-----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, ME+ajYDE2RsIFs49EHYxuP1qAz4FB2pg+Fj1NgWFtpvYQEmTtOQA79I87zvQlLKJ o7181jOsLjuCVyUHecZ7Hg== 0000950131-98-003384.txt : 19980518 0000950131-98-003384.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950131-98-003384 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980404 FILED AS OF DATE: 19980515 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: SEC FILE NUMBER: 000-17540 FILM NUMBER: 98624257 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 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF --- THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 4, 1998 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 May 15, 1998 the Registrant had 18,322,215 shares of Class A Common Stock and 25,000,000 shares of Class B Common Stock outstanding. ================================================================================ Montgomery Ward Holding Corp. For the Quarter Ended April 4, 1998 Index to Quarterly Report on Form 10-Q Page Part I - Financial Information. Item 1. Financial Statements (Unaudited). Consolidated Statements of Income. 3 Consolidated Balance Sheets. 4 Consolidated Statements of Cash Flows. 5 Notes to Consolidated Financial Statements. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 11 Part II - Other Information. 15 2 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the 13-Week Periods Ended ----------------------- April 4, March 29, (In millions, except per share amounts) 1998 1997 -------- --------- Revenues Net sales, including leased and licensed department sales $ 772 $1,119 Direct response marketing revenues, including insurance 219 210 ------ ------ Total Revenues 991 1,329 ------ ------ Costs and Expenses Cost of goods sold, including net occupancy and buying expense 625 997 Operating, selling, general and administrative expenses, including benefits and losses of direct response operations (Note 4) 447 518 Interest expense 13 40 ------ ------ Total Costs and Expenses 1,085 1,555 ------ ------ Loss before Reorganization Costs and Income Taxes (94) (226) Reorganization Costs (Note 5) 16 - ------ ------ Loss before Income Taxes (110) (226) Income Tax Benefit - (85) ------ ------ Net Loss (110) (141) Preferred Stock Dividend Requirements - 3 ------ ------ Net Loss Applicable to Common Shareholders $ (110) $ (144) ------ ------ Net Loss per Common Share (Note 6) Class A $(2.99) $(3.71) Class B (2.19) (3.05)
See notes to consolidated financial statements. 3 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED BALANCE SHEETS
April 4, January 3, (In millions) 1998 1998 -------- ---------- (Unaudited) Assets Cash and cash equivalents $ 234 $ 189 Short-term investments 1 1 Investments of insurance operations 353 358 ------ ------ Total cash and investments 588 548 Trade and other accounts receivable 277 234 Accounts and notes receivable from affiliates 8 6 ------ ------ Total Receivables 285 240 Merchandise inventories 1,179 1,120 Prepaid pension cost 374 366 Properties, plant and equipment, net of accumulated depreciation and amortization 1,072 1,088 Direct response and insurance acquisition costs 547 559 Other assets 298 352 Deferred income taxes 299 299 ------ ------ Total Assets $4,642 $4,572 ====== ====== Liabilities Short-term debt $ 102 $ 102 Trade accounts payable 419 442 Accrued liabilities and other obligations 700 736 Insurance policy claim reserves 242 241 Long-term debt 355 122 Liabilities subject to compromise (Note 3) 3,472 3,468 ------ ------ Total Liabilities 5,290 5,111 Commitments and Contingent Liabilities (Note 7) Redeemable Preferred Stock 177 177 Shareholders' Deficit Common stock 1 1 Capital in excess of par value 64 64 Retained deficit (761) (651) Unrealized gain on marketable equity securities 10 9 Less: treasury stock, at cost (139) (139) ------ ------ Total Shareholders' Deficit (825) (716) ------ ------ Total Liabilities and Shareholders' Deficit $4,642 $4,572 ====== ======
See notes to consolidated financial statements. 4 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the 13-Week Periods Ended -------------------- April 4, March 29, (In millions) 1998 1997 -------- --------- Cash flows used for operating activities: Net loss $(110) $(141) Adjustments to reconcile net loss to net cash used for operating activities: Net receipts of cash relating to disposition of assets of Lechmere, Inc. and closing of Electric Avenue & More stores 41 - Depreciation and goodwill amortization 29 35 Amortization of direct response and insurance acquisition costs 59 61 Deferred income taxes - (96) Changes in operating assets and liabilities: Trade and other accounts receivable (43) 39 Accounts and notes receivable from affiliates (2) 2 Merchandise inventories (60) 143 Prepaid pension cost (8) (4) Direct response and insurance acquisition costs (47) (57) Other assets 14 (17) Trade accounts payable 6 (245) Accrued liabilities and other obligations (47) (77) Insurance policy claim reserves 1 3 Liabilities subject to compromise (13) - ----- ----- Net cash used for operating activities (180) (354) ----- ----- Cash flows provided by (used for) investing activities: Purchase of short-term investments - (43) Sale of short-term investments - 42 Purchase of investments of insurance operations (215) (101) Sale of investments of insurance operations 221 142 Capital expenditures (10) (21) Disposition of properties, plants and equipment, net (1) - ----- ----- Net cash provided by (used for) investing activities $ (5) $ 19 ----- -----
See notes to consolidated financial statements. 5 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the 13-Week Periods Ended -------------------- April 4, March 29, (In millions) 1998 1997 -------- --------- Cash flows provided by financing activities: Borrowings under Post-Petition Loan and Guaranty Agreement, net $234 $ -- Proceeds from short-term borrowings, net -- 409 Payments of long-term debt (1) (2) Payments of obligations under capital leases (3) (2) Cash dividends paid -- (6) ---- ---- Net cash provided by financing activities 230 399 ---- ---- Increase in cash and cash equivalents 45 64 Cash and cash equivalents at beginning of period 189 32 ---- ---- Cash and cash equivalents at end of period $234 $ 96 ==== ==== Supplemental disclosure of cash flow information: Interest paid $ 8 $ 19 Non-cash investing activity: Change in unrealized gain on marketable equity securities $ 1 $ 3
See notes to consolidated financial statements. 6 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Accounting Policies Basis of Presentation The accompanying consolidated financial statements are unaudited. The consolidated 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 consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto filed with the Securities and Exchange Commission in the 1997 Annual Report on Form 10-K of Montgomery Ward Holding Corp. ("MW Holding" or, together with its subsidiaries, the "Company"). Capitalized terms not otherwise defined herein have the meaning ascribed to such terms in the 1997 Annual Report on Form 10-K. Certain prior period amounts have been reclassified to be comparable with the current period presentation. Comprehensive Income In 1998, the Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting Comprehensive Income. This statement establishes rules for the reporting of comprehensive income and its components. Comprehensive income (loss) consists of unrealized holding gains and losses on available-for-sale securities. The adoption of SFAS 130 had no impact on total shareholders' equity. Comprehensive loss was $109 million and $138 million for the quarterly periods ended April 4, 1998 and March 29, 1997, respectively. 2. Reorganization At the close of business on July 7, 1997 (the "Petition Date"), MW Holding and certain of its U.S. subsidiaries filed petitions for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. These related proceedings are being jointly administered under the caption "In re Montgomery Ward Holding Corp., a Delaware corporation, et. al.", Case No. 97-1409 (PJW). The following U.S. subsidiaries were not included in the bankruptcy filings: Signature Financial/Marketing, Inc. and its direct and indirect subsidiaries ("Signature"); Marinco Insurance U.S.A., Inc. ("Marinco"); and Montgomery Ward Foundation. The Company expects to reorganize its affairs under the protection of Chapter 11 and to propose a Chapter 11 plan of reorganization for itself and the other filing subsidiaries, including Montgomery Ward & Co., Incorporated ("Wards"). The Bankruptcy Court has granted the Company's request to extend its exclusive right to file a plan of reorganization through September 15, 1998. The Company expects to file a motion to further extend such exclusive right to file a plan of reorganization. Although management expects to file a plan of reorganization in late 1998 or 1999, which would contemplate emergence in 1999, there can be no assurance at this time that a plan of reorganization will be proposed by the Company or approved or confirmed by the Bankruptcy Court, or that such plan will be consummated. After the expiration of the exclusivity period, creditors of the Company have the right to propose alternative plans of reorganization. Any plan of reorganization, among other things, is likely to result in elimination of the equity of existing shareholders, as a result of the issuance of equity to creditors or new investors. 7 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 2. Reorganization (continued) The accompanying financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. However, as a result of the Chapter 11 filing and circumstances relating to this event, including the Company's leveraged financial structure and losses from operations, such realization of assets and liquidation of liabilities is subject to uncertainty. While under the protection of Chapter 11, the Company may sell or otherwise dispose of assets, and liquidate or settle liabilities, for amounts other than those reflected in the financial statements. Further, a plan of reorganization could materially change the amounts reported in the financial statements, which do not give effect to all adjustments of the carrying value of assets or liabilities that might be necessary as a consequence of a plan of reorganization. The appropriateness of using the going concern basis is dependent upon, among other things, confirmation of a plan of reorganization, future profitable operations, the ability to comply with the terms of the DIP Facility and the ability to generate sufficient cash from operations and financing arrangements to meet obligations. 3. Liabilities Subject to Compromise The principal categories of claims classified as liabilities subject to compromise under reorganization proceedings are identified below. All amounts below may be subject to future adjustment depending on Bankruptcy Court action, further developments with respect to disputed claims, determination as to the value of any collateral securing claims, or other events. Additional claims may arise resulting from rejection of additional executory contracts or unexpired leases by the Company.
April 4, (In millions) 1998 -------- Accounts payable $1,375 Long-term Credit Agreement 603 Short-term Credit Agreement 456 Note Purchase Agreements 276 Other Long-term Debt 9 Obligations under capital leases 48 Lease and other contract rejection claims 96 Other liabilities 609 ------ $3,472 ======
The Company has $81 million of liabilities due Signature and Marinco which have been eliminated in consolidation but are subject to compromise. 4. Insurance, Benefits and Losses Operating, selling, general and administrative expenses include benefits and losses related to direct response marketing operations of $39 million and $34 million for the 13-week periods ended April 4, 1998 and March 29, 1997, respectively. 8 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Reorganization Costs Reorganization costs recorded in the first quarter of fiscal 1998 of $16 million consisted of professional fees, fees relating to the Interim Account Agreement (see Note 8), accrued retention bonuses not yet paid and other expenses incurred relating to reorganization activities. 6. Net Loss Per Common Share Net loss per common share is computed as follows:
For the 13-Week For the 13-Week Period Ended Period Ended April 4, 1998 March 29, 1997 ------------------------------------------- -------------------------------------- (In millions, except share and per share amounts) Class A Class B Class A Class B ------------------ ------------------ ------------------ ------------- Net loss applicable to common shareholders $ (55) $ (55) $ (68) $ (76) Weighted-average number of common shares outstanding 18,322,237 25,000,000 18,322,248 25,000,000 Net loss per share $ (2.99) $ (2.19) $ (3.71) $ (3.05)
Basic and diluted earnings per share are the same for the 13-week periods ended April 4, 1998 and March 29, 1997, as all common stock equivalents are antidilutive due to the net loss incurred during these periods. 7. Commitments and Contingent Liabilities MW Holding, Wards and its subsidiaries are engaged in various litigation and have a number of unresolved claims, as set forth in the 1997 Annual Report on Form 10-K. 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. 8. Customer Credit Agreements On April 3, 1998, the Bankruptcy Court approved an interim amendment to the Bank Program and Account-Related Agreements ("Interim Account Agreement") that provides the Company the ability to utilize the private label credit card through the expected duration of the Company's Chapter 11 status. The Interim Account Agreement provides for additional payments to Montgomery Ward Credit Corporation ("Montgomery Ward Credit"), an affiliate of General Electric Capital Corporation, of $2.5 million for the months of January 1998 through June 1998, $3.0 million per month for the remainder of 1998, $2.5 million per month from January 1999 though June 1999, and $2.0 million per month from July 1999 through December 1999. 9 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 8. Customer Credit Agreements (continued) Wards is obligated to make all such payments through December 1999, except in the circumstance where the Company would be liquidated, then payments shall be made through the later of the date of liquidation termination or the last Thursday in June 1999. The Interim Account Agreement will terminate on the earliest of the following events: (a) the date the Bankruptcy Court enters an order for rejection of the Agreements, (b) the sale of the portfolio of receivables covered by the Agreements, (c) the date the Bankruptcy Court enters an order for assumption of the Agreements, provided Montgomery Ward Credit may withdraw its consent to assumption at any time prior to such an order, (d) if the Bankruptcy Court enters an order after March 18, 1998, whereby over 100 retail stores are to close, (e) upon adoption by the Company's or Wards' Board of a resolution for liquidation, or (f) December 31, 1999. 10 MONTGOMERY WARD HOLDING CORP. 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 1998 to the first quarter of 1997. 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 quarter 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: Bankruptcy Court actions or proceedings related to the bankruptcy, 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 1998 Compared with First Quarter 1997 Consolidated total revenues (net sales and direct response marketing revenues, including insurance) were $991, compared with $1,329 in the first quarter 1997, decreasing by $338, or 25%. The $338 total revenue decrease consisted of a $347 decrease in net sales (a 31% decrease) and a $9 increase in direct marketing revenues (a 4% increase). Sales on a comparable store basis decreased approximately 6% after adjusting for the closing of stores, the exit of the personal computer product line and the effect of the calendar shift, as discussed below. The increase in direct response marketing revenues was primarily due to new product line sales. The decrease in net sales is attributable to the closing of 44 retail stores in conjunction with the Company's decision in August 1997 to exit its non-core retail businesses, the closing of 47 retail stores and liquidation and outlet centers in November 1997, and the closing of 8 other underperforming retail stores and 2 other liquidation and outlet stores during 1997. The closed stores reported net sales of $245 in the first quarter of 1997. The sales decrease was also caused by the Company's decision in the third quarter of 1997 to exit its personal computer product offerings which reported sales of $27 in the first quarter of 1997. Wards' 1997 fiscal year was a 53-week year; therefore, the first quarter of 1998 does not consist of comparable weeks with the 1997 first quarter. As the first quarter of 1997 included an additional week of the post-Christmas selling season, the impact of the calendar shift resulted in decreased sales of $24. Wards' management also believes that the decline in promotional offers to Wards' credit cardholders and an aggressive markdown and promotional advertising strategy to liquidate inventory during the first quarter of 1997 contributed to the first quarter 1998 sales decrease. 11 MONTGOMERY WARD HOLDING CORP. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Results of Operations (continued) First Quarter 1998 Compared with First Quarter 1997 (continued) Gross margin (net sales less cost of goods sold) dollars were $147, an increase of $25, or 20%, from the first quarter 1997. This increase was due to an increase in the gross margin rate on sales of $90 and decreased occupancy and other margin-related expenses of $35 primarily related to the closed stores, offset by the gross margin impact of decreased sales of $100. The improvement of 8 percentage points in the gross margin rate in the first quarter of 1998 as compared to the first quarter of 1997 was due the effects of the closing of the Lechmere, Wards and Electric Avenue & More stores of 4 percentage points and the increase in the margin rate of comparable stores of 4 percentage points. The 4 percentage point increase in the margin rate at comparable stores was attributable to the impact of higher margins in the apparel, home, electronics and appliance businesses as a result of a more profitable, trend-right product offering, as well as the negative impact of the aggressive markdowns strategy employed in the first quarter of 1997 to liquidate inventories. Operating, selling, general and administrative expenses decreased $71, or 14%, from the first quarter 1997. The decrease is primarily due to the closing of the Lechmere, Inc. stores of $41, decreased payroll costs primarily related to the closing of the Wards and Electric Avenue & More stores of $32, and a decrease in advertising and other promotional costs of $25, offset by decreased product service income of $15, increased bad debt expense of $10 and all other costs of $2. Net interest expense decreased $27, or 68%, from the prior year. The Company stopped accruing interest on its pre-petition short-term debt in connection with the Chapter 11 filing. The weighted-average borrowings for the first quarter of 1998, excluding pre-petition debt, decreased by approximately $1,000 as compared to the first quarter of 1997. No income tax benefit was recorded for the first quarter of 1998 as compared to a benefit of $85 for the first quarter of 1997 due to the Company's substantial net operating loss carryforwards. Discussion of Financial Condition As discussed in Note 2 to the Consolidated Financial Statements, due to the inability of Wards to negotiate an out-of-court settlement with its lenders, MW Holding and certain of its subsidiaries have filed petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Court. As a result of the Chapter 11 filing the Company and those subsidiaries have ceased making certain debt, interest, trade payable and other liability payments that arose prior to the Chapter 11 filing. Payments related to these liabilities are deferred, in most cases, until a plan for reorganization is confirmed by the Bankruptcy Court. Net cash used in the Company's operating activities totaled $180 compared to $354 for the first quarter of 1997, a decrease of $174. The lower cash usage is summarized as follows: Cash impact of smaller operating loss $119 Net cash received from facility closings 41 All other cash from operations 14 ---- $174 ====
12 MONTGOMERY WARD HOLDING CORP. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Discussion of Financial Condition (continued) Net cash provided by financing activities totaled $230 for the first quarter 1998, compared to $399 for the first quarter 1997. The Company had borrowed to the full extent of its financing facilities prior to the Chapter 11 filing, with the exception of the Seasonal Credit Agreement. Net borrowings under the DIP facility were $234 in the first quarter of 1998. Wards is the only subsidiary of the Company and, therefore, Wards and its subsidiaries are the Company's sole source of funds. Wards entered into the DIP Facility on July 8, 1997, as amended, which was approved by the Bankruptcy Court on July 31, 1997. Under the DIP Facility, the lenders have agreed to provide a revolving credit and letter of credit facility, the maximum amount of which is based on the book value of eligible inventory (as defined in the DIP Facility), the fair market value of eligible real property (as defined in the DIP Facility) and the earnings of Signature. In no case may borrowings exceed $1,000. Under the DIP Facility, Wards may select among several interest rate options, all of which are based on market rates plus a margin. A commitment fee is payable based on the unused amount of the facility. The facility expires on July 7, 1999, or earlier in the case of an event of default. Total borrowings outstanding were $284 and letters of credit outstanding were $96 at April 4, 1998. The Company had $605 of borrowing availability under the DIP Facility at April 4, 1998. On February 20, 1998, Wards obtained a waiver and second amendment to the DIP Facility (the "Waiver and Second Amendment Agreement") which was approved by the Bankruptcy Court on March 31, 1998. The Waiver and Second Amendment Agreement waived and amended certain provisions of the DIP Facility, including a reduction in the level of earnings required, as defined in the DIP Agreement. The Company is currently in default of the terms of each of the Long-Term Credit Agreement, the Short-Term Credit Agreement and the Note Purchase Agreements and no future amounts may be drawn thereunder. The Company was in default of the Seasonal Credit Agreement, which was terminated as a result of the Chapter 11 filings. There were no borrowings outstanding under this agreement. Signature borrowed $102 under a Credit Agreement ("Signature Credit Agreement") dated as of September 27, 1996 as amended and restated October 21, 1996 between Signature and various lenders, as further modified and amended. The proceeds were used to repay the intercompany loan from Wards to Signature arising from Signature's acquisition of the Amoco Motor Club. The loan matured on January 31, 1998 and has not been repaid. In March 1998, Signature received a commitment from a new lender for a secured loan in the amount of $100 which would enable Signature to repay the amounts borrowed under the Signature Credit Agreement by June 30, 1998. The lenders have agreed to extend the maturity date of the loan under the Signature Credit Agreement to the earlier of June 30, 1998 or the funding of the replacement loan facility provided Signature, as part of such extension, pledges the stock of certain Signature subsidiaries, provides limited guarantees from certain Signature subsidiaries, and agrees to certain additional terms specified by the lenders. If the new lender's commitment were to be terminated, the aforementioned extension agreement would also terminate. In 1997, Wards had facilities available under vendor financing programs (which are reflected in liabilities subject to compromise) which totaled $725. At June 28, 1997, these facilities were principally drawn. These facilities are no longer available due to the Chapter 11 filing. 13 MONTGOMERY WARD HOLDING CORP. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Discussion of Financial Condition (continued) The Company intends to improve its financial condition and reduce its dependence on borrowing by increasing its sales base, controlling expenses and potentially closing additional stores. Management has reevaluated the Company's merchandising, marketing, store operations and real estate strategies, and is in the early stages of implementing the new strategy. Future cash is expected to continue to be provided by ongoing operations, receipt of payment for credit sales under the agreements with Montgomery Ward Credit Companies and borrowings under the DIP Facility. In April 1998, Wards entered into a non-binding letter of intent with respect to the sale of its corporate complex in Chicago, IL and the leaseback of certain office space. As of the date of the filing of this Form 10-Q, Wards is negotiating definitive documentation with respect to such sale and leaseback. If such sale were to occur based on the terms of the non-binding letter of intent, the Company would incur no adverse financial impact. As discussed in Note 2 to the Consolidated Financial Statements, the accompanying financial statements have been prepared on a going concern basis. The appropriateness of using the going concern basis is dependent upon, among other things, confirmation of a plan of reorganization, future profitable operations, the ability to comply with the terms of the DIP Facility and the ability to generate sufficient cash from operations and financing arrangements to meet obligations. Other Matters In 1998, the Company adopted AICPA Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities," which requires that costs of start-up activities, including organization costs, be expensed as incurred. The Company had no start-up costs capitalized as of January 3, 1998 and, therefore, the adoption of this statement had no effect on the financial statements. 14 MONTGOMERY WARD HOLDING CORP. Part II - Other Information Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities The Company's Certificate of Incorporation provides that the holders of shares of New Senior Preferred Stock of the Company are entitled to receive, before any dividends may be declared or paid upon or set aside for the Common Stock, cash dividends in quarterly payments on the last business day of March, June, September and December. The Company did not make any dividend payment with respect to the New Senior Preferred Stock on June 30, 1997. The holder of all 1,750 outstanding shares of the New Senior Preferred Stock would have been entitled to receive $3,066,875 in such dividend on such date. Such amount also represents the total arrearage on the payment of dividends on the New Senior Preferred Stock as of the date of filing of this report. The redemption provisions of the New Senior Preferred Stock have been stayed by the Chapter 11 proceedings. No further dividends will be declared or paid prior to the approval of a plan of reorganization. The Company's Certificate of Incorporation provides that the holders of shares of Series C Preferred Stock of the Company are entitled to receive, before any dividends may be declared or paid upon or set aside for the Common Stock, cash dividends in quarterly payments on the last business day of March, June, September and December. If for any reason the full dividend on any payment date is not paid in cash on such date, the unpaid amount thereof will be automatically, without further action, be deemed added to the Liquidation Value. The Company did not make any dividend payment with respect to the Series C Preferred Stock on June 30, 1997. The holder of all 352 shares would have been entitled to receive $1,726,154 in such dividend on such date. This amount was added to the Liquidation Value. The redemption provisions of the Series C Preferred Stock have been stayed by the Chapter 11 proceedings. No further dividends will be declared or paid prior to the approval of a plan of reorganization. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. 15 MONTGOMERY WARD HOLDING CORP. Item 6. Exhibits and reports on Form 8-K (a) Exhibits 10.(i)(G)(5) Waiver and Second Amendment to Post-Petition Loan and Guaranty Agreement among Montgomery Ward & Co., Incorporated, as borrower; Montgomery Ward Holding Corp. and other debtor subsidiaries of Montgomery Ward Holding Corp., as guarantors; General Electric Capital Corporation, as agent and lender; and various lenders dated as of February 20, 1998. 10.(ii)(B)(1) Letter Agreement dated March 27, 1998 by and between Montgomery Ward & Co., Incorporated and Monogram Credit Card Bank of Georgia amending the Bank Program Agreement dated as of April 1, 1996. 10.(ii)(B)(2) Letter Agreement dated March 20, 1998 by and between Montgomery Ward & Co., Incorporated and Montgomery Ward Credit Corporation amending the Account-Related Agreement dated as of April 1, 1996. 10.(ii)(B)(3) Interim Amendment Agreement Relating to Bank Program and Account-Related Agreements dated as of April 1, 1998 by and between Monogram Credit Card Bank of Georgia, Montgomery Ward Credit Corporation and Montgomery Ward & Co., Incorporated. 27. Financial Data Schedule. (b) Reports on Form 8-K None. 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 /s/ Thomas J. Paup ---------------------------------- NAME AND TITLE Thomas J. Paup, Executive Vice President and Chief Financial Officer DATE: May 15, 1998 16
Exhibit Index ------------- 10.(i)(G)(5) Waiver and Second Amendment to Post-Petition Loan and Guaranty Agreement among Montgomery Ward & Co., Incorporated as borrower; Montgomery Ward Holding Corp. and other debtor subsidiaries of Montgomery Ward Holding Corp., as guarantors; General Electric Capital Corporation, as agent and lender; and various lenders dated as of February 20, 1998. 10.(ii)(B)(1) Letter Agreement dated March 27, 1998 by and between Montgomery Ward & Co., Incorporated and Monogram Credit Card Bank of Georgia amending the Bank Program Agreement dated as of April 1, 1996. 10.(ii)(B)(2) Letter Agreement dated March 20, 1998 by and between Montgomery Ward & Co., Incorporated and Montgomery Ward Credit Corporation amending the Account-Related Agreement dated as of April 1, 1996. 10.(ii)(B)(3) Interim Amendment Agreement Relating to Bank Program and Account-Related Agreements dated as of April 1, 1998 by and between Monogram Credit Card Bank of Georgia, Montgomery Ward Credit Corporation and Montgomery Ward & Co., Incorporated. 27. Financial Data Schedule.
EX-10.(I)(G)(5) 2 POST-PETITION LOAN AND GUARANTY AGREEMENT 10.(i)(G)(5) WAIVER AND SECOND AMENDMENT TO POST-PETITION LOAN AND GUARANTY AGREEMENT WAIVER AND SECOND AMENDMENT TO POST-PETITION LOAN AND GUARANTY AGREEMENT, dated as of February 20, 1998 (this "Amendment"), among MONTGOMERY WARD & CO., INCORPORATED, an Illinois corporation and a debtor and debtor in possession ("Borrower Representative"), MONTGOMERY WARD HOLDING CORP., a Delaware corporation and a debtor and debtor in possession ("Parent" or "Guarantor"), as Guarantor, the other Guarantors signatory hereto (together with Parent and the Borrower Representative, the "Credit Parties"), GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (in its individual capacity, "GE Capital"), for itself, as Lender, and as Agent (the "Agent") for Lenders, and the other Lenders signatory hereto. RECITALS -------- WHEREAS, the Borrower Representative, the Guarantors, the Lenders and the Agent are parties to that certain Post-Petition Loan and Guaranty Agreement, dated as of July 8, 1997 (as amended by the Waiver and First Amendment to Post- Petition Loan and Guaranty Agreement, dated as of July 30, 1997 and as further amended, supplemented or modified, the "Loan Agreement"). The Borrower Representative and the Guarantors have requested that the Lenders agree to amend and waive certain provisions of the Loan Agreement. The Borrower Representative, the Guarantors, the Lenders and the Agent have agreed, upon the terms and conditions specified herein, to amend and waive certain provisions of the Loan Agreement, all as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties hereto agree as follows: SECTION 1. Defined Terms and Interpretation. (a) The capitalized terms used herein which are defined in the Loan Agreement, shall have the respective meanings assigned to them in the Loan Agreement except as otherwise provided herein or unless the context otherwise requires. In addition, as used in this Amendment, the following terms shall have the following meanings: "Second Amendment" shall mean the Waiver and Second Amendment to Post- Petition Loan and Guaranty Agreement dated as of February 20, 1998. "Second Amendment Effective Date" shall have the meaning specified in Section 5 hereof. (b) Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. (c) No provision in this Amendment shall be interpreted or construed against any Person because that Person or its legal representative drafted such provision. SECTION 2. Waiver. (a) As of the Second Amendment Effective Date, Lenders hereby waive the provisions of Section 6.4 of the Loan Agreement, for the limited purpose of permitting the Borrower Representative to sell the real property and improvements that constituted the premises (the "Premises") of the Closed Locations (as such term is defined in the Waiver to Post-Petition Loan and Guaranty Agreement, dated November 7, 1997) and of the Borrower Representative's Greenwood, Indiana retail store and auto center; provided, however, that the Borrower Representative acknowledges and agrees that it is hereby permitted to sell or cause to be sold, over and above the limit set forth in Section 6.4 of the Loan Agreement, Premises which, in the aggregate, have a book value not to exceed $70,000,000. (b) The Lenders agree that any Premises sold pursuant to subsection 2(a) above, not in excess of an aggregate of $70,000,000, shall not be included in calculating the amount of assets permitted to be sold by the Borrower Representative and its Subsidiaries pursuant to Section 6.4 of the Loan Agreement. (c) As of the Second Amendment Effective Date, Lenders hereby waive (i) the provisions of Section 8.1(r) of the Loan Agreement, for the limited purpose of permitting the Credit Parties to make modifications to their cash management systems including the treatment of Automated Clearinghouse transactions pursuant to that certain Motion of Debtors and Debtors in Possession for an Order, Pursuant to Sections 363 and 364 of the Bankruptcy Code, Authorizing Certain Modifications to Cash Management System and Granting Superpriority Status to Certain Claims that Would Arise Thereunder and (ii) the provisions of Section 1.4 of the Loan Agreement, for the limited purpose of permitting the Credit Parties to pay certain prepetition claims pursuant to (x) Motion of Debtors and Debtors in Possession for an Order Approving Participation in Consent Decree, Purity Site Work Agreement and Agreement for Participation of Montgomery Ward in Purity Oil Sales Superfund Site Settlement and (y) Motion of Debtors and Debtors in Possession for an Order (A) Approving Compromise and Settlement of Eminent Domain Action, (B) Authorizing the Use of Estate Assets to Make Certain Tax Payments in Connection Therewith and (C) Modifying the Automatic Stay to Allow Such State Court Proceedings as Are Necessary for Implementation of Settlement. (d) As of the Second Amendment Effective Date, Lenders hereby agree to waive the provisions of Section 6.3 of the Loan Agreement, for the limited purpose and solely in connection with, the granting by the Borrower Representative or any Guarantor of any Lien in favor of any Person acting as an agent of such Credit Party in connection with any dispositions or sales of the Premises pursuant to a valid and enforceable order of the Bankruptcy Court, provided that: (i) any such Lien shall not extend to any assets or properties other than the Premises that are being disposed of or sold and shall only secure the fees and obligations owed to such person by such Credit Party and (ii) such Premises shall not be considered Eligible Real Property for purposes of calculating the Borrowing Base. SECTION 3. Amendments to the Loan Agreement. The Loan Agreement is, effective as of the Second Amendment Effective Date, amended as follows: (a) Annex E to the Loan Agreement is hereby amended by inserting in the second line of paragraph (a) thereof after "Fiscal Month" and before the comma the wording "except the last Fiscal Month of each Fiscal Quarter" and by adding the following paragraphs (n) and (o) thereto: 2 "(n) Minimum Requirements for Additional Monthly Reporting. To Agent and Lenders, (i) within 15 days after the end of each Fiscal Month, for all stores of the Borrower Representative with respect to which no order has been entered by the Bankruptcy Court authorizing the closing thereof ("Comp Stores") in the aggregate, sales, gross margin dollars and gross margin percent on a preliminary basis for each division within such Comp Stores for such Fiscal Month, together with the aggregate divisional sales, gross margin dollars and gross margin percent for such Comp Stores included in the annual operating plan for that Fiscal Month, (ii) after the end of each Fiscal Quarter except the last Fiscal Quarter of each Fiscal Year, a copy of the financial report required to be delivered by the Borrowers and their Subsidiaries to the United States Trustee in connection with the chapter 11 cases of the Borrowers and their Subsidiaries that summarizes, on a cumulative basis, the financial performance and the results of the last Fiscal Month of such Fiscal Quarter and Fiscal Year to date contemporaneously with the delivery of such report to the United States Trustee, but in no event more than 30 days after the end of such Fiscal Quarter (the "Fiscal Quarter Report") and (iii) after the end of each Fiscal Year, a copy of the financial report required to be delivered by the Borrowers and their Subsidiaries to the United States Trustee in connection with the chapter 11 cases of the Borrowers and their Subsidiaries that summarizes, on a cumulative basis, the financial performance and the results of the prior Fiscal Year contemporaneously with the delivery of such report to the United States Trustee, but in no event more than 60 days after the end of such Fiscal Year (the "Fiscal Year Report"). (o) Preliminary Compliance Estimates. No later than 45 days after the end of each Fiscal Quarter, to Agent and Lenders a statement in reasonable detail showing the calculations used in determining compliance with each of the financial covenants set forth in Annex G based upon Borrower Representative's preliminary estimate of the numbers to be used in such calculations." (b) Subsection (b) of Annex G of the Loan Agreement is hereby amended and restated to read as follows: "Minimum EBITDA. At the end of each Fiscal Quarter set forth below, EBITDA, for the respective periods set forth below, shall be an amount not less than the following: (i) $(125,000,000) for the three Fiscal Months ending the first Fiscal Quarter of 1998; (ii) $(150,000,000) for the six Fiscal Months ending the second Fiscal Quarter of 1998; (iii) $(185,000,000) for the nine Fiscal Months ending the third Fiscal Quarter of 1998; (iv) $(185,000,000) for the twelve Fiscal Months ending the fourth Fiscal Quarter of 1998; (v) $(175,000,000) for the twelve Fiscal Months ending the first Fiscal Quarter of 1999; and (vi) $(150,000,000) for the twelve Fiscal Months ending the second Fiscal Quarter of 1999." 3 SECTION 4. Representations and Warranties True; No Default or Event of Default. The Credit Parties represent and warrant to the Agent and the Lenders that on the date of and after giving effect to the execution and delivery of this Amendment (a) the representations and warranties set forth in the Loan Agreement are true and correct in all material respects on the date hereof as though made on and as of such date (unless any such representation or warranty expressly relates to an earlier date); and (b) neither any Default nor Event of Default has occurred and is continuing as of the date hereof. SECTION 5. Conditions of Effectiveness. As used in this Amendment, "Second Amendment Effective Date" shall mean: (a) in connection with Sections 2 and 3(a), the date when, and only when, Agent has received executed counterparts of this Amendment from the requisite number of Lenders that comprise the Requisite Lenders; and (b) in connection with Section 3(b), the date when, and only when: (i) Agent has received executed counterparts of this Amendment from the requisite number of Lenders that comprise the Requisite Lenders; (ii) the Bankruptcy Court has entered a final order that is not subject to appeal, in form and substance satisfactory to the Agent, in its sole and absolute discretion, authorizing the payment of a fee to Agent from the Borrowers, for the account of the Lenders who execute this Amendment, in an amount up to $1,000,000 (the "Fee") and (iii) Agent has received the Fee. SECTION 6. Reference to this Amendment and Effect on Loan Documents. (a) From and after the Second Amendment Effective Date, each reference in the Loan Agreement (including in any Exhibit thereto) to "this Agreement," "hereunder," "herein" or words of like import shall mean and be a reference to the Loan Agreement, as affected and amended hereby. (b) From and after the Second Amendment Effective Date, each reference in the Loan Documents (i) to the Loan Agreement shall mean and be reference to the Loan Agreement, as affected and amended hereby and (ii) to the terms whose definitions are amended pursuant to this Amendment shall mean and be a reference to such term as affected and amended hereby. (c) The Loan Agreement, the Notes and the other Loan Documents, as affected and amended hereby, shall remain in full force and effect and the Loan Documents are hereby ratified and confirmed in all respects. (d) The effectiveness of the waiver evidenced by Section 2 hereof, shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Lenders or the Agent under the Loan Agreement, or constitute a waiver of any other provision of the Loan Agreement or any other Loan Document. SECTION 7. Governing Law; Binding Effect. In all respects, including all matters of construction, validity and performance, this Amendment shall be governed by, and construed and enforced in accordance with, the internal laws of the State of New York (without regard to conflict of law provisions) and any applicable laws of the United States of America, and shall be binding upon the parties hereto and their respective successors and permitted assigns. 4 SECTION 8. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 9. Consent of Guarantors. By their execution and delivery of this Amendment, each Guarantor hereby consents to all of the terms and provisions of this Amendment and ratifies and confirms that each of the other Loan Documents to which it is a party remains in full force and effect and enforceable in accordance with their respective terms. IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first written above. BORROWER: MONTGOMERY WARD & CO., INCORPORATED By: /s/ Douglas V. Gathany ----------------------------------- Name: Douglas V. Gathany Title: Vice President and Treasurer GUARANTORS: LECHMERE, INC. By: /s/ Douglas V. Gathany ----------------------------------- Name: Douglas V. Gathany Title: Assistant Treasurer AMERICAN DELIVERY SERVICE COMPANY By: /s/ Philip D. Delk ----------------------------------- Name: Philip D. Delk Title: Vice President, Secretary CONTINENTAL TRANSPORTATION, INC. By: /s/ Philip D. Delk ----------------------------------- Name: Philip D. Delk Title: Vice President and Assistant Treasurer 5 JRI DISTRIBUTING, INC. STANDARD T CHEMICAL COMPANY, INC. WFL REALTY, INC. By: /s/ Philip D. Delk ----------------------------------- Name: Philip D. Delk Title: Vice President and Secretary M-W PRESTRESS, INC. MW DIRECT GENERAL, INC. MW DIRECT LIMITED, INC. By: /s/ Philip D. Delk ----------------------------------- Name: Philip D. Delk Title: Secretary MONTGOMERY WARD INTERNATIONAL, INC. MPI, INC. By: /s/ Philip D. Delk ----------------------------------- Name: Philip D. Delk Title: Assistant Secretary BARRETWARD PROPERTIES CO., INC. BRANDYWINE DC, INC. BRANDYWINE PROPERTIES, INC. BRETTWARD PROPERTIES CO., INC. FIRST MONT CORPORATION FOURTH WYCOMBE PROPERTIES, INC. GABEWARD PROPERTIES CORPORATION GARDEN GROVE DEVELOPMENT CORPORATION HUGA REALTY INC. JOSHWARD PROPERTIES CORPORATION LECHMERE DEVELOPMENT CORPORATION M-W FAIRFAX PROPERTIES, INC. M-W PROPERTIES CORPORATION M-W RESTAURANTS REALTY CORPORATION MARCOR HOUSING SYSTEMS, INC. MARYWARD PROPERTIES CORPORATION 6 MF NEVADA INVESTMENTS, INC. MICHAELWARD PROPERTIES CO., INC. MONTGOMERY WARD DEVELOPMENT CORPORATION MONTGOMERY WARD LAND CORPORATION MONTGOMERY WARD PROPERTIES CORPORATION MONTGOMERY WARD REALTY CORPORATION MW LAND CORPORATION NATIONAL HOMEFINDING SERVICE, INC. 998 MONROE CORPORATION PAULWARD PROPERTIES CO., INC. ROBERTWARD PROPERTIES CORPORATION SACWARD PROPERTIES, INC. SECOND MONT CORPORATION 7TH & CARROLL CORPORATION SEVENTH MONT CORPORATION 618 CORPORATION 619 CORPORATION THE 535 CORPORATION THIRD WYCOMBE PROPERTIES, INC. 2825 DEVELOPMENT CORPORATION 2825 REALTY CORPORATION UNIVERSITY AVENUE MARKETPLACE, INC. WFL DEVELOPMENT CORPORATION WYCOMBE PROPERTIES, INC. By: /s/ G. Tad Morgan --------------------------------- Name: G. Tad Morgan Title: Vice President and Secretary GOODE FURNITURE COMPANIES, INC. MONTGOMERY WARD SECURITIES, INC. R M P DEVELOPMENT CORPORATION By: /s/ G. Tad Morgan --------------------------------- Name: G. Tad Morgan Title: Secretary 7 MONTGOMERY WARD HOLDING CORP. By: /s/ G. Tad Morgan --------------------------------- Name: G. Tad Morgan Title: Assistant Secretary JEFFERSON STORES, INC. By: /s/ G. Tad Morgan --------------------------------- Name: G. Tad Morgan Title: Vice President and Treasurer AGENT and as LENDER GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ James C. Ungari --------------------------------- Name: James C. Ungari Title: Its Authorized Signatory LENDERS: THE CHASE MANHATTAN BANK By: /s/ William P. Rindfuss --------------------------------- Name: William P. Rindfuss Title: Vice President BANK OF SCOTLAND By: /s/ Joseph Fratus --------------------------------- Name: Joseph Fratus Title: Assistant Vice President 8 BANKAMERICA BUSINESS CREDIT, INC. By: /s/ Thomas G. Sullivan --------------------------------- Name: Thomas G. Sullivan Title: Vice President BANKBOSTON RETAIL FINANCE INC. (f/k/a GBFC, INC.) By: /s/ Joseph V. Balsamo --------------------------------- Name: Joseph V. Balsamo Title: Vice President BANQUE PARIBAS By: /s/ Duane Helkowski --------------------------------- Name: Duane Helkowski Title: Vice President By: /s/ Robert G. Carino --------------------------------- Name: Robert G. Carino Title: Vice President CREDIT AGRICOLE INDOSUEZ By: /s/ David Bouhl, F.V.P. --------------------------------- Name: David Bouhl Title: Head of Corporate Banking, Chicago By: /s/ Dean Balice --------------------------------- Name: Dean Balice Title: Senior Vice President, Branch Manager 9 THE CIT GROUP/BUSINESS CREDIT, INC. By: /s/ Nicole Cangelos --------------------------------- Name: Nicole Cangelos Title: Assistant Secretary CITIBANK, N.A. By: /s/ John Calder --------------------------------- Name: John Calder Title: Attorney-in-Fact CITICORP USA, INC. By: /s/ Claudia Slacik --------------------------------- Name: Claudia Slacik Title: Vice President FLEET CAPITAL CORPORATION By: /s/ Thomas E. Joyce --------------------------------- Name: Thomas E. Joyce Title: V.P. & Portfolio Manager FLEET NATIONAL BANK By: /s/ Kevin Chamberlain --------------------------------- Name: Kevin Chamerlain Title: Vice President GOLDMAN SACHS CREDIT PARTNERS L.P. By: /s/ John Urban --------------------------------- Name: John Urban Title: Authorized Signatory 10 GREEN TREE FINANCIAL SERVICING CORPORATION By: /s/ Hugh M. Norris ------------------------------------ Name: Hugh M. Norris Title: Director of Credit HELLER FINANCIAL, INC. By: /s/ Thomas Bukowski ------------------------------------ Name: Thomas Bukowski Title: Senior Vice President IBJ SCHRODER BUSINESS CREDIT CORP. By: /s/ Alfred J. Scoyni ------------------------------------ Name: Alfred J. Scoyni Title: Vice President JACKSON NATIONAL LIFE INSURANCE COMPANY By: PPM FINANCE, INC. Its Attorney-in-fact By: /s/ Jeffrey J. Podwika ------------------------------------ Name: Jeffrey J. Podwika Title: Vice President LEHMAN COMMERCIAL PAPER, INC. By: /s/ Michele Swanson ------------------------------------ Name: Michele Swanson Title: Authorized Signatory NATIONAL CITY COMMERCIAL FINANCE, INC. By: /s/ Mark Hanak ------------------------------------ Name: Mark Hanak Title: Account Officer 11 STAR BANK, N.A. By: /s/ Mike Ehlert ------------------------------------ Name: Mike Ehlert Title: Vice President 12 EX-10.(II)(B)(1) 3 LETTER AGREEMENT 10.(ii)(B)(1) MONOGRAM CREDIT CARD BANK OF GEORGIA March 27, 1998 Mr. John Workman Montgomery Ward & Co., Inc. 619 West Chicago Avenue Chicago, Illinois 60610 Re: Amendment to Bank Program Agreement ---------------------------------------- Dear John: This letter confirms the following amendments to that certain Bank Credit Card Program Agreement, dated as of April 1, 1996 (the "Bank Program Agreement"), by and between Montgomery Ward & Co., Incorporated ("MW") and Monogram Credit Card Bank of Georgia ("Monogram"). For purposes of this letter, capitalized terms not otherwise defined herein shall have the meaning assigned to such terms in the Bank Program Agreement. Definitions - ----------- 1. The following definition is added to Section 1 of the Bank Program Agreement after the definition of "Subsidiary": "Supplementary Store Closing-Related Account" shall mean an Account, the primary Cardholder in respect of which: (a) (i) is associated with a retail Store location or locations operated by MW or an Authorized Affiliate being closed or sold on a Store Closing Date, (ii) does not live within thirty (30) miles of the zip code area of a retail Store location or locations operated by MW or an Authorized Affiliate not being closed or sold on a Store Closing Date and (iii) has not made a purchase at a retail Store location other than at a closed Store during a consecutive 12-month period during the period commencing twelve months prior to the Store Closing Date and ending twelve months after the Store Closing Date; (b) (i) is associated with a retail Store location or locations operated by MW or an Authorized Affiliated being closed or sold on a Store Closing Date, (ii) lives within thirty (30) miles of the zip code area of a retail Store location or locations operated by MW or an Authorized Affiliate not being closed or sold on a Store Closing Date and (iii) does not make a purchase at a retail Store location not being closed or sold on the Store Closing Date during the 12-month period following the announcement of the Store Closing; or (c) in the event that the relevant Store Closing does not involve the closing of a retail Store location, has not made a purchase on his or her Account at a Store other than the Store(s) that are closing or being sold as part of the Store Closing in question within the immediately preceding 12- month period. Store Closing - ------------- 2. The following are added as new subsections (iii) and (iv) of Section 5.14 (4): (iii) Monogram and/or an Affiliate of Monogram (at their option exercised in their sole discretion) at any time that Monogram owns Supplementary Store Closing-Related Accounts in connection with such Store Closing may (a) issue (or authorize a Person to issue) to some or all Cardholders obligated in respect thereof a replacement or substitute widely accepted general purpose credit card, whether or not co-branded, and market (or authorize the issuer to market) goods and services to the holders of such replacement or substitute cards, (b) sell such Supplementary Store Closing-Related Accounts (or the related portion of the Customer List) to any Person, provided such person may issue new cards only in accordance with (a) above, and/or (c) cease to authorize purchases on and close such Accounts. All Store Closings that have occurred or may occur after July 7, 1997, shall be considered Store Closings to which this paragraph applies. In the event that any Store Closing(s) occur hereafter, at least ninety (90) days prior to any Store Closing Date, MW shall deliver to Monogram a written notice identifying the Store location or locations that will be closed or sold on such Store Closing Date. Except as provided above, MW shall continue to have the right to market goods and services sold by MW to such Customer List as such list existed upon the date of such Store closings. 2 (iv) MW shall cause Signature to cease marketing to all Supplementary Store Closing-Related Accounts on and after the date such Accounts first constitute Supplementary Store Closing-Related Accounts. Monogram shall continue to authorize purchases of items sold by Signature to the extent then being billed on a continuing or renewal basis as long as Monogram owns such Accounts and the Cardholders obligated in respect thereof are in good standing with respect to payments owed on their Accounts, except that Monogram at any time may cease such authorizations upon ninety (90) days' notice to Signature and MW in the event that Monogram in good faith determines that continuing such authorizations no longer is economically appropriate for Monogram. If the foregoing evidences your understanding of the amendments agreed to by the parties, please acknowledge the same by signing below. MONOGRAM CREDIT CARD BANK OF GEORGIA By: /s/ Marc Sheinbaum ----------------------------------- Name: Marc Sheinbaum Title: Director ACKNOWLEDGED & AGREED: MONTGOMERY WARD & CO., INCORPORATED By: /s/ John Workman ----------------------------------- Name: John Workman Title: Executive Vice President General Electric Capital Corporation, as guarantor of the obligations of Monogram under the Bank Program Agreement, hereby acknowledges the terms and agrees that the Guaranty is not invalidated hereby and that the Guaranty continues in full force and effect in accordance with its terms with respect to the Bank Program Agreement as so amended. 3 GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Marc Sheinbaum ----------------------------------- Name: Marc Sheinbaum Title: Vice President SIGNATURE FINANCIAL/MARKETING, INC., FOR ITSELF AND ITS SUBSIDIARIES, ACKNOWLEDGES THIS LETTER. By: /s/ John Workman ----------------------------------- Name: John Workman Title: Acting Chief Financial Officer 4 EX-10.(II)(B)(2) 4 LETTER AGREEMENT 10.(ii)(B)(2) MONTGOMERY WARD CREDIT CORPORATION March 27, 1998 Mr. John Workman Montgomery Ward & Co., Inc. 619 West Chicago Avenue Chicago, Illinois 60610 Re: Amendment to Account-Related Agreement ------------------------------------------- Dear John: This letter confirms the following amendments to that certain Account- Related Agreement, dated as of April 1, 1996 (the "Account-Related Agreement"), by and between Montgomery Ward & Co., Incorporated ("MW") and Montgomery Ward Credit Corporation ("MWCC"). For purposes of this letter, capitalized terms not otherwise defined herein shall have the meaning assigned to such terms in the Account-Related Agreement. Definitions - ----------- 1. The following definition is added to Section 1 of the Account-Related Agreement after the definition of "Subsidiary": "Supplementary Store Closing-Related Account" shall mean an account, the primary Cardholder in respect of which: (a) (i) is associated with a retail Store location or locations operated by MW or an Authorized Affiliate being closed or sold on a Store Closing Date (as defined in the Bank Program Agreement), (ii) does not live within thirty (30) miles of the zip code area of a retail Store location or locations operated by MW or an Authorized Affiliate not being closed or sold on a Store Closing Date and (iii) has not made a purchase at a retail Store location other than at a closed Store during a consecutive 12-month period during the period commencing twelve months prior to the Store Closing Date and ending twelve months after the Store Closing Date; (b) (i) is associated with a retail Store location or locations operated by MW or an Authorized Affiliated being closed or sold on a Store Closing Date, (ii) lives within thirty (30) miles of the zip code area of a retail Store location or locations operated by MW or an Authorized Affiliate not being closed or sold on a Store Closing Date and (iii) does not make a purchase at a retail Store location not being closed or sold on the Store Closing Date during the 12-month period following the announcement of the Store Closing; or (c) in the event that the relevant Store Closing does not involve the closing of a retail Store location, has not made a purchase on his or her Account at a Store other than the Store(s) that are closing or being sold as part of the Store Closing in question within the immediately preceding 12- month period. Store Closing - ------------- 2. The following are added as new Section 5.14 (5) and new Section 5.14 (6): (5) At any time that MWCC owns Supplementary Store Closing-Related Accounts in connection with such Store Closing may (a) issue (or authorized a Person to issue) to some or all Cardholders obligated in respect of such Supplementary Store Closing-Related Account a replacement or substitute widely-accepted general purpose credit card, whether or not co-branded, and market (or authorize the issuer to market) goods and services to the holders of such replacement or substitute cards, (b) sell such Supplementary Store Closing-Related Accounts (or the related portion of the Customer List (as defined in the Bank Program Agreement)) to any Person, provided such person may issue new cards only in accordance with (a) above, and/or (c) cease to authorize purchases on and close such Accounts. All Store Closings that have occurred or may occur after July 7, 1997, shall be considered Store Closings to which this paragraph applies. In the event that any Store Closing(s) occur hereafter, at least ninety (90) days prior to any Store Closing Date, MW shall deliver to MWCC a written notice identifying the Store location or locations that will be closed or sold on such Store Closing Date. Except as provided above, MW shall continue to have the right to market goods and services sold by MW to such Customer List as such list existed upon the date of such Store closing. 2 (6) MW shall cause Signature to cease marketing to all Supplementary Store Closing-Related Accounts on and after the date such Accounts first constitute Supplementary Store Closing-Related Accounts. MWCC shall continue to authorize purchases of items sold by Signature to the extent then being billed on a continuing or renewal basis as long as MWCC owns such Accounts and the Cardholders obligated in respect thereof are in good standing with respect to payments owed on their Accounts, except that MWCC at any time may cease such authorizations upon ninety (90) days' notice to Signature and MW in the event that MWCC in good faith determines that continuing such authorizations no longer is economically appropriate for MWCC. If the foregoing evidences your understanding of the amendments agreed to by the parties, please acknowledge the same by signing below. MONTGOMERY WARD CREDIT CORPORATION By: /s/ Marc Sheinbaum ----------------------------------- Name: Marc Sheinbaum Title: President & Chief Executive Officer ACKNOWLEDGED & AGREED: MONTGOMERY WARD & CO., INCORPORATED By: /s/ John Workman ----------------------------------- Name: John Workman Title: Executive Vice President General Electric Capital Corporation, as guarantor of the obligations of MWCC under the Account-Related Agreement, hereby acknowledges the terms and agrees that the Guaranty is not invalidated hereby and that the Guaranty continues in full force and effect in accordance with its terms with respect to the Account-Related Agreement as so amended. 3 GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Marc Sheinbaum ----------------------------------- Name: Marc Sheinbaum Title: Vice President SIGNATURE FINANCIAL/MARKETING, INC., FOR ITSELF AND ITS SUBSIDIARIES, ACKNOWLEDGES THIS LETTER. By: /s/ John Workman ----------------------------------- Name: John Workman Title: Acting Chief Financial Officer 4 EX-10.(II)(B)(3) 5 INTERIM AMENDMENT AGREEMENT 10.(ii)(B)(3) INTERIM AMENDMENT AGREEMENT RELATING TO BANK PROGRAM AND ACCOUNT-RELATED AGREEMENTS ------------------------------------------- INTERIM AMENDMENT AGREEMENT (the "Interim Amendment Agreement"), made and entered into as of April 1, 1998, by and between MONTGOMERY WARD & CO., INCORPORATED ("MW"), an Illinois corporation with its chief executive offices located at 619 West Chicago Avenue, Chicago, Illinois 60671, MONOGRAM CREDIT CARD BANK OF GEORGIA ("Monogram"), a Georgia banking corporation with offices located at 7840 Roswell Road, Atlanta, Georgia 30350, and MONTGOMERY WARD CREDIT CORPORATION ("MWCC"), a Delaware corporation with offices at 880 Grier Drive, Las Vegas, Nevada 89119. W I T N E S S E T H: -------------------- WHEREAS, MW and Monogram are parties to that certain Bank Credit Card Program Agreement, dated as of April 1, 1996 (the "Bank Agreement"), pursuant to which Monogram has agreed to issue Credit Cards and directly enter into Accounts with individuals in order to allow them to buy Merchandise at Stores on credit pursuant to Accounts owned by Monogram; and WHEREAS, MW and MWCC are parties to that certain Account-Related Agreement, dated as of April 1, 1996 (the "Account-Related Agreement" and, together with the Bank Agreement, the "Credit Card Agreements"), pursuant to which MWCC has agreed to purchase certain Accounts and Indebtedness (as hereinafter defined) from MW with respect to Credit Cards in order to allow individuals to buy Merchandise on credit at Stores; and WHEREAS, on July 7, 1997, MW and certain related entities (collectively, the "Debtors") filed voluntary petitions under chapter 11 of title 11, United States Code (the Debtors' chapter 11 cases being referred to herein collectively as the "Bankruptcy Cases") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"); and WHEREAS, by motion dated July 8, 1997 (the "Assumption Motion"), the Debtors sought an order of the Bankruptcy Court authorizing the assumption of the Credit Card Agreements; and WHEREAS, since July 8, 1997, the parties have been operating the Program pursuant to an interim order issued by the Bankruptcy Court mandating, among other things, that the Credit Card Agreements be treated as if such Credit Card Agreements had been assumed by the Debtors (the "Interim Order"); and WHEREAS, the Debtors have determined not to seek assumption of the Credit Card Agreements at this time and, accordingly, the Debtors, Monogram and MWCC have agreed to defer a hearing to consider the Assumption Motion; and WHEREAS, pursuant to an agreement among the parties hereto and various other parties to the Bankruptcy Cases which agreement was "So Ordered" by the Bankruptcy Court on January 14, 1998 (the "January Order"), MW (among other things) has been making monthly payments to MWCC in accordance with the terms of the January Order; and WHEREAS, MW, Monogram and MWCC each desire that (a) MW continue to operate under the Program upon the terms and subject to the conditions set forth herein, (b) the Credit Card Agreements be amended, for the Interim Term (as hereinafter defined) only, in accordance with the terms and conditions hereinafter set forth, and (c) upon entry of the Approval Order (as hereinafter defined), this Interim Amendment Agreement shall become effective as of April 1, 1998 (the "Interim Amendment Agreement Effective Date"); and WHEREAS, as of February 28, 1998, MW and MWCC conducted certain settlement transactions provided for in the Account-Related Agreement and in accordance with the Interim Order, which transactions included (among others): (a) the execution by MW of a $15,123,200 note deferring payment of a portion of the amount owed by MW under the Credit Card Agreements in respect of credit losses for Fiscal Year 1997 (after application by MWCC of certain incremental revenue shared by MWCC with MW under the Credit Card Agreements) and (b) the payment by MW in cash of the remaining portion of such amount; NOW, THEREFORE, the parties hereto agree as follows: Definitions - ----------- 1. Capitalized terms used herein which are not otherwise defined shall have the meanings given to them in the Account-Related Agreement. 2. Unless otherwise specified, all references in this Interim Amendment Agreement to MWCC, whether or not there is a specific reference to Monogram, shall be deemed a reference both to Monogram, to the extent of Monogram's involvement in and/or ownership of Accounts, and to MWCC. For example, a reference to a sale by MWCC of all of its right, title and interest in and to Accounts and Indebtedness owned by it shall mean a sale by MWCC and Monogram of all of their right, title and interest in and to Accounts and Indebtedness owned by them. All references to fiscal periods are the fiscal periods followed by MWCC. 2 3. The Credit Card Agreements shall be amended during the Interim Term to incorporate the following definitions: "Approval Order" shall mean an order, in a form reasonably acceptable to MWCC and the Creditors' Committee entered by the Bankruptcy Court approving this Agreement, it being understood that MW, MWCC and the Creditors' Committee shall agree upon the form of any order proposed to the Bankruptcy Court and such order shall not be deemed acceptable if approved by the Bankruptcy Court in a form not substantially similar to the order submitted. "Assumption Motion" shall have the meaning assigned to such term in the fourth recital hereto. "Bankruptcy Cases" shall have the meaning assigned to such term in the third recital hereto. "Bankruptcy Code" shall mean 11 U.S.C. (S)(S) 101-1330. "Bankruptcy Court" shall have the meaning assigned to such term in the third recital hereto. "Creditors' Committee" shall mean the official committee of unsecured creditors appointed in the Bankruptcy Cases. "Debtors" shall have the meaning assigned to such term in the third recital hereto. "Interim Amendment Agreement Effective Date" shall have the meaning assigned to such term in the eighth recital hereto. "Interim Order" shall have the meaning assigned to such term in the fifth recital hereto. "Interim Stipulated Payment Obligation" shall mean, for the following fiscal quarters, an amount equal to: (a) for each month commencing April, 1998 through June, 1998 $2.5 Million 3 (b) for each month commencing July, 1998 through December, 1998 $3.0 Million (c) for each month commencing January, 1999 through June, 1999 $2.5 Million (d) for each month commencing July, 1999 through December, 1999 $2.0 Million "Interim Term" shall have the meaning assigned to such term in paragraph 6 hereof. "January Order" shall have the meaning assigned to such term in the seventh recital hereto. "Portfolio Net Book Value" shall mean, on any date, an amount equal to (a) the aggregate amount of all Indebtedness (other than written-off Indebtedness) owned by MWCC, Monogram and Assignees as of the opening of business of such day, less (b) the amount of all reserves on the books of MWCC, Monogram and Assignees with respect to such Indebtedness as of the opening of business on such day, such reserves to be determined by MWCC and Monogram in their sole discretion, provided that such determinations shall be in accordance with GAAP. "Portfolio Sale" shall have the meaning assigned to such term in paragraph 10 hereof. "Specified MW Default" shall mean (a) an MW Default under Section 16.1(1) or 16.1(10) of the Bank Program Agreement or the Account-Related Agreement to the extent such default results from a failure by MW to fulfill its purchase obligations under Section 5.14(3)(iii) of the Bank Program Agreement and/or Section 5.14(1) of the Account-Related Agreement, (b) unless MW is insolvent with respect to its ability to pay its administrative claims, an MW Default under Section 16.1(3) of the Bank Program Agreement and/or the Account- Related Agreement to the extent such default results from a breach by MW of the representation contained in Section 8.4 of the Bank Program Agreement or Account-Related Agreement, (c) unless MW admits in writing, with the Creditors' Committee's concurrence, its inability to pay, or the Bankruptcy Court determines MW is unable to pay, its post-petition debts or MW makes a general assignment for the benefit of creditors post-petition, an MW Default under Section 16.1(5) of the Bank Program Agreement and/or the Account-Related Agreement, and (d) unless holders of MW's indebtedness 4 accelerate amounts owed post-petition or MW fails to meet scheduled payments on such indebtedness post-petition, an MW Default under Section 16.1(9) of the Bank Program Agreement and/or the Account-Related Agreement. For the avoidance of doubt, if the unless clause in any of subsections (b), (c) or (d) applies, there is no Specified MW Default. General Operations - ------------------ 4. Except to the extent inconsistent herewith or as otherwise specifically provided herein, the terms and conditions of the Credit Card Agreements shall continue in full force and effect and shall be fully binding on the parties hereto in accordance with the Interim Order. Without limiting the generality of the foregoing, during the Interim Term, MWCC and Monogram shall not be entitled to (a) compel assumption of the Credit Card Agreements, or (b) terminate the Credit Card Agreements, and shall not file pleadings or otherwise request a hearing seeking such relief, except that (1) if there is an MW Default (other than a Specified MW Default or as otherwise provided in paragraph 6(d)) under the Credit Card Agreements, MWCC and/or Monogram shall be entitled to file and prosecute a motion seeking to compel assumption of, or to terminate, the Credit Card Agreements and (2) if MW moves for assumption of the Credit Card Agreements, MWCC and Monogram may (i) withdraw their consent to assumption at any time prior to entry of such order, (ii) object to such assumption on any grounds whatsoever or (iii) seek adequate assurance of future performance. The parties further agree that (x) during the Interim Term, MWCC and Monogram shall be paid post-petition by MW in respect of MW's share of Section 4 Net Defaulted Indebtedness and Starter Card Account Net Defaulted Indebtedness (irrespective of when the sales giving rise thereto occurred), (y) MWCC and Monogram shall have administrative expense claims for, at least, any unpaid amounts owed in respect of Section 4 Net Defaulted Indebtedness and Starter Card Account Net Defaulted Indebtedness arising from sales that occurred post- petition and (z) the parties fully reserve all of their rights and defenses as to whether MWCC's and Monogram's claims for payment from MW with respect to Section 4 Net Defaulted Indebtedness and Starter Card Account Net Defaulted Indebtedness other than the indebtedness described in subsection (y) are administrative expense claims, pre-petition unsecured claims or any other type of claims, as to which MWCC and Monogram are, or are not, entitled to be paid on a post-petition or on any other basis (irrespective of whether payments have in fact been made in respect thereof after July 7, 1997). The parties by this Interim Amendment Agreement also fully reserve all of their other rights and defenses under the Credit Card Agreements, including, but not limited to, rights and defenses in respect of sales tax recapture obligations. Interim Stipulated Payment Obligations - -------------------------------------- 5. MW shall pay to MWCC in cash on or before the last Thursday of each calendar month an amount equal to the Interim Stipulated Payment Obligation specified for such calendar month. MW's obligation under this paragraph shall survive any termination of this 5 Interim Amendment Agreement and be paid by MW in accordance with the previous sentence, except that: (a) if this Interim Amendment Agreement terminates pursuant to paragraph 6(a) hereof, MW shall pay the Interim Stipulated Payment Obligation in respect of each calendar month during the period through and including the later of the month during which termination occurs and the month of June, 1999, but shall have no obligation to pay the Interim Stipulated Payment Obligation in respect of any calendar month after the later of the month during which termination occurs and the month of June, 1999, (b) if this Interim Amendment Agreement terminates pursuant to paragraph 6(d) hereof as a result of a Monogram Default or MWCC Default, MW shall pay the Interim Stipulated Payment Obligation in respect of each calendar month during the period through and including the month during which such termination occurs, but MW shall have no obligation to pay the Interim Stipulated Payment Obligation in respect of any calendar month after the month during which such termination occurs and (c) if this Interim Amendment Agreement terminates pursuant to paragraph 6(d) hereof as a result of a Specified MW Default, MW shall pay the Interim Stipulated Payment Obligation in respect of each calendar month during the period through and including the month during which such termination occurs, but MW shall have no obligation to pay the Interim Stipulated Payment Obligation in respect of any calendar month after the month during which such termination occurs. In the event that a termination described in subsection (a) occurs after June 1999 and other than at the end of a calendar month or a termination described in subsection (b) or (c) of the preceding sentence occurs at any time other than as of the end of a calendar month, MW shall pay to MWCC in cash within three (3) Business Days after such termination in respect of the month of termination an amount equal to (i) the Interim Stipulated Payment Obligation for that month, multiplied by (ii) a fraction the numerator of which is the number of days in such month that have transpired prior to termination and the denominator of which is the number of days in that month. Interim Term - ------------ 6. This Interim Amendment Agreement shall become effective as of the Interim Amendment Agreement Effective Date (it being understood that the effectiveness of this Interim Amendment Agreement is conditioned upon entry of an Approval Order). This Interim Amendment Agreement shall terminate on the earliest of the following events: (a) upon entry by the Bankruptcy Court of an order: (i) authorizing or directing MW to discontinue all or substantially all of its retail operations (which order may be an order confirming a plan of reorganization that provides for such discontinuance) or (ii) converting the Bankruptcy Cases to cases under Chapter 7 of the Bankruptcy Code, (b) the date upon which the Bankruptcy Court enters an order authorizing rejection of the Credit Card Agreements pursuant to Section 365 of the Bankruptcy Code, (c) the date upon which the Bankruptcy Court enters an order approving assumption of the Credit Card Agreements pursuant to Section 365 of the Bankruptcy Code, (d) if the non-defaulting parties elects to terminate this Interim Amendment Agreement, the date upon which a Monogram Default, MWCC Default or MW Default occurs under the Credit Card Agreements (as amended to include the obligations under this Interim Amendment Agreement), provided that, for purposes of termination of this Interim Amendment Agreement, (1) the filing of 6 its Bankruptcy Case shall not constitute an MW Default, and (2) failure by MW to make payments (including interest thereon) in respect of Seller Notes or Seller Recourse Notes and the obligation to make payments in respect of Section 4 Net Defaulted Indebtedness and Starter Card Account Net Defaulted Indebtedness for Fiscal Year 1996 and 1997 through July 7, 1997, shall not constitute during the Interim Term an MW Default, (e) consummation of a Portfolio Sale, or (f) December 31, 1999. The period from the Interim Amendment Agreement Effective Date through the earliest of the dates set forth in subsections (a) through (f) is referred to as the "Interim Term". January Order - ------------- 7. Upon entry of the Approval Order and execution of this Interim Amendment Agreement, the January Order shall be superseded by the Approval Order and this Agreement, except that the court's confidentiality order dated November 13, 1997 shall remain in effect with respect to all documents previously filed under seal and any orders or portions of orders under seal including Exhibit 1 to the January Order. The foregoing notwithstanding, it is acknowledged and agreed that all payments made by MW under the January Order prior to the date hereof properly were made and are indefeasible. Termination and Effects of Termination - -------------------------------------- 8. In the event that this Interim Amendment Agreement terminates in accordance with paragraph 6 hereof, (a) this Interim Amendment Agreement shall be of no further force or effect (except (i) to the extent otherwise provided herein (including in respect to Interim Stipulated Payment Obligations, if any, for periods specified in this Interim Amendment Agreement to occur after termination in accordance with paragraph 5 hereof) and (ii) paragraphs 4(y) and (z), the final sentence of paragraph 4 and paragraphs 7, 8, 9, 12 and 13 hereof shall survive termination hereof), and (b) except as expressly contemplated herein, all parties shall have the rights that they had prior to execution of this Interim Amendment Agreement. In addition, if the Credit Card Agreements are rejected, upon termination of this Interim Amendment Agreement, the provisions of Section 15 of the Credit Card Agreements (the termination provisions of such Agreements) shall not be effective. 9. The parties acknowledge and agree that the administrative expense claims of Monogram and MWCC in respect of the Interim Term shall not exceed an amount greater than the sum of (a) the amount of any unpaid Interim Stipulated Payment Obligations, if any, payable hereunder, and (b) all other amounts that are or may become due and payable under the Credit Card Agreements in respect of the Interim Term (including, without limitation, unpaid amounts owed in respect of Section 4 Net Defaulted Indebtedness and Starter Card Account Net Defaulted Indebtedness which are or may become due and payable in respect of the Interim Term). Other than in respect of the Interim Term, Monogram and MWCC fully reserve all of their rights to claim that any amounts owed to them are administrative expense claims as to which they are 7 entitled to be paid on a post-petition basis, and the other parties reserve their rights to contest such claims. Portfolio Sale - -------------- 10. At any time during the term of this Interim Amendment Agreement, at MW's request (and subject to the rights of Monogram and MWCC under Section 15.3 of each of the Credit Card Agreements), MWCC shall sell to a third party designated by MW all of its right, title and interest in and to Accounts and Indebtedness (including written-off Accounts and Indebtedness) owned by it upon payment to it of an amount equal to the Portfolio Net Book Value. Any such sale shall be referred to herein as a "Portfolio Sale." 11. At MW's request, MWCC shall use commercially reasonable efforts to cooperate in the orderly transfer of Accounts and Indebtedness to the purchaser in respect of a Portfolio Sale, provided that MWCC shall be reimbursed for the reasonable costs and expenses incurred by it in connection with such cooperation and the Debtors may seek Bankruptcy Court approval of the payment of reasonable costs and expenses if the Debtors, as opposed to the purchaser, intend to pay such costs and expenses. Disputes - -------- 12. All disputes that may arise between the parties with respect to this Interim Amendment Agreement which, under the terms of the Credit Card Agreements, would be resolved by the Marketing Committee (or, in the event the Marketing Committee fails to resolve such issues, by arbitration conducted in accordance with the terms of the Credit Card Agreements) shall be so resolved. All other disputes arising under the Interim Amendment Agreement shall be resolved by the Bankruptcy Court. Miscellaneous - ------------- 13. All payments determined and due one party by the other pursuant to this Interim Amendment Agreement shall be netted or otherwise offset against each other. The parties expressly understand, acknowledge and agree that neither party hereto shall be obligated at any point in time to make any payment until a netting or offset calculation is given effect such that only the net amount shall be due and payable. This right of netting or offset is subject to the parties' reservation of rights set forth in paragraph 4. 14. Upon the execution of this Interim Amendment Agreement, each reference in the Credit Card Agreements during the Interim Term to "this Agreement," "hereunder," "hereof," or words of like import, shall mean and be a reference to the Credit Card Agreements as amended hereby. In the event of any conflict between the terms of the Credit Card Agreements and the terms of this Interim Amendment Agreement, the terms of this Interim Amendment Agreement 8 shall prevail. 15. This Interim Amendment Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument, and any of the parties hereto may execute this Interim Amendment Agreement by signing any such counterpart. IN WITNESS WHEREOF, MW, MONOGRAM and MWCC have executed this Interim Amendment Agreement as of the date first set forth above. MONTGOMERY WARD & CO., INCORPORATED By: /s/ John Workman ---------------------------------- Name: John Workman Title: Executive Vice President MONOGRAM CREDIT CARD BANK OF GEORGIA By: /s/ Marc Sheinbaum ---------------------------------- Name: Marc Sheinbaum Title: Director MONTGOMERY WARD CREDIT CORPORATION By: /s/ Marc Sheinbaum ---------------------------------- Name: Marc Sheinbaum Title: President & Chief Executive Officer General Electric Capital Corporation, as guarantor of the obligations of MWCC and Monogram under the Credit Card Agreements, hereby acknowledges the terms of this Interim Amendment Agreement, and agrees that the Guaranties are not invalidated by this Interim Amendment Agreement and that the Guaranties continue in full force and effect in accordance with their terms with respect to the Credit Card Agreements as so amended. 9 GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Edward D. Stewart ---------------------------------- Name: Edward D. Stewart Title: Executive Vice President 10 EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000,000 3-MOS JAN-02-1999 JAN-04-1998 APR-04-1998 234 354 285 0 1,180 0 1,910 (838) 4,643 0 0 177 0 1 (826) 4,643 772 991 625 625 447 16 13 (110) 0 (110) 0 0 0 (110) (2.99) (2.19)
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