Subsidiary to, enter into any amendment, waiver or modification with respect to any Finance Agreement (hereinafter defined). 1.3 Limitation on Waivers. The waivers contained herein are limited precisely to their terms and shall not constitute an amendment, modification or waiver generally or for any other purpose. The waivers contained herein shall immediately terminate and cease to be effective upon breach by the Company of its obligations under Section 1.2 hereof or any of the representations or warranties contained in Article III. ARTICLE II AMENDMENTS ---------- 2.1 Signature Debt. Section 11.23 of the Long Term Credit Agreement is amended to read in its entirety as follows: 11.23 Limitation on Signature Debt. Not permit Signature to incur or permit to exist any Indebtedness for Borrowed Money, except (i) Indebtedness for Borrowed Money under the Signature Credit Agreement not exceeding $101,886,491 in aggregate principal amount, and (ii) Indebtedness for Borrowed Money of Signature to the Company or its other Subsidiaries. 2.2 Seller Notes. Section 13.1(j) of the Long Term Credit Agreement is amended by substituting "February 28, 2003" for "March 14, 1996". 2.3 Inventory Financing. Section 13.1 of the Long Term Credit Agreement is further amended by adding subsections (m) and (n) as follows: (m) Inventory Financing with GE Capital. The aggregate outstanding principal amount of indebtedness of the Company and its subsidiary, Lechmere, Inc. to GE Capital pursuant to its so-called vendor program shall at any time be less than $350,000,000. (n) Note Purchase Agreements. The occurrence of an event of default under the Company's Note Purchase Agreements dated as of March 1, 1993 and July 11, 1995, as amended. No waiver, amendment or other action by the noteholders with respect to any event of default under the such Note Purchase Agreements shall be effective to terminate the Event of Default arising under this Section 13.1(n). 2.4 Termination Date. The definition of Termination Date is amended by substituting "August 29, 1997" for "February 15, 1998". 2 ARTICLE III REPRESENTATIONS AND WARRANTIES ------------------------------ The Company hereby represents and warrants to the Agents and the Banks as of the Effective Date: 3.1 No Default. No Event of Default or Unmatured Event of Default will exist after giving effect to this Waiver and Amendment. 3.2 Finance Agreements. (a) Without limitation of Section 2.1, for the Waiver Period the Company has obtained all necessary amendments, waivers or modifications (collectively, the "Finance Agreement Modifications") in respect of any financial covenants under the Finance Agreements so that during the Waiver Period, no default or event of default shall exist under any of such Finance Agreements as a result of noncompliance with any of such financial covenants. The Company has furnished to the Agents copies of any amendment, waiver or modification entered into on or after December 23, 1996 with respect to any Finance Agreement. The Company has furnished to each of the Banks a true and correct summary (dated as of 3/27/97) of the Finance Agreement Modifications. (b) As used herein, "Finance Agreement" means any or all of the following: (i) any and all agreements of the Company or any of its Subsidiaries evidencing or governing the terms of any Indebtedness for Borrowed Money, (ii) the so- called synthetic or operating lease agreements with Sumitomo Bank Leasing and Finance, Inc. and Credit Lyonnais, as lessors, as amended, and (iii) any agreements or notes (including the so-called Seller Notes referred to in Section 13.1(j) of the Long Term Credit Agreement) evidencing amounts owed by the Company or a Subsidiary under the Retail Credit Program Agreement. 3.3 Due Execution. The execution, delivery and performance of this Waiver and Amendment, (i) are within the Company's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not require any governmental approval which has not been previously obtained (and each such governmental approval that has been previously obtained remains effective), (iv) do not and will not contravene or conflict with any provision of law, or of any judgment, decree or order, or of the Company's charter or by-laws, and (v) do not and will not contravene or conflict with, or cause any Lien to arise under, any provision of any agreement binding upon the Company, any Subsidiary or any of their respective properties. 3.4 Validity. The Long Term Credit Agreement as modified by this Waiver and Amendment constitutes the legal, valid and binding obligations of the Company, enforceable against it in 3 accordance with its respective terms, without defense, counterclaim or offset. 3.5 Long Term Credit Agreement. All representations and warranties of the Company contained in Sections 10.1, 10.2, 10.3, 10.4(a), 10.7, 10.10, 10.11, 10.12, 10.15 and 10.18 of the Long Term Credit Agreement are true and correct as of the date hereof with the same effect as though made on the date hereof. 3.6 Maturity of Seller Notes. The maturity of the Seller Notes referred to in Section 13.1(j) of the Long Term Credit Agreement has been extended to February 28, 2003. 3.7 Inventory Financing with GE Capital. As of the Effective Date, the aggregate outstanding principal amount of indebtedness of the Company and its Subsidiary Lechmere, Inc. to GE Capital under its so-called vendor program is at least $350,000,000. ARTICLE IV GENERAL 4.1 Expenses. The Company agrees to pay all fees and expenses of McDermott, Will & Emery as counsel to the Documentary Agent, the Administrative Agent and the Negotiated Loan Agent in connection with the preparation, execution and delivery of this Waiver and Amendment. 4.2 Effectiveness. This Waiver and Amendment shall become effective as of the Effective Date, subject to receipt by McDermott, Will & Emery as counsel to the Agents of the following, each duly executed and dated the Effective Date and in form and substance reasonably satisfactory to the Administrative Agent: (a) Waiver and Amendment. Counterparts of this Waiver and Amendment, whether on the same or different counterparts, executed by the Company and the Required Banks (or in the case of any Bank as to which an executed counterpart shall not have been so received, telegraphic, telefax, telex or other written confirmation of execution of a counterpart hereof by such Bank); (b) Finance Agreements. A certificate of an Authorized Officer of the Company to the effect that (i) attached thereto is an executed copy of each Finance Agreement Modification entered into during the period from December 24, 1996 through the Effective Date, and (ii) each such Finance Agreement Modification is fully effective; and 4 (c) Short Term Credit Agreement. A duly executed waiver and amendment to the Short Term Credit Agreement that has terms substantially identical to the terms of this Waiver and Amendment. 4.3 Definitions. Except as otherwise herein specifically defined, all the capitalized terms contained herein shall have the meaning ascribed to such terms in the Long Term Credit Agreement. 4.4 Reaffirmation. Except as hereinabove expressly provided, all the terms and provisions of the Long Term Credit Agreement shall remain in full force and effect and all references therein and in any related documents to the Long Term Credit Agreement shall henceforth refer to the Long Term Credit Agreement as modified by this Waiver and Amendment. This Waiver and Amendment shall be deemed incorporated into, and a part of, the Long Term Credit Agreement. 4.5 Successors. This Waiver and Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 4.6 Governing Law. This Waiver and Amendment shall be governed by and construed in accordance with the laws of the State of Illinois. 4.7 Counterparts. This Waiver and Amendment may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same agreement. 4.8 Acknowledgement of Lechmere. By executing the acknowledgement to this Waiver and Amendment, Lechmere, Inc. hereby confirms and agrees that the Lechmere, Inc. Guaranty is, and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects, except that on or after the Effective Date each reference therein to the "Long Term Credit Agreement" shall refer to the Long Term Credit Agreement after giving effect to this Waiver and Amendment. 5 Delivered at Chicago, Illinois as of the day, month and year first above written. MONTGOMERY WARD & CO., INCORPORATED By: /s/ Carol J. Harms -------------------------------- Name: Carol J. Harms Title: Senior Vice President - Finance ACCEPTED AND APPROVED: THE FIRST NATIONAL BANK OF CHICAGO, in its individual capacity and in its capacity as Documentary Agent By: /s/ Linda M. Thompson ----------------------------- Name: Linda M. Thompson Title: First Vice President THE BANK OF NEW YORK, in its individual capacity and in its capacity as Negotiated Loan Agent By: /s/ Michael Flannery ----------------------------- Name: Michael Flannery THE BANK OF NOVA SCOTIA, in its individual capacity and in its capacity as Administrative Agent By: /s/ A.S. Norsworthy ----------------------------- Name: A.S. Norsworthy Title: Sr. Team Leader-Loan Operations 6 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, in its individual capacity and in its capacity as Advisory Agent By: /s/ Sandra S. Ober ------------------------------ Name: Sandra S. Ober CIBC INC. By: /s/ William J. Koslo, Jr. ------------------------------ Name: William J. Koslo, Jr. NATIONSBANK, N.A. By: /s/ Valerie C. Mills ------------------------------ Name: Valerie C. Mills Title: Sr. Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: ------------------------------ Name: CREDIT LYONNAIS CHICAGO BRANCH By: /s/ Mary Ann Klemm ------------------------------ Name: Mary Ann Klemm Title: Vice President and Group Head BANCA COMMERCIALE ITALIANA, CHICAGO BRANCH By: /s/ Julian M. Teodori ------------------------------ Name: Julian M. Teodori Title: Senior Vice President & Branch Manager By: /s/ Matthew V. Trujillo ------------------------------ Name: Matthew V. Trujillo Title: Assistant Vice President THE DAI-ICHI KANGYO BANK, LTD., CHICAGO BRANCH By: ------------------------------ Name: THE BANK OF TOKYO-MITSUBISHI, LTD., CHICAGO BRANCH By: /s/ Gus C. Browne II ------------------------------ Name: Gus C. Browne II THE NORTHERN TRUST COMPANY By: /s/ Sidney R. Dillard ------------------------------ Name: Sidney R. Dillard THE SAKURA BANK, LTD. By: ------------------------------ Name: THE SANWA BANK, LIMITED, CHICAGO BRANCH By: /s/ Tomomi Omura ------------------------------ Name: Tomomi Omura Title: Assistant General Manager SWISS BANK CORPORATION, CHICAGO BRANCH By: /s/ Nancy Russell ------------------------------ Name: Nancy Russell Title: SBC Director By: /s/ Ernst Schirmer ----------------------------- Name: Ernst Schirmer Title: Director Credit Risk Management UNITED STATES NATIONAL BANK OF OREGON By: ------------------------------ Name: UNION BANK OF CALIFORNIA, N.A. By: /s/ Richard A. Sutter ------------------------------ Name: Richard A. Sutter Title: Vice President ABN AMRO BANK N.V. By: /s/ David C. Sagers ----------------------------- Name: David C. Sagers Title: Vice President By: /s/ Ronald R. Richter ----------------------------- Name: Ronald R. Richter Title: Group Vice President FIRST BANK NATIONAL ASSOCIATION By: /s/ Christopher H. Patton ----------------------------- Name: Christopher H. Patton THE FIRST NATIONAL BANK OF BOSTON By: /s/ Judith C.E. Kelly ------------------------------ Name: Judith C.E. Kelly Title: Vice President THE FUJI BANK, LIMITED By: ------------------------------ Name: Title: PNC BANK, NATIONAL ASSOCIATION By: ------------------------------ Name: THE YASUDA TRUST AND BANKING CO., LTD. By: /s/ Joseph C. Meek ------------------------------ Name: Joseph C. Meek THE FIRST NATIONAL BANK OF MARYLAND By: /s/ Andrew W. Fish ------------------------------ Name: Andrew W. Fish Title: Vice President INSTITUTO BANCARIO SAN PAOLO DI TORINO, S.P.A. By: /s/ Robert Wurster ------------------------------ Name: Robert Wurster Title: First Vice President By: /s/ Carlo Persico ------------------------------ Name: Carlo Persico Title: Deputy General Manager KREDIETBANK N.V. By: /s/ Raymond F. Murray ------------------------------ Name: Raymond F. Murray Title: Vice President By: /s/ Robert Snauffer ------------------------------ Name: Robert Snauffer Title: Vice President UNION BANK OF SWITZERLAND - NEW YORK BRANCH By: /s/ Daniel R. Strickford ------------------------------ Name: Daniel R. Strickford Title: Assistant Vice President By: /s/ Samuel Azizo ------------------------------ Name: Samuel Azizo Title: Vice President WELLS FARGO BANK, N.A. By: ------------------------------ Name: BANCA DI ROMA, S.P.A. By: ------------------------------ Name: Title: By: ------------------------------ Name: Title: COMERICA BANK By: /s/ Harve C. Light ------------------------------ Name: Harve C. Light Title: Assistant Vice President BANK OF AMERICA ILLINOIS By: /s/ Sandra S. Ober ------------------------------ Name: Sandra S. Ober GUARANTY REAFFIRMED: LECHMERE, INC. By: /s/ Carol J. Harms ------------------------------ Name: Carol J. Harms Title: Vice President and Treasurer EX-10.(I)(I)(6) 5 WAIVER TO SHORT TERM CREDIT AGREEMENT EXHIBIT 10.(i)(I)(6) WAIVER AND FOURTH AMENDMENT TO SHORT TERM CREDIT AGREEMENT THIS WAIVER AND AMENDMENT (this "Waiver and Amendment") dated as of March 29, 1997 (the "Effective Date"), is made and entered into among MONTGOMERY WARD & CO., INCORPORATED (the "Company") and the banks listed on the signature pages hereof (herein, together with their respective successors and assigns, collectively called the "Banks" and individually called a "Bank"). WHEREAS the Banks are parties to that certain Short Term Credit Agreement dated as of September 15, 1994, as amended (the "Short Term Credit Agreement"), among Montgomery Ward & Co., Incorporated, various banks named therein, The First National Bank of Chicago, as Documentary Agent, The Bank of Nova Scotia, as Administrative Agent, The Bank of New York, as Negotiated Loan Agent, and Bank of America National Trust and Savings Association, as Advisory Agent; and WHEREAS the Company desires that the Banks waive compliance by the Company with certain financial covenants contained in the Short Term Credit Agreement; NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I WAIVERS 1.1 Waiver. (a) For the Fiscal Quarter ending March 29, 1997 (the "Waiver Period"), the Banks hereby waive any noncompliance by the Company with the provisions of Sections 11.3, 11.4, and 11.20, of the Short Term Credit Agreement. (b) The Banks hereby further waive compliance by the Company under Section 11.18 of the Short Term Credit Agreement with the ratio of Debt of the Company and its Restricted Subsidiaries to Total Capitalization, such waiver being for the sole purpose to permit the Company on March 31, 1997 to make a dividend of (but not in excess of) $3,066,875 on its Debt-Like Preferred Stock. (c) The Banks hereby further waive any Event of Default under Section 13.1(c) of the Short Term Credit Agreement arising by reason of any payment or other concession pursuant to the Finance Agreement Modifications referred to in Section 3.2(a) hereof. 1.2 Modification of Finance Agreements. After the Effective Date, without the written consent of the Required Banks, the Company will not, and will not permit any Subsidiary to, enter into any amendment, waiver or modification with respect to any Finance Agreement (hereinafter defined). 1.3 Limitation on Waivers. The waivers contained herein are limited precisely to their terms and shall not constitute an amendment, modification or waiver generally or for any other purpose. The waivers contained herein shall immediately terminate and cease to be effective upon breach by the Company of its obligations under Section 1.2 hereof or any of the representations or warranties contained in Article III. ARTICLE II AMENDMENTS ---------- 2.1 Signature Debt. Section 11.23 of the Short Term Credit Agreement is amended to read in its entirety as follows: 11.23 Limitation on Signature Debt. Not permit Signature to incur or permit to exist any Indebtedness for Borrowed Money, except (i) Indebtedness for Borrowed Money under the Signature Credit Agreement not exceeding $101,886,491 in aggregate principal amount, and (ii) Indebtedness for Borrowed Money of Signature to the Company or its other Subsidiaries. 2.2 Seller Notes. Section 13.1(j) of the Short Term Credit Agreement is amended by substituting "February 28, 2003" for "March 14, 1996". 2.3 Inventory Financing. Section 13.1 of the Short Term Credit Agreement is further amended by adding subsections (m) and (n) as follows: (m) Inventory Financing with GE Capital. The aggregate outstanding principal amount of indebtedness of the Company and its subsidiary, Lechmere, Inc. to GE Capital pursuant to its so-called vendor program shall at any time be less than $350,000,000. (n) Note Purchase Agreements. The occurrence of an event of default under the Company's Note Purchase Agreements dated as of March 1, 1993 and July 11, 1995, as amended. No waiver, amendment or other action by the noteholders with respect to any event of default under the such Note Purchase Agreements shall be effective to terminate the Event of Default arising under this Section 13.1(n). 2 ARTICLE III REPRESENTATIONS AND WARRANTIES ------------------------------ The Company hereby represents and warrants to the Agents and the Banks as of the Effective Date: 3.1 No Default. No Event of Default or Unmatured Event of Default will exist after giving effect to this Waiver and Amendment. 3.2 Finance Agreements. (a) Without limitation of Section 2.1, for the Waiver Period the Company has obtained all necessary amendments, waivers or modifications (collectively, the "Finance Agreement Modifications") in respect of any financial covenants under the Finance Agreements so that during the Waiver Period, no default or event of default shall exist under any of such Finance Agreements as a result of noncompliance with any of such financial covenants. The Company has furnished to the Agents copies of any amendment, waiver or modification entered into on or after December 23, 1996 with respect to any Finance Agreement. The Company has furnished to each of the Banks a true and correct summary (dated as of 3/27/97) of the Finance Agreement Modifications. (b) As used herein, "Finance Agreement" means any or all of the following: (i) any and all agreements of the Company or any of its Subsidiaries evidencing or governing the terms of any Indebtedness for Borrowed Money, (ii) the so-called synthetic or operating lease agreements with Sumitomo Bank Leasing and Finance, Inc. and Credit Lyonnais, as lessors, as amended, and (iii) any agreements or notes (including the so-called Seller Notes referred to in Section 13.1(j) of the Short Term Credit Agreement) evidencing amounts owed by the Company or a Subsidiary under the Retail Credit Program Agreement. 3.3 Due Execution. The execution, delivery and performance of this Waiver and Amendment, (i) are within the Company's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not require any governmental approval which has not been previously obtained (and each such governmental approval that has been previously obtained remains effective), (iv) do not and will not contravene or conflict with any provision of law, or of any judgment, decree or order, or of the Company's charter or by-laws, and (v) do not and will not contravene or conflict with, or cause any Lien to arise under, any provision of any agreement binding upon the Company, any Subsidiary or any of their respective properties. 3.4 Validity. The Short Term Credit Agreement as modified by this Waiver and Amendment constitutes the legal, valid and binding obligations of the Company, enforceable against it in 3 accordance with its respective terms, without defense, counterclaim or offset. 3.5 Short Term Credit Agreement. All representations and warranties of the Company contained in Sections 10.1, 10.2, 10.3, 10.4(a), 10.7, 10.10, 10.11, 10.12, 10.15 and 10.18 of the Short Term Credit Agreement are true and correct as of the date hereof with the same effect as though made on the date hereof. 3.6 Maturity of Seller Notes. The maturity of the Seller Notes referred to in Section 13.1(j) of the Short Term Credit Agreement has been extended to February 28, 2003. 3.7 Inventory Financing with GE Capital. As of the Effective Date, the aggregate outstanding principal amount of indebtedness of the Company and its Subsidiary Lechmere, Inc. to GE Capital under its so-called vendor program is at least $350,000,000. ARTICLE IV GENERAL ------- 4.1 Expenses. The Company agrees to pay all fees and expenses of McDermott, Will & Emery as counsel to the Documentary Agent, the Administrative Agent and the Negotiated Loan Agent in connection with the preparation, execution and delivery of this Waiver and Amendment. 4.2 Effectiveness. This Waiver and Amendment shall become effective as of the Effective Date, subject to receipt by McDermott, Will & Emery as counsel to the Agents of the following, each duly executed and dated the Effective Date and in form and substance reasonably satisfactory to the Administrative Agent: (a) Waiver and Amendment. Counterparts of this Waiver and Amendment, whether on the same or different counterparts, executed by the Company and the Required Banks (or in the case of any Bank as to which an executed counterpart shall not have been so received, telegraphic, telefax, telex or other written confirmation of execution of a counterpart hereof by such Bank); (b) Finance Agreements. A certificate of an Authorized Officer of the Company to the effect that (i) attached thereto is an executed copy of each Finance Agreement Modification entered into during the period from December 24, 1996 through the Effective Date, and (ii) each such Finance Agreement Modification is fully effective; and 4 (c) Long Term Credit Agreement. A duly executed waiver and amendment to the Long Term Credit Agreement that has terms substantially identical to the terms of this Waiver and Amendment. 4.3 Definitions. Except as otherwise herein specifically defined, all the capitalized terms contained herein shall have the meaning ascribed to such terms in the Short Term Credit Agreement. 4.4 Reaffirmation. Except as hereinabove expressly provided, all the terms and provisions of the Short Term Credit Agreement shall remain in full force and effect and all references therein and in any related documents to the Short Term Credit Agreement shall henceforth refer to the Short Term Credit Agreement as modified by this Waiver and Amendment. This Waiver and Amendment shall be deemed incorporated into, and a part of, the Short Term Credit Agreement. 4.5 Successors. This Waiver and Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 4.6 Governing Law. This Waiver and Amendment shall be governed by and construed in accordance with the laws of the State of Illinois. 4.7 Counterparts. This Waiver and Amendment may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same agreement. 4.8 Acknowledgement of Lechmere. By executing the acknowledgement to this Waiver and Amendment, Lechmere, Inc. hereby confirms and agrees that the Lechmere, Inc. Guaranty is, and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects, except that on or after the Effective Date each reference therein to the "Short Term Credit Agreement" shall refer to the Short Term Credit Agreement after giving effect to this Waiver and Amendment. 5 Delivered at Chicago, Illinois as of the day, month and year first above written. MONTGOMERY WARD & CO., INCORPORATED By: /s/ Carol J. Harms ------------------------------------ Name: Carol J. Harms --------------------------------- Title: Senior Vice President - Finance ACCEPTED AND APPROVED: THE FIRST NATIONAL BANK OF CHICAGO, in its individual capacity and in its capacity as Documentary Agent By: /s/ Linda M. Thompson ----------------------------- Name: Linda M. Thompson Title: First Vice President THE BANK OF NEW YORK, in its individual capacity and in its capacity as Negotiated Loan Agent By: /s/ Michael Flannery ------------------------------ Name: Michael Flannery THE BANK OF NOVA SCOTIA, in its individual capacity and in its capacity as Administrative Agent By: /s/ A.S. Norsworthy ----------------------------- Name: A.S. Norsworthy Title: Sr. Team Leader-Loan Operations BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, in its individual capacity and in its capacity as Advisory Agent By: /s/ Sandra S. Ober ----------------------------- Name: Sandra S. Ober CIBC INC. By: /s/ William J. Koslo, Jr. ----------------------------- Name: William J. Koslo, Jr. NATIONSBANK, N.A. By: /s/ Valerie C. Mills ----------------------------- Name: Valerie C. Mills Title: Sr. Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By:_____________________________ Name: CREDIT LYONNAIS CHICAGO BRANCH By: /s/ Mary Ann Klemm ----------------------------- Name: Mary Ann Klemm Title: Vice President and Group Head BANCA COMMERCIALE ITALIANA, CHICAGO BRANCH By: /s/ Julian M. Teodori ----------------------------- Name: Julian M. Teodori Title: Senior Vice President Branch Manager By: /s/ Matthew V. Trujillo ----------------------------- Name: Matthew V. Trujillo Title: Assistant Vice President THE DAI-ICHI KANGYO BANK, LTD., CHICAGO BRANCH By:_____________________________ Name: THE BANK OF TOKYO-MITSUBISHI, LTD., CHICAGO BRANCH By: /s/ Gus C. Browne II ----------------------------- Name: Gus C. Browne II THE NORTHERN TRUST COMPANY By: /s/ Sidney R. Dillard ----------------------------- Name: Sidney R. Dillard THE SAKURA BANK, LTD. By:_____________________________ Name: SWISS BANK CORPORATION, CHICAGO BRANCH By: /s/ Nancy Russell ---------------------------- Name: Nancy Russell Title: SBC Director By: /s/ Ernst Schirmer ------------------------------ Name: Ernst Schirmer Title: Director Credit Risk Management UNION BANK OF CALIFORNIA, N.A. By: /s/ Richard A. Sutter ----------------------------- Name: Richard A. Sutter Title: Vice President ABN AMRO BANK N.V. By: /s/ David C. Sagers ----------------------------- Name: David C. Sagers Title: Vice President By: /s/ Ronald R. Richter ----------------------------- Name: Ronald R. Richter Title: Group Vice President FIRST BANK NATIONAL ASSOCIATION By: /s/ Christopher H. Patton ----------------------------- Name: Christopher H. Patton THE FIRST NATIONAL BANK OF BOSTON By: /s/ Judith C.E. Kelly ----------------------------- Name: Judith C.E. Kelly Title: Vice President PNC BANK, NATIONAL ASSOCIATION By:_____________________________ Name: THE YASUDA TRUST AND BANKING CO., LTD. By: /s/ Joseph C. Meek ----------------------------- Name: Joseph C. Meek THE FIRST NATIONAL BANK OF MARYLAND By: /s/ Andrew W. Fish ----------------------------- Name: Andrew W. Fish Title: Vice President ISTITUTO BANCARIO SAN PAOLO DI TORINO, S.P.A. By: /s/ Robert Wurster ---------------------- Name: Robert Wurster Title: First Vice President By: /s/ Carlo Persico ------------------ Name: Carlo Persico Title: Deputy General Manager UNION BANK OF SWITZERLAND - NEW YORK BRANCH By: /s/ Daniel R. Strickford ------------------------- Name: Daniel R. Strickford Title: Assistant Vice President By: /s/ Samuel Azizo ----------------------- Name: Samuel Azizo Title: Vice President WELLS FARGO BANK, N.A. By:_____________________________ Name: COMERICA BANK By: /s/ Harve C. Light ----------------------------- Name: Harve C. Light Title: Assistant Vice President BANK OF AMERICA ILLINOIS By: /s/ Sandra S. Ober ----------------------------- Name: Sandra S. Ober THE INDUSTRIAL BANK OF JAPAN, LIMITED By:_____________________________ Name: GUARANTY REAFFIRMED: LECHMERE, INC. By: /s/ Carol J. Harms ----------------------------- Name: Carol J. Harms Title: Vice President and Treasurer EX-10.(I)(L)(2) 6 WAIVER LETTER EXHIBIT 10.(i)(L)(2) THE BANK OF NEW YORK THE BANK OF NOVA SCOTIA March 27, 1997 Signature Financial/Marketing, Inc. 200 North Martingale Road Schaumburg, Illinois 60173 Gentlemen: We refer to the Credit Agreement dated as of September 27, 1997, as amended and restated as of October 21, 1996 and as amended as of December 23, 1996 among Signature Financial/Marketing, Inc., various Banks, BNY, and BNS (the "Signature Credit Agreement"). The Bank of New York ("BNY") and The Bank of Nova Scotia ("BNS") have been advised by Montgomery Ward & Co., Incorporated ("Montgomery Ward") that Montgomery Ward plans to enter into a Limited Waiver and First Amendment (the "Waiver and Amendment") to the Note Purchase Agreements dated as of March 1, 1993 between Montgomery Ward and the note purchasers thereunder (the "Note Agreements") with the holders (the "Noteholders") of the notes (the "Notes") issued under the Note Agreements. The Waiver and Amendment provides for the waiver by the Noteholders for the periods prior to and including June 27, 1997 of compliance by Montgomery Ward with the minimum shareholders equity and priority debt tests under the Note Agreements and provides for the payment of a waiver fee to the Noteholders, an increase in interest rates on the Notes, a shortening to August 29, 1997 of the maturity of the Notes and the imposition of certain additional covenants and restrictions on Montgomery Ward. BNY and BNS have been advised that the Program Agreement dated as of October 7, 1996, as amended, ("Program Agreement") among Montgomery Ward, Lechmere, Inc. and Deutsche Financial Services Corporation has a cross default provision similar to the cross default provision contained in section 13.1(c) of the Long and Short Term Credit Agreements dated as of September 15, 1994, as amended, among Montgomery Ward, various Banks, and BNY, BNS, The First National Bank of Chicago, and Bank of America National Trust and Savings Association, as agents. March 27, 1997 Page 2 BNS and BNY hereby waive any "Event of Default" which might arise under section 8.1(f) of the Signature Credit Agreement solely and exclusively by reason of any "Event of Default" under section 7.1(e) of the Program Agreement, provided that such "Event of Default" under the Program Agreement was caused solely and exclusively by reason of the execution and delivery by Montgomery Ward of the Waiver and Amendment and the performance by Montgomery Ward of its obligations thereunder and for no other reason whatsoever. The waiver contained herein is limited precisely to its terms and shall not constitute an amendment, modification or waiver generally or for any other purpose. This letter may be executed in any number of counterparts, each of which shall be an original and all of which when taken together will constitute one document. This letter shall be governed by and construed in accordance with the laws of the State of Illinois. THE BANK OF NEW YORK, in its individual capacity and in its capacity as Documentation Agent By: /s/ Michael Flannery ----------------------------- Name: Michael Flannery THE BANK OF NOVA SCOTIA, in its individual capacity and in its capacity as Administrative Agent By: /s/ F.C.H. Ashby ----------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations EX-10.(I)(L)(3) 7 CORRECTION LETTER AGREEMENT Exhibit 10.(i)(L)(3) March 27, 1997 THE BANK OF NOVA SCOTIA, as Administrative Agent 600 Peachtree Street NE, Suite 2700 Atlanta, Georgia 30308 THE BANK OF NEW YORK, as Documentation Agent One Wall Street New York, New York 10286 Re: Signature Financial/Marketing, Inc. ----------------------------------- This letter confirms that the Credit Agreement dated as of September 27, 1996, as amended and restated as of October 21, 1996 and as amended as of December 23, 1996 entered into and among the Banks and Signature Financial/Marketing, Inc. as now in effect or hereafter extended, renewed, modified, supplemented, amended or restated is corrected so that the definition of "Change in Control" shall read in its entirety as follows: "Change of Control" shall be deemed to have occurred at such time as: (i) General Electric Capital Corporation ceases to own on a fully-diluted basis the percentage of each class of the capital stock of Montgomery Ward Holding Corp., a Delaware corporation, which is owned by it on the Original Closing Date on a fully-diluted basis, or (ii) Montgomery Ward Holding Corp. ceases to own 100% of the capital stock of MW on a fully-diluted basis, or (iii) MW ceases to own 100% of the capital stock of the Borrower on a fully-diluted basis, or (iv) the Borrower ceases to own, directly or indirectly, 100% of the capital stock of any Subsidiary of the Borrower on a fully-diluted basis. SIGNATURE FINANCIAL/MARKETING, INC. March 27, 1997 Page 2 By: /s/ Alan Portelli ------------------------- Title: ----------------------- THE BANK OF NEW YORK, in its individual capacity and in its capacity as Documentation Agent By: /s/ Michael Flannery ------------------------- Title: Vice President ----------------------- THE BANK OF NOVA SCOTIA, in its individual capacity and in its capacity as Administrative Agent By: /s/ A.S. Norsworthy ------------------------- Title: Sr. Team Leader-Loan Operations ------------------------------- EX-10.(I)(M)(3) 8 WAIVER TO CREDIT AGREEMENT EXHIBIT 10.(i)(M)(3) WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT THIS WAIVER AND THIRD AMENDMENT (the "Waiver and Amendment") dated as of March 29, 1997, is made and entered into among MONTGOMERY WARD & CO., INCORPORATED (the "Company") and the lenders listed on the signature pages hereof (herein, together with their respective successors and assigns, collectively called the "Lenders" and individually called a "Lender"). WHEREAS the Lenders are parties to that certain Credit Agreement dated as of October 4, 1996, as amended (the "Credit Agreement"), among Montgomery Ward & Co., Incorporated, various Lenders, The Bank of New York as Documentation Agent, and The Bank of Nova Scotia, as Administrative Agent; and WHEREAS the Company desires to amend the Credit Agreement in certain respects; NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I WAIVER 1.1 Waiver. The Lenders hereby waive any Event of Default under Section 13.1(c) of the Credit Agreement arising by reason of any payment or other concession pursuant to the Finance Agreement Modifications referred to in Section 3.2 hereof. 1.2 Limitation on Waivers. The waiver contained herein is limited precisely to their terms and shall not constitute an amendment, modification or waiver generally or for any other purpose. The waiver contained herein shall immediately terminate and cease to be effective upon breach by the Company of its obligations under Section 2.3 hereof or any of the representations or warranties contained in Article III. ARTICLE II AMENDMENTS 2.1 Section 1.1 of the Credit Agreement is hereby amended by adding the following definitions thereto: (a) the definition of "Existing Credit Agreements" is amended by deleting reference therein to "December 23, 1996" and inserting in lieu thereof "March 29, 1997". (b) the definition of "Change in Control" is corrected by deleting reference therein to "Company" and inserting in lieu thereof "Montgomery Ward Holding Corp., a Delaware corporation". (c) The following definition is added in the appropriate alphabetical order: "Finance Agreements" means any or all of the following: (i) any and all agreements of the Company or any of its Subsidiaries evidencing or governing the terms of any Indebtedness for Borrowed Money, (ii) the so- called synthetic or operating lease agreements with Sumitomo Bank Leasing and Finance, Inc. and Credit Lyonnais, as lessors, as amended, and (iii) any agreements or notes (including the so-called Seller Notes referred to in Section 13.1(j)) evidencing amounts owed by the Company or a Subsidiary under the Retail Credit Program Agreement. 2.2 Section 11 of the Credit Agreement is hereby amended by replacing in subsection (i) reference to "December 23, 1996" and inserting in lieu thereof "March 29, 1997". 2.3 Section 11 of the Credit Agreement is hereby amended by adding the following paragraph at the end of the section: Modification of Finance Agreements. Without the consent of the Required Lenders, after the Effective Date the Company will not, and will not permit any Subsidiary to, enter into any material amendment, waiver or modification with respect to any Finance Agreement. 2.4 Inventory Financing and Note Purchase Agreements. Section 13.1 of the Credit Agreement is further amended by adding subsections (m) and (n) as follows: (m) Inventory Financing with GE Capital. The aggregate outstanding principal amount of indebtedness of the Company and its subsidiary, Lechmere, Inc. to GE Capital pursuant to its so-called vendor program shall at any time be less than $350,000,000. (n) Note Purchase Agreements. The occurrence of an event of default under the Company's Note Purchase Agreements dated as of March 1, 1993 and July 11, 1995, as amended. No waiver, amendment or other action by the noteholders with respect to any event of default under the such Note Purchase Agreements shall be effective to 2 terminate the Event of Default arising under this Section 13.1(n). ARTICLE III REPRESENTATIONS AND WARRANTIES ------------------------------ The Company hereby represents and warrants to the Agents and the Lenders as follows: 3.1 No Default. No Event of Default or Unmatured Event of Default has occurred and is continuing or will exist after giving effect to this Waiver and Amendment. 3.2 Finance Agreements. Without limitation of Section 2.1, for the Fiscal Quarter ending March 29, 1997 the Company has obtained all necessary amendments, waivers or modifications (collectively, the "Finance Agreement Modifications") in respect of any financial covenants under the Finance Agreements so that during the Waiver Period, no default or event of default shall exist under any of such Finance Agreements as a result of noncompliance with any of such financial covenants. The Company has furnished to the Agents copies of any amendment, waiver or modification entered into on or after December 23, 1996 with respect to any Finance Agreement. The Company has furnished to each of the Lenders a true and correct summary (dated as of 3/27/97) of each Finance Agreement Modification. 3.3 Due Execution. The execution, delivery and performance of this Waiver and Amendment, (i) are within the Company's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not require any governmental approval which has not been previously obtained (and each such governmental approval that has been previously obtained remains effective), (iv) do not and will not contravene or conflict with any provision of law, or of any judgment, decree or order, or of the Company's charter or by-laws, and (v) do not and will not contravene or conflict with, or cause any Lien to arise under, any provision of any agreement binding upon the Company, any Subsidiary or any of their respective properties. 3.4 Validity. The Credit Agreement as amended by this Waiver and Amendment constitutes the legal, valid and binding obligations of the Company, enforceable against it in accordance with its respective terms, without defense, counterclaim or offset. 3.5 Credit Agreement. All representations and warranties of the Company contained in Sections 10.1, 10.2, 10.3, 10.4(a), 10.7, 10.10, 10.11, 10.12, 10.15 and 10.18 of the Credit Agreement are true and correct as of the date hereof with the same effect as though made on the date hereof. 3 ARTICLE IV GENERAL ------- 4.1 Expenses. The Company agrees to pay all out-of-pocket expenses (including fees and expenses of McDermott, Will & Emery) of the Documentation Agent and the Administrative Agent in connection with the preparation, execution and delivery of this Waiver and Amendment. 4.2 Effectiveness. Article I of this Waiver and Amendment shall become effective as of the date on which, McDermott, Will & Emery as counsel to the Agents shall have received the following in form and substance reasonably satisfactory to the Documentation Agent: (a) Waiver and Amendment. Counterparts of this Waiver and Amendment, whether on the same or different counterparts, executed by the Company and the Required Lenders (or in the case of any Lender as to which an executed counterpart shall not have been so received, telegraphic, telefax, telex or other written confirmation of execution of a counterpart hereof by such Lender). (b) Finance Agreements. A certificate of an Authorized Officer of the Company to the effect that (i) attached thereto is an executed copy of each Finance Agreement Modification entered into during the period from December 24, 1996 through the Effective Date, and (ii) each such Finance Agreement Modification is fully effective. 4.3 Definitions. Except as otherwise herein specifically defined, all the capitalized terms contained herein shall have the meaning ascribed to such terms in the Credit Agreement. 4.4 Reaffirmation. Except as hereinabove expressly provided, all the terms and provisions of the Credit Agreement shall remain in full force and effect and all references therein and in any related documents to the Credit Agreement shall henceforth refer to the Credit Agreement as amended by this Waiver and Amendment. This Waiver and Amendment shall be deemed incorporated into, and a part of, the Credit Agreement. 4.5 Successors. This Waiver and Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 4.6 Governing Law. This Waiver and Amendment shall be governed by and construed in accordance with the laws of the State of Illinois. 4 4.7 Counterparts. This Waiver and Amendment may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same agreement. 4.8 Acknowledgement of Lechmere. By executing the acknowledgement to this Waiver and Amendment, Lechmere, Inc. hereby confirms and agrees that the Lechmere, Inc. Guaranty is, and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects, except that on or after the Effective Date each reference therein to the "Credit Agreement" shall refer to the Credit Agreement after giving effect to this Waiver and Amendment. 5 Delivered at Chicago, Illinois as of the day, month and year first above written. MONTGOMERY WARD & CO., INCORPORATED By: /s/ Carol J. Harms -------------------------------- Name: Carol J. Harms Title: Senior Vice President - Finance ACCEPTED AND APPROVED: THE BANK OF NEW YORK, in its individual capacity and in its capacity as Documentation Agent By: /s/ Michael Flannery ----------------------------- Name: Michael Flannery THE BANK OF NOVA SCOTIA, in its individual capacity and in its capacity as Administrative Agent By: /s/ A.S. Norsworthy ----------------------------- Name: A.S. Norsworthy Title: Sr. Team Leader-Loan Operations GENERAL ELECTRIC CAPITAL CORPORATION, in its individual capacity By: /s/ R.M. Agans ------------------------------ Name: R.M. Agans GUARANTY REAFFIRMED: LECHMERE, INC. By: /s/ Carol J. Harms ------------------- Name: Carol J. Harms Title: Vice President and Treasurer EX-10.(III)(C) 9 WAIVER LETTER Exhibit 10.(iii)(c) March 27, 1997 Montgomery Ward & Co., Incorporated Montgomery Ward Plaza Chicago, IL 60671 Gentlemen: General Electric Capital Corporation ("GE Capital") has been advised by Montgomery Ward & Co., Incorporated ("Montgomery Ward") that Montgomery Ward plans to enter into a Limited Waiver and First Amendment (the "Waiver and Amendment") to the Note Purchase Agreements dated March 1, 1993 between Montgomery Ward and the note purchasers thereunder, as amended, and the Note Purchase Agreement dated July 11, 1995 among Montgomery Ward and the note purchasers thereunder (the "Note Agreements") with the holders ("Noteholders") of the notes (the "Notes") issued under the Note Agreements. The Waiver and Amendment provides for the waiver by the Noteholders for the periods prior to and including June 27, 1997 of compliance by Montgomery Ward with the minimum shareholder equity and priority debt tests under the Note Agreements and provides for the payment of a waiver fee to the Noteholders, an increase in interest rates on the Notes, a shortening to August 29, 1997 of the maturity of the Notes and the imposition of certain additional covenants and restrictions on Montgomery Ward. GE Capital hereby waives an "Event of Default" which might arise under Section 7(a)(4) of the Program Agreement dated October 12, 1989 between GE Capital and Montgomery Ward, as amended, solely and exclusively by reason of the execution and delivery by Montgomery Ward of the Waiver and Amendment and the performance by Montgomery Ward of its obligations thereunder and for no other reason whatsoever. GENERAL ELECTRIC CAPITAL CORPORATION By: ------------------------- Title: ------------------------- EX-10.(IV)(D)(3) 10 RETIREMENT SECURITY PLAN AMENDMENT EXHIBIT 10.(iv)(D)(3) MONTGOMERY WARD & CO., INCORPORATED Third Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan Dated: March 30, 1997 WHEREAS, Montgomery Ward & Co., Incorporated, an Illinois corporation ("Ward"), maintains the Montgomery Ward & Co., Incorporated Retirement Security Plan ("Plan"); and WHEREAS, pursuant to Section 17.1 Power to Amend, the power to amend the Plan is reserved to the Board of Directors of Montgomery Ward & Co., Incorporated ("Board"); and WHEREAS, the Board desires to amend the Plan. NOW, THEREFORE, the Plan is amended effective April 1, 1997, in the following manner: 1. Addendum B is added to the Plan to read in its entirety as attached hereto. 2. In all other respects, the Plan shall continue in full force and effect. MONTGOMERY WARD & CO., INCORPORATED By: Robert A. Kasenter /s/ Robert A. Kasenter ------------------------------------------ Its: EVP Human Resources ----------------------------------------- ATTEST: By: Philip Delk /s/ Philip Delk ------------------------------- Its: VP & Deputy General Counsel ------------------------------ Addendum B Montgomery Ward & Co., Incorporated Retirement Security Plan B-1 Purpose. The purpose of this Addendum B is to provide for participation in the Plan by eligible employees of Montgomery Ward & Co., Incorporated-Japan Branch. B-2 Use of Terms. Except where the context of this Addendum B expressly indicates to the contrary, terms used and defined in the Plan shall have the same meanings for purposes of this Addendum B. As used in this Addendum B, the term this "Addendum B" shall include only this Addendum B, and the references to the "Plan" shall include all provisions of the Plan but shall not include this Addendum B. B-3 Conflicts Between Plan and This Addendum B. This Addendum B, together with the Plan, comprises the Plan with respect to Participants under this Addendum B. In case of any conflict between the provisions of the Plan and this Addendum B, the terms and the provisions of this Addendum B shall govern to the extent necessary to eliminate such conflict. B-4 Participants. Nonresident aliens employed by Montgomery Ward & Co., Incorporated-Japan Branch shall be considered "Employees", "Associates", and "Japan Associates" for purposes of the Plan and this Addendum B. Japan Associates employed by Montgomery Ward & Co., Incorporated-Japan Branch on April 1, 1997 who have completed one Year of Service by April 1, 1997 participate in the Plan as of April 1, 1997. Each other Associate who both attains age 21 and complete one Year of Service shall become a Participant under the Plan on the first day of the month following the month in which such Associate meets the eligibility requirements. B-5 Vesting. If a Japan Associate completes two Years of Service, such Associate shall be Vested (have a nonforfeitable right to a Retirement Benefit) in such Associate's Retirement Benefit. B-6 Final Monthly Salary. For purposes of this Addendum B, "Final Monthly Salary" means annual base salary or pay preceding the date of termination of Service by a Japan Associate, divided by fifteen (15). B-7 Retirement Benefit. If a Participant who is a Japan Associate Retires on the Participant's Normal Retirement Date, the amount of the Retirement Benefit shall be the Actuarial Equivalent of a lump sum expressed in the currency of Japan determined by multiplying the participant's Final Monthly Salary by the Participant's years of Service (calculated to the nearest month). Sections 9.1, 9.2, 10.1, 10.2 and 10.3 of the Plan do not apply to Participants who are Japan Associates. Except as otherwise provided in Article IX and Section 11.4 of the Plan, a Participant who is a Japan Associate who Retires on the Participant's Normal Retirement Date shall be eligible for the Retirement Benefit defined in this paragraph B-7 or an Actuarial Equivalent benefit thereto as provided for herein. B-8 Optional Methods of Payment. In lieu of the Qualified Joint and Survivor Benefit payable to a married Participant or the single life annuity payable to an unmarried Participant, a Participant who is a Japan Associate may elect, subject to Sections 11.3 and 11.4 of the Plan, to receive the Actuarial Equivalent of the Retirement Benefit to which the Participant is entitled under the Plan in one lump sum payment in the currency of Japan, or in installments over five quarterly payments in the currency of Japan. Any such election shall comply with the spousal consent requirements of Section 11.5 of the Plan. Section 11.2 of the Plan does not apply to Participants who are Japan Associates. B-9 Termination of Service by a Vested Participant. If the Service of a Participant who is a Japan Associate and who is Vested terminates prior to Retirement, such Participant may elect, subject to the spousal consent requirements of Section 11.5 of the Plan, a Retirement Benefit commencing on the first day of any month within nine months after the Participant's termination of Service and prior to the Participant's Normal Retirement Date or on the Participant's Normal Retirement Date. Section 13.2 of the Plan does not apply to Participants who are Japan Associates. B-10 Death Benefits. In lieu of the Pre-Retirement Death Benefit described in Section 12.1, the spouse of a Participant who died while employed as Japan Associate or within the first nine months after the Participant's termination of Service may elect to receive (i) a lump sum amount equal to the lump sum amount which would have been payable to the Participant if the Participant had terminated Service on the earlier of the date of the Participant's death or the Participant's prior termination of Service or (ii) five quarterly installments equal to the quarterly installment amount which would have been payable to the Participant if the Participant had terminated Service on the earlier of the date of the Participant's death or the Participant's prior termination of Service. B-11 Actuarial Equivalent. For purposes of this Addendum B, "Actuarial Equivalent" shall mean the lesser of (i) Actuarial Equivalent as otherwise defined in the Plan and (ii) Actuarial Equivalent computed as otherwise defined in the Plan but using a 5% interest rate. 2 EX-10.(XIV) 11 EMPLOYMENT AGREEMENT [LETTERHEAD OF MONTGOMERY WARD] EXHIBIT 10.(xiv) CONFIDENTIAL ------------ April 1, 1997 Spencer H. Heine 1141 Carberry Circle Inverness, Illinois 60067 Dear Spencer: This letter confirms our offer to you to remain Executive Vice President, General Counsel and President Montgomery Ward properties for Montgomery Ward with continuing responsibility for all Legal and Real Estate activities for the Company. Additionally, you will remain the Corporate Secretary. You will report to Burnie Donoho, Vice Chairman and Chief Operating Officer and continue to serve as a member of the Montgomery Ward Executive Committee under this Agreement. Your compensation plan will include the following: 1.) Base salary of $400,000 annually, paid semi-monthly. 2.) Target bonus on the Performance Management Plan of $125,000. Based upon the achievement of superior performance against specific objectives for the year, you have the opportunity to earn up to 150% of your target bonus. For fiscal 1997, your target bonus of $125,000 will be guaranteed. 3.) You will receive a one-time payment of $400,000 within 10 days of your signing this agreement in exchange for your waiver of the diminution of your position when you were removed from the Board of Directors in January, 1997. Upon receipt of this payment, you will waive your ability to elect a two year severance option due to any act through this date. This payment is also consideration for your waiver of all future rights under the Montgomery Ward Change of Control Security Plan dated March 1, 1996. This letter will constitute our new Agreement. 4.) You will continue to participate in the senior officer perquisites, including; financial counselling, tax assistance, executive medical, and annual physical examination. You will also participate in any new benefits, retention, and perquisite plans that are implemented for the Executive Committee members as a group. Spencer H. Heine April 11, 1997 Page 2 5.) When the new Stock Option Plan is approved, (or as soon as possible using the current plan if the new plan is not approved by the Board) you will receive a stock option for 225,000 shares of Montgomery Ward Holding stock at the 1997 fair market value as of December 29, 1996. These options will vest as follows: 75,000 - April 1, 1998 75,000 - April 1, 1999 75,000 - April 1, 2000 All stock options in point 5 are subject to the Stockholder's Agreement which govern the Stock Option Plan at the time they are granted. (A copy of the current 10-Q and latest Prospectus are included). 6.) If Montgomery Ward initiates a separation of your employment prior to April 1, 2000 for any reason other than "Cause" as defined below, you will receive: A) Your base salary for twenty-four months. After April 1, 2000, you will participate in the normal Senior Officer Severance Plan that exists as of that date. B) The continuation of the vesting of your stock and stock options through April 1, 2000. "Cause" shall mean (i) your willful failure to substantially perform your duties hereunder, (ii) your willful failure to follow a written, lawful order or written directive from the Board of Directors or Chief Executive Officer of the company, or (iii) your conviction of any kind of felony or any misdemeanor involving moral turpitude. For purposes of this paragraph, no act, or failure to act, on your part shall be considered "willful" unless such act, or failure to act by you was not in good faith and was without reasonable belief that your action or omission was in the best interest of the Company. Spencer H. Heine April 11, 1997 Page 3 In the event of a Change of Control where the Company is sold to a third party you may elect to leave the Company upon thirty (30) days written notice to the Chairman and Chief Executive Officer. If you elect this separation reason, you will receive one year's base salary in a lump sum. All stock and stock options will vest in accordance with the normal terms of the Stockholder's Agreement and will not be accelerated. You must elect this option within thirty (30) days of the Change of Control or it will terminate as an option to you. If you voluntarily leave Montgomery Ward, or are separated for "Cause", you will receive no severance payments, nor will your stock continue to vest beyond your separation date. I am happy that you are remaining with Montgomery Ward. If you are in agreement with this letter, please sign below and return it to me whereupon it will become our binding agreement. I am certain that your experience and knowledge of the Company will be a valuable asset to us as we move forward and improve Montgomery Ward's performance. I look forward to working together to meet our goals. Sincerely, /s/ Roger V. Goddu Roger V. Goddu Chairman & C.E.O. Montgomery Ward cc: Bob Kasenter /s/ Spencer H. Heine ----------------------------- Spencer H. Heine 4/13/97 ----------------------------- Date EX-27 12 FINANCIAL DATA SCHEDULE
5 1,000,000 OTHER DEC-28-1996 DEC-29-1996 MAR-29-1997 96 280 185 0 1402 0 1297 0 4768 0 0 175 0 1 290 4768 1119 1329 997 997 525 0 33 (226) (85) (141) 0 0 0 (141) (3.71) (3.71)
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