-----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, FfnkaCDb131nmp4sZvLz0A7FZXoihInA1OWnsN0udjtrWLrA/6Dhd5ORWphG1pDH 61UifaMQ0xKGnVXUpnzsSQ== 0000950131-98-004907.txt : 19980819 0000950131-98-004907.hdr.sgml : 19980819 ACCESSION NUMBER: 0000950131-98-004907 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980704 FILED AS OF DATE: 19980818 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: 98693509 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 JULY 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 August 18, 1998 the Registrant had 18,322,152 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 July 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. 13 Part II - Other Information. 19 2 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the 13-week For the 26-week Periods Ended Periods Ended --------------------- --------------------- July 4, June 28, July 4, June 28, (In millions, except per share amounts) 1998 1997 1998 1997 ------- -------- ------- -------- Revenues Net sales, including leased and licensed department sales $ 841 $1,151 $1,613 $ 2,270 Direct response marketing revenues, including insurance 214 214 433 424 ------ ------ ------ ------- Total Revenues 1,055 1,365 2,046 2,694 ------ ------ ------ ------- Costs and expenses Cost of goods sold, including net occupancy and buying expense 678 1,070 1,303 2,067 Operating, selling, general and administrative expenses, including benefits and losses of direct response operations (Note 5) 438 594 885 1,112 Interest expense 15 46 28 86 ------ ------ ------ ------- Total Costs and Expenses 1,131 1,710 2,216 3,265 ------ ------ ------ ------- Loss before Reorganization Costs and Income Taxes (76) (345) (170) (571) Reorganization Costs (Note 6) 58 - 74 - ------ ------ ------ ------- Loss before Income Taxes (134) (345) (244) (571) Income Tax Benefit - (129) - (214) ------ ------ ------ ------- Net Loss (134) (216) (244) (357) Preferred Stock Dividend Requirements - 5 - 8 ------ ------ ------ ------- Net Loss Applicable to Common Shareholders $ (134) $ (221) $ (244) $ (365) ====== ====== ====== ======= Net Loss per Common Share (Note 7) Class A $(3.68) $(6.10) $(6.67) $(10.08) Class B (2.70) (4.36) (4.89) (7.21)
See notes to consolidated financial statements. 3 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED BALANCE SHEETS
July 4, January 3, (In millions) 1998 1998 ---------- --------- (Unaudited) Assets Cash and cash equivalents $ 178 $ 189 Short-term investments 1 1 Investments of insurance operations 370 358 ------ ------ Total cash and investments 549 548 Trade and other accounts receivable 277 234 Accounts and notes receivable from affiliates 17 6 ------ ------ Total Receivables 294 240 Merchandise inventories 1,058 1,120 Prepaid pension cost 384 366 Properties, plant and equipment, net of accumulated depreciation and amortization 1,044 1,088 Direct response and insurance acquisition costs 528 559 Other assets 292 352 Deferred income taxes 301 299 ------ ------ Total Assets $4,450 $4,572 ====== ====== Liabilities Short-term debt (Note 3) $ 102 $ 102 Trade accounts payable 360 442 Accrued liabilities and other obligations 722 736 Insurance policy claim reserves 244 241 Long-term debt 371 122 Liabilities subject to compromise (Note 4) 3,433 3,468 ------ ------ Total Liabilities 5,232 5,111 Commitments and Contingent Liabilities (Note 8) Redeemable Preferred Stock 177 177 Shareholders' Deficit Common stock 1 1 Capital in excess of par value 65 64 Retained deficit (895) (651) Unrealized gain on marketable equity securities 9 9 Less: Treasury stock, at cost (139) (139) ------ ------ Total Shareholders' Deficit (959) (716) ------ ------ Total Liabilities and Shareholders' Deficit $4,450 $4,572 ====== ======
See notes to consolidated financial statements. 4 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the 26-Week Periods Ended ------------------------------------------------ July 4, June 28, (In millions) 1998 1997 ------------------ ------------------ Cash flows used for operating activities: Net loss $(244) $(357) 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 Wards and Electric Avenue & More stores 45 - Provision for reorganization costs 42 - Depreciation and goodwill amortization 56 69 Amortization of direct response and insurance acquisition costs 120 123 Deferred income taxes (2) (210) Other 1 - Changes in operating assets and liabilities: Trade and other accounts receivable (43) 47 Accounts and notes receivable from affiliates (11) 10 Merchandise inventories 59 269 Prepaid pension cost (18) (8) Direct response and insurance acquisition costs (89) (109) Other assets 17 17 Trade accounts payable (57) (73) Accrued liabilities and other obligations (36) (147) Federal income taxes payable - (4) Insurance policy claim reserves 3 2 Liabilities subject to compromise (39) - ------------------ ------------------ Net cash used for operating activities (196) (371) ------------------ ------------------ Cash flows provided by (used for) investing activities: Purchase of investments of insurance operations (513) (289) Sale of investments of insurance operations 501 325 Purchase of short-term investments - (85) Sale of short-term investments - 87 Capital expenditures (34) (35) Disposition of properties, plants and equipment, net 1 3 ------------------ ------------------ Net cash provided by (used for) investing activities $ (45) $ 6 ------------------ ------------------
See notes to consolidated financial statements. 5 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the 26-Week Periods Ended ------------------------------------------------ July 4, June 28, (In millions) 1998 1997 -------------------- -------------------- Cash flows provided by financing activities: Borrowings under Post-Petition Loan and Guaranty Agreement, net $ 250 $ - Restricted cash applied as payments under Long Term Credit Agreement (14) - Proceeds from short-term borrowings, net - 409 Payments of long-term debt (1) (5) Payments of obligations under capital leases (5) (3) Cash dividends paid - (4) -------------------- -------------------- Net cash provided by financing activities 230 397 -------------------- -------------------- Increase (decrease) in cash and cash equivalents (11) 32 Cash and cash equivalents at beginning of period 189 32 -------------------- -------------------- Cash and cash equivalents at end of period $ 178 $ 64 ==================== ==================== Supplemental disclosure of cash flow information: Income taxes paid $ 2 $ - Interest paid 20 65 Non-cash investing activity: Change in unrealized gain on marketable equity securities $ - $ (5)
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 net income (loss) plus 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 $135 million and $223 million for the quarterly periods ended July 4, 1998 and June 28, 1997, respectively, and $244 million and $363 million for the 26-week periods then ended, 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. Short-term Debt 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. The lenders agreed to extend the maturity date of the loan under the Signature Credit Agreement to the earlier of July 31, 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. Signature has requested a further extension of the maturity date of the loan through September 1998 from the lenders. Although the Company believes the lenders will extend the maturity date of the loan, it cannot assure that such request will be granted. On August 13, 1998, the Company filed a motion with the Bankruptcy Court to permit a debtor subsidiary of the Company to lend Signature the funds to repay its loan. The Creditors Committee has indicated it will support the Company's motion. Any such loan will require approval of the DIP Facility lenders. 8 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. 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.
July 4, January 3, (In millions) 1998 1998 ------- ---------- Accounts payable $1,364 $1,340 Long Term Credit Agreement 603 603 Short Term Credit Agreement 442 456 Note Purchase Agreements 276 276 Other Long-term Debt 9 9 Obligations under capital leases 46 51 Lease and other contract rejection claims 103 104 Other liabilities 590 629 ------ ------ $3,433 $3,468 ====== ======
The Company has $80 million of liabilities due Signature and Marinco which have been eliminated in consolidation but are subject to compromise. As a result of the bankruptcy filing, no principal or interest payments will be made on any pre-petition debt without Bankruptcy Court approval or until a reorganization plan defining the repayment terms has been approved. In June 1998, upon approval of the Bankruptcy Court, cash held in segregated accounts by various banks, who were lenders to the Company under the Long Term Credit Agreement and Short Term Credit Agreement, totaling $24 million was offset against pre-petition debt ($14 million) and interest ($10 million) claims. Contractual interest expense not recorded on certain pre-petition debt totaled $31 million and $61 million for the 13-week and 26-week periods ended July 4, 1998. 5. Insurance, Benefits and Losses Operating, selling, general and administrative expenses include benefits and losses related to direct response marketing operations of $26 million and $37 million for the 13-week periods ended July 4, 1998 and June 28, 1997, respectively, and $65 million and $71 million for the 26-week periods then ended, respectively. 9 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 6. Reorganization Costs Reorganization costs recorded in fiscal 1998 consisted of the following (in millions):
13-Week 26-Week Period Ended Period Ended July 4, 1998 July 4, 1998 ------------ ------------ Wards store closings 26 $26 Interim Account Agreement Fees (Note 9) 6 12 Professional fees 5 10 Distribution center closings 8 8 Other 14 21 Interest income (1) (3) ------------ ------------ $58 $74 ============ ============
In June 1998, the Bankruptcy Court approved a motion filed by Wards to close an additional nine underperforming stores. The Company recorded a pre-tax charge of $26 million associated with the closing of these stores, which includes losses and costs associated with the liquidation of assets, lease rejection claims, severance payments, and other related expenses. Professional fees incurred consisted of consulting and legal fees for bankruptcy activity and restructuring efforts on behalf of the Company and Creditors' Committee. Restructuring of distribution facilities includes expenses associated with the closing and downsizing of facilities including the losses on liquidation of assets, lease rejection claims, severance payments, and other related expenses. Other reorganization costs represent expenses associated with retention bonuses not yet paid, the exit of certain product lines and other expenses. 10 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. 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 July 4, 1998 June 28, 1997 ------------------------------- ------------------------------ (In millions, except share and per share amounts) Class A Class B Class A Class B ------------- ------------- ------------ ------------- Net loss applicable to common shareholders $ (67) $ (67) $ (112) $ (109) Weighted-average number of common shares outstanding 18,322,174 25,000,000 18,322,248 25,000,000 Net loss per share $ (3.68) $ (2.70) $ (6.10) $ (4.36)
For the 26-Week For the 26-Week Period Ended Period Ended July 4, 1998 June 28, 1997 -------------------------------- ------------------------------ (In millions, except share and per share amounts) Class A Class B Class A Class B ------------- ------------- ------------ ------------- Net loss applicable to common shareholders $ (122) $ (122) $ (185) $ (180) Weighted-average number of common shares outstanding 18,322,195 25,000,000 18,322,248 25,000,000 Net loss per share $ (6.67) $ (4.89) $ (10.08) $ (7.21)
Basic and diluted earnings per share are the same for the 13-week and 26- week periods ended July 4, 1998 and June 28, 1997, as all common stock equivalents are antidilutive due to the net loss incurred during these periods. 8. 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. 11 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 9. 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. 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 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 Directors a resolution for liquidation, or (f) December 31, 1999. 12 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 second quarter of 1998 to the second quarter of 1997, as well as the first six months of 1998 to the first six months 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 Second Quarter 1998 Compared with Second Quarter 1997 Consolidated total revenues (net sales and direct response marketing revenues, including insurance) were $1,055, compared with $1,365 in the second quarter 1997, decreasing by $310, or 23%. The decrease was caused by the decline in net sales (a 27% decrease). Sales on a comparable store basis decreased approximately 5% after adjusting for the closing of stores and the exit of the personal computer product line. The decrease in net sales is attributable to the closing of 101 retail stores and liquidation and outlet centers in the second half of 1997 as a result of the Company's decision to exit its non-core retail businesses and to close certain underperforming Wards retail stores. The closed stores reported net sales of $242 in the second 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 $26 in the second quarter of 1997. 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 second quarter of 1997 contributed to the second quarter 1998 sales decrease. 13 MONTGOMERY WARD HOLDING CORP. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Results of Operations (continued) Second Quarter 1998 Compared with Second Quarter 1997 (continued) Gross margin (net sales less cost of goods sold) dollars were $163, an increase of $82, or 101%, from the second quarter 1997. This increase was due to an increase in the gross margin rate on sales of $140 and decreased occupancy and other margin-related expenses of $31 primarily related to the closed stores, offset by the gross margin impact of decreased sales of $89. The improvement of 12 percentage points in the gross margin rate in the second quarter of 1998 as compared to the second quarter of 1997 was due to the effects of the increase in the margin rates in all categories of merchandise and the impact of closing Lechmere and Electric Avenue & More stores, which historically reported lower gross margin rates. The increase in the margin rate for comparable stores was attributable to a more profitable, trend-right product offering, as well as the negative impact of the aggressive markdowns strategy employed in the second quarter of 1997 to liquidate inventories. Operating, selling, general and administrative expenses decreased $156, or 26%, from the second quarter 1997. The decrease is due to decreased payroll costs primarily related to the closing of the Wards and Electric Avenue & More stores of $41, write-downs of investments and other unrealizable assets in the prior year of $38, 1997 operating, selling, general and administrative costs incurred by Lechmere of $39, decreased advertising and other promotional costs of $32, increased pension income of $5, and a decrease in all other costs of $16, offset by increased bad debt expense of $10 and decreased product service income of $5. Net interest expense decreased $31, or 67%, 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 second quarter of 1998, excluding pre-petition debt, decreased by approximately $1,000 as compared to the second quarter of 1997. No income tax benefit was recorded for the second quarter of 1998 as compared to a benefit of $129 for the second quarter of 1997 due to the Company's substantial net operating loss carryforwards. First Six Months of 1998 Compared with First Six Months of 1997 Consolidated total revenues (net sales and direct response marketing revenues, including insurance) were $2,046, compared with $2,694 in the first six months of 1997, decreasing by $648, or 24%. The $648 total revenue decrease consisted of a $657 decrease in net sales (a 29% decrease) and a $9 increase in direct marketing revenues (a 2% increase). Sales on a comparable store basis decreased approximately 7% after adjusting for the closing of stores and the exit of the personal computer product line. 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 101 retail stores and liquidation and outlet centers in the second half of 1997 as a result of the Company's decision to exit its non-core retail businesses and to close certain underperforming Wards retail stores. The closed stores reported net sales of $487 in the first six months 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 $53 in the first six months of 1997. 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 six months of 1997 contributed to the 1998 year- to-date sales decrease. 14 MONTGOMERY WARD HOLDING CORP. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) First Six Months of 1998 Compared with First Six Months of 1997 (continued) Gross margin (net sales less cost of goods sold) dollars were $310, an increase of $107, or 53%, from the first six months of 1997. This increase was due to an increase in the gross margin rate on sales of $230 and decreased occupancy and other margin-related expenses of $66 primarily related to the closed stores, offset by the gross margin impact of decreased sales of $189. The improvement of 10 percentage points in the gross margin rate in the first six months of 1998 as compared to the first six months of 1997 was due the effects of the increase in the margin rates in all categories of merchandise and the impact of closing Lechmere and Electric Avenue & More stores, which historically reported lower gross margin rates. The increase in the margin rate for comparable stores was attributable to a more profitable, trend-right product offering, as well as the negative impact of the aggressive markdowns strategy employed in the first six months of 1997 to liquidate inventories. Operating, selling, general and administrative expenses decreased $227, or 20%, from the first six months of 1997. The decrease is primarily due to the closing of the Lechmere, Inc. stores of $80, decreased payroll costs primarily related to the closing of the Wards and Electric Avenue & More stores of $73, decreased advertising and other promotional costs of $57, write-downs of investments and other unrealizable assets in the prior year of $38, increased pension income of $9, and a decrease in all other costs of $10, offset by increased bad debt expense of $20 and decreased product service income of $20. Net interest expense decreased $58, or 67%, 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 six months of 1998, excluding pre-petition debt, decreased by approximately $1,000 as compared to the first six months of 1997. No income tax benefit was recorded for the first six months of 1998 as compared to a benefit of $214 for the first six months 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. 15 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 used in the Company's operating activities totaled $196 compared to $371 for the first six months of 1998, a decrease of $175. The lower cash usage is summarized as follows: Cash impact of smaller operating loss $ 348 Net cash received from facility closings 45 Lower cash provided by inventory (210) All other cash from operations (8) -------- $ 175 ========
The lower cash provided by inventory was due to the significant amount of discontinued merchandise sold in the second quarter of 1997 as part of the Company's effort to reduce discontinued merchandise. Net cash provided by financing activities totaled $230 for the first six months of 1998, compared to $397 for the first six months of 1997. The Company had borrowed to the full extent of its financing facilities (excluding the Seasonal Credit Agreement) prior to the Chapter 11 filing. Net borrowings under the DIP facility were $250 in the first six months 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 $300 and letters of credit outstanding were $141 at July 4, 1998. The Company had $437 of borrowing availability under the DIP Facility at July 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. 16 MONTGOMERY WARD HOLDING CORP. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Discussion of Financial Condition (continued) 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. The lenders agreed to extend the maturity date of the loan under the Signature Credit Agreement to the earlier of July 31, 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. Signature has requested a further extension of the maturity date of the loan through September 1998 from the lenders. Although the Company believes the lenders will extend the maturity date of the loan, it cannot assure that such request will be granted. On August 13, 1998, the Company filed a motion with the Bankruptcy Court to permit a debtor subsidiary of the Company to lend Signature the funds to repay its loan. The Creditors Committee has indicated it will support the Company's motion. Any such loan will require approval of the DIP Facility lenders. 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. The Company intends to improve its financial condition and reduce its dependence on borrowing by increasing its sales base, continuing to improve its gross margin rates and controlling expenses. In addition, the financial performance of the remaining retail stores will be reviewed on a continuing basis and additional stores may be closed if warranted. Management has also reevaluated the Company's merchandising, marketing, store operations and logistics 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. On June 25, 1998, Wards entered into a Purchase and Sale Agreement ("Agreement") with respect to the sale of its corporate complex in Chicago, Illinois and the leaseback of certain office space. On July 15, 1998, the Bankruptcy Court approved the "First Sale Order" which authorized the sale of the property, pursuant to the terms of the Agreement. The purchaser has until September 13, 1998 to conduct due diligence and notify Wards whether they will proceed with the terms of the Agreement. An auction will be held, pursuant to the terms of the Agreement and a Bankruptcy Court order, between 60 and 63 days after such approval is provided. If such sale were to occur based on the terms of the Agreement, the Company would expect to recognize a gain, although such amount has not yet been quantified. The Company continues to incur costs as a result of modifying existing software programs and the purchase and installation of new software associated with the Year 2000 date change issue. Based on the Company's plans and amounts expended, the total future costs to address the date change issue are not expected to materially impact future cash flows. 17 MONTGOMERY WARD HOLDING CORP. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Discussion of Financial Condition (continued) 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. 18 MONTGOMERY WARD HOLDING CORP. Part II - Other Information Item 1. Legal Proceedings None. Item 2. Changes in Securities On June 21, 1998, the Voting Trust Agreement dated as of June 21, 1998, under which Voting Trust Certificates representing shares of Class A Common Stock, Series 1 and Series 2, of the Company had been issued, expired pursuant to its terms. Item 3. Defaults Upon Senior Securities The Company's Certificate of Incorporation provides that the holders of shares of 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 Senior Preferred Stock on June 30, 1997. The holder of all 1,750 outstanding shares of the 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 Senior Preferred Stock as of the date of filing of this report. The redemption provisions of the 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. 19 MONTGOMERY WARD HOLDING CORP. Item 6. Exhibits and reports on Form 8-K (a) Exhibits 10. (i) (H) (6) Fifth Amendment to the Long Term Credit Agreement dated as of May 22, 1998 among Montgomery Ward and Co., Incorporated, various banks, 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. 10. (i) (I) (7) Fifth Amendment to the Short Term Credit Agreement dated as of May 22, 1998 among Montgomery Ward and Co., Incorporated, various banks, 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. 10. (i) (L) (6) Waiver, Amendment and Extension Agreement dated as of January 31, 1998, among Signature Financial/Marketing, Inc., various lenders, The Bank of New York, as Documentation Agent, and The Bank of Nova Scotia, as Administrative Agent. 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: August 18, 1998 20 EXHIBIT INDEX ------------- 10. (i) (H) (6) Fifth Amendment to the Long Term Credit Agreement dated as of May 22, 1998 among Montgomery Ward and Co., Incorporated, various banks, 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. 10. (i) (I) (7) Fifth Amendment to the Short Term Credit Agreement dated as of May 22, 1998 among Montgomery Ward and Co., Incorporated, various banks, 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. 10. (i) (L) (6) Waiver, Amendment and Extension Agreement dated as of January 31, 1998, among Signature Financial/Marketing, Inc., various lenders, The Bank of New York, as Documentation Agent, and The Bank of Nova Scotia, as Administrative Agent. 27. Financial Data Schedule. EX-10.(I)(H)(6) 2 LONG TERM CREDIT AGREEMENT 10(I)(H)(6) FIFTH AMENDMENT TO LONG TERM CREDIT AGREEMENT This Fifth Amendment to Long Term Credit Agreement (this "Amendment") --------- is entered into as of May 22, 1998 by and among Montgomery Ward & Co., Incorporated (the "Company"), the undersigned financial institutions, The Bank ------- of Nova Scotia, as Administrative Agent (in such capacity, the "Administrative -------------- Agent"), The First National Bank of Chicago, as Documentary Agent (in such - ----- capacity, the "Documentary Agent"), The Bank of New York, as Negotiated Loan ----------------- Agent (in such capacity, the "Negotiated Loan Agent") and Bank of America --------------------- National Trust and Savings Association, as Advisory Agent (in such capacity, the "Advisory Agent," and together with the Administrative Agent, the Documentary -------------- Agent and the Negotiated Loan Agent, the "Agents"). ------ W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Company, the undersigned financial institutions and the Agents are party to that certain Long Term Credit Agreement, dated as of September 15, 1994 (as amended, supplemented or otherwise modified, the "Long ---- Term Credit Agreement"); capitalized terms used herein and not otherwise defined - --------------------- shall have the meanings assigned to them in the Long Term Credit Agreement; and WHEREAS, the parties hereto desire to amend certain provisions of the Long Term Credit Agreement relating to the sale of participations in and assignments of Loans; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Amendment to Long Term Credit Agreement. Effective as of the date --------------------------------------- hereof and subject to Section 3 hereof, the Long Term Credit Agreement is amended as follows: A. Section 15.4 is amended and restated as follows: 15.4 Participations: Assignments; Replacement of Banks. ------------------------------------------------- (a) Participations. Subject to the provisions of this Section -------------- ------- 15.4, any Bank may at any time, in the ordinary course of its business ---- and in accordance with applicable law, sell to one or more banks or other entities (a "Participant") participating interests in any Loan ----------- owing to such Bank, or any Note held by such Bank. In the event of any such sale to a Participant the selling Bank shall give written notice to the Company and the Administrative Agent stating the Participant's name and address and the amount of the participation purchased, but (i) the Company and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement, 1 (ii) all amounts payable by the Company shall be determined as if such Bank had not sold such participation, and (iii) any Participant which is not an Affiliate of the selling Bank shall have no right to require the selling Bank to take or omit to take any action under this Agreement or any Note other than action directly affecting the extension of the stated maturity of any Loan, directly affecting any scheduled installment of principal or any scheduled reduction in the stated amount of, or interest on, any Loan in which such participation was sold, or reducing the principal or stated amount thereof or the rate of interest thereon or fees payable hereunder. Each Bank agrees to incorporate the requirements set forth in the preceding sentence into each participation agreement which such Bank enters into with any Participant. The Company agrees that if amounts outstanding under this Agreement and the Notes are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, if its participation agreement with the selling Bank so provides, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement or any Note to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement or any Note; provided that such -------- right of setoff shall be subject to such Participant's obligation to share with the Banks, and the Banks agree to share with such Participant, as provided in Section 8.2(c). No participation -------------- contemplated in this Section 15.4 shall relieve any Bank either from ------------ its Commitment hereunder or from any of its other obligations hereunder and such Bank shall remain solely responsible for the performance thereof. (b) Assignments. Subject to the provisions of this Section 15.4, ----------- ------------ any Bank may assign to one or more banks or other entities (an "Assignee") all or any part of such Bank's rights and benefits, and --------- delegate all or any part of such Bank's obligations under this Agreement and its Notes; provided, however, that -------- ------- (i) except in the case of an assignment to another Bank, the amount of the Loans of the assignor Bank subject to such assignment shall be in an amount not less than $5,000,000 and an integral multiple of $1,000,000 in excess thereof or shall be the entire remaining amount of Loans of such assignor Bank, (ii) unless the assignor Bank is assigning all of its Loans, the aggregate amount of the Loans of such assignor Bank after giving effect to such assignment and any assignments agreed to contemporaneously therewith by such assignor Bank shall be not less than $5,000,000, (iii) the assignor Bank shall advise the Assignee that the Company shall not be obligated to execute any replacement Notes and shall add a legend to any of its Notes which evidence all or part of the Loans assigned to the effect that rights thereunder have been assigned, 2 (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an assignment and acceptance substantially in the form of Exhibit L, with --------- appropriate insertions (an "Assignment"), ---------- (v) upon request of the Administrative Agent, if the Company is not authorized by court order to pay the Transfer Fee referred to in Section 15.4(e) or fails to honor its --------------- obligations under Section 15.4(e), the parties to the --------------- Assignment shall deliver to the Administrative Agent a processing and recordation fee of $3,500 for such Assignment, (vi) if the assignor Bank is assigning all of its Loans, it shall deliver to the Administrative Agent an amount, determined by the Administrative Agent, equal to the unpaid amount for which no reserve has been established of such Bank's pro rata share (based upon the aggregate unpaid --- ---- principal amount of the Loans) of any reasonable costs or expenses payable by such assignor Bank pursuant to the Credit Agreement, including, without limitation, Section 14.2 and Section 15.5, ------------ ------------ (vii) the Assignee shall advise the Administrative Agent in writing as to whether it is a Non-United States Person and if it is a Non-United States Person, it shall deliver to the Company and the Administrative Agent a written representation and undertaking similar to Section 8.4(b), and -------------- (viii) the assignor Bank shall provide written notice to the Company (with a copy to the Administrative Agent) of the name and address of the Assignee, shall deliver to the Company a copy of the duly executed Assignment and shall deliver to the Administrative Agent evidence of such deliveries to the Company. (c) Acceptance of Assignment by Administrative Agent. An ------------------------------------------------ Assignment shall be accepted by the Administrative Agent only if all of the requirements of subsection (b) of this Section 15.4 have been ------------ fulfilled to the Administrative Agent's satisfaction. Each Agent and each Bank shall be entitled to continue to deal solely and directly with the assignor Bank in connection with any interests assigned or delegated to an Assignee until the Administrative Agent has accepted the Assignment. Upon the Administrative Agent's acceptance of an Assignment, it shall record the Assignment in the Master Register. All entries in the Master Register shall be conclusive, in the absence of manifest error, and the Company, each Agent and each Bank shall treat each person whose name is recorded in the Master Register as the owner of the Loans recorded therein for all purposes of this Agreement. The Administrative Agent shall from time to time distribute a Schedule to each of the Banks and the Company giving effect to any Assignments. (d) Rights and Obligations of Assignor Bank and Assignee. On ---------------------------------------------------- the date the Administrative Agent accepts an Assignment (the "Assignment Effective Date"), the Company, the Agents and the Banks -------------------------- agree that, to the extent of any such Assignment, 3 (i) the Assignee thereunder shall be a Bank hereunder and, in addition to any rights, benefits and obligations hereunder held by it immediately prior to such Assignment Effective Date, have the rights, benefits and obligations of a Bank under this Agreement and the assignor Bank's Notes (including, without limitation, rights and benefits arising out of Section 9) and the same rights of setoff pursuant to --------- Section 8.3 and obligation to share pursuant to Section 8.2 ----------- ----------- as a Bank hereunder to the extent that the same have been assigned and delegated to it pursuant to such Assignment, and (ii) the assignor Bank shall, to the extent that rights, benefits and obligations hereunder have been assigned and delegated by it pursuant to such Assignment, relinquish its rights and benefits and be released from its obligations under this Agreement (and, in the case of an Assignment covering all or the remaining portion of an assignor Bank's rights, benefits and obligations under this Agreement, such Bank shall cease to be a party hereto), except that in all cases the assignor Bank shall remain entitled to the rights and benefits arising under Sections 6, 8.4, 9, 15.5 and 15.6 with respect to any period ---------- --- - ---- ---- of time prior to the Assignment Effective Date, and shall remain liable with respect to any of its unpaid obligations arising under Sections 6.9, 8.4(c), 14.2 and 15.5, with ------------ ------ ---- ---- respect to any matters arising prior to the Assignment Effective Date; provided, the Company shall not be required -------- to pay any costs, fees or taxes of any kind or nature with respect to the interest(s) assigned in excess of those payable by the Company in connection with such interest(s) prior to such assignment except for any costs, fees or taxes described in Section 8.4, 9 or 15.6. ----------- - ---- (e) Transfer Fee. In consideration of the services to be ------------ performed by the Administrative Agent hereunder, the Company shall pay to the Administrative Agent a quarterly fee of $18,750 (the "Transfer -------- Fee"), payable quarterly in advance on May 1, August 1, November 1 and --- February 1 of each year, provided that the Company shall pay the fee -------- payable on May 1, 1998 within three Business Days after the entry of an order by the United States Bankruptcy Court for the District of Delaware approving the Fifth Amendment to Long Term Credit Agreement. If the Company is not authorized to pay such fee or fails to pay such fee, the Administrative Agent may impose a processing and recordation fee on the parties to each Assignment of $3,500 for each Assignment. (f) Federal Reserve. Anything contained in this Agreement to the --------------- contrary notwithstanding, and without the need to comply with any of the formal or procedural requirements set forth in this Agreement, any Bank may at any time and from time to time grant a participation in, assign, deposit or pledge all or any portion of its rights under this Agreement or the Notes to a Federal Reserve Bank; provided, however, -------- ------- no such participation, assignment, deposit or pledge shall relieve such Bank of any of its obligations under this Agreement. 4 (g) Information. Notwithstanding the terms of any previous ----------- confidentiality agreements with respect to the subject matter hereof between the Company and any Bank, from and after the Effective Date any Bank may furnish any information concerning the Parent, the Company and the Subsidiaries which has been furnished to such Bank pursuant hereto to any Assignee, Participant, or potential Assignee or Participant; provided, however, that the recipient of such information -------- ------- shall, prior to being furnished with any such information, agree to maintain the confidentiality of such information. Notwithstanding the foregoing sentence, any Agent, Bank, Assignee, Participant or potential Assignee or Participant shall be permitted to disclose information regarding the Company and its Subsidiaries (i) to any other Agent or Bank, or to any Assignee or Participant, (ii) to any Affiliate, agent or employee that agrees to be bound by this Section ------- 15.4(g), (iii) upon order of any court or administrative agency, (iv) ------- upon the request or demand of any regulatory agency or authority having jurisdiction over such party, (v) which has been publicly disclosed, (vi) which has been obtained from any Person that is not a party hereto or an Affiliate, agent or employee of any such party, (vii) in connection with the exercise of any remedy hereunder, or (viii) to such Person's certified public accountants and its attorneys. B. Exhibit L is replaced with the Exhibit L annexed hereto. --------- --------- 2. Waiver. The undersigned Banks hereby waive the requirement set ------ forth in the proviso in Section 15.4(b) of the Long Term Credit Agreement that an assignor Bank shall assign equal percentage amounts of its commitment under the Long Term Credit Agreement and Short Term Credit Agreement with respect to any trades entered into by any of the Banks prior to the date of this Amendment. This waiver is limited precisely to its terms and shall not constitute an amendment, modification or waiver generally or for any other purpose. 3. Effectiveness. Section 1 of this Amendment shall become effective ------------- with respect to trades entered into after the date of this Amendment, upon the execution and delivery of this Amendment by the Company and the Required Banks, provided, however, the requirement that the Company pay the Transfer Fee - -------- ------- referred to in the amended Section 15.4(e) shall not be effective until the entry of an order of the United States Bankruptcy Court for the District of Delaware approving this Amendment. Section 2 of this Amendment shall become effective upon the execution and delivery of this Amendment by the Required Banks. 4. Entire Agreement. This Amendment contains the entire agreement ---------------- among the parties with respect to the matters set forth herein and supersedes all prior agreements, arrangements or understandings with respect thereto. 5. Reference to and Effect on the Long Term Credit Agreement. Upon --------------------------------------------------------- the effectiveness of this Amendment, on and after the date hereof, each reference in the Long Term Agreement to "this Agreement," "hereunder," "hereof," "herein" and words of like import, shall mean and be a reference to the Long Term Credit Agreement as amended hereby. Except as specifically amended or waived hereby, all of the terms and provisions of the Long Term Credit Agreement shall remain in full force and effect and are hereby ratified and confirmed. 6. Descriptive Headings. The descriptive headings in this Amendment -------------------- are for convenience only and shall not control or affect the meaning or construction of any provision of this Amendment. 5 7. Counterpart Execution. This Amendment may be executed by --------------------- telecopier and in any number of counterparts, each of which, when so executed and delivered, shall be an original, but all of which together shall constitute one agreement binding all of the parties hereto. 8. Successors. This Amendment shall be binding upon and inure to the ---------- benefit of each of the parties hereto, and each of the Banks and their respective successors and assigns. IN WITNESS WHEREOF, each of the undersigned has duly executed this Amendment as of the date first set forth above. MONTGOMERY WARD & CO. INCORPORATED By: /s/ Douglas V. Gathany ------------------------- Name: Douglas V. Gathany Title: Vice President & Treasurer 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/ Mark R. Slane ------------------------- Name: Mark R. Slane Title: Senior Vice President THE BANK OF NOVA SCOTIA, in its individual capacity and in its capacity as Administrative Agent By: /s/ D.N. Gillespie ------------------------- Name: D.N. Gillespie Title: Assistant General Manager 6 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, in its individual capacity and in its capacity as Advisory Agent By: /s/ Ronald A. Prince ------------------------- Name: Ronald A. Prince Title: Vice President ABN AMRO BANK N.V. By: /s/ S.L. Wimpenny ------------------------- Name: S.L. Wimpenny Title: Senior Vice President By: /s/ William J. Fitzgerald ------------------------- Name: William J. Fitzgerald Title: Senior Vice President BANCA COMMERCIALE ITALIANA, Chicago Branch By: /s/ Julian M. Teodori ------------------------- Name: Julian M. Teodori Title: Senior Vice President & Manager By: /s/ Matthew V. Trujillo ------------------------- Name: Matthew V. Trujillo Title: Vice President BANCA DI ROMA, S.P.A. By: /s/ Joyce Montgomery ------------------------- Name: Joyce Montgomery Title: AVP By: /s/ Luigi Rocchi ------------------------- Name: Luigi Rocchi Title: Vice President 7 BANKBOSTON, N.A. By: _________________________ Name: Title: BANKERS TRUST COMPANY By: /s/ Rosemary F. Dunne ------------------------- Name: Rosemary F. Dunne Title: Vice President THE BANK OF TOKYO-MITSUBISHI, LTD., Chicago Branch By: /s/ Hajime Watanabe ------------------------- Name: Hajime Watanabe Title: Deputy General Manager BAY HARBOUR PARTNERS, LTD. By: _________________________ Name: Title: CIBC INC. By: _________________________ Name: Title: COMERICA BANK By: /s/ Cynthia B. Jones ------------------------- Name: Cynthia B. Jones Title: Vice President 8 CREDIT LYONNAIS Chicago Branch and CREDIT LYONNAIS Cayman Island Branch By: /s/ Alan Sidrane ------------------------- Name: Alan Sidrane Title: Senior Vice President DAYSTAR SPECIAL SITUATIONS FUND L.P. By: ________________________ Name: Title: THE FIRST NATIONAL BANK OF MARYLAND By: /s/ Linda J. Weinberg ------------------------ Name: Linda J. Weinberg Title: Vice President ING BARING (U.S.) CAPITAL CORPORATION By: ________________________ Name: Title: ISTITUTO BANCARIO SAN PAOLO DI TORINO, S.P.A. By: _________________________ Name: Title: 9 KREDIETBANK N.V. By: /s/ Robert Snauffer ------------------------- Name: Robert Snauffer Title: Vice President By: /s/ Tod R. Angus ------------------------ Name: Tod R. Angus Title: Vice President LOEB PARTNERS CORPORATION By: /s/ Giagon B. Ving ------------------------- Name: Giagon B. Ving Title: AVP THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: /s/ Armund J. Schoen, Jr. ------------------------- Name: Armund J. Schoen, Jr. Title: Senior Vice President MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ Neil Brisson ------------------------- Name: Neil Brisson Title: Director NATIONSBANK, N.A. By: /s/ Charles A. Kerr ------------------------- Name: Charles A. Kerr Title: Senior Vice President 10 THE NORTHERN TRUST COMPANY By: _________________________ Name: Title: PNC BANK, NATIONAL ASSOCIATION By: _________________________ Name: Title: THE SAKURA BANK, LTD. By: /s/ Yukiharu Sakumoto -------------------------- Name: Yukiharu Sakumoto Title: Joint General Manager SWISS BANK CORPORATION By: /s/ David C. Hemingway ------------------------- Name: David C. Hemingway Title: Director - Global Project Finance By: /s/ William A. Roche ------------------------- Name: William A. Roche Title: Director - Restructuring UNION BANK OF CALIFORNIA, N.A. By: _________________________ Name: Title: 11 UNION BANK OF SWITZERLAND By: /s/ G. Christian Ullrich ------------------------- Name: G. Christian Ullrich Title: Managing Director By: /s/ M. Terri Reilly ------------------------- Name: M. Terri Reilly Title: Assistant Treasurer U.S. BANK NATIONAL ASSOCIATION By: /s/ Jack L. Quitmeyer ------------------------- Name: Jack L. Quitmeyer Title: Vice President WELLS FARGO BANK, N.A. By: _________________________ Name: Title: 12 EXHIBIT L --------- ASSIGNMENT AND ACCEPTANCE ------------------------- Reference is made to the Long Term Credit Agreement, dated as of September 15, 1994 (herein, as heretofore amended, modified or supplemented, called the "Credit Agreement") among Montgomery Ward & Co., Incorporated, an Illinois corporation (the "Company") and the Banks and Agents parties thereto. Terms used but not otherwise defined herein are used herein as defined in the Credit Agreement. _________________________________________ (the "Assignor") and _____________________________ (the "Assignee") hereby agree as follows: 1. The Assignee hereby purchases and assumes from the Assignor, and the Assignor hereby sells and assigns and delegates to the Assignee, without recourse and without representation or warranty except as specifically set forth in paragraph 2 below, an interest (the "Assigned Interest") in and to all of the Assignor's rights, benefits and obligations under the Credit Agreement, including, without limitation, rights of setoff pursuant to Section 8.3 of the Credit Agreement, and obligations to share pursuant to Section 8.2 of the Credit Agreement and under the Revolving Note, if any, held by the Assignor. The Assigned Interest is a percentage equal to the total principal amount of the Loans assigned to the Assignee pursuant hereto divided by the total principal amount of all of the Loans owing to the Assignor on the date hereof as recorded on the Master Register (without giving effect to any other assignments made on the date hereof). The total principal amount of Loans being assigned to the Assignee pursuant hereto is $_____. 2. (a) The Assignor represents and warrants that the Assignor shall provide written notice of the name and address of the Assignee to the Company (with a copy to the Administrative Agent) shall deliver to the Company a copy of this Assignment duly executed and shall deliver to the Administrative Agent evidence of such deliveries to the Company. (b) The Assignor represents and warrants that it is the legal and beneficial owner of the Assigned Interest and that such interest is free and clear of any adverse claim. (c) The Assignee acknowledges and agrees that neither the Assignor nor any Agent nor any other Bank makes any representation or warranty or assumes any responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other instrument or document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto. 1 (d) The Assignee acknowledges and agrees that neither the Assignor nor any Agent nor any other Bank makes any representation or warranty or assumes any responsibility with respect to the financial condition or creditworthiness of the Company or the performance or observance by the Company of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto. The Assignee acknowledges and agrees that (i) the Assignee has made and will continue to make such inquiries and has taken and will continue to take such care on its own behalf as would have been the case had it made Loans directly to the Company without the intervention of the Assignor, any Agent or any other Person, and (ii) the Assignee has made and will continue to make its own credit analysis and decisions relating to the Credit Agreement independently and without reliance upon the Assignor, any Agent or any other Person, and based on such documents and information as it has deemed appropriate. (e) No Negotiated Loans are currently owing to the Assignor. (f) The Assignor represents and warrants that it has advised the Assignee that the Company is not obligated to execute any replacement Notes and will add a legend to any of its Notes which evidence all or part of the Loans assigned to the effect that the rights thereunder have been assigned. (g) If the Assignor is assigning all of its Loans, it represents and warrants that it has paid in full all amounts owing by the Assignor under the Credit Agreement for which no reserve has been established. 3. Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered for acceptance to the Administrative Agent Att: D. Norman Gillespie by telecopier at (212) 225-5205 or such other number as may be provided by the Administrative Agent. At such time, the parties shall also (a) deliver to the Administrative Agent a written representation and warranty from the Assignee as to whether the Assignee is a Non-United States Person and if it is a Non-United States Person the Assignee shall also deliver to the Administrative Agent a written representation and warranty substantially similar to that contained in Section 8.4(b) of the Credit Agreement, (b) if required pursuant to Section 15.4(b)(v) of the Credit Agreement, wire transfer to the Administrative Agent a processing and recordation fee of $3,500 and (c) wire transfer to the Administrative Agent an amount equal to all amounts owing by the Assignor under the Credit Agreement for which no reserve has been established. 4. The effective date for this Assignment and Acceptance shall be __________(the "Assignment Date")./1/ 5. Upon such acceptance by the Administrative Agent, as of the Assignment Date, - --------------------- /1/ To be completed by the Administrative Agent after compliance by the parties with paragraph 3. 2 (a) the Assignee shall, in addition to any rights, benefits and obligations under the Credit Agreement held by it immediately prior to the Assignment Date, have the rights, benefits and obligations under the Credit Agreement that have been assigned to it pursuant to this Assignment and Acceptance, and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and benefits and be released from its obligations under the Credit Agreement, except that the Assignor shall remain entitled to the rights and benefits arising under Sections 6, 8.4, 9 and 15.6 of the Credit Agreement, and shall remain liable with respect to any of its obligations arising under Sections 6.9, 8.4(c), 14.2 and 15.5 of the Credit Agreement, with respect to any matters arising prior to the Assignment Date. 6. Upon such acceptance by the Administrative Agent, from and after the Assignment Date, the Administrative Agent shall make all payments under the Credit Agreement and the Revolving Note in respect of the Assigned Interest (including, without limitation, all payments of principal, interest and commitment and other fees with respect thereto) to the Assignee. The Assignor and the Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Revolving Note, for periods prior to (and, if agreed to, in the case of commitment fees or interest, after) the Assignment Date directly between themselves. 7. This Assignment and Acceptance may be executed by telecopier and in any number of counterparts, each of which when so executed and delivered, shall be an original, but all which together shall constitute one agreement binding all of the parties hereto. 8. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of Illinois without regard to conflict of laws principles. ASSIGNOR: ______________________________________________ By: _______________________________________ Name: _______________________________________ Title: _______________________________________ Copies of all notices, etc. should be sent to: ______________________________________________ ______________________________________________ ______________________________________________ Telecopier No.: ______________________________ ASSIGNEE: ______________________________________________ By: _______________________________________ Name: _______________________________________ Title: _______________________________________ 3 Copies of all notices, etc. should be sent to: ______________________________________________ ______________________________________________ ______________________________________________ Telecopier No.: ______________________________ Accepted this _____ day of __________, 1998 THE BANK OF NOVA SCOTIA, as Administrative Agent By: _________________________ Name: _________________________ Title: _________________________ 4 EX-10.(I)(I)(7) 3 SHORT TERM CREDIT AGREEMENT 10(I)(I)(7) FIFTH AMENDMENT TO SHORT TERM CREDIT AGREEMENT This Fifth Amendment to Short Term Credit Agreement (this "Amendment") is entered into as of May 22, 1998 by and among Montgomery Ward & --------- Co., Incorporated (the "Company"), the undersigned financial institutions, The ------- Bank of Nova Scotia, as Administrative Agent (in such capacity, the "Administrative Agent"), The First National Bank of Chicago, as Documentary -------------------- Agent (in such capacity, the "Documentary Agent"), The Bank of New York, as ----------------- Negotiated Loan Agent (in such capacity, the "Negotiated Loan Agent") and Bank --------------------- of America National Trust and Savings Association, as Advisory Agent (in such capacity, the "Advisory Agent," and together with the Administrative Agent, the -------------- Documentary Agent and the Negotiated Loan Agent, the "Agents"). ------ W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Company, the undersigned financial institutions and the Agents are party to that certain Short Term Credit Agreement, dated as of September 15, 1994 (as amended, supplemented or otherwise modified, the "Short ----- Term Credit Agreement"); capitalized terms used herein and not otherwise defined - --------------------- shall have the meanings assigned to them in the Short Term Credit Agreement; and WHEREAS, the parties hereto desire to amend certain provisions of the Short Term Credit Agreement relating to the sale of participations in and assignments of Loans; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Amendment to Short Term Credit Agreement. Effective as of the ---------------------------------------- date hereof and subject to Section 3 hereof, the Short Term Credit Agreement is amended as follows: A. Section 15.4 is amended and restated as follows: 15.4 Participations: Assignments; Replacement of Banks. ------------------------------------------------- (a) Participations. Subject to the provisions of this -------------- Section 15.4, any Bank may at any time, in the ordinary course of its ------------ business and in accordance with applicable law, sell to one or more banks or other entities (a "Participant") participating interests in ------------ any Loan owing to such Bank, or any Note held by such Bank. In the event of any such sale to a Participant the selling Bank shall give written notice to the Company and the Administrative Agent stating the Participant's name and address and the amount of the participation purchased, but (i) the Company and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement, 1 (ii) all amounts payable by the Company shall be determined as if such Bank had not sold such participation, and (iii) any Participant which is not an Affiliate of the selling Bank shall have no right to require the selling Bank to take or omit to take any action under this Agreement or any Note other than action directly affecting the extension of the stated maturity of any Loan, directly affecting any scheduled installment of principal or any scheduled reduction in the stated amount of, or interest on, any Loan in which such participation was sold, or reducing the principal or stated amount thereof or the rate of interest thereon or fees payable hereunder. Each Bank agrees to incorporate the requirements set forth in the preceding sentence into each participation agreement which such Bank enters into with any Participant. The Company agrees that if amounts outstanding under this Agreement and the Notes are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, if its participation agreement with the selling Bank so provides, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement or any Note to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement or any Note; provided that such -------- right of setoff shall be subject to such Participant's obligation to share with the Banks, and the Banks agree to share with such Participant, as provided in Section 8.2(c). No participation -------------- contemplated in this Section 15.4 shall relieve any Bank either from ------------ its Commitment hereunder or from any of its other obligations hereunder and such Bank shall remain solely responsible for the performance thereof. (b) Assignments. Subject to the provisions of this Section 15.4, ----------- any Bank may assign to one or more banks or other entities (an "Assignee") all or any part of such Bank's rights and benefits, and -------- delegate all or any part of such Bank's obligations under this Agreement and its Notes; provided, however, that -------- ------- (i) except in the case of an assignment to another Bank, the amount of the Loans of the assignor Bank subject to such assignment shall be in an amount not less than $5,000,000 and an integral multiple of $1,000,000 in excess thereof or shall be the entire remaining amount of Loans of such assignor Bank, (ii) unless the assignor Bank is assigning all of its Loans, the aggregate amount of the Loans of such assignor Bank after giving effect to such assignment and any assignments agreed to contemporaneously therewith by such assignor Bank shall be not less than $5,000,000, (iii) the assignor Bank shall advise the Assignee that the Company shall not be obligated to execute any replacement Notes and shall add a legend to any of its Notes which evidence all or part of the Loans assigned to the effect that rights thereunder have been assigned, 2 (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an assignment and acceptance substantially in the form of Exhibit L, with appropriate --------- insertions (an "Assignment"), ---------- (v) upon request of the Administrative Agent, if the Company is not authorized by court order to pay the Transfer Fee referred to in Section 15.4(e) or fails to honor its obligations --------------- under Section 15.4(e), the parties to the Assignment shall --------------- deliver to the Administrative Agent a processing and recordation fee of $3,500 for such Assignment, (vi) if the assignor Bank is assigning all of its Loans, it shall deliver to the Administrative Agent an amount, determined by the Administrative Agent, equal to the unpaid amount for which no reserve has been established of such Bank's pro rata share (based upon the aggregate unpaid principal amount --- ---- of the Loans) of any reasonable costs or expenses payable by such assignor Bank pursuant to the Credit Agreement, including, without limitation, Section 14.2 and Section 15.5, ------------ ------------ (vii) the Assignee shall advise the Administrative Agent in writing as to whether it is a Non-United States Person and if it is a Non-United States Person, it shall deliver to the Company and the Administrative Agent a written representation and undertaking similar to Section 8.4(b), and -------------- (viii) the assignor Bank shall provide written notice to the Company (with a copy to the Administrative Agent) of the name and address of the Assignee, shall deliver to the Company a copy of the duly executed Assignment and shall deliver to the Administrative Agent evidence of such deliveries to the Company. (c) Acceptance of Assignment by Administrative Agent. An ------------------------------------------------ Assignment shall be accepted by the Administrative Agent only if all of the requirements of subsection (b) of this Section 15.4 have been ------------ fulfilled to the Administrative Agent's satisfaction. Each Agent and each Bank shall be entitled to continue to deal solely and directly with the assignor Bank in connection with any interests assigned or delegated to an Assignee until the Administrative Agent has accepted the Assignment. Upon the Administrative Agent's acceptance of an Assignment, it shall record the Assignment in the Master Register. All entries in the Master Register shall be conclusive, in the absence of manifest error, and the Company, each Agent and each Bank shall treat each person whose name is recorded in the Master Register as the owner of the Loans recorded therein for all purposes of this Agreement. The Administrative Agent shall from time to time distribute a Schedule to each of the Banks and the Company giving effect to any Assignments. (d) Rights and Obligations of Assignor Bank and Assignee. On the ---------------------------------------------------- date the Administrative Agent accepts an Assignment (the "Assignment ---------- Effective Date"), the Company, the Agents and the Banks agree that, to -------------- the extent of any such Assignment, 3 (i) the Assignee thereunder shall be a Bank hereunder and, in addition to any rights, benefits and obligations hereunder held by it immediately prior to such Assignment Effective Date, have the rights, benefits and obligations of a Bank under this Agreement and the assignor Bank's Notes (including, without limitation, rights and benefits arising out of Section 9) and the same rights of setoff --------- pursuant to Section 8.3 and obligation to share pursuant to Section ----------- ------- 8.2 as a Bank hereunder to the extent that the same have been assigned --- and delegated to it pursuant to such Assignment, and (ii) the assignor Bank shall, to the extent that rights, benefits and obligations hereunder have been assigned and delegated by it pursuant to such Assignment, relinquish its rights and benefits and be released from its obligations under this Agreement (and, in the case of an Assignment covering all or the remaining portion of an assignor Bank's rights, benefits and obligations under this Agreement, such Bank shall cease to be a party hereto), except that in all cases the assignor Bank shall remain entitled to the rights and benefits arising under Sections 6, 8.4, 9, 15.5 and 15.6 with respect to any ---------- --- - ---- ---- period of time prior to the Assignment Effective Date, and shall remain liable with respect to any of its unpaid obligations arising under Sections 6.9, 8.4(c), 14.2 and 15.5, with respect to any matters ------------ ------ ---- ---- arising prior to the Assignment Effective Date; provided, the Company -------- shall not be required to pay any costs, fees or taxes of any kind or nature with respect to the interest(s) assigned in excess of those payable by the Company in connection with such interest(s) prior to such assignment except for any costs, fees or taxes described in Section 8.4, 9 or 15.6. ----------- - ---- (e) Transfer Fee. In consideration of the services to be performed by ------------ the Administrative Agent hereunder, the Company shall pay to the Administrative Agent a quarterly fee of $18,750 (the "Transfer Fee"), ------------ payable quarterly in advance on May 1, August 1, November 1 and February 1 of each year, provided that the Company shall pay the fee payable on May 1, -------- 1998 within three Business Days after the entry of an order by the United States Bankruptcy Court for the District of Delaware approving the Fifth Amendment to Short Term Credit Agreement. If the Company is not authorized to pay such fee or fails to pay such fee, the Administrative Agent may impose a processing and recordation fee on the parties to each Assignment of $3,500 for each Assignment. (f) Federal Reserve. Anything contained in this Agreement to the --------------- contrary notwithstanding, and without the need to comply with any of the formal or procedural requirements set forth in this Agreement, any Bank may at any time and from time to time grant a participation in, assign, deposit or pledge all or any portion of its rights under this Agreement or the Notes to a Federal Reserve Bank; provided, however, no such participation, -------- ------- assignment, deposit or pledge shall relieve such Bank of any of its obligations under this Agreement. 4 (g) Information. Notwithstanding the terms of any previous ----------- confidentiality agreements with respect to the subject matter hereof between the Company and any Bank, from and after the Effective Date any Bank may furnish any information concerning the Parent, the Company and the Subsidiaries which has been furnished to such Bank pursuant hereto to any Assignee, Participant, or potential Assignee or Participant; provided, -------- however, that the recipient of such information shall, prior to being ------- furnished with any such information, agree to maintain the confidentiality of such information. Notwithstanding the foregoing sentence, any Agent, Bank, Assignee, Participant or potential Assignee or Participant shall be permitted to disclose information regarding the Company and its Subsidiaries (i) to any other Agent or Bank, or to any Assignee or Participant, (ii) to any Affiliate, agent or employee that agrees to be bound by this Section 15.4(g), (iii) upon order of any court or --------------- administrative agency, (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over such party, (v) which has been publicly disclosed, (vi) which has been obtained from any Person that is not a party hereto or an Affiliate, agent or employee of any such party, (vii) in connection with the exercise of any remedy hereunder, or (viii) to such Person's certified public accountants and its attorneys. B. Exhibit L is replaced with the Exhibit L annexed hereto. --------- --------- 2. Waiver. The undersigned Banks hereby waive the requirement set forth ------ in the proviso in Section 15.4(b) of the Short Term Credit Agreement that an assignor Bank shall assign equal percentage amounts of its commitment under the Short Term Credit Agreement and Long Term Credit Agreement with respect to any trades entered into by any of the Banks prior to the date of this Amendment. This waiver is limited precisely to its terms and shall not constitute an amendment, modification or waiver generally or for any other purpose. 3. Effectiveness. Section 1 of this Amendment shall become effective with ------------- respect to trades entered into after the date of this Amendment, upon the execution and delivery of this Amendment by the Company and the Required Banks, provided, however, the requirement that the Company pay the Transfer Fee - -------- ------- referred to in the amended Section 15.4(e) shall not be effective until the entry of an order of the United States Bankruptcy Court for the District of Delaware approving this Amendment. Section 2 of this Amendment shall become effective upon the execution and delivery of this Amendment by the Required Banks. 4. Entire Agreement. This Amendment contains the entire agreement among ---------------- the parties with respect to the matters set forth herein and supersedes all prior agreements, arrangements or understandings with respect thereto. 5. Reference to and Effect on the Short Term Credit Agreement. Upon the ---------------------------------------------------------- effectiveness of this Amendment, on and after the date hereof, each reference in the Short Term Agreement to "this Agreement," "hereunder," "hereof," "herein" and words of like import, shall mean and be a reference to the Short Term Credit Agreement as amended hereby. Except as specifically amended or waived hereby, all of the terms and provisions of the Short Term Credit Agreement shall remain in full force and effect and are hereby ratified and confirmed. 6. Descriptive Headings. The descriptive headings in this Amendment are -------------------- for convenience only and shall not control or affect the meaning or construction of any provision of this Amendment. 5 7. Counterpart Execution. This Amendment may be executed by telecopier --------------------- and in any number of counterparts, each of which, when so executed and delivered, shall be an original, but all of which together shall constitute one agreement binding all of the parties hereto. 8. Successors. This Amendment shall be binding upon and inure to the ---------- benefit of each of the parties hereto, and each of the Banks and their respective successors and assigns. IN WITNESS WHEREOF, each of the undersigned has duly executed this Amendment as of the date first set forth above. MONTGOMERY WARD & CO. INCORPORATED By: /s/ Douglas V. Gathany --------------------------------------------- Name: Douglas V. Gathany Title: Vice President & Treasurer 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/ Mark R. Slane --------------------------------------------- Name: Mark R. Slane Title: Senior Vice President THE BANK OF NOVA SCOTIA, in its individual capacity and in its capacity as Administrative Agent By: /s/ D. N. Gillespie --------------------------------------------- Name: D.N. Gillespie Title: Assistant General Manager 6 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, in its individual capacity and in its capacity as Advisory Agent By: /s/ Ronald A. Prince --------------------------------------------- Name: Ronald A. Prince Title: Vice President ABN AMRO BANK N.V. By: /s/ S.L. Wimpenny --------------------------------------------- Name: S.L. Wimpenny Title: Senior Vice President By: /s/ William J. Fitzgerald --------------------------------------------- Name: William J. Fitzgerald Title: Senior Vice President BANCA COMMERCIALE ITALIANA, Chicago Branch By: /s/ Julian M. Teodori --------------------------------------------- Name: Julian M. Teodori Title: Senior Vice President & Manager By: /s/ Matthew V. Trujillo --------------------------------------------- Name: Matthew V. Trujillo Title: Vice President BANKBOSTON, N.A. By: _____________________________________________ Name: Title: BANKERS TRUST COMPANY By: /s/ Rosemary F. Dunne --------------------------------------------- Name: Rosemary F. Dunne Title: Vice President 7 THE BANK OF TOKYO-MITSUBISHI, LTD., Chicago Branch By: /s/ Hajime Watanabe --------------------------------------------- Name: Hajime Watanabe Title: Deputy General Manager BAY HARBOUR PARTNERS, LTD. By: _____________________________________________ Name: Title: CIBC INC. By: _____________________________________________ Name: Title: COMERICA BANK By: /s/ Cynthia B. Jones --------------------------------------------- Name: Cynthia B. Jones Title: Vice President CREDIT LYONNAIS Chicago Branch and CREDIT LYONNAIS Cayman Island Branch By: /s/ Alan Sidrane --------------------------------------------- Name: Alan Sidrane Title: Senior Vice President DAYSTAR SPECIAL SITUATIONS FUND L.P. By: _____________________________________________ Name: Title: 8 THE FIRST NATIONAL BANK OF MARYLAND By: /s/ Linda J. Weinberg --------------------------------------------- Name: Linda J. Weinberg Title: Vice President ISTITUTO BANCARIO SAN PAOLO DI TORINO, S.P.A. By: ____________________________________________ Name: Title: THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: /s/ Armand J. Schoen, Jr. --------------------------------------------- Name: Armand J. Schoen, Jr. Title: Senior Vice President MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ Neil Brisson --------------------------------------------- Name: Neil Brisson Title: Director NATIONSBANK, N.A. By: /s/ Charles A. Kerr --------------------------------------------- Name: Charles A. Kerr Title: Senior Vice President THE NORTHERN TRUST COMPANY By: _____________________________________________ Name: Title: 9 PNC BANK, NATIONAL ASSOCIATION By: _____________________________________________ Name: Title: THE SAKURA BANK, LTD. By: /s/ Yukinaru Sakumoto --------------------------------------------- Name: Yukinaru Sakumoto Title: Joint General Manager SWISS BANK CORPORATION By: /s/ David C. Hemingway --------------------------------------------- Name: David C. Hemingway Title: Director - Global Project Finance By: /s/ William A. Roche --------------------------------------------- Name: William A. Roche Title: Director - Restructuring UNION BANK OF CALIFORNIA, N.A. By: _____________________________________________ Name: Title: UNION BANK OF SWITZERLAND By: /s/ G. Christian Ullrich --------------------------------------------- Name: G. Christian Ullrich Title: Managing Director By: /s/ M. Terri Reilly --------------------------------------------- Name: M. Terri Reilly Title: Assistant Treasurer 10 U.S. BANK NATIONAL ASSOCIATION By: /s/ Jack L. Quitmeyer --------------------------------------------- Name: Jack L. Quitmeyer Title: Vice President WELLS FARGO BANK, N.A. By: Name: _____________________________________________ Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED, CHICAGO BRANCH By: /s/ Walter Wolff --------------------------------------------- Name: Walter Wolff Title: Senior Vice President & Deputy General Manager 11 EXHIBIT L --------- ASSIGNMENT AND ACCEPTANCE ------------------------- Reference is made to the Short Term Credit Agreement, dated as of September 15, 1994 (herein, as heretofore amended, modified or supplemented, called the "Credit Agreement") among Montgomery Ward & Co., Incorporated, an Illinois corporation (the "Company") and the Banks and Agents parties thereto. Terms used but not otherwise defined herein are used herein as defined in the Credit Agreement. _________________________________________ (the "Assignor") and _____________________________ (the "Assignee") hereby agree as follows: 1. The Assignee hereby purchases and assumes from the Assignor, and the Assignor hereby sells and assigns and delegates to the Assignee, without recourse and without representation or warranty except as specifically set forth in paragraph 2 below, an interest (the "Assigned Interest") in and to all of the Assignor's rights, benefits and obligations under the Credit Agreement, including, without limitation, rights of setoff pursuant to Section 8.3 of the Credit Agreement, and obligations to share pursuant to Section 8.2 of the Credit Agreement and under the Revolving Note, if any, held by the Assignor. The Assigned Interest is a percentage equal to the total principal amount of the Loans assigned to the Assignee pursuant hereto divided by the total principal amount of all of the Loans owing to the Assignor on the date hereof as recorded on the Master Register (without giving effect to any other assignments made on the date hereof). The total principal amount of Loans being assigned to the Assignee pursuant hereto is $_____. 2. (a) The Assignor represents and warrants that the Assignor shall provide written notice of the name and address of the Assignee to the Company (with a copy to the Administrative Agent) shall deliver to the Company a copy of this Assignment duly executed and shall deliver to the Administrative Agent evidence of such deliveries to the Company. (b) The Assignor represents and warrants that it is the legal and beneficial owner of the Assigned Interest and that such interest is free and clear of any adverse claim. (c) The Assignee acknowledges and agrees that neither the Assignor nor any Agent nor any other Bank makes any representation or warranty or assumes any responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other instrument or document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto. 1 (d) The Assignee acknowledges and agrees that neither the Assignor nor any Agent nor any other Bank makes any representation or warranty or assumes any responsibility with respect to the financial condition or creditworthiness of the Company or the performance or observance by the Company of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto. The Assignee acknowledges and agrees that (i) the Assignee has made and will continue to make such inquiries and has taken and will continue to take such care on its own behalf as would have been the case had it made Loans directly to the Company without the intervention of the Assignor, any Agent or any other Person, and (ii) the Assignee has made and will continue to make its own credit analysis and decisions relating to the Credit Agreement independently and without reliance upon the Assignor, any Agent or any other Person, and based on such documents and information as it has deemed appropriate. (e) No Negotiated Loans are currently owing to the Assignor. (f) The Assignor represents and warrants that it has advised the Assignee that the Company is not obligated to execute any replacement Notes and will add a legend to any of its Notes which evidence all or part of the Loans assigned to the effect that the rights thereunder have been assigned. (g) If the Assignor is assigning all of its Loans, it represents and warrants that it has paid in full all amounts owing by the Assignor under the Credit Agreement for which no reserve has been established. 3. Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered for acceptance to the Administrative Agent Att: D. Norman Gillespie by telecopier at (212) 225-5205 or such other number as may be provided by the Administrative Agent. At such time, the parties shall also (a) deliver to the Administrative Agent a written representation and warranty from the Assignee as to whether the Assignee is a Non-United States Person and if it is a Non-United States Person the Assignee shall also deliver to the Administrative Agent a written representation and warranty substantially similar to that contained in Section 8.4(b) of the Credit Agreement, (b) if required pursuant to Section 15.4(b)(v) of the Credit Agreement, wire transfer to the Administrative Agent a processing and recordation fee of $3,500 and (c) wire transfer to the Administrative Agent an amount equal to all amounts owing by the Assignor under the Credit Agreement for which no reserve has been established. 4. The effective date for this Assignment and Acceptance shall be __________(the "Assignment Date")./1/ 5. Upon such acceptance by the Administrative Agent, as of the Assignment Date, _________________________ /1/ To be completed by the Administrative Agent after compliance by the parties with paragraph 3. 2 (a) the Assignee shall, in addition to any rights, benefits and obligations under the Credit Agreement held by it immediately prior to the Assignment Date, have the rights, benefits and obligations under the Credit Agreement that have been assigned to it pursuant to this Assignment and Acceptance, and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and benefits and be released from its obligations under the Credit Agreement, except that the Assignor shall remain entitled to the rights and benefits arising under Sections 6, 8.4, 9 and 15.6 of the Credit Agreement, and shall remain liable with respect to any of its obligations arising under Sections 6.9, 8.4(c), 14.2 and 15.5 of the Credit Agreement, with respect to any matters arising prior to the Assignment Date. 6. Upon such acceptance by the Administrative Agent, from and after the Assignment Date, the Administrative Agent shall make all payments under the Credit Agreement and the Revolving Note in respect of the Assigned Interest (including, without limitation, all payments of principal, interest and commitment and other fees with respect thereto) to the Assignee. The Assignor and the Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Revolving Note, for periods prior to (and, if agreed to, in the case of commitment fees or interest, after) the Assignment Date directly between themselves. 7. This Assignment and Acceptance may be executed by telecopier and in any number of counterparts, each of which when so executed and delivered, shall be an original, but all which together shall constitute one agreement binding all of the parties hereto. 8. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of Illinois without regard to conflict of laws principles. ASSIGNOR: ______________________________________________ By: _______________________________________ Name: _______________________________________ Title:_______________________________________ Copies of all notices, etc. should be sent to: ______________________________________________ ______________________________________________ ______________________________________________ Telecopier No.: ____________________________ ASSIGNEE: ______________________________________________ By: _______________________________________ Name: _______________________________________ Title:_______________________________________ 3 Copies of all notices, etc. should be sent to: _________________________________________________ _________________________________________________ _________________________________________________ Telecopier No.: _______________________________ Accepted this _____ day of __________, 1998 THE BANK OF NOVA SCOTIA, as Administrative Agent By: ________________________________ Name: ________________________________ Title: ________________________________ 4 EX-10.(I)(L)(6) 4 EXTENSION AGREEMENT 10(I)(L)(6) WAIVER, AMENDMENT AND EXTENSION AGREEMENT THIS WAIVER, AMENDMENT AND EXTENSION AGREEMENT ("Agreement"), dated as of January 31, 1998, is made and entered into among SIGNATURE FINANCIAL/MARKETING, INC. (the "Borrower") 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 Credit Agreement dated as of September 27, 1996, as amended and restated as of October 21, 1996, and as further amended or modified as of December 23, 1996, March 27, 1997, July 15, 1997, and August 29, 1997 (as heretofore amended or modified, the "Credit Agreement"), among Signature Financial/Marketing, Inc., various Banks, The Bank of New York as Documentation Agent, and The Bank of Nova Scotia, as Administrative Agent; and WHEREAS, the Borrower desires to extend the Maturity Date of the Credit Agreement from January 31, 1998, to July 31, 1998; NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I WAIVER, AMENDMENT AND EXTENSION I.1 The Banks hereby waive an Event of Default (the "Specified Default") arising solely by reason of the failure of the Borrower on January 31, 1998, through the Effective Date of this Agreement to pay in full all Notes and other Obligations. I.2 The Preamble to the Credit Agreement is hereby amended to add The Bank of Nova Scotia as the Collateral Agent, and reads in its entirety as follows: This CREDIT AGREEMENT dated as of September 27, 1996, as amended and restated as of October 21, 1996 (the "Restatement Effective Date"), among Signature Financial/Marketing, Inc., a Delaware corporation (the "Borrower"), the banks listed on the signature pages -------- hereof (herein, together and with their respective successors and assigns, collectively called the "Banks" and individually called a "Bank"), The Bank of New York ("BNY"), as documentation agent for the Banks (herein, in such capacity, together with its successors and assigns in such capacity, called the "Documentation Agent"), The Bank of Nova Scotia ("BNS"), as administrative agent to the Banks (herein in such capacity, together with its successors and assigns in such capacity, called the "Administrative Agent"), and BNS, as collateral agent for the Banks (herein, in such capacity, together with its successors and assigns in such capacity, called the "Collateral Agent") (the Documentation Agent, the Administrative Agent, and the Collateral Agent are herein collectively called the "Agents" and individually called an "Agent"). I.3 Section 1.1 of the Credit Agreement is hereby amended by amending the definition of "Guarantors," "Guaranty," and "Loan Documents," and by adding the definitions of "Collateral Agent," "Pledge Agreements," "Pledged Securities," "Pledgors," and "Regulated Subsidiary" as follows: "Guarantors" means MW and each Subsidiary of the Borrower listed ---------- on Schedule 1.1 hereto except that the term "Guarantors" when used in ------------ Section 2.15 and clauses (c) and (i) of Section 7.4 shall be deemed not to include any Regulated Subsidiary or AM Industries, Inc. "Guaranty" means the guaranty executed by the Guarantors in -------- substantially the form of Exhibit F-1, F-2, or F-3, as the same may be ----------- --- --- amended or modified from time to time. "Loan Documents" means this Agreement, the Guaranties, the Pledge -------------- Agreements, the Notes, and any fee letter and all other documents delivered to any Agent or any Bank in connection herewith. "Collateral Agent" means -- see Preamble. ---------------- "Pledge Agreements" means those certain Pledge Agreements, dated ----------------- as of January 31, 1998, executed by Borrower and Montgomery Ward Enterprises, Inc., respectively, in favor of the Banks and the Collateral Agent, and granting to such Banks a first priority lien in the Pledged Securities, as collateral security for the repayment of the Obligations, each in substantially the form of Exhibit I-1, I-2, ----------- --- or I-3, as the same may be amended or modified from time to time. --- "Pledged Securities" shall have the meaning specified in Section ------------------ 1 in the Pledge Agreements. "Pledgors" means Borrower and Montgomery Ward Enterprises, Inc. -------- "Regulated Subsidiary" means any Subsidiary of the Borrower -------------------- listed on Schedule 1.1 hereto under the caption "Regulated ------------ Subsidiaries." 2 I.4 The words "calendar quarter" appearing in the fourth line of the first sentence of the definition of "Interest Payment Date" in Section 1.1 of the Credit Agreement is hereby changed to "calendar month." I.5 The Maturity Date is hereby extended by substituting "July 31, 1998" for "January 31, 1998" in the definition of Maturity Date as set forth in Section 1.1 of the Credit Agreement. I.6 Section 2.12 of the Credit Agreement is amended to read in its entirety as follows: 2.12 Extension Fee. (a) Concurrent with the execution by each ------------- Bank of the Waiver, Amendment and Extension Agreement dated as of January 31, 1998 ("Extension Agreement") among the Banks and the Borrower, the Borrower agrees to pay directly to each Bank in immediately available funds a fee equal to 1/8th% of the aggregate outstanding principal amount of the Loans then outstanding from each Bank (it being understood that such fee shall be retained by such Bank regardless of whether the Extension Agreement becomes effective). (b) The Borrower agrees to pay to the Administrative Agent in immediately available funds, for the prorata account of each Bank, a fee of $2,000 per day for each day the Loans (or any principal amount thereof) remain outstanding during the month of June 1998. Such fee shall be payable on the earlier of the day all the Loans are repaid in full or June 30, 1998. I.7 Article II of the Credit Agreement is amended by adding the following Sections 2.13, 2.14, 2.15, and 2.16 thereto: 2.13 Subsidiary Guaranties. Each of the Subsidiary Guarantors --------------------- identified on Schedule 1.1 have executed and delivered, or are executing and delivering, to the Banks either a Guaranty (Non- Insurance Subsidiaries) or a Guaranty (Regulated Subsidiaries), as indicated on Schedule 1.1, in the form of Exhibits F-2 and F-3, ------------ ------------- --- respectively. 2.14 Pledge of Securities. Borrower and Montgomery Ward -------------------- Enterprises, Inc. are executing and delivering to the Banks the Pledge Agreements, in the form of Exhibits I-1, I-2, or I-3. ------------ --- --- 2.15 Additional Collateral. Borrower and each Subsidiary --------------------- Guarantor except AM Industries Inc. (formerly known as Amoco Motor Club, Inc.) shall furnish Banks with such additional guaranties, collateral, and credit enhancement as the Banks may request from time to time. 2.16 Collateral Agent. The Collateral Agent will have such ---------------- duties as are set 3 forth in that certain Collateral Agent Agreement, dated as of January 31, 1998, among BNY, BNS, and the Collateral Agent. I.8 Section 5.3 of the Credit Agreement is amended by adding the phrase "and the Pledge Agreements" after the words "Section 6.13" and before the comma. I.9 Section 7.8(d) of the Credit Agreement is amended to read in its entirety as follows: (d) the Pledge Agreement executed by Montgomery Ward Enterprises, Inc. and the Guaranties. I.10 Sections 8.1(m) and 8.1(r) of the Credit Agreement are amended to read in their entirety as follows: (m) Guarantor or Pledgor Defaults. Any Guarantor or Pledgor ----------------------------- fails in any material respect to perform or observe any term, covenant or agreement in its Guaranty or Pledge Agreement, as applicable; or the Guaranty of any Guarantor or the Pledge Agreement of any Pledgor is for any reason partially (including, with respect to future advances) or wholly revoked or invalidated, or otherwise ceases to be in full force and effect, or any Guarantor, Pledgor, or any other Person contests in any manner the validity or enforceability of such Guaranty or Pledge Agreement or denies that it has any further liability or obligation thereunder; or any event described in subsections (f) or (g) of this Section occurs with respect to any Guarantor or Pledgor. (r) Citicorp Commitment Letter. (i) Any party to that certain -------------------------- Commitment Letter, dated as of March 24, 1998, between Citicorp USA, Inc. and the Borrower, as extended by letter agreement dated May 6, 1998 (the "Commitment Letter") revokes, withdraws, or terminates the Commitment Letter, or (ii) any amendment, modification or waiver is made to the Commitment Letter which is not acceptable to the Banks, or (iii) the Commitment Letter shall cease to be in full force and effect. I.11 Schedule 1.1 of the Credit Agreement is hereby amended and replaced in its entirety with Schedule 1.1 attached hereto, and new Exhibits F-3., I-1, I-2, ------------ --- --- and I-3 are hereby added to the Credit Agreement in the form of Exhibits F-3, I- --- ------------ - 1, I-2, and I-3 attached hereto. - - --- --- I.12 Schedules 5.5, 5.7, 5.11, 5.12, 5.16(a), 5.16(b), and 5.17 are each ------------- --- ---- ---- ------- ------- ---- hereby amended by adding thereto the items set forth in the applicable section of Schedule J attached hereto. ---------- I.13 Notwithstanding the provisions of Section 2.4 of the Credit Agreement, from and after January 31, 1998, Borrower shall not be entitled to elect to convert any Base Rate Loans to 4 LIBO Rate Loans, and any LIBO Rate Loans outstanding on January 31, 1998, shall, effective as of the end of the applicable Interest Period, be converted into Base Rate Loans. I.14 Notwithstanding the provisions of Section 2.7 of the Credit Agreement, for the period from January 31, 1998, until May 31, 1998, interest on the unpaid principal amount shall accrue and be payable at a rate per annum equal to the sum of two percent (2%) per annum plus the rate otherwise in effect pursuant to Section 2.7(a) of the Credit Agreement; and from and after June 1, 1998, interest on the unpaid principal amount shall accrue and be payable pursuant to Section 2.7(a)(i) of the Credit Agreement, except that if an Event of Default exists after the Effective Date of this Agreement, then interest on the unpaid principal amount shall accrue and be payable pursuant to Section 2.7(c) of the Credit Agreement. I.15 The waiver, amendment and extension contained herein are limited precisely to their terms and shall not constitute a waiver, amendment or other modification generally or for any other purpose. ARTICLE II REPRESENTATIONS AND WARRANTIES The Borrower hereby represents and warrants to the Agents and the Banks as follows: II.1 No Default. No Default or Event of Default has occurred and is ---------- continuing, other than the Specified Default, or will exist after giving effect to this Agreement. II.2 Due Execution. The execution, delivery and performance of this ------------- Agreement, (i) are within the Borrower'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 Borrower'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 Borrower, any Subsidiary or any of their respective properties. II.3 Validity. The Credit Agreement as extended by this Agreement -------- constitutes the legal, valid and binding obligations of the Borrower, enforceable against it in accordance with its respective terms, without defense, counterclaim or offset. II.4 Credit Agreement. All representations and warranties of the Borrower ---------------- contained in Article 5 (except Section 5.11(b) of the Credit Agreement) are true --------- --------------- and correct as of the date hereof with the same effect as though made on the date hereof. Since December 31, 1995, there has not occurred any event which (i) materially impairs the ability of the Borrower to perform its 5 obligations under any Loan Document or to avoid, after the Effective Date hereof, any Event of Default, or (ii) materially adversely effects the legality, validity, binding effect or enforceability against the Borrower of any Loan Document. ARTICLE III GENERAL III.1 Expenses. The Borrower agrees to pay all fees and expenses of each -------- of the Agents and the Banks (including all legal fees and related expenses of separate counsel for each of the Banks and the Agents) in connection with the preparation, execution and delivery of this Agreement. III.2 Effectiveness. This Agreement shall become effective on the date ------------- (the "Effective Date") on which the Administrative or Collateral Agent shall have received each of the following: (a) Agreements. Counterparts of this Agreement, the Guaranty of each ---------- Subsidiary Guarantor, and the Pledge Agreements, whether on the same or different counterparts, executed by the Borrower, the Subsidiary Guarantors, and the Pledgors, as appropriate, and by 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) MW Court Order. The entry of an order by the United States -------------- Bankruptcy Court, District of Delaware, In Re Montgomery Ward Holding Corp., a Delaware corporation, et al., Case No. 97-1409 (PJW) substantially in the form attached hereto as Exhibit X, or the --------- written waiver of this requirement by the Banks; (c) Agreement Fee. Evidence of payment from the Borrower to each Bank of ------------- the fees provided for in Section 2.12 of the Credit Agreement as herein amended; and (d) Pledged Securities. All stock certificates evidencing the Pledged ------------------ Securities, all financing statements relating thereto, and all stock powers relating thereto executed by Pledgors. (e) Legal Opinions. Favorable opinions of counsel of Borrower and its -------------- subsidiaries, in form and substance acceptable to the Banks, opining on the enforceability of this Agreement, the Guaranty of each Subsidiary Guarantor, and the Pledge Agreements. 6 III.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. III.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 extended by this Agreement. This Agreement shall be deemed incorporated into, and a part of, the Credit Agreement. III.5 Successors. This Agreement shall be binding upon and inure to the ---------- benefit of, the parties hereto and their respective successors and assigns. III.6 Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of Illinois. III.7 Counterparts. This Agreement 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. Dated at Chicago, Illinois as of the date, month and year first above written but executed and delivered on or after June 26, 1998. SIGNATURE FINANCIAL/MARKETING, INC. By: /s/ John Workman --------------------------------- Name: Acting Chief Financial Officer --------------------------------- ACCEPTED AND APPROVED: THE BANK OF NEW YORK, in its individual capacity and in its capacity as Documentation Agent By: /s/ Julie B. Follosco ---------------------------- Name: Vice President ---------------------------- 7 THE BANK OF NOVA SCOTIA, in its individual capacity, in its capacity as Administrative Agent and in its capacity as Collateral Agent By: /s/ D.N. Gillespie ------------------------------- Name: Assistant General Manager ------------------------------- 8 REAFFIRMATION OF GUARANTY: Each Guarantor hereby confirms and agrees that (i) its Guaranty dated as of September 27, 1996, as heretofore reaffirmed from time to time, is, and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects, as applied to the Credit Agreement as modified above; (ii) to the extent the liability of any Guarantor under its Guaranty is limited by applicable law, such Guarantor shall be nonetheless liable under its Guaranty to the maximum extent permitted by applicable law, and (iii) to the extent that a Guarantor shall have paid more than its proportionate share of any payment made under its Guaranty, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor which has not paid its proportionate share of such payment (it being understood that (a) such Guarantor's right of contribution shall be subordinated to the obligations of such Guarantor to the Banks and shall not be paid until all of the Obligations under the Credit Agreement have been indefeasibly paid in full, and (b) the provisions of this clause (iii) shall in no respect limit the obligations and liabilities of any Guarantor to the Banks, and each Guarantor shall remain liable to the Banks for the full amount guaranteed by such Guarantor under its Guaranty). CREDIT CARD SENTINEL, INC. ISS AGENCY, INC. MONTGOMERY WARD CLUBS, INC. MONTGOMERY WARD ENTERPRISES, INC. SIGNATURECARD, INC. MONTGOMERY WARD FINANCIAL CENTER, INC. MONTGOMERY WARD AGENCY, INC. NATIONAL DENTAL SERVICE, INC. SIGNATURE DIRECT, INC. SIGNATURE INVESTMENT ADVISORS, INC. AM INDUSTRIES, INC. (FORMERLY KNOWN AS AMOCO MOTOR CLUB, INC.) By: /s/ John Workman --------------------------------------- Name: Acting Chief Financial Officer --------------------------------------- 9 SCHEDULE 1.1 ------------ GUARANTOR SUBSIDIARIES ---------------------- A. Non-Insurance Subsidiaries: -------------------------- 1. Credit Card Sentinel, Inc. 2. ISS Agency, Inc. 3. Montgomery Ward Clubs, Inc. 4. Montgomery Ward Enterprises, Inc. 5. SignatureCard, Inc. 6. Montgomery Ward Financial Center, Inc. 7. Montgomery Ward Agency, Inc. 8. National Dental Service, Inc. 9. Signature Direct, Inc. 10. Signature Investment Advisors, Inc. 11. AM Industries, Inc., formerly known as Amoco Motor Club, Inc. B. Regulated Subsidiaries: ---------------------- 1. Montgomery Ward Auto Club, Inc. 2. Greater California Dental Plan 3. Signature Dental Plan of Florida, Inc. 4. Ocoma Industries, Inc. 5. Signature's Nationwide Auto Club, Inc. 6. Signature Agency, Inc. 7. Signature Agency - Wyoming, Inc. 8. AEC Signature Industries, Limited 10 EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000,000 6-MOS JAN-02-1999 JAN-04-1998 JUL-04-1998 178 371 294 0 1,058 0 1,888 (844) 4,450 0 0 177 0 1 (960) 4,450 1,613 2,046 1,303 1,303 885 74 28 (244) 0 (244) 0 0 0 (244) (6.67) (4.89)
-----END PRIVACY-ENHANCED MESSAGE-----